Michael Gill’s Fairfax Business Publications go out of their way not to report Crikey’s shareholder activism, but will they maintain the pathetic ban during our tilt at the Fairfax board in a few weeks?
This has left the field wide open for publications like Crikey and Paddy Manning’s new magazine Ethical Investor to properly cover the detail of shareholder activism in Australia.
And it’s not as if the Fairfax Business Publications are booming at the moment. The latest Roy Morgan readership figures for the Australian Financial Review, BRW, Personal Investment magazine and Shares magazine were disappointing but it should be pointed out that they are comparing the top of the tech boom with a depressed market today.
That said, The Fin Review lost 14 per cent of its weekday readers and 3 per cent on Saturday for the 6 months to June 30, 2001.
BRW performed even worse suggesting the recent article for Crikey by insider Larry Trobe was close to the mark. Readership plummeted 17.6 per cent to 276,000 although the Bulletin did even worse losing 19.56 per cent to 292,000.
In this context, Personal Investor magazine held up reasonably well to only lose 4.4 per cent and Shares must have been pleased to only lose 1.1 per cent.
Crikey does not expect any favours from Gill’s publications – especially after falling out with Gill on leaving the AFR in September 1999 – but the way they go out of their way not to report Crikey’s shareholder activism is bad journalism and, therefore, bad for the business of so-called quality publications.
Crikey’s shareholder activism has been written up in Forbes Magazine, The Australian, The Age, The Sydney Morning Herald and featured on several ABC programs, but there has not been even a half-hearted attempt to look at the issue in any of the Fairfax business publications which purport to report business and shareholder matters in Australia.
These are publications under Gill’s purview. This makes Crikey’s upcoming tilt at the John Fairfax board interesting. Will the Fairfax press accurately report the first contested election in the history of the company or will they do a Rupert and just toe the company line and freeze out all critics.
This is the letter I sent to Fairfax company secretary Gail Hambly a couple of weeks back nominating for the board:
Crikey’s nomination for Fairfax board
Ms Gail Hambly
The Company Secretary
John Fairfax Holdings Ltd
Level 18, 201 Sussex St
Fax number: (02) 9282 3065
Monday, August 21, 2001
Dear Ms Hambly,
Please accept this letter as my consent to nominate for the board of John Fairfax Holdings Ltd at the upcoming 2001 AGM. Shareholder Paula Piccinini is supporting this nomination and has written to you separately.
Could you please include the following biographical and platform to be distributed to shareholders in the notice of meeting:
“Stephen D. Mayne, age 32. Bcom (Melb). Mr Mayne is the publisher of www.crikey.com.au, Australia’s most successful independent news website, and has been a business journalist for 12 years with a range of Australian papers including The Age and the Australian Financial Review. He won the Walkley Award for business journalism in 1999 for a series from the perspective of an active shareholder. Electing Mr Mayne would give Fairfax a director with extensive journalistic and newspaper experience and also a second Melbourne-based director, something chairman Brian Powers has said the company would like. Mr Mayne also believes Fairfax needs more directors with no previous commercial or personal association with rival media companies and their proprietors.”
I trust that the position on the notice paper will be determined by ballot and would also request that you consult with me before editing the proposed CV and platform summary to be distributed to shareholders. I would also request that all of the directors up for re-election speak to the motion and that I be given up to five minutes to address the meeting. In my view the notice of meeting should require a specific box to be ticked if shareholders wish to give undirected proxies to the chairman. Finally, I trust that my nomination will be successful if I receive 50.1 per cent of the valid votes and that the board will not decree that there is no vacancy for an additional candidate given that the size of the current board is well below the maximum prescribed in the company’s constitution. And would you please provide details of the largest 100 shareholders given that this information is readily available to the other candidates through the investor relations department.
Could you please confirm your receipt and acceptance of this nomination by email to [email protected] or by phone to (0412) 106 241 or fax to (03) 9846 1472.
Why run for Fairfax board
Now the main idea of standing is to point out that Kerry Packer’s favourite Australian merchant banker, David Gonski, and Rupert Murdoch’s equivalent, Mark Burrows, should not be on the board of John Fairfax.
The moguls already have too much power in Australia and we lack media diversity such that merchant bankers who advise the moguls should not be allowed inside the Fairfax boardroom.
