My take on the Buffalo News sale
by Jim Heaney, editor of Investigative Post
It’s rarely, if ever, a good thing when a chain buys a newspaper. And so it is with the surprise announcement today that The Buffalo News is being sold to Lee Enterprises, one of the larger newspaper chains in the country.
We can expect cuts to an already depleted newsroom if Lee’s track record at its other newspapers holds true in Buffalo.
But things could be worse. Lee Enterprises is regarded as a more responsible chain than most of the others that have taken over the newspaper industry, and certainly better than the cutthroat hedge funds that have bought and strip-mined a growing number publications.
The News has been an outlier: a stand-alone daily newspaper. Most have been gobbled up by chains, but News owner Warren Buffett hung onto the paper partly out of fondness for the first daily he purchased, back in 1977. The huge profits it generated for him — $1 million a week, back in the day — didn’t hurt either.
I worked as a reporter for The News for 25 years and negotiated eight contracts for the Buffalo Newspaper Guild. Buffett’s legacy, so far as I’m concerned, was that of an owner who was primarily interested in profits and who should have invested more of them in the paper’s news operation. He kept his hands off the editorial product and, on balance, was a relatively benevolent owner compared to most of his brethren — although I didn’t always see it that way when I was negotiating contracts.
Update: Ominous developments in wake of sale
After buying The News and winning the war with The Courier-Express, Buffett went on to to buy papers in other cities and said he would hold on to them so long as they made his Berkshire Hathaway money. Profits these days at The News are a fraction of what they once were and the newspaper industry as a whole is tanking financially. It prompted Buffett to declare last spring that newspapers were “toast,” save for a few national dailies like The New York Times and Washington Post.
So, as shocking as today’s news is, it should come as no surprise.
Buffett isn’t just bailing on The News, but 30 other daily newspapers owned by his BH Media. Lee has been managing those papers — but not The News — since 2018. Lee is paying $140 million for all the papers and Berkshire is lending more than a half billion dollars to underwrite the deal and refinance Lee’s existing debt. At an eyebrow raising 9 percent, I might add.
The question is what does Lee intend to do with these papers. It already made cuts to many of them when it assumed management of them two years ago.
Isthmus, an alternative weekly in Madison, Wis., home to a Lee publication, had this to say in 2017 before the original management agreement with BH Media:
Lee Enterprises, the fourth-largest newspaper group in the country, embarked on an aggressive series of acquisitions in the early 2000s, racking up $1 billion in debt and filing for bankruptcy in 2011. In recent years the company has achieved debt reduction through aggressively cutting costs — and people. A 2013 report from financial analysis website Seeking Alpha describes the approach as “burning the furniture to heat the house,” noting that since 2010 Lee Enterprises reduced its headcount from 6,304 people to 4,678, a decline of 26 percent. The report continues: “If you’re wondering how this is possible, it’s not from getting people to work smarter or harder. Firing 26 percent of the workforce was made possible by the company’s decision to shrink its newspapers … The end result of firing so much of its staff is that [Lee] now produces a substantially less robust product than it previously did.
Still, much worse has been written about bigger chains such as Gannett and GateHouse, which recently merged. To say nothing of hedge funds that are buying up papers only to strip them of assets in an effort to squeeze whatever profits remain to be had.
The Washington Post wrote this a year ago about two of the largest hedge fund operations:
The tactics employed by Alden and Digital First Media are well-chronicled: They buy newspapers already in financial distress, including big-city dailies such as the San Jose Mercury News and the Denver Post, reap the cash flow and lay off editors, reporters and photographers to boost profits.
The early consensus here in Buffalo is that Lee might not be great, but relatively speaking, isn’t so bad.
The company has already had its way with the dailies it’s been managing for BH Media. What will it do at The News?
The paper has steadily downsized its newsroom over the past two decades. The newsroom staff when I joined paper in 1986 was more than 200. By the time I left in 2011, the headcount was down to about 145. It now stands at about 95. During the same period, daily circulation has dropped from more than 300,000 to under 100,000.
The Newspaper Guild, which represents newsroom employees, is understandably concerned about the sale.
“Everyone is incredibly worried and anxious about what this means for us,” said President Sandra Tan.
Some comfort can be found in the terms of the sale, in which Lee agreed to accept existing contracts, including the agreement between the Guild and The News. Some other purchases in the industry have involved “asset sales” in which the buyer walks away from union contracts, which can be a precursor to a cut in wages, benefits and staff.
Also encouraging: Lee has a reputation as being adept at generating digital advertising sales, something The News has struggled with. At the root of the paper’s problem is a failure to replace lost print revenue (advertising and subscriptions) with online revenue.
What The News’ journalists and readers have to fear, more than what Lee might do to the staff and the product, is what’s happening to the newspaper industry.
The business model that once made newspapers one of the most profitable industries in America has collapsed. Advertising, long the financial lifeblood of papers, is drying up. Circulation, another major source of revenue, is plummeting. Online revenues are growing, but don’t come close to making up for lost print revenue. As a result, newspapers staffs have been slashed, and local coverage along with it.
Newspapers now trail television and the web as a primary source of news.
Only 13 percent of Western New Yorkers prefer print publications as their source of local news, according to a survey published last year by the Pew Research Center. Television is the media of choice (48 percent), followed by online (34 percent). Radio was preferred by 4 percent.
Even worse for print, its audience is dying off — literally.
Print newspaper readers are disproportionately older, and the younger generation isn’t interested. Consider another Pew survey, this one a national sampling, that found only 2 percent of adults under 30 often turn to print to get their news, versus 63 percent who turn to websites and social media platforms.
All this is to say that whoever owns The News faces a huge, perhaps hopeless, challenge. Buffett himself has said he expects most newspapers to “disappear.”
I wish Lee good luck; it’s going to need it.