Warren Buffett would not buy newspapers “at any price.” From Paidcontent, he said (according to Fox Business):
The current environment is accentuating problem in newspapers -but it’s not the basic cause. Charlie and I read five a day. We’ll never give them up. We would not buy them at any price. They have the possibility of going to unending losses. They were essential to the public 20 years ago. Their pricing power was essential with customer. They lost the essential nature. The erosion has accelerated dramatically. They were only essential to advertiser as long as essential to reader. No one liked buying ads in the paper – it’s just that they worked. I don’t see anything on the horizon that causes that erosion to end.
This from the owner of the Buffalo News and a board member of the Washington Post Company.
And they call me a doomsayer.
Now add to this what Jeffrey Cole of USC said in his latest valuable report:
We’re clearly now seeing a path to the end of the printed daily newspapers — a trend that is escalating much faster than we had anticipated,” Cole said. “The decline of newspapers is happening at a pace they never could have anticipated. Their cushion is gone, and only those papers that can move decisively to the Web will survive.
I wondered whether Vanishing Newspaper author Philip Meyer — who’s often quoted as predicting the last paper rolling off a press in 2043 (though as you’ll see, that’s not quite right) — had updated his prognostication. Last year, he wrote this:
Judging by the Google alerts the book’s title has accumulated since then, readers took away the wrong message.This reference from The Economist is typical: “In his book ‘The Vanishing Newspaper,’ Philip Meyer calculates that the first quarter of 2043 will be the moment when newsprint dies in America as the last exhausted reader tosses aside the last crumpled edition.”
That’s a clever image, and it is true that extrapolating the recent linear decline in everyday readership would show a zero point in April 2043. But newspaper publishers are not so relentlessly stubborn that we can expect them to continue churning out papers until there is only one reader left. The industry would lose critical mass and collapse long before then.
Moreover, straight-line trends do not continue indefinitely. Nature throws us curves.
His superb piece was written probably just before last fall’s crash — one helluva curve.
Add this all up and it keeps getting clearer and clearer: It makes less sense every day to try to preserve and protect – to invest in – what is obviously a failing model. Every day that papers keep printing is a day that they haven’t reinvented themselves for a new reality.
The same can be said of the auto industry, retail, banking, education, and many other sectors of society. But those will be the subjects of upcoming posts (and maybe more).
This isn’t doomsaying, though. It is a reality check. It is nothing more than observing what is obviously and inexorably happening in the economy and society. The insane response to this change is to resist it and mourn it. The sane response is to find the opportunity in it.
Don’t bail. Build.
It may be too late for newspapers to find that opportunity. But others will find it. That’s not doomsaying. That’s optimism.
: LATER: I find it interesting – that’s all – that Romenesko’s angle on the Buffett quote was partner Charlie Munger’s lament that the erosion of papers is tragic. For me, that’s the color. For him, Buffett’s tarring of newspaper investment is that addendum.
Thanks, Jeff. I picked up that full quote from Liz Claman at Fox Business. The link to our post is http://tinyurl.com/cpxa53 — with links to Liz and others on the scene.
Her direct link is at http://tinyurl.com/dclx54
warren’s honesty is right up there with joe biden’s– isn’t john kerry to hold hearings on “the future of journalism” this week?
and a side note- the union representing boston globe employees is negotiating through the weekend to work out a deal to keep the globe from closing (at least the printed part).
Regardless of when the last newspaper roles off the press without a drum role, it will just the same be a very sad day. Simply because the newspaper has played such an important role in the history of this nation. However even this cannot and will not keep it alive. There it comes back to brutal facts of economics. Amen…
Though they’ve always been the dirty, if not always successfully hidden, little secret it’s profit margins that will determine the fate of newspapers, not Buffett, and certainly not Jarvis. (Wasn’t Buffett supposed to be busy straightening out the banking and/or auto industry?)
Look at MOST newspaper profit margins, if you can. They’re higher than almost all other businesses, still. They aren’t making as much money as they have in the past, but they’re still making money, even in this crappy economy.
They’re still showing big margins because they’re cutting expenses like crazy. Good journalism is suffering and googly-eyed Jarvis is gloating, as usual. Yawn.
That’s an old tune. The Globe is losing $85 million, the SF Chronicle $75 million. They are not still showing big margins. You might want to catch up with the news about news.
