Fairfax is broke and dying before our eyes – it needs Gina

In this piece originally posted on The Conversation Sinclair Davidson of RMIT University argues that Fairfax Media desperately needs a patron.

Every business needs paying customers. Who those paying customers are varies from business to business. The single largest paying customer for Australian universities, for example, is the federal government. Similarly the ABC’s only paying customer is the federal government. The point being that the single largest customer might also own the organisation.

Fairfax used to have lots of advertisers as paying customers – but no longer. Bottom line is Fairfax is broke and dying before our very eyes. They need a viable business model quickly. The old model of selling eyeballs to advertisers isn’t going to sustain Fairfax much longer.

Fairfax has announced that their metro papers will move from broadsheet format to tabloid size next year. It isn’t clear to me, however, that the size of the paper is the problem. The product itself is the issue – not enough people want to read The Age or Sydney Morning Herald. True – this is a problem all media organisations face and the industry as a whole will be radically restructured over the next decade.

Fairfax, however, doesn’t have a decade. The organisation as it currently stands has run out of time. As Business Spectator columnist Stephen Bartholomeusz argued a few weeks ago, Fairfax revenues are falling faster than it can cut costs.

Those who fear a Gina Rinehart takeover of Fairfax are imagining a future without a Fairfax at all. In practice, she has become their single largest paying customer.

A lot of ink and pixels are going to be wasted on a Rinehart takeover of Fairfax. People will talk about the end of democracy, a lack of diversity, perhaps even the collapse of civilisation as we know it.

The first objective of any media company is to earn a profit, or have a patron who will tolerate losses. All the other objectives, promoting democracy, providing alternate voices, enhancing civilisation, whatever, are subsidiary to the first objective. Right now Fairfax can’t earn a profit and doesn’t have a patron.

Media patrons are not unknown or even unusual. As indicated the ABC has the federal government, The Conversation has a consortium of universities, Crikey has Eric Beecher, the Global Mail has Graeme Wood, The Monthly has Morrie Schwartz. This pattern of ownership is hardly surprising. In a 2003 Journal of Law and Economics paper looking at media ownership across 97 countries, Harvard economist Andrei Shleifer and co-authors found two dominant modes of media ownership – government and concentrated private owners.

The apparent concern, however, is that Gina Rinehart is said to be somewhat conservative and the Fairfax papers – especially The Age – are considered to be quite progressive.

Specifically it has been reported that Gina Rinehart has refused to guarantee “editorial independence” at Fairfax. Who can blame her? It isn’t like that “editorial independence” has produced an excellent product commanding a price premium. Fairfax needs to be restructured beyond simply changing the size of the paper. One of the benefits of a takeover is that inefficient and ineffective work practices get abolished.

But some might argue that Gina Rinehart will use Fairfax to push her own views and agenda – as opposed to the current editorial stance. How much of a problem is this really? It doesn’t matter who owns the media – if they cannot attract other paying customers the media patron will lose money and eventually will sell out or shut down.

The old Fairfax is gone. Whether a new Fairfax will rise out of the ashes I cannot say. But without a patron it certainly will not. There is no guarantee that a Rinehart-controlled Fairfax will be successful, but in the first instance she will give it a red hot go. This takeover buys breathing space that will allow the company to restructure and gives Fairfax the best chance of survival.

Sinclair Davidson has received funding from the Australian Research Council. He is a senior fellow with the Institute of Public Affairs. He is a subscriber to the Australian Financial Review and has published a number of op-eds in Fairfax newspapers.

Comments


  1. Sam
    18 Jun 12
    9:56 pm

  2. Sinclair is spot on in saying Gina’s takeover isnt really a problem. Unless the paper attracts more paying customers, it will lose even more money and eventually shut down, or perhaps it may continue as the private (loss-making) plaything of a billionaire. Either way, unless they get more paying customers the business will die.

    Fairfax journos & supporters decrying the Gina takeover ought not to worry about editorial indpendence so much as their own existence.

  3. Fast Eddy
    19 Jun 12
    10:15 am

  4. Some good points –
    but some arrant nonsense too –
    Fairfax has never been read more widely, ever –
    it is not in trouble because people are not reading it –
    it’s because they are not paying for it.

    The business model is broke and society’s 10 year free media trial is over –
    You want journalism locally, you must now start paying.
    This applies whether you are in London, Sydney, NYC, or Timbuktu.

