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Why Warren Buffett is right about newspapers

Let me finish tonight with this.

Let me finish tonight with this.

Warren Buffett is one of America's wealthiest and most successful businessmen. Such is the interest that Buffett commands that even his secretary's tax rate can spark a political debate. His Berkshire Hathaway, Inc. has a market capitalization of $250 billion and employs 288,000 people. It has holdings in everything from auto insurer Geico to railroad operator Burlington Northern to See's Candies.

Buffett just released his annual letter to Berkshire Hathaway, Inc. stockholders. It's quite an entertaining read, even for the financially uninitiated. For example, in 2012, Berkshire achieved a total gain for its shareholders of $24.1 billion—a profit that Buffett called that "sub par."

And guess what he's bullish about? Newspapers!

Okay, maybe not all newspapers—but smaller, community-based papers. During the past 15 months, Berkshire acquired 28 daily newspapers at a cost of $344 million. Buffett, a former newspaper boy, acknowledged that television and the Internet have created a challenging environment. He acknowledged that stock market quotes and the details of national sports events are old news long before the presses begin to roll. He said that the Internet offers extensive information about both available jobs and homes, and that television bombards viewers with political, national, and international news.

Despite editorial content, Buffett laments that in one area of interest after another, newspapers have lost their primacy, and, as their audiences have fallen, so has advertising. Revenues from "help wanted" classified ads, long a huge source of income for newspapers, have plunged more than 90% in the past 12 years.

But then he said this:

Newspapers continue to reign supreme, however, in the delivery of local news. If you want to know what's going on in your town—whether the news is about the mayor or taxes or high school football—there is no substitute for a local newspaper that is doing its job. A reader's eyes may glaze over after they take in a couple of paragraphs about Canadian tariffs or political developments in Pakistan; a story about the reader himself or his neighbors will be read to the end. Wherever there is a pervasive sense of community, a paper that serves the special informational needs of that community will remain indispensable to a significant portion of its residents.

He could have said something else: that newspapers provide a vital oversight function. In a world where everyone with a computer is suddenly a journalist, there is nevertheless a lack of primary news-gathering, and local papers with their editorial pages often remain the best watchdog we have over local government.

Here's hoping the Oracle of Omaha's investment in American newspapers pays off.