Jack Shafer

This piece originally appeared in Reuters Magazine.

Rupert Murdoch has endured more crises during his 80-plus years than Richard Nixon and Odysseus combined, so the CEO and chairman of News Corporation can be forgiven for seeming nonplussed by his current predicament. He took over the family newspaper business in Australia at 21, when his father died, and expanded it. He fought the British unions in 1986 and won. He repelled the bankers in 1990, when he was close to insolvency. He has survived two divorces, the purchase and sale of MySpace.com, a bunch of other digital disasters, and even the predations of John Malone, who threatens Murdoch family hegemony with his purchase of News Corp stock. And now, referencing his media empire’s latest fiasco, the British Parliament has deemed Murdoch “not a fit person” to run an international company.

If Murdoch were the sort of pompous captain of industry who collected leadership maxims, Look for Trouble would likely top his list. He craves competition, and has repeatedly bet his company on new ventures like 20th Century Fox, the Fox Network, NFL football and his satellite operations.

Most chief executives think rewarding stockholders is their primary job. Not Murdoch. The Murdoch family owns the controlling shares in the company, so the chairman can largely ignore Wall Street to pursue a strategy that stretches across decades, not quarters. Yes, he’s impulsive, but creatively so.

I asked Ken Auletta, who has covered Murdoch for almost 40 years, to distill management maxims from the CEO’s adventures. He offered Ideology Is for Amateurs, which captures Murdoch’s political agnosticism. He leans right in his utterances, but subscribes to the politics of expediency, which explains how easily he shifted in the UK from supporting the Tories to supporting Labour and back again. Auletta says Murdoch’s genuine identity is that of a businessman. If he has any ideology, it’s What’s Good for Me?

A second maxim identified by Auletta – Public Memories Are Short, So Apologies Are Inexpensive – explains his performance before the phone-hacking committee last summer, when he said, “This is the most humble day of my life.” This very insincere regret made headlines around the world and bought his company a breather as it scrambled to rebuild its defenses.

Michael Wolff spent hundreds of hours with Murdoch for his 2008 biography, The Man Who Owns the News. “Loyalty is the most important virtue in an employee – hire only people who think you did them a favor by hiring them, i.e., not people with a lot of other options,” Wolff writes in explanation of Murdoch’s practices. If your employees share your primary values and feel they owe you, you can lead them with a flick of your pinky.

“Seek Leverage over everybody you do business with – being able to punish people is an incredibly effective currency,” Wolff continues. “Listen to the voice in your own head more than to anyone else – everybody else will recommend caution; only you will take real risks.” Murdoch exhibited his faith in his own voice at the Leveson hearings in late April, when he said, “I’m under strict instructions by my lawyers not to say this, but I’m going to…” and proceeded to confess to a “cover-up” of phone hacking at News of the World. “Rupert famously doesn’t take advice,” one news story quoted an anonymous source.

A fourth maxim from Wolff makes a virtue of Selfishness. “Make it yours; keep it yours; make sure everyone knows it’s yours – be the one and only, the singular, the irreplaceable,” Wolff writes. The News Corp firings, his brisk shuttering of News of the World when the phone-hacking scandal crested last summer, and his cavalier treatment of his children (and heirs) prove that when loyalty collides with Murdoch’s agenda, his selfishness trumps all.

Although Murdoch is said to be a good boss, whenever one of his executives grows too big, he becomes an expendable rival. Roger Ailes, the mastermind behind Fox News, is the only existing exception – and he could go at any time.

Former broadcast journalist Adrian Monck, who briefly worked for Sky News (which News Corp co-owns), detects a current of Machiavellianism flowing through Murdoch’s career, specifically the sentiment expressed in this line from The Prince: “Whosoever desires constant success must change his conduct with the times.”

“Throughout his commercial career, from Adelaide aristocracy to Manhattan moguldom, he has convinced every major protagonist that he is somehow the answer to their prayers,” Monck says. “At every step he has somehow managed to recast himself for the opportunity. Even appearing before British legislators, each appearance has been subtly different. So that would be my lesson – appear consistent and conservative, succeed through shape-shifting.”

Only a madman would embrace the Murdoch strategy in its entirety. Only the brave would apply even three of the maxims at once. For managers who find opportunity instead of terror in turmoil and don’t mind being denounced by ex-employees as a betrayer, Murdoch’s way might work. Just make sure the corporate bylaws keep you in control of the board of directors. It’s easiest to lead when you own.

Addendum, June 26: This piece was published before Murdoch addressed his 106th crisis: How to separate his tainted, money-losing newspaper division from his profitable network-cable-film-satellite operations. A split of the company is envisioned, News Corp. announced, but if I know my Murdoch, he’s constructed a trap door that will either send his enemies to the dungeon or provide for his own escape.

PHOTO: News Corporation Chief Executive and Chairman Rupert Murdoch leaves with his wife, Wendi, and son Lachlan after giving evidence for the second day at the Leveson Inquiry at the High Court in London, April 26, 2012. REUTERS/Paul Hackett

Ann Curry, the second fiddle on NBC’s Today show, is apparently being shown the door. That news was broken yesterday afternoon by Brian Stelter, the prolific media reporter of the New York Times on the newspaper’s website, and that 1,100-word story earned prominent placement on Page One of the business section of this morning’s paper.

I’ll forgive you in advance if you don’t care whether Curry continues on Today or if you don’t care whether she finds a slot elsewhere in the NBC empire, just as long as you forgive me for not giving a fig either. It’s not that I dislike Ann Curry or Today‘s first fiddle, Matt Lauer, or even Today‘s morning-show competition. It’s just that I dislike the shows for being dulled-down messes of news, entertainment and talk. If I watch any of them, it’s by accident.

My lack of interest in the morning-show mix puts me in the majority. Today, which is usually the number-one-rated program, and ABC’s Good Morning America, which took that position a couple of times this spring, draw an average of fewer than 5 million viewers. The third-ranked show, CBS’s This Morning, pulls in a little more than 2 million viewers. In a country of 311 million, that’s minimal interest.

The length and placement of Stelter’s piece, on the other hand, conveys a level of importance to Curry’s rumored departure that’s hard to justify. Stripped to its essence, the Curry saga might justify a 300-word short about Today‘s recent ratings volatility, Lauer’s alleged estrangement from Curry, and NBC’s judgment that she wasn’t as good a co-host as predecessor Meredith Vieira, all leading to her impending exit.

Instead, Stelter serves an extended story packed with anonymous sources – ”some at NBC,” “some staff members,” “people with knowledge of the negotiations, who insisted on anonymity because the matter was confidential,” “several people who know Ms. Curry,” “one of the people” who know Curry, “friends” of Meredith Vieira, and “one of the people with knowledge of the negotiations” between Curry and NBC – that makes the departure of a TV co-host sound like the final days of Richard Nixon. How much of the anonymous dancing is Curry’s people spinning her story and how much of it is NBC framing the ouster as necessary strategy to save the show is anybody’s guess.

Overdramatizing the comings and goings of on-air talent and the hirings and firings of network executives is a traditional part of the TV beat. The People Who Cover Television never have to worry about material: The TV industry defines itself by ratings, ratings produce winners and losers, and from winners and losers flow an endless river of copy to bottle and sell. The People Who Cover Sports have been doing a similar thing for more than a century. The toughest choice in covering the TV industry (or sports) is to decide whether to make the loser or the winner the day’s story. It’s not that difficult a choice. If you cover the loser today, just remember to put the winner in your calendar for coverage in the future.

A case can be made that the fate of Ann Curry constitutes big news because Today is a $300 million profit machine dependent on ratings for its ad revenues. If ratings drop and she’s to blame, the network’s stockholders must know! But Stelter spends little time there. In the worst tradition of TV coverage, he’s writing a soap opera about a TV show.

I pick on Stelter, but he’s only one of the several dramatizers working the TV beat. His Times colleague Bill Carter has been known to indulge this tendency, and a couple of years ago, critic Bill Wyman took pleasure in hosing Howard Kurtz (Washington Post and the Daily Beast) for his inappropriately thorough pieces on the fading of Katie Couric’s nightly news lights. The extreme coverage of Curry echoes Politico’s coverage of the Washington beat: While the outlet routinely breaks legitimate news, it also tends to inflate whatever political lint it collects into giant mainsails.

