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.
Whilst easy and convenient to throw some blame in the direction of the digital dominants – one thing missing from this article is the role of classifieds. For decades prior to Google, or Carsguide.com.au or seek or any other online ad vertical sites – the newspapers made ALL their money from the door-stop sized editions full of classified ads. Some of these sites they still own. Others they sold off. Let’s be honest here – display ads and the price punters paid for the papers at the newsagent NEVER drove the profit of the papers – it was the classifieds.
This comment hits the nail on the head. The newspaper companies profits were always driven by the classifieds (and real estate still does today) but those rivers of gold have long dried up as SEEK and Carsguide provide users with a better model.
Oh really? Do you think?
So it is therefore acceptable that some 25 years after that fact was obvious it is ok to pay someone $2.7m a year to call retrenchment a strategy? FFS.
The fact is a robot would do a better job than Hywood. Much cheaper too.
The operating model is near defunct. Revenue streams have diminished to the point of no return and it’s actually increasing at a rate of more than 10% pa. That gives a life expectancy of 5 years for the print division? The market sign will be the spin off of Domain (the only group asset). This is sad but inevitable. Why would the ordinary punter pay for a subscription when the ABC gives it away for free? More tears to come…
Google does reward and pay publishers of both video and written content? The Fairfax business model has not changed, which is a leadership issue and is why they have fallen over. They retained classifieds with Domain. They tried with Drive but failed.
Looking at say Carsales, which took the money from the auto classies, surely that will be killed soon by Facebook? (If FB looks like they are going to eat up the auto classifieds, then Google will also switch on the ‘selling a car?’ button.)
There are many, many, many millionaires as a result of harnessing the reach of Google and Facebook. Fairfax haven’t and have not built their business to be able to do so. Could they have done? Probably, with smart leadership. Any computer scientists on the Fairfax board?
These generalisations apply to all newspapers. Fairfax has its own burden, which is UTS renarkably greedy management and habitually inept board.
On the face of recent news it appears Hywood has received an enormous amount in pay, a multiple of that reported in the annual report and an amount much greater than that which caused a furore at Australia Post.
At the same time it now emerges that the Domain business has not been growing if its own acccord but has been sucking revenue from the masthead businesses.
The effect is that Hywood and his mates get big pay jackets for both the growth of Domain and cost cuts in mastheads. Yet it appears that one is not a true picture and the need for other is caused by the same cross subsidy or accounting allocation.
Remarkable.
In my view, Fairfax Media should have spun off the Digital part of the business more than 15 years ago, or F2 as it was known back then. As the AFR reported back then, Fairfax didn’t do it because of a potential large tax transfer hit. However, if they had done it then, investors would have two vehicles to invest in. Then Hywood and co would not have been at the mercy of the market in managing two different vehicles of print and digital, and they would have been able to manage shareholder expectations, which is driving the current bloodbath.
I do realise this scenario does not solve the diminishing rivers of gold, and the general malaise globally that is hurting newspapers. They also missed out on doing clever strategic deals in the early 2000s (think the N Dews era, where nothing really happened).
My concern is the ABC online platform – its free to access – well that is what the ABC is all about isnt it? I think not – never have we seen the ABC beat mainstream television or radio news but online it is a force to be reconded with as it has no pay wall. This needs to change – I am a tax payer, I work in media – my own taxes are going to put me out of a job paying for the ABC. Make it a fair playing field – give Fairfax, News Corp a chance to compete. I dont want the ABC – a Government owned media business to be the most powerful media business in Australia
Sounds like someone is scared of a little bit of healthy competition. This ostrich head in the sand syndrome is why our market model is generations behind global ones
A ridiculous comment. Australians should hand over stewardship of the media to an outfit you wouldn’t trust to run a bingo night?
How does that play out exactly? It wouldn’t stop Fairfax’s financials plummeting. And after they close shop we’ll have no media at all. Better the ABC than nothing.
Good piece although I would change the headline to “Why current Fairfax management aren’t the real villains’ – some of us remember the hubris of the late 90s.
