Coming to Senses

The Bancrofts, the controlling family of the Dow Jones company, seem to be coming to their senses with the announcement that they will look for a potential acquirer. I have often blogged about the investment merits, or lack of, in newspapers. The declining prices have been an incentive for me to evaluate the potential opportunity.

But the words of Warren Buffett in the 2006 BRK annual report are ominous on the topic of newspapers: "...are constantly losing ground in the battle for eyeballs...faces unrelenting pressures that will cause profit margins to slide...economic potential of newspaper internet site a small fraction of that existing in the past for a print newspaper facing no competition...no rule that a newspaper's revenues can't fall below its expenses and that losses can't mushroom...fixed costs are high...lush days of profits..are over."

His admonitions have certainly affected investment thinking in this area. Not only his investment history, buy also his ownership of the Buffalo News and his shares in the Washington Post certainly make him worth paying attention to. Instead of bashing Murdoch's style, the Bancrofts might utilize their own - by writing Rupert Murdoch a thank-you note.