Reuters | World-Herald | UNL
Billionaire Warren Buffett warned investors two years ago that newspapers faced “the possibility of nearly unending losses” and not to buy them. Today, his company has purchased his hometown paper, the Omaha World-Herald. Berkshire Hathaway also owns the Buffalo News and is the largest shareholder of the Washington Post Co. Buffett left the Post’s board this year after serving on it for three decades.
“For most newspapers in the United States, we would not buy them at any price,” Buffett said in May 2009 at a Berkshire shareholders meeting. “Twenty, thirty years ago, they were a product that had pricing power that was essential” but now “they have lost that essential nature.”
Berkshire also owns three other Omaha businesses, including a furniture store and a jewelry store.
“This means the World-Herald is staying in local hands,” says Gary Kebbel, dean of the University of Nebraska-Lincoln College of Journalism and Mass Communications. “Those locally owned newspapers that are delivering information about their communities and their communities’ needs have been stronger in comparison to large metropolitan papers.”
UNL finance professor Donna Dudney underlines the news org’s local value, saying: “The World-Herald is in the top 10 newspapers in the country in terms of the percentage of subscribing households in its market, and its digital news site dominates the Omaha market.”
Adam Hochberg reports:
Buffett’s purchase is being greeted with cynicism by some observers. “How quaint,” wrote Avi Salzman of Barron’s. “There probably won’t be very many negative stories about the Oracle of Omaha in the World-Herald anymore.” Bloomberg Businessweek quoted analyst Meyer Shields, who suggested that Buffett bought the paper to “cultivate his legacy.” “It’s very difficult to see this as a financial investment,” Shields said.
But this isn’t the first time that Buffett has perplexed observers by investing in an out-of-favor industry. When he bought the Burlington Northern Sante Fe Corporation in 2009, the New York Times noted, “A railroad might strike many people as a bit old-fashioned — more 19th century than 21st.” In an NPR story, UCLA Economist Matthew Kahn told me it struck him as a “Back to the Future” kind of investment.
So far, the BNSF purchase has exceeded Buffett’s expectations. The railroad earned $3.6 billion last year.