Learn from Warren Buffett

Newspaper, which has been around for hunderdes years, is facing serious threat from new Media including Internet and Social News. Although Buffett said he never go into the Internet business, he admitted that the erosion of the newpaper business will never end and Mr. Buffett will never buy newspaper business. Read more about the Q&A session Buffett answered in his 2009 annual shareholder meeting.

Question: At what price does it become compelling to invest in newspaper business or is there no price in today’s environment?

Buffett: The current environment is accentuating problem in newspapers -but it’s not the basic cause. Charlie and I read 5 a day. We’ll never give them up. We would not buy them at any price. They have the possibility of going to unending losses. They were essential to the public 20 years ago. Their pricing power was essential with customer. They lost the essential nature. The erosion has accelerated dramatically. They were only essential to advertiser as long as essential to reader. No one liked buying ads in the paper – it’s just that they worked. I don’t see anything on the horizon that causes that erosion to end.

Munger: It’s really a national tragedy. As they disappear – I think what replaces them won’t be as desirable as what we’re losing.

Mr Buffett’s comments came just days before Rupert Murdoch is expected to give investors his rundown on the industry, with News Corp scheduled to report third-quarter earnings on Thursday morning, Sydney time.

And in America, the Washington Post Company posted a $US18.7 million ($25.5 million) quarterly loss last week as its venerable flagship paper reported a 33 per cent slump in print advertising sales.

News Corp’s newspaper division may report just $US7 million in operating profit for the quarter, down from $US216 million a year earlier, hurt by ad declines of more than 20 per cent in all its markets and the weaker British pound and Australian dollar, according to Credit Suisse. The broker expects the slide in operating earnings of Mr Murdoch’s empire to have accelerated in the three months to March, slumping 46 per cent to $US778 million with the only gains coming from cable TV and filmed entertainment.

In Australia investors will be looking for the latest update on advertising markets when West Australian Newspapers reports third-quarter earnings tomorrow. . Deutsche Bank expects the publisher, which is 23 per cent owned by Kerry Stokes’s Seven Network, will post a 26 per cent slump in operating earnings as the end of the state’s mining boom has hurt classifieds.

Australia’s largest publishers say they are better off than their US peers. Their combined ad sales fell less than 1 per cent last year, they say, and they predict a rebound when the economy recovers.