The Age and SMH to go tabloid sized; 1900 redundancies; presses to be shut

Fairfax media logoFairfax has announced a series of radical moves including The Age and The SMH moving to a compact size format, the closure of print works, the axing of 1,900 jobs and the introduction of paywalls for online content.

The two newspapers will move to a compact size format in nine months’ time. The leap comes more than five years after the company first weighed up a change of format. Another possibility would have been the midsized “Berliner” format used by the likes of The Guardian in the UK. However that was discounted partly because of the additional investment needed at the print works.

A key challenge the company will now face with the advertising market will be negotiations over ratecard for ads in the smaller size print edition.

The move is also a signal that the company is preparing for a time when the newspapers are no longer in print format, referring to moving the business “to a digital-only model if that is what is required in the future”.

However, as part of its debt reduction drive, the company is selling down its holding of NZ website Trade Me from 66% to 51%.

The shift – labelled “Fairfax of the Future” – comes as mining billionnaire Gina Rinehart closes in on getting seats on the board of Fairfax. After further [purchases last week, she is reported to be closing in on a 20% share.

The announcement:

SYDNEY, 18 June 2012: Fairfax Media Limited [ASX:FXJ] has today announced fundamental changes to the Company. The changes are focused on three objectives:

  • Positioning the Metro Media business to address further structural movements and provide flexibility to move the business to a digital-only model if that is what is required in the future;
  • Reducing group-wide costs and corporate overhead in line with the revised business structure;
  • and Strengthening the Fairfax Media balance sheet during a period of restructuring costs.

Metro Media

Fairfax Media is the clear market leader on digital platforms and continues to grow its audience base.

From this position it is seeing an acceleration of content being consumed on digital platforms.

The Sydney Morning Herald and The Age now attract 7 million high-quality unique users to the mastheads every month. This represents a 25% increase over the last five years, with around 65% of all readers of The Sydney Morning Herald and The Age now accessing Fairfax journalism through digital means – online, tablet, smartphone or smart TV.

While Fairfax Media’s print circulation remains meaningful and the Company has been working hard to boost Metro revenue and implement major cost cutting initiatives over the past 12 months, the profitability of the Metro business will come under further pressure with its current legacy cost base.

Four changes announced today will provide Metro Media with the business model and cost base to match the reduced significance of print readership to an increasingly digital business.

1. Metro Mastheads to Move to Compact Format: The Sydney Morning Herald and The Age will move to “compact” formats similar to The Australian Financial Review, with the first copy to be released on 4 March 2013.

This format will be more reader friendly while editorial standards will be unchanged, and existing content will be retained.

2. Digital Subscriptions Introduced to Metro Mastheads: Digital subscriptions will be implemented across The Sydney Morning Herald and The Age during the first quarter of calendar 2013. A “metered” model will be adopted with a base level of free access to the websites retained. The pricing and plans for digital subscriptions will be announced by the end of 2012.

3. Closure of Chullora and Tullamarine: It is proposed that the Chullora and Tullamarine printing facilities be closed by June 2014. Both sites were commissioned when almost all of Metro Media’s content was delivered through the printed newspaper. They have legacy presses with significant surplus capacity which is no longer required. It is proposed that printing of Metro papers will be reallocated to the Fairfax printing network.

4. Digital-First Editorial Model: The editorial function will be restructured to ensure full integration across our digital, print and mobile platforms. There will be increased flexibility with greater sharing of editorial content across geographies and across platforms.

Increasing and Accelerating Fairfax of the Future

Fairfax announced on 23 February 2012 that cost savings from the Fairfax of the Future program were expected to reach annualised savings of $170 million by FY2015.

Current progress is ahead of schedule, and we will now move to further accelerate implementation of the cost savings previously identified together with a number of additional cost-saving initiatives. In aggregate, this will result in a reduction in staff of 1,900 over the next three years.

