POSTED: 1:30 a.m. HST, Jun 18, 2012
BUFFALO, N.Y. >> Over the years, newspaper owners have built monuments to themselves in the form of giant buildings, statues and plaques commemorating their roles in their communities and the country at large. At the headquarters of The Buffalo News here, a sand-colored office building across the river from a fragrant Cheerios factory, the only visible sign of the owner is a small photograph hanging in the office of the publisher, Stanford Lipsey, signed, “To the best in the business, Warren.”
Warren is, of course, the billionaire Warren E. Buffett, but the modesty of his physical presence at the paper — he has not visited the newsroom in the last eight years — understates his interest in the paper, which his company, Berkshire Hathaway, bought in 1977.
Buffett’s views on newspapers have been a hot topic of late. Three years after telling his shareholders that he would not buy a newspaper at any price, Buffett has moved aggressively into the business, buying 63 local papers and revealing a 3 percent stake in Lee Enterprises, a chain of mostly small dailies based in Iowa.
In a letter Buffett sent to the publishers and editors of all Berkshire Hathaway daily newspapers, he described himself as a newspaper “addict” who planned to buy more papers in the future. While he is less certain how he will make papers profitable in the digital age, he’s confident that in certain cities, newspapers will thrive.
“I do not have any secret sauce,” Buffett said in a phone interview. “There are still 1,400 daily papers in the United States. The nice thing about it is that somebody can think about the best answer and we can copy him. Two or three years from now, you’ll see a much better-defined pattern of operations online and in print by papers.”
For his new employees, the best indicator of what Buffett may do is what he has done with The Buffalo News. Interviews with more than a dozen current and former editors paint a picture of a profitable paper that is run with little involvement from its owner. Some journalists say that the owners will hold out as long as they can to buy the latest printing presses and that they wish the paper dedicated more resources to the highly ambitious journalism that wins the biggest awards.
But many workers agree that the owners do not skimp on sending journalists to town meetings or on enterprising local journalism, which is in line with Buffett’s belief about intensely locally focused papers.
“In Grand Island, Nebraska, everyone is interested in how the football team does. They’re interested in who got married. They’re maybe even more interested in who got divorced,” Buffett said, adding that he was not interested in sprawling markets like New York or Los Angeles. “If you live in South Central Los Angeles, you’re not interested in who dies in Beverly Hills.”
But being owned by Berkshire Hathaway has not shielded The News from the industry’s slump. In 2011, the union said newspaper officials told them the paper earned a profit of $9.3 million, the first time the paper’s profits fell below $10 million in a quarter-century. To put this in perspective, Lipsey said The Buffalo News often reported annual profits in the 1980s of $55 million. Since 2009, nearly 100 full-time jobs were cut from the union — which includes the newsroom and the classified, accounting, bookkeeping and circulation departments — according to Henry L. Davis, the paper’s health reporter and the president of Buffalo Newspaper Guild. A stroll through the newsroom, which is dotted with potted plants, feels like a walk through a half-empty city park. The unionized staff members who remain have had a 1 percent raise since 2009.
The newsroom staff is now 140, from 200 about a decade ago, with cuts made mainly through buyouts rather than layoffs. Retirees have few complaints about the pension managed by Berkshire Hathaway because the maximum retirement payouts have been raised. So while union negotiations have been heated and highlighted debates over who should pay for employee parking, newsroom employees still have their health benefits fully covered.
“We do kind of consider ourselves lucky,” said Gene Warner, a reporter with the paper for 32 years who retired in 2010 and now works part time. “We’re not bleeding red ink.”
On top of the industry’s tough climate, The News’ home is a Rust Belt city that has suffered economically. Buffalo has lost 10 percent of its population every decade for the last 30 years, according to data tracked by the University at Buffalo Regional Institute.