Agan, MOST. They’re making money. It doesn’t fit your narrative but it’s true.
Do we have any examples of papers making big profit margins? Any quantifiable data to back up “MOST”
I think the big problem here is that newspapers could become the first victims of what Alvin Toffler described exactly 30 years ago in his seminal book “The Third Wave” as the age of the “de-massified media.”
The rise of cable TV, small-dish satellite TV and -especially- the public Internet has massively contributed to the end of newspapers, especially nowadays you can get news as fast as it happens over the Internet. Nowadays, it’s just as likely that instead of reading a newspaper with your morning beverage you’ll be drinking that same morning beverage in front of your computer. Indeed, if you have a “smart” cellphone such as a Blackberry, various Palm models, models that run Windows Mobile or the Apple iPhone, you can even get -real time- video over today’s high-speed cellphone networks! Even the lower-rated cable news operation like MSNBC will become a survivor because of MSNBC’s ability to deliver news in real time (around the clock if necessary on breaking stories).
But the gigantic killer for newspaper is the rise of the Craigslist online service for classified ads–it essentially took away the newspapers’ biggest source of revenue and replaced it with a free to very cheap alternative compared to newspapers.
[...] declaraciones de Warren Buffet que vi ayer en BuzzMachine no tienen desperdicio, y menos aún pronunciadas por una persona que tiene inversiones en algunos [...]
[...] declaraciones de Warren Buffet que vi ayer en BuzzMachine no tienen desperdicio, y menos aún pronunciadas por una persona que tiene inversiones en algunos [...]
[...] declaraciones de Warren Buffet que vi ayer en BuzzMachine no tienen desperdicio, y menos aún pronunciadas por una persona que tiene inversiones en algunos [...]
the globe is on track to lose $85M.
unions are being asked to make $20M in concessions.
how does this solve the problem?
also, i’ve been following a boston-based online poll over the weekend asking which paper folks in boston would rather see survive (if they had a choice). since the globe’s circulation is double that of the herald (per 2004 figures) the number in favor of the globe’s survival should not be a surprise in that it is double that of the herald. what is stunning about the poll is the total number of ALL who participated- in a metro of well over 4.4M people ONLY 1200 even bothered to chime in, some 200 of those voted that they didn’t read either paper.
maybe nobody really gives a ratz(*)
[...] more here: I’m not the only doomsayer Bookmark [...]
Thank you Mr. Jarvis for your candor and your guts to speak what is certain. For some, this is a bitter pill, for others it is an enormous opportunity. Not only is it an opportunity to capitalize and innovate, but it is an opportunity to be part of the next ‘insert adjective here’ age.
Mr Hogan’s views and facts represent the viewpoint of those which cannot see the imminent passing of the daily printed news, but it also represents denial… for that, I cannot blame him, I, too do not wan the newspaper to vanish, but I know it is going to happen.
Jeff, you’re right that the appropriate response is to build, not bail. I’d like to see you explore whether print has any place in the building of a new local news organization. I think it does. But I don’t think it can look anything like what we’ve been doing for generations. I think we’re talking niche print products, free papers, custom-ordered print products and once or twice a week publication of local magazine/papers that don’t report news, but do what papers have said they’re trying to do anyway: explain why things are happening, what events mean and how they could impact our communities. More storytelling, investigations and opinion/insight. All this could come from a single news organization, along, of course, with a robust Web presence. Everything would start on the Web and the organization’s sites would do more than report the news; they’d be a resource for their communities, connecting people in ways that help them live richer lives and helping businesses reach customers looking for their services.
One can only wonder whether Buffett would invest in Paidcontent.org . . .
>>>Every day that papers keep printing is a day that they haven’t reinvented themselves for a new reality.
This is really silly. Newspapers make more money per reader from those who read the news on paper than the do from those who read the news online. This is fact – you can look it up on the Internet! Continuing to print the news MAY give papers the funds to reinvent themselves. Giving up print _definitely_ won’t.
The sooner newspapers stop spending money on Internet consultants, the sooner they can get back to journalism.
-r
Print makes up at least 60 percent of the cost structure of papers. Audience is leaving print for online. Online is the future. Print is the past. There is no growth there. No, online won’t supported the bloated, monopolistic organizations newspapers became. Online provides no end of opportunities for new efficiencies (do what you do best, link to the rest; creating networks….). It’s a new reality that requires new businesses. Wishing that weren’t so won’t make it true.
