Fairfax restructures amid board battle
KIRSTY SIMPSON, CHRIS ZAPPONE AND TOM PULLAR-STRECKER
Fairfax Media's decision to slash jobs and downsize its two largest Australian newspapers coincides with a battle for control of the boardroom involving Australia's richest woman and Fairfax's largest investor, Gina Rinehart.
The company expected to save A$68 million (NZ$86m) a year and reposition itself as "an increasingly digital business".
Under the radical changes designed to cut costs as readers and advertising move online, Fairfax said yesterday it would axe 1900 of its more than 10,000 staff, close two Australian printing presses and put some Australian internet content behind a paywall.
None of the redundancies are in New Zealand.
After an 85 per cent collapse in the company's share price in the past five years and the transfer of the "rivers of gold" classified market from print newspapers to online, chief executive Greg Hywood announced the "historic" overhaul of the company's business model.
Billionaire miner Rinehart is now believed to want to be appointed deputy chairwoman of the company and have two other board positions for her representatives, which would include Hungry Jack's founder Jack Cowin.
She or her representatives are also believed to have told the Fairfax board that as a major shareholder, she and her representatives should not be restricted when it comes to editorial matters - including the hiring and firing of editors.
Her demands are in conflict with Fairfax board protocol that directors not interfere with the editorial direction of the media group and a charter of editorial independence that has been honoured by the board since the early 1990s.
The board had been believed to be considering offering Rinehart seats in recognition of her substantial investment in the company - she now owns 18.67 per cent after a sharemarket raid last week. But her resistance to editorial independence will make an offer more difficult.
This afternoon, Australian Fairfax journalists released a letter they sent to Rinehart asking that she commit to upholding editorial independence.
"The [media] reports suggesting you might not support the Charter of Editorial Independence have caused considerable disquiet among staff," reads the June 7 letter, which was signed by the house committees of the Sydney Morning Herald, Age and the Canberra Times.
"We would like you to give us an assurance you do support the principles set out in the Charter of Editorial Independence and, in the event you join the Fairfax board, you will agree to uphold them.
"Such an assurance would go a long way to reassuring the staff who produce the publications in which you have such a substantial investment."
The journalists had not received a reply, prompting their publication of the letter.
The independence charter was created in 1988 and required that any proprietor allow journalists to report regardless of the political, personal or commercial interests of proprietors, shareholders or board members.
Hywood refused to comment on Rinehart, but political leaders from both the Australian government and the opposition also expressed alarm at the possibility of editorial interference.
"What this will do is destroy the credibility of the Fairfax mastheads," said Communications Minister, Stephen Conroy. "And if you were to start turning it into just a pro-mining industry gazette, well, I don't think you would say the rest of the shareholders in Fairfax would be too excited about the collapse in readership."
Opposition communications spokesman Malcolm Turnbull also said the board's reluctance to give Rinehart board seats was understandable "without a commitment to supporting editorial independence ... If Fairfax, for example, were seen to be a mouthpiece of Gina Rinehart and a 'spokes vehicle' for the mining industry that would undermine its business model dramatically."
Long-time Gina Rinehart friend, businessman John Singleton, said the mining magnate should be free to hire and fire editors should she take over Fairfax Media if that's what it takes to keep the company profitable.
Singleton told ABC Radio's AM programme this morning that anyone owning a company had the right to resist being "held to ransom by your employees" if such a structure left the firm losing money.
Singleton also underlined the difference between Rinehart and her rising stake in the company and the fact that other Fairfax board members held few shares in the company.
"The other directors represent basically no per cent of the shareholders, they don't stand to gain or lose," he said. "They can make horrendous mistakes and not suffer any financial penalty."
Singleton said journalists supporting Fairfax's charter of independence - which serves as a firewall between commercial and editorial operations - may not understand the circumstances surrounding its creation in 1992.
"That Fairfax independence was written by Sir Zelman Cowen when I was on the board, it was just one of the those ...things that no-one understood," he said. "Sir Zelman was very proud of and the journalists didn't know how to say no to Sir Zelman, even though they don't know what he's talking about."
Singleton's Macquarie Radio Network had been in talks with Fairfax earlier this year to purchase the company's radio stations.
Under the changes, nearly one in five jobs will be lost, including at least 300 editorial staff mainly in Sydney and Melbourne after the recent loss of 66 production jobs in regional NSW. The closure of the printing sites will lead to the loss of about 380 jobs.
News Ltd, the largest newspaper company in Australia, is also expected to come out with a similar sweeping overhaul within days.
The decision has followed relentless pressure from investors and sharemarket analysts to refocus the company towards the internet as the share price fell this year from a high of A$1.01 to 56.5¢ at its lowest. The announcement pushed the share price 4.5¢ higher to 65¢ and won plaudits from analysts.
The decision to convert The Age and the Herald to tabloid from March follows years of internal discussions, but Hywood said the decline in print advertising had forced the changes, which he said would be embraced by readers.
"It should be a compact [tabloid] because a broadsheet was just built to hold classified advertising. It was never built to be reader friendly."
While yesterday's announcement suggests the possibility of closing down print products completely if they became unprofitable, Hywood played down the likelihood, saying there were many ways to improve profitability, including lifting the cover price.
"I would expect there to be a print product around for some considerable time," he said.
Garry Linnell, the editorial director of Fairfax metropolitan newspapers, said there would be "no push" to change the tone and content of the paper as a result of the move to the tabloid format.
Linnell said foreign bureaus and weekly liftout sections would be reviewed. He said Fairfax's newspapers could not be "all things to all people" and their core business was "news, business, sport, investigative journalism and great writing".
"We've got sections on our newspapers that have been there for 30 years that were introduced as circulation drivers," he said. "Well, they're no longer circulation drivers."
Fairfax flagship Australian newspapers may only let people read 20 stories online each month for free before insisting they pay, The Sydney Morning Herald says.
Fairfax New Zealand chief executive Allen Williams said Fairfax had no plans at present to move New Zealand titles to a compact format or to introduce metered paywalls on its websites here.
The shift in audience from print to online was driving the changes in Australia, he said.
"We haven't seen the shift to digital away from print as they have. Our plans will be governed by the needs of the New Zealand market and its readers and advertisers."
Fairfax also announced yesterday that it had sold a further 15 per cent stake in Trade Me, raising A$160m and reducing its shareholding to 51 per cent, but said it intended to retain its majority shareholding.
Trade Me chairman David Kirk said the sale was a positive step for Trade Me shareholders.
"We understand the shares have been placed with a wide range of New Zealand and Australian institutions, and this broader spread of shareholdings in Trade Me will assist liquidity," he said.
"There has been strong support from existing Trade Me shareholders, which shows their confidence in the company."
Australian media forecaster Ross Dawson said the Australian layoffs suggested newspapers would "essentially die in Australia within the decade", but he believed publishers such as Fairfax could survive.
"I believe we will have an even richer and more diverse news media landscape in years to come. The large news companies of today have baggage in their debt, infrastructure, and mindset.
"However, they are still better positioned than anyone else to dominate the news landscape of tomorrow, if they act decisively."
Stuff.co.nz is owned by Fairfax New Zealand
- Businessday.co.nz, Sydney Morning Herald and AAP