Fairfax chief executive Greg Hywood has dismissed the threat from the impending Australian launch of UK media group The Guardian, telling shareholders it is not a strong competitive brand in Australia.
“The Guardian is an extremely good brand in some suburbs of London,” Mr Hywood said, after Fairfax Media announced a first-half net profit of $386.3 million.
The sale of Fairfax’s remaining stake in Trade Me and its US agricultural publishing business made a significant contribution towards the profit result, as the company chose to reduce its debt.
The results show Fairfax spent $69 million in redundancy payments during the half, as part of the Fairfax of the Future transformation program. This is now expected to deliver improved savings of $251 million by 2015.
Fairfax also revealed its plan to introduce domestic paywalls to its metro websites, originally slated for March would proceed in the June quarter. It will however deploy the paywall to international readers within the next month.*
“I think this shows the level of concern about the long term decline for print newspapers,” said Andrea Carson, PhD researcher at the University of Melbourne, adding that this is the third quarter in a row that circulation figures for Fairfax showed significant declines.
Mr Hywood today argued circulation figures were no longer a relevant measure of the performance of the business, with 75% of the audience of the metro SMH and Age businesses now accessing the brands digitally.
“It’s not up to us to say to our audience you have to buy a newspaper,” Mr Hywood said, adding that Fairfax would remain in the newspaper business for as long as it was profitable.
However digital advertising revenues remained soft and volatile during the half. December revenues were 5% below the same period last year, with second-half revenues in the first six weeks 9 to 10% lower.
“While they’ve got the paywalls on ice they’ve yet to realise a sustainable revenue model to deliver the kind of revenues the print newspapers have done,” Ms Carson said.
Ms Carson said the upcoming launch of The Guardian in Australia would have played a role in the decision-making process related to Fairfax paywalls.
“I think The Guardian is a direct competitor with Fairfax and it’s going to have a lot of interest.
"It’s the third largest read online site in the world behind the Daily Mail and the New York Times.”
Mr Hywood dismissed the threat however, and argued it was Fairfax and News Ltd brands that had the strongest relationship with Australian readers.
“The brands that dominate the public agenda in this country are Fairfax brands and to give our direct competitors some credit, News Ltd brands.
"They have the relationship with audiences, the depth of journalism and the credibility of the long-term standing of the brand,” he said.
Mr Hywood said Fairfax was focused on substantial change without compromising the quality of its journalism.
“Our work on and in the business is about more than taking cost out … no one cuts to greatness.
"We’re taking a fresh look at territories once considered sacred cows and smashing silos that once seemed untouchable,” Mr Hywood said.
“While we are optimistic about our future there is not a single pair of rose coloured glasses in the building.”
Fairfax’s ongoing cost cutting program mirrors that being undertaken at other newspaper publishers around the world.
It comes on the back of a $2.8 billion write-down of its assets last year.
Yesterday Seven West Media posted a $109 million loss for the December half, after it made a $260 million write-down to the value of its magazine business and stake in Yahoo!7.
Brian McNair, Professor of Journalism, Media and Communication at QUT, said media sector cost cutting was clearly a short-term measure in response to an immediate crisis.
“In the longer term the risk is the very thing that makes traditional media viable - the quality of the journalism - can be put at risk.”
Professor McNair said while new technologies provided real opportunities to cut costs, cost cutting had not stopped the decline in print circulation in the UK.
“There’s been a lot of rationalisation of services and many regional and national groups, but it hasn’t stopped circulation decline, it’s just led to criticism of decreasing standards and quality.”
- Article updated to reflect the nature of the paywall deployment planned for March.