First Warren Buffet started buying up local newspapers in the US. Then in March this year he made a statement in his letter to shareholders that he and his investment partner, Charlie Munger, were “bullish” about local newspapers. These two events created a positive mood in the sector and sparked others into following suit.
But this week Buffett’s company, Berkshire Hathaway, dumped all of its shares (1.7 million, worth about £24.3 million) in US publishing giant Gannett, which owns, among other media interests, Newsquest Media Group, publisher of over 200 newspapers, magazines and trade publications in the UK.
What, I wonder, is the Sage of Omaha indicating with this apparent dichotomy? It is possible that the optimism he voiced in March about local papers has been overtaken by a more cautious view.
Or could it be that he always understood that the huge returns predicted by most boardrooms running large local media networks are a myth, have always been a myth and will always be a myth. Local, in his view, might mean just that: each local newspaper run autonomously but with cover from a corporate umbrella when or if required.
Buffett has always said that he buys management, not companies. And there is no doubt that the managers of local newspaper groups in the UK have not exactly covered themselves in glory in the past, confusing cost-cutting in editorial departments with generating revenues and profits by innovation and smarter business development.