Miranda, you raise some very important and valid points and while one has to acknowledge that Facebook and Google have certainly had a significant affect on ad revenue, journalism and ‘content’, the Board and Management of Fairfax should also have been looking at this level of disruption 15 years ago. They should have been considering other revenue streams, growth opportunity through M&A or investment in synergistic businesses – iSentia (Media Monitors) is a good example -The boards job is to look at headwinds and challenges in the sector and plan for them. Sure, government policy is stifling the media sector, but executives at Fairfax are far from blameless.
This article shows a fairly spectacular lack of understanding of the problem at hand here. It’s not that cuts are necessary, it’s how they’re being made. It’s the fact that editorial – the team that actually produces the product the company is built on – is the only department being affected by these cuts. It’s the fact that not a single person in upper management or at board level is even taking the smallest pay cut. It’s the fact that Fairfax keeps repeating the same mistakes over and over again and expecting different results.
As much as I am against the changes happening at Fairfax, your statement isn’t completely true. As an employee myself at the ODI building, other departments have been cut and redundancies were made weeks prior to the editorial announcement. It was just very shush shush under the rug so Editorial didn’t feel threatened.
Truth be told there is not a great deal of concern regarding the strike outside the inner suburbs of Sydney and Melbourne. Fairfax vs News Corp same political and ideological arguments presented on a daily basis. It truly is sad almost like watching repeats of A Country Practice or Water Rats. Argument for the sake of Argument. Circulation and advertising declining due to the general populous switching off from the traditional sources against a backdrop of empty rhetoric and smug editorials. Karma much?
Here’s a bit of content I stole from somewhere else:
Vineet Jain, managing director of BCCL, which owns The Times of India, said, “We are moving from pure news toward entertainment, short-form content, and fun videos. The definition of news has changed completely…millennials want to consume content from wherever they are, especially on social media. They want to read what their friends are sharing, not what an editor chose to put on the front page.” The movie Spotlight won “Best Picture”, but the foot soldiers of good journalism are getting gunned down in a world where “engagement” is the metric that matters, not sales.
@Journo, the editorial department aren’t the only department that is being affected. Janz and crew have been locked up in Surry Hills for well over a year quietly building their own team of almost 100. They landed in Pyrmont a couple of months back and very quickly started hacking away at the other core teams. Core product team gone. Technology team decimated. Commercial team slashed and with no leadership. Editorial just have the power of the union behind them which is why it’s news at all.
Hey Journo
The concept of consulting stakeholders when hard decisions like these need to be made is as daft as 90% of the lightweight PC waffle that the Fairfax group think machine passes off as quality journalism.
The invocation of “PC” should really be the new Godwin’s Law.
Fuck yes. Especially when combined with such a nonsensical and stupid word like ‘waffle’
Janz (did he pay for this puff piece) and Hywood have been in Surry Hills planning this for 12 months with their consultants. They want all journalists off the EBA.
Hywood’s legacy is killing powerful mastheads and backing Huffington Post. Pop Sugar. RSVP.
“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.” Er, so what IS the vision? So far it seems to consist solely of cutting costs faster than revenues are declining. That’s not a vision. And it’s not a sustainable strategy — comes a time (and it’s getting ever closer) where there is literally nothing left to cut. What are the plans to address the revenue side of the equation – new products or businesses? Acquisitions? New Revenue streams?
@Gina – you say that “Janz and crew have been locked up in Surry Hills for well over a year quietly building their own team of almost 100.”
What were these 100 people doing for a year? What does Fairfax have to show for it?
Trying to install WordPress.
You mean like News Corp – and many other publishers – have already done? Hilarious if true and this is the digital “innovation” Hywood keeps promising will soon be unleashed for all to see.
Why isn’t an asset like Domain (real estate classifieds) funding the journalism that is needed?
Scenario 1:
Classified company can spend profit on research and marketing
Scenario 2:
Classified company can spend profit propping up an unprofitable business which is largely unrelated except for now redundant reasons of distribution.
Guess who wins?
We shall see about that. Domain includes all the property ads in print. The question is: what is Domain worth when real estate agents don’t get the print? It’s not just about inventory. It’s also about price. So don’t be too quick to dismiss the journalism.
So back in February Hywood has given a $2.4 million bonus on top of his $1.6 million salary. Hows that work?
My thought exactly Trevor.
Hywood gets a $2.5m bonus. Has to cut $30m. 125 FTEs go.