At least one newspaper reporter on the TV beat keeps a sense of perspective about her work: Lisa de Moraes of the Washington Post. (Here’s my 2003 appreciation of her work.) With her oeuvre more resembling that of a sports columnist than a sports reporter, de Moraes still delivers as much news about the industry as the writers at the Times – only she doesn’t weigh the beat down with high word counts and Timesian puff. And she’s funny. When CNN’s Lou Dobbs Moneyline was renamed Lou Dobbs Tonight, de Moraes explained that it was “because CNN would not let him rename it “I’m Lou Dobbs, Not Some Darn Islamist.”

With no disrespect to Curry, who is an accomplished reporter, if her impending exit from Today is big news, so is every segment on Entertainment Tonight.

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Stelter, who long ago mastered “more” and “faster,” has my permission to move on to “better.” Send permission slips for my future to Shafer.Reuters@gmail.com. My Twitter feed went down twice today. I really missed it. Sign up for email notifications of new Shafer columns (and other occasional announcements). Subscribe to this RSS feed for new Shafer columns.

PHOTO: Television personality Ann Curry arrives at the Time 100 Gala in New York, April 24, 2012. REUTERS/Lucas Jackson

“Write every piece three times,” the late Richard Strout used to advise journalists who craved advancement in the profession.

Strout, who wrote the New Republic’s TRB column for four decades and worked 60 years as a Washington correspondent for the Christian Science Monitor, wasn’t calling on his colleagues to submit identical copies of their work to different publications for payment, as New Yorker staff writer Jonah Lehrer just got busted for.

Strout was more subtle. If, for example, you were a freelancer who had just penned a slice-of-life piece for the New Republic about a coal strike in West Virginia, the only way to earn back your investment of time on such a low-paying piece was to spin off a similar yet distinctive version, maybe to the Outlook section of the Washington Post. If you could reconstitute elements of the narrative into a work that fed the policy debate over unions, your efforts were legitimate. After satisfying those two outlets, a smart freelancer would shoot for the glossies with a big coal-strike feature, perhaps the New York Times Magazine or the Atlantic. Sometimes the publish-every-piece-three-times impetus has come not from writers, but from editors who, having seen a writer’s earlier work on a topic, wanted a localized version of the writer’s story.

As entrepreneurial as Strout was about repurposing, he never sanctioned the wholesale lifting of paragraphs from old pieces and their insertion into new publications with a few tweaks – what Lehrer stands guilty of. Under Stroutian rules, writers were expected to freshen their work enough to make some plausible claim to originality.

In the early hours of l’affaire Lehrer, my instincts were telling me that Lehrer had transgressed, but I couldn’t figure out whether his offense was a felony, a misdemeanor or a violation of journalistic taboo. A variety of observers were calling what Lehrer did “self-plagiarism,” but in my mind plagiarism requires some act of thievery. You can’t steal money out of your own bank account, can you? You can’t commit adultery with your own spouse, right?

The words Lehrer wrote “belonged” to him even if he had surrendered the copyright to the places he published them. My feeling was that you could call Lehrer lazy for repeating himself, you could call him a hack, you could call him a sneak, but you couldn’t call him a thief. He was an onanist, playing self-abuse games with his copy, but he wasn’t any sort of plagiarist.

But not long after I committed this thought to my keyboard, news reached me via the Twitter feed of the blindingly handsome @davidfolkenflik that Edward Champion was accusing Lehrer of plagiarizing Malcolm Gladwell. If it turns out that Lehrer is a plagiarist as well as an onanist, you can click here for my views on plagiarists.

If Lehrer committed no plagiarism, the discussion will return to how to think about his repetitions. The mores of journalism permit all kinds of republication. For example, if Lehrer wrote a magazine piece and then resold the piece to another publication that knew it was receiving used goods, nobody would be harmed or offended as long as there was no pretense about the work being original. Indeed, republication of previously published works is what press syndicates and wire services do every day. It was also the business model for the Reader’s Digest, which usually condensed previously published pieces.

Likewise, if Lehrer or another writer were to re-traffic the occasional half-sentence or catch phrase from their prior work, no alarms should ring, because self-citation for trivial self-quotation, especially of the “catch phrase” quality, is more trouble than it’s worth.

The republication “danger zone” exists somewhere between rehashing the complete piece and the signature phrase. If a writer feels that he must revisit his old material, it’s only fair for him to alert readers that he may be taking them to a place they’ve already visited – unless, of course, he brings new literary value to the passages or presents new or newish findings. If he feels he has no alternative but to quote himself, it’s a simple matter to provide a footnote to the previous work, or a hyperlink, or some sort of disclaimer that alerts readers (and his publisher!) that he’s recycling.

Lehrer didn’t do this. He cheated his new publishers by breaking the implied (or written) contract that he was producing original copy. Today he’s apologizing for his recycling – “It was a stupid thing to do and incredibly lazy and absolutely wrong,” he tells the Times – but I’m not buying it. No journalistic neophyte (he’s 30 years old with four books to his credit), Lehrer knew that the New Yorker would have rejected the gently used copy from his old Wall Street Journal columns had he informed them of the lack of originality of his “new” work.

We mustn’t put too much effort into understanding Lehrer’s self-destructive behavior. When forced to play the armchair psychiatrist, I usually conclude by saying that onanists, plagiarists and fabulists break the rules of journalism because they either disdain the discipline or feel inadequate to its demands. But let me warn you: I’ve written something like that before.

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My Strout anecdote: I never met him, but after he died in 1990 I attended the estate sale at his house. The goods were pretty picked over by the time I got there. But in his office a few 3-by-5 cards in cardboard trays containing indecipherable notes for ancient stories were still for sale. I regret not buying the whole lot. Send your thoughts to Shafer.Reuters@gmail.com and join the estate sale that is my Twitter feed. Sign up for email notifications of new Shafer columns (and other occasional announcements). Subscribe to this RSS feed for new Shafer columns.

When did the ripe, bulbous, and gibbous newspaper bubble pop?

It was probably in the 1990s, when the business better resembled a cruising blimp than it did the dotcoms like Pets.com, Boo.com, and TheGlobe.com, which all went kerblewy around the turn of the century. Unlike the bombing dotcoms, the high valuation of newspapers was based on real, not imaginary profits, and the belief that the profits from these deals would extend for years, if not decades, into the future.

And such deals there were. The New York Times Co bought the Boston Globe for $1.1 billion in 1993. In 1997, McClatchy acquired the corporation that owned the Minneapolis Star Tribune for $1.4 billion and Knight-Ridder purchased the Kansas City Star and Fort Worth Star-Telegram (and two other smaller papers) for $1.65 billion. On the sidelines, newspaper consultant John Morton crunched the numbers and expressed the market consensus about these transactions in the headline for his January/February 1998 American Journalism Review column: “Expensive, Yes, But Well Worth It.”

Morton’s column provides no sense of the impending doom, no inkling that an entire industry is arrowing its way to a hospice, no clue that all these newspaper people have booked passage on a death ship. Even after the Hearst Corp ditched its San Francisco Examiner for a $660 million deal to buy the San Francisco Chronicle in late 1999, more happy talk ensued. If anybody cited Warren Buffett’s 1991 warning that newspapers had lost their special “franchise” value and that he wouldn’t be buying any more of them soon, I missed it.

The newspaper faithful were still such strong believers at the end of the century that the Washington Post, one of the most prudent newspaper operations in the universe, opened a new $130 million press facility in 1999. By 2009, the company had to shutter the place. The Post wasn’t being stupid when it built the plant, it just misread the contraction of newspapers by a decade. Many newspaper owners continued to think that profits would fund expansion forever. Arthur Sulzberger Jr. completed a modern Renzo Piano-designed Manhattan office tower for his New York Times in 2007, and as recently as 2008, Rupert Murdoch was completing construction of a new $290 million printing complex for his London newspapers.

