Berkshire Hathaway 2018 Annual Meeting Audience Question # 37

The rate of decline for newspapers hasn’t moderated

Warren Buffett:

OK, Carol.

Carol Loomis:

This question is from Max Taylor of Chicago, and it concerns the newspapers that Berkshire owns.

In your 2012 letter to shareholders, Mr. Buffett, you had a section devoted to Berkshire’s buying 28 newspapers during the year just past. Since then, you have not come back to the newspaper subject.

But this year, at the end of the annual report, you published a list of the newspapers Berkshire owns today, along with their circulation. I compared that list with the one you published five years ago at the end of 2012.

As you no doubt know better than anyone, the circulation of the 26 newspapers that Berkshire still owns, of the 28 originally bought, fell sharply. In many cases, by big amounts like 30 percent to almost 50 percent.

I know that five years ago, you acknowledged the risk in owning newspapers, but you still said, ‘Charlie and I believe that papers delivering comprehensive and reliable information to tightly- bound communities, and having a sensible internet strategy, will remain viable for a long time.’

Skip to today, and imagine that you are writing about Berkshire’s experience with newspapers.

What would you be saying?”

Warren Buffett:

Yeah. I would say that… I forget the modifying word on internet strategy… but I could say (the sound in this part of the video is inaudible).

The problem has been… about 1,300 daily newspapers in the United States… there were 1,700 not that long ago… is that no one except The Wall Street Journal, The New York Times, and now probably The Washington Post has come up with a digital product that, really in any really significant way, will replace the revenue that is being lost as print newspapers lose both circulation and advertising.

And if you look at the communities in which we operate, or the communities in which, you name it… other newspapers operate, the community could be prospering. We’re in a prosperous economy presently. And all are losing daily circulation, they’re losing Sunday circulation, they’re losing street… all street sales, they’re losing home-delivered.

And it is… I’ve been surprised that the rate of decline has not moderated in the last five years.

We bought all the papers at reasonable prices, so it is not of great economic consequence to Berkshire. But I would like to see daily newspapers, actually, you know, be economically viable, because of the importance to society.

But I would say that the trends which… I put those circulation figures in there because I think the shareholder’s entitled to look, year-to-year, at what is happening. And it’s not only…

It’s happening to 1,300 newspapers throughout the United States. And it happens in small towns, where you would think that the alternative sources of information would not be that good. It happens every place.

And The Journal, The Times, and probably The Post, have a viable economic model in the digital world, and probably will continue to shrink… I’m almost certain will continue to shrink… in the print world.

But the digital world will be big enough that… and they’ll be successful enough… so that they have, in my view, a sustainable business model.

But it is very difficult to see, with the lack of success, in terms of important dollars arising from digital, it’s difficult to see how the print product survives over time. And that’s… I’m afraid that’s true of 1,300 papers in this country.

And we’ll keep looking to see if there is a way to do it. But you’d have to look at our experience, and look at the experience of everyone else’s.

McClatchy newspapers came out the other day, you know, and I think that newspaper… which is very good… fine cities that they operate in… and advertising revenue is down something like 17 or 18 percent, and circulation. But it isn’t just them, it’s everybody in the business. And I wish I had a better answer for you, but I don’t.

I would say that the economic significance to Berkshire is almost negligible, but the significance to society, I think, actually is enormous.

And, you know, I hope that we find something. I hope others find something because we’ll copy it. But so far, we have not succeeded in that.

Charlie?

Charlie Munger:

Well, the decline was faster than we thought it was going to be. So it was not our finest bit of economic prediction. And I think it’s even worse.

I think, to the extent we miscalculated, we may have done it because we both love newspapers and are… and have considered them so important in our country.

These little local newspaper monopolies tended to be owned by people who behaved well and tended to control the politicians. And we’re going to miss these newspapers if they disappear.

We’re going to miss them terribly. And…

Warren Buffett:

I think you may continue…

Charlie Munger:

… I hope to God it doesn’t happen, but the figures are not good, Warren.

Warren Buffett:

No. No, they aren’t. And it isn’t just… you know, it isn’t some town that has a particular problem with unemployment or anything of the sort. And it isn’t due to general economic conditions.

It’s due to the fact that a newspaper, if you wanted to know the baseball results from the present day, and the box scores, and everything else, they told you the following morning and it was still news to you.

And the financial material that I read from there, and in terms of looking at the stock prices and everything, they were news to you the following morning. And the…

What was developing in the Pacific in terms of the war was news to you when you read about it in the morning in The New York Times. And it’s… news is what you don’t know that you want to know. And the…

And those Help Wanted ads, you know, segregated as they may have been, still were the place to go to look to find a job. And you can go up and down the line and one element after another where the daily print newspaper was primary, they’re no longer primary.

And the business has changed in a very material way, and we haven’t been able to figure out any solutions to that, and we’ll keep trying.

Like I say, it’s not of economic consequence, but I think it is societal consequence. And we haven’t been able to solve it.

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