Buffett plays guardian angel to print media

He describes himself as a newspaper addict who plans to buy more papers in the future

Over the years, newspaper owners have built monuments to themselves in the form of giant buildings, statues and plaques commemorating their roles in their communities and the country at large.

At the headquarters of The Buffalo News, a sand-coloured office building across the river from a fragrant Cheerios factory, the only visible sign of the owner is a small photograph hanging in the office of the publisher, Stanford Lipsey, signed, ‘To the best in the business, Warren.’

Warren is, of course, the billionaire Warren E Buffett, but the modesty of his physical presence at the paper – he has not visited the newsroom in the last eight years – understates his interest in the paper, which his company, Berkshire Hathaway, bought in 1977.

Buffett’s views on newspapers have been a hot topic of late. Three years after telling his shareholders that he would not buy a newspaper at any price, Buffett has moved aggressively into the business, buying 63 local papers and revealing a 3 per cent stake in Lee Enterprises, a chain of mostly small dailies based in Iowa.

In a letter Buffett sent to the publishers and editors of all Berkshire Hathaway daily newspapers, he described himself as a newspaper ‘addict’ who planned to buy more papers in the future. While he is less certain how he will make papers profitable in the digital age, he’s confident that in certain cities, newspapers will thrive.

“I do not have any secret sauce,” Buffett said in a phone interview. “There are still 1,400 daily papers in the United States. The nice thing about it is that somebody can think about the best answer and we can copy him. Two or three years from now, you’ll see a much better-defined pattern of operations online and in print by papers.”

For his new employees, the best indicator of what Buffett may do is what he has done with The Buffalo News. Interviews with more than a dozen current and former editors paint a picture of a profitable paper that is run with little involvement from its owner.

Some journalists say that the owners will hold out as long as they can to buy the latest printing presses and that they wish the paper dedicated more resources to the highly ambitious journalism that wins the biggest awards.

But many workers agree that the owners do not skimp on sending journalists to town meetings or on enterprising local journalism, which is in line with Buffett’s belief about intensely locally focused papers.

“In Grand Island, Nebraska, everyone is interested in how the football team does. They’re interested in who got married. They’re maybe even more interested in who got divorced,” Buffett said, adding that he was not interested in sprawling markets like New York or Los Angeles. “If you live in South Central Los Angeles, you’re not interested in who dies in Beverly Hills.”

Job cuts

But being owned by Berkshire Hathaway has not shielded The News from the industry’s slump. In 2011, the union said newspaper officials told them the paper earned a profit of $9.3 million, the first time the paper’s profits fell below $10 million in a quarter-century. To put this in perspective, Lipsey said The Buffalo News often reported annual profits in the 1980s of $55 million.

Since 2009, nearly 100 full-time jobs were cut from the union – which includes the newsroom and the classified, accounting, bookkeeping and circulation departments – according to Henry L Davis, the paper’s health reporter and the president of Buffalo Newspaper Guild.

The newsroom staff is now 140, from 200 about a decade ago, with cuts made mainly through buyouts rather than layoffs. Retirees have few complaints about the pension managed by Berkshire Hathaway because the maximum retirement payouts have been raised. So while union negotiations have been heated and highlighted debates over who should pay for employee parking, newsroom employees still have their health benefits fully covered.

“I hate to think of what Buffalo would be without a newspaper,” said Lee Coppola, a reporter at the paper from 1967 to 1982 who went on to work in television, and then became a federal prosecutor and later was the dean of the journalism school at St. Bonaventure. “I think Buffett has sheltered the city since he bought the paper, in a way.

He has sheltered the paper. He spent millions and millions of dollars when newspapers were in decline.”

While the newspaper’s circulation (now about 1,50,000 daily and 2,30,000 on Sunday) has dropped with the population, the residents who remain still read the paper. According to data tracked by Media Audit, The Buffalo News has the second-highest penetration of any news organisation in the nation.

In other words, 70.9 per cent of area households read or viewed The Buffalo News in the last month. The only news outlet with a higher number was The Des Moines Register, with 72.9 percent reading. Brian Connolly, a managing editor involved with expanding the paper’s online efforts, says he still sees papers delivered to two-thirds of the homes he passes on his morning jogs. “That’s still where a lot of the eyeballs are,” Connolly said.

Lipsey, the publisher, hopes to improve the paper’s fortunes by unveiling a version for Apple’s iPad and a paid subscription model in the fall. He is expanding into commercial printing, including the programmes it prints for the Buffalo Sabres hockey team, and hopes for double-digit growth this year. Lipsey said that in the coming years employees may have to contribute to their health insurance. But he is confident Buffett will support them.

“This will be one of the last papers that folds because Warren has pride in it,” said Lipsey, an athletic, slender man in his 80s whose boss jokes that he refuses to tell him his exact age. Lipsey is close enough to Buffett to know. They were introduced more than 40 years ago by Buffett’s first wife, Susie, who shared with Lipsey a love of jazz.

Buffett bought out Lipsey’s Omaha weeklies, called the Sun newspapers, but kept him on as president and publisher. With Buffett’s help, the weeklies went on to win the Pulitzer Prize for their investigation into Boys Town, the charity for homeless boys, in 1973. Buffett and Lipsey still share a sense of humour and folksy manner.

In 1977 Buffett learned that the Butler family, the longtime owners, wanted to sell The News to The Washington Post, where Buffett was a board member. When The Post turned down the Butlers, Buffett said he was interested and asked Lipsey to sort out the paper’s finances.

It was not an auspicious start. According to a corporate history, the paper lost $10 million in 1980, and Buffett’s desire to start a Sunday edition set off a costly court battle with the rival Buffalo Courier-Express, which folded in 1982. “That was a very tough period,” Buffett said. “They persevered in a tough fight and a tough legal situation.”