Billionaires like their toys — massive mansions, fleets of fast cars, luxury yachts. However, it now appears there is something new the people with big bucks want to own: newspapers.
In the past couple of days two billionaires have purchased historic publishing companies, in an industry considered by some to be on the brink of extinction.
John Henry, a hedge fund billionaire and majority owner of the Boston Red Sox, is paying a paltry $70 million for The Boston Globe, a publication founded in 1872. He is buying the paper from The New York Times, which paid more than $1.1 billion for the Globe in 1993.
And, Jeff Bezos, founder of online retailer Amazon.com (Nasdaq: AMZN), is putting up $250 million of his own money to buy The Washington Post, a newspaper dating back to 1877.
Perhaps Henry and Bezos were simply following the lead of another billionaire, Warren Buffett. In his 2012 letter to Berkshire Hathaway (NYSE: BRK.A) shareholders, Buffett acknowledged his company has acquired 28 daily newspapers in the past 15 months for a total cost of $344 million.
“Before television and the Internet, newspapers were the primary source for an incredible variety of news, a fact that made them indispensable to a very high percentage of the population. Whether your interests were international, national, local, sports or financial quotations, your newspaper usually was first to tell you the latest information,” Buffett wrote to his shareholders.
Of course, he acknowledges the world has changed.
“Stock quotes and details of national events are old news long before the presses begin to roll. The Internet offers extensive information about both available jobs and homes. Television bombards viewers with political, national and international news.
“Newspapers continue to reign supreme, however, in the delivery of local news. If you want to know what’s going on in your town — whether the news is about the mayor or taxes or high school football — there is no substitute for a local newspaper that is doing its job,” he added.
Buffett, although a self-admitted technology neophyte, realizes the future of the publishing industry does not include competing against online sources but, rather, having a sensible Internet strategy making them viable for a long time.
“We do not believe that success will come from cutting either the news content or frequency of publication. Indeed, skimpy news coverage will almost certainly lead to skimpy readership. Our goal is to keep our papers loaded with content of interest to our readers and to be paid appropriately by those who find us useful, whether the product they view is in their hands or on the Internet,” Buffett said.
Buffett's strategy mirrors that of The Daily Transcript, which went to a subscription-only online model in 1994.
Bottom line, Bezos and Henry did not become billionaires by making stupid money mistakes. And, if they follow the advice of a valued counselor like Buffett, their small investments in two once-proud newspapers should pay off handsomely.