Why Fairfax management aren’t the real villains

Yesterday Fairfax Media journalists at The Sydney Morning Herald and The Age voted to go out on strike. As journalists lambast CEO Greg Hywood for failing to do an impossible job, Mumbrella's Miranda Ward suggests he's not the villain.

Last month Fairfax Media flagged to its investors, and to its own company, that cuts were coming – a move potentially welcomed by investors and one to be feared by those working for the publishing company behind the likes of The Sydney Morning Herald, The Age and The Australian Financial Review.

With a total of $30m of savings to be made, the details revealed yesterday are brutal – 125 full-time equivalent roles are set to be axed by the media company.

And yes, my heart is hurting for my fellow journalists who have gone out on strike in protest at these cuts.

But, Fairfax Media management aren’t the villains here.

Fairfax Media CEO Greg Hywood not a villain

I am confident the likes of Greg Hywood and Chris Janz were not sitting in a dimly lit room in a cloud of cigar smoke gleefully rubbing their hands together as they faced the prospect of telling more than a hundred people that they were no longer required.

Axing jobs isn’t a glamorous part of the job.

Despite my hopes to the contrary Hywood and Janz have ballsed again by failing to properly communicate why these cuts were needed. And yet again staff don’t feel properly consulted. And the timing of the announcement for World Press Freedom Day was spectacularly crass.

But given the state of the company’s balance sheet the cuts did have to happen. Something had to change or the end result would be worse.

This time last year 100 FTE jobs were axed.

Two years ago Fairfax gutted its Community Media business.

It’s clearly the signs of a business that is shrinking – and that’s not news to anyone.

The Sydney Morning Herald’s compact edition

In 2012 (when Fairfax also took its broadsheets into the more reader friendly tabloid or ‘compact’ format) the industry saw Fairfax Media shed the largest number of jobs in recent years after it looked to make a whopping 1,900 jobs redundant, many of them on the print side.

It was a blood bath.

In the company’s 2012 annual report, then chairman Roger Corbett said: “Unfortunately cost saving imperatives meant we needed to announce redundancies. Including those already announced in Fairfax of the Future and the changes outlined here, 1,900 people will be leaving the company over the next three years.

“Every job matters and your Board and management wish these redundancies were avoidable. They are not.”

And Corbett was, unfortunately, right.

Fairfax staff preparing to walk out yesterday

In FY2012, total revenue was $2.3b, down from $2.465b in 2011.

That same year, total gross revenue for Metro Media for print and classifieds (which houses The SMH, The Age and The AFR) was $565.2m, down from $652.7m the year prior. Metro digital delivered total gross revenue of $252.9m.

In FY2013, total revenue was $2,033.8m while total revenue for Metro Media was $884.5m.
In FY2014, total revenue was $1,866.2m, while total revenue for Metro Media was $803.2m

Can you see what I’m trying to say yet?

In FY2015, total revenue was $1,840.8m, and revenue for Metro Media was $829.9m.
In FY2016, total revenue was $1,830.5m while revenue for Metro Media was $574.1m (this was the first year Domain was reported separately – Domain Group in 2016 reported a total revenue of $296.3m).

That brings us to FY2017 for which we only have the half-year results.

As at December 31, total revenue was at $902.9m, down 5.8% on the same period the year before. Metro Media for the first half was $289.1m, down 8.2% from $301.1m the year before. Domain Group reported $162.9m the first half of this year, up 5.8% on FY16 $153.9m.

Fairfax Media is a troubled business – but the drastic cuts of 2012 slowed down some of those declines that were threatening to swallow up the business.

The seeds of Fairfax’s problems were indeed sown in 1990 when Warwick Fairfax Jr led the company down a $2.25b bid to re-privatise it with the deal falling apart, with the company falling out the Fairfax family’s control and leaving it crippled with debt.

But that has been compounded in the past few years with the downward spiral of ad spend in the newspaper sector.

Looking at figures from Standard Media Index – and yes, these only account for agency spend and do not include any direct spend – ad spend across newspapers (print), was down 25% year-on-year.

In February, it was down 35% and in January it was down 24% year-on-year.

Yes, this isn’t looking at digital spend – but it’s difficult to tell how much of digital spend is being spent with publishers like Fairfax Media as opposed to the tech giants such as Facebook and Google. But as the old adage goes, it’s replacing print dollars with digital cents.

These ad spend figures come against a market in which Google and Facebook now account for 20% of global advertising expenditure, according to Zenith’s Top Thirty Global Media Owners report released earlier this week.

Chris Janz: not the villain of the piece

It’s a grim picture. And one that would have been staring at Hywood and Janz, and Janz’ predecessor Allen Williams, every day as they examined how the business could be righted in order for it to have a viable future.

Hard choices had to be made and that’s resulted in the announcements we’ve seen in the last month, culminating in yesterday’s decision by journalists to strike. But the options for management are cut, or go bust. The latter is not an option for a publicly-traded business.

So if Fairfax’s management aren’t the villains, who is?

To answer that we need to examine the impact of Google and Facebook on the industry.

And for the tech giants who have shown little to no interest in creating content themselves, it is an easy label to assign.

These companies want the majority of ad spend, they want consumers’ attention, but to make that happen they need content from the likes of Fairfax, and News Corp. They aren’t willing to put the investment into content themselves and content is expensive, it is a commitment and the margins in it are a lot worse than simple display and search ads.

Effectively, Facebook and Google have created billion-dollar platforms off the back of the content of others – and now the impact of that is starting to be felt upon those trying to make money out of that content.

And while journalists might think it’s time to abandon the masthead, journalists need it just as much as the masthead needs them.

It’s a symbiotic relationship.

While journalists may obsess over who has written what, the average reader isn’t aware of who the people are breaking the news day-to-day. They do know if they read it in The Australian, The Sydney Morning Herald, The Guardian or Buzzfeed.

Journalists need a team to do their job, they need resources and they need the backing of management.

Individually journalists can make a difference, and do some valuable work. But history shows the best work comes from teams of journos pulling together to speak truth to power. To do that they need the backing of a bigger media machine which is able to give them the time and resources to go out and do that work.

That scale also offers a level of protection to journalists investigating the rich, powerful and corrupt. These are the people who can afford expensive lawyers to tie up companies in expensive, and often frivolous, litigation for years. That’s enough to ruin anyone trying to plough a lone furrow by pushing out their own reports.

Would Steve Pennells have been able to take on Gina Rinehart in a long and expensive court battle to get him to reveal his sources – something no self-respecting journalist would ever consider, without the protection of publisher West Australian News? Doubtful.

That’s one example of the importance of our media organisations, something often easily dismissed by critics who point to the focus on the Kardashians and clickbait as the proof media is broken. But it’s not yet. Not completely at least.

So while Hywood and Janz aren’t the villains of this story, it is time for them to be transparent and get their journalists on board with the vision for the company. If they can’t do that, the villain story will continue and the future viability of the company will continue to remain in question.


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