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In the years 1978-1982 both the Buffalo Evening News and the Courier-Express suffered large losses as they lowered prices in attempts to attract readers and advertisers in an over-supplied market. The outlook was bleak for both. Until, that is, the breath-taking announcement on September 19 1982 by the owners of the Courier-Express that they were quitting, leaving the News as the only metropolitan daily paper in Buffalo.
The Courier-Express’s owners had simply had enough, and they could see that the News’s owners had deep pockets capable of supporting loses for many years yet. Not only did they have the back up of See’s Candy’s income and Wesco’s income flowing to Blue Chip, but this holding company was, in turn, controlled by the very strong Berkshire Hathaway which could pump-in money at the drop of a hat. What was the point of going-on with the banging of heads in Buffalo?
Thus it was that the best resourced, the fattest, company prevailed, and turned Buffalo from a two-paper town to a one-paper town. The rewards are seen in the terrific jump in after-tax profits flowing to Berkshire Hathaway. After the withdrawal of the Courier-Express it only took another three years or so before Berkshire received back everything it had put into the News back in 1977. And the profits grew from there until they were receiving on an annual basis almost as much as the $35.5m put in.
Source: Warren Buffett, Letters to Berkshire Hathaway shareholders. Data unavailable after 1999.
In 1983 the News recruited many former Courier newsroom and other journalistic staff, and started a morning paper immediately following the closure of the Courier. Also the business name was changed to simply Buffalo News. Sunday circulation quickly doubled to over 360,000 and weekday circulation was a much improved 323,000. In January 1983 Forbes had a stab at valuing the News – they reckoned $400m.
A decline, but not a fall
By the middle of the noughties the internet had changed the economics of the newspaper business, as it did with many other industries. Buffett lamented the effect:
“Not all of our businesses are destined to increase profits. When an industry’s underlying economics are crumbling, talented management may slow the rate of decline. Eventually, though, eroding fundamentals will overwhelm managerial brilliance. (As a wise friend told m
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