Fairfax posts $2.7bn loss, media agency boss: ‘the newspaper sector is eating a massive shit sandwich’

Fairfax Media’s $2.7bn loss announced today demonstrates that “the sector is eating a massive shit sandwich,” media agency boss John Sintras said today.

Speaking at the Audit Bureau of Circulations conference, CEO of Starcom told the audience: “The sector is eating a massive shit sandwich. The Fairfax news emphasizes how bad the sandwich is. If we’d started eating the sandwich ten years earlier it would have been a lot easier to digest.”

Sintras’s comments comes as the value of Fairfax Media’s mastheads reportedly fell by $3bn due to write-downs and restructuring costs, as the publisher posted a $2.7bn loss.

The value of newspapers including The Age, The Sydney Morning Herald and The Australian Financial Review plummeted from $3.25bn to $1.29bn, due to write-downs.

Fairfax’s EBITDA fell 16.7% on last year, to $506m. This results was “slightly above market consensus”, the company has told the ASX.

Fairfax boss Greg Hywood said in a statement to the ASX:

“Fairfax Media has a sound and diversified business, as shown in the underlying results we have reported today. These results reflect a challenging trading environment. We continue to drive significant change through the business, consistent with our strategy, and we are responding to a stressed economic environment.”

“The cyclical downturn worsened during the 2012 financial year, while continuing structural change is affecting our Metro Media Division. Fairfax has worked hard to respond to these conditions. At the half year we formally announced the Fairfax of the Future program to transform our business. We subsequently expanded and accelerated that process.”

“Despite the tough times, Fairfax is a company that is committed to growth and committed to innovation. We are investing across our digital businesses, which grew revenue by 20% this year. Digital advertising yields grew strongly as advertisers recognise the value of target demographics – the demographics that Fairfax sites attract.”

Fairfax’s extensive restructuring program prompted strikes by affected journalists earlier this year over the decision to outsource production jobs to New Zealand.

Comments


  1. Huh?
    23 Aug 12
    11:29 am

  2. Why have they sold down TradeMe? Why don’t they let the Rural Press guys run the show?
    It’s a train wreck. Even the AFR is failing.

  3. Shamma
    23 Aug 12
    11:36 am

  4. $506m in EBITDA is still not the worst result. Yes, down on year prior but the on-paper write-down makes the result look horrible.

    Metro Media print ad revenues killing them – down 17%. That’s $84m of lost print revenue, with digital gains in ad revenue only $17m (11.9%). Net ad revenue loss of $67m. Digital is not plugging the print hole.

    AFR down $10m too, EBITDA halved. Have to think AFR offloaded would only bring around $50m from a sale. Even more exposed now with News buying Spectator and Eureka and looking to scale them considerably.

    Broadcast not delivering much either. In metro print, AFR and broadcast there are 3 very sluggish businesses with significant transformation challenges.

    Trademe 114m of revenue and $86m in EBITDA … incredible.

  5. Hoin
    23 Aug 12
    11:38 am

  6. Gee, the infamous Charter of Editorial Independence is working well. Where’s Gina when you need her?

  7. Reader
    23 Aug 12
    12:27 pm

  8. ‘Shit sandwich’. Interesting choice of words by the CEO. No wonder Fairfax Media is in trouble. Predict in 5 years, there will be no print presence, only a website consisting of salacious short gossip stories like TMZ format, saturated in countless ads.

  9. Rawnocerous
    23 Aug 12
    12:28 pm

  10. Geez, I’m eating my lunch.

  11. Anon
    23 Aug 12
    12:36 pm

  12. Huh: Trade Me was an essential sale to significantly reduce debt.

    I stopped my SMH subscription years ago. I loved getting newspapers home delivered but the quality drop off started years ago and has been definitely part of Fairfax’s woes.

    Hoin: I don’t think any mega-rich investor will fix the problem; only quality management can fix the problem.

    Frankly, Fairfax is paying the price for thinking it is in the business of selling newsprint. The board has let us all down for years either as employees (I’m not one), suppliers (I’m not one), investors (I’m not one) or superannuation fund members (we’re all one).

    We are witnessing generational decay and lack of imagination. Sad.

  13. Good moron
    23 Aug 12
    1:00 pm

  14. Maybe they would do better if they put a few more links and clutter on the SMH home page?

  15. b
    23 Aug 12
    1:57 pm

  16. A somewhat strained metaphor there. Fairfax are eating a massive, 10-year-old shit sandwich?

  17. Stephen
    23 Aug 12
    1:59 pm

  18. I always thought APN’s newspaper division would fall before Fairfax’s, maybe I was wrong.

    How did management ever thing digital ad revenue would plug the leaking ad revenue hole that is press?

