The belts are being tightened at Fairfax. The company’s commercial
director Alan Revell has sent an email to his divisional heads telling
them that the commercial division – that’s the Sydney Morning Herald and The Age – is $8m behind budget and they have to cut costs.
One of the ways the Herald is
cutting costs is by reducing editorial resources and space in its
Domain real estate section. The downturn in the property market is
affecting ad revenue, so editorial has to go. But Sydney real estate
agents are most unimpressed. Their view is that the free editorial is a
quid pro quo for the vast revenues they pump into the SMH.
Staff and shareholders at Fairfax should not only get used to more belt
fastening, they should start fastening their seat belts as well. That’s
because Fairfax is living on borrowed time and, as the economy turns,
the publisher of Australia’s two fattest broadsheet newspapers will be
powerless to prevent their profits peeling away. Fairfax has been
riding the greatest advertising (display and classified) boom of recent
times. It has continued to jack up its classified advertising rates as
advertisers have continued to place fewer ads. It has continued to
reduce editorial spending as circulations and credibility fall. This is
a company with nowhere to hide when the economy flattens out, as it is
now doing, and the result is likely to be a profit and morale
bloodbath. No wonder Professor Hilmer has packed his bags.