Recently much has been said about the demise of the newspaper. New media like Yahoo!, Google, etc. is triumphing old media in US and other Western markets. In contrast, the old media is thriving in BRIC countries. Newspaper circulation is up in both India and China and advertising revenues are booming. Just for fun, let’s say you are Warren Buffet (WB). So you own Buffalo News in New York and a lot of Washington Post (WP). What do you make of all these industry changes? What are you going to do?
Sitting tight doesn’t make sense. WB realizes that. Here is what he wrote in his annual letter to shareholders recently…
Almost all newspaper owners realize that they are constantly losing ground in the battle of eyeballs. If cable and satellite broadcasting, as well as the Internet, had come along first, newspapers as we know them probably would never have existed.
So, I guess, its safe to say that doubling down on the existing investment is certainly out. After all, this is not a matter of horizontal consolidation. The enemy is the new media.
One option is transform WP to new media. Basically this involves becoming, as Rupert Murdoch says in his famous speech, a “digital immigrant”. This is possible but you need a terrific transformation leader like Lou Gerstner. These guys are hard to find.
The second option is to stay in old media but take a newspaper like WP global. Of course, this is not a simple matter of taking the brand global. You have to be multi-local in this business. This is not easy but can be done. Murdoch’s newspaper empire is testament to that. But then even his newspaper empire is basically in three countries (Australia, UK and US0 and publishes only in English.
The third option is abandon idea of transforming old media in US. Why not pick up old media that has a future. Why not buy Deccan Chronicle Holdings in India; it was up by 81% last year. Or HT Media, or even Jagran Prakashan. They are all doing well. There are similar options in China too.
The fourth option is to abandon old media altogether. Why not pick up new media stocks? What’s stopping WB from becoming the largest shareholder in Yahoo! like he is in WP? Intriguing proposition but its unlikely to happen. Why? Because Yahoo! market cap is near $40b while WP is only $8b. Hmm… maybe WB can buy StarTV or TV18 – these are examples of great “new media” picks in India.
What’s your guess that WB will do? I would imagine that options one and two are out. Both options three and four are bets on entrepreneurs – stuff that WB is comfortable with. But he is also prone to stick to the knitting. That gives option three an edge. That’s what I would vote for. So the conclusion could be that Warren Buffet is coming to town!
Now if only there was a way to find what he really thinks!
[Disclosure: I have no inside knowledge. This is purely speculative. Consume it at your own risk.]