Abstract
Warren Buffet, John Henry, Jeff Bezos … can we find some millionaires interested in a British paper? In their different ways, the American money men have brought a chink of light to an industry in which all seemed unremittingly sombre; sales, advertising, pagination, staff numbers, story counts. Warren Buffett spent $344 million buying almost 30 newspapers including the Omaha World-Herald. He has followed this with the Tulsa World. All purchases have been medium-size publications well away from large metropolitan areas.
Contrast them with the Boston Globe, recently bought by John Henry, best known as the owner of the Boston Red Sox baseball team and Liverpool football club, and the purchase of the once-mighty Washington Post by Jeff Bezos, the founder of Amazon. This was a personal investment by Bezos and marked the end of an 80-year old ownership by the Graham family. This entry of the super-rich into the newspaper business marks another cycle of the process which made jobbing printers into publishers and profitable newspapers into the ownership of large groups. Now we see them returning to what might be regarded as private, but very rich, hands.
What is the likelihood of a similar development in British newspapers? We have some interesting parallels in philosophical terms. Warren Buffett is principally concerned with local newspapers, and so, on a much smaller scale, is Sir Ray Tindle. Since the end of the Second World War, he has been building a stable of more than 200 weekly newspapers throughout the nation. They are small, they are very local and they are profitable, a description which is increasingly difficult to find elsewhere in the British newspaper industry
How attractive is the industry likely to be to outside investors? Apart from the handful of national titles with an international following, the answer seems to be “not very”. The Times and The Sunday Times look likely to remain firmly in the Murdoch stable; John Fallon, Chief Executive of the FT's parent company Pearson, has said that that the title is not for sale. Richard Desmond has considered selling the Express. Perhaps the Barclay brothers would listen to offers for the Telegraph titles, though they would command nothing like the £665 million of 2004. From an investment viewpoint, the glory days of 20-plus per centage return on investment are long gone and the future prospects are of margins in line with the rest of manufacturing industry. The long-standing guarantee of ownership of a newspaper bringing serious political leverage looks less copper-bottomed now the Leveson inquiry has exposed some gaps in the moral towers that constructed to dominate the media landscape.
However there have always been prospective press barons willing to bid for the authority which newspaper ownership is seen to bring. The favoured targets of these potential owners are the handful of national newspapers which might be available if the price was right, despite long and vehement denials. There is still family ownership, in effect, at the Daily Mail and the Telegraph. Rupert Murdoch is often accused of running his company like a family business. But any decision to sell will be financial rather than emotional, and will be conditioned rather more by avoiding loss than by making profit.
So who will play Buffett, Bezos or Henry? Any excursion into the British market would plunge a buyer into the cockpit of newspaper politics with magnates such as Rupert Murdoch, who might not take kindly to anyone new seeking to enter what he might regard as his backyard. But other titles and groups would surely consider a sale, just as they did when Roy Thomson wrote to most, if not all, large British newspaper publishers, when he wanted to enter the media industry here. In those days the titles were profitable.
Most regional newspapers are owned by large publishing groups. Daily titles are experiencing difficult trading conditions trying to maintain advertising revenues in the face of internet competition. The weeklies are managing better principally because they are community focused, and because the rates they charge for advertising are low with little in the way of wasted circulation, as happens with the larger circulation regional dailies. It is thought that most groups would happily part with daily newspapers if their cost structures had not been closely coupled with the weeklies. If it is the weeklies that are keeping the regional industry afloat, and the dailies that are costing large amounts, probably in fixed costs, then it would make sense to trim the latter. Groups are willing to divest themselves of those titles which, in their view, cannot be encouraged, or coerced, into providing a satisfactory return. But are they exciting enough to attract buyers?
In Britain we are unlikely to see the intervention of the mega-rich as in the United States, except possibly for the pro-British Michael Bloomberg. Many of our national newspapers have already passed through the hands of several owners, some who have been benevolent and some who have not, but that was in the era when newspapers had the field to themselves, long before a technological revolution brought forth the internet and the agile entrepreneurs who made the most of it. The need for agile entrepreneurs in newspapers has never been greater, but anyone looking to buy in the UK must be looking more to the power than the profit.