Buffett and the Washington Post

Warren Buffett owns 20% of the Washington Post, currently valued at $1.7 billion dollars. It’s interesting to review Buffett’s steadily declining attitude towards the publishing industry and wonder: at what point does Buffett bail on WPO? Obviously, selling even 10% of WPO would be tough in the open market and destroy confidence in WPO’s business model. So what is a billionaire to do?

Charlie Munger, Buffett’s partner, said in 1986:

‘Newspapers are a marvelous business. It’s one of the few businesses that tend toward a natural, limited monopoly. Obviously, it competes with other advertising forms, but not with anything exactly like itself. Show me another business like that ‘ there isn’t one.’

Asked about selling shares, Warren Buffett in 2002:

“It’s not our natural inclination to sell. We’ve never sold a share of the Washington Post, Berkshire Hathaway (since we began acquiring it in 1962), Coke or Gillette.”

“We would sell if we needed the money for something else, but that hasn’t been a problem in the past 10-15 years. Earlier in my career, I had more ideas than money, but now it’s the reverse.”

“Now, we typically sell when we reevaluate the economic characteristics of a business; when we had one view of the long-term competitive advantage, but are modifying it. That’s not to say it’s become a bad business — just that the competitive advantages are not as strong as
we initially thought.”

“A classic case is the newspaper business. Decades ago [when Berkshire bought The Buffalo News and The Washington Post], it was impregnable. We still think it’s quite a business, but it’s not the same as in the 1970s. There are so many other sources of information now. Incidentally, the same thing has been happening to network television.”

And in 2004:

Buffett and Munger were surprisingly bearish on newspapers, a major investment for Berkshire through its large stake in the Washington Post Co. and its outright ownership of the Buffalo News.

After saying that he and Munger are “newspaper addicts” and that “it’s still an unusually good business,” Buffett struck a somber note.

“The economics of newspapers are very, very close to certain to deteriorate over the next 10-20 years,” he warned. “I see nothing that will turn around the erosion from both the circulation and advertising standpoints.”

Here’s a 15 year perspective on WPO.