Every seller has good reason for unloading his property, but until bubbles pop the news coverage accentuates the buyer’s brilliance and vision. Thanks to the genius of hindsight, we know that the sellers of the Globe, the Star Tribune, the Chronicle, the Star, and the Star-Telegram were the dealers and the buyers were the marks. But I doubt if any of them were making a shrewd market call when they sold. The Globe, Chronicle, and Star Tribune went on the market primarily because the sprawling families that owned the properties had lost interest in the business and preferred cash to dividends. The Star and Star-Telegram went to the block because their owner, Disney, which had recently acquired them in another deal, wasn’t interested in the press.

Newspaper owners who spied the newspaper bubble early were the small fry at Harte-Hanks and Park, who got out of newspapers in the late 1990s, and the multibillionaire Canadian overlords who issue my paycheck, the Thomson family. Thomson started selling its 140-plus chain of newspapers in the mid-1990s and had basically exited the market by 2000, collecting at least $2.44 billion along the way. The company used the proceeds to expand their investments in electronic information and later, in 2007, went more electric than Dylan at Newport by acquiring Reuters.

What did Thomson know that the other newspaper operators didn’t? Perhaps nothing, except for using a cold eye to look at its profit margins. In a brilliant feature about the company written by William Prochnau and published in the October 1998 American Journalism Review, we learn that Thomson’s newspaper profit margins fell steadily from 33.9 percent in 1987 to 17.6 percent in 1997. Thomson, which was as good as any company at extracting high margins out of its newspapers, wisely read the data as a market directive to escape the bubble and get out of newspapers.

Around the time Thomson was using some of its proceeds to buy Reuters, the last of the fool’s money was rushing in to buy Knight-Ridder (McClatchy dropping $4.5 billion), the Wall Street Journal (Rupert Murdoch spending $5.6 billion on the paper and the other Dow Jones properties), and the Tribune Co (Sam Zell orchestrating an $8.2 billion bid). Not long after, Tribune was stumbling into a bankruptcy filing, Murdoch was writing down the value of his new toy by a half, and McClatchy stock had disintegrated. And the market cap for the entire New York Times Co dropped below the $1.1 billion it paid for the Boston Globe in 1993.

By the end of 2008, New York Times media reporter Richard Pérez-Peña had pronounced the newspaper bubble pricked. He reported:

Looking back, what happened to newspapers in 2006 and 2007 directly paralleled the bubble in the housing market, with similar results.

“There was very cheap credit available,” despite risks that should have been obvious to everyone, Mr. [Dave] Novosel [an analyst at a research firm] said. “The banks were willing to lend, and people were willing to buy at these prices because they figured if asset prices kept going up, they’d be fine.”

The great recession, which arrived in December 2007, completely degassed the newspaper bubble, driving print newspaper advertising revenue to the bottom of the Marianas Trench. In a widely reproduced chart by Mark J. Perry based on Newspaper Association of America data (and made viral by the Atlantic‘s Derek Thompson), we see that newspaper ad revenues peaked in the early 2000s but have now dropped to levels not seen since 1950. Perry noted that it took newspapers 50 years to go from $20 billion to $63.5 billion in print ad revenue (1950 to 2000), but only 11 years to go from $63.5 billion back to about $20 billion in 2011.

Unlike the tech bubble, the newspaper bubble won’t come back because it can’t. Many of the businesses that once supported newspapers with ads don’t exist on the same level anymore (such as competing department stores and grocery stores) or have found better places to put their ad dollars (the Web, television and Craigslist) or have discovered that they don’t need to spend ad dollars anymore to sell their goods and services (Craigslist again).

The expired bubble won’t take all newspapers down with it immediately. One theory (pdf) gaining currency is that because the current generation of print newspaper readers isn’t being replaced, major U.S. print dailies will be dead in five years with only small-town newspapers and the national dailies surviving.

This is at least the second time in newspaper history that collapsed advertising revenues and rising production costs have thrown the newspaper biz into a crisis. In January 1918, American journalist Oswald Garrison Villard decried the “tragedy of journalism” that was destroying newspapers in Boston, New York, Cleveland and elsewhere. Owners weren’t giving up just because they were incurring losses – they were used to that because many of them published newspapers for the social cachet and political influence it brought them. They were giving up because they were incurring unsustainable losses.

If this 1918 owners’ psychology continues to hold true, we can expect marginally profitable and unprofitable newspapers to persist. But not forever, and certainly not by the time running a newspaper that few read and even fewer advertise in carries all the social stigma of owning Pets.com.

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Look, Ma! I’ve inadvertently written a three-part series! This piece goes down well with an Anchor Steam beer and “What happens to Tribune after bankruptcy?” and “The great newspaper liquidation.” BYOB. Send Your Own Mail to Shafer.Reuters@gmail.com and lap up the vinegary goodness of my Twitter feed. Sign up for email notifications of new Shafer columns (and other occasional announcements). Subscribe to this RSS feed for new Shafer columns.

PHOTO: Copies of original newspapers describing the sinking of the Titanic in an exhibit at the South Street Seaport Museum commemorating the 100th anniversary of the sinking of the Titanic, in New York, April 11, 2012. REUTERS/Lucas Jackson

Choking softly on the wad of debt “rescuer” Sam Zell fed it, Tribune Co checked into a Wilmington, Delaware, bankruptcy court at the end of 2008. Now newly slimmed, especially after the payment of $410 million in legal and other professional fees, the much diminished patient is about to be released and turned over to its new owners, a group of banks and hedge funds. How diminished? At the time Zell acquired control in 2007, Tribune Co’s newspapers, television stations, other media properties and Chicago Cubs baseball franchise were valued at $8.2 billion. Reporting from court filings, Chicago Tribune reporter Michael Oneal put Tribune Co’s current value at about $4.5 billion.

That’s not a haircut. That’s a beheading. Some of that loss in value represents the sale (for $845 million) of Tribune’s Chicago Cubs operation in 2009, but still.

What will the likely new owners (JPMorgan Chase; Angelo, Gordon & Co.; and Oaktree Capital Management) do with the reconstituted Tribune Co? According to Oneal, who has been monitoring the ailing company’s vitals since before its bankruptcy, Tribune isn’t so sick that it must sell off all its parts immediately. But hedge funds and banks aren’t the best managers of media properties, and when combined with today’s declining market for media properties, those hedge funds and banks might want to put out a for-sale sign as soon as possible. I’m sure that if you were interested in Tribune’s 23 TV stations, which are valued at $2.9 billion, they’d meet you for coffee.

But Tribune’s eight remaining dailies – the Los Angeles Times, Chicago Tribune, Baltimore Sun, Hartford Courant, Orlando Sentinel, Ft. Lauderdale Sun Sentinel, Allentown Morning Call, and Hampton Roads Daily Press – are another story. Given the collapse of newspaper properties, the hedgies and bankers might be willing to bring Irish coffee, pastries, and the pink slips for the papers to your home in hopes of doing a quickie deal. Evidence is mounting that newspaper properties – with the exception of the national dailies and some small-town franchises – now have expiration dates stamped on their sides. Every moment the new owners don’t sell the Los Angeles Times and the Chicago Tribune is a moment that the newspapers decline in value. If some of these newspapers don’t sell in the next five years, there might not be anything left for the owners to sell.

Oneal provides a couple of data points that illustrate the decaying value of Tribune’s newspapers. In December 2006, prior to Sam Zell’s takeover, David Geffen made a reported $2 billion cash offer for the Los Angeles Times alone, but company adviser Lazard Freres & Co recently valued the Tribune newspaper portfolio at about $623 million. That’s $27 million less than what Tribune got for Newsday when it sold the paper to Cablevision in 2008. (Cablevision took a write-down for half of that price in 2009.)

I’d be surprised if Tribune could command that price today. Consider the Philadelphia Inquirer and Daily News, which have a combined daily circulation of about 325,000. This pair of papers sold for $515 million in 2006, $139 million in 2010, and a couple of months ago for just $55 million. Every market is different, but imagine how the market will treat the Los Angeles Times, daily circulation about 616,000, and the Chicago Tribune, daily circulation about 414,000, when they reach the block. Unless the new owners possess brilliant plans for the renewal of the business, they’d be wise to note the trend of falling prices paid for newspapers, falling revenues, and falling circulation, and head for the exit before additional value, especially goodwill, melts away.

