More staff cuts likely as Fairfax eyes digital only
In light of the cost-cutting measures by Fairfax Media, in this cross-posting from The Conversation, Merja Myllylahti examines if Fairfax Media is ready to be truly digital-led.
There seems to be no end to Fairfax’s restructuring saga. On Friday, the company’s management signalled it would continue to cut costs no matter what. CEO Greg Hywood said:
“We have made clear many times that we are managing a structural shift in publishing from print to digital. We continue to adapt business model to this reality, which involves an intense focus on cost reduction.”
This week Fairfax also said it would shed 70 jobs in New Zealand as it moves sub-editing work back to Pagemasters.
Figures published in Fairfax’s 2015 Annual Report show that between 2011-2015 the company cut 30% of its full-time employees. Today’s 2016 half-year results show that during the last four years Fairfax has cut its cost base by 34%, clearly on the back of staff reductions.
An internal restructure this week saw the departure of The Age’s editor-in-chief Andrew Holden, and the abolition of AM and PM news directors. Commentators say the new structure will increase clickbait content on the Fairfax papers. Under the new structure, says Crikey media writer Myriam Robin, “editors of the papers will no longer work closely with journalists and commission stories; instead, the print editors will scrape together material already put on Fairfax’s websites to fill their papers”.
Cost cutting: ‘short-term cost, long term benefits’
However, Fairfax is not the only news publisher focusing on cost cutting, or reinventing its newsroom strategies. The New York Times Company announced earlier in February that despite strong growth in digital revenue in the fourth quarter, it continued to “feel the impact of declines in parts of our print business”. Dean Baquet, the newspaper’s executive said “the company must continue to carefully manage its costs”, and that “everything we do now has got to include a certain amount of thinking about costs”. He didn’t rule out layoffs.
Similarly, Rupert Murdoch’s News Corp is planning to further cut costs in its Australian and British mastheads after poor results in the 2016 second quarter. While commenting on News Corp results, chief executive Robert Thomson said that “for our Australian mastheads, it was clearly a difficult quarter in advertising and to that extent we’ve clearly embarked on a cost-cutting program.” He added that “cost cutting has a short-term cost and a long-term benefit”.
Following The Independent’s example?
We know that in 2013, Fairfax asked Bain & Co to undertake a “detailed analysis” of the benefits of going entirely digital, shrinking its editorial team from 503 to 205.
Now, a similar move actually underway at The Independent in the UK will see the loss of approximately 100 editorial jobs.
Is Fairfax ready for such a move?
Fairfax’s numbers show it still has a long way to go to be truly digital-led.
The company’s digital subscription revenue rose 14.3% on the back of “around 162,000 digital subscribers across the SMH and The Age”. In 2015, the two papers had 158,000 digital subscribers. The real driver in its digital earnings was Domain, which saw digital advertising revenue growth of 37%.
To see if the digital-only model would work, let’s do some simple math.
In the first half of 2016, the combined digital advertising and subscription revenue of Fairfax’s metropolitan media was A$149 million, whereas revenue from its print advertising and circulation was A$252 million – a gap of A$103 million in favour of print.
The digital advertising income of metropolitan media rose A$24.3 million to A$131 million from the same time last year, and the digital subscription revenue A$2.2 million to A$18 million over the same period.
To simplify, in the first half of 2016, the digital revenue of Fairfax’s metropolitan media made 15.5% of the company’s total revenue of A$958 million. In comparison, print papers of metropolitan media made 26.3% of the total revenue.
Clearly Fairfax still needs the print for the revenue, but if it continues its heavy cost cutting, the digital-only model could be closer to reality.
Merja Myllylahti is a lecturer at Auckland University of Technology
This article was originally published on The Conversation. Read the original article.
you Can’t just look at digital v print revenue. You also need to consider costs. Sure, if Fairfax stopped printing its metro newspapers and moved to digital-only, it would lose all or most of the $252m in print revenues (some would likely transition to digital, but probably only a small proportion). But cutting print production also allows Fairfax to cut ALOT of cost — printing presses, paper, distribution costs etc etc. Better to look at net revenue or EBIDTA of print and digital operations (revenue less costs) to understand the net effect of dropping print on Fairfax’s bottom line.
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Expect a whole lot more howlers like yesterday’s “Industrialisation in the region PEEKED in the 1950s.”
And expect more Google maps to serve as fillers, I mean to inform Sydneysiders where Penrith and Parramatta are.
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There’s been a huge discounting and ‘free’ benefits push on new subscriptions the past 3-4 months. Meanwhile existing monthly subscription prices for the Weekend Papers + Digita have increased from $25 to $30 a month.
