Henry, Bezos and Buffett are Betting on Newspapers
When three brilliant billionaire investors and entrepreneurs delve into an industry, there has to be something there, right? This week, it was announced that John Henry, principal owner of the Boston Red Sox and many other successful properties, was joining "the sage of Omaha," Warren Buffett, by betting on the newspaper industry. Henry's was the winning $70M bid to purchase The Boston Globe. Warren Buffett's investment firm had bought 28 newspapers over a 15 month period for $344M as of March 2013. Just last month he added the Atlantic City Press to his newspaper holdings. And while I was writing this post, Amazon founder Jeff Bezos announced he is buying The Washington Post and other local newspapers for $250M.
In this digital age when we hear about restructuring of papers like the Cleveland Plain Dealer, whose brutal layoff of one-third of its newsroom staff was covered in a blog post last week, one wonders what these smart investors are seeing in this still-mostly-print industry.
What Investors See In Print
Buffett has explained his moves as focused around "hyperlocal and community reporting," as covered by Business Insider. He laid out his reasons for these investments, along with clarification that they need to make money:
"Newspapers continue to reign supreme, however, in the delivery of local news. If you want to know what’s going on in your town – whether the news is about the mayor or taxes or high school football – there is no substitute for a local newspaper that is doing its job. A reader’s eyes may glaze over after they take in a couple of paragraphs about Canadian tariffs or political developments in Pakistan; a story about the reader himself or his neighbors will be read to the end. Wherever there is a pervasive sense of community, a paper that serves the special informational needs of that community will remain indispensable to a significant portion of its residents.
(...) 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."
Jeff Bezos has not outlined his reasons or strategy yet. But some, as reported by USA TODAY, are suggesting that his decision to buy The Washington Post is all about content:
"We're seeing a lot of smart people buying newspapers," said John Miller, senior vice president and portfolio manager at the Ariel funds. "We saw [legendary investor and Berkshire Hathaway CEO Warren] Buffett buy 30 to 31 newspapers in the last two years, we saw The Boston Globe sold" to Henry.
"A lot of people had written off the industry, but we're seeing more transactions occurring," Miller said. "People view them as newspaper companies, but they are content providers, and we know content is valuable. People are buying these assets when they are out of favor. It's time to be an acquirer. Ariel has about 2.6% of its $2.2 billion Ariel Fund assets in Washington Post Co. stock and 3.8% of its assets in Gannett, owner of USA TODAY."
John Henry also has not personally outlined his reasons for the acquisition or his strategy for his new newspaper holdings. There has been some speculation, particularly on sports radio programs, that the real estate holdings were most attractive to Henry. I'd like to remain optimistic and believe that this smart investor sees an industry and a medium that is evolving and, with the right investment and direction, can be revived and can once more flourish.
A New Direction For Newspapers
That direction, in my humble opinion, should be stronger local coverage and community building. As someone who, like Bezos, still buys and reads the print versions of The Boston Globe, The Wall Street Journal and my own weekly community newspaper, I personally can attest to the value of local news and information that digital media cannot yet adequately replace. That includes advertising -- for local sales and events at retailers, as well as local classifieds.
Ken Doctor from the Nieman Journalism Lab posted an evaluation of the "newsonomics" of the statistics-happy Henry's decision.
"Will he re-envision The Globe as he did another storied enterprise, the Red Sox? The big question: How can he rebuild The Globe as a winner? Will he bring in top new talent, invest heavily in infrastructure and profit, as he first did with the Red Sox?"
Much of the sports radio discussion of Henry's purchase has questioned the editorial integrity of an owner of the largest newspaper in the city also owning one of its most-covered sports teams. Given that Henry's Fenways Sports Group already owns the New England Sports Network (NESN), Henry's addition of The Globe's well known sports section could threaten objective reporting on management's moves and the team's performance. I'm not worrying about that right now -- possibly because all is good in Red Sox Nation at the moment, at the top of the AL East.
What I find most intriguing in these moves by these three successful businessmen is what it says about the future of the newspaper industry, both print and digital. When smart investors see a potential for reinvention and profitable enterprises, that means the industry has yet another evolution ahead.
And that is a good thing for all of us who want newspapers to survive and thrive.