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Media earthquake: panic, disinformation, and competing visions at Fairfax and News

News limited chief executive Kim Williams has outlined a coherent strategy for the future, while Fairfax has relied on panic tactics, stoking fears of a crisis.

So that was the week that was. The Conversation anticipated this would be a big week that required close scrutiny and debate. What we didn’t realise was that first thing Monday morning Fairfax would announce plans to axe 1,900 staff, close two printing plants, effectively merge The Age and the SMH, and erect pay walls around the content it had previously pledged to keep free.

Then on Wednesday News Ltd jumped on the bandwagon and announced a major restructure. News Ltd chief executive Kim Williams refrained from announcing how many of the company’s 11,000 staff would go, though it is expected to be up to 1,500. Mr Williams said it would be “reckless” to spell out how many would go “but it will be significantly lower than at Fairfax”.

And of course, stage left, we had Gina Rinehart and friends talking up her prospects of board representation, if not outright control. The Gina putsch prompted concern from Labor, the Greens and some Liberal politicians. Messages of support for Rinehart came from Hungry Jack Cowin, the hamburger man; John Singleton, the ad man; and Ron Walker former Fairfax Chairman and Liberal Party Treasurer.

Throughout the week we tried to provide some context and analysis to help you make sense of it all. Our coverage attracted a record number of readers, and has been widely republished under our Creative Commons licence, appearing on the ABC and SBS online, The Australian, Business Spectator, The Guardian, and Crikey among others.

But first some clarifications and points for further discussion.

1. The Fairfax Charter of Editorial Independence.

The Board at Fairfax has always hired and fired its editors. Nothing will change once Gina Rinehart takes effective control. And once appointed, as the Charter states, “full editorial control of the newspapers is vested with the editors”.

The appointment procedure is the only one that matters. Let’s say, a Gina-dominated Board wants Andrew Bolt. He would be interviewed and appointed by the Board and then given “full editorial control” as specified in the Charter. The editorial staff would have to abide by the Charter and take his instructions. There would be no reason for Gina to intervene. The Charter would be upheld. And that’s why signing (or not) would not make any difference.

Conrad Black signed up to the Charter and soon after appointed his own editors. Similarly when Rupert Murdoch took over The Times and Sunday Times in the UK in 1981 he too signed up to demands for editorial independence and appointed independent directors to the Board.

But as a proprietor, he had the right to hire and fire his editors. So he found new editors who shared his world view, and left them to get on with it. There is no need for him to intervene. They keep their jobs if they do his bidding.

2. Newspapers are dead, long live digital.

Fact: every week News Ltd sells 11 million newspapers and Fairfax three million. Fairfax paints a picture of the newspaper age being over as the pretext to soften its staff up for the blow. It states: “the challenges we face are not unique to Fairfax”. Yet Kim Williams paints a very different picture: “Print has an active future, it won’t be abandoned”. And adds: “Editorial cuts will be slender”.

Why the different or mixed messages? Because Fairfax management wants staff to think print is dead and accept a radical shake-up of the business. There is a bias against newspapers led by the former CEO of Fairfax Digital who now leads Fairfax Metros, Jack Matthews. He has pulled off a coup parachuting his digital team to take control over most aspects of the combined business.

3. The crisis is not of our making, it’s happening everywhere.

Up to a point. But Fairfax has seen its market performance deteriorate while News Ltd has performed much better. The commercial leadership at The Age and SMH has been woeful. Led by inept managers totally out of their depth and appointed as cost cutters with no idea how to retain business let alone grow new revenue streams.

Newspapers are still where the big advertising dollars sit. As Kim Williams said, the print $1 is equivalent to 18 cents in digital revenue. At Fairfax, digital revenues only account for 12% of revenues, and to date they have had a free ride from the content provided and paid for by the newspapers.

