Fairfax flags its digital-only future. In a trading update presented to a finance conference in Sydney today, Fairfax Media CEO Greg Hywood revealed the company is preparing to abandon much of its direct print involvement for a full-time digital model. For the first time he flagged Fairfax is looking at cutting print editions during the week and moving to a 24/7 digital model (which the likes of the Financial Times, New York Times and Wall Street Journal are rapidly embracing).
Hywood told the conference the company’s metropolitan publishing titles (The Sydney Morning Herald, The Age and The Australian Financial Review) will move to the new publishing model in future years in a “future sustainable, profitable publishing model”. He didn’t put a date on it, but it would seem from his speech that it will be sooner than later. Perhaps the current job cuts of around 120 journalists jobs at the metro papers is the first hint of this move.
He said Fairfax is foreseeing a possible outcome where the revenue model for the SMH and Age is “reset to focus on the 65% of advertising revenue which is generated on the weekend”. The AFR print edition would “likely focus on its weekday revenue strength”, he added. This is also the model that the Independent in Britain adopted after its Monday-Friday and Sunday editions stopped being printed at the end of March. In a statement to the ASX which carried highlights of his conference speech, Hywood warned:
“It should surprise no one, and certainly not us, that the seven-day-a-week publishing model will eventually give way to weekend-only or more targeted printing for most publishers … Quite simply it is likely that one day, the viability for newspapers on current trends will run out. It isn’t going to happen overnight — but eventually it will.
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“People have accused us of being too pessimistic about print — perhaps it’s more a case of being too honest for their liking. We prefer telling it like it is and planning for it.”
The timing of the shift, he said, would depend on the view Fairfax forms about trends in consumer and advertiser behaviour:
“All the signs indicate it is inevitable — although some time away. We understand that people are focused on Metro publishing — what we have outlined today is a very frank, transparent view of the potential future.”
— Glenn Dyer
Red in the News … A day after 21st Century Fox produced a solid March quarter result, driven by the surge in interest and advertising revenue for Fox News and other cable channels, the Murdoch clan’s other company, News Corp, again disappointed with a weak quarterly result. It was made worse by a larger-than-expected 7.3% slide in quarterly revenue, which flowed from another weak performance by its biggest business: news and information services.
As expected, the company reported a loss from the US$280 million settlement earlier this year of a lingering dispute in its News America supermarkets business. Ignoring that one-off charge, earnings still fell, thanks to weaker returns from that supermarkets business and book publisher HarperCollins. That offset improved returns from newspapers in the United States and Australia, but continuing weakness in the United Kingdom where revenues remain under pressure (as the Trinity Mirror update confirmed overnight).
Including the one-off charge, News Corp reported a net loss of US$149 million in the three months to March 31, compared with a profit of US$23 million a year earlier. Driving the 7.3% slide in revenues to US$1.89 billion from US$2.04 billion was a 9.7% drop in advertising revenue to US$816 million, while circulation and subscription revenue dropped 10.9% to US$343 million. “Currency fluctuations” reduced revenue by about US$72 million in the quarter. Advertising revenues in the News and Information business slid 15%, News said:
“Circulation and subscription revenues declined 4%, and would have been flat excluding the impact of $US19 million from negative foreign currency fluctuations, as growth in paid digital subscribers at The Wall Street Journal and in Australia, higher subscription pricing and selected cover price increases in the U.K. and Australia offset print volume declines and the impact from the change in the digital strategy at The Sun.”
— Glenn Dyer
… while Foxtel treads water. Despite the calm marketing assurance from Foxtel about platforms such as Presto, a new service offering limited English Premier League coverage (out this morning), the buzz around Game of Thrones and the higher audiences for the NRL with the first season of shared coverage of all games with the Nine Network, the pay TV business 50% controlled by News Corp hit rough seas in the three months to March 31.
Foxtel’s earnings came under pressure, dipping in Australian dollar terms due to higher marketing costs and programming for the Presto streaming video service. News said Foxtel’s operating income for the three months to March 31 was US$85 million, down from US$88 million for the same period of 2014-15.
Those higher costs were seen in a soaring churn rate in the quarter in subscriber numbers. In fact, in stark contrast to the performance in the December quarter and half year, Foxtel had an alarming 40% jump in the rate of churn (that is replacing departing subscribers). News said:
“In the quarter, cable and satellite churn increased to 14.3% from 10.9% in the prior year due to some customer departures following the introduction of no-contract offers in the first half of fiscal 2016. Fiscal 2016 year-to-date churn was relatively flat compared to the prior year.
“Foxtel’s total closing subscribers were approximately 2.9 million as of March 31, 2016, with year-over-year growth driven by cable and satellite subscribers, which increased approximately 6% compared to the prior year period, and higher Presto subscribers.”
Once again News did not break down the number of pay TV subscribers (who usually pay more) or the number of people with monthly contracts (not the free first 30-day offer) to Presto. That 2.9 million figure for total subscribers to Foxtel has not changed since June 30, when it was “over 2.8 million”, according to the News Corp’s filings. That indicates the pay TV giant is running up and down on the spot and has been just replacing subscribers as they finish their contracts and “cut the cord”.
News said that on a US accounting basis, Foxtel’s revenues, for the three months to March 31, fell US$42 million to US$578 million from US$620 million in the prior year period. — Glenn Dyer
Dining in with the NY Times. The New York Times is still bleeding money, despite solid growth in its digital subscriber base. Like newspapers that sell real estate and newspapers that become auction houses, it’s trying to diversify in the hopes of finding some desperately needed cash. According to Quartz, the Times is going into the food delivery business:
“This summer, the Times will begin selling ready-to-cook ingredients for recipes on its cooking site through a partnership with Chef’d, a Los Angeles-based meal kit startup. The Times is licensing select recipes, curated by food editor Sam Sifton, to Chef’d, which will handle all of the actual ingredients, deliveries, and other logistics. Chef’d and the Times will share revenue from any sales, though both declined to comment on details of the split.”
Front page of the day. The very last edition of British paper New Day after Trinity Mirror announced it would close the publication — just nine weeks after launch …