This week, 10 Virginia newspapers were sold to a company based in Davenport, Iowa. Sandy Hausman spoke with a national expert on newspaper economics to see what this might mean for readers and their communities.
The newspapers in Richmond, Roanoke, Fredericksburg, Charlottesville, Waynesboro, Lynchburg and four other cities were owned by Warren Buffett’s company – Berkshire Hathaway. In making the announcement he told reporters that the buyer – Lee Enterprises – was committed to high quality local news, but media consultant Alan Mutter is not so convinced.
“More and more people are getting and giving information on their iPhones, and advertisers who had always paid the freight for newspapers have shifted to where the eyeballs are, and the eyeballs are online," he explains.
Most people are unwilling to pay for online access to newspapers when they can get news from free platforms like Facebook. To stay in business, Mutter says, Lee and other newspaper owners will have to cut costs.
"Reducing the number of pages in the paper, reducing sometimes the size of the newspaper, eliminating sections, not printing on certain days of the week, and one of the key things that they do is they reduce the number of people working in the newsroom," Mutter says. "In the United States today, the number of reporters and editors working at newspapers is probably half what it was in the heyday, the early 2000s."
Some investors also sell off valuable buildings and land.
"Many newspapers sit on or sat on really terrific real estate," he continues. "The Los Angeles Times building. The Chicago Tribune building -- imagine the Chicago Tribune does not work out of the Chicago Tribune building. It's being turned into condos. They move the press rooms out to the suburbs or someplace else and increasingly publishers are moving printing to another city altogether."
Newspaper offices have moved to cheaper areas – suburbs or cities. The Columbus Dispatch, for example, is printed in Indianapolis, and Charlottesville’s newspaper is produced in Lynchburg.
“From the town it serves, the only way you can get it on trucks and get it back to where it’s supposed to be is by moving up the deadline, so you can’t have late sports scores. You won’t have late city council meetings. You won’t have all of the late-breaking news. By the way, that’s what news is. It’s stuff that just happened.”
Lee Enterprises did not respond to an e-mail asking about plans for the future, but by adding 31 Berkshire Hathaway papers to its group of 50 – including the St. Louis Post Dispatch and the Buffalo News – the company will have more readers. That could create new opportunities for ad sales, but Mutter notes a new hedge fund has purchased enough stock in Lee to force changes that could ultimately kill the papers.
“What’s happening is that these few financial companies have decided that they’re going to own as many newspapers as they can, milk them for what they’re worth and then at some point probably shut out the lights and throw the keys on the table. Last year, Warren Buffet declared the newspaper business toasts=. We are in an end stage of the newspaper business as we know it.”
Ten years ago, Lee had 72-hundred employees. Today there are just under 3,000. The company had been managing the papers for Berkshire Hathaway which lent the buyer money to make the deal happen. With $576 million, Lee can restructure $400 million in debt and purchase the papers with money to spare. For its part, Berkshire Hathaway gets interest of 9% and removes losing newspapers from its portfolio.