That is an accountant’s approach.
A leader’s approach would be to say that the place is going to shit and that I am scrapping my bonus. Pro-rata that would be 10 journos saved. Through in the rest of the executives bonuses and you’d probably still have 50 journos there. And journos who would understand that management valued their work.
I know when I read the SMH it is for the content as it – and only it – provides value.
Miranda. There are examples of high quality leading news media that have found a path hat sustains the role as news provider in profit. The New York Times for example reported yesterday on a positive trend. Hywood has never at any stage indicated that he has a clue about a sustainable business and that includes Domain, which is reliant on the business Hywood has strangled.
NYT reported a digital subscriber record thanks to Trump taking office (while noting that it will cool off quickly and they have no idea of what the retention rates of the spike look like).
MM at News said they’re seeing the same trend in Australia, but an unexpected short term increase with no idea on retention isn’t a trend
Miranda, you miss the elephant in the room regarding staff anger – the ever-increasing salaries and bonuses that senior management have continued to give themselves, even as revenue has been rapidly declining.
This is to the tune of millions of dollars.
http://thenewdaily.com.au/mone.....ood-bonus/
And this has happened when many staff have been stuck on the same pay grade for years and years, apart from measly below-inflation EBA-negotiated rises.
The anger would not be so great if management were willing to share the pain, but they’d rather sack others to fund their own exorbitant salaries.
They didn’t start the fire, but they have been sure to keep themselves warm by it while shoving others out into the cold.
Greg has a grace a subtlety that staff fail to grasp. His Maserati and multimillion dollar apartment are not affectations or wilful rubbing if noses in crap. They are his way of demonstrating what can be achieved if one will only ignore or even actively forget any momentary concern for others. He is truly a monument to the enormous efforts of at least two decades of Fairfax board of director blindness. Lest we forget.
Of course, ad spend is now spread across both old and new platforms but that is half the story, compare circulation figures now with say 15 years ago
75% Australian
65% Courier Mail
60% West Australian
58% Herald Sun
57% Telegraph
43% Age
42% Canberra Times
41% SMH
All these newspapers were reporting the same stories to virtually the same potential readership. If the Fairfax papers had simply held their drop in readership to that of the other mastheads their circulation and presumably revenue would have been 50% higher. What is so remarkable that the 3 with the greatest drops are all Fairfax.
I think it is time to realise that content is what has driven this demise as much as anything. A composer may produce great work but the pop songs pay the bills. The Fairfax press obviously had either a different focus or different set of values. Rightly or wrongly that focus was not what the public was willing to pay for.
There are a few problems with your argument here. The first is that you confuse circulation and readership. Including their digital audiences, SMH and The Age have more readers than ever before. It’s only natural that they would have had larger circulation drops than the Murdoch tabloids because the Fairfax readership is more white-collar, so they moved more quickly towards reading on the web and, later, on mobile. According to the latest readership figures from EMMA, the largest readership for Australian newspapers is 1. SMH 2. Daily Telegraph 3. Herald Sun 4. The Age. Rather than indicate the content is the problem, it indicates the opposite.
Miranda: I couldn’t have put it better myself. And I’m deeply in awe of the work (surely not mine) in today’s speech by Hywood in which he reveals that all of Fairfax revenues have fallen, some by over 10% – yet Domain is up 10%! (Even though Domain is very much a print and digital business.) Now I’m wondering about the finale: will Hywood announce that only half of Fairfax died? And is so, the top half? After which I’m thinking of the Truly Christian Roger Corbett, delivering the Fairfax eulogy: “Sadly, its brain died in 2018. But the bum lives on, a reminder to the world of how much can be achieved by a brilliant board and its pet ferret.”
It’s reported that the most recent round of voluntary redundancies is an attempt to reduce $30Million by cutting 125 jobs. A simple calculation shows each job = $240,000. Dare I ask, isn’t this abit too high compared to ther other people who work at FairFax eg Admin staff, IT, Accounting, HR ?
Lots of non-editorial staff have already been made redundant plus there would be cost savings from contributors, syndication, technology providers.
Multiplying an average salary by three (to account for taxes, rent, leave, equipment and other overheads) is a decent rule of thumb when calculating the actual cost of an FTE.
absolutely no way the average journalist salary at Fairfax is $240k. Cutting 125 jobs will not save $30m. It “may” save about half of that.
