I was pleased to read Robert Heath’s comment on my recent blurt wrt to the un- and re-bundling of newspaper content. In it, he directed me to a post of his in July. Quoth Mr. Heath, citing the Oracle of Omaha, circa 1977:
The economics of a dominant newspaper are excellent, among the very best in the business world. Owners, naturally, would like to believe that their wonderful profitability is achieved only because they unfailingly turn out a wonderful product. That comfortable theory wilts before an uncomfortable fact. While first-class newspapers make excellent profits, the profits of third-rate papers are as good or better - as long as either class of paper is dominant within its community.” [emphasis added]
In other words, while it’s good to be the king, it’s best to be a monopolist. I’ll repeat what I wrote a couple of weeks ago: as recently as two decades after Mr. Buffet’s observation, a large Texas newspaper sponsored a softball team with “The Only Game in Town” stencilled on the back of their jerseys.
More recently, of course, Buffet changed his tune, citing the prospect of “unending losses” and saying that he wouldn’t buy most newspapers “at any price.” Mr. Heath posits why:
The structure of any market in equilibrium is determined by a complex and recursive interplay of technology, economics, inertia (in the form of pre-existing business relationships) and sometimes regulation. In the short term, the last three factors are paramount; in the long-term, technology dominates.
I admire Mr. Heath’s writing and analysis, and am flattered that he stopped by.