Together with the proposed closure of Chullora and Tullamarine printing facilities, total savings are now expected to be $235 million on an annualised basis by June 2015. Of this total, $215 million will be achieved by June 2014.

The one-off costs associated with achieving these cost savings are expected to be approximately $248 million on a net basis including proceeds from expected land sales.

Strengthening the Balance Sheet

Fairfax has executed a fully underwritten share placement for the sale of 59.4 million Trade Me shares to reduce its interest from 66% to 51%.

The shares are being sold at a price of A$2.70 per share and will provide Fairfax with approximately A$160 million of proceeds. This selldown is on an EV/EBITDA (2012F) multiple of 14.6x based on Prospectus forecasts, and compares with a price per share equivalent to A$2.05 at the time of the

IPO of Trade Me in December 2011.

The selldown of Fairfax’s Trade Me interest will strengthen Fairfax’s balance sheet and is prudent in the context of the current environment and planned restructuring.

As a result of the sale, Fairfax will have net debt, excluding the consolidation of Trade Me’s net debt, of approximately $800 million.

Fairfax remains highly supportive of the Trade Me business and intends to retain a majority shareholding.

Conclusion

Commenting on today’s announcements, Chief Executive and Managing Director Greg Hywood said: “No one should be in any doubt that we are operating in very challenging times. Readers’ behaviours have changed and will not change back. As a result, we are taking decisive actions to fundamentally change the way we do business.

“The changes announced today have been selected after considering the merits of a full range of structural alternatives, including a demerger. The package of strategic initiatives is bold, and several are difficult, particularly as they will impact on some of our people. However, we believe that they are in the best interests of Fairfax, our shareholders, and ultimately the majority of our people. They are necessary to ensure Fairfax retains its position as a leading independent media company and a key voice in our markets.

“The evolution of The Sydney Morning Herald and The Age to compact formats and the implementation of digital subscriptions for these mastheads are landmark events for Fairfax. Our investment in quality journalism and our editorial standards will not be compromised and will continue to underpin our success.

More follows shortly

Comments


  1. Analog Penetration
    18 Jun 12
    9:59 am

  2. Not tabloid, smaller though.
    It’ll be tabloid quality when Gina gets her way!

  3. thumbelina
    18 Jun 12
    10:11 am

  4. about time – Finnally they understood that the size is a massive detractor.

  5. great
    18 Jun 12
    10:15 am

  6. this couldn’t come soon enough – finally papers that are easy to read & not awkward & flimsy…

  7. Stephen Byrne
    18 Jun 12
    10:25 am

  8. I think it’s rather naive of Fairfax to believe and for its shareholders to swallow the conclusion that it’s 7m unique users per month for its digital formats will be retained once they head to paywalls. The NYTimes has had mixed success with this but there is no way they have retained anywhere near the level of readership they had prior to the introduction of the paywalls, so any of Fairfax’s projected digital revenues form their metro editions should be taken with a grain of salt.

  9. Read, Set, Slow
    18 Jun 12
    10:26 am

  10. This would have been a relevant & timely move in 2006

  11. Fencer
    18 Jun 12
    10:28 am

  12. Bad news about the workers getting shafted at Chullora and Tullamarine, but good news for Fairfax, and particularly good news for readers who won’t have to put up with that idiotic broadsheet format any longer. Tabloid size? – great, not before bloody time!

  13. Waaah
    18 Jun 12
    10:31 am

  14. @thumbelina http://goo.gl/MeMYO

  15. Kevin
    18 Jun 12
    10:32 am

  16. I know I’m some sort of Luddite, but I love the broadsheet size. That said, it’s only really the news part that’s oversized; the sport, business etc have been tabloid for ages. Another thing to think about might be the over PC/leftist reporting (not that I’m saying to lurch the way of The Oz.) Take something like the refugee/boat people. A huge issue in the community at the moment which the SMH doesn’t seem to want to touch. Get rid of the selective reporting, please. We’re adults, we can handle it!