>>>Print makes up at least 60 percent of the cost structure of papers.
This is true, but it’s *completely irrelevant*. Newspapers make MUCH more per reader in print than they do online. Print may be the past – or it may not be. But pushing people to shift to online would result in a vast and sudden decline in revenue that newspapers could not absorb.
>>>No, online won’t supported the bloated, monopolistic organizations newspapers became.
This is has absolutely nothing to do with what I said. But while you’re on the subject, what you see as “bloated, monopolistic organizations,” I prefer to think of as sources of badly needed middle-class jobs.
Then again, I guess it depends whose side you’re on. Remember, when the economy tanked, Gawker laid off a much higher percentage of its work force than the New York Times. Anyone want to guess who got more severance?
-r
It’s not a matter of sides. It’s not about emotions. It’s about economic reality and the best way to sustain journalism. That has to be through innovation, not preservations. Papers will, as Buffett says, shrink. Paper is rapidly turning into an unsustainable model. Indeed, $85 million in losses defines unsustainable.
Journalism requires sustaining in the same way singing songs, or drawing pictures require sustaining.
They are all things human beings desire to do, and do on their own. Not one of them will either cease to exist (or even be seriously endangered) if the money goes out of them.
As Clay Shirky pointed out, the cost to distribute barrier keeping amateurs off the field has evaporated. That money wall isn’t coming back.
today i heard an interview with a globe union representative who seemed genuinely sympathetic to mgmt’s losses saying “we realize they’re losing a million dollars per week”.
hey, my math skills are alot better those of my grammar– an $85M a year loss = more like $1.6M per week (or $225,000 each and every day)
Retailing needs a reboot. Just went to a mall for the first time in months. Couldn’t find things I wanted and had salespeople pushing things that I don’t want.
No doubt JJ’s line on retailing is that toy and clothing retailers have to emulate the Apple store (where you can actually find what you want and not be concerned about getting taken advantage of).
>>>Paper is rapidly turning into an unsustainable model. Indeed, $85 million in losses defines unsustainable.
What about the estimated $470 million that YouTube lost last year? Doesn’t that DEFINE unsustainable?
Most of the “new journalism models” are far _less_ sustainable than print. YouTube has content they own and can’t sell and content they can sell but don’t own. Google AdSense doesn’t pay too well. And the Huffington Post is the latest get-rich-quick scheme run by a conservative-turned-liberal who treats her employees like slaves.
But these points, like yours, are irrelevant to the point at hand. You said that print is dying, so papers should stop printing immediately. That’s wrong – the math doesn’t work out. You can try to cast me as old-fashioned (which I’m not) or emotional about what I see as the decline of journalism (which I am). But that doesn’t change the fact the stopping print editions now would be about as smart as burning money.
-r
> What about the estimated $470 million that YouTube lost last year? Doesn’t that DEFINE unsustainable?
Nope, not any more than EW’s $200M startup costs did. (Also, the $470M isn’t real money. The bulk of it is bandwidth charges at retail rates, and Google doesn’t pay retail.)
Google and EW’s owners are/were willing to lose money in the short term because they’re pretty sure that they know how to make money in the long term.
If you’re going to argue that a money losing newspaper is like Youtube, you get to explain what’s going to change so the newspaper makes money. YouTube’s the revenue/cost ratio is increasing so the only thing that has to happen for YouTube to be profitable is more of the same.
>>>Nope, not any more than EW’s $200M startup costs did. (Also, the $470M isn’t real money. The bulk of it is bandwidth charges at retail rates, and Google doesn’t pay retail.)
Jeff said, and I quote, “Indeed, $85 million in losses defines unsustainable.” If there was any nuance intended, it wasn’t received.
As far as >>>they’re pretty sure that they know how to make money in the long term.
Hey, 1999 called and they want their bubble back!
Google is a lot like Microsoft – so incredibly successful at a couple of businesses (search advertising and Adsense) that people forget all their failures (Orkut, anyone), just like people overlooked Microsoft’s missteps (BOB!)
