Pagemasters — the outsourced “sub-hub” for publications including The Age and The Sydney Morning Herald — has been told by Fairfax its services are no longer required, a further sign the business model is in trouble. Yet the company has dumped a deal that would have fast-tracked a move into Asia, accessing low-cost production in Bangkok and Phnom Penh.

The regional consortium that Pagemasters left standing at the altar is now working on a stand-alone model that may cruel the Australian company’s future, Crikey has learned.

The consortium is led by Catholic Asian news service executive director Mick Kelly, a Jesuit priest with decades of experience in media and communications. It includes Australian news veteran David Armstrong, who as well as being Chris Mitchell’s predecessor as editor-in-chief at The Australian has also edited Hong Kong’s South China Morning Post and who finished his full-time career running Thailand’s main English-language daily, the Bangkok Post.

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The consortium retains a company registered in Hong Kong called Pagemasters Asia and has extensive on-the-ground experience in Asia, where revenue opportunities in the fastest-growing English-speaking region in the world are growing.

Pagemasters, a wholly owned subsidiary of the Australia Associated Press, began as a custom publisher and continues to publish most of Australia’s racing guides, television listings and sport results, its chief executive Peter Atkinson told Crikey. More recently, it has built up a business as a provider of subediting and page layouts to the financially stricken newspaper industry. Atkinson says Pagemasters’ revenue will be flat this financial year compared with “steady growth” in 2012-13.

After initial discussions last year, the two groups met in Bangkok early this year. In late February they convened in Hong Kong with the intention of concluding discussions and agreeing to a deal. The initial approach was that Pagemasters would license its brand, its third-party publishing system and its payments model to the consortium, which also includes a number of other players who would take on executive roles in the new group.

At the Hong Kong meeting along with Atkinson, Kelly and Armstrong were AAP chief operating officer Bob Davies and lawyers for both sides. Pagemasters had already met and professed to be impressed with editor-to-be Ben O’Neill.

Pagemasters presented the consortium with a proposal more akin to a subsidiary arrangement, but after negotiations Kelly describes as “intense”, the two groups agreed the consortium would retain its independence, as well as agreeing on a pricing model for their services. Kelly and Armstrong walked away convinced they had a “handshake” deal. Days later they were shocked to receive an email from Atkinson calling off the deal but offering no reasons. It stated:

“While the board saw merit in this initiative, on balance it was agreed that the timing, circumstances and many details were not appropriate for such an ambitious undertaking.”

“The deal was with the wrong partner at the wrong time,” Atkinson told Crikey. “We have long had ambitions in Asia, long maintained some very good contacts.” He says the consortium tried to change the deal and dismisses UCA News as “only” an online business.

Kelly, who firmly believes Pagemasters reneged on agreed terms, told Crikey: “These guys are the Jennings of journalism, if you don’t take the pre-fab model you don’t get a deal. They are a classic example that some Australian companies are marked not for export. It’s an out-of-date business model that only works between Australia and New Zealand.”

Pagemasters’ main business remains in Australia and New Zealand, but it has a few deals in North America and the United Kingdom. The cost of operations and labour in Australia and New Zealand is significantly higher than in places like Thailand and Cambodia, which are potential competitors.

Kelly says there are increasing numbers of experienced journalists attracted to south-east Asia, many of whom have collected redundancies in an industry being savaged by job cuts and/or who have accessed their superannuation funds.

“Pagemasters appeared comfortable in Hong Kong, uncertain about Bangkok, and the thought of Phnom Penh seemed to scare them to pieces, such is their lack of understanding about Asia,” Kelly said.

Both parties now return to square one. Kelly says he and Armstrong will be in Australia next month with the aim of signing up “anchor tenants” for the consortium’s business.

“They have actually done us a favour — their lack of flexibility showed us they are a company we don’t want to do business with,” Kelly said, adding the consortium is still considering using the name Pagemasters Asia despite Atkinson’s email requesting that the consortium not use it.

While Atkinson remains confident about his company’s experience and brand, he will soon learn whether his board’s decision was the right move or whether it has, perhaps unintentionally, picked a fight with the wrong people.

*Disclosure: the author writes occasional commentary for UCANews, commissioned by editor-in-chief Phil Bader, but has no role or financial interest in the subediting consortium