They can throw in member benefits like movie screens and Stan freebies all they want, but the value isn’t there from a news perspective and that’s why I subscribe, news & editorial.
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Whatever your politics, News is the absolute winner in Australia.
They must be ecstatic to see that most of Fairfax’s profit now comes from Domain. When that’s sold, what’s left?
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Fairfax may be trying to cut costs by moving from print to digital but what has become apparent is the desperate need to invest in re-training their sales people during this shift, who from my experience are still at a loss as to how to effectively sell their digital opportunities and then manage them once live. Poor service all round from Fairfax at the moment.
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The bit that’s not covered here is the Fairfax newsstand sales, which are (by my understanding) bigger than either print or digital subscription revenues.
Digital subscription revenues have stagnated, print is declining but they have those subscribers that even Greg Hywood refers to as ‘rusted on’ instead of loyal, so they might be OK for a while.
This weights the argument firmly on the print side. I wonder if they actually know enough to break down costs so they can see digital and print attribution to do maths on whether they can actually move to digital only.
I wonder whether Greg H meant to give that pretty juicy quote about moving to all digital in his roadshow…..
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Hywood talks about a transition. But he’s really talking about aggregates of revenue. The news media is funded by the print revenues. Fairfax gets very little revenue from digital subscriptions and the attribution of advertising to content is tiny.
The question that lingers is: how much of Domain is dependent on print? That is, through print and digital bundles, especially in the regional markets. Is this why Fairfax can’t sell it off? And what happns when print hits the wall?
What’s actually happening is that print revenues are falling and so news media costs have to fall. The revealing characteristic of Hywood’s strategy is the constant flip=flopping on consultant advice. Hywood himself has no plan other than to pump up Domain. Stan is a midget in a market that will be dominated by global content players. The events business is nothing more than a re-bundling of things that Fairfax has done for yonks.
Perhaps most obvious is Hywood’s assertion that quality news reporting is always in demand. He’s right. But he’s not in that business.
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I agree with Numbers….consultants must have made a bloody fortune out of fairfax in recent years whilst it hasn’t been able to decide how to price this or when to drop that.
That makes it sound like a business without clear direction from those making decisions.
I’d disagree that digital revenue is tiny, the problem is that it’s not growing as fast as print is falling – save for acquisitons in print ad space that mask the problem for another year.
I think the problems are pretty big – they’ve gone half way with a porous digital strategy that anyone with half a brain and access to google can get around, thus meaning really only fans of fairfax are probably paying right now…but it generates too much money to kill.
Print is still a massive cash cow when you add in newsstand.
No one knows how much domain relies on the news products.
So where to…..hmmm!
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Rice King: to be clear, my point is about the digital revenues attributed to content.
A very big chunk of Fairfax digital revenue would exist if they published only porn and real estate ads.
The problem is that the money that relies on a demographic, which is what quality journalism needs, is not big in the digital model. In fact the tendency to ad blocking and other pricing issues has led even The Guardian media writer to suggest that maybe publishers will punt their digital business first!
Fairfax under Hywood has not ever had a focus on the reader as the core value driver in the business. For that reason it’s quite likely that it will crumble as a business as the once great news brands are killed off by slow strangulation.
But there’s still time for Hywood to upgrade his car.
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Sorry, the Guardian link http://www.theguardian.com/med.....ing-mobile
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Headline for this article ought to read “New Zealand based man speculates on Australian based publisher”. As, it is the largest in the Southern Hemisphere.
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What about the Heralds Growers Market being shut down after 18 years?
http://www.businessinsider.com.....own-2016-2
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I read that Hywood is getting paid so much he feels comfortable buying silly cars and very expensive flats. I wonder why this is, since as a long time client and reader I see nothing but dysfunction. Fairfax has no coherent sales story in any of its products, even Domain. The bundling is ad hoc and makes little sense. Pricing is weird. The metrics they use are either fake or extremely hard to apply to anything that a client would buy. In short, they are living on the past.
As a reader I am mortified. Once proud, reliable news media are patchy at best. There are B grade celebs writing as if their words had the force of substance and balance of style that famous authors would be proud of. Sheehan, to make the obvious recent example, is a goat.
Hywood should hand back his pay and get a job that suits him. Maybe with Billy Shorten!
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I am thoroughly under the opinion that the future of written print journalism is in a once or twice a weekly compact issue with long form articles, analysis, opinion and arts and books review content much like The Saturday Paper, Guardian Weekly, The Spectator, The New Statesman, Time etc etc…..
The daily run of news is so available on other platforms that the hard copy newspaper as we know it is a gonna!!!
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