Melting goodwill isn’t the worst scenario. Negative goodwill is. In his 2004 book The Vanishing Newspaper: Saving Journalism in the Information Age, Philip Meyer explains that traditionally 20 percent of the value of a newspaper could be found in its physical assets like delivery trucks, printing presses, and computers, and 80 percent of it in goodwill, that is, the community’s regard for the paper and its willingness to place ads in it and subscribe. As the transaction value of newspapers has dropped, so too has that ratio, with some of the air going out of the price being the goodwill that the previous owners burned with their cost-cutting and other cheapenings of the product. Via email, Meyer tells me to be on the lookout for evidence of negative goodwill at newspapers: in other words, which newspaper will be sold for less than the value of its trucks, presses and computers.

It might not be long. Those physical assets aren’t worth as much as they once were. As circulation has fallen, American newspapers have been outsourcing their printing jobs to other newspapers or shops, with the San Francisco Chronicle, Montreal’s Le Presse, the Toronto Globe and Mail, Chicago Sun-Times, New Haven Register, Topeka Capital-Journal, Annapolis Capital, Washington Times, Indianapolis Star, and many others. As circulation continues to fall and more papers cut back to three-days-a-week publishing schedules from seven, it might not be long before the remaining value in some of these presses will be as scrap.

The luckiest newspapers will have real estate to buoy their selling price. Last year, McClatchy sold its 14-acre Miami Herald site to a developer for $236 million – much more than anybody would pay for just the newspaper. The Tribune papers are not so blessed with real estate holdings. In 2008, when Zell was in charge of Tribune, he talked about putting the downtown offices of the Los Angeles Times and the Chicago Tribune up for sale, but he garnered little or no interest.

A variety of equations have been evoked over the ages to predict the acquisition price of newspapers, as John Morton explained in the April-May issue of American Journalism Review. Back in the good old days before the Internet started to strangle newspapers, steady cash flows and the expectation of increasing values made it easy for buyers to borrow huge sums from banks for big deals. When credit was loose and profits were high, a newspaper could sell for “one-and-a-half to two times its annual revenue (or 13 to 15 times its annual cash profit), or $1,000 to $1,500″ per average daily circulation, Morton wrote.

But no more. Industry veteran Alan D. Mutter, who blogs as Newsosaur, wrote earlier this year that eroding profits make it harder and harder for owners to manage the debt that most added before ad sales declined. He estimates the value of today’s newspapers at about $300 per average daily circulation, which would put the Los Angeles Times in $185 million territory and the Chicago Tribune in the $125 million range.

Market uncertainty often partners with panic. The evaporating value of dailies has everybody spooked. Why buy the Los Angeles Times today for $185 million when you can buy it for $110 million next summer? But the papers will go on the block quickly, because the banks and hedge funds  don’t know how to run them and don’t want to learn.

Warren Buffett’s deal last month notwithstanding, I expect the Tribune papers to go to “non-traditional owners” (Morton’s phrase), because experienced newspaper owners already have more trouble than they can manage. Look for buyers like the Babbitt who bought the San Diego daily for about $110 million last year, or a consortium of business- and political-heavyweights who just bought the Philly papers. Today, greeting-card magnate Aaron Kushner and a group of former publishing executives purchased the Orange County Register and six other titles for an undisclosed price. Kushner, a non-traditional owner who previously tried to buy the Portland Press Herald and made noises about buying the Boston Globe, made such optimistic noises about his deal that he must know something about the newspaper future I don’t. Or maybe they see additional places to cut goodwill and remaining assets that nobody has spotted. Then again, investment firms may not be the kiss of death. Angelo, Gordon, one of the Tribune investors, has made business progress with Minneapolis newspaper the Star Tribune.

I wish good luck to all of these new owners and the eventual owners of the Tribune papers, but it comes with a warning. Just because running newspapers is a lot of fun doesn’t mean they’re toys. You break them, you bought them.

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The $1,000 per average daily circulation rule-of-thumb applied to Warren Buffett’s Omaha World-Herald deal last year, Morton noted in his piece. Can anybody explain this outlier aside from it being Buffett’s hometown newspaper and solidly profitable? Send hints to Shafer.Reuters@gmail.com. My Twitter feed is ecumenical. Sign up for email notifications of new Shafer columns (and other occasional announcements). Subscribe to this RSS feed for new Shafer columns.

PHOTO: Sam Zell, Tribune Co chairman and CEO, speaks at the 2009 Milken Institute Global Conference in Beverly Hills, California in this Apr. 27, 2009 file photograph. REUTERS/Fred Prouser/Files

In his 2004 book The Vanishing Newspaper: Saving Journalism in the Information Age, Philip Meyer imagined “the final stages” of a “squeeze scenario” by a newspaper owner who wanted to exit the business but didn’t want to actually sell the title: He would start charging more for his newspaper and delivering less, commencing the “slow liquidation” of his property. This slow liquidation would not be immediately apparent to observers, Meyer wrote, because the asset “being converted to cash” would be “goodwill” – the newspaper’s standing in the community and the habit of advertisers and subscribers of giving it money.

One reason an owner would want to extract a newspaper’s goodwill value before selling its physical assets – its real estate, presses, computers, trucks, paper, ink, etc. – is that traditionally, goodwill is where most of a newspaper’s value has resided. When Meyer asked two newspaper appraisers to estimate how much of a newspaper’s value was locked up in goodwill versus physical assets, both gave him the same answer: 80 percent goodwill, 20 percent physical assets.

Selling goodwill is a dangerous strategy because once sold, it’s difficult to reacquire. But a newspaper owner who feels trapped by losses and can’t find a new owner at what he considers a fair price may feel he has no alternative but to cheapen his newspaper bit-by-bit, month-by-month. He may explain the goodwill sell-off as temporary economizing to be reversed once business conditions improve, or even as the exploration of a new business model. Sellers of newspaper goodwill might protest that the financial losses they’re absorbing constitute a serious investment in the newspaper’s future, that they’re harvesting nothing. But don’t be fooled. If you’re winding your company down with no strategy to wind it up, you’re burning goodwill even if you don’t acknowledge it.

It’s hard to blame newspaper owners for winding their print operations down, even if you devour four dailies a day, which I do. All of the industry’s vital signs are pointing south. Profit margins are way down, its stock prices have collapsed, daily circulation has fallen about 30 percent over the last 20 years, the percentage of adults regularly reading newspapers has been falling steadily since 1999 (especially among younger adults), and advertising revenue, which stood at $50 billion in real terms in 1984, fell to $23.9 billion in 2011. The corresponding decline in newspaper valuation is illustrated by three recent sales of the Philadelphia Inquirer and Daily News. In 2006, the papers went for $515 million. In 2010, they commanded $139 million. Just two months ago they sold for $55 million.

Of course newspaper owners aren’t the only heavies in the story. “The owner didn’t decide to shrink the paper,” said Detroit News reporter Charlie LeDuff in 2008 as the Detroit papers decreased home delivery from seven days to three. “The reader decided to shrink the paper.”

Other salient financial data points: Rupert Murdoch’s News Corp. bought the parent company of the Wall Street Journal for $5.6 billion in 2007, but wrote down $2.8 billion of that in 2009, essentially admitting that its value had halved in two years. The New York Times Co, once worth $7 billion, is now valued at less than $1 billion.

If you were a newspaper owner, you’d be liquidating and harvesting, too, and with the exception of the New York Times and the Wall Street Journal, that’s what most owners appear to be doing. Last week, Newhouse Newspapers* announced it was going to reduce the number of days it prints its New Orleans Times-Picayune and its Alabama titles from seven days to three days a week. This follows similar cutbacks in printing by Newhouse’s Michigan papers announced in 2011 and by the Detroit Free Press and the Detroit News in 2009.

