If you want to understand newspapers' future ...

Then you have to read the interview with Media General CEO Marshall Morton in RichmondBizSense.com about why Media General agreed to sell most of its papers to Warren Buffett.

Say all you want about "Mismanagement General" - and there's plenty that can be said. But Morton lays some stark truths on the line:

Although the bulk of its cash flow — 87 percent in the first quarter —comes from its TV stations, owning newspapers put Media General at a disadvantage when it came time to renegotiate its huge debt load.

That blindsided Media General, Morton said.

“The banks who had lent us the money no longer wanted to lend to media companies,” Morton said. “They just don’t have confidence in newspapers. You can talk until you’re blue in the face about the value of newspapers in communities, but if you can’t get capital …”

And this:

Publishing revenues are down about 50 percent over the past five years, Morton said, but much of the costs— printing presses, delivery drivers, etc. — have held steady.

“There was nowhere to hide from these revenue declines,” Morton said.

“Over the past five years, our first thought was that this was heavily due to the recession and, like many other recessions in the past, that this was a cycle. You tighten your belt, freeze hiring and even drop the number of people.

“So we went through a couple years thinking that was the way to handle it. But it kept going.”

It wasn’t until the second quarter of 2011, Morton says, “that we realized the world had changed.”

I don't think Buffett is all nostalgic and doesn't understand the newspaper business as people like Clay Shirky suggest. In fact, I don't think he really bought newspapers at all - he bought cash flow from properties that, in general because of their location, are likely to throw off decent cash for at least a decade. He bought them at a fire-sale price. And he got the real estate and a 20 percent stake in Media General's broadcast operations as well (just as has often been noted, McDonald's is not so much a hamburger company as a real estate holding company that happens to sell hamburgers.

So when he's done getting he cash, he can flip the real estate (if not before)

Meanwhile, over at John Robinson's blog, in response to his skeptical post about paywalls, we continue to get from some of the comments the same old take-it-on-faith rubbish that as the younger generation gets older, has families, etc., they will become newspaper readers. Rip Van Winkle can't top that. Every stick of research in the past 20 years shows that each generational cohort reads the newspaper less and does not convert as it ages. Back to my rant last week about journalists failing to even read the research about their industry - and then waking up surprised.