Warren Buffett was once talking to Bob Woodward, the legendary Washington Post journalist. Woodward asked Buffett the famous question: "How do you do it?" And Buffett answered: Bob, there's really no difference between an investigative reporter and an investor; an investor is just an investigative reporter of companies and what they're worth.
I was reminded of that story when I read about two recent media acquisitions. The first is Morningstar's agreement to purchase Footnoted.org, a blog founded by a business reporter named Michelle Leder, which became a premium subscription service, which made it an attractive acquisition. Some background here and here. The second is Pearson's (publisher of the Financial Times) acquisition of Medley Global Advisors, an economic policy consultancy.
I expect to see more of these kinds of deals. The way to get rich in media is to earn high profit margins, and there are only two ways to earn high profit margins: either produce a product that customers are willing to pay a high price for relative to what it costs to deliver it, or be a low-cost producer.
The two deals are good examples of high-value journalism. If your job is to gather information, analyze it, and organize it into some kind of story, then per the Buffett anecdote you are a journalist. If you can find someone else to pay substantial money for your journalism (because they think they can make money from it and the journalism you provide is scarce), then I suppose you can call yourself something else--an analyst, a consultant--but you're still a journalist, as Buffett considers himself. This is good news for journalists, because it shows there is an underappreciated fluidity to the job description.
I wrote that the second way to earn high margins in media is to be a low-cost producer. I hope to address that in a future post.
Disclosure: Long Berkshire Hathaway
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