Warren Buffett, the greatest investor the modern world has ever known, just ponied up $142 million to add Richmond, Virgina-based Media General to his list of prized companies.
Media General operates 18 network-affiliated television stations and their associated websites, plus several dozen community newspapers across the Southeastern part of the U.S. Titles like Richmond Times-Dispatch and Winston-Salem Journal are well known, but most of the others like The Goochland Gazette and The Bland County Messenger have small circulations in the range of 5,000 – 25,000, according to paidContent.
Is the old man getting sentimental, or is this truly a wise investment? Both, I reckon.
“I’ve loved newspapers all of my life — and always will,” Buffett, who delivered newspapers as a boy, wrote in a letter introducing himself and his newly formed BH Media Group to the Media General team.
Berkshire Hathaway purchased The Omaha World Herald, its hometown newspaper last year, and has owned the Buffalo News since 1977. Buffett has also been on the board of The Washington Post and owned a large share of that national paper for years. One might say he’s making Omaha something of a genuine media town now. As a native of the hilly river city, I’m happy about that.
Of course, there are others with other more important media matters on their minds. Professor, consultant and writer Clay Shirky, for one. He argues that “ordinary citizens don’t pay for news. What we paid for, when we used to buy the paper, was a bundle of news and sports and coupons and job listings, printed together and delivered to our doorstep.” Shirky believes that news has always been a loss leader subsidized by advertisers. And now those advertisers are off to greener pastures. “Ad dollars lost to competing content creators can be fought for; ad dollars that no longer subsidize content at all are never coming back,” he contends.
GigaOm writer, Mathew Ingram, adds that “the subscription price of a newspaper and circulation revenues in general have historically only accounted for a small proportion of a media company’s overall revenue. In most cases, the bulk of that revenue comes from advertising.”
I’m a fan of both Shirky and Ingram, but I don’t agree that all the value is in the platform. The Oracle of Omaha believes there’s value in content and he wants his new newspaper managers to find ways to maximize that value for readers (who will be asked to pay for the content, regardless of the platform). “It’s your job to make your paper indispensable to anyone who cares about what is going on in your city or town,” Buffett outlines.
He also wants to solve the advertising riddle, as well, because marketers will put money where it gets them a desired return. “We want your best thinking as we work out the blend of digital and print that will attract both the audience and the revenue we need,” he writes. It almost makes me want to return to Omaha and roll up my sleeves again. I understand the power of the platform in today’s networked economy, but I want to go to bat everyday for content. That’s how I’m wired.
In semi-related news, Salesforce.com wants to buy Buddy Media for $800 mil. Buddy Media, founded in 2007, offers social enterprise software to help advertisers “maintain relationships with their consumers in a connections-based world.”
Let me think for a minute…a social enterprise software company for $800 million or 18 TV stations and 63 newspapers for $142 million? Given that Facebook, Twitter and all the rest are far from indispensable for the great majority of users, plus social platforms are poor advertising venues (facts that will become evident to marketers sooner or later), I like Buffett’s bet.