If you cut 125 jobs you can also reduce rent to accommodate 125 people…
Only if the space they occupy can be let to someone else or the lease is up and you can move (at great expense).
You rang?
Print journalists keep talking about quality journalism, sure, that’s important. But more important is picking up a paper and feeling that what people are reading gives them more than what they see elsewhere – either from other media or other mediums. The Fairfax papers have often failed in this area in the last decade. There’s talk that if they go, there will be no paper of record, but they haven’t promoted that, or what the loss of these papers would mean for Joe Citizen out there – and does the average Joe still care about quality journalism anyway? That’s what matters, and that’s what ought to be emphasised. Everyone talks about how this all happened, how the company is in this state of decline … Okay, this is small fry, but if you ask me, blame the café owners for a change in culture and consumer habits… they’re the ones who offered customers free copies of the papers every morning. Who needs to buy?
“But more important is picking up a paper and feeling that what people are reading gives them more than what they see elsewhere – either from other media or other mediums. The Fairfax papers have often failed in this area in the last decade.”
Of course they didn’t convince people that they get more from dead trees and ink than any other media… that’s the opposite of reality.
At best, newspapers can give people (at a huge cost) the feeling that even though they’re reading yesterday’s news they still can’t share it or add their two cents easily.
I can’t add my 2 cents to stories in the Oz online because that’s for subscribers only. I can’t usually do it in the Age or SMH because the story’s comment allowing time has been cut off. ABC stories don’t usually let me comment at all.
The majority of senior managers in Australia are wildly out of their depth. Just another industry run by incompetents about to be wiped out by a global wave.
No, Fairfax management don’t get off that easily. Sure, times are tough in the media but Fairfax have continually got it wrong. First, too slow to embrace the internet. Then, too quick to embrace the internet. For all the talk of “quality journalism”, Fairfax’s recent model has been all about “quantity journalism” – spray as many words as possible all over the internet, count all the eyeballs, and hope that one day money will magically rain from the sky. Meanwhile, the bits of the business that actually bring in money – ie, the newspapers – were deliberately, and aggressively, degraded. Which explains the difference in circ losses between News and Fairfax. There’s never any cost or comeback for management in this. All they have to do is slap each other on the back for their “bravery” in paying consultants to tell them what to do, then pay themselves bonuses for doing so – cutting costs. Struggling to think of a company that has succeeded despite having such open contempt for its product, the people who produce it and the people who pay for it (as opposed to clicking on it).
Circulation of both The Age and SMH has declined far more than News Corp’s titles, which means the content isn’t grabbing people. Then they give it away free on the internet. A recipe for disaster.
At what stage do journalists realise so few people are willing to pay even token amounts for quality journalism that it doesn’t matter anymore.
They carry on about being the moral compass of society, politics etc etc but people would rather look at BuzzFeed, or even the Beetoota Advocate (which is hilarious, has a great website and even though it’s satire it has a bigger impact than the SMH)
Haven’t noticed a change in the SMH during this or any other strike, it’s just proving they’re not needed and saving Fairfax some more $$$
Except that the SMH is the most-read masthead in the country, and Buzzfeed doesn’t even make the top 10, thereby entirely undermining your argument.
Correct — audience is not the problem for Fairfax (or for most other major masthead titles). With online and print they have more readers now than they ever have — albeit the online audience is far, far less engaged than print in terms of time spent. Their problem — and the problem of every other publisher – is how to monetise that audience. Print $ are hemhorraging and digital $ don’t come close to replacing.
Of course management is to blame. If the seeds were sewn in 2012, what have they been doing in the last five years to change the business model and adapt to the times, without requiring mass redundancies as a strategy for saving face on the bottom line? If not management, then whom? Realistically, cutting jobs is the easy way to save money, in any business. Drastic overhauls of the way a business operates is not, it’s hard, but it is necessary for the reasons you have listed and more. These are five, ten, fifteen year projections of change, not simple quick fixes. In these times no one is worth a multi-million dollar bonus when staff are laid off in such numbers and others paid bugger all for their contributions. The fundamental business model is broken. Management is there to work that out, that’s why they’re paid the big bucks, no?
