Instead of ordering up a feature about the future of TV, as the Fairfax owned Sydney Morning Herald did on the weekend, it would have been better served by subjecting itself to a hard-nosed examination of the future of its staple product, something which it and rival News Ltd seem loath to do.
A good starting place might have been to send someone who knows something about business analysis off to Omaha Nebraska to have a long chat to Warren Buffett. Fairfax could have done it on the cheap over the weekend if it had bothered to send someone smart enough to the annual meeting of Berkshire Hathaway, Buffett’s company.
Around 35,000 people turned up to hear Buffett explain why the company had such a bad year in 2008: he and his vice chairman, Charlie Munger, were patient, took answers, purposely made sure the questions were tougher than normal, and admitted their wrong turns.
The contrast between the fortress mentality at Fairfax and even the controlling News Corp, where Rupert Murdoch will perform his third quarter earnings conference call on Thursday morning our time, was telling.
Buffett is a newspaper owner, or rather Berkshire is: he owns the largest slab of The Washington Post Company, which reported a nasty first quarter loss on Friday and the Buffalo News in New York State. He used to own a big stake in ABC Capital Cities, so he knows the media, despite what some might say.
Back in his 2007 letter to shareholders, Buffett wrote this about the future of newspapers:
And fundamentals are definitely eroding in the newspaper industry, a trend that has caused the profits of our Buffalo News to decline. The skid will almost certainly continue.
As long ago as my 1991 letter to shareholders, I nonetheless asserted that this insulated world was changing, writing that “the media businesses . . . will prove considerably less marvelous than I, the industry, or lenders thought would be the case only a few years ago.” Some publishers took umbrage at both this remark and other warnings from me that followed. Newspaper properties, moreover, continued to sell as if they were indestructible slot machines. In fact, many intelligent newspaper executives who regularly chronicled and analyzed important worldwide events were either blind or indifferent to what was going on under their noses.
Now, however, almost all newspaper owners realize that they are constantly losing ground in the battle for eyeballs. Simply put, if cable and satellite broadcasting, as well as the internet, had come along first, newspapers as we know them probably would never have existed.
At the AGM over the weekend he had this much tougher take on their future; they don’t have one, in his opinion.
“For most newspapers in the United States, we would not buy them at any price. They have the possibility of nearly unending losses … I do not see anything on the horizon that sees that erosion coming to an end.
“Twenty, thirty years ago, they were a product that had pricing power that was essential,” said Buffett. “They have lost that essential nature.”
Buffett said Berkshire would hold on to the Buffalo News, if only because Berkshire buys businesses for the long term and does not sell simply because companies hit a rough patch.
“On an economic basis you should sell this business. I said I agree 100% but I am not going to do it,” he said. “The union has been cooperative in having an economic model that will at least give us a little bit of money.”
Charlie Munger, Berkshire’s vice chairman, called the decline of the newspaper industry “a national tragedy.”
“What replaces it will not be as desirable as what we are losing,” he said.
And that’s why the New York Times is currently battling the unions at the Boston Globe to keep it open. Small progress was made on Friday night in talks saw a two day extension until 2pm today, Australian time.
It will probably get more time.
But even the mighty Times is staggering. It’s going down the route of boosting prices.
“The New York Times raised the cover price of its Monday to Saturday editions by 25 cents to $1.50 last year, and its strategy reflects similar moves by other newspapers, including The Wall Street Journal, owned by News Corp and the Financial Times, owned by Pearson. The Wall Street Journal raised the cover price by 50 cents in each of the last two years and now costs $2 per copy. The Financial Times implemented 50 cent increases in US cover prices in 2005, 2007 and 2008, and now costs $2.50.”
The Washington Post Co reported a quarterly net loss on Friday as print ad revenues dropped more than 30% per cent at its flagship newspaper and online revenue also fell.
The Post Co posted a net loss of $US19.5 million ($A26.8 million), or $US2.04 ($A2.8) US per share in the first quarter compared with a net profit of $US39.3 million ($A54.2 million), or $US4.08 ($A5.63) per share, in the same quarter last year.
And reports from London this morning say that WPP, the world’s biggest advertising agency group is cutting 7,200 people from its various businesses to cut costs and handle an expected earnings and revenue slump this year. That will be 6% of staff.
“Some 3,600 jobs have already gone in the first three months of the year, including 2,200 who were made redundant. Most of the remaining job cuts are expected in the second quarter.”
Every part of the media is being impacted.