Almost everywhere you look across the newspaper landscape, page count is down. Coverage areas have contracted, and newsroom staffs have shrunk dramatically. Over the past decade, newspapers have deleted features readers long took for granted, such as reporting from their own foreign, Washington and state bureaus. Last month, the Los Angeles Times folded its Sunday magazine, further winnowing the number of newspapers publishing a Sunday glossy. Newspapers have dumped free-standing book review sections, abandoned late-breaking news to websites, given up on providing comprehensive stock listings, winnowed comics pages, cut editorial cartoonists from their staff, and reduced the number of community listings and announcements.

In exchange for less and less, owners are charging readers more and more. The Chicago Tribune recently doubled and tripled some readers’ subscription rates. The New York Times boosted home-delivery rates in January. And in DC, readers gave the Washington Post ombudsman hell in January after the paper pushed through a stealth price increase for single-copy sales from 75 cents to $1, providing its customers no announcement or publisher’s note about the increase in the paper or online. Publishers can rightly claim that falling display and classified revenues give them no other choice but to make readers pay more. But that doesn’t erase the fact that most readers are paying more for less now, one of the hallmarks of liquidation.

Everybody blames the Internet for the decline of newspapers, but the Web is only the most recent of electric interruptions to have disturbed their profitability, which began with radio in the late 1920s and was followed by broadcast television, car radios, transistor radios, FM radio, and cable television. Newspapers were in so much advertising trouble in September 1941 that Time magazine ran a piece (paid) about their “downward economic spiral.” Press scholar David R. Davies argues in his 2006 book The Postwar Decline of American Newspapers, 1945-1965 that daily newspapers were in serious trouble by the mid-1960s, because, among other things, they had failed to hook the baby boom generation. Los Angeles Times press reporter David Shaw sounded the alarm in a 1976 piece in his newspaper. It began: “Are you now holding an endangered species in your hands?” Update the figures and change a few dates and the names of the principals in Shaw’s piece and you could almost pass it off as a 2012 diagnosis of newspaper industry ills.

Newspaper owners may be running out of time to beat the liquidation clock if the prediction (pdf) made in January by the USC Annenberg Center for the Digital Future proves accurate. Because the current generation of print newspaper readers aren’t being replaced, most major U.S. print dailies will be dead in five years, the report concluded. Very small newspapers might endure as dailies, as well as the large national newspapers – the New York Times, the Wall Street Journal, and USA Today – and the local Washington Post. For other newspapers to beat the reaper, said the Annenberg report, they must downsize from daily to once- or twice-a-week publication.

One tycoon who nosed the smell of death about newspapers early was Warren Buffett, penning a letter to his Berkshire Hathaway investors in 1992 saying that newspapers were over as a lucrative, “franchise” business. He didn’t blame the Web for the decline of newspapers in part because he couldn’t. The Web did not yet exist as a business. Other media properties, including television and magazines, had diminished the newspaper, he said. Buffett basically swore off acquiring any newspaper properties beyond his Buffalo News and his investment in the Washington Post Co until last month, when he purchased most of Media General’s newspapers.

The Buffett purchase doesn’t necessarily nullify the curse of liquidation. He told the Daily Beast’s Howard Kurtz he has no interest in bidding on the Los Angeles Times or Chicago Tribune and any other Tribune Co newspapers when the company exits bankruptcy. Nearly all of the Media General titles he bought are published in small towns, which Annenberg predicted will survive, so he has that going for him. He also indicated that weekly or thrice-weekly production isn’t in the cards for his dailies, nor is “shrink[ing] the news hole.”

Philip Meyer volunteers some optimism about the Buffett purchase.

“Somewhere on the downhill slope there might be a viable and stable [newspaper] business, and that is what Buffett is counting on,” he said in an interview. “Maybe the Internet has done all the damage it can. I sure hope he’s right. He does understand that community influence is a paper’s most important product, and I think he will invest in it.”

Even if Meyer is right, which I hope he is, it still won’t be a happy ending to a century (and then some) of newspaper glory. The papers that escape liquidation will still be watered down.

*CORRECTION: This article originally stated that Newhouse had reduced the frequency of publication of several of its papers in the South. Newhouse announced the reduction, which will take effect in the fall. The article has been changed to incorporate the correction.

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PHOTO: Newly printed Detroit News newspapers run through the presses at the paper’s printing plant in Sterling Heights, Michigan, December 16, 2008.  REUTERS/Rebecca Cook

Last Saturday afternoon, a naked man gnawed off most of the face of a half-naked man on a Miami causeway. He continued chewing even after police shot him and did not stop until they shot him dead.

Things like that don’t happen everyday – not even in Miami – so quite naturally the horror story has been picked up by every flavor of media around the world. The most sensational – and I don’t mean that in a good way – coverage came from local TV station CBS4 (WFOR-TV). On the day Rudy Eugene attacked Ronald Poppo, CBS4 relied on the musings of the president of the Miami Fraternal Order of Police and an emergency room physician – neither of whom attested to having firsthand knowledge of the case – to speculate that the attack was caused by a new kind of LSD, by a mixture of drugs, or by “bath salts,” the street name given to the many quasi-legal, over-the-counter stimulant concoctions that are packaged and sold under such wacky brand names as “Ivory Wave,” “Vanilla Sky,” “White Cloud” and “Zoom.”

Before any criminal lab could determine that Rudy Eugene had drugs in his system, some outlets, including the Guardian, the New York Daily News and CNN were seizing on CBS4′s reporting to vilify a “new” drug and its users, exaggerate the peril it presents and launch a new drug panic. To believe the early press accounts about bath salts – recall last year’s story of a West Virginia man found in bra and panties next to his neighbor’s murdered goat – madness comes in a $20 package of powder, the product gives its users superhuman strength, and they may have turned a 31-year-old man into a flesh-eating zombie.

To assist the press in its coverage I offer this brief bath-salts primer. I don’t want to overstate its worth – any skeptical journalist with access to the scientific literature could produce such a primer in an afternoon. That the press hasn’t bothered to produce such a primer speaks volumes about how serious they are in covering the drug beat.

Reporting on bath salts is complicated by the fact that bath salts aren’t one thing: They’re whatever a drug entrepreneur dumps into colorful bags and sells through head shops, convenience stores, and over the Internet as “bath salts,” plant food” or “air freshener.” Promoted by word-of-mouth, bath salts are supposed to deliver a high similar to that of methamphetamine, cocaine and even the “entactogen” MDMA. Bath-salts marketers make certain to label their products “not for human consumption” because, as this July 2011 Department of Justice “situation report” (pdf) explains, the Food and Drug Administration can prosecute anyone who introduces into interstate commerce a compound that’s marketed as a substitute for either a licit or illicit drug, no matter what the compound is composed of.

What’s inside a typical bath-salts packet? Sometimes it contains nothing more psychoactive than caffeine and local anesthetics, as a 2011 Journal of Medical Toxicology article reported (abstract). Commonly it contains one or more synthetic cathinones – derivatives of the organic compound cathinone, which occurs naturally in the Catha edulis (khat) plant. Two synthetic cathinones frequently marketed in bath salts are 3,4-methylenedioxypyrovalerone (MDPV) and mephedrone, although the Department of Justice claims that at least 10 other clandestine synthetic cathinones have been collected and identified. Sometimes methamphetamines are mixed with the synthetic cathinone; synthetic cathinones have also been marketed to unsuspecting users as MDMA.

As the Department of Justice admits in its situation report, users are drawn to bath salts when they desire the effects of a powerful stimulant. The ever-changing formulas, the fluctuations in purity and potency, and user tendency to consume other drugs while on bath salts makes it difficult for researchers to study bath-salts users compared with, say, whiskey drinkers or potheads. Medical scientists concede that research on bath salts is sketchy.

“Little has been written in the United States about the chemistry, physiological effects, and pattern of consumption of these agents given the relative novelty of their usage compared with the stimulants whose effects they are known to mimic,” wrote the authors of the 2012 article “Are ‘Bath Salts’ the Next Generation of Stimulant Abuse?” in the Journal of Substance Abuse Treatment (paid). The Department of Justice surmises a diverse population of synthetic cathinones users, but none of the standard drug surveys have asked users about it yet.