The geographical monopolies of newspapers was smashed by the internet, and Facebook is where eyeballs have gone is very large numbers, so of course advertisers are following. The SMH and Age compete, for much of there news offerings, with the entire english speaking world now, and good luck with that. Sure for local news there’s an opportunity, but good luck with getting people to pay for it, because advertisers will not and it’s a fantasy to think they ever will again. The whole point of being a “one-stop shop” newspaper has collapsed. The point about larger news orgs being more resistant to legal attack is about the only good reason for being a large organisation. But small news operations with specialist, good journalism and low overheads are far more likely to survive on subscriptions, and they are the only future for quality journalism. And the solution to the legal issue is umbrella orgs like the MEAA bringing their muscle to bear.
The specialist online news operation is the only way to survive. No point focusing on breaking news, as i can get that anywhere. That’s chasing ‘first to publish’ and the advantage lasts about 30 seconds. But in-depth articles, unique insights? That’s worth a small subscription. Problem is, subscriptions won’t bring in much revenue, and articles can be copied so easily by competitors.
One other thing, and an uncomfortable thing. If I was Fairfax senior management, and had the support of the Board, I’d be thinking how do the shareholders exit this business with the best return they can get, before it withers away. I’d think a private equity acquisition would get the best return, so I’d be trying to engineer the company into a state most favourable for buying and slicing into profitable and unprofitable parts. To make it most attractive for a PE bidding war. And that’s what it looks to me is happening at Fairfax. Sloughing off whole chunks of loss-making news, bolstering and separating out Domain etc, the whole shebang. It’s going to get a lot worse.
There’s a bunch of stuff there that could throw up different answers if you look at the numbers in other ways. But it provides a useful start for debate. So here’s my invitation to you: run the article past a top-notch balance sheet and revenue analyst from outside our industry and ask them to pick holes in it.
Why? The media industry is one big circle jerk of PC asses that are out of touch with the rest of society. I used to be a liberal (or lefty) until the left became extremists in PC. The media have failed morally in its PC crusade that has divided the community.
I’d try to align Godwin’s law and PC if I was part of the media circle jerk. Einstein recognised that we need different thinking to solve problems from the thinking that created them. But, the PC circle jerk is so much more fun, truth be damned!
Newcastle Lad hit the spot. Now go back to your PC circle jerk journo. You are due back in the office shortly. You need to write the next PC tripe piece that the majority will roll their eyes at. Anchorage Capital expose? Nah, write some PC fluff about genders and income with figures that looked like it was crafted by Anchorage Capital. PC mate, PC.
This is about the 4th time somebody has said Average Joe doesn’t want the truth and all readers are idiots. That’s a journo circle jerk yet again.
Do you think everybody is a millenial? Why has nobody challenged the sewage being pumped out of the SMH? Journos can’t be this clueless. Telling the voters which candidate to vote for. Marginalising children (especially boys in education) because it ticks some box. There are so many rotten faces to the media.
As an average Joe, I am willing to pay for good journalism. The SMH has been off for a long time and nobody trusts it. If there are good writers they are overshadowed by political propaganda (against both parties, at different times), sexism, and an air of self righteousness. Anchorage capital was one an example that got little coverage and Eddie McGuire’s poor taste joke about ice saturated papers for months, while ignoring real injustices. You don’t think anybody saw through that charade? You think pandering to a squeaky wheel for months was ignored by the more affluent and educated?
People want truth rather than what Fairfax is offering. Fairfax’s sexism alone alienates 1 in 2 readers, regardless of what Facebook echo chambers tell you. If the SMH was even remotely decent, Joe Average would be more inclined to pay for it. In SMH’s defense, most distributions are almost as bad. However, I’m an ill educated twit (Average Joe), so keep ignoring me. I don’t notice layer on layer of prejudice and manipulation.
Joe Average
This has been going on for a few years with News’ regional papers. On the NSW Central Coast their paper Central Coast Express Advocate is being reduced from twice weekly to once a week soon after laying off heaps off heaps of staff (2 photographers the latest). It is now an advertiser platform. Nothing else. Ten years ago the Central Coast supported two weekly newspapers and a budding daily. News Limited changed that!