Warren Buffet

related sites: The Buffalo News Berkshire Hathaway Inc. City of Buffalo

Warren Buffett of Omaha is a champion investor, of course, but America's second-richest man is also a press lord. The Berkshire Hathaway holding company, which he controls, owns 17 percent of The Washington Post Company (where he is a director), and is the tenth-largest shareholder in Gannett. In the 1980s, Buffett offered to raise his stake in Time Inc. to more than 10 percent, although the board declined the offer. He was the largest shareholder in Capital Cities/ABC, Inc., until it was swallowed by Walt Disney, and he became the largest investor in that company. He even provided $82,000 to the liberal Washington Monthly in its early days. His longtime friend, Carol J. Loomis, a member of the board of editors at Fortune, once wrote of Buffett, "He says that if he had not been an investor, he might well have picked journalism."

The one journalistic outlet that publicly traded Berkshire Hathaway owns outright is The Buffalo News in upstate New York. What does this quarter-million-circulation daily tell us about Buffett's notion of the journalism business?

In many ways, the News is an awesome success. Editor & Publisher says it has the highest profit margin of the nation's publicly owned newspapers; better than 35 cents of each dollar the paper took in last year turned into pre-tax profit. Buffett paid $32.5 million for what was The Buffalo Evening News in 1977 (nearly $88 million in 1998 dollars). Last year it earned a record $55.4 million before taxes, up from $49.8 million in 1996.

What makes these profits especially impressive is that they are generated in an economically troubled Rust Belt city, its once-vibrant port in decline, its once-mighty steel industry decimated. Of course, the News hasn't been immune to the problems of upstate New York. Publisher Stanford Lipsey cites the Buffalo area's population drop -- 2.1 percent between 1990 and 1997 -- as one of the reasons for declining circulation. The daily has lost ground for four years, down to 252,705 from a peak of 320,372 in 1983, and the Sunday edition has been slipping for six, to 338,467 from 383,017 in 1992.

Even so, the News's penetration -- a remarkable 64 percent of Buffalo-area households, and an even more impressive 80 percent on Sundays -- remains number one in the top fifty U.S. markets.

Yet journalistically, Buffett gets a B in Buffalo. This is doubly disappointing to many in that city of 310,000 who hoped that Buffett wanted editorial excellence, too. As Buffet wrote shortly after he bought the paper, "I want to achieve business success in newspapers, but will be unhappy unless it is accompanied by journalistic success."

The News, while respected and read, has failed to fulfill the expectations of those who hoped Mr. Deep Pockets would transform it into a role model. James Heaney, one of the News's education reporters, echoes people inside and outside the newsroom when he says: "This is a decent but underachieving newspaper. Given our profitability and penetration rate, we could and should be one of the great regional newspapers in the country."

The key to the News's extraordinary profitability was a move Buffett made seven months after buying it. He launched a Sunday edition, dealing what proved to be a mortal blow to its weak morning rival, the Buffalo Courier-Express, which had previously had the lucrative Sunday market to itself. In less than six years the Courier was out of business and the News had become an all-day operation, dropping the word Evening from its title. The News, which lost millions during its struggle with the Courier, was now poised to reap the benefits of being the only game in town. Reap them it did, relentlessly raising circulation and advertising rates, while keeping an exceptionally tight lid on costs.

The News could raise rates and make them stick because of the reader loyalty that had developed under its previous owner, the aristocratic Butler family. The paper Buffett bought from them was sober, solid, and known for its strong coverage of western New York.

Buffett, 68, whose net worth Forbes estimated last year to be $21 billion, is a famously hands-off owner of the companies that Berkshire Hathaway has bought -- a disparate group that ranges from Dairy Queen to World Book encyclopedias to GEICO, the auto insurer. In the case of the News, Buffett installed as publisher his friend Lipsey, who had been publisher of a group of Omaha weeklies that Buffett owned for a while.

On the editorial side, Buffett named Murray B. Light, now 72, a News employee since 1949, as editor. "In his first meeting with me," Light says, "he told me he would not interfere with newsroom operations. He never has."

Yet a couple of the owner's fingerprints are discernible. Buffett, son of a Republican congressman from Nebraska, moved early on to have the paper abandon its tradition of endorsing only Republicans, telling his new editor, "Let's be truly independent." Under Buffett's ownership the News has endorsed only Democratic presidential candidates. (Light, who oversees the editorial page as well as news sections, says that Buffett is not involved in the endorsement process, though he is notified before publication. Buffett, who talks infrequently with reporters, declined to be interviewed.)

The second area on which Buffett has left his stamp is the size of the paper's news hole, which in the first six months of 1998 represented nearly 60 percent of the total content -- extraordinarily high. While the Butlers had followed the industry standard of 40 percent news and 60 percent advertising, Buffett insisted on a news hole of at least 50 percent. He sees this as a business decision: a large and intelligently utilized news hole, he wrote in his 1989 letter to Berkshire shareholders, "attracts a wide spectrum of readers and thereby boosts penetration. High penetration, in turn, makes a newspaper particularly valuable to retailers since it allows them to talk to the entire community through a single megaphone."

"You could do a helluva lot worse than Warren Buffett for an owner," says Barbara Ireland, who was the News's editorial page editor until she left this year to join The New York Times. Before she landed the editorial-page job, in 1989, Ireland says Buffett interviewed her for two and a half hours. "He definitely was not the standard business conservative," she recalls. "I saw a humane attitude on social issues. He had two major issues: world population control and nuclear weapons control." But "because he doesn't impose his politics, most people don't even know what they are."

part 1: Buffett in Buffalo
part 2: ...the News became strikingly different...

cjr  |  archive  |  resources  |  contact  |  search  |  subscribe