Buffet: Print is dying

The Oracle of Omaha has spoken, and he minces no words in predicting the newspaper industry’s declining fortunes. I hope newspaper owners will take this as yet another sign that they ought to be rapidly beefing up their websites (via BankStocks.com):

If you were looking at newspaper publishers as possible investments, what would you use as a margin of safety?

[Warren Buffett]: What multiple should you [use] for a company that earns $100 million per year whose earnings are falling by 5% per year rather than rising by 5% per year? Newspapers face the prospect of seeing their earnings erode indefinitely. It’s unlikely that at most papers, circulation or ad pages will be larger in five years than they are now. That’s even true in cities that are growing.

But most owners don’t yet see this protracted decline for what it is. The multiples on newspaper stocks are unattractively high. They are not cheap enough to compensate for the companies’ earnings power. Sometimes there’s a perception lag between the actual erosion of a business and how that erosion is seen by investors. Certain newspaper executives are going out and investing on other newspapers. I don’t see it. It’s hard to make money buying a business that’s in permanent decline. If anything, the decline is accelerating. Newspaper readers are heading into the cemetery, while newspaper non-readers are just getting out of college. The old virtuous circle, where big readership draws a lot of ads, which in turn draw more readers, has broken down.

Charlie and I think newspapers are indispensable. I read four a day. He reads five. We couldn’t live without them. But a lot of people can now. This used to be the ultimate bulletproof franchise (get more info here from this article about it). It’s not anymore.


WB: It may be that no one has followed the newspaper business as closely as we have for as long as we have — 50 years or more. It’s been interesting to watch newspaper owners and investors resist seeing what’s going on right in front of them. It used to be you couldn’t make a mistake managing a newspaper. It took no management skill — like TV stations. Your nephew could run one.

Just posting for the sake of posting

OK, I’m tired of seeing that Katrina post at the top of my site. It’s now five months later, and it seems life goes on. I’ve been back to New Orleans once, and I’ll go again later this month. The city will come back, I’m sure. But it will be a totally different place.

Here in L.A., I’m keeping busy at the Los Angeles Times, where I’m the night managing editor for latimes.com. Besides planning the daily makeup of the site’s front page, I get to work on the occasional fun project. Here are two that I did recently:

P.S.: Comments are back on. Maybe the spammers have given up.

Engulfed in sorrow

New Orleans, my hometown and one of the world’s great cities, is drowning tonight as water fills it from the east and the west.

A massive recovery operation is under way. If you have the means, consider making a donation to the American Red Cross or another relief organization.

The city as I knew it is gone. I’m heartbroken.

Advocating obesity?

The heroically-named Center for Consumer Freedom is running full-page ads in major U.S. newspapers lambasting the conventional wisdom that obesity is unhealthy. If this were, in fact, a group of consumers tired of being rebuked about their dietary habits, one could certainly sympathize. But, according to this Reuters story, the Center for Consumer Freedom is funded by none other than the “casual dining” industry. The ad, of course, says nothing about this. It calls the Center for Consumer Freedom “a nonprofit organization dedicated to protecting consumer choices and promoting common sense.” And misleading the public, apparently.

Knitting to help tsunami victims

My former LAT colleague, photojournalist and knitting enthusiast Sedda Kreabs, has come up with a novel way to aid in the ongoing tsunami relief effort. She and her knitting group are selling ‘string scrubbies‘ (knitted dishcloths) and donating $10 from each sale to UNICEF. Knitters from across the country have joined in the effort, and a couple of local merchants are helping them sell the fruits of their labor. Now Sedda is planning a trip to Thailand to help make a difference in person. Read about her plans on her blog.