By Michael Hooper
An agreement between BH Media Group and Lee Enterprises Incorporated will give the two corporations control over most of the daily newspapers in Nebraska.
The Lincoln Journal Star, owned by Lee Enterprises, is a longtime rival to the Omaha World-Herald. However, both newspapers will be under management by Lee Enterprises through a new contract with Berkshire Hathaway's BH Media Group effective July 2, 2018. Berkshire Hathaway is paying Lee Enterprises $5 million per year to manage BH Media Group newspapers.
Some Nebraska properties owned by BH Media Group include the Grand Island Independent, the Kearney Hub and the North Platte Telegraph.
An Omaha World-Herald story of the departing of Terry Kroeger, chairman and CEO of BH Media Group, signals a new path as Buffett favors the alliance with Lee Enterprises for management of the media properties.
An Omaha World-Herald story of the departing of Terry Kroeger, chairman and CEO of BH Media Group, signals a new path as Buffett favors the alliance with Lee Enterprises for management of the media properties.
During a conference call, Mary Junck, executive chairman of Lee Enterprises, said the alliance with Berkshire Hathaway is an attractive strategic alliance that will improve cash flow and debt reduction. She said Lee will manage the BH Media properties "the same way we manage our own."
Kevin Mowbray, Lee president and CEO, said Lee will work with BH Media Group publishers to develop a plan to improve revenue and reduce costs.
He said there was no plans for immediate changes.
I would expect over time Lee Enterprises to encourage management to reduce cost. Perhaps layout and design of newspapers in Nebraska will be conducted in one central location. Printing process can be consolidated in one central location.
Newspapers are struggling, they have been losing to Google and Facebook for years.
An article published by the Pew Research Center says; The estimated total U.S. daily newspaper circulation (print and digital combined) in 2017 was 31 million for weekday and 34 million for Sunday, down 11% and 10%, respectively, from the previous year. Declines were highest in print circulation: Weekday print circulation decreased 11% and Sunday circulation decreased 10%.
Warren Buffett has an expertise in handling the demise of an industry. Berkshire Hathaway itself was in the dying textiles industry in America in the 70s and 80s. He eventually shut down the textile mills. And focused on acquiring quality businesses. He tried to buy the Omaha World-Herald in the 1970s, but it wasn't for sale. He found the Buffalo News.
It's interesting to note the Buffalo News is not part of this BH Media alliance with Lee Enterprises.
I think Buffett is looking for a way to improve efficiencies in a newspaper industry that is losing traditional subscribers.
My colleague Terry Krepel had this to say, I believe all Lee papers in Nebraska — Columbus, Fremont, Beatrice — are already printed at the Journal-Star plant. The World-Herald will likely keep its own plant, but there’s not a lot else that can be done there either, unless Lee does something like having its paper in Sioux City printed in Omaha (not outside the realm of possibility, given that the Wichita paper is now printed at the Kansas City Star). Otherwise, it appears that Nebraska is the only area where BH and Lee operations have any sort of significant overlap.
My colleague Terry Krepel had this to say, I believe all Lee papers in Nebraska — Columbus, Fremont, Beatrice — are already printed at the Journal-Star plant. The World-Herald will likely keep its own plant, but there’s not a lot else that can be done there either, unless Lee does something like having its paper in Sioux City printed in Omaha (not outside the realm of possibility, given that the Wichita paper is now printed at the Kansas City Star). Otherwise, it appears that Nebraska is the only area where BH and Lee operations have any sort of significant overlap.
The more likely source of cost savings will be in creating design and layout hubs. Lee is already heavily into that, BH not so much as far as I can tell. I was surprised that the Independent and the Kearney Hub apparently do not do much in the way of consolidation — the Hub has its own copy editors and still runs its own printing plant. I suspect the Lee deal will hasten the shifting of Hub printing to GI and a creation of a design hub that probably at the start will include the BH papers in GI, Kearney, North Platte and (maybe) Scottsbluff (perhaps all shifted to Omaha) and then ultimately folded into the Lee design hub system. The Scottsbluff paper might see some consolidation with the Lee paper in Casper, Wyo.
Lee got itself in trouble by selling off its TV stations to focus on newspapers, then paying top dollar for the Pulitzer papers just before the industry tanked. Lee filed bankruptcy in 2011, after which BH bought a piece of the company and helped it refinance its debt from buying Pulitzer. Lee’s been basically on the sidelines the past few years focused on trying to shore up its operations while BH and GateHouse were snapping up most of the papers that came up for sale. The management deal is probably a precursor to a full merger between Lee and BH down the road.
Warren E. Buffett, chairman and CEO of Berkshire Hathaway, said: “I love our newspapers and am passionate about the vital role they serve in our communities. 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 also has led the industry in overall innovation and performance, all while faithfully fulfilling its public trust as an indispensable source for local news, information and advertising. Our missions and goals match exactly, our markets are similar, and we both have excellent managers. Operating together will strengthen both of us, and Lee is logical to lead the process.”
The author Michael Hooper owns shares of Berkshire Hathaway
