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Greg Hywood: ‘ABC is creating additional pressure on commercial media’

Fairfax Media CEO Greg Hywood has lashed out at the ABC for “undermining” commercial media companies by “aggressively” competing with them for audience and for giving money to Google for SEO marketing.

Greg Hywood: “”ABC is creating additional pressure on commercial media by aggressively competing for the same audience”.

Speaking at today’s Senate Select Committee on the Future of Public Interest Journalism in Sydney, Hywood said the media industry needs a level playing field in order to compete.

The inquiry, led by Sam Dastyari, was announced last week following a week-long Fairfax journalist strike over mass redundancies.

“Current media regulations designed for a legacy market prevent local media effectively competing for scale with international players such as Facebook and Google,” Hywood argued.

“ABC is creating additional pressure on commercial media by aggressively competing for the same audience that commercial media rely on by providing online content for free undermining our ability to create a sustainable model.

“The ABC also pays Google out of taxpayers money, who pay negligible tax, and spend nothing on local content provision for search engine marketing, that means that the ABC stories appear higher on search terms such as national news, international news and restricts our ability to generate revenue from our audience.”

Hywood argued the “biggest threat” to quality journalism is “unprofitable media companies”.

“We believe the biggest threat to quality journalism in this country is unprofitable local media companies,” he said.

Hywood argued ABC is taking traffic away from the commercial media companies.

“They use dollars to drive their traffic and they take traffic away from us, traffic is dollars to us and if ABC takes traffic from us by using tax payers money to drive that traffic it’s using tax payers money to disadvantage commercial media organisations,” he said.

“You do not have to pay money to Google to drive traffic, you can put your content up and people can search that content and see where it lands.

“If the ABC happens to be down the bottom, they’ve still fulfilled their mandate to get the news out to Australian people, people can go straight onto the ABC websites.

“But what we do as commercial organisations is compete for traffic because traffic is dollars,” Hywood continued.

“To me, the issue is if we want the sort of diversity that everyone wants in terms of as many players as possible in this local marketplace, the commercial organisations need to be as healthy as possible and why the ABC is taking money out of the system I don’t understand.

“The ABC does claim it does not spend much money but it does spend money.

“What we’re talking is government funding to do this, I am not saying doing this with the ABC is going to solve the problem, it’s a bigger problem than that but it doesn’t help,” he said.

Hywood rejected the notion Fairfax is “anti-ABC”.

“The ABC is part of the Australian community and has been for many years and does very good work,” he said.

“It’s just aspects of the new world of media where we have to be careful the decisions of government don’t impinge upon the diversity and the commercial environment we all value.”

During the inquiry, Hywood also rejected the suggestion that he has received bonuses on slashing editorial jobs.

“Given the recent press I’m not surprised the question has been asked,” he said when the question of his remuneration was raised.

“Everyone at Fairfax is paid appropriately in terms of market rates. The CEO salary at Fairfax is based around benchmarking around companies of similar size both in terms of market capitalisation, revenues, employees.

“That salary is round where the market is for that role and what we pride ourselves on at Fairfax is to provide market rate or better salaries for everyone throughout the organisation. 

“Bonus arrangements for executives, not just CEO’s, is very common practice across publicly-listed companies, both short and long term,” Hywood said.

“Let me say in terms of short and long term – the long term incentives that have been received by Fairfax executives have been based around the substantial growth in the Domain business which has driven the share price.

“Short term incentives, which have been based upon yearly earnings, which have been stressed because of the publishing business’, have been much less and have not been achieved.”

Hywood added that he has not received a short term bonus for some years “because of the stress on earnings of the publishing business”.

When pushed on if he is incentivised to cut jobs, he said: “They are based around the performance of earnings for the company on an annual basis, largely. There is no single incentive based around laying off journalists.

“Salaries of people in Fairfax will not solve what is a global issue around the disruption going on in the media, that is what is occurring. This is a global phenomenon. People inside Fairfax should be paid appropriate market rates for what they do and they are but what we have to do is deal with these global issues.”

The bulk of Hywood’s hour-long interview with the inquiry largely focused on his own and other executives remuneration, with Hywood stating he has a base of $1.6m which he admitted is a “very healthy income”.

“Everything around my personal salary is in the annual report and is open for scrutiny through the Fairfax annual report,” he said.

When pushed again on his remuneration, Hywood shot back at the Senators, stating: “I thought we were here to talk about the future of journalism.”

When asked what was he paid last year, he refused to answer, stating “I don’t think that is appropriate”.

Hywood was also questioned on the TPG offer currently before the Fairfax Media Board.

“This is a really difficult issue – this is something I cannot talk about, it is in front of the board a the moment,” he said when asked if TPG has access to Fairfax’s books at the moment.

“I really don’t want to comment on that, I feel very uncomfortable commenting on that.”

The inquiry noted it would consider calling upon TPG to appear at the next session.

When asked on media reform and how that might impact offers before the Fairfax Media board, Hywood returned to his Facebook-Google comments.

“If the laws changed, the media companies in this country can have conversations about the right mix of assets for media companies and whether that leads to some sort of consolidation of those assets I don’t know, but right now we can’t have that conversation,” he said.

“And while we can’t have that conversation, Google and Facebook continue to hoover up dollars because they have scale.

“When a board looks at a takeover offer, by law it has to look after shareholder interests. Therefore it looks at the value of the business and at the offer and it makes it decision on the outcome for the shareholders,” he added.

Earlier in the day the committee heard from Paul Murphy, CEO of the Media, Entertainment and Arts Alliance, who warned that the government needed to look at tax relief and tax incentives in a bid to help protect the future of journalism.

MEAA CEO Paul Murphy

“We do have to look at tax deductibility for new subscriptions and some sort of industry assistance,” Murphy said.

Murphy also raised concerns about the potential impact of splitting Fairfax’s newspaper business from Domain.

The union leader also revealed to full cost of Fairfax’s redundancy program over the last decade, saying the media company had paid out $455.5m in redundancy payments between 2007 and 2016.

Questioned on the impact of media newsroom closures in regional Australia he said that regional Australians had lost a vital resource for local news, with remaining journalists under extreme pressure to deliver content such as photos and stories with increasing stretched resources.

“It’s kind of like journalists are operating in a Thermomix environment where you drop ingredients in and come out with a complex product,” he said.

Murphy also said that the digital giants, Google and Facebook, which had soaked up a lot of the revenue lost from newspapers in recent years, should be forced to pay a 1% advertising levy which could be used to support local journalism.

One Senator likened the power of Google to that of the Dutch East India Company in the 1800s.

Murphy said a successful bid by TPG for Fairfax, which could see the closure of the mastheads, would be bad news for News Limited as well, with the loss of competitive tension in the market leading to a cascading effect where there was no pressure from competitors to find stories.

Investigative journalist Michael West, who set up his own website after being sacked from Fairfax last year, raised a number of serious issues, including Australia’s defamation laws which precluded small individual and small independent news site from taking on the might of corporate Australia.

He said while he had built up the expertise in taking on big business developed over more than 20 years with Fairfax and News Corp, journalism that challenged the practices of big business could not continue without proper funding.

West warned that journalists, fearing the reaction of big business, were already self censoring their work in order to avoid the possibility of defamation or other legal proceedings used by well funded businesses to shut down stories.

“The costs are prohibitive for someone without a big budget,” he said.

He said his own new reporting platform, michaelwest.com.au, relied on people “digging in and donating” to support his investigative journalism.

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