Media giant Fairfax has signalled its Australian publishing and printing division’s newspaper costs, which account for 20 per cent of its total costs, are slated to fall between 5 per cent and 5.5 per cent during the 2009 financial year.
With Fairfax’s costs rising 1.4 per cent to $2.09bn in 2007-08, which the company attributed to rising salary costs, combined with weaker advertising revenue from its major newspapers, the company was expected to introduce a round of cost cutting. While chief executive David Kirk said there were no big cost savings to announce on the day of the company's results, the next day he sacked 550 staff, a third of them journalists as part of a drive to save $50m.
Kirk who is in a strong position to negotiate on paper costs as in one of his previous roles he was the managing director of paper manufacture Norske Skog Australia, which supplies paper to Fairfax, says this year would see a continuation of a strong management focus on cost.
Also, the company says its plan to trim the size of The Sydney Morning Herald and The Age, was not part of this year’s cost control programme. The move would have lifted Fairfax’s short-term costs because of the need to reconfigure printing centres to handle the new size, but reduced its long-term costs by using less paper. However the project is thought to be more complex than was initially envisaged, and so while not killed off is very much on the back burner.
Kirk says, “There are always opportunities to take more costs out, but that is the normal course of business", adding, "Further costs savings will be needed.”
The Australian newspapers business makes up 61 per cent of Fairfax's equity value, with New Zealand newspapers accounting for 13 per cent, with Fairfax digital now contributing 12 per cent. Radio and TV are still minor parts of the empire at four and two per cent respectively.
