When Warren Buffett makes an investment, people tend to notice. Last week, he shared his newspaper- investing philosophy with his shareholders. Buffett believes he’s onto something and his interest in the industry might lead more newspaper publishers to change their ways in order to increase both readership and marketing revenue.
Buffett has been buying newspapers, which he believes are undervalued, for a while now. In total, he’s spend $315 million on these investments over the past year or so. Buffett shared some of this thinking on this topic in a letter to his shareholders last week. The letter focused on the strategy of the Arkansas Democrat-Gazette which began charging for online content in 2001. In the past dozen years or so, while many newspapers have lost readership, the Arkansas Democrat-Gazette has retained circulation.
Berkshire has tasked Terry Kroeger with heading up the BH Media Group. The goal of this group will be to make sure that local and community papers deliver content that is not easily accessible anywhere else and to charge for it. A key part of the delivery model is to bring news to ‘tightly-knit communities’. This strategy is a bit different from the one taken by AOL with Patch. In that case, hyperlocal reporting is done by non-professional reporters though it is curated by an editor and then made available for free. Marketers are paying to get the their messages in front of the readers of Patch content.
It will be fascinating to see if Buffett succeeds with this strategy. Some have called the Arkansas Democrat-Gazette model that Walter Hussman Jr. stuck to old-fashioned. But after a decade of success and with more publishers chasing marketers in a fragmented marketplace, the focus on local and the delivery of a quality audience may be just what is needed to capture advertising dollars — both traditional and online.[Source: Collins, Margaret et al. Buffett Says Newspaper Bet Fueled by Arkansas Model. Bloomberg.com. 2 Mar. 2013. Web. 13 Mar. 2013]