Why newsagents need to cut home delivery costs and look for new revenue opportunities.
I’ve had some time to digest the Fairfax half yearly results and comments by some reading this site and what the share some more observations.
Fairfax interests me because it is Australia’s largest locally owned newspaper publisher; their deliberations from recent years have been exposed through the recent book by former CEO Fred Hilmer; and, because of their considerable success at monetising their brand online.
THE AGE
Circulation Monday to Friday is up 4.5%; Saturday down 3% and Sunday up 11%. Circulation income is up 0.3% – interesting compared to the circulation numbers. I’ve mentioned problems with Saturday sales here before for The Age and the Sydney Morning Herald. Over the counter feedback is that the papers are too big for what people want in a weekend paper now. But I’m sure Fairfax have their own more scientific research on this. Whatever the reason, action is needed.
The difference in circulation revenue compared to actual circulation supports my concerns for newsagents who provide home delivery services. The pressure will be on them to take a ‘pay’ cut and deliver for less. They can’t afford to do this yet can’t afford not to, so they will – an economic consequence for newsagents of deregulation
DIGITAL
Revenue is up 43.7% and profit up 41.8%. Take a look at Digital profit contribution over the last three years
While these are exceptional numbers, they are not sufficient to replace the loss of advertising revenue if newspaper sales and ad revenue fall as has happened in the US. Their decision to promote more aggressively into other markets such as Adelaide where they do not publish a daily should boost revenue.
The pressure old media companies such as Fairfax is under was the subject of this story in The Australia last Thursday.
MASTHEAD VALUE
For months I have complained here about Fairfax newspapers, specifically The Age and the Sydney Morning Herald, abusing their masthead with post-it style stuck on ads. The accounts report intangibles representing 123% of net assets. Most of this would be mastheads. So, why what an ad on top of the masthead? The longer term damage is not worth the short-lived thrill from ad revenue.
I am sure that the half year results unlock more valuable information than I have covered here.
Key messages for newsagents are that Fairfax is pushing hard to replace old (newspaper) revenue with new (online) revenue and that while they do this they will be looking to cut costs associated with old media products. Newsagents need to make similar adjustments in their businesses.
It bothers me that newsagents are not being fed current information about these challenges.