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Newspapers & Uncle Warren


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Berkshire has been investing in "local newspapers" and Buffett has said it is more of vanity investment rather than obscenely profitable investment...but I am thinking I will look at his actions and look past his words ;D

 

So I think the question is, what do we think the newspaper business will look like in 10 years? If the trend we are seeing continues, then the business will be mostly selling digital subscriptions, yes? Whatever type of pricing model they choose, the nuts and bolts of it are that they will not be selling a physical paper. Therefore there is relatively little future capital investment needed, very little distribution costs, and the only major costs will be the cost of generating the content (i.e. staff).

 

So could this be another brilliant move by good ole' Warren?

 

I was looking at Lee Enterprises, which owns about 30 or so local newspapers nationwide. Berkshire has refinanced a portion of their debt at 9% and owns equity as well. I think it's just brilliant. Lee pays Uncle Warren the majority of the profits of their print & circulate newspaper business in interest on the debt. These operations will eventually fade off into the sunset, meanwhile Berkshire retains equity ownership as the digital business picks up with the next generation in these towns and generates recurring revenues.

 

I think if one can pick up these "brands" at distressed or reasonably cheap prices, in 5-10 years they might look like a great investment. What do you folks think?

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Our local papers including one of Lee's seem to be entering the digital age offering local merchants advertising packages with print, Internet and mobile exposure. Is it working? I'm not sure if it is today, but I believe they may eventually figure it out and become the "local search" others, like the yellow pages/book, etc. haven't quite figured out.

 

I don't see newspapers digital subscriptions replacing current hard copy subscription $ volume and unless they can figure out online real estate and auto advertising (the largest advertising contributors) I don't know how they can exit hard copy - reducing costs as you suggest.

 

You and Warren could be right, but it seems like it will take a long time to find out...

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A good question was posed at last spring's Ben Graham Dinner, which I'll paraphrase. 

 

If newspapers didn't exist today, would they be created?

 

(A good question to ask of most businesses.)

 

Thats a great frame of thought.

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  • 2 weeks later...

Hey Canadians,

 

Would you consider Sun Media products a competing daily paper?  I honestly have never read one regularly and was curious about the strength of their local coverage.

 

For example, would you say the Ottawa Citizen meets requirement #1 of Buffett (below)? Or does the presence of the Ottawa Sun make Ottawa not an appropriate city for Newspaper investment?

 

Ottawa Citizen circulation: 113,859 weekdays

Ottawa Sun circulation: 45,442 weekdays

 

 

American papers have only failed when one or more of the following factors was present:

1) The town or city had two or more competing dailies

2) The paper lost its position as the primary source of information important to its readers

3) The town or city did not have a pervasive self identity

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Berkshire has been investing in "local newspapers" and Buffett has said it is more of vanity investment rather than obscenely profitable investment...but I am thinking I will look at his actions and look past his words ;D

 

So I think the question is, what do we think the newspaper business will look like in 10 years? If the trend we are seeing continues, then the business will be mostly selling digital subscriptions, yes? Whatever type of pricing model they choose, the nuts and bolts of it are that they will not be selling a physical paper. Therefore there is relatively little future capital investment needed, very little distribution costs, and the only major costs will be the cost of generating the content (i.e. staff).

 

So could this be another brilliant move by good ole' Warren?

 

I was looking at Lee Enterprises, which owns about 30 or so local newspapers nationwide. Berkshire has refinanced a portion of their debt at 9% and owns equity as well. I think it's just brilliant. Lee pays Uncle Warren the majority of the profits of their print & circulate newspaper business in interest on the debt. These operations will eventually fade off into the sunset, meanwhile Berkshire retains equity ownership as the digital business picks up with the next generation in these towns and generates recurring revenues.

 

I think if one can pick up these "brands" at distressed or reasonably cheap prices, in 5-10 years they might look like a great investment. What do you folks think?

 

Buffett should buy Glacier Media here in Vancouver.  They are the dominant community newspaper player in Canada, as well as specialty publications.  At a 5-year low right now, and I've been loading up! 

 

Solid balance sheet, fat dividend, excellent cash flows...about 9 times earnings.  Tim's owned it for years so I know it very well, but it finally fell to the price that I would buy at.  Cheers!

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Buffett should buy Glacier Media here in Vancouver.  They are the dominant community newspaper player in Canada, as well as specialty publications.  At a 5-year low right now, and I've been loading up!

 

So you're the guy who's been keeping the price high!  ;)

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Buffett should buy Glacier Media here in Vancouver.  They are the dominant community newspaper player in Canada, as well as specialty publications.  At a 5-year low right now, and I've been loading up!

 

So you're the guy who's been keeping the price high!  ;)

 

What do ya mean?  I was buying at lower prices last week, but somebody else pushes it up.  Can't get as many this week!  Cheers!

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Buffett should buy Glacier Media here in Vancouver.  They are the dominant community newspaper player in Canada, as well as specialty publications.  At a 5-year low right now, and I've been loading up!

 

So you're the guy who's been keeping the price high!  ;)

 

What do ya mean?  I was buying at lower prices last week, but somebody else pushes it up.  Can't get as many this week!  Cheers!

 

Anybody know why the gross margin of Glacier dropped in the last FY?

 

BeerBaron

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