Bath salts first gained popularity in Europe in 2007, but as far back as 1993 the popularity of a synthetic cathinone (methcathinone) in Michigan’s upper peninsula and elsewhere in the Midwest was documented (abstract). U.S. Customs seized shipments of synthetic cathinones in July 2009, according to the Department of Justice, and the U.S. press started covering bath salts around that time, with cautionary articles appearing in the New Orleans Times-Picayune, the New York Times, the Palm Beach Post, the Associated Press, Time (paid), and elsewhere. According to the press, users were swallowing, snorting, smoking, and injecting bath salts, and often the outcome was ugly: Soaring body temperatures, psychotic outbursts, paranoid delusions, violence, and suicidal thoughts were among the noted unpleasant side effects. Numerous deaths related to bath salts have been reported in both the popular and the medical press. One measure of the rise of interest in bath salts can be found in the number of calls made to U.S. poison control centers (pdf) regarding it. Zero calls were made in 2009; 304 were placed in 2010; and 6,138 were made in 2011. As of the end of April 2012, only 1,007 calls have been made. (Perhaps bath salts have already peaked? Or is it a statistical false bottom?)

Standard drug tests fail to detect synthetic cathinones, something that delights users, especially those who must submit to mandatory drug screenings or worry about being tested at traffic stops, according to the Department of Justice. Complicating the job of the drug prohibitionists is the ease with which illicit chemists can shift to other synthetic cathinones to supply users whenever the federal government places new legal proscriptions on the cathinones they’re producing. Three of the most popular synthetic cathinones weren’t scheduled until late last year, making them an appealing “legal high” for some drug aficionados. (State laws also apply, but I haven’t got time to go there.)

Even the Department of Justice understands this game of whac-a-mole ends up pushing newer and potentially more dangerous compounds into the illicit market. (Anecdotal evidence exists to suggest that bath salts can become popular in places methamphetamine enforcement has succeeded.) That’s why the Justice situation report states that the government has hunkered down for a “long-term” battle against this class of drugs.

Drug panics like the current one centered on bath salts conform to a predictable pattern revealed by scholar Alasdair J.M. Forsyth in his recent paper in the International Journal of Drug Policy: “Virtually a Drug Scare: Mephedrone and the Impact of the Internet On Drug News Transmission” (abstract), which I will attempt to summarize:

First, a new drug is newsworthy because it’s of novel interest to specialty publications, such as the music press. A high-profile case or increased prevalence of the drug leads the press to construct the drugs as a problem and to campaign against it with the aid of moral entrepreneurs (politicians, researchers, etc.), with disproportionate coverage of the harm done to teenagers or females (often portrayed as first-time users), even though older males who partake of multiple drugs account for most drug-related deaths.

“Drug scares tend to focus on the ‘moral dimension’ or ‘human interest angle’ of individual tragedies rather than the proportionate threat which the substance concerned may actually present in public health terms,” Forsyth wrote. “Drug scares also tend to involve the same harms being reported, regardless of the pharmacology of the substance concerned.”

The more stereotypical, false, scary or familiar the press accounts – the drug causes sudden death, it causes violence, it causes self-harm, it causes brain damage, it causes blindness, it causes impotence, it causes cognitive deficits – the greater the willingness of the public to believe the worst, no matter what the empirical data says. If it turns out that Rudy Eugene had any form of bath salts aboard during his rampage, you can only imagine how giddy with tabloid delight even the “respectable” will become.

Tragically, the media-inspired drug-scare cycle tends to raise the awareness of a “new” drug at the expense of the drugs that have a greater impact on public health (alcohol, tobacco). Even worse, scare stories end up promoting the new drug better than any Madison Avenue campaign ever could, creating a “boomerang effect.” How many drug “fiends” are eager to get their hands on some of what they think Rudy Eugene was taking?

The failure of the press to think clearly and report soberly about illicit drugs and illicit drug users probably goes back to the invention of movable type. Perhaps the press does such a shoddy job because it  doesn’t have to worry about any organized, militant constituency of drug users keeping them honest. Stoners are like that: I’ve never met one who was a good press critic.

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I’ve been on drugs for decades. See this piece about “Designer Drugs,” which appeared in Science 85. Don’t send drugs to Shafer.Reuters@gmail.com and don’t expect my Twitter feed to produce a contact high. Sign up for email notifications of new Shafer columns (and other occasional announcements). Subscribe to this RSS feed for new Shafer columns and subscribe to this hand-built RSS feed for corrections to my column.

PHOTO: Packet of Ivory Wave bath salts from the Arizona Police Science Journal.

CNN’s rotten ratings have grown only rottener. The Time Warner-owned news network drew fewer prime-time viewers last week than any week since September 1991, the New York Times just reported. But CNN isn’t the only network riding the down escalator when it comes to ratings. Over the same week, Fox News Channel attracted its fewest viewers in the important 25-to-54-year-old category since July 2008, the Times added. * But CNN isn’t the only cable news network in the doldrums, according to year-by-year data. Various observers have blamed the viewership downturn on the lull in the 2012 campaign, on viewers defecting to the season finales on the entertainment channels and on the lack of breaking news. But I interpret the falloffs as fresh evidence that the audience for cable news has peaked.

The first sign of a peak in cable news appeared in March 2011, when the Pew Research Center released a study that proclaimed, “Though many will remember 2010 as a hard year for CNN, in reality, most cable news channels suffered audience losses.” The able chartists at Pew drew a sad graph of cable news. Combined median viewership for CNN, Fox News and MSNBC during prime time had receded 16 percent, to 3.2 million, that year. Mean viewership had also dropped 13 percent, to 3.3 million, making it the largest year-to-year drop for cable news since Pew started analyzing the numbers in 1997. It also marked the first drop in the median audience since 2006.

The bad news continued through 2011, as cable news viewership remained nearly flat. This was fairly astonishing considering all the breaking news from that year – the Arab Spring, Japan’s tsunami, the killing of Osama bin Laden, the Libyan civil war and the European economic crisis – not to mention the bustle of the presidential campaign.

Among those who noticed that cable news was flatlining was the Atlantic Wire’s Uri Friedman, who surveyed analysts for the underlying reasons in a March 2011 post. The consensus view put the onus on the Web: Now when big news breaks, the polled pundits agreed, the curious go to the Web (often via their mobile device) instead of cable news. Outside the Beltway‘s Doug Mataconis speculated that the potential audience for overtly liberal (MSNBC) and overtly conservative (Fox) TV news had maxed out.

Other possible reasons for the cable news slump is that the three channels (plus CNN’s subsidiary channel, HLN), approached maximum carriage on large cable systems years ago. Upwards of 90 percent of U.S. households already subscribe to cable or satellite TV, and most carry the news channels, so there are very few eyeballs out there that would like to tune in to CNN, Fox News and MSNBC but can’t.

Fox attempted to expand the market for cable news in 2008, when it started the Fox Business Network to compete with CNBC, but it has not succeeded. The network continues to occupy the “bottom tier” of cable channels rated by Nielsen, in part because it’s available on only 50 percent of cable-TV households compared with the 85-plus percent of CNN/HLN, Fox News, MSNBC, and direct competitor CNBC. It’s reasonable to surmise that cable systems don’t want to carry Fox Business because so few viewers are dying for more of the same.

Just because cable news may have peaked doesn’t mean the audience is static. Viewers still move around the dial. For instance, in 2011, CNN and MSNBC gained some prime-time viewers at the expense (Excel spreadsheet) of HLN and ratings colossus Fox News. But the increase in viewership by two standard yardsticks is only 1 percent or 2 percent.

There’s so little news in cable news – especially during prime time – that it’s a bit of a misnomer to keep calling it “cable news.” As currently programmed, the networks best resemble political talk radio, in which people chat about the news instead of report it. That political talk radio has already reached its own “saturation point” has occurred to the industry, talk-radio consultant Randall Bloomquist of Bloomquist Media told me.