As far as I can see, YouTube has three kinds of video – things they own and can’t sell (think skateboarding bulldog), things they sell but don’t own (think licensed music videos) and stolen property (think Viacom and Warner music). The first simply isn’t very valuable – the CPM stinks, and it’s falling, and the network effect keeps the storage and transmission costs climbing. The second presents a negotiation problem now that Hulu is so successful: Why do you want to split revenue with a company that only takes care of transmission when transmission is so easy? The third is a whole separate problem.
If you think YouTube is going to make money, you have to either believe that advertisers want to run messages along with skateboarding bulldogs or that it offers content owners a better value than Hulu. I can’t imagine either one.
Also, even if the cost of bandwidth is declining sharply, the cost of electricity isn’t. Even if Silicon Valley smugness is an inexhaustible resource, electricity isn’t!
-r
> the network effect keeps the storage and transmission costs climbing.
Huh? Storage and transmission costs are declining and should continue to do so. (Both include electricity costs.)
> If you think YouTube is going to make money, you have to either believe that advertisers want to run messages along with skateboarding bulldogs or that it offers content owners a better value than Hulu. I can’t imagine either one.
And yet, Youtube’s revenues are increasing than its costs. (Its costs are growing slower than its size.)
Maybe that will change before profitability, or before adequate profitability, but a theory that concludes that youtube’s revenues can’t grow faster than its costs is as relevant as the one that says that bumblebees can’t fly.
Note that none of the above has any dependence on who owns Youtube.
[...] declaraciones de Warren Buffet que vi ayer en BuzzMachine no tienen desperdicio, y menos aún pronunciadas por una persona que tiene inversiones en algunos [...]
[...] Jeff Jarvis agrees and says the prognosis “keeps getting clearer and clearer”. He says it is making less sense to try to preserve and protect the failing newspaper model. “Every day that papers keep printing is a day that they haven’t reinvented themselves for a new reality,” he said. Jarvis says he is not being a doomsayer, but merely observing inexorable events in the economy. “The insane response to this change is to resist it and mourn it,” he said. “The sane response is to find the opportunity in it.” [...]
[...] declaraciones de Warren Buffet que vi ayer en BuzzMachine no tienen desperdicio, y menos aún pronunciadas por una persona que tiene inversiones en algunos [...]
>>> the network effect keeps the storage and transmission costs climbing.
Huh? Storage and transmission costs are declining and should continue to do so. (Both include electricity costs.)
The network effect has nothing to do with storage and transmission costs – it has to do with the value and growth of a network. Here’s an explanation: en.wikipedia.org/wiki/Network_effect
What I meant was, as YouTube grows and the availability of video cameras grows, more people will use it for more stuff. As it grows exponentially, the cost of bandwidth and electricity seems to be declining arithmetically. (I can only speak with certainty about electricity.) More to the point, the site is now getting more traffic from parts of the world where views can’t _possibly_ be monetized.
>>>Maybe that will change before profitability, or before adequate profitability, but a theory that concludes that youtube’s revenues can’t grow faster than its costs is as relevant as the one that says that bumblebees can’t fly.
Also not sure this is true. For some time now, YouTube hasn’t paid out much for content owned by others – they either happily served as a repository for stolen goods or used the negotiating tactic that, hey, where else can you go? That’s over. Content owners are withdrawing (Warner Music), getting better terms (Universal Music) or forming their own companies (NBC, Disney, etc. with Hulu).
So, as it says in the fine print people in Silicon Valley don’t read, “Past performance is no indicator of future results.”
More broadly, what does YouTube have that’s so valuable? A license to use Flash? People really like to watch _content_ – music videos, TV shows, etc. As that content goes to sites that offer better terms, YouTube is left with user-generated content – and that draws a very low CPM.
[...] Las declaraciones de Warren Buffet que vi ayer en BuzzMachine no tienen desperdicio, y menos aún pronunciadas por una persona que tiene inversiones en algunos medios de comunicación y que suele representar bastante bien el pensamiento de muchos de los más importantes fondos de inversión internacionales: “no invertiría en periódicos a ningún precio”: [...]
[...] face it, now is the time to lose the ink and newsprint version and get with the times. Many magazines and newspapers are seriously looking at this concept, [...]
[...] will be published. In his 2006 book The Vanishing Newspaper, Philip Meyer famously came out with the prediction of 2043, but recent trends have many expecting that date to arrive much sooner. Old-school reporter and [...]