Back in 1969, billionaire investor Warren Buffett wrote a letter to his investing partners that is now quite famous. In this letter he told his investing partners that he was not able to find any value in the marketplace and he believed it best to return their money and dissolve the partnership.
In the letter he came to the conclusion that only two businesses possess relative value, and one of those was Berkshire Hathaway. As part of an option to his company liquidation, he offered the investing partners the choice of owning pro rata shares of both of these companies.
Warren Buffett’s tremendous personal wealth is evidence to the success of those who stuck with him. Plus, he is the antithesis to the typical greed you hear about on Wall Street, and he has pledged to the Bill and Melinda Gates Foundation a total of $30 billion.
Over the next 50 years, Warren Buffett has been a major powerhouse in the investing world. He is obviously the most famous investor the world has known, and certainly the most successful in the eyes of many. When the technology boom came along, he backed away because he didn’t understand this business model. Luckily or strategically, he was capable of avoiding the dot com bust altogether.
You know Warren Buffett owns stocks, he doesn’t invest in them. When he invests, he does so in the companies and the value that they bring. He’s also known to ignore the emotions and attention of the marketplace.
Warren Buffett has been buying newspapers as of late. It’s funny because this medium is looked at as yesterday’s media. But he has a specific way of investing in newspapers. He only buys small-market, hometown newspapers with a loyal following. Does he know something that the rest of us do not?
In the year 1986, Bill Kovach was hired by the Atlanta Journal-Constitution, and became their new editor. He was previously the Washington bureau chief of the New York Times.
This new appointment brought about a turbulent two years, and the investigative journalism brought two Pulitzer prizes and many more nominations. That’s not a normal occurrence for a newspaper like the Atlanta Journal-Constitution.
They proceeded to ramp up their reporting, and decided to cover more international and national news stories. They also covered critical business stories that revolve around the city of Atlanta. They even picked a fight with the mighty Coca-Cola. This resulted in a proud community, who enjoyed their vastly improve newspaper.
But like all good things, they must come to an end. And Bill Kovach was fired in November 1988.
The city was in an uproar, and they were very upset over this decision. There was even a protest march that went all away down Marietta Street, and went past the front of the newspaper’s office. Such important intellectual leaders like Pat Conroy and Morehouse professor Michael Lomax even participated in this event.
This situation became national news, and the newspaper owners, Cox Enterprises, were vilified in the media. The event gained a lot of attention, and all of it was overwhelmingly in favor of Bill Kovach.
But Cox wanted to return to its regular style of journalism. They weren’t interested in becoming a competitor of USA Today or the New York Times. So Bill Kovach was out. That’s just the way it goes sometimes.
Fuhrman Bisher, a sports reporter for the newspaper during that time, said: “Maybe now we can get back to covering Dixie like the dew” – the tagline of the newspaper.
The message in that saying is quite simple: the local news is still important and it still sells, and the local newspaper has to completely serve the market if it’s going to survive.
As a newspaper editor, you need to realize that a person could get their national and international news from so many different media sources at this point. But there aren’t many ways to get the local news, except for the local newspaper in many cases. There will always be a tremendous demand for comprehensive coverage of local business, local sports, local festivities and the local lifestyle.
It’s fairly straightforward at the empirical level: the life force of a newspaper is always going to be the advertising revenue. If you plan to give advertisers their money’s worth, you have to get in touch with their target audience. If the target audience is local readers, then you have to provide local information. It’s that simple.
According to the way Warren Buffett thinks, this is always going to be a profitable business model.
The media is saying that print newspapers are dying, and national newspapers and news magazines are having a tough time surviving at this point because of the Internet.
At the time of this writing, Time Warner has done something practically unthinkable. They have spun off Time Inc., the company’s magazine portfolio, and turned it into its own standalone company.
In the meantime, Warren Buffett has shrewdly found value in a largely ignored investment that the rest of Wall Street seems to have overlooked. At the time of this writing, Berkshire Hathaway currently owns 28 newspapers. It wouldn’t be surprising if other people seem to recognize this opportunity and eventually follow suit.