If Warren Buffet is the smartest investor in America, why in the world is he buying up newspapers, which is supposed to be the dumbest investment in the world these days? The secret is that most of the 63 papers he now owns are in the 5,000-25,000 circulation range:
“In towns and cities where there is a strong sense of community, there is no more important institution than the local paper. The many locales served by the newspapers we are acquiring fall firmly in this mold and we are delighted they have found a permanent home with Berkshire Hathaway.”
Buffett can wax sentimental all he wants but he is still the same hard-nosed businessman who was tough enough to stick it to Goldman Sachs. Like any of his deals, this is all about money.
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The story of the catastrophic decline in newspapers has been driven by metropolitan papers like the Washington Post (on whose board Buffett sat for years) where ad rates plummeted while readers embraced digital alternatives.
The experience of small towns and counties has been different. In these places, a lack of print and online competition has allowed newspapers to hold onto some of their traditional monopoly power.
“In these communities, the local paper is the sole source of everyday news — from high school sports, local events or obituaries,” says Gordon Crovitz, former publisher of the Wall Street Journal and founder of digital subscription service, Press+.
So what we're likely to end up with in print are a handful of giants that will survive, like the Wall Street Journal, the New York Times and USA Today, and hundreds of small dailies and weeklies that cover the hell out of their local communities. Has anybody else noticed that the same kind of sorting has been going on online? There are a handful of high-traffic outlets for news like Google, Yahoo and Drudge, and millions of one-person shops called blogs that can exist because they don't have to generate a ton of money to support staff and infrastructure.
Kind of silly to speculate about it, though, because we're getting to the point where change will come so fast it can't be planned for (not that it ever was that possible). Last week we saw that Facebook, which was supposed to be the be-all and end-all of social media, may have already peaked by the time of its IPO. That means the next iteration is just around the corner.