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Conrad Black and Warren Buffett have something in common -- they both think newspapers are undervalued.
As newspapers across North America frantically build paywalls to charge their online customers and cut back on their publishing schedules and staff to reduce costs, the former publisher says there’s still value in the industry if it’s run the right way.
“There is a great premium to be placed on the editorial function and on the goodwill of a famous trademark like a respected newspaper,” Black said in an interview with the Huffington Post . “Any good title that’s grossly underpriced could be interesting.”
It’s a sentiment echoed by the world’s most famous value investor. Buffett bought the Media General newspaper chain earlier this year, which has 25 dailies in small markets. Buffett believes small, civic-minded communities will continue to support their local papers regardless of problems facing the industry at large.
“I’ve loved newspapers all my life -- and always will…. Berkshire will probably purchase more papers in the next few years,” he said.
While Black may be interested in getting back in the game after a 12-year absence (29 months of it spent in a U.S. jail on fraud charges and obstruction of justice charges), it wouldn’t be easy for him to resume his publishing career. Canadian tax laws favour Canadian ownership, allowing the paper’s advertisers to deduct the cost of buying ad as a business expense.
And because he isn’t a Canadian citizen, his stay in the country isn’t even guaranteed let alone his business career. Black is in the country on a one-year temporary–resident permit, although he would like to once again become a Canadian citizen.
In the interview with the Huffington Post, he made it clear he wasn’t actually in the market looking for papers to buy, but he dodged when asked how he would make money where others have struggled.
“It’s not that I don’t have an answer, but I’m not going to answer because it might be an untimely and excessive disclosure, and compromise what I might actually do,” he said.
If he were shopping, the most obvious place to start would be at Postmedia Network, which is the company formed out of the bankruptcy of the Canwest Global Communications Media. The newspapers that formed the backbone of Canwest -- such as the National Post, Ottawa Citizen and Calgary Herald -- were sold to the company by Mr. Black in 2000 for $3.2 billion.
Postmedia is now in the middle of a massive restructuring as it attempts to pay down about $481 million in debt while revenues fall. It hopes to cut $120 million out of its operating budget within the next three years, through a series of cuts and consolidations.
The chain now has a market capitalization of about $30 million after its shares have fallen 95 per cent this year. Chief executive officer Paul Godfrey has said he doesn’t want to sell individual papers, but did sell the Victoria Times Colonist and a handful of community papers for $85 million in a deal that had more to do with the paper’s union contract than business model.