1. Fairfax plans fundamental shift from print future
Margaret Simons writes:
When the modern history of Australian media is written, the next few weeks will surely form a big chapter. Not only do we have the James Packer move on Channel Ten, with all it says about the long-term health of pay television and the fragile and resurgent hopes for free to air.
We also have the Fairfax Media annual general meeting and investor day, at which we will get a picture of that company’s long-term plans for survival, and with it the future of those vital organs of the nation, The Age and The Sydney Morning Herald.
There are big things, and profound shifts, afoot.
It has been an open secret for weeks that the company plans to converge its online and print products, doing away with the organisational divide between digital and print. This represents largely a loss for Fairfax Digital boss Jack Matthews.
But it is becoming clear that much more than resolution of internal factional issues is on the cards. The plans have been very closely held at senior levels, leading some to expect that, as one source put it, “Fairfax will once again demonstrate its enormous capacity to underwhelm”.
I think not this time. I gather that Fairfax Media is contemplating a fundamental shift away from a future based on print, and towards the migration of readers to online and in particular mobile devices — the iPad and its competitors.
Not much of this will be announced tomorrow (Thursday), at the AGM. More important is the planned investor day, presently slated for November 23, which will be venue for the release of the new strategy.
The accompaniment to the shift towards migrating readers to online will be a determined attempt to cut the huge costs of printing papers on dead trees and trucking them around the nation. In other words, job losses — the rumour is about 100 of them — largely at the big print plants, as Fairfax Media tries to shift as much of its print run as possible to Rural Press printing sites, which are cheaper to run.
Nobody is predicting the death of print any time soon. As one insider said to me “timing and pace will be critical”. The company is keeping a close eye on the sale of iPad devices and the plans for iPad competitors from Google and other companies. Whether the telcos give devices away as part of telecommunications bundles will also influence the pace of change, and whether the numbers of devices has reached critical mass.
But the overall direction has been decided. The effort of the next few years will be directed towards winding down print and scaling up the effort to get people to pay for content delivered to mobile devices. Moving the print broadsheets to tabloid may be considered as part of this.
All this will be a profound shift from the thinking that has dominated the past decade — that what counted was getting the papers in front of as many eyeballs as possible, no matter the freebies and cheap deals it took to do it — and towards asking people to pay.
The iPad, it is believed, creates a unique opportunity to get people used to accessing content online for free to pay for convenient mobile delivery.
The challenges are immense, and the risks enormous. As Macquarie analyst Alex Pollak pointed out last September, at present only 28% of the company’s value is not in some way dependent on the printing press.
The shift will represent an enormous disruption in the business model.
There are many ways in which it could fail, and if it fails, then we are probably looking at a long-term future without The Age and The Sydney Morning Herald as strong presences in the national marketplace of ideas.
The key issues Pollak identified are whether advertising on the mobile devices can be charged at full tote odds, or at something closer to the miserable yields of ads on the websites. Also, how quickly can the cost of printing newspapers and trucking them around the nation be reduced without pissing off traditional readers and nuking revenue?
But there are also hopeful signs. Indeed, they probably offer the only hope for Fairfax and other journalism-based companies worldwide.
Sales of iPads, and the Fairfax broadsheet apps on the iPad, have been phenomenal. In September, Pollak wrote that iPad subscriptions for the smart edition of The Sydney Morning Herald had jumped from 10,000 a month after launch to 16,000 over the period of a week.
This meant that at that date, 16,000 daily editions of The Sydney Morning Herald were on iPad — or about 10% of its weekday circulation.
Two months later, there have been more than 150,000 iPads sold nationwide,and the competitor devices are soon to hit the market. The shift is on, and every newspaper company knows it.
But why should Fairfax be a winner from the iPad? Once you concede — as Fairfax Media is being forced to do — that owning a printing press is nothing special and indeed a very mixed blessing, you open yourself to the fact that online news content can be almost anyone’s game. After decades of cost cutting in the Fairfax newsrooms, the pressure is on now to create really, really special content.
The people who are loading the SMH app are probably also loading up the ABC app and The Australian app, and depending on their interests, a dozen others locally and overseas. Nobody knows how sticky these subscribers will be once the novelty wears off.
And Pollak also points out that the shift risks breaking the age-old deal where the seller of news content also gets to sell the ad that appears alongside it. Online, there are many sellers of advertising, from Google to Doubleclick. Why should Fairfax retain its premium hold on display ads? Certainly its position will be contested. When Google releases its reader, we can expect that it will be much more based on open source, open-to-anyone models. And that may well become dominant.
The Fairfax strategy briefing is the outcome of the Bain and Co process, in which the outside consultancy was brought in by the board to advise on ways forward, and in part to adjudicate between Matthews and Fairfax CEO Brian McCarthy. Bain fulfilled the age-old role for consultants of taking the political heat, precisely because it is able to exit.
But Bain is now out of the building, and the remaining details are being driven internally.
Will it succeed? There are no road maps for old media companies at present. And there is plenty of room for disaster. If Fairfax Media fails to correctly manage the shift of the next few years, then we can expect a future without The Sydney Morning Herald and The Age as strong presences.
Will that mean News Limited domination? Perhaps. But that company, too, faces its challenges.
Examples of companies successfully dominating one technology and shifting to dominate a new technology are, in history, very rare.
The decision has been made that mining the premium print position for as long as possible is no longer the focus. It is a time for big risks and experiments.
Yes, it will be a big chapter in that history book. But nobody knows the ending.
Visit Margaret Simons’ blog, The Content Makers: HERE
Meanwhile, the Net Revolution is laying waste to sub-editing sections of newspapers around the nation … particularly in News Ltd.
Nervous subs around the nation’s News Ltd sites are wondering when it will be their turn to get the bullet (which is sugar-coated with a redundancy package).
Already around seven sub-editors are being put out to pasture at the NT News in Darwin and all sub-editing is being done from News’ grand new vision of editing “hubs”… centralised subbing rooms already are working over multiple mastheads (for example some subbing work for Mercury is done now from Melbourne). And work done by NT subs is all being done from Adelaide.
In Brisbane there are battery hen cages of some 120 subs working across multiple mastheads.
John West hears the subs at Mercury are watching nervously, with local management unable to confirm or deny a local future for the pool of editing hacks. As would be the subs sections at The Examiner and The Advocate as Rural Press (Fairfax) ponders its regional future.
John West reckons they’ve got about 20 months before the battery hen subbing centres are fully operating in the main capital cities (Brisbane, Melbourne and Adelaide) and local subs – already seen by management as simply production units – go the way of the compositor and the Dodo.
But fear not, no doubt State Labor and Federal Labor Governments will swing into action here with generous compensation and retraining packages … modelled on its ground-breaking Forestry compo strategy …