Fairfax Media will slice The Sydney Morning Herald and The Age to tabloid-size and sack 1900 staff?—?including about 380 editorial positions?—?as part of a massive cost-cutting drive to save the media giant from corporate oblivion.
In the bombshell revelation delivered via a technically plagued internal staff webcast this morning, CEO Greg Hywood said 20% of the cuts would come from editorial, 20% from printing and the remainder from unspecified other activities.
In a separate ASX announcement, the company revealed it was turning The Age and The SMH into tabloids?—?or “compacts” as it describes it?—?as part of its $170 million, three-year “Fairfax of the Future” strategy. The first cut-down editions will start in March next year.
Hywood also announced that digital paywalled subscriptions will be introduced to metro masthead websites on a “metered” basis?—?apparently similar to The New York Times, which gives non-subscribers a certain number of articles for free?—?with details due by the end of 2012. The ailing firm will also press ahead with its “digital first” editorial model, forcing hacks to file multiple times for online during the day.
The company’s Tullamarine and Chullora printing presses will close by June 2014, saving the company $44 million annually. Tullamarine opened to much fanfare in 2003; Chullora employs 230 permanent full-time staff and 140 casuals. The decision raises the prospect that The Age will be printed at regional facilities like Ballarat and shipped to the Melbourne CBD early each morning.
The total savings from the dual moves will come in at $235 million annually with one-off costs (mostly redundancies) of $248 million after land sales are factored in.
Hywood, a former Australian Financial Review cadet, said he would be booking a “substantial” number of redundancies in the next 60 to 90 days.
The media giant currently employs 800 metropolitan journalists across The Age, The Herald, The Canberra Times and its Brisbane and Perth web portals. In an internal email to staff, obtained by Crikey, metro chief Jack Matthews said 300 staff would be excised from the metro division?—?150 from editorial.The Age’s house committee will meet at midday today to mull a response.
The Financial Review Group, which employs 270 people at titles including The AFR and BRW, will slash 10% of its headcount over the next three months.
“While it will be hard, it will change the business for the better. I urge people to think twice before challenging the changes,” Hywood told staff, adding it is “the greatest chance to be a profitable or sustainable business in the future”.
He said the strategy was about bringing the fixed cost base down and relieving pressure on revenues. The company was “carrying a cost base that is way over what you need”.
In his email, Jack Matthews was more sanguine, saying “the decisions underpinning these changes are difficult, but … we simply cannot shy away from them”.
“Not only are they a response to significant revenue pressures brought about by the broader economic environment, but also sweeping structural changes that challenge the economics of our?—?and virtually all other?—?traditional publishing businesses. It is important to reiterate that the challenges we face are not unique to Fairfax,” he wrote.
“While we have previously announced a range of strategic initiatives to achieve efficiencies and develop new revenue streams, we need to do more to respond to the pace of structural change and the depth of the current cyclical slump in advertising revenue.”
Earlier this morning, Fairfax said it had reaped $166 million by selling off 15% of New Zealand auction site TradeMe. It will continue to hold a majority 51% stake in the company. Hywood also revealed Fairfax had considered spinning off the metro businesses, as recommended by some analysts and 9% shareholder Allan Gray.
Analyst Peter Cox told Crikey it was the right thing to do, but came 10 years too late. “It’s the correct action but it’s too late,” he said. “The board have been asleep at the wheel for the past five to 10 years.
“Fairfax management made three big mistakes: they didn’t charge online much earlier (the public are now used to free content); they failed to see how many people would abandon print for online and they failed to capture classified rivers of gold online.”
The metered paywall, Cox said, “was purely a survival technique to get costs below revenue. Of course, this will help Fairfax survive for the time being but it doesn’t mean the company has a future.”
Fairfax shares jumped 4% at the open to 63.5 cents before slipping to 62 cents as the news sunk in. The company had been trading for months at record lows, having lost 15% of its value this year and 85% of its value over the past five years.
Mining entrepreneur Gina Rinehart last week upped her stake in the company to 18% and is pushing for a board seat for herself and her close adviser, fast food king Jack Cowin.
This article first appeared on Crikey.
