Newspapers, the next government bailout?
Potemkin capitalist Warren Buffet is set to purchase 63 newspapers from Media General. Why would Buffett do such a thing when flagship papers like the New York Times and the Washington Post-It are losing money hand over fist and the industry is in free fall?
Maybe because Buffett, a willing (if ineffective) stage prop for the President, is working on deals which will provide failing old-economy industries with bailout bucks, government subsidies, tax breaks, or other forms of rent seeking for stated the purpose of preserving good American jobs or the likes.
And because the 63 papers may well be scattered near and far, that is, in many states and Congressional districts, such a Buffett-led endeavor could gain legislative traction.
How does Buffett defend the buy? By making a statement as phony as a three dollar bill:
“In towns and cities where there is a strong sense of community, there is no more important institution than the local paper,” said Buffett, a former paper boy who owns Omaha World Tribune and other publications.
I’d offer there are plenty of institutions are more important than the local paper, and the failures of these newspapers is itself evidence of their unimportance.
But why would Buffett buy into a dying industry?
Buffett’s statement seems to run counter to statements that he made on May 5, at Berkshire Hathaway’s annual shareholder gathering in Omaha. At that event, Buffett referred to the newspaper industry as a “declining” industry with “problems.”
When a member of the audience asked him how to deal with a declining industry, Buffett replied, “Generally it pays to stay away from declining businesses. [The] newspaper business is a declining business and we will pay a price to be in that. That is not where we will make real money at Berkshire.”
Clearly something has changed in Grandpa Warren’s mind since earlier this month. The man isn’t a do-gooder and the business model for newspapers is broke hard, so what’s his real idea for turning a known loser into a useful winner?