Buffett stopped loving his hometown paper — but still makes pocket change from papers he sold
Sometimes, if you love something, you have to let it go.
You certainly don’t keep it on life support to collect disability checks.
I consider that analogous to what Warren Buffett has done with his supposedly once-beloved newspapers, to the detriment of their communities, including Buffett’s hometown.
I speak as a Nebraskan, a veteran journalist and a former editor of the Omaha World-Herald. For full disclosure, I was laid off last year as World-Herald editor as part of nationwide cost-cutting by the company to which Buffett sold his newspapers.
Buffett, who had owned the Buffalo News since 1977 and previously owned the Pulitzer-winning, now-defunct Omaha Sun, bought The World-Herald in 2011. Emerging from the Great Recession, The World-Herald’s employee-ownership trust was in trouble. Buffett stepped up in what seemed to be an altruistic rescue of his hometown paper.
It wasn’t the first time a local rich guy had stepped in to preserve The World-Herald that Omahans and Nebraskans knew.
Peter Kiewit bought the paper in 1962 to ensure that it would continue to be locally owned. Corporate ownership of newspapers was on the rise, and media magnate Samuel Newhouse was interested in The World-Herald. From a revenue standpoint, it was a gem. The paper long boasted the among highest market penetrations in the country, and its circulation in the 1970s, when I spent a summer as a World-Herald intern, reached from Wyoming and Kansas into Iowa and Missouri.
Kiewit, an international construction billionaire, died in 1979 and set up employee ownership of the paper, with the Kiewit Foundation holding 20% and veto power over a sale.
As a result, The World-Herald remained something of an island as the newspaper industry consolidated, and corporate owners, always mindful of the next quarter’s earnings, began squeezing cost reductions out of their properties.
Since 1980, I’ve been an editor in every U.S. time zone at papers owned by five companies. I feel very fortunate to have gotten into the industry when we had money for travel and ambition and big ideas. Still, according to ownership, times are always tight and newsrooms throughout my career have lived under a budget sword of Damocles. At the end of the tech boom — the fattest time in my management career — I lost a position that was closed before interviews were complete. The cuts could come that fast.
The World-Herald, though, carved its own path, buying several smaller Nebraska and Iowa papers and keeping its afternoon paper until 2016, thought to be the last newspaper in America with both morning and afternoon editions.
In 2012, after Buffett bought The World-Herald and its smaller affiliates, he formed Berkshire Hathaway Media Group and expanded its holdings in an effort to create an economy of scale. He kept the Buffalo News separate.
Buffett told World-Herald employees, “This would be (Kiewit’s) solution. He wanted an independent, locally owned and vibrant newspaper, forever, in Omaha, Nebraska. We would be the logical consequence.’’
It turned out that BH Media, despite the pingpong table outside the newsroom entry, was not immune to forces shriveling the industry. Google and Facebook have captured tens of billions in ad revenue that used to go to newspaper companies. At the same time, those social media platforms and the advent of the smartphone changed how news is delivered.
The World-Herald made cuts in 2017, but at the beginning of 2018, its newsroom had more than 125 employees, its reductions being less than the industry norm in the years following the Great Recession. In mid-2018, Buffett more or less gave up and signed a five-year management agreement with Iowa-based Lee Enterprises.
Three weeks after I became editor in January 2020, BH Media sold its newspaper operations, along with the Buffalo News, to Lee with more than three years left on the management agreement. In the deal, Berkshire became Lee’s sole financier of $576 million in debt at 9% interest. Berkshire also retained ownership of many of the buildings, so it collects rent from some of its former subsidiaries, including The World-Herald.
When the sale was made final in March 2020, just as COVID hit, the World-Herald newsroom had about 80 employees. After reductions this year, the staff is about half that size. The Buffalo News, a longtime bastion of stability, is at about 60 news staffers, down from 145 in 2011.
Buffett had alternatives to ending The World-Herald as the “independent, locally owned and vibrant newspaper, forever, in Omaha, Nebraska,” that he said Kiewit wanted.
Highly reliable former World-Herald journalists have told me that a local group tried to put together an offer to buy the newspaper. In addition, the newly formed newsroom union proposed to Buffett creating a trust and taking The World-Herald nonprofit, as Paul Huntsman did with the Salt Lake Tribune, a closely watched model for the future of legacy media brands.
Buffett rebuffed the alternatives and, I’m told, is “allergic” to any discussion of cleaving The World-Herald away from Lee. It’s clearly an important property in the Lee portfolio. It’s a regional print center — and a source for savings. A Lee leader once pointed out the obvious to me: that most of the company’s operations are too small to realize much more in terms of cost savings, putting larger operations in focus for reductions.
I am among journalists who recognize that legacy news is a for-profit deal whose business model is broken. I knew reductions were inevitable when I became World-Herald editor. COVID and subsequent inflation made things even tougher. I’ve managed through cuts through most of my career and generally pitched to my staffs that, while we can’t do all we used to do, we still have resources to do fantastic journalism. And we do.
But I also know that legacy media brands are a community trust and have considerable civic responsibility. Strong local media enhance civic life, solve problems, build community engagement and hold local leaders accountable. Peter Kiewit apparently believed that, and in 2011, Buffett talked a good game.
It might have been embarrassing to him — I have no idea if multibillionaires are capable of embarrassment — to give up on his BH Media investment, but in the scale of his portfolio, it was peanuts.
Instead of leaning into the civic responsibility embodied in his newspaper brands and protecting the rare independence of his hometown paper, Buffett decided to squeeze what he could from a dramatically disrupted industry. He collects interest and rent — a little pocket change.
And the communities left with shrinking newsrooms, from Richmond to Waco to Omaha, are poorer.