“The audience for personality-driven political talk radio has flattened and aged in recent years. Still, radio companies have been reluctant to pull their hand from that still-lucrative jar and experiment with new forms of spoken word programming,” said Bloomquist. “Political talk radio has always viewed the performance of cable news as a key indicator. Peak cable might provide another impetus for radio to start taking some chances with non-political formats, especially shows with an appeal to younger men, something that political talk sorely lacks.”

Although cable news growth may have stalled, don’t weep for the networks. Revenues are still growing. Pew reported in its 2012 study that revenues (both advertising and subscription fees charged to cable systems) were rising at all three of the top channels.

But as cable news has peaked, so too has Fox News Channel President Roger Ailes. He’ll continue to call the plays at his channel, but unless he comes up with something startlingly new, he won’t be able to cause any greater public ruckus with his shows. And if Ailes and Fox News have peaked, what of Media Matters for America, David Brock’s advocacy group? Media Matters polices Fox News with such dedication that it’s become the network’s finest publicist, pushing Fox News stories to liberal audiences who would otherwise never be aware of them. Oh, Media Matters will continue to ding Fox News. But if the Fox News audience isn’t growing, Media Matters can’t expect its followers to be more scandalized about Fox News than they already are.

Bill O’Reilly? Peaked. Chris Matthews? Peaked. Anderson Cooper? Peaked. Democratic Party outrage over what Fox News said about the president? Peaked. Maddow, Hannity, O’Donnell, Sharpton? Peaked, peaked, peaked, peaked.

* Correction, May 25: This article originally cited a flawed New York Times article whose analysis of Fox News rating has been corrected.

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I peaked in 1992. (Disclosure: Randall Bloomquist is a friend and used to write for me in the old days, when I was an editor and just peaking.) When did you peak? Send your confession to Shafer.Reuters@gmail.com. My Twitter feed has yet to peak. Sign up for email notifications of new Shafer columns (and other occasional announcements). Subscribe to this RSS feed for new Shafer columns and subscribe to this hand-built RSS feed for corrections to my column.

PHOTO: Republican presidential candidates (L-R) former Senator Rick Santorum (R-PA), former Massachusetts Governor Mitt Romney, former House Speaker Newt Gingrich and Representative Ron Paul (R-TX) listen to CNN moderator John King (R) in a Republican presidential candidates debate in Charleston, South Carolina, January 19, 2012. REUTERS/Jason Reed

Just because Warren Buffett blew $142 million in cash on 63 daily and weekly Media General newspaper titles yesterday doesn’t mean that newspapers are back. All it means is that an old cow that’s still a milker has been moved to a neighboring farm’s pasture, where it will be squeezed until it can give no more and will then be ground into pet food.

Buffett has long loved newspapers, having made about a half a billion dollars on the Washington Post Co. after his company, Berkshire Hathaway Inc, started investing in it in 1973. In 1977, he bought the Buffalo Evening News for $32.5 million, and after it vanquished the city’s other daily, it became one of the country’s most profitable newspapers, as measured by return on assets.

But Buffett isn’t romantic about newspapers. He buys when he sees value that others don’t. For instance, in a lecture he gave at Notre Dame in 1991 (pdf), Buffett explained why he bought Washington Post Co. stock.

In ’74 you could have bought the Washington Post when the whole company was valued at $80 million … If you asked any one of thousands of investment analysts or media specialists about how much those properties were worth, they would have said, if they added them up, they would have come up with $400, $500, $600 million.

This disparity between Post Co.’s stock price and the company’s true value was no secret. Even the 10 sellers who unloaded their Post Co. shares on Buffett knew that the Post Co.’s assets — the newspaper, Newsweek, its television stations, its timberland and paper mill in Canada, a third of the International Herald Tribune, and more — were worth much more than its stock value. They just weren’t prepared to act on the information, Buffett told the Notre Dame faculty and students.

If you want to make money, “just buy something for less than it’s worth,” Buffett advised the gathering — articulating a simple formula that informs Buffett’s purchase of Media General. But there’s more to Buffett’s investment philosophy than that. He has repeatedly stated his preference for lucrative properties that are “economic franchises” — that is, companies that produce needed or desired goods or services that are “not subject to price regulation” and that are thought by “customers to have no close substitute.” As he put it in his Feb. 28, 1992, letter to Berkshire Hathaway stockholders:

The existence of all three conditions will be demonstrated by a company’s ability to regularly price its product or service aggressively and thereby to earn high rates of return on capital. Moreover, franchises can tolerate mis-management. Inept managers may diminish a franchise’s profitability, but they cannot inflict mortal damage.

“Mortal damage” arrives when the property stops resembling a franchise and starts resembling a business, Buffett lectured. In that 1992 letter, Buffett expressed his reluctance to purchase additional media properties — newspapers, magazines, broadcasters — because they were losing their “franchise strength.” There was just too much media competition out there and a change in advertising markets, themes he sounded in a stockholder letter the previous year:

While many media businesses will remain economic marvels in comparison with American industry generally, they will prove considerably less marvelous than I, the industry, or lenders thought would be the case only a few years ago.

The reason media businesses have been so outstanding in the past was not physical growth, but rather the unusual pricing power that most participants wielded. Now, however, advertising dollars are growing slowly. In addition, retailers that do little or no media advertising (though they sometimes use the Postal Service) have gradually taken market share in certain merchandise categories. Most important of all, the number of both print and electronic advertising channels has substantially increased. As a consequence, advertising dollars are more widely dispersed and the pricing power of ad vendors has diminished. These circumstances materially reduce the intrinsic value of our major media investments and also the value of our operating unit, Buffalo News — though all remain fine businesses.

Did I mention that Buffett was souring on making additional media acquisitions before the Web existed?

Media General newspaper readers should not automatically expect Buffett to improve the newspapers he just bought. Buffett likes quality newspapers as much as the next billionaire, but he’s not goofy about it. As he outlined in a Feb. 25, 1985, stockholder letter, quality can prove decisive in making a newspaper dominant in its market, but once “dominant, the newspaper itself, not the marketplace, determines just how good or how bad the paper will be.” Buffett continued:

Good or bad, it will prosper. That is not true of most businesses: inferior quality generally produces inferior economics. But even a poor newspaper is a bargain to most citizens simply because of its “bulletin board” value. Other things being equal, a poor product will not achieve quite the level of readership achieved by a first-class product. A poor product, however, will still remain essential to most citizens, and what commands their attention will command the attention of advertisers.

As late as 2009, Buffett was badmouthing newspapers, telling attendees at Berkshire Hathaway’s annual meeting: “For most newspapers in the United States, we would not buy them at any price … They have the possibility of nearly unending losses … I do not see anything on the horizon that sees that erosion coming to an end … Twenty, thirty years ago, they were a product that had pricing power that was essential … They have lost that essential nature.” In a recent book, he waxed sarcastically to Jeff Matthews, author of Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett: “Imagine that someone came along saying, ‘I have a great idea: Let’s chop trees down, buy expensive printing presses, and buy a fleet of delivery trucks, all to get pieces of paper to people to read about what happened yesterday,’ ” Buffett said.

So what explains Buffett’s Media General deal and his purchase last November of the Omaha World-Herald (and a few scattered regional papers) in a $200 million deal? The Omaha deal looks like equal parts hometown boosterism and faith that the properties retain some franchise cachet. “The World-Herald is in the top 10 newspapers in the country in terms of the percentage of subscribing households in its market, and its digital news site dominates the Omaha market,” University of Nebraska at Lincoln finance professor Donna Dudney wrote at the time of the deal. Buffett chronicler Matthews told BusinessWeek that Buffett liked the paper because it’s profitable and well-run.

The Media General deal is slightly harder to decode. Aside from Richmond, Va., and Winston-Salem, N.C., most of the towns where Buffett is now the press lord are backwaters — places like Hickory, N.C., Bristol, Va., and Eufaula, Ala. These small dailies and weeklies still retain franchise status because they cover local issues nobody else does, and they make money. It’s worth noting that Buffett did not purchase Media General’s Tampa Tribune, an unprofitable paper in competition with the Tampa Bay Times (née St. Petersburg Times) with no franchise value on the horizon.