The company also lacks any directors with newspaper experience and has a strong Sydney bias on its board with the lamentable Sir Roderick Carnegie, another Packer associate, the only Melbourne-based director.
But there are important operational issues as well with all the major Fairfax titles under pressure at the moment. Fred Hilmer’s tenure as CEO is looking shaky and there are rumors everywhere that Fairfax is about to close down its separate internet company F2 to stop the $40 million annual losses coming in.
The issues around the Business Publications are also very important. The AFR’s move to a subscription only website has not pulled in the subscriber numbers hoped for, the joint venture with Macquarie Bank has been heavily scaled back and circulation is under pressure. Gill is also said to have had acrimonious turf wars with f2 boss Nigel Dews which has hurt the cohesion of the group’s strategic planning.
Crikey has cancelled his Fin Review for financial reasons recently and was particularly disappointed to see they lost their best journalist, Ivor Ries, to The Bulletin magazine. The petty issue of Ivor having a picture by-line was apparently one of the issues that caused some tension with Gill.
Since taking over in 1998, Gill has built up a long line of enemies. He heavily shafted the paper’s then Canberra Bureau Chief Tom Burton but the Fairfax bosses appear to have woken up to the error of this move and are now grooming Burton to be the next editor of The Sydney Morning Herald if Robert Whitehead and Alan Revell don’t lift their games.
Problems with people management seem to be a recurring them with Michael Gill.
Finally, there was the mini-scandal back in late 1999 about some dodgy auditing of the circulation figures at BRW after a Gill-inspired relaunch. Let’s throw to that excellent trade magazine Adnews for the detail on this particular problem.
Whoops! 9,318 copies of BRW disappear
By Evan Mistilis
SYDNEY: Mystery surrounds the inflation in audited circulation of BRW from 66,000 to 75,318 with the magazine’s auditor, Col Jones, wanting an explanation.
The published circulation figure was inflated by 14%, according to a statement issued by Michael Gill, publisher and editor-in-chief of Fairfax Business Publications. Gill claims the real circulation of BRW is now 66,000+, down from the average circulation of 75,318 copies sold weekly from January to June 1999 reported by the Audit Bureau of Circulations.
Gill stated: “The effect is entirely due to changed methods, to bring consistency across all Fairfax Business Publications.”
Gill later said the discrepancy may have been caused by miscalculating revenue from subscriptions, for which there are different prices.
Gloria Jarman, executive director of the Audit Bureau of Circulations, said: “All audits should be conducted in the same way. It’s a standardised system.” The ABC has strict rules for calculating a magazine’s circulation. The hired auditor must trace the physical copies of a magazine to compare with the revenue from copies sold to retailers and subscribers.
The appointed auditor from WV Armstrong & Co, Col Jones said he did not understand how Fairfax could come up with a new audit figure. “I want to know how they worked it out,” he said.
Calculations for the last two months in the audit period depend partly on an “estimate” of the number of returned copies and renewed subscriptions.
An over-estimation must be subtracted from the next audit. Jones said: “The estimates were in line with the previous issues’ figures.”
Gill laughed at a suggestion made by Australian Consolidated Press that BRW, which relaunched in June, fell because people have switched to The Bulletin, after a relaunch in March.
Neil Fryer is hired by Fairfax to gather the circulation data to pass to the auditor, and he is also baffled by the discrepancy between the old and new circulation. “I don’t understand how the figures were wrong,” he said.
And they have an even better follow-up two weeks later.
Whatever happened at BRW?
Revised circulation figures for BRW have sparked concerns among media buyers and advertisers as to why its circulation fell.
Media buyers are still absorbing the implications of the admission that the circulation figures for Business Review Weekly magazine had been overstated by 9,318 copies.
As yet no detailed explanation has been forthcoming from Michael Gill, publisher and editor-in-chief at Fairfax Business Publications.
“We have done something that no one has ever done before. We issued a correction,” he says. In a statement to the industry (page 3, Ad News 3 December), Gill claimed the fall in circulation was caused by “changed methods” which brought “consistency” across all the titles at Fairfax Business Publications.
“The moment we found out there was a problem, we told the market,” Gill says. But media buyers are not applauding Gill’s candour. Many admit to being bewildered as to how an audited circulation figure could have been inaccurate.
