Media General President and CEO Marshall Morton tells Michael Schwartz that the company didn’t realize until 2011 that its newspaper revenue declines were not simply due to the recession:
“Over the past five years, our first thought was that this was heavily due to the recession and, like many other recessions in the past, that this was a cycle. You tighten your belt, freeze hiring and even drop the number of people.
“So we went through a couple years thinking that was the way to handle it. But it kept going.”
It wasn’t until the second quarter of 2011, Morton says, “that we realized the world had changed.”
Morton says the company had considered selling its papers for months, but the deal with Berkshire Hathaway to buy most of its newspapers came together over a matter of days. Key to the deal: Buffett could buy the newspapers and solve Media General’s debt problem at the same time:
The larger side of the deal includes $445 million in loans and credit lines that give Media General better terms on its debt than it could find elsewhere. In addition to taking the newspaper, Buffett’s company also grabbed a 20 percent ownership stake in what’s left of Media General.
Clay Shirky writes that Buffett doesn’t understand the newspaper business:
Here’s a prediction: long before the Berkshire Hathaway warrants expire, many of the papers Buffett has invested in will have reduced both print days and their newsroom staff, and journalists will be writing the “What went wrong with the Media General deal?” story.
Related: Berkshire Hathaway now owns 4 percent of Lee Enterprises after buying $85 million in debt (Riverfront Times)