Thanks Hondo. I haven't read the Barron's article. My criticism was of print media in particular, not necessarily WPO as a whole. Media companies will have to continue to diversify their business models to stay viable.
Buffett himself acknowledges how weakness in print media can drag down the rest of the firm:
For the newspaper industry, however, setbacks are more troubling. "It blows your mind how fast" the newspaper industry is losing ground, Buffett explained, according to coverage by The Wall Street Journal's MarketBeat blog. However, as Barron's pointed out last month, Berkshire Holding Washington Post earns most of its revenue from its Kaplan private-education subsidiary, which could be worth more than the firm's current market cap alone.
Looking at WPO's 10-K from March 2, their Education division has shown steadily increasing revenues since 2007. Meanwhile, the Washington Post's paid daily circulation declined to 615,628 in 2009 from 657,918 in 2007. The MD&A's discussion reflects the firm's focus on shifting the firm more into the education services market, with mention of Kaplan's serial acquisitions and strong revenue growth. It also mentions declines in print advertising revenue in 2009 (23% at the Post, 37% at Newsweek).
Indeed, WPO's management sees the handwriting on the wall. Shareholders should welcome continued progress away from the print media business segment. Weakness in print is clearly what's dragging down ROE at WPO!
