Newspapers can seem like a terrible investment. Circulation and advertising revenues have crashed as the Internet has surged. Staffs have been cut, slimming the volume and depth of coverage. On Wednesday, for example, The New York Times said it was cutting about 100 newsroom jobs, as well positions from its editorial and business operations. And small gains from online ads and other business-side experiments are still nowhere near to making up the revenues lost from print ads and classifieds.
Despite the doom and gloom, some of the savviest investors in the world are buying in. Billionaire Warren Buffett bought 28 regional newspapers for $344 million over 18 months in 2011, 2012 and 2013; his BH Media Group now owns 69 titles. Amazon founder Jeff Bezos bought The Washington Post in 2013 for $250 million. And former hedge fund manager and Red Sox owner John Henry bought The Boston Globe last year for $70 million.
Why? One reason is that they see value. The beat-up papers were relatively cheap to buy and, with their newfound financial stability and some tweaks, could still make a modest profit. The investors, especially Henry, have also expressed a sense of civic duty. They want to protect venerable producers of quality journalism and, some might say, earn the prestige of saving an important local institution. Call it a profit hedge.
But it's not just about meager returns or charity. Buffett, Bezos and Henry are investing in innovation in the hopes of actual growth. People may not yet be paying much for news now, but they are reading it in record numbers on their computers and, increasingly, their smartphones and tablets. It's in that demand that they see the long-term potential for digitally driven profit.
Indeed, the investments that Buffett, Bezos and Henry are making today provide clues as to what newspapers could look like in 25 years. If the men succeed, their efforts today point to a newspaper industry in 2039 that will be highly targeted and geared toward a nearly all-digital audience.