4 mins to read

Mad games by Aussie-owned media dingbats

APN and Fairfax need to urgently implement an online pay model – for their shareholders and employees.

David Williams
Sat, 23 Feb 2013

Information, former US president Ronald Reagan told a London audience in 1989, is the oxygen of the modern age.

"It seeps through the walls topped with barbed wire," he said during his Guildhall speech to the English Speaking Union, on his first visit to Britain after leaving the White House.

"It wafts across the electrified, booby-trapped borders. Breezes of electronic beams blow through the Iron Curtain as if it was lace."

The conservative former actor's policies, including the philosophical war of ideas, are credited with bankrupting the Soviet Union and ending the Cold War.

His administration moved from the historic stance of containment, including mutually assured destruction, to confrontation.

This radical change is something New Zealand's information "super powers", Australian-owned APN and Fairfax, should be coming to grips with.

Information might make the modern world go round, but how can a company continue to make money if it gives its products away free?

And is it too little, too late?

Mutually assured destruction

APN and Fairfax have invested heavily in the newspaper industry but are teaching a whole generation of people not to buy newspapers because they can read their news online.

In a Canterbury University lecture theatre three years ago only a handful of students had read a physical newspaper by 9am.

The average age of newspaper readers in New Zealand is likely to be over 50 and even they are cancelling their subscriptions.

It is the maddest of mutually assured destruction – a spiral to the bottom, destroying shareholder value along the way.

On the ASX, APN shares were trading for about $A6 in 2007 and have slumped to about A27c this week.

Fairfax Media isn't much better. Peaking at more than $A4.50 in 2007, the shares are now hovering just above A50c.

You can see the strain at every announcement.

APN announced on Thursday it had haemmorhaged $465 million in the financial year, on asset writedowns, after the company's two biggest shareholders successfully rolled the board.

Fairfax surprised the market last year by offloading its remaining 51% stake in auction website Trade Me, but that windfall was only expected to pay off two-thirds of its debt.

Further assets sales will hurt revenues and the prospect of pulling themselves out of the financial quagmire.

Lost opportunity

Whatever the reasons, there are several problems with Fairfax's sale, aside from Trade Me's consistent returns, its dominance of New Zealand's web traffic and the fact it positions Fairfax neatly in online classified advertising.

The real problem is loss of integration. Most working New Zealanders have a Trade Me account and Fairfax has lost the opportunity to integrate its newspaper websites with Trade Me.

That would have allowed Trade Me users to be charged miniscule amounts to access stories generated by Fairfax journalists, while hardly noticing the deduction from their accounts.

To be fair, these media companies are hardly alone.

The digital age is exercising the best and brightest in some of the previously most profitable businesses the world has known. 

UK giant HMV which went into administration last month, and, at home, consider the troubles of book retailers Whitcoulls and Borders.

But at no point did they start giving away books and CDs. 

Offshore, international media companies are also struggling.

Many large cities in the United States are no longer served by a daily paper and media mogul Rupert Murdoch's News Corporation has implemented an online paywall approach.

In a tightly-held niche market, for example, the business community is prepared to pay for finance-related news, which helps the likes of NBR ONLINE, Financial Times and Fairfax's Australian Financial Review. 

Too frightened to move

That doesn't make the blood-letting any more palatable. Workers in New Zealand's small media landscape find the downward spiral depressing, recognising the decline of the superpowers hurts the industry overall.

Shareholders will be beside themselves.

This once thriving industry is weakened, and journalistic experience lost, because the boards of both companies are too frightened to make a first move.

APN and Fairfax are hardly in a position of power – they owe hundreds of millions of dollars.

It's too late for some sort of step-by-step transformation. Capital raising is only delaying the inevitable. 

Both companies have talked about installing paywalls on their websites to bring in revenue to offset the continued decline in print circulation and advertising.

It's time for the directors to admit the model is broken and do something about it, instead of mumbling about "gradual transition" when the reading public is more comfortable paying for news elsewhere.

Otherwise there will be fewer sources of information to waft across the electrified, booby-trapped borders, as Mr Reagan so eloquently said.

David Williams
Sat, 23 Feb 2013
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Mad games by Aussie-owned media dingbats