Nov 16, 2009

Australian newspapers following the US in steep decline

The declining revenues of Australian newspapers will spell trouble locally, just as the same trend has resulted in disaster for many US titles, writes Niki Scevak.

Australian newspaper publishers say they are different from their US counterparts but they are following a near identical path to a dramatically smaller existence. A rule of thumb in the media and telecommunications industries is that Australia is 18-24 months behind the US and in looking at the demise of the Australian newspaper industry this rule is eerily close to reality. News Corp's Australian newspaper revenue was down 17% on a local currency basis in the first quarter of FY10. Western Australian Newspapers were down 14%. These results are the latest in a string that show a steady acceleration in the rate of revenue declines .

This chart analyses the rate of decline in revenue at News Corp's Australian papers, Fairfax's metro and regional publications and WAN and compares them to the decline in US newspaper revenues (Source: NAA). I took the first year from when papers were seeing growth to when they were seeing a decline. In all cases that was 18 months after the US first began the long decline except for Fairfax's regional publication where the clock starts 30 months later. The picture is not pretty and shows very little difference between the newspaper industry in the US and Australia. Executives in the US have given up on the argument that advertising declines are cyclical versus secular but Australian managers have not. The earlier implies there is little to do now and that the future will magically brighten when the overall economy returns. For instance, from APN's chief executive, Brendan Hopkin, who chairs the industry body The Newspaper Works in April of this year: "Hopkins declined to make a forecast for the industry for this year, but endorsed an analyst report by RBS Equities that predicts advertising at metropolitan newspapers will fall 12.9% this year, and at regional titles by 9.1%, before picking up 4 per cent in 2010." The Australian economy has grown surprisingly well through a dire global economic backdrop. However, the strong growth in resources and commmodities did nothing for WAN's recent results for instance. Good luck growing by 4% in FY2010. So what will become of the papers? A pattern in the US saw papers in good times get high on their fat margins and lever up their capital structures with mounds of debt, which were used to build empires. Many, like Freedom Communications, are in bankruptcy now. In Australia, Fairfax is saddled with nearly $1.8 billion in debt, after having (smartly) raised capital to reduce the total amount from $2.5 billion last financial year. But operating cash flow declined to $633 million in FY09. Looking at a scenario of a 20-25% decline in operating cash flow for FY2010 and it is clear why the dividend was slashed and likely will be eliminated if this case plays out, while the company attempts to service ~$170 million a year in debt repayments. The real bell will toll as the firm enters into FY11 in June of next year where large amounts of debt fall due -- neatly 18 months after the fate of such US stalwarts as the Tribune Company, the Philidelphia Inquirer and Freedom Communications began to enter bankruptcy proceedings. Fairfax has a lot more going for it than those institutions, with stronger Internet assets in TradeMe but even after multiple rounds of asset sales, the lenders on the firm's debt may end up running important pillars of the Australian fourth estate. Niki Scevak is the founder of , a real estate site in the United States. He maintains a blog about online media and advertising.

Free Trial

You've hit members-only content.

Sign up for a FREE 21-day trial to keep reading and get the best of Crikey straight to your inbox

By starting a free trial, you agree to accept Crikey’s terms and conditions


Leave a comment

6 thoughts on “Australian newspapers following the US in steep decline

  1. Mary Garden

    To suggest that we are following in the footsteps of the US is nonsense. Our newspaper industry has significant structural differences, and our leading news websites belong to our main newspaper publishers, unlike the US. Major differences will emerge here.

    If you are differentiating regional and metro declines for Fairfax, then why not do the same for News Ltd? And what is far more important in this debate is the state of the ‘quality’ metros, so why not chart the ‘declines’ for The Australian, the AFR, The Age and the SMH. A different picture will emerge. The middle of the road dailies that try to appeal to everyone are suffering the most declines, particularly in circulation. So that skews the picture. BTW the free community papers are not declining. Their numbers are burgeoning. Any discussion of the future of newspapers that limits itself to figures of paid newspapers does not present the whole picture.

    Also, there are only small declines in metro circulation this last quarter, but the cover cost of the Australia also increased … so there is more revenue.

    Any discussion of the future of newspapers is much more nuanced than pessimists (such as Niki Scevak) allow, and usually reflects a curious North American and Eurocentric view of the press.

