Fairfax CEO Greg Hywood yesterday delivered a presentation at the Macquarie Australia Conference in Sydney. The content is available online through the ASX website.
Below are some excerpts from the published material followed by my comments:
Over the last four years we have reset the 185-year-old Fairfax. We are now a modern media business that is diversified and ready, willing and able to be part of the future.
The strategic priorities and opportunities for each of our businesses feed into our Group strategy, which is to ‘transform, grow and invest’ to drive long-term performance.
We have delivered a 26% reduction in annualised publishing costs (that is $400 million).
At the same time, our digital and print audiences have never been larger, reaching 12.9 million Australians and 3.2 million New Zealanders, as well as 2.2 million radio listeners.
While it could be tempting for newsagents to be critical here from their perspective, I think a more helpful take-away is the focus on cutting costs and pursuing revenue from other sources. These are mission critical moves for newsagents. Newsagents need to set their 140 year old businesses (that’s how old the channel is) on a similar path – cutting costs and pursuing other revenue sources. Many of us have been doing this for years now.
Over the last four years, we have reshaped all aspects of the way we operate. We have built a stronger, more diversified, digitally-driven business that is leaner and more agile.
We have never shied away from the fact that we are on a print to digital journey. We have prepared our business to minimise
Newsagents need to be on a similar journey, replacing traffic for old products with traffic for new, replacing traffic for agency products with traffic for new.
The reality of media today can be summarised in four points:
1. Consumers have wholeheartedly embraced digital, as reflected by the rising use of search engines, social media as well as going online for news and information. Print is steadily declining but still attracting valuable audiences. Already around 70% of our Metro audiences reach us via digital means.
2. Print advertising and circulation revenue continue to decline. Digital display advertising and circulation alone cannot provide an offset.
3. Mass circulation print products involve a high level of fixed cost, notwithstanding the reduction and variabilisation we have achieved over the past four years.
4. Technology and systems costs to support legacy print and digital infrastructure have grown over the years, creating complex and expensive support requirements.
In short, failure to address the old – the traditional model – is not an option.
These are points we need to read again and again. In short, the points come back to: spend less on the parts of your business that are shrinking, chase new traffic, not acting is not an option.
It should surprise no one, and certainly not us, that the seven-day-a-week publishing model will eventually give way to weekend-only or more targeted printing for most publishers. We are already seeing this happening offshore.
Quite simply it is likely that one day, the viability for newspapers on current trends will run out. It isn’t going to happen overnight – but eventually it will.
The question for newsagents is: are you ready for this? Are you ready for the decline in daily traffic that will result from the end to the daily newspaper? Are you ready to no longer be the habit-based retail stop-off? The ramifications beyond newspaper sales could be extraordinary.
Material reduction in printing and distribution costs resulting from significant reduction in newspaper publishing frequency. We expect increased industry cooperation on printing and distribution.
Distribution newsagents take note.
This slide on page 19 of the presentation document is telling. There is no denying the trend re print circulation reported by PWC and included in the presentation by Fairfax – and seen in our own benchmark studies.
I like that Fairfax is transparent about what it is doing and why and that it has been for some years. Presentations like the one to which I refer above can inform newsagents for their own plans, and this is what I hope happens.
Sure, it would be easy for newsagents to complain about Fairfax for a various reasons. I think time and energy would be better spent learning from their plans and considering this information when making our own plans for our future.
If you have not significantly changed your newsagency in recent years, what should this Fairfax presentation encourage you to do:
- Cut operating costs relating to print media products. This means less floorspace but not necessarily less range. It also means driving supplier efficiency.
- Chase new traffic. This means finding new products to attract people in your area who do not shop with your today, promoting these products outside your business and creating an in-store experience that is contrary to a newsagency in-store experience.
- Change your management practices. You no longer own and operate a newsagency.
- Cut off dead wood. Stock, people expenses – anything not helping you pursue the goals of your business need to be eliminated, urgently.
- Have fun. Change is an opportunity for excellent fun in-store.
Those who have been in pursuit of change and acting on it accordingly will be the winners.
Those that stand still will fade away.
Just take a look at the population changes, especially in your area, the technology that the younger ones are born with and how you can adapt to that for your business.
I would add that Fairfax would not be the only one experiencing this ground shift.
To presume that the reduction or even demise of some of the papers we sell today that draw foot traffic will surely be hit the hardest.
So, Fairfax has reduced annual costs by 26% and has a bigger audience, but overall revenues are still falling.
The graph says everything. Print revenues are down about 35% in the last 4 years and are forecast to fall 60% over the next 4 years.
Expect freebies in the major cities and complete absence of major titles outside the cities in the very near future .. this year or next ?!?
All,
The timing of this announcement is interesting.
Only this week News held a meeting for all SA Distributors.
At a rough guess 15% were there. (Does that say anything about the people in our industry?)
News representatives (one from Sydney) were talking about we can value add to our existing Distribution business by using our current under utilized warehouse’s and vehicles.
I think it was clear, they (News) want as a viable partner in the Distribution of their products.
What will come from further discussions? I’m not sure, but at least we are talking – that’s a step in the right direction.
John
John,
The attendance number may reflect the lack of value such meetings tend to provide.
This pitch from News is nothing new – newsagents have had idle infrastructure for decades. Many newsagents have tried to use it but it is difficult with other better structured and researched local, state and national trucking operations up and running.
News needs newsagents as they offer News the only viable opportunity for delivering newspapers for less than a fair wage. The better option for newsagents is to negotiate a fee for service that is commercial. However, that fee would not be suitable to News.
Mark,
I agree.
John
Reading AFR today . Interesting that Fairfax’s business realignment and cost cutting has reduced the cost of closing metropolitan titles from $450m to around $150m. Sums up where they are going.
Cannot quote exact wording, we sold out.
I’d be interested to hear from other distribution newsagents their thoughts/plans on when the weekday SMH and AGE no longer is.
No date has been given, what if this happens in the next 12 months?
The way I see it is losing half of our home delivered papers plus supply to subagents Monday to Friday will put us back in the same position we were in before we took on other areas and made distribution a profitable part of our business.
Being unprofitable or just breaking even for a publisher is history now for newsagents.
Distribution is not done by a newsagent in this area – it’s done by a distribution agent.
Hi Mark
do you have an idea when the smh will be cut back?
Andrew I do not know, all I can do is guess. I suspect the decision internally is close given ad pages, circulation, the cost base of the physical product and the cost cutting in the company resetting the labour model for a digital business.
From a newsagent’s perspective it will not matter to those who have reset their businesses.