By: Joe Strupp
When Warren Buffett told CNBC last November that “newspapers have got a terrible future” and predicted his paper, The Buffalo (N.Y.) News, might be “the last man standing,” it drew industry-wide notice. Buffett, among the most astute ? and wealthiest ? businessmen around, considers himself a real news-paperman. But he also says having just one newspaper makes that easier, allowing him to have a hand in the business he loves but avoid many of the headaches newspaper chains are suffering.
“If we had 40 newspapers, it would be hard to have quite the same emotional attachment as you have to one,” Buffett tells E&P. “I have a big emotional attachment to [the News]. But if it had unending losses, we’d have to end it.”
That is not likely anytime soon, given the News’ current positive cash flow, lack of debt and relatively small circulation losses. While the industry is reeling from massive layoffs, huge debt loads and plummeting ad revenue, Buffett’s lone daily is something of an oddity. Sure, it has taken ad revenue hits like other papers, but smart management and creative changes have kept the paper going in good shape.
“You try and cut in a way that doesn’t affect the quality of the paper,” says Stan Lipsi, who has served as publisher since 1983. He estimates the paper’s “gigantic” newshole at about 70%.
While the paper has offered two rounds of buyouts, one each in 2007 and 2008, the news staff has been reduced by only 40 since 1999, standing now at 160. There have been no newsroom layoffs since Buffett bought the daily in 1977, and some 700 total employees are still on the job. The paper’s last daily competitor, the Courier-Express, folded in 1982.
“We have a very tight management group. I let people run their own departments, and I don’t have a lot of turnover,” says Lipsi, 82. Profit margins run at about 11%, he adds, admitting that’s down from the 20% profits of just five years ago. But he stresses that’s better than most metro dailies that are stemming losses, helping to pay down debts or dealing with bankruptcy.
On the news side, Editor Margaret Sullivan, who started in 1980 as an intern and has overseen the newsroom for 10 years, says her staff is still able to cover local news, investigations and big breaking stories, such as the February 2009 plane crash of a Continental commuter jet in which 50 people were killed. That story earned the News numerous state Associated Press awards and is likely to make the paper a Pulitzer Prize contender. “It was all hands on deck,” Sullivan says of the plane coverage. “It was the first big story we covered on the Web. It showed that we have a top-flight news staff that is capable of rising to the occasion and come together.”
The News still maintains one-person news bureaus in Albany, the state capital, and Washington, D.C. Its four-person investigative unit is also intact, despite staff cuts in recent years. D.C. scribe Jerry Zremski spent most of 2008 covering the presidential primaries, with then-New York Sen. Hillary Clinton a candidate. He has even embedded in Iraq.
“What is key about the News is that it spends money when it has to, but it has never gotten out of control,” says Zremski, a 25-year staffer and former president of the National Press Club. “We’ve always picked our spots.”
The paper’s coverage of a city government scandal, meanwhile, last year led to the departure of a city council member and an economic development official. In addition, the Society of News Design has rated the News among the top 20 newspapers for each of the past two years.
“It is doing better editorially than it was five or six years ago,” says Geoff Kelly, editor of ArtVoice, Buffalo’s largest alternative weekly. “They are dedicating more of their reporting talent to stories of local interest. We find ourselves more in direct competition with them, which is great for both of us.” But that doesn’t mean other money-saving moves have not been made. Three suburban bureaus were closed in the past year, with those staffers moved back into the main office.
The paper is also a member of the Northeast Consortium, a content-sharing alliance forged in 2008 with five other metro dailies in New York and New Jersey, including The Star-Ledger in Newark and the Daily News in Manhattan.
“We are lean, we are not big spenders, but we do the things that are worth it,” says editor Sullivan. “Journalistically, I think I have a very free hand. My aim was to make the News the best regional paper in the U.S. The push has been strong enterprise and investigative ? enterprise on the front page every single day.”
Buffett, whose Berkshire Hathaway properties have made him one of the richest men in the world, grew up a newspaper fan, with five different paper routes in Washington, D.C., at age 13. The son of Congressman Howard Buffett, he made his money elsewhere ? but always wanted a hand in newspapers. He admits his news-paper interest “is not totally rational.”
Although he has been on the board of The Washington Post Co. since 1974, he wanted to own his own paper and tried unsuccessfully to buy The Cincinnati Enquirer and the Albuquerque Journal in the early 1970s. “It is more fun to have your own,” he says. “I feel an identity with it.” He ended up with the News for $31.5 million.
“People ask me what I would have done if I had not gotten into business,” he explains. “I say, ‘I’d be a reporter, because that is what I do in my job. I assign myself a story. The story might be, ‘What is Coca-Cola worth?’ and then I write the story.”
Buffett says the local focus and interest is a key for the paper: “In the end, you’ve got to be primary in areas of interest to your readers. Your reader has to have a reason to give up time and money to you. In Buffalo, they have done a good job on that.” Buffett further invested in the paper’s future in 2004 with the installation of new $40 million presses.
He credits Lipsi ? who he has known since 1969, when Buffett bought a string of Nebraska weeklies from him ? with following smart management even before the tough times. “It was ungodly profitable for years, and people in the business never fully appreciated that,” Buffett says of other newspaper owners. “You didn’t need to manage them well, you didn’t need to manage them at all. But the people that ran them well 20 years ago are succeeding today. Stan ran it well all the time. He never forgot what he learned from the small operation.”
That success in Buffalo, however, is as difficult as anywhere, says Lipsi. He says the paper, even with all its positives, is still being hit by ad revenue and circulation slides like everyone else. Daily circulation dipped from 175,984 to 165,511 for the six months ending Sept. 30, according to the last Audit Bureau of Circulations FAS-FAX report. Sunday saw a similar slip, dropping from 255,369 to 248,016 during the same period.
“I know we will do relatively well as long as a significant number of people read daily newspapers,” says Buffett. “It gets tough when you get below 30% of households, less important to the advertiser. There is a point at which you don’t deliver tonnage.”
Circulation and ad-revenue declines are forcing Lipsi to find new ways to raise revenue and cut costs. “I don’t budget,” he tells E&P. “We watch every single expense against the previous year.”
One move to save money has been a two-year management salary freeze. Last March, Lipsi also got a concession from the local Newspaper Guild for buyouts and a reduction in a contracted raise, down to 1% from 2%. Circulation distribution managers also took a 10% wage cut. In 2007, the paper got into the commercial printing business and has been printing The New York Times since October, when it also began delivering the Times. For the News, that practice isn’t new: it has been delivering The Wall Street Journal since January 2007 and USA Today since July 2008.
The paper even went so far as to rent out its luxury box at Ralph Wilson Stadium for Buffalo Bills games. “This year is the first time we have sold them,” he says of the seats. But Lipsi also praises Buffett for staying with the paper, not requiring a set revenue stream, and letting it maintain the staff needed to cover news. Asked if the News may go to a paid Web site, Buffett responds, “We are going to look at everything everyone else does.”
But it is also understood that none of Buffett’s millions are there to truly subsidize the paper. “We have to stay profitable,” Buffett adds, “because when you get unprofitable, it just creates problems. It is nice to have it make reasonable money.”