  17. Amy
    18 Jun 12
    10:38 am

  18. Unbelievable that it took them this long to make a change not only with the printed format but with the move to digital. A paywall is a sketchy move, plenty of news sites are successful without it. They would need to combine both The Age and SMH into one digital news source.

  19. JC
    18 Jun 12
    10:42 am

  20. I actually prefer a broadsheet format DONE WELL, that is filled with news., without radical layout settings and fillers. Bigger pages with more to read on each page makes for a simpler read. Unfortunately, in this day and age, a newspaper’s main income is from adspace, and while the broadsheet model is great for delivering news, if you pepper the large spread with ads, try to ‘jazz it up with pictures and different article layouts, it makes it difficult to read.

    Besides, seems we never get papers with news in it anymore anyway. On average, about 5 pages of domestic, 2 pages world, about the same number in sport, the necessary weather/tv/comics, and then plenty of ‘lifestyle’ filler. Yeah, thinking that way, the move to a tabloid size makes sense.

    Wish we had a decent broadsheet paper in the style of old, just pages of text, some good photography (mind you, not file photos), and with good news coverage… then again, does that style of news journalism even exist anymore?

  21. Breaking News?
    18 Jun 12
    10:48 am

  22. Sorry, but there is something really strange about this as breaking news. Shame on you Fairfax for taking so long to do the obvious. Hope you do the right thing by the people (PEOPLE) at Chullora and Tullamarine

  23. George Michaelson
    18 Jun 12
    11:31 am

  24. I also love broadsheet.

    I can’t make something add up: going paywall functionally reduces eyeballs by count. So, unless they can demonstrate $ return to adpeople for those eyes (ie, higher value) how can the paywall equate to improved advertising revenue?

    ie, they face less eyes, declining revenue, and declining eyes-per-ad which reduces ad revenue. Isn’t this a vicious cycle?

  25. Ann
    18 Jun 12
    11:38 am

  26. to “great” & “thumbelina”. its about the content not the format, although by the sound of your comments, easy to read applies equally to both.

  27. NJK
    18 Jun 12
    11:46 am

  28. JC – there’s a reason that style of paper doesn’t exist any more. It doesn’t make money.

  29. Serena
    18 Jun 12
    12:06 pm

  30. So what is the “Fairfax Printing Network”? I don’t have problems reading broadsheet and think the layout options better than with smaller pages. Obviously there is a skill in handling broadsheet on the train to work, and there the electronic editions appear popular. Personally I’m not very enthusiastic about reading on electronic media because generally screens are too small for quality presentation without clumsy formatting. But good for skimming, which perhaps is all many people do.

  31. Scot
    18 Jun 12
    12:06 pm

  32. to “George” The idea behind the paywall is people will have to subscribe to access the news on the site. With the subscription, you get more personal information. So yes you will probably have fewer eyeballs but you will be able to more accurately target ad’s towards their audience. This means they can charge a higher rate and would mean less “wastage” in terms of client spend.

  33. James
    18 Jun 12
    12:36 pm

  34. Will the new tabloid sized papers or redirecting the subediting offshore sacrifice the journalistic credibility which the SMH and Age deserve.

    I noted a error on the front page of the SMH today. Reference the second paragraph of the article ‘Downer sniffed a bargain….’ Linton Besser has used “it’s” where the appropriate “its” should apply.

    I hope it’s not a sign of things to come!!

  35. Pete
    18 Jun 12
    1:11 pm

  36. where are they going to print them?

  37. zumabeach
    18 Jun 12
    1:18 pm

  38. @ James … both the Fairfax and News Ltd papers are already littered with grammatical and spelling errors – and they were that way even before they chain-sawed their subbing desks. Their websites are even worse. But no one seems to care about that old foggy stuff any more. It’s all about the 24 hour news cycle and having a new sensation to splash on the screen every 10 minutes – “Lady Gaga Changes Her Hair Colour” … “Man Bites Dog” … blah blah blah. Anyway, isn’t the gossip out there that News is set to sack about a thousand, including 400 editorial staff? No wonder they’re not mouthing off too much today about poor old Fairfax’s misery.

