The words are like daggers to newspaper editors and publishers across America.
"For most newspapers in the United States, we would not buy them at any price. They have the possibility of going to just unending losses."
They sting considerably worse considering the source. This is the assessment of Warren Buffett, arguably the country's most influential investor, to his Berkshire Hathaway Inc. shareholders this month.
I was left doubled-over gasping for air. Not at any price? Predicting unending losses?
It felt like we were getting disowned by disapproving parents. Buffett is regarded as a newspaper man, having stakes in various papers through the years, including the Buffalo News currently, and having delivered newspapers as one of his first jobs.
Buffett's comments were still ringing as I attended a downtown Rotary Club meeting last week to hear a presentation by Springfield News-Leader Publisher Tom Bookstaver and Executive Editor Don Wyatt. The talk, "Newspaper Brass on the 21st Century News-Leader," was more promotion than meat. But it was clear that the News-Leader's print product is diminishing in favor of other technology-driven trends.
The N-L brass rightly pointed out that other "disruptive technologies" such as ATMs, e-mails and cell phones have emerged in other industries without them becoming a death knell. Banks, mailing services and telecommunications companies have adjusted their business models to rein in new revenues. Newspapers have not. The industry's print revenues have dropped 18 percent to $35 billion in 2008, according to the Newspaper Association of America, which tracks annual advertising expenditures back to 1950.
The answer for the newspaper industry is in Internet revenues. For years, publishers have pledged that news would be free on Web sites in order to attract the necessary hits to appease paying advertisers. It worked for a couple of years. The Newspaper Association of America reports online revenue growth of at least 19 percent since 2004 - including back-to-back years of 32 percent gains.
Now those dollars are slipping. After peaking at $3.2 billion in 2007, Web revenues dropped 2 percent.
So what does that mean? Where do we go from here? Is it more than a recessional reaction? Buffett thinks so.
But the industry is not throwing in the towel. The next answer is in charging for online content. That's the latest trend introduced by media tycoon Rupert Murdoch, owner of Wall Street Journal and New York Post.
In a conference call with reporters, Murdoch said his News Corp.'s sites would charge for content within 12 months.
"We are now in the midst of an epochal debate over the value of content and it is clear to many newspapers that the current model is malfunctioning," Murdoch said while addressing his company's 47 percent slide in quarterly profits to $755 million. "The current days of the Internet will soon be over."
Springfield Business Journal is not most newspapers in the U.S. - as Buffett categorized those bearing the brunt of his comments - but we certainly have been thinking through this paid Web model. So are other members of the business publications association to which SBJ belongs.
As a May 4 page 3 article noted, companies in niche markets have weathered the economic recession better than most. SBJ is a niche product. But we're not immune.
Our advertising is off-budget, which results in fewer editorial pages, and subscriptions are slipping as companies look to tighten belts across the board. What I don't understand there is how we've heard executives call SBJ their top market resource yet turn down advertising and subscription opportunities.
But I would argue that SBJ today - in the center of this newspaper storm - is an improvement compared to what was coming off the presses a year ago. We've had no downsizing sans a reporter position lost through attrition with no green light yet to rehire. The paper is a heavier stock throughout and colors are brighter. News stories are strong and of the depth necessary to uphold our 30-year reputation.
Sure, I'd like to have more pages of news to offer you, but that's just a matter of supply and demand. Companies are going to have to buy ads on those pages to cover the printing, personnel and operations costs. It's no different than your business model. We just churn out business news and events, not the next widget.
At least I know this niche newspaper is out to prove Buffett wrong.
Springfield Business Journal Editor Eric Olson can be reached at eolson@sbj.net.
