Media’s malaise: Fairfax and News swing the axe and search for the right model

The business model for mass media is not dead; it is just changing faster than the incumbent dominant publishers, Fairfax and News, are able to respond, according to experts.


 In the days when revenue was nostalgically referred to as the Rivers of Gold, newspapers controlled ads for jobs, cars and real estate. That business model, it is universally agreed, is over.

Having acted too slowly when the coffers were full, the big players have little choice now but to slash jobs and cut costs, Sydney University’s senior lecturer in media, Dr Fiona Martin, told LeadingCompany today.

Fairfax today announced that 56 full-time positions would go offshore to New Zealand, with 66 people facing redundancies. News is negotiating the introduction of seven-day rosters with the journalists union, the Media Entertainment and Arts Alliance, and there are reports that at least 400 jobs will be lost, possibly many more. Both companies have flagged major announcements in the next few days.

“They are cutting jobs to save money and invest elsewhere, but it is a very bad idea to lose valuable skilled editorial workers,” Martin says. “Better to train them to work together across all the platforms.”

Martin points out that some modern mass media is thriving. “There are global international news brands like Al Jazeera International, CNN, BBC Worldwide and The Economist that are all doing fine,” she says. “You see some regional media models developing around trade and culture blocks, such as bskyb. Al Jazeera came out of a regional model, the Middle East, and it was doing innovative and interesting journalism, and then moved to a global cosmopolitan model offering a perspective we didn’t see in the West.”

The problem lies at the highest levels, says media analyst, Peter Cox. “The boards lack media experience, certainly in the case of Fairfax,” he says. “The board doesn’t have the skills to develop the media of the future, the models for it. Circulation continues to drop, and subscriptions fall, and what do they do about it? Appoint another accountant!”

Cox is referring to the appointment on May 23 of James Millar, the former CEO of big four accounting firm, Ernst & Young.

The appointment of Millar comes at a time when Fairfax’s biggest shareholder, mining mogul Gina Rinehart, has been pressing for a board seat, and is publicly criticising the board and its chair, Roger Corbett. Rinehart released a statement yesterday raising questions about how the current chairmanship could have “presided over both an approximate 60% loss in sharemarket value and continuous loss of circulation of all (its) major mastheads, which in turn (affects) revenue.”

The failure of Fairfax and News to quickly adapt their companies to online distribution is threatening the mass media model that has underpinned scrutiny of politics, business and democracy. Peter Lewis, a director at research and strategy company, Essential Media Communications, conducted research for the MEAA on the future role of journalists. “There is strong public support for media, but when you ask how many are prepared to pay for it, it is very low. It is valued, but not financially,” he tells LeadingCompany.

Cox says the Fairfax board does not have the skills to model a financial future for its media operations. “The judgement in model building are in the assumptions, about the number of readers going online and what the advertisers are going to pay. They are the really important issues. I believe these are board level decisions, not management.”

Cox says the big publishers should appoint “people like myself” to their boards. “They need specialist analysts and economists who have been looking at these issues for a long time, and are able to create models and put forward whether they are feasible or not. I was the first one to raise the issue that the media model was broken in 1998 in an address at the PANPA [Pacific Area Newspaper Publishers’ Association] awards.” (PANPA is now called Newspaper Works.)

The first opportunity to adapt was over a decade ago in 1999, says Martin, when the dotcom boom demonstrated the internet’s broad appeal. There was a second chance in 2006, when the social media “broke”. “If not in 1999, why not then?” she asks.

The problem is one of management culture. “The board is not alone in being old media-minded people who haven’t spent enough time at the coal face of new media, and assume they can change the culture with things like a few apps,” Martin says. “But the change is across the entire business; the ways that journalists work is different.”

Paul Murphy, the director of media with the MEAA, says lack of training means journalists cannot contribute stories across the print and online platforms. He says the only “radical change” contemplated by publishers are job cuts. “We need smart decisions to be made. The Fairfax decision to outsource its sub-editing function to PageMasters was not very smart, because PageMasters cannot sub digital copy, the growing part of the business.”

The new model is “timely, specialist” media, says Martin. “I think it was Google’s chief economist who said, ‘There is no money in general news’. Australia is at cutting edge of the ‘attention economy’, which says that with our information rich environment, longer working hours and flexibility at work, we have less discretionary time to consume media.”

“We are choosey about what we consume. In the past, if we were in Sydney, we read the Sydney Morning Herald, or the Daily Telegraph. Now we are looking for information, which is why Google has been so successful.


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