Bucking Buffet’s Advice, Brothers Open New Daily in America’s Most Distressed City

At his annual stockholders’ meeting last May in Omaha, famed investor and Berkshire Hathaway Chairman Warren Buffet was asked if he would invest in or do an outright purchase of a newspaper enterprise.

This wasn’t just some idle question as Berkshire Hathaway has owned The Buffalo News for several years and is the largest shareholder of the Washington Post, which also owns the weekly magazine Newsweek and has various cable television interests.

“For most newspapers in the United States, we would not buy them at any price,” the Oracle of Omaha said. “They have the possibility of going to just unending losses.”

As someone who has been involved in the newspapers business on and off for over 40 years (I’ll proudly include my time peddling The Detroit News as a mere lad), it is a business in which I have lot of time invested in.

Certainly if you look at the state of large metropolitan daily newspapers, the future is hazy at best. Earlier this year, one share of McClatchy Inc., the parent of The Sacramento Bee, could be purchased for less than the price of its daily paper. That’s right: a share of McClatchy could be purchase for less than 50 cents. Although McClatchy and other newspaper shares have recovered from those dark days last winter, the future for the industry is still uncertain.

Pummeled by the recession and the growth of alternative advertising venues, daily newspapers, even in the best of business environments, face an array of challenges. Starting a daily newspaper in this environment is like being a kamikaze pilot.

That’s exactly what I thought when I first read about two brothers who launched a new major metropolitan daily newspaper yesterday in the midst of the worst economic downturn since the Great Depression. What’s more, these two brothers are launching it in of all places, Detroit – arguably America’s most distressed city by just about every measure.

A new model in the making?

The new fish wrap, called the Detroit Daily Press will initially by hawked at 3,500 retailers in the three-county Detroit metropolitan area and well sell for 50 cents. By next Monday, the paper plans to start home delivery.

The Press is the brainchild of Gary and Mark Stern who are hoping to offer a low cost alternative to Detroit’s other dominant newspapers, the Detroit News and the Detroit Free Press. The difference is that the Press will offer daily home delivery, while The News and the Free Press have cut home delivery to two and three days a week respectively.

Another big difference, and advantage the Press will have over it two competing newspapers is that it will outsource printing to several printers throughout the Detroit area. For years both The News and the Free Press have been hampered by expensive union contracts and high distribution costs.

Furthermore, with the massive layoffs in the industry, their rivals have made a large pool of talented and experienced reporters, editors, sales people and circulation personnel available. Undoubtedly, their labor costs will be lower than the The News and the Freep.

The Sterns’ foray into publishing in Detroit goes back 45 year when the brothers slapped together the original Detroit Daily Press.. At the time both the Freep and The News were on strike and the Sterns quickly put together the rag and had unemployed newsies, three of which were my brothers and me, hawk them all over the Detroit area.

Subsequent to that, the brothers published several more strike papers and, in their words, “made a fortune.” This time around Mark Stern says “We are here to stay.”

So will the Detroit Daily Press be the model for other daily newspapers for survival? Is this the beginning of the renaissance of the major metropolitan daily?

This is a very tough question to answer but this much is certain: if the Stern brothers can make this new model work in the devastated city of Detroit, Warren Buffet might have to re-evaluate his assessment of newspapers.