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Jun 18, 2012

Fairfax cuts deep: papers to tabloids, 1900 staff axed

Fairfax Media will move The Sydney Morning Herald and The Age to a tabloid and sack 1900 staff -- including 380 journalists -- as part of a massive cost cutting drive.

Andrew Crook — Former <em>Crikey</em> Senior Journalist

Andrew Crook

Former Crikey Senior Journalist

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.

Additional research by Matthew Knott

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97 comments

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97 thoughts on “Fairfax cuts deep: papers to tabloids, 1900 staff axed

  1. ggm

    hmmm.

    “Fairfax management made three big mistakes: they didn’t charge online much earlier (public now used to free content); they failed to see how many people would abandon print for online and failed to capture classified rivers of gold online.”

    but, “public now used to free content” pre-dates ALL of the paywalls: this practice was established well before the walls went up, and I am not being told the News Paywall is an overwhelming success: either at making money, or protecting the brand.

    “failed to capture classified rivers of gold online”

    those rivers of gold demand freemium content. You cannot justify the $ charge to the admen without eyeballs, and you don’t get the eyeballs behind a paywall.

    I can’t make this bit add up: the paragraph contradicts itself.

    -G

  2. Ronson Dalby

    Time for the ABC to up the number and quality of its servers.

  3. Andrew McIntosh

    “(C)ompany also revealed it was turning The Age and The SMH into tabloids….”

    Good to see they’re making that official.

    Likeliest scenario – Gina The Hutt sweeps in, props it all up with her billions, gloats. Then it’s just a matter of privatising the ABC (forthcoming Abbott government) and that’s it for mainstream media in this country, goodnight.

  4. jonnowarren

    Ha ha, a paywall. To read the drivel they put up. Yeah sure. I don’t know how many people are willing to pay online for News Corp papers like the Herald Sun but I can’t imagine it’s that many, and given the standards at Fairfax have been inexorably approaching those at News Corp I can’t imagine many will want to pay for that. I certainly won’t.

    Constant spelling and grammatical errors, crap “news”, e.g one of todays “headlines” is about a “fight” between comedians Russell Brand and Graham Norton, others are recaps of last nights television shows – wow, hard hitting news that is. Then they reprint articles from overseas sources – The Guardian(UK) is free so why would I pay to read one of its articles in The Age a week or two later? (This happens regularly).

    Fairfax is headed for oblivion, or now that Gina is buying up, it really will become another version of a News Corp paper.

  5. Peter Ormonde

    Time to leave folks. Leave Gina an empty husk of a masthead and the parrot for editor in chief. The SMH is worthless without good journalism. Time for the extended holiday and a nice little farm somewhere.

  6. Sir Ian Chegsworth III

    “Fairfax management made three big mistakes: they didn’t charge online much earlier (public now used to free content)..dude we are all geniuses in retrospect.

  7. John

    How appropriate that the papers will now go tabloid-size. The website has been tabloid in approach since its inception.

  8. gdt

    It’s not clear those strategies would have worked.

    Consider that real estate advertising has been moving towards disintermediation of listings, with the large real estate chains like Century21 simply running their own websites.

    What the SMH hasn’t done very well is to use its content to drive advertising. Take car sales, where viewers want advice as much as they want to see listings. The Fairfax effort is pretty half-hearted. The real threat to all the operators of those sites is the motoring service/lobby using their huge historical content, knowledge and on-the-ground presence (eg, pay us to inspect your car and we’ll throw in access to our reviews archive, reliabliity database, etc). So far the papers have benefited from those organisations’ absence.

    You shouldn’t talk about the SMH as if it were one person. I am very sure there are people in Fairfax who understood what needed to be done well before the rest of newspapers.

    You shouldn’t assume that a model which works for a high-reputation paper in a country with no effective public broadcaster will work in Australia.

    My criticism of Fairfax online is it’s failure to engage. It has no hyper-local content, rather the websites are very focussed along their paper mastheads. The comments don’t eludicate, but make the worst of talkback radio look intelligent. The content is arranged to optimise webhits rather than optimise engagement. There is no user-contributed content of value.

  9. ggm

    berliner is not tabloid. not all small papers are tabloid. having said which, I think about all fairfax has left in the chest IS the chest: page-3 might boost sales. I can’t see their journalism doing it..

  10. ggm

    what they need is somebody smart, yea, an academic. Maybe somebody like Fred Hilmer. Or Warwick. I say bring back Warwick..

    sorry… too much coffee..

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