Newspapers Last Defender Has Gone Sour, Buffett Says They Are Going Down

Tuesday, August 16, 2016

GoLocalWorcester Business Team

That was then and this is now -- Warren Buffett the owners of more than 30 newspapers has now declared that future of newspapers is dismal.

“In the past 15 months, Berkshire Hathaway acquired 28 daily newspapers for $344 million,” reported Business Insider in a March, 2013 article. Buffett’s purchase of Newspapers was the last hope that the industry was viable.

Buffett bought 32 papers in total.

But, in an interview with Politico’s Playbook this month, Buffet said "Newspapers are going to go downhill. Most newspapers, the transition to the internet so far hasn’t worked in digital. The revenues don’t come in. There are a couple of exceptions for national newspapers — The Wall Street Journal and The New York Times are in a different category. That doesn’t mean it necessarily works brilliantly for them, but they are a different business than a local newspaper."

Not great news for newspaper ownership groups when the premier investor in the United States turns sour on his own assets - publicly.

“But local newspapers continue to decline at a very significant rate. And even with the economy improving, circulation goes down, advertising goes down, and it goes down in prosperous cities, it goes down in areas that are having urban troubles, it goes down in small towns – that’s what amazes me,” said Buffett.

“A town of 10 or 20,000, where there’s no local TV station obviously, and really there’s nothing on the internet that tells you what’s going on in a town like that, but the circulation just goes down every month. And when circulation goes down, advertising is gonna go down, and what used to be a virtuous circle turns into a vicious circle.”

Related Slideshow: Why the Last 60 Days May Have Been the Worst Ever for Newspapers

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Pew's Forecast is Dismal

"Though the industry has been struggling for some time, 2015 was perhaps the worst year for newspapers since the Great Recession and its immediate aftermath. Daily circulation fell by 7%, the most since 2010, while advertising revenue at publicly traded newspaper companies fell by 8%, the most since 2009. At the same time, newsroom staffing fell by 10% in 2014, the last year for which data were available. Coming amid a wave of consolidation, this accelerating decline suggests the industry may be past its point of no return," said Michael Barthel, research associate, Pew Research. June 16, 2016

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Collapse of Print

Mary Meeker's annual digital study finds that time with print has now declined to just 4 percent of consumer's time -- less than 10 percent of the time consumers spend with digital. Her report "2016 Internet Trend Report," was released June 1, 2016.

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Macy's Cuts

"In a large metro market, Macy’s ROP – or run of press, the ads running with the newspaper pages – would generate $1 million to $1.5 million in ad revenue a year. Now, with that number cut 40-60%, depending on the market, a publisher would see a drop of as much as $900,000. Figure that’s the equivalent of at least 10 newsroom jobs. In fact, at some companies, these cutbacks will mean a fairly commensurate cut in newsroom jobs, unless digital ad growth can offset the print losses," reports Ken Doctor in Politico on June 9, 2016.

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Newspaper Cuts

Employment Changes:

In The Newspaper Industry

1993 to 2007: -79,000

2007 to 2016: -168,200

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Other Print Cuts

68% of job loss occurred since 2007

In The Magazine Industry

1993 to 2007: -300

2007 to 2016: -48,400

99% of job loss occurred since 2007

In The Book Industry

1993 to 2007: 700

2007 to 2016: -20,700

100% of job loss occurred since 2007

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Loss of Readership

Newspaper readers are declining for all age groups -- especially the young. They aren't starting to read papers, accroding to the Center for Media Research, July 4, 2016.

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More Digital Staff Now

"Few industries have been affected by the digital or information age as much as newspapers and other traditional publishing industries (books, magazines, etc.). In June 1990, there were nearly 458,000 people employed in the newspaper publishing industry; by March 2016, that figure had fallen to about 183,000, a decline of almost 60 percent. Over the same period, employment in Internet publishing and broadcasting rose from about 30,000 to nearly 198,000." according to a U.S. Department of Labor report issued in June.

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Even Brexit Hits Hard

"Economic uncertainty arising from the June 23 referendum will impact advertising across all media sectors, including TV and the Internet, Enders Analysis, a leading London research firm, said in a report emailed to clients on Friday. But print is likely to be the worst hit, adding to the woes of a sector that is already facing serious financial challenges…Enders is projecting that print advertising income on Fleet Street will decline by between 20 and 25 percent in 2016 and 2017," writes Alex Spence from Politico.