“I hate to think of what Buffalo would be without a newspaper,” said Lee Coppola, a reporter at the paper from 1967 to 1982 who went on to work in television, and then became a federal prosecutor and later was the dean of the journalism school at St. Bonaventure. “I think Buffett has sheltered the city since he bought the paper, in a way. He has sheltered the paper. He spent millions and millions of dollars when newspapers were in decline.”
While the newspaper’s circulation (now about 150,000 daily and 230,000 on Sunday) has dropped with the population, the residents who remain still read the paper. According to data tracked by Media Audit, The Buffalo News has the second-highest penetration of any news organization in the nation. In other words, 70.9 percent of area households read or viewed The Buffalo News in the last month. The only news outlet with a higher number was The Des Moines Register, with 72.9 percent reading. Brian Connolly, a managing editor involved with expanding the paper’s online efforts, says he still sees papers delivered to two-thirds of the homes he passes on his morning jogs.
“That’s still where a lot of the eyeballs are,” Connolly said.
Lipsey, the publisher, hopes to improve the paper’s fortunes by unveiling a version for Apple’s iPad and a paid subscription model in the fall. He is expanding into commercial printing, including the programs it prints for the Buffalo Sabres hockey team, and hopes for double-digit growth this year. Lipsey said that in the coming years employees may have to contribute to their health insurance. But he is confident Buffett will support them.
“This will be one of the last papers that folds because Warren has pride in it,” said Lipsey, an athletic, slender man in his 80s whose boss jokes that he refuses to tell him his exact age.
Lipsey is close enough to Buffett to know. They were introduced more than 40 years ago by Buffett’s first wife, Susie, who shared with Lipsey a love of jazz. Buffett bought out Lipsey’s Omaha weeklies, called the Sun newspapers, but kept him on as president and publisher. With Buffett’s help, the weeklies went on to win the Pulitzer Prize for their investigation into Boys Town, the charity for homeless boys, in 1973. Buffett and Lipsey still share a sense of humor and folksy manner. (Lipsey’s iPhone ring tone is a clown’s horn.)
In 1977 Buffett learned that the Butler family, the longtime owners, wanted to sell The News to The Washington Post, where Buffett was a board member. When The Post turned down the Butlers, Buffett said he was interested and asked Lipsey to sort out the paper’s finances.
It was not an auspicious start. According to a corporate history, the paper lost $10 million in 1980, and Buffett’s desire to start a Sunday edition set off a costly court battle with the rival Buffalo Courier-Express, which folded in 1982. “That was a very tough period,” Buffett said. “They persevered in a tough fight and a tough legal situation.”
In those years, Buffett was more deeply involved in the paper. He encouraged Coppola, then a reporter, to write an article about how chief executives were using corporate jets to fly to a California retreat and treating it as a business expense. Edward Cuddihy, a former managing editor, said Buffett offered guidance on negotiating with unions. In 1989, Buffett met with the incoming editorial page editor, Barbara Ireland, for a two-hour brunch to talk about politics before she was offered the job. Reporters recall how he attended the company picnic and autographed their dollar bills.
Buffett’s involvement has shrunk as Berkshire Hathaway has grown. Margaret Sullivan, who was appointed managing editor in 1998, said that Buffett had offered guidance when asked and offered praise for the paper’s awards. But he is not involved in editorial decisions. She said she had the financial resources to hire staff when necessary and to approve investigative projects, like a series last year on prescription drugs. But she does not have an endless bank account to spend on prizewinning journalism.
“We don’t have all of the resources behind us. We do really strong work, not to win awards, but to benefit the community. I think we’re very ambitious in our reporting.”
Still, the paper attracted Charlie Specht, a 24-year-old staff reporter who turned down a job in Washington, D.C., at The Daily Caller to work in Buffalo. In Buffalo, he could afford to buy a $105,000 house, get married, start a family and get better reporting experience.
“I would never have gotten to cover the types of stories that I have been able to cover,” Specht said. “It’s comforting to know your paper is owned by Warren Buffett. I hope he lives to be 200.”