Warren Buffett says his company is likely to buy more newspapers in the next few years, and Berkshire Hathaway will not try to influence the editorial policies of any of them.
Buffett wrote a memo this week to the editors and publishers of all of Berkshire's daily newspapers. That group is about to grow to include 26 daily newspapers because Berkshire announced last week that it plans to buy 63 newspapers from Media General Inc. for $142 million.
The letter was posted online Thursday by the Omaha World-Herald, which is a Berkshire newspaper. Buffett's assistant didn't immediately respond to an inquiry about the letter Thursday.
Buffett's memo mostly reiterated things he has said about newspapers before, but it appears that he wanted to put them in writing for the company's editors before the Media General deal is completed. That deal is expected to close in late June.
Buffett said Berkshire will look to buy small to mid-sized newspapers that cover their communities well.
"We will favor towns and cities with a strong sense of community, comparable to the 26 in which we will soon operate. If a citizenry cares little about its community, it will eventually care little about its newspaper," said Buffett, Berkshire's 81-year-old chairman and CEO.
Andy Kilpatrick, the stockbroker-author who wrote "Of Permanent Value: The Story of Warren Buffett," said he thinks Buffett will get a lot of calls from people wanting to sell him newspapers because of the turmoil in the industry over the past few years.
"There will be a lot out there for him to choose from," Kilpatrick said.
Berkshire Hathaway already includes more than 80 different subsidiaries that largely run themselves because the company is extremely decentralized. Buffett told the newspaper editors that he won't try to influence the way their reporters cover news.
"You should treat public policy issues just as you have in the past," Buffett said. "I have some strong political views, but Berkshire owns the paper -- I don't. And Berkshire will always be non-political."
Buffett said many of the newspaper editors he was writing to would likely outlive him as Berkshire employees, but he predicted that his successors would follow the same hands-off management approach.
Outsell Inc. media analyst Ken Doctor said Berkshire isn't a major player in the media business yet.
Doctor said much of the value in Berkshire's Media General deal comes from the other parts of the transaction besides the newspapers. Berkshire is lending $445 million to Media General. Of that money, $400 million is a loan that will generate 10.5 percent interest for Buffett's company. A $45 million credit line has a 10 percent interest rate.
And Berkshire will receive warrants to purchase 19.9 percent of Media General stock. The company still owns 18 TV stations and some websites, such as coupon provider DealTaker.com. It also owns the Tampa Tribune and smaller newspapers in that market, but is in talks to sell them.
"It's a good time to buy a newspaper if you're Warren Buffett and can get the deal he got," Doctor said.
Buffett said the newspapers it is buying from Media General, which include the Richmond Times-Dispatch in Virginia and the Winston-Salem Journal in North Carolina, have been successful on both the business and journalistic fronts. He said that's also true of the newspapers Berkshire Hathaway already owns in the Omaha World-Herald Co. and the Buffalo News.
But Buffett said he believes all newspapers need to quit offering their product free online.
"The original instinct of newspapers then was to offer free in digital form what they were charging for in print," Buffett wrote. "This is an unsustainable model and certain of our papers are already making progress in moving to something that makes more sense."
Buffett said he believes newspapers will do well if they remain the primary source of information about their communities.
"It's your job to make your paper indispensable to anyone who cares about what is going on in your city or town," he said.
Berkshire owns clothing, insurance, furniture, utility, jewelry and corporate jet companies. It also has big investments in companies including Coca-Cola Co., IBM Corp. and Wells Fargo & Co.
Berkshire Hathaway Inc.: http://www.berkshirehathaway.com
Buffett's letter: http://bit.ly/LuVJ0a