Ken Doctor calls Buffett’s Media General deal “more a feat of financial engineering than a newspaper deal” because it includes a loan of $400 million and a $45 million line of credit at 10.5 percent interest in exchange for warrants that would give Berkshire Hathaway almost 20 percent of Media General. As Financial Times reporter Andrew Edgecliffe-Johnson points out, those warrants are worth $19.5 million. Once it dumps the Tampa Tribune, Media General will essentially be a profitable TV-station owner, a business that Buffett knows and likes, and, writes Doctor, the deal comes with valuable newspaper real estate that can be flipped.

Newspapers aren’t Buffett’s idea of the perfect business — that would be tobacco. “I’ll tell you why I like the cigarette business,” Buffett is quoted as saying in Bryan Burrough and John Helyar’s 1990 book Barbarians at the Gate: The Fall of RJR Nabisco. “It costs a penny to make. Sell it for a dollar. It’s addictive. And there’s fantastic brand loyalty.”

Don’t assign too much sentimentality to his recent deals, that March 2012 video of him singing “I’m Only a Paperboy” notwithstanding. He comes to the table with his eyes wide open about the newspaper business. In his Feb. 28, 2007, (pdf) stockholder letter, he put it this way:

Aspiring press lords should be careful, however: There’s no rule that says a newspaper’s revenues can’t fall below its expenses and that losses can’t mushroom. Fixed costs are high in the newspaper business, and that’s bad news when unit volume heads south. As the importance of newspapers diminishes, moreover, the “psychic” value of possessing one will wane.…

Buffett promised in that letter to stick with his Buffalo News unless “we face an irreversible cash drain … just as we’ve said that we would.” Buffett’s recent newspaper acquisitions don’t indicate the industry has returned to health. But if he starts selling, you’ll know that it’s dead.

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Every time I read Buffett’s cigarette quotation I want to ignite my first cigarette. Do you mind if I smoke here? Let me know at Shafer.Reuters@gmail.com. Also, see my Twitter feed, an economic franchise if ever there was one. Sign up for email notifications of new Shafer columns (and other occasional announcements). Subscribe to this RSS feed for new Shafer columns and subscribe to this hand-built RSS feed for corrections to my column.

PHOTO: Warren Buffett sings with University of Nebraska cheerleaders during the Berkshire Hathaway Annual shareholders meeting in Omaha, May 5, 2012. REUTERS/Lane Hickenbottom

Having secured the nominations of their parties, Barack Obama and Mitt Romney have set their campaign throttles to late-spring idle with a speech here, a speech there, a commencement address over there, and fundraisers and soft TV appearances everywhere. Eventually, the two candidates will stop coasting, but until they do, reporters will continue to lard their work with exercises in meta-journalism, such as today’s 1,800-word Politico piece, “Obama and Romney’s common foe.”

The common foe, don’t you know, is the press! According to Politico’s Maggie Haberman and Glenn Thrush, Barack and Mitt both “disdain” the “political news media” because they believe reporters are “eager to vaporize them for the sheer sport of it.”

Is there anything new about presidents and presidential candidates having bad feelings for the press? Does nobody recall John McCain’s low regard for the New York Times coverage of his 2008 campaign? Or of George W. Bush’s attitude toward the press? Bill Clinton’s scorn? George H.W. Bush’s hatred? Carter’s? Nixon’s? Johnson’s? Sometimes candidates do charm the press, as McCain did in 2000, and the anti-war candidates of 1968 and 1972, but it’s the exception, never the rule.

No, there is nothing new about presidents and presidential candidates having bad feelings about the press, something the Politico piece readily admits. As Haberman and Thrush write: “Media-hating has been an occupational hazard among presidential candidates for decades, and it’s deeply self-serving.”

Then, Haberman and Thrush abandon the idea of media-hating being a campaign constant in their next paragraph, writing: “But 2012 is shaping up to be an especially sour cycle for the campaigns and the media, amplifying the natural tension between candidates and the press in the absence of an uplifting storyline.”

Attacking Politico for contradicting itself or for confusing a lightning bug with lightning (hat tip to Mr. Twain) may seem to be a fool’s errand. The people who edit and write for the site know good journalism from bad, but that self-knowledge doesn’t prevent them from serving half-baked, rancid dishes like this. Politico, which has become influential and ubiquitous in our political culture, depends on patrons like me to send entrees like this back to the kitchen and to summon the health inspector to do his thing. Only then can America be safe.

The evidence presented by Politico that this campaign is “shaping up to be especially sour” is so thin it almost vanishes. Obama has said vague things about being disappointed by the press, such as in his commencement address at Barnard College, and he delivered a cheap shot about Huffington Post’s aggressive aggregation in his White House Correspondents’ Association Dinner speech. But that hardly constitutes press hatred. Straining to come up with material, the Politico piece quotes David Plouffe’s The Audacity to Win, the Obama adviser’s 2009 memoir about the 2008 campaign, on press-candidate relations. Exactly how Plouffe’s views on his candidate’s relations with the press in the last campaign help show candidate-press relations approaching some new “sourness” plateau in this campaign is not explained.

Indeed, it shows that Politico doesn’t really have the goods to prove its thesis, as the piece zigs back to note that there is at least one outlet the president admires: An anonymous “onetime Obama press adviser” tells Haberman and Thrush that Obama “likes the New York Times,” which he thinks is “serious” as opposed to “the rest of you guys.” Also, Obama told Rolling Stone that he read all the Times columnists.

Perhaps Politico has conflated Obama’s dislike of Politico into a hatred of the entire press corps? I hope Haberman and Thrush pursue this angle with the anonymous onetime Obama press adviser.

Establishing that Romney hates the press should be a cinch, but Politico doesn’t even try. It reports that Ann Romney didn’t like a 1994 profile done on her by the Boston Globe during Mitt’s failed run for the Senate. That would be admissible evidence if Politico were attempting to show that 1994 was the nastiest year in press-candidate relations, but that’s not what the site is up to here, is it? It also tells us that Romney “walled” himself off from beat reporters during the primary campaign, that he has kept reporters off his “rope line” to prevent them from asking questions, that his camp thinks the Washington Post story about his Cranbrook days was a hit job, that he dislikes the extreme scrutiny (such as what brand of jeans he’s wearing) and that he has a “handful of favorites” in the press, including Washington Post blogger Jennifer Rubin. This sounds less like conflict to me than baseline candidate-press relations.

As presented by Politico, Romney’s most urgent media problem isn’t the conventional press, it’s the world of conservative bloggers, “who view him as a moderate,” as well as other conservative writers. Only Politico would dare conflate a Republican candidate’s inability to please conservative bloggers and conservative writers into confirmation of a candidate’s poor relations with the press.

Veteran White House reporter James Deakin posited the inevitability of confrontations between the president and the press in his 1984 book Straight Stuff: The Reporters, the White House, and the Truth and documented them in their many flavors. Likewise, presidential candidates and the press are equally apt to mix it up, and do, as readers of Teddy White and his successors have learned.

When Politico asserts that “Romneyland, like Obamaland, is inherently mistrustful of the press corps,” it’s hardly breaking news. Of course Romneyland and Obamaland are inherently mistrustful of the press corps, as were Santorumland, Gingrichland and Perryland, and for good reason. It’s the job of the press to expose things about candidates that they would rather not have you hear.

As a practical matter, voters and readers need never worry about the state of candidate-press relations. Until, of course, the unfortunate day comes when Politico reports everybody is getting along swell.

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It’s not the job of the press to be liked by anybody. Or did I make that point already. Send your hate-the-press notes to Shafer.Reuters@gmail.com. There’s plenty in my Twitter feed to dislike. Sign up for email notifications of new Shafer columns (and other occasional announcements). Subscribe to this RSS feed for new Shafer columns, and subscribe to this hand-built RSS feed for corrections to my column.

PHOTO: President Barack Obama’s teleprompter, with the White House press corps in the foreground, shown in the East Room of the White House in Washington, September 10, 2010.  REUTERS/Jason Reed