Warren Buffett on newspapers - Why Mark Cuban would buy the Chicago Cubs, but not the Chicago Tribune

Warren Buffett is the most successful investor of all time and the second richest man in the world. Buffett is the chairman of Berkshire Hathaway and each year he publishes a letter to shareholders.  Thanks to Brad Feld for the pointer to the letter.

Yesterday I wrote about the demise of newspapers, music, and video. Buffett's letter to shareholders includes a lengthy section on newspapers. When the "Oracle of Omaha" speaks...every investor should listen.

Here are the "golden nuggets" I found while reading the section on newspapers;

• If you want a reputation as a good businessman, be sure to get into a good business.
• Advertisers prefer the paper with the most readers, readers prefer the paper with the most pages and ads. (This is why Google gets most of the ad revenue)
• Rich people used to love to own newspapers and sports teams. Now sports teams are the better choice.
• If cable TV and the Internet came first, there probably never would have been newspapers.
• Only a combination of print and online ads will ward off doomsday for papers.
• The days of lush profits for newspapers are over.

The economics of the newspaper business are being disrupted by the Internet. Conversely, the Internet provides a whole new revenue stream for sports teams. This is why Mark Cuban would consider buying the Chicago Cubs...but never the Chicago Tribune.

Note to subscribers: This is the third time I have written this post. TypePad has inexplicably lost it the previous two times. This is why you might get a feed with nothing but the title. Sorry, but I have no idea what went wrong.

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Comments

[Ed Kohler]

Good points. Rich people tend to prefer sure things since they have a lot to lose. Newspapers face competition from people with nothing to lose who can actually compete with next to nothing financially. Compare that to sports teams where competition is limited by the oligarchy owners.

Imagine someone starting up a team in the NBA or MLB with great players and no stadium who simply traveled for every game and kicked butt. That would never be allowed to happen since it would be a threat to the network. Yet that's what's happened to media.

[DonDodge]

Ed, Excellent point. I didn't think about that, but you are absolutely right.

Think about Donald Sterling, owner of the NBA LA Clippers, probably the worst team in basketball for more than 20 years. The Clippers have made more dumb trades and bad draft decisions than any team I can think of. Yet, Sterling still manages to make money on the Clippers.

Nice work if you can get it.

[JBV]

The Clippers make money because
1. they lease a stadium. This is pure write off.
2. they have no support staff to hire and pay to protect the stadium they dont have.
3. They get a chunk of change from the NBA as a result of the NBA TV deal.
Without the TV deal they would lose their shirt.