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Friday, May 25, 2012

Berkshire Hathaway to Buy More Papers

Story first appeared in USA Today.

The CEO of Berkshire Hathaway says his company is likely to buy more newspapers in the next few years, and Berkshire Hathaway will not try to influence the editorial policies of any of them.

He wrote a memo this week to the editors and publishers of all of Berkshire's daily newspapers. That group is about to grow to include 26 daily newspapers because Berkshire announced last week that it plans to buy 63 newspapers from Media General for $142 million.

The letter was posted online Thursday by the Omaha World-Herald, which is a Berkshire newspaper.

The memo mostly reiterated things that had been said about newspapers before, but it appears that he wanted to put them in writing for the company's editors before the Media General deal is completed. That deal is expected to close in late June.

The CEO says Berkshire will look to buy small to mid-sized newspapers that cover their communities well. Stating that they will favor towns and cities with a strong sense of community, comparable to the 26 in which they will soon operate. If a citizenry cares little about its community, it will eventually care little about its newspaper.

Berkshire Hathaway includes more than 80 different subsidiaries that largely run themselves because the company is extremely decentralized. Buffett told the newspaper editors that he won't try to influence the way their reporters cover news.

The CEO said many of the newspaper editors he was writing to would likely outlive him as Berkshire employees, but he predicted that his successors would follow the same hands-off management approach.

The newspapers it is buying from Media General, which include the Richmond Times-Dispatch in Virginia and the Winston-Salem Journal in North Carolina, have been successful on both the business and journalistic fronts. He said that's also true of the newspapers Berkshire Hathaway already owns the Omaha World-Herald and the Buffalo News.

The CEO wrote that he believes newspapers need to adopt a business model that doesn't give away all its stories for free online.

The original instinct of newspapers then was to offer free in digital form what they were charging for in print. This is an unsustainable model and certain of our papers are already making progress in moving to something that makes more sense.

He believes newspapers will do well if they remain the primary source of information about their communities.

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