Fairfax Media has reported a whopping full year loss of $350m for the financial tear 2008/09, and has indicated it is wanting to fall in with Rupert Murdoch’s plan to charge readers for online content.
The full year loss is primarily derived from a $513m write down in the mastheads and the value of licenses, as well as $85.7m associated with the redundancy and restructuring costs - it shed 1090 staff through the year. However underlying net profit for Fairfax still fell by 40 per cent to $226.7m on a revenue that was down by 10 per cent to $2.6bnChief executive Brian McCarthy is currently waiting for News Ltd CEO John Hartigan to give him a call to discuss the online options in Australia, a call that probably won’t be too long in coming. Already Rupert Murdoch’s US digital chief is holding talks with the biggest newspapers in the States, including the Washington Post, New York Times, the Hearst and Tribune groups, to discussing online charging.
Murdoch is already successfully operating the Wall Street Journal on a pay basis for the online edition, but the big question is whether ordinary consumers will pay for tabloids and broadsheets online, when they have been getting them free for the past decade.
Whether the ACCC will think it has an interest in the discussions between Fairfax and News is not yet known. The imperative for online charges comes as newspaper circulation continues to decline, although not dramatically, and new content delivery options become available. The prime example are the new generation of smart phones – the Apple iPhone and the like – which provide a portable reading option.
Combined with this is the rapidly developing software for content personalisation, where the stories sent to the reader are those that the systems believe are the ones you would be interested in from your reading history, and it is easy to see why newspaper bosses believe that they must move to online charging.
Rupert Murdoch himself recently stated that newspapers will be ‘finished’ within ten years in their current form, and certainly if the classifieds and display ads continue migrating to the internet the business model for printed newspapers will not be as easy to justify as they have been. However Hartigan is on record as stating that the printed newspaper will be around for the foreseeable future.
Ad revenue at Fairfax, which includes The Age, Sydney Morning Herald, Australian Financial Review, various regional and suburban newspapers, radio stations and online sites, has been flatlining since May, following a period of constant decrease. McCarthy said it was the newspaper and printing divisions that had been responsible for most of the $300m revenue loss.
McCarthy says the company is well positioned to meet increased demand in ad spends, but of course no-one knows when, or indeed if, that time will come again for the newspaper side of the business. Of the major parts of the Fairfax business it was the Sydney and Melbourne metro newspapers that recorded the biggest losses, with EBITDA plummeting by 46 per cent to $96.9m. Printing lost 18.7 per cent to $58.1m, while online revenue slipped by less than one per cent to $108.7m.
