Warren Buffett’s Top Plays: #12 BN media “the Buffalo News”
Lesson summary:
In 1977, Blue Chip Stamps bought The Buffalo Evening News (also known as “The News”) for $35.5 million, representing 22% of Warren Buffett’s net worth. The company was bought at a high P/E of 50 based on its 1976 earnings. Buffett believed that owning a dominant newspaper was similar to owning an unregulated toll bridge due to the pricing power towards readers and advertisers. The News was not yet dominant in Buffalo and was competing with another newspaper, The Courier-Express. However, Buffett believed that The Courier-Express would fold eventually, which it did in 1982. The News went from losing $1.2 million in 1982 to making a profit of $19.4 million in 1983. However, shortly after its purchase, The News ran into trouble and was sued by The Courier-Express, as well as facing strikes by unions. Buffett was tough and challenged the union leaders to figure out the point where they could push him and still keep their jobs. The unions returned on Thursday.