Tag Archives: Warren Buffett

The Care and Feeding for The Orange County Register

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OC Register Masthead from Peak Year 2005

OC Register Masthead from Peak Year 2005

Recently I wrote on the future of newspapers, something many of us with roots in the industry do as a daily pastime. In all of my research, I still think the models of the future that Alan Mutter of Newsosaur postulated for newspapers recently best portray a reasonable future as indicated by the paths many current papers are taking.  Briefly they are:

Farm it – The Buffett Model.  Buy and hold…and hope!

Feed It – Rupert Murdoch Model.  Give the fire some fuel and oxygen and hope that it creates a sustainable blaze.  After having split his media empire into digital and non-digital, this may be a real key for many to follow.  Especially to those public companies that have to report their financials.  Print is no longer a growing methodology, and as such, is dead to public companies as a forward-looking model. Even Harte-Hanks, who pioneered the advertising-only Pennysaver model to millions and millions of circulation, has seen the light and is reported to looking for buyers for their huge franchise.  It can still generate some good cash flow, but looks horrible on quarterly 10K reports.  “Time to set those doggies free” my buddy Bill would say.

Milk It – Newhouse Model.   Why bother to feed the cow, just keep milking it for all you’ve got until it runs dry.  Hope you don’t grab a bull…that could be bad.  This is how those in the industry see most of the changes for newspapers, and what they see in New Orleans is not pleasing to the palate of the N.O. residents and readers.

My Experience there – I during the 90s I was in advertising director at The Orange County register. Those were truly the best of times, when newspapers were at their zenith, and competition kept us strong. It was fun to compete with The Los Angels Times, and to add a number of specialty products to our overall marketing mix. At one time, there were as many as 7 OC Register sales representatives who could be calling on any potential advertiser in Orange County. The favorite expression of senior management was quoted” time to impose our will”.  Sadly, that was what we did with rates, and that was the beginning of a long downward slide for the Orange County Register, and a number of other newspapers that followed the strategy.  Newspapers were still mini-monopolies, and the profits flowed.

Revenues peaked during the early part of the next decade encouraging the family ownership to seek an opportunity to cash out. They did and several of those in the family who took the buyout are still smiling today. Those family members who did not and stayed with freedom communications ultimately lost everything in the recent bankruptcy. In talking with some of the recent employees I hear and almost Universal joy and optimism based on their initial meetings with the new ownership group.

However, most also said it’s too soon to tell how things will actually shake out. They’re also saying that they think there will be a change in the editorial focus of the newspaper, and hoping to see a return to a more centrist albeit still Libertarian viewpoint of the paper.  Over the last several years, under the new ownership and management, the paper had gone strongly to the right and far beyond the historical Libertarian viewpoints of the founding families. This was also not reflected in the larger viewpoint of a changing and dynamic Orange County, which is not the singular conservative bastion from the days of John Wayne.   A strict editorial slant, either left or right is not a positive factor in the newspaper world that is searching for the largest audience possible, even the Hoiles family, had understood that factor and kept their politics in check.

Based on everything I have seen and heard I think it is still too soon to tell exactly which model the OC Register is likely to follow, though I think we can rule out the Newhouse – Milk It model.  New ownership would not have invested to simply let it go without some kind of fight.  New money in, especially from someone outside of the established print community as the new owners as probably signals they want to accomplish something, and also want a return on their investment dollars – something unique in print today.

That leaves Feed It or Farm It!  Based on a strong foothold in Orange County we are still a highly desirable market that will rise again when housing takes off in the future.  For now I’ll go with my heart in hand and say they will “Feed It” and try to do everything they can to build a strong multi-media franchise with the paper as the core product.  This fits the community, and what I think is a great opportunity.  They will not be able to impose their will, or dictate a political bent, but I think they can make small gobs of money, year after year if they play their cards right.  I’m keeping my fingers crossed.

Not Dead Yet! Just a Little Diminished Around the Edges!

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I love the scene in Monty Python and the Holy Grail, circa back in my callow youth, where they were collecting bodies from the ‘Black Death’.  If they weren’t dead, a quick bonk to the head speeded up the process.  I think in today’s media world we are seeing this played out over and over again.  I confess I had bought into this talk, but I think there is still some life ‘in the old girl yet.’

What gives me hope is that baby whom cover the industry are starting to see the patterns that are evolving that show some various tracks key newspapers are taking to ensure their survivability. My favorite is from Alan Mutter of Newsosaur who in his recent article “What’s Next for Newspapers”  highlighted three paths that could offer some hope for newspapers and newspaper staffs who are looking for some relief.

Alan’s three possible paths to the future he labels as: Farm It, Milk It and Feed It.  He has plausible representations for each, and it makes for a great read.  This has been made all the more urgent in trying to move towards a recognizable future for newspapers with the decision of Rupert Murdoch to split his media empire into two segments – print and everything else.  That news was met with a round of – “it’s abut time” and the blessings of the market with an upturn.  If anyone really understands the future of media it is Rupert Murdoch.  Whatever sentiment he had for his holdings was dashed with cold water after the media circus in England that has stained his reputation.  His head is now ruling his heart…and his pocketbook.

In the next post I’ll start reviewing these options, and perhaps have some additional ones to through on the discussion pile.  Back soon…now for a viewing of Monty Python on my iPad ap.  A great bargain for a few bucks, and a few moments with some lively songs and the Knights Who Say Nea always leaving me smiling.

What Does Warren Know That We Don’t Know?