  19. anon1
    23 Aug 12
    2:22 pm

  20. Print newspapers are doomed whichever way you look at it.

    Fairfax will meet its doom even more quickly because it is so inefficient.

    What they could have done (though it is now too late):

    1. Created one combined masthead for Australia, with a few regional pages for each state.

    2. Avoided wasting huge resources on an old-era, costly TV production set up (staff and equipment) when all they put out is a few, unprofitable web videos

    3. Create one single consistent online presence, not theage.com.au this and smh.com.au that

    4. Engage better with readers, particularly younger demographics, to win heartshare (an absolute no brainer considering how much Murdoch papers are loathed and distrusted)

    Sadly, old media is run by people stuck in old ways. I don’t doubt there are some brilliant, innovative people at Fairfax, but if so their ideas clearly aren’t getting through.

  21. Anon
    23 Aug 12
    2:58 pm

  22. I am officially middle age. You don’t need y and net-gens to see the writing on the wall.

    Too many people in Fairfax were thinking that the knocking they heard on the door was a PA about lunch reservations, not the bringers of disruptive change.

    All those MBAs, sheesh…

  23. Shamma
    23 Aug 12
    3:00 pm

  24. Seems the main thing FXJ have done wrong is listen to too many media experts telling them about how to approach the future.

  25. Billy C
    23 Aug 12
    3:35 pm

  26. I’d start with improving their sub editing. There are an increasing number of mistakes appearing on their sites. Missing words, repeated sentences. If they want me to pay for it it needs to be readable. If they lift their game I might even turn off adblock.

  27. Zaffy
    23 Aug 12
    4:31 pm

  28. “Print newspapers are doomed” … Someone stab me in the eye, this comment bores me to tears.

    Print newspapers were “doomed” 10 years ago too. In 5 years time, you’ll still be saying print newspapers are “doomed”. In 20 years, when there is a chance they wont be around as much, you’ll be saying “See, I told you they were doomed”.

    Jump on a train at 5pm in the CBD of Sydney, Melbourne or Brisbane and let the thousands of crammed commuters trying to read their mX know that newspapers are doomed.

    Pull out all the newspapers from EVERY cafe in this country and let the Sunday bruncher know that newspapers are doomed.

    What you mean to say is “Fairfax Media” is doomed. Very different.

    You sound like another middle aged wanker with an iPAD trying to be cool.

    Oh, i AM Gen Y.

  29. James Wellington
    23 Aug 12
    4:46 pm

  30. does it come with a pickle?

  31. Potty
    23 Aug 12
    4:59 pm

  32. Anon: nice summary.
    Still think it weird that they sell TradeMe. Though I see the writedowns go beyond the Age and SMH. (In fact the AFR seems to have caved. Yet they have that huge jump in paying users online???)
    I reckon the core problem is crap editorial product. The Herald and Age have been slack or worse for years, The web sites are garbage. The AFR has been very odd of late (with strange obsessions and some extremely ugly page layout and what were they thinking with that dotty FT thing??)
    No where to turn here. And, yes, it looks like poor leadership is the cancer that’s killing them. And someone like Rinehart will be more of the same.

  33. Bobble
    23 Aug 12
    6:51 pm

  34. Huh? The Rural Press guys did run the show – Brian McCarthy took the $3 million and said sayonara! All his managers kept their jobs while the people at Fairfax (and some of them must have been good) were squeezed out! And also JB Fairfax and his son thought they would have this great media empire they lost bigtime! Sadly my shares are all but worthless now that’s Gina’s giving Fairfax the big A!!!!

  35. And Red All Over
    24 Aug 12
    3:59 am

  36. @Zaffy

    Tablets / smart phones will be the newspaper weapons of choice, you wont see paper. IF there are publishers still doing a print run, then yes weekends and cafe’s in the wee will be the places you will see printed newspapers.

    Too many ego’s at Fairfax. The board is full of ego’s and senior management are made up of ego’s.

    Shame, I think that with the awfulness of News Ltd, Fairfax could kick them where it hurts.

    I would love to see the quality at Fairfax leave and set up a digital only offering. The offering could be focussed on paying the quality staff a decent wage, not making mega profits and giving something back to society.

    Centre left and smash News Ltd in Oz.

    People: you know who you are – do it!!!!!!! You will make it I am sure of it.

  37. And Red All Over
    24 Aug 12
    4:00 am

  38. “in the week”

  39. teejay
    24 Aug 12
    8:34 am

  40. @Reader – the ‘shit sandwich’ comment wasn’t from Greg Hywood – that was John Sintras speaking at a conference yesterday. (He was right, by the way)

  41. Ben #2
    24 Aug 12
    8:49 am

  42. You all know, if Fairfax eats a triple shit sandwich with cheese this year, enough to cover the next three years of shit sandwiches, then next years results will look great even if revenue is another 20% down. The giant shit sandwich is probably equal to a 2bn+ writedown.

