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Warren Buffett said newspapers were going to disappear. Now he’s disappearing from th
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Warren Buffett said newspapers were going to disappear. Now he’s disappearing from the industry.
Berkshire Hathaway announced it is selling its 31 daily newspapers to Lee Enterprises for $140 million, bringing the publisher’s stable from 50 to 81 papers

[Image: FK5MYDTP54I6TEZRGC6FQNXURY.jpg&w=1440]
Warren Buffett, chairman and chief executive of Berkshire Hathaway, at the annual Berkshire Hathaway shareholders meeting in May. Buffett announced that it is selling the entirety of its newspaper operations to publisher Lee Enterprises for $140 million. (Nati Harnik/AP)

By
Taylor Telford 

Jan. 29, 2020 at 8:04 a.m. CST
Warren Buffett is getting out of the newspaper business.
Berkshire Hathaway announced Wednesday that it is selling the entirety of its newspaper operations to publisher Lee Enterprises for $140 million, bringing the company’s stable from 50 to 81 papers. Lee had already been operating the papers since July 2018, the company said in a news release, among them the Omaha World-Herald in Nebraska, the Tulsa World in Oklahoma and the Buffalo News, which Berkshire owned separately from the BH Media Group.

“We had zero interest in selling the group to anyone else for one simple reason: We believe that Lee is best positioned to manage through the industry’s challenges,” Buffett said in a news release. “No organization is more committed to serving the vital role of high-quality local news, however delivered, as Lee.”
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The deal brings more consolidation in newspapers, at a time when consolidation is already rampant. In August, the merger of the nation’s two largest newspaper publishers, McLean-based Gannett and GateHouse Media, created a conglomerate with a combined total of almost 600 daily and weekly papers. Executives from both companies touted the deal as an opportunity to slash up to $300 million in annual overhead costs within two years, The Washington Post has reported, while “continuing to invest in newsrooms."
A lifelong fan of newspapers, Buffett has soured on the industry, which has been in steady decline for more than a decade. Print papers relied on ad revenue for survival, and few have figured out how to navigate a digital landscape where Google and Facebook command 75 percent of ad revenue. Surviving papers are left fighting over crumbs as the industry takes in $30 billion a year less in ad revenue than it was in 2005.
Gannett, GateHouse approve merger, creating nation’s largest newspaper publisher
“It went from a monopoly to franchise to competitive to … toast,” Buffett told Yahoo Finance in April. He predicted that large papers such as the New York Times, the Wall Street Journal and The Post might be able to weather the storm. The rest, he said, would “disappear.”
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In fact, they’ve been disappearing for years. About 20 percent of all U.S. newspapers have closed since 2004, according to a recent report from PEN America, and the sector has shed 47 percent of its jobs. Today, 225 counties nationwide are without a newspaper. Half of all U.S. counties — more than 1,520 — have just one, usually a weekly. Of the nation’s remaining 7,200 newspapers, at least 1,000 are “ghost papers” — meaning they’ve been so hobbled by cutbacks that they produce little original reporting, according to PEN America.
But the sector’s grim trajectory has gone largely unnoticed by the public. A 2018 Pew survey found that 71 percent of U.S. adults think their local news outlets are doing well financially, and just 14 percent have directly paid a local news source, although subscriptions have become crucial to outlets’ survival in the era of dwindling ad revenue. Researchers say the lack of a strong subscription base limits a newspaper’s ability to cover the basics — local government, schools and law enforcement — let alone have the resources for accountability journalism. As a result, it’s the public that suffers.
“The biggest impact of the decline is on communities that are losing coverage each year, the basic news and governments that are going uncovered,” said Ken Doctor, a newspaper analyst. “People are becoming illiterate and innumerate in terms of what they know and how they can act as citizens in a democracy.”
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Ghost papers and news deserts: Will America ever get its local news back?
The Omaha-based Berkshire Hathaway, which operates a massive slate of utilities, manufacturers and retailers, will offer more than $575 million in long-term financing to Lee at a 9 percent annual rate, the company said in the news release. This funding will go toward refinancing Lee’s $400 million in debt and allow it to end its revolving-credit facility. After the deal closes, expected in March, Berkshire Hathaway will be Lee’s sole lender. Lee expects the deal to translate to an 87 percent increase in revenue.
“We have enjoyed a strong, long-term relationship with Berkshire Hathaway, which has been a significant investor across our capital structure for years,” Mary Junck, Lee’s chairman, said in a news release. “As manager of BH Media for the past 18 months, we have developed a deep knowledge of these properties and tremendous respect for their operators. We know first-hand the power this acquisition brings for further accelerating our industry-leading digital revenue growth while maintaining our focus on delivering high-quality local news.”
Lee has identified $20 million to $25 million in cost “synergies” and plans to enter into a 10-year lease agreement for the media group’s real estate. The real estate of other papers has become a major target for hedge funds such as Alden Global Capital, which have made a business out of buying struggling papers and slashing staffs to maximize profits and take advantage of their assets. Alden owns the nation’s second-largest newspaper chain, Digital First Media, and has overseen significant cost-cutting at 100 daily papers, causing more than 1,000 jobs to be lost. In a 2018 court case, Alden disclosed that it has affiliated real estate companies whose business is focused primarily on efficiently buying, selling, leasing and redeveloping newspapers’ offices and printing plants.
Lee’s shares were up 57 percent in premarket trading after the sale was announced.
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