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Warren Buffett - Now Loose with Open Check Book

Warren Buffett – The New ‘King of All Media

Warren is on the loose…again, and he brought his check book.  What does the Oracle of Omaha know that the result of us don’t.  For one thing he knows a great investment, and that means something he can own for a long time.  That habit is not in vogue in todays fast trading world.  Warren is looking to own assets that will appreciate over time, while bringing in some great cash flow, year in and year out.  I remember those days, but then my idea of long range planning is “what are we going to do after lunch?”  Warren is worried about the next decade, not what’s for lunch!

Warren, really Berkshire Hathaway, bought most of the print units of Media General, sans the Tampa Tribune, which will stand on its own for Media General, or until they find a way to sell it off as well.  Media General got some great cash and a chance to stay alive for awhile, something many major media companies are trying to do.  Warren got all of these holdings at a good price along with the real estate.  The price is significantly lower than the multiples paid in the past decade when all of these media companies sold or recapitalized, and then the bust hit.  Media companies can still make money, if they are not mired in debt – that is what Warren knows.

With our transition to a digital media world, in progress as we speak, there is still room for print media in local markets.  I should qualify that and say ‘print’ is not really the operative word going forward, but news media leader in a local market with a print product is more to the point.  As the ‘voice’ of the community – their earned mantle – they can be important and profitable businesses.  Kind of like having gone through a takeover by a venture capital company.  Make it leaner, and meaner and you can still make a buck.  Lots of jobs will be shed, but then that is better than oblivion.

With this deal Mr. Buffett and Berkshire have seats at the table with Media General, as well as with The Washington Post Company, as well as a stake in The Buffalo News. He is quickly gaining influence throughout the industry by his unabashed belief in the continuing role of the newspaper in the community.  He provides both financial and moral support to an industry in need of both, and at a very critical time.  The biggest players like the New York Times, Washington Post and Wall St. Journal exist on a different plane.  They are national papers of record that large audiences look to, their issues are different. Local and regional papers have different needs and Warren understands.  With his purchases, not only does he have a seat at the table, but now he sits at the head of the table, and all eyes are on him.

Facebook is launching today what could be one of the truly huge IPOs with a value over $100B.  FB is one of the contributing factors to the demise of newspaper readership.  No they are not the main culprit, but more of a symptom of the decline of newspaper subscriptions.  The newspaper was the watercolor content provider for social currency up through the last 10 years.  If you wanted to be able to join the conversation at work, you read the newspaper.  TV was also a source of conversation with your friends and co-workers.  Now you keep in touch by digital means, texting and emailing…and the Facebook.  Newspapers, in this new age, have lost a lot of their relevance of social currency.  By the way it opened at $38 and has moved across $40 where it is as of this post.  Oh for the days when newspaper sales attracted half of the attention of the FB IPO.

Warren understands that the local market is the last great place to have a real chance to still have an open forum in the community.  There is still a chance in our ever growing social world that the local paper can have a real chance to drive that social discussion.  As in the past, this is not about altruism, it is about having a good earning business.  Newspapers will never command the high multiples when they are sold, because they will never be the monopolies of the past.  With low debt and reduced operating costs newspapers can deliver a return that a ‘buy and hold’ kind of guy like Warren can appreciate.  This strategy can be the one that can save local papers, and I don’t see much else that will.

Good luck Warren!  We are all pulling for you and your strategy for the sake of our industry, and our communities.  We’ll be waiting for more good news in the future.  By the way how about some love for Orange County – The Register is available, and I hear the price is too good to pass up.

Warren Buffet – A Savior for Newspapers

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Warren Buffett - The New Savior of Newspapers“Warren Buffett Says He May Buy More”

by Peter Kafka in  All Things Digital

Berkshire Hathaway’s Warren Buffett, who owns the Buffalo News, the Omaha World-Herald and a big chunk of the Washington Post, told shareholders today that he may buy more newspapers. “I think there is a future for newspapers that exist in an area where there is a sense of community,” he said. “I think the economics will be ok, but it will be nothing like the old days.”

If there is one man who can set the direction for newspapers it could be the Warren.  He still sees the value because he see the total proposition, not just the bottom line.  In many of the recent sales of newspapers this kind of logic has prevailed – as in San Diego, Philadelphia, and the potential of Eli Broad buying the Los Angeles Times.  Money seeking influence.  I think we have found our new business model.  As the saying goes “Everything old is new again!

Another Newspaper Chain takes on water

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Another one bites the dust!  Lee Enterprises, publisher of 48 daily newspapers, filed for Chapter 11  bankruptcy protection to refinance almost $1 billion in debt.  This will not be the last bankruptcy filing for the newspaper field, perhaps the last for 2011, and that’s a good thing.

The plan is for the company to repay its creditors in full, but will require the extension of key payments of maturing debt due in April into 2015-2017, though at higher interest rates.

The newspaper business is not the high margin field it used to be.  Coupled with the debt incurred after a major raft of acquisitions and consolidations over the past several years, the field is awash in red ink.  In the case of Lee it was their acquisition of the Pulitzer chain back in 2005.

Recently, Warren Buffett bought The Omaha World Herald, it’s other newspapers in what is likely a ‘sugar daddy’ deal.  By that I mean it was for personal reasons, not just as an investment.  Nice to have a lot of disposable billions like Warren has, and that is what the newspaper business needs.  Deep pockets, and the desire to make a difference with a big voice in the local community.  This was really how the newspaper business got started, and going back to our roots could be what we really need at this time in our history.