Why rich people are investing in newspapers, again
In March, Chris Hughes paid around $5 million for a majority share of The New Republic. On Sunday The New York Times reported he'd be doubling the magazine's staff and hiring former editor Franklin Foer to edit the magazine once again. Also last week, Warren Buffett's Berkshire Hathaway purchased most of Media General's newspaper holdings. Both moves -- which amplify the recent drumbeat of wealthy people taking ownership stakes in newspapers in Philadelphia and Maine -- are the sort of brash, conventional-wisdom agnostic actions wealthy people, especially wealthy men, like to make. But there are a couple of reasons not to look at them as vanity projects.
• "The money was already lost." That's what banker Brad Bulkley told Chicago Reader media columnist Michael Miner about the reported sale of the alt weekly to the Chicago Sun-Times' ownership for $3 million dollars. Last time it was sold, back in 2007, the Reader and Washington City Paper went for $30 million, a purchase price that drove the company that wrote that check into bankruptcy. That $27 million that vanished from the face of the Earth isn't the new owners' problem, nor is the $507 million that evaporated between the sale of The Philadelphia Inquirer and Daily News' purchase by Brian Tierney in 2006 and its resale this past April a problem for the coalition of wealthy fellows who bought those properties. The new owners of these properties are hoping the properties are right-priced now.
Buffett might have gotten an even better deal: As Bill Freehling points out in the Fredericksburg Free Lance-Star, Berkshire Hathaway refinanced Media General's debt in exchange for about 20 percent of the newly newspaper-free company, which still owns 18 TV stations. Berkshire's loaning Media General $400 million at a 10.5 percent interest rate.
In other words, by the time the loan matures, assuming Media General makes all the interest payments, Berkshire will have received almost all of its $400 million back already. In 2020 Berkshire could probably refinance the loan if necessary. As a kicker, Berkshire gets warrants to own 20 percent of Media General’s remaining television-focused business as well as a seat on its board.
And those community papers, which fit neatly with Buffett's ideas about successful newspapers being businesses that deliver news no one else can, have been, as Erik Wemple wrote, "plodding along. Not printing money, mind you, but making a living." The new holdings also include real estate and a healthy contract printing subsidiary.
Which brings us to the second great draw:
• Ideas. On Friday, Chris Hughes' share of Facebook became worth about $836 million. When he bought his share of The New Republic, he told Brian Stelter, "I’m investing and taking control of The New Republic because of my belief in its mission, not to make it the next Facebook.” Appointing Foer, an editor (like Richard Just, whom he is replacing) who loves long thinky features, reflects on Hughes' ideals more than his jaw-dropping wealth. The New Republic won't be the next Facebook, but if it carves out a niche for itself, Chris Hughes will further refine his legacy, from the guy who had the spectacular luck of rooming with Mark Zuckerberg at Harvard to the guy who ran Barack Obama's social media outreach to the guy who helped Good magazine evolve to the guy who saved serious political journalism.
Likewise, Buffett. He supposedly passed on buying The Tampa Tribune, which competes with the Poynter-owned Tampa Bay Times, because it didn't fit his idea of what a newspaper should be in 2012: A business with what Jack Shafer calls "franchise value." In the Winston-Salem Journal, which Buffett just bought, Bertrand M. Gutierrez and Jacob Geiger write:
Media General's largest paper, The Tampa Tribune, was "never part of the equation" because Berkshire likes community newspapers, [Media General CEO Marshall N.] Morton said. The Richmond Times-Dispatch, which Media General considers a large paper and which is widely considered Virginia's paper of record, is, in Berkshire's perspective, a large community paper, he said.
Buffett's bullish on newspapers that can deliver exclusive local content and figure out how to monetize it, either from advertising or paywalls or some combination thereof. And it's a strong signal from the Heartland that community is more important than commodity -- Buffett's probably not going to ride his magical checkbook into the headquarters of newspapers that mostly cover the same news as The Wall Street Journal, The New York Times and The Washington Post.
And then there's Bart Blatstein, spurned would-be owner of the Philadelphia Media Group. He's got the dough and the desire to own a Philadelphia outlet -- why not the Daily News, Joel Mathis argues.
Bart Blatstein would love to own his own newspaper.
When he was shut out of bidding for PMN this spring, Blatstein threatened to start his own operation. There haven’t been any public signs that he’s followed through on that threat—so maybe the dream of being a new era Charles Foster Kane was a fleeting ambition.
Still, Blatstein is a Philly guy. He’s around for the long haul. He’s certainly attempting to leave a lasting mark on the city, with the creation of the Piazza and the proposed renovation of the old Inky building at 400 N. Broad. What could be more legacy-enhancing than saving and bankrolling a civic treasure like the Daily News?
The silent aggrieved party in all this rich guy white knightery? All of us who've given our time to presenting, attending and speaking at future-of-media conferences. While we've dutifully Storified, aggregated and earnestly discussed business models, we've probably spent too little time on David Carr's "cat toy" hypothesis:
If you pull back a few thousand feet, you can see newspapers coming full circle. Before World War II, newspapers were mostly owned by political and business interests who used them to push an agenda. People like William Randolph Hearst and Robert McCormick wielded their newspapers as cudgels to get their way. It was only when newspapers began making all kinds of money in the postwar era that they were professionalized and infused with editorial standards.
Maybe rich guys will take an interest in future-of-media conferences down the road?