1996: Is the newspaper industry's economics deteriorating?

AUDIENCE MEMBER: Mr. Buffett, my name is David Lowe (PH) from Ventura, California.

My first Berkshire meeting, and I want to mention that I’m very intrigued at the influence you have over the shareholders here. I note that the first beverage they ran out of in the lobby was Cherry Coke. (Laughter)

My question is about The Buffalo News. You say, in the letter for the ’95 report, that the newspaper industry has lost another notch in its economic attractiveness. Can you elaborate on that?

WARREN BUFFETT: Yeah. The — what you are seeing in newspapers is a circulation trend that has been prevalent for a long time, in terms of newspapers per household.

But that has been declining, and that — daily newspapers — and that I would say the trends of the last couple years are somewhat worse, in that respect.

I would say that the ability to price, both at the circulation and advertising level, is — has weakened a bit in recent years — not dramatically, but it’s weakened a bit.

At one time, newspapers really — daily newspapers in single-newspaper towns were probably as attractive, economically, as any business you could find. I mean, it — a large percentage of advertisers had very little choice, in terms of using them as an advertising medium.

People had less options, in the way of learning what was going on around them other than the daily newspaper. So, the — they started from a position of extraordinary strength.

They still have a very strong position. And I’ve tried to emphasize that in the report. I mean, they’re a bargain at the price they sell for. They give you all kinds of information with very low price. And they’re a magnificent way for most merchants to reach their customers.

But they are not — they do not have the exclusive advantages, in many cases, that they had 15 or 20 years ago.

Third-class mail has become more of an option. People have more ways of obtaining information. As we talked earlier, information can be processed electronically and delivered at far lower cost than people dreamt of 20 years ago.

So, all of those things eat away a little bit. It’s still a very fine business. But those — I don’t see anything that will reverse those trends. I don’t think that they will necessarily accelerate.

But I think that, if the only thing you owned in life was a daily newspaper in a single-newspaper town 20 years ago, you would feel slightly less secure today than you did at that time. But you’d still be a lot better off than owning virtually any other business.

Charlie?

CHARLIE MUNGER: Nothing to add.