At dinner tonight, I asked my children if they would eventually read newspapers. They said yes, probably, even if the news was not up-to-date. That was my first insight - that the daily newspaper had "old" news. I had seen that recently when the newspaper reported that all but one miner had survived an explosion while the television reported that only one made it.
Then I asked what they would get from a newspaper, if not news. They said articles and features like crossword puzzles. I then asked them how much they would be willing to pay for these services since most of them were available for free on the Internet. That was a surprise. They did not know that most papers are available for free online. They said that they might buy the paper as a luxury. That was my second insight - that the daily newspaper is moving to a "luxury" category. Nice, but not necessary.
From that short discussion, it seems clear that newspapers will be forced to reinvent themselves. Just as multi-topic magazines like Reader's Digest and Redbook were amply supplemented by specific topic magazines like Golf or Gourmet and three television stations were joined by three hundred, so too could the daily newspaper become a wide range of different newspapers in specialty areas. In some ways, the Wall Street Journal is already such a publication. Further, just as $0.25 coffee is now sold for $3.50, so too could a luxury system develop around the daily newspaper.
And the other side of the business - the advertising - is just as challenged. When my son and I spoke about how I would sell my guitar (if my son is unable to teach me how to play), the answer was clearly the Internet. Classified ads, a major profit center for newspapers, is clearly going away. It seems as if the only real forced advertisers are the grocery stores.
Warren Buffett commented in the 2004 meeting that two things were almost certain to happen to newspapers: circulation would continue to decline and advertising revenues would also decline. Highly successful investors have been purchasing newspaper stocks as they continue to drop. I am still trying to figure out what is the right price to pay for a business whose only visible future is decline.
I just don't understand why it's necessary to disparage the specialty coffee industry to make your point.
ReplyDeleteDon't be hatin'. . .
News reports convey the drop out of financial firms from a purchase of KRI, citing difficulties getting to higher break-up or cost-cutting values. That leaves Gannett and the Tribune in the hunt. It would seem unlikely to occur at a much higher price than the stock currently trades, as the typical recent takeover premium of 20% has already come into the stock.
ReplyDeleteIt seems absolutely amazing that at this time Knight Ridder was purchased by McClatchy newspapers for $4 billion in stock and cash and the assumption of $2.5 billion in debt. By 2016, 10 years late, the stock engineered a 10 for 1 reverse split at $1 (down from $60+) and now is trading at an equivalent of $0.80 with a market cap of $60 million. Amazing.
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