May 22, 2012 — In case you hadn’t noticed, Warren Buffett, dubbed the “Oracle of Omaha” for his success in business investments, just spent $142 million to purchase 63 newspapers from Media General, Inc.
Despite the prophets of doom who continue to predict the demise of all newspapers, this guru of the stock market invested much of that money in communities the size of Morehead.
Here’s how Buffett described his decision:
“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 apparently has a special place in his heart for the newspaper industry because he says he started Berkshire Hathaway with $5,000 he saved while delivering his hometown newspaper, the Omaha World-Herald, which he purchased last year.
Sentimentalism aside, Buffett is a hard-nosed businessman who used his personal interest in newspapering to leverage a deal that should add to his already vast fortune.
One media observer described the Media General deal as a “three corner pool shot.”
He claims it will enable Buffett to make money on loans and a credit line he is providing to Media General, from stock warrants he will receive from Media General as it converts to a broadcast company and by eventually reselling all or most of the newspapers he reportedly acquired at bargain prices.
Investing in the newspaper business might be an unusual move for most big investors but not for Buffett. He has consistently invested in things he knows about, a good rule for any investor.
Buffett is well acquainted with newspapering from his ownership of the Buffalo News and from his years on board of the Washington Post, in which he has held a major stock share.
In our opinion, his experience with urban dailies also made him aware that community newspapers have fared better in the digital age and, on average, are more profitable.
We are proud of the fact that The Morehead News and other community newspapers remain the primary source of news and information for the areas we serve.
Yes, we have moved to digital platforms like the Internet and social media to help deliver the news but our basic news package primarily is the work product of newspaper reporters and editors.
Thanks, Mr. Buffett, for the $142 million vote of confidence in community newspapers.