It’s worth noting the size and trends of the US advertising market. In America, according to a report by ratings agency Moody’s, print still commands US$4,360 million - though it is trending 8.2% down - while online’s share is only 20% of print at US$815 million. But online is only up 1%. The US view is that the digital era of growth and optimism has come to an end. So why has Fairfax put all its eggs in the digital basket?

A smart media company backs all its platforms while at the same time it positions its business for a digital future. It doesn’t denigrate the biggest revenue earner.

In sum, Fairfax panicked its staff, readers, advertisers, and shareholders into believing there is a crisis. Instead of providing a vision to its staff the management has talked down to its staff in a hectoring, demeaning way.

Yes trading conditions are tough, but it has made matters worse. And allowed the company to be vulnerable to cheap takeover.

News Ltd had a different PR approach. It has a surer feel for the future. And its acquisition of James Packer’s stake in Foxtel makes it now the equal owner with Telstra of pay TV, plus it has pocketed the Business Spectator/Eureka Report business into its portfolio to allow for a stronger paywall offering. It is better positioned for the future.

4. Paywall or not?

Fairfax announced this week that from 2013 it will charge for access to its content after “a great deal of analysis”. Yet only last year CEO Greg Hywood announced that Fairfax would not go down the paywall route introduced by News Ltd. “That is not our model,” he said, adding: “85% of our revenue comes from advertising, so we don’t want to reduce access, especially with competition just a click away. We want to increase the audience, not limit it.”

5. Tabloid fears. Fairfax says when its metro papers go tabloid there “will be no difference to the quality of the content”. Yet there is a real difference between The Age and SMH papers and their online counterparts. Now that the “digital” managers control the combined company, who knows whether the tabloid values of its online sites will be replicated by its tabloids.

Also why take so long to make the switch format? Fairfax has announced the change for March next year, yet it could be done next month. There is no requirement to make adjustments to the presses as they currently print tabloid sections every day.

Fairfax’s decision to shut its printing plants at Chullora and Tullamarine doesn’t mean print is dead. Fairfax is simply switching the printing to its many other regional printing plants. This is simply about better utilising spare print capacity within the group. And dumping a lot of staff and costs.

6. Lack of diversity of voices just got worse.

Australia has three quality media voices, The Australian, SMH and The Age (excluding the specialist Australian Financial Review). The audience reach of all three has almost doubled with the addition of online and mobile devices. They still set the agenda for the morning talkback radio and TV news. There is greater concentration of media control and influence than at any other time.

With the decision by Fairfax to “nationalise” its reporting staff, that is, merge the Sydney and Melbourne reporting teams, the number of distinct voices will reduce to two: the merged Fairfax metros and The Australian.

If as expected Gina Rinehart takes control of Fairfax and appoints editors of her own choosing, then both The Australian and the Fairfax papers will share the same broad editorial voice: right-of-centre, pro-free market, climate change sceptics/deniers, and opposed to mining taxes or any other “impost” that stands in the way of creating wealth.

Australia will be left with one dominant and combined voice of the right. The only significant counterbalance will be from the ABC. But because it is taxpayer funded it is susceptible to interference by the government of the day. John Howard’s last Coalition government stacked three right-wingers onto the board and kept funding tight in an attempt to clip the wings of what it saw as its left-wing enemy.

But the Coalition has changed its view as spelled out by Malcolm Turnbull. Interviewed by The Conversation he said under a Coalition government the ABC will have a crucial role as a source of well-funded, independent news as the nation’s biggest newspapers continue their demise. “We don’t have any plans to do anything other than support the ABC. If there’s an Abbott government, I’ll be the communications minister and I’ll be responsible for the ABC.”

We believe Australian citizens must have a choice and range of views to allow for a robust competition of ideas, for proper democratic discourse and debate.

On a more hopeful note, yes, there are new players, including The Conversation. But in comparison to Fairfax and News Limited we are a minnow with only 350,000 unique readers a month. However, we aim to grow and expand our service. And if you support media diversity, we hope you will support us.

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