How Many Times Do You See Warren Buffet, Tony Blair, Rupert Murdoch and Wonderbra All In The Same Headline? Do We Have Your Attention? Read On

Take Warren Buffet, for instance. The second richest man in America made headlines all over the world last week when he announced he was giving the Bill and Melinda Gates Foundation some $36 billion. Oh, how the Buffalo News, owned by Buffet’s Berkshire Hathaway, wishes the old man would loosen up the purse strings for them just a tad.

Like so many newspapers, the News needs to cut costs and it has instituted a pension enhancement buyout scheme, plus it is switching to morning delivery.

Publisher Stanford Lipsey says the newspaper is still making money but, “Like every other paper, we have to reduce expenses.” And of course Buffet is giving his money away to charity, and the News is not a charity, it’s a Berkshire Hathaway business expected to stand on its own two feet.

ftm background

A High Price For Knight-Ridder Sale Would Have Signaled A Bright Future For Newspaper Valuations, But McClatchy Paid Practically No Premium And Yet In The Intervening Weeks Its Shares Have Dropped 12% To A Four-Year Low. What Does That Tell You?
Most observers seemed to think that McClatchy did OK. It bought Knight-Ridder for $4.5 billion representing a dollar or two a share over its stock market price, and then said it was only keeping the 20 newspapers that showed real growth and it was dumping the rest, and that sale, after tax, would reduce the total transaction to around $3 billion.

Lee Bought Pulitzer Last Year for 13.5 times Earnings Yet McClatchy Paid Just 9.5 times Earnings For Knight-Ridder. What Does That Tell You About the Value of Newspapers Today?
That someone, it happened to be McClatchy, paid about $67.25 a share for Knight-Ridder -- some $4.5 billion plus absorbing K-R’s $2 billion of debt -- was about what the markets expected. But where was Gannett and all those private equity companies that were expected to put in bids? The word is they dropped out, which gives as good an indication as any that newspaper valuations are not what they used to be.

US Newspaper Executives Tell Wall Street This Week Their 2006 Prognosis But the Real Story is That Knight-Ridder Won’t Be Presenting – It’s In the Midst Of Being Forced to Try and Sell Itself -- And That’s the Real Future That Many of Them Don’t Want to Talk About!
When the major US publishing companies give their various reports to the 33rd annual UBS Media Week Conference and to the Credit Suisse First Boston media meeting this week the shadow of who is not there will be overwhelming. Knight-Ridder’s prognosis is already known – its three main shareholders want it sold to gain shareholder value, and many of those other newspaper companies – especially those without family protection on their shareholdings – fear they could soon be in the same boat.

“Private Capital Management (PCM) Has $4 Billion Invested in US Newspapers. What Do They Know That We Don’t”? – FTM Sept, 2005; PCM Tells Knight-Ridder To Put Itself Up For Sale
In what must be considered a very gloomy assessment of the US newspaper business, one of its largest institutional investors has seemingly lost patience with the industry being able to turn itself around, and has now urged Knight-Ridder (K-R), the country’s second largest newspaper chain, to put itself up for sale.

Now That Knight-Ridder Is Officially For Sale, Two Questions Emerge: Who Would be Foolhardy Enough to Buy Newspapers These Days and Which Major Media Group Will Next Feel Shareholder Pressure To Sell Itself?
Knight-Ridder didn’t have much choice. With its three largest shareholders representing some 36% of the shares telling the company to explore ways of selling itself and threatening board changes if it didn’t, it hired Goldman Sachs to scout out the market.

But encouraging people to retire early by boosting their pension payments as if they had five extra years of service is a novel way to go about doing this. It could have something to do with the fact that while many media pension funds are under-funded, at the News it is over-funded at 162%, so the real cost to management hardly shows.

But of course you can’t please everyone. “Considering it’s not going to cost them money, it could have been a little more generous,” said John Bonfatti of the newspaper guild.

Meanwhile on the advertising front a recent ad for Wonderbra caught our eye, as most Wonderbra ads do. This one is very clever; it actually hides its attributes.

Something that global companies learn quickly are the local customs in the countries they do business. And in Arab countries when it comes to sexual attire one has to be vary careful how one promotes ones wears. In the United Arab Emirates, for instance, it is common practice that government censors will use black marker pencils to blot out magazine content that falls foul of standards.

So Wonderbra saved the censors the trouble. It has printed an ad showing a model wearing its Wonderbra but it has used its own black marker pencil to block out really a rather large amount of space. My gosh, could she really have been that uplifting? And that is the point of the ad. It gets its message across and stays inside the limits. 10 out of 10.

On the political front British Prime Minister Tony Blair is hearing the poodle word again. For some time he was called President Bush’s “poodle” for doing everything the US administration wanted the British to do in Afghanistan and Iraq. But now we’re being told he is somebody else’s poodle – none other than media mogul Rupert Murdoch.

The truth is that Murdoch really does hold great political power in the UK via his Sun tabloid newspaper in particular, but also with the Times, Sunday Times and the New of the World, let alone the Sky News 24-hour news channel. When Rupert Murdoch speaks in the UK, politicians of all parties listen. And to be granted an audience is considered a great privilege.

Murdoch has always claimed his editors have complete freedom in deciding whom they will support for prime minister, but that is usually considered to be said with a very big wink. For the Times and The Sunday Times he actually gave assurances to the government when he bought the newspapers from the Canadian Thomson family that the editors of those two newspapers would make their own political endorsement decisions. Again, in today’s world 25 years later, big winks all around.

So it caught the attention of most pundits when Murdoch said last week that Blair should quit the premiership at least one year ahead of the next UK general elections so the country could compare Gordon Brown, who would step into Blair’s shoes, and David Cameron, the new head of the main opposition Conservative Party. And whereas Murdoch had been somewhat indifferent to Cameron in the past, when asked whether he thought he could support Cameron now he responded, “Oh, yes.”

Because Blair has been in the habit of flying off to Murdoch meetings wherever they may be – the next one is in Pebble Beach, California, next month – a Liberal Democrat member of the House of Lords put in a request under the freedom of information Act to know just how many times Blair and Murdoch have talked on the phone or met. The Prime Minister’s office flatly refused the request on the grounds that prime ministers should be able to meet and talk at will with whom they wish without fear such conversations would be made public.

Not so, ruled Richard Thomas, the information commissioner, who told Downing Street to provide all the details within 35 days. “The public interest requires the release of the information as the dates of discussions are of an official nature,” Thomas ruled.

Murdoch also has put his foot into his home Australian politics. When Prime Minister John Howard visited Washington last month Murdoch attended a state dinner in his honor where he was asked by Australian journalists about Howard. He basically said the prime minister, who has been in office 10 years, should quit while he was ahead and not suffer the Margaret Thatcher fate. He later amended that to say the journalists got it all wrong and he didn’t mean the prime minister should go now. But his original statement caused headlines throughout Australia, including his own newspapers.

Murdoch is now a naturalized US citizen, and he holds plenty of sway in US politics, too.

He is hosting a fund raising event for Hilary Clinton although she has been very negative in the past about Murdoch’s New York Post and he had seldom a kind word for her. She is also going to attend Murdoch’s annual executive conference in Pebble Beach and the list of other American politicians, former and current, who will attend include John McCain and former vice president Al Gore. Right now the 2008 presidential race is wide open but there is considerable betting it will be Hilary Clinton vs John McCain. Nothing like covering both sides.