Fairfax Media will slice The Sydney Morning Herald and The Age to tabloid-size and sack 1900 staff — including about 380 editorial positions — as part of a massive $235 million cost-cutting drive to save the media giant from corporate oblivion.
In the bombshell revelation delivered via a technically plagued internal staff webcast this morning, CEO Greg Hywood said 20% of the job cuts would come from editorial, 20% from printing and the remainder from other activities. There are currently around 10,000 Fairfax employees.
In an ASX announcement, the company revealed it was turning The Age and The SMH into tabloids — or “compacts” as it describes it — as part of its three-year “Fairfax of the Future” strategy. The first cut-down editions will start in March next year.
Hywood also announced that digital paywalled subscriptions will be introduced to metro masthead websites on a “metered” basis — apparently similar to The New York Times, which gives non-subscribers a certain number of articles for free — with details due by the end of the year. The firm will also press ahead with its “digital first” editorial model, forcing hacks to file multiple times for online during the day.
The well-remunerated CEO said he could stop printing hard copies completely and move to a “digital only model” if print circulation and revenues changed materially. If the redundancy targets aren’t met voluntarily, they will be compulsory, especially outside “core areas” including news, investigations, business and sport.
As part of the drive, the company’s Tullamarine and Chullora printing presses will close by June 2014, saving $44 million annually. Tullamarine opened to much fanfare in 2003; Chullora employs 230 permanent full-time staff and Tullamarine about 100. The decision raises the prospect that the new tabs will be printed at regional facilities like Ballarat and Beresfield and shipped to their respective CBDs each morning.
The total savings from the dual moves will come in at $235 million annually with one-off costs of $248 million (mostly redundancies) after land sales are factored in.
Furious Age staff were mulling whether to walk off the job to protest the changes with The Age’s house committee convening at midday to formulate a response. A half hour stop work meeting will be held at 4PM to discuss the company’s proposed changes and get feedback. Publisher David Hoath, editorial director Garry Linnell Age editor Paul Ramadge rolled through the changes at an 11am all-staff crisis meeting.
In Sydney, senior SMH business scribe Stuart Washington spoke about “tears on the newsroom floor” and said the paper’s staff was considering its options. Linnell will front staff alongside metro chief Jack Matthews and SMH publisher Peter Fray at 4pm. The mood is poisonous inside the metro newsrooms after the decision two weeks ago to offshore 66 NSW regional sub-editors to New Zealand resulted in a 36-hour strike.
Hywood, a former Australian Financial Review cadet, said he would be booking a “substantial” number of redundancies in the next 60 to 90 days.
Fairfax currently employs 800 metropolitan journalists across The Age, The Sydney Morning Herald, The Canberra Times and its Brisbane and Perth web portals. In an internal email to staff, obtained by Crikey, metro chief Jack Matthews said 300 staff would be excised from the metro division — 150 from editorial.
The Financial Review Group, which employs 270 people at titles including The AFR and BRW, will slash 10% of its headcount over the next three months.
“While it will be hard, it will change the business for the better. I urge people to think twice before challenging the changes,” Hywood told staff, adding it is “the greatest chance to be a profitable or sustainable business in the future”.
Hywood said (read the full address and presentation here) the strategy was about bringing the fixed cost base down and relieving pressure on revenues. The company was “carrying a cost base that is way over what you need”. Hywood wrote:
“This is an historic day for Fairfax Media. We are making the biggest changes to the business ever made and none of us under-estimates the enormity of them.
“We are determining our future by decisively moving us along on the journey from print to digital.
“While some of the decisions that we are announcing today were very hard to make — others were exciting because of what they will unlock and problems they will solve. All are necessary, all are inevitable — and we will not, and have not, shied away from making them. We know there is no choice.
“Very significant change must happen and must happen now. We will not abdicate our responsibility to secure the future of the company.”
In his email, Jack Matthews was equally bullish, saying “the decisions underpinning these changes are difficult, but … we simply cannot shy away from them”.
“Not only are they a response to significant revenue pressures brought about by the broader economic environment, but also sweeping structural changes that challenge the economics of our — and virtually all other — traditional publishing businesses. It is important to reiterate that the challenges we face are not unique to Fairfax,” he wrote.
“While we have previously announced a range of strategic initiatives to achieve efficiencies and develop new revenue streams, we need to do more to respond to the pace of structural change and the depth of the current cyclical slump in advertising revenue.”
Earlier this morning, Fairfax said it had reaped $166 million by selling off 15% of New Zealand auction site TradeMe. It will continue to hold a majority 51% stake in the company. Hywood also revealed Fairfax had considered spinning off the metro businesses, and selling its radio division, as recommended by some analysts and 9% shareholder Allan Gray, but after some reflection, he dismissed this course of action. “we do not agree with them, but, we do have to make sweeping changes and we have been working on them for some time.”
Analyst Peter Cox told Crikey the plan was a step in the right direction, but came 10 years too late. “It’s the correct action but it’s too late,” he said. “The board have been asleep at the wheel for the past five to 10 years.
Fairfax management made three big mistakes, Cox said. “They didn’t charge online much earlier, they failed to see how many people would abandon print for online and they failed to capture classified rivers of gold online.”
The metered paywall “was purely a survival technique to get costs below revenue. Of course, this will help Fairfax survive for the time being but it doesn’t mean the company has a future.”
Australian Manufacturing Workers Union national printing chief Lorraine Cassin, told Crikey that the union, which covers staff at Chullora and Tullamarine, was “disturbed” by the announcement.
“We’re pretty unimpressed, the way we learned about it was via the media…we’ve had no consultation with our members and we’ll be seeking urgent discussions with the company.” Rolling industrial action was possible: “…we’ll consult with the members and decide how to respond.”
Fairfax shares surged 7.7% to 65.5 cents today against a 2% jump in the broader market. The company had been trading for months at record lows, having lost 15% of its value this year and 85% over the past five years.
Mining entrepreneur and climate change denier Gina Rinehart last week upped her Fairfax stake to 18.6% and is pushing for a board seat for herself and another for her close adviser, right-wing fast food king Jack Cowin.