Warren Buffett's company has hired Lee Enterprises to manage the mostly smaller newspapers it has acquired since 2011 in 30 different markets.
Warren Buffett’s company has hired Lee Enterprises to manage the mostly smaller newspapers it has acquired since 2011 in 30 different markets. Lee said Tuesday it expects to collect $50 million in fees from the five-year agreement that should help BH Media Group’s newspapers reduce costs. “In addition to the primary benefit of deploying Lee’s successful strategies at BH Media, this alliance provides a significant expansion of operating scale, adding 30 markets to our own 49,” Lee President Kevin Mowbray said.
Billionaire Omaha investor Warren Buffett, chairman and CEO of Berkshire Hathaway, said that, “although the challenges in publishing are clear, I believe we can benefit by joining efforts. Lee Enterprises’ growth in digital market share and revenue has outpaced the industry.” Lee’s shares jumped nearly 20 percent Tuesday to close at $2.88. Berkshire Class A shares rose slightly to $285,271.34 each.
Since Berkshire began buying more newspapers in 2011 it has largely let them run themselves, as it does with its other subsidiaries, but that meant there weren’t significant changes at a time when the industry is struggling to replace ad and subscription revenue lost to online competitors. “It has been very disappointing we haven’t seen much innovation out of Berkshire Hathaway Media,” newspaper analyst Ken Doctor said. If this deal is successful in reducing costs, Doctor said other media companies might consider similar arrangements.
Rick Edmonds, a media business analyst with The Poynter Institute, said this new arrangement should help Berkshire’s newspapers because it’s harder for smaller companies to keep up with technology needs and centralize operations like larger media companies have. “Lee has a track record of running its newspapers efficiently,” Edmonds said. Andy Kilpatrick, the stockbroker-author who wrote “Of Permanent Value: The Story of Warren Buffett,” said this move signals that Buffett doesn’t want to bother with the challenges of running the newspapers anymore, but he also doesn’t appear to want to sell them.
The Omaha World-Herald, the Richmond (Virginia) Times-Dispatch and the Winston-Salem Journal in North Carolina are among properties owned by BH Media, which is based in Omaha with Berkshire Hathaway. BH Media Group’s top executive, Terry Kroeger, said he is leaving the company as a result of the agreement. Kroeger had been the Omaha World-Herald’s publisher before leading Berkshire’s newspaper group. No other changes are planned immediately at BH Media group. Newspaper executives will work with Lee to develop plans to increase revenue and cut costs.
Lee’s larger daily papers include the St. Louis Post-Dispatch, the Lincoln (Nebraska) Journal Star and the Wisconsin State Journal. The company is based in Davenport, Iowa. Mary Junck, executive chairman of Lee Enterprises, said the alliance “enables us to generate more cash flow, speed our debt reduction, enhance our industry leadership and further advance our abilities as we introduce our digital and print strategies at BH Media properties.”
Junck said Buffett got to know Lee in the past as an investor, and that helped make this deal happen. Lee doesn’t plan to hire any additional staff as part of the deal. The contract excludes management of BH Media television assets, as well as Berkshire Hathaway’s separate newspaper, The Buffalo (New York) News. Newspapers are a relatively small part of Berkshire Hathaway, which owns an assortment of more than 90 companies and holds major investments in companies like Coca-Cola Co., Apple and Wells Fargo.