Fairfax Media will move The Sydney Morning Herald and The Age to a tabloid and sack 1900 staff — including 380 journalists — as part of a massive cost-cutting drive to save the media giant from corporate oblivion.
In the bombshell announcement 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 also 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, 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 also be closed 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.
Hwyood, a former AFR 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.
"While it will be hard, it will change the business for the better. I urge people to think twice before challenging the changes," he 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, adding that company was "carrying a cost base that is way over what you need".
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 that Fairfax had considered spinning off the metro businesses, as recommended by some analysts.
Analyst Peter Cox told Crikey that it was the right thing to do, but came ten years too late. "It's the correct action but it's too late. The board have been asleep at the wheel for the past five to ten years."
"Fairfax management made three big mistakes: they didn't charge online much earlier (public now used to free content); they failed to see how many people would abandon print for online and 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.
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.
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