Until now, an audited circulation was the most reliable statistic of all. Peter Cornelius, managing director at Zenith Media, with a $1bn media budget, is concerned. “There should be a more thorough explanation of what’s happened.”
Gill dismisses the importance of circulation, saying advertisers buy on readership. But Cornelius, who oversees $1bn of media expenditure, says: “That’s crap. The two go hand in hand.”
Circulation is a reliable measure of a publication’s health because of statistical anomalies associated with estimating a magazine’s readership.
Readership figures can and do vary wildly for no apparent reason. Gill himself questioned the readership figure for the Australian Financial Review Magazine when Roy Morgan found that the insert suffered a sudden drop in readers while the circulation of the host newspaper remained healthy.
In contrast to a readership survey, the circulation figure counts every copy a person buys by choice. This includes newsstand sales, subscriptions and term offers in which, say, members of an association have the choice to receive a copy of a publication, usually at discount rate.
“It’s meant to be kosher,” says Paul Davey, client services director designate at media shop OMD. “I’m still in a quandary as to how they can audit at a different number. I thought audits are pretty straight forward – subscriptions plus newsstand sales.”
Gill would not say how the method was “changed” to arrive at a circulation figure of 66,000+ in November, revised from the average of 75,318 reported in the ABC audit for the January to June 1999 audit period.
Nor will he say how the ABC audit could be so wrong, although he promised to investigate “if there is a need”.
Gloria Jarman, executive director of the Audit Bureau of Circulations, says there is only one standard system for calculating an audit, conducted by an ABC-approved auditor.
However, Gill raised a number of possibilities as to how BRW’s circulation figures for the first six months of 1999 could have been wrong.
Depending on the title, for the last one or two months of any audit period sales are estimated on newsagent returns. In BRW’s case, some of the unsold copies may not have been returned by the newsagents. Gill says Fairfax now has a better system for estimating the returns.
Another reason for the fall could be subscription renewals, which account for about 80% of BRW’s sales. There is a grace period of six months in which unrenewed subscriptions may be counted. Possibly a large number of subscribers decided not to renew.
Gill says the audit could have been wrong because subscriptions had been sold under many different deals, leading to a confusing number of prices.
The ABC is clear on its rules. Bulk sales in which copies are delivered to a third party for distribution are not allowed. Term offers in which a group of people have the option to receive a subscription – often through a tick box on a membership form or application – are allowed, whatever the price paid.
Under ABC rules, the auditor has to be able to trace the physical copies of the magazine, as well as the revenue, and match both together.
Because of the ABC’s stringent audit methodology we can assume that its audit figure for 1998 is correct, a fact emphasised by Jim Clarke, chief executive of BRW Media until last year. He stands by the circulation figures that were signed off under his stewardship.
Paul McNamara, who was BRW’s circulations manager until April 1999 when he joined The Eye as publisher, says the BRW circulation probably fell after the December 1998 audit because in March 1999 Gill put an end to discount subscription offers to three large groups, accounting for some 15,000 subscribers.
The discount subscriptions would have lasted six to 12 months, so they would slowly flow through for renewal throughout this year. Many of these 15,000 subscribers may have chosen to cancel their subscription rather than pay full price. “I could see the signs when I was leaving in April,” McNamara says.
Over 12,000 BRW subscribers were getting a discount because they also subscribed to The Age or The Sydney Morning Herald. BRW also offered a joint subscription deal to about 3,000 Australian Property News subscribers. Another 2,500 subscriptions were sent out as part of a deal with fast growing companies, which paid to be covered in the Emerging Companies advertorial section. These companies each received 110 copies of BRW for their shareholders.
Gill in his statement to the market says that the “the effect is entirely due to changed methods”.
After ending the discount subscriptions, BRW embarked on a redesign, switching to matt paper stock and moving away from segmenting its sections by topic. Many media buyers wonder whether this could have resulted in a fall in sales and subscription renewals, especially as it faces increasing competition from the revamped Bulletin.
Australian Consolidated Press, publisher of The Bulletin, is keen to capitalise on its competitor’s problems but distances itself from a mysterious letter sent to media buyers highlighting BRW’s problems.
BRW raised its advertising rates by 8% on 1 July this year, the first increase in about two years. No doubt advertisers would like an explanation as to exactly what has happened.
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