  2. Smithee


    “Significant structural differences” ? Sure. But a newspaper is still a newspaper, and whether that’s in the US, Europe or Australia, almost all of them are going down. The most significant question is how fast.

    If you talk to people actually employed by a newspaper – and I do almost every day – they will tell you that it’s the most grim time they can remember. Doom and pessimism infect the whole chain from top to bottom. The occasional shred of good news is so eagerly promoted it just adds to the feeling of desperation.

    So to say that Australian papers are “structurally different” is irrelevant. The tsunami is rolling in and it doesn’t make a lot of difference whether your house is made of sticks or bricks.

  3. Niki Scevak

    @Mary thanks for leaving your thoughts and comments and I do appreciate them.

    There is no doubt I am a complete pessimist when it comes to the revenue growth prospects of newspapers of any kind in Australia.

    The ‘Quality Metros’ are right there in Fairfax. I do think you are right: there are plenty of nuances. But also zoom out: They hardly matter at all. Every newspaper is declining in double digit rates at the moment, which puts huge pressures on companies that have debt (they only have to fail 50% say to be completely wiped out).

    Also, I am not suggesting, I am presenting the reported financials of the newspaper companies. Are you saying that revenue at newspapers in Australia aren’t declining in the mid-teens year over year now?

  4. Mary Garden

    Hi Niki
    thanks for your response.
    We are just emerging from a global financial crisis, so in that context Australian newspapers are performing surprisingly well. And the Oz has increased its cover price twice in the last year.

    We don’t know what the future of newspapers will be, but Australian newspapers have been much more robust in circulation, ad revenue and readership than the US and the UK. Ditto N.Z.

    I’m totally amazed that so many people (and they are not all oldies or baby boomers) continue to read print newspapers when they are available for free on line. Most of Australia’s circ declines were before the emergent of the internet and they are attributable to a number of factors including the evening TV newscast, more people driving to work (rather than taking public transport) etc etc. Unlike the US and UK we have had no loss of titles, or newspapers moving to online editions. I just don’t buy the argument we are following their footsteps and are 1-15 years behind. When newspapers begin charging for access to online sites, then the picture may change.

    Readers are not deserting newspapers at anything approaching the rate of advertising customers. Dane Clausen in the “New directions”, Australian Journalism Review, 29 (2) has questioned the role of media buyers at advertising agencies for driving advertising to the internet despite high and solid numbers of consumers for newspapers and the unreliable and small numbers for websites. One could also question the role of scholars and commentators (at Crikey tc): have they also (unwittingly) influenced the migration of advertising?

    BTW There was a very interesting article in yesterday’s Oz on NZ newspapers, and how they are faring … but can’t find it at the moment. We are in the middle of a heat wave, so I’m going to hop into a cold bath with a beer to cool off, as even the air conditioner is not helping.

  5. Mary Garden

    That should have been 10-15 years, not 1-15. But now I see you say 18-24 months behind. No way.
    ‘demise of the Australian newspaper industry ‘ … this is not going to happen. Even Prof. Meyer, author of The Vanishing Newspaper does not actually believe newspapers are dying … although he is often misquoted as saying they are. Nature throws us curves and not straight lines, he said recently. He believes newspapers will change and hopefully the rubbish will be jettisoned. Some of the quality mainstream are a promising sign: for example, Meganomics , Jack the Insider & Pair of Ragged Claws.

  6. Niki Scevak

    Well I wouldn’t say an average of 15% year on year revenue decline ‘surprisingly well’ but we can agree to disagree on that.

    You mention circulation declines and that is an interesting observation. In the US at the start of the decline, circulation also wasn’t declining at a sharp rate. In fact it was flat just like Australia is now. But circulation is extremely fuzzy (free copies, copies in hotel lobbies and rooms, professional freebies etc.). Basically, after the newspapers were forced into huge cuts in their business they decided to stop printing the circulation fluffing copies and so circulation ‘declined’. They also had to jack up cover prices and that contributed too. You can see how the AFR did after raising their rates to $3 in the most recent results.

    I would not be at all surprised if the same plays out in Australia.

    Ultimately though, we hold different views (you are optimistic and I am pessimistic) about the prospects of the Australian newspaper issue. Neither of us is right because we are talking about the future.

Share this article with a friend

Just fill out the fields below and we'll send your friend a link to this article along with a message from you.

Your details

Your friend's details