  39. Cam
    18 Jun 12
    1:48 pm

  40. So… apparently size does matter?

  41. Pete
    18 Jun 12
    2:27 pm

  42. @Zumabeach, not a happy day for anyone involved….and on subbing, they’re publishing a lot of words a day, count the ones they get right…

  43. Cognitively DIssonant
    18 Jun 12
    3:04 pm

  44. As Australian news stops being “one of three” that you can buy in the newsagent’s shop and starts being “one of many” you can buy online, Fairfax’s only point of difference is content. Any news portal online that’s not doing a better job than the ABC’s free service won’t make any money.

    The first question any institutional investor should be asking Fairfax’s strategists is “what are you doing to provide quality ‘niche’ content for the Victorian & NSW markets?” Maybe hiring experienced, quality writers?

    The next thing they should do is insist Fairfax do more than just reprint AAP reports and spin doctor media releases that are available everywhere.

    @Zumabeach

    *fogey* ;)

  45. Alan Robertson
    18 Jun 12
    3:18 pm

  46. I don’t know the “Robbo” who jumped on the line earlier in the day on the subject of the SMH, but it obviously wasn’t the original Robbo, because that’s me.

    Not only that, I’m perfectly happy to have rotten tomatoes thrown at me by using my real name, not hiding in anonymity and getting me into trouble with my mates at the same time.

  47. zumabeach
    18 Jun 12
    4:09 pm

  48. @Pete … I know they publish tens of thousands of words a day but in the not so distant past they got a lot more of them right than they do now. I’m not gloating about anyone losing their jobs. Newspapers were my working life for more than 40 years and I still love them. You want depth, you want scoops, you want stuff to make you think, you still find it in newspapers, with all their faults, and not on the internet where any dill – including this one – can be a critic. And you know what they say about critics: they’re like a certain part of the anatomy – everybody’s got one and everybody can be one. Anyway, I agree it’s a sad day for what was once a great industry and apparently there are more sad days to come as more good people are shown the door.

  49. Delia
    18 Jun 12
    4:14 pm

  50. Could this be the birth of a thousand blogs? Mumbrella is awesome and I read it before I would read Media sections in Fairfax/News. I read Crikey and pay for it because it’s great insider info. I read a handful of food blogs before reading food sections in MSM. My food blogs are way better than anything Good Living does – more pics, friendlier voice, more affordable establishments. My take is this is the end of the duopoly of Fairfax/News and we’re going to see scores of new sites, new voices. Who cares what Gina Rinehart does at Fairfax, I’m reading Mumbrella/Crikey/Twitter – content sources that didn’t exist a decade ago.

  51. Carole Goldsmith
    18 Jun 12
    5:03 pm

  52. Another step in the death of good journalism, 1900 staff cut, why don’t they get rid of the CEO at Fairfax instead of the workers who are all trying to survive. .

  53. teejay
    18 Jun 12
    6:36 pm

  54. Carole, not only are they not going, they are adding to their numbers. Another exec starts in August.
    http://www.bandt.com.au/news/m.....from-fox-s

  55. Dean
    19 Jun 12
    10:10 am

  56. Why dont people understand that Broadsheet newspapers ARE SMALLER AND EASIER TO READ ON THE TRAIN!

    You fold them down the centre, creating a thin long paper that you read downwards. You then fold it around to read the next article. The Tabloid Newspapers are the ones that are too large. Think of yourself sitting on the train, and you have to open a tabloid newspaper wide and you take up either side of you. A properly folded broadsheet is 30 cm wide.

    Broadsheet newspapers when folded correctly take up less than 30 CM. Fools.