    ALL papers the world over are facing this structural change –
    and compared with the Guardian/NYT/many others, Fairfax is in fact in a
    pretty good position, with a strong online presence to (hopefully, that is, if you value
    media voices in this country) monetise and grow.

    If Gina is indeed a patron, good on her – I think getting in on FXJ at 60c,
    (which equates to a forward P/E ratio of 2 !!) she’ll make a motza over time as well.
    The public will either start to pay or we will have no media.
    A clear choice really – and neither controversial nor difficult to understand.

  5. Dead
    19 Jun 12
    10:18 am

  6. Fairfax is dead with or without Rinehart.

    Without her, readership but no funds.

    With her, funds but no readership. Just don’t call it a commercial business. It’ll be a megaphone for mining interests in much the same way The Australian is a megaphone for Rupert’s interests. How much money does the The Australian make again?

  7. Analog Penetration
    19 Jun 12
    11:16 am

  8. Where, today, are the belligerentsia who popped up in Mumbrella’s comments yesterday asserting that The Conversation is all left-wing propaganda?

  9. Mark
    19 Jun 12
    11:48 am

  10. “Every business needs paying customers”.

    Amongst this debate noone has mentioned that it’s impossible to get the paper delivered, shitty distribution may be as much to blame for the papers woes as other issues that aren’t as interesting to talk about.

    Myself and some mates, settling into midlife, decided it’s time to get the papers delivered. We all live in a central melbourne suburb, after three weeks since paying our subcriptions we were all still without our papers and gave up.

    Every article about the woes of print should start with “Every business needs paying customers”, then acknowledge how hard they’ve made it for customers.

  11. Mark
    19 Jun 12
    11:50 am

  12. sorry, i mean crappy distribution not being particularly interesting to talk about…

  13. Rushdie
    19 Jun 12
    4:45 pm

  14. If you want to see what effect a right-wing owner has, have a quick listen to John Singleton’s 2GB. A mate of Gina’s, he only employs Gillard bashers and truth is irrelevant. They talk down the country every 30 seconds (seriously) as they happily bullshit the battlers for their Coalition mates. You won’t ever hear a mining magnate criticised on 2GBullshit.

  15. Andrew Smith
    19 Jun 12
    6:47 pm

  16. Even Rhinehart doesn’t seem to understand, as some intimate here, that digital has turned many business/sales and social structures upside down, e.g. finance, travel, education, marketing etc..

    One can see a future, not unlike society, of more diversity through digital based media available (often for free due to much lower cost bases and then aggregated to produce a higher quality whole) while having the freedom to address multiple issues.

    Fairfax vs News print duopoly in Australia fits the local psychology or preference for big and authoritative organisations (AFL/NRL, Ford/GM, Woolworths/Coles etc.), but meanwhile digital is undercutting traditional reporting, journalism and business models.

    PS While not missing News behind a pay wall, Fairfax also lost me with “property propaganda”, plus too much soft human interest and opinion based “journalism”….

  17. Conrad
    19 Jun 12
    8:45 pm

  18. That IPA-viewpoint article is a load of tosh. Davidson’s pushes the view:
    Let Gina in (she has money) – and if she pushes her agenda it does not matter much (says he, who happen to agree with her views).

    Gina’s actions speak clearly: (1) I am pig-headed about what I believe in (put Plimer onto the boards of several of her key companies), and (2) I will bully my way into spreading my views (placed The Bolt programme on Channel 10)

    Davidson’s falacy is exposed in this excellent and well researched article:

    “Rinehart’s tilt at power is bad news for public debate”
    By Stephan Lewandowsky (Australian Professorial Fellow, Cognitive Science Laboratories at University of Western Australia).
    http://theconversation.edu.au/.....ebate-7725

  19. days of whining poseurs
    20 Jun 12
    1:29 am

  20. #Conrad,

    Gina Rinehart did not put Andrew Bolt on Channel 10.
    Bolt has said repeatedly that it was Lachlan Murdoch’s decision to put on his program..

    http://www.adelaidenow.com.au/.....6265126540

    Stop throwing tantrums. Use your time to check your assumptions.
    Then double-check.

    “In fact, I worked with Ten before Ms Rinehart bought into it, and was signed up for The Bolt Report by then acting CEO Lachlan Murdoch, once my chairman here at News Ltd.”