Jan 9, 2017

How getting rid of the weekday SMH and Age papers could kill the AFR

The economics of printing the Financial Review five days a week make a lot less sense if it can't piggyback off the SMH and Age.

Glenn Dyer — <em>Crikey</em> business and media commentator

Glenn Dyer

Crikey business and media commentator

Fairfax can’t kill the weekday Sydney Morning Herald and Age without undermining the chances of The Australian Financial Review surviving as an independent Monday-to-Friday paper. In recent weeks, the problems of distributing the AFR as the sole major daily paper in the Fairfax stable have emerged as a key hurdle in discussions about how to move away from weekday printing for the metros, according to well-placed sources. If a solution is not found, any reduction in the printing schedules of the SMH and Age could have dire implications for the Fin. Its paper circulation is effectively subsidised by the production and distribution of the two metro papers. Without that underwriting, the AFR's profitability is far reduced. With Fairfax said to want to keep weekend editions of The Age and the SMH, it would be cheaper for the company to close the Monday-to-Friday editions of the AFR and continue with the loss-making weekend edition, which would still have most of its production and distribution costs covered. Internal estimates suggest the distribution costs account for 30% to 40% of the AFR’s daily production costs on a standalone basis. Without the internal subsidy, the AFR could have to be closed, or sold. For months, Fairfax has been looking at ceasing printing of its weekday editions of its two metro papers. This would leave Fairfax as a primarily digital media network for most of the week. Saved would be the weekday editions, which are rich in property advertising and make most of the company's print ad revenue. The move was first revealed in early 2016 by CEO Greg Hywood, then refined a little in May when the company revamped its structure to break out the Domain property operation as a separate (and, it was hoped, main) focus for investors. Hywood said last year on several occasions that the company had not yet made a decision on when to halt weekday printing, although it was under review. If printing stopped, he said, the company’s journalistic approach would not be affected.“Our readers have never been hungrier for good-quality news reporting,” Hywood said. In a May presentation, he expanded:
"It is worth remembering where we were four years ago -- facing enormous structural change -- the sort of structural change that threatened the entire industry. A decision then to move out of Metro publishing would have cost the business an unmanageable $450 million. "Because of the work that we have done over the past four years a similar decision now would cost approximately $150 million, a manageable figure that will continue to fall over time as we take further structural costs out of the business. But moving out of Metro publishing is not a decision we need to make, nor should we. "We have a profitable publishing business -- and we know there is a profitable publishing future with a different mix of digital and print than is currently the case. "Despite the costs we have taken out, our audiences have never been larger and our reputation for quality never higher, as reflected in our award-winning quality journalism."
That is the core of Fairfax argument for its radical move. But it can’t go down that route without crushing the small, though lucrative, print circulation of the Financial Review completely. Distribution of the financial paper is down to 44,000 print copies a day. At the moment the AFR is printed before The Age and SMH and is carried around the country to direct subscribers and newsagencies with those papers on planes and or trucks. The Age and SMH have much higher print circulations, and the AFR piggybacks off their distribution channels. If they no longer deliver daily, it will be hard for the AFR to be circulated cheaply. And then there are the production costs -- the AFR is prepared and printed first in Sydney, Melbourne and Canberra (where The Canberra Times is printed first). Its production costs are thus subsidised to an extent. There are options for Fairfax. It could go to the rival News Corp, which is still wedded to daily newspaper distribution, and do a joint distribution deal. But doing this for just the AFR would be expensive, and it would force the group to endure some humiliation at the hands of the media writers at The Australian. But if nothing is done the weekday AFR is doomed --and sooner rather than later, no matter the spin from Hywood and his executives.

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5 thoughts on “How getting rid of the weekday SMH and Age papers could kill the AFR

  1. AR

    Sorry but, apart from the comix & puzzles, the dead tree SMH (and I assume, therefore, the Age) has no function.

  2. Gavin Moodie

    Why would Fairfax be anxious to keep the Australian Financial Review as an independent Monday-to-Friday paper if it needs so much subsidy?

  3. Xoanon

    You wrote: “Saved would be the weekday editions”.

    I think you mean: “Saved would be the weekend editions”.

  4. John Quiggin

    Am I missing something? Why not convert the AFR to digital only as well?

    1. Gavin Moodie

      Does the Australian Financial Review carry a lot of print ads, or p’haps its readers are less ‘digital’ than the rest of us?

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