Jul 21, 2014

Fairfax ‘weathered the storm’, says Hywood, but more cuts possible

The Fairfax CEO had no patience for critics at a Melbourne Press Club appearance last week, telling those gathered that his company had "weathered the storm".

Myriam Robin — Media Reporter

Myriam Robin

Media Reporter

Fairfax chief executive Greg Hywood has slammed the "conga line of hysteria" in recent books about Fairfax's decline. Speaking at the Melbourne Press Club on Friday, the former journalist outlined a new book he thought should be written, about how the plan he and his executives initiated is working to save the 185-year-old newspaper company, claiming they had "weathered the storm and survived". Fairfax's new business model of diversified revenue sources following the precipitous decline of classified advertising is "working", says Hywood. "Where's the rule book that says journalism has to be supported by classified advertising?" he asked. Between its burgeoning events division, its radio stations and real estate portal Domain, where Hywood hinted a major announcement was imminent, Fairfax is improving its financial position. And the metropolitan newspapers, he claims, are increasing their profitability. "They provide strong cash flows [and] are more profitable now ... than a few years ago." Fairfax's circulations have been rapidly declining -- which Hywood says is part of a deliberate strategy to boost  per-paper profitability. Included in this strategy of moving away from a reliance on print has been the sale of the Chullora and Tullamarine printing plants, which were state-of-the-art facilities established with much fanfare in the early 2000s just before the internet began to seriously disrupt the print business model. Hywood says the sale of these plants is saving the company $45 million a year in running costs, with printing done more cheaply in regional centres. Last week, Allan Gray CEO Simon Marais told The Australian he believed Fairfax could be at the end of its life cycle and could be broken up, with the newspapers a major casualty. Hywood responded that Marais, whose company is Fairfax's second-largest shareholder, had actually done well out of Fairfax. "Simon is a long-standing and very successful investor in Fairfax ... I congratulate him for his foresight in investing [with the company]." Both Fairfax and News Corp conducted large redundancy rounds in 2012, but Fairfax's layoffs were far more public. "I will not apologise for giving people a fair and honest warning of what had to occur", Hywood said. He says reporters left Fairfax at half the rate they've left everywhere else, and that the brunt of downsizing was borne by management. As for the company's swelling ranks of cub reporters? "The influx of new people and generational change has been good for Fairfax." In May, Fairfax announced plans to fire 75% of its highly respected photography pool, leaving far fewer photographers working across The Sydney Morning Herald, The Age and The Canberra Times. The redundancies have now been completed, and asked how Fairfax will maintain attractive papers with far less original photography, Hywood says the papers are still as attractive as ever. "We've always outsourced photography", he said, citing the sports pages, where the paper had previously relied on agencies. "Our view is that the reader wants information -- they want journalism. Reporters are a priority." It's not the end of this sort of cost-cutting, Hywood hinted, when asked how many more jobs would be lost at the company. "Change never stops." Indeed, most analysts expect the company to keep finding areas to trim. But every series of redundancies comes with controversy over quality control and the loss of reporting experience. Fairfax is currently considering a report from management consultancy Bain & Co that reportedly makes recommendations such as removing all subediting and closing down many of Fairfax's regional papers. Hywood says he has a responsibility to consider all options, and that he won't pick the most radical options to implement, but the most sensible. "I want an organisation that throws it all on the table. I want an organisation that doesn't hide behind hope that it might get better in the future ... What the people at Fairfax want is leadership." Asked to comment on The Australian's birthday celebrations, Hywood appeared to damn the competitor with faint praise. "Like all newspapers, it makes positive and negative contributions. I read and respected it in the 1970s, when I got into journalism."

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2 thoughts on “Fairfax ‘weathered the storm’, says Hywood, but more cuts possible

  1. Scott

    Greg Hywood can spin all he likes, but at the end of the day, the annual reports don’t lie.

    Retained profits in 2004: 679,817,000
    Reatined profits in 2013: (2,867,387,000)

    Thats a $3.5 billion loss of value over 9 years..the vast majority of loss occuring in the last 2 years.

    You can’t expect investors to just shake that sort of stuff off. Fairfax will be under the pump for a while yet.

  2. AR

    Says Hywood. “Where’s the rule book that says journalism has to be supported by classified advertising?
    It is called sales and is intrinsic to the raison d’etre of newspaper – to get people to read the stories they have to be worth reading – made difficult by ridding yourself of unnecessary appendages like journos – so if you ain’t selling to large numbers, then you ain’t selling to advertisers who want to reach those masses.QED.
    All else is vanity & waffle

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