  43. Cogito
    24 Aug 12
    9:42 am

  44. Well Rinehart seems to have made it clear that she wants heads on spikes. Putting 5% of the company on offer on results day at no discount says that she wants to trash the price. And she did. You have to assume that the AGM will be a shocker. And that the company is now a smorgasbord for Carnegie, Kennedy, Wylie and Singo to pick over.
    The board should be ashamed.

  45. anon1
    24 Aug 12
    10:34 pm

  46. >Print newspapers were “doomed” 10 years ago too. In 5 years time, you’ll still be saying print newspapers are “doomed”. In 20 years, when there is a chance they wont be around as much, you’ll be saying “See, I told you they were doomed”.

    Look at the numbers. If you think that your anecdotal evidence of a few commuters reading a FREE NEWSPAPER PUSHED INTO THEIR HANDS is indicative of a healthy industry, then you are truly cretinous.

    >You sound like another middle aged wanker with an iPAD trying to be cool.
    >Oh, i AM Gen Y.

    Then perhaps there is some chance of you growing up a bit one day. And learning some manners.

    No one wants to see a beloved industry die. The fact is that it has. Nothing but a skeleton will remain in a few years, though most of us hope for some kind of sustainable online alternative, far smaller though it will be.

    In 20 years, if all those “Sunday paper brunch cafe readers” and commuters have not swapped newspapers for iPads (or whatever will be around then) I will eat my fucking hat.

  47. Doris
    27 Aug 12
    10:05 pm

  48. @Zaffy on my morning bus commute I don’t see anyone reading these free newspapers you speak of. Everyone I see are on their phones. Same goes for doctor’s surgeries. The magazines sit unread while everyone scrolls on their phones.

  49. Albert wWilson
    28 Aug 12
    2:56 pm

  50. Hmmmmmm
    Every thing i read here to day is of no consolation to shareholders
    why blame Ms lionhearted at least she did invest a lot oh money into shares
    yet the chairman of the board did not have enough confidence in the company to increase his stake from above 4 odd million of them and seeing that only him and his in charge was allowed to speak about the company it sure does make you wonder
    who can dismiss them as it appears it is an exclusive boys club and them and them alone decide who goes on if you do not think this is fact ask john b fairfax and his son
    is the print section of media dead well i was of the opinion that everyone was as it was so in 1987 Fairfax closed down the sun newspaper and it was printing an average of at least 30 editions a weak so they new then that it was on the way out
    but i am still of the opinion that there is room on a very very reduce that it may be stabilised into being profitable
    changing from a broad sheet to a has been talked about for many years even by the people that read it but hence again board decision was negative as is now not doing it for 6 months or so there is no excuse not to do it now they have all facilities to do so as all the inserted supplements are in that format
    the greatest business person in the world does not mean he would be in types of businesses and more so the the print one
    so what can we do to try and save this great icon of Australia (these are strictly my opinions)
    first sack the board as i am sure they have proved they should not be there and the CEO included
    if the IT is the direction we have to pursue then lets get some top IT personnel on the board on the board
    expand RSVP with lots more advertising as i am sure adds on the net are not dead
    maybe even open up a new on line chat service like teet or facebook maybe call it havyursay and there are so many more things that can be done besides these
    and the main thing is to start thing positive and if you cant do that look for alternative and forget negativity as that is what got us where we are now

    some may or may not think i dont know what i am on about well everyone has the right to make there own decisions but i first became involved with this firm in 60s and yes i am a shareholder as i write this and hope to be for many years to come so i you can see i have had a long association with this great firm

  51. Alex
    28 Aug 12
    3:07 pm

  52. Does @Albert wWilson sub for Fairfax? That was one very long sentence!!

  53. Albert wWilson
    29 Aug 12
    11:04 am

  54. Alex
    i suppose it would seem long if you put it along side a subbed one from the Fairfax board but the main thing is that the contents of my message is absorbed.
    to also clear up a point i was an owner driver and had nothing to do with the editorial
    sections of the company

  55. Albert wWilson
    1 Sep 12
    1:02 pm

  56. Hmmmmmm everyone gone very quite they must have looked at the annual report again and noticed there was not one section that did not make a profit fact not fiction
    and they still paid a dividend lot more than i can say about a lot of the companies that released there annual reports this month
    if you want to criticise some one make sure it is authentic and not some rubish because you friends or mates have been made redundant and remember they are being paid out not like a lot of firms that have gone down the drain and the workers got zilch