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BEST OF THE WEEK
And another thing...
Welcome to Best of the Week, written at beautiful Sisters Beach with no soundtrack, other than the sound of the ocean waves.
Okay, I admit it. Itâs not waves I can hear. Itâs rain. But looking out of the window, itâs still the sight of the waves that are proving to be a magnificent distraction.
Yet despite being many miles from whichever Tasmanian printing press they emerged from, my laptop is sharing the table with the daily miracle, todayâs newspapers.
And I must admit, if youâd asked me five years ago whether that would be still be the case now, Iâd not have been sure.
I may have been listening to the wrong people.
Iâm slightly disturbed to discover that [on LinkedIn]( Iâm connected with 42 people who include the word âfuturistâ in their description. Mind you, Iâm also connected to 541 with the word influencer, so I may be mixing in questionable circles. But more on influencers another time.
However, one of Australiaâs more influential futurists is Ross Dawson who famously (or perhaps infamously) created his Newspaper Extinction Timeline back in 2012.
And one of the risks of making future-gazing predictions is that eventually, the future happens. And at that point everybody remembers the prediction, and nobody remembers the caveats.
In 2018, the prediction that newspapers in the US would be extinct by 2017 looks a little awkward. Tell that to the New York Times. And the idea that theyâd be irrelevant in the UK by next year seems increasingly unlikely.
And although itâs still four years away from his predicted newspaper extinction in Australia, itâs now fair to say it ainât gonna happen here in 2022. And as a newspaper reader, nay lover, I couldnât be happier.
FXJ for the win
Yesterday, Fairfax closed with its healthiest share price in just under a decade.
Itâs a $1.85bn company. Which is something I never expected to write when it fell below $1bn value for the first time in October 2012.
The upwards blip followed this weekâs announcement that [News Corp and Fairfax are to cooperate with printing](. As is so often the case, the market likes it when people lose their jobs - in this case because of print works closing.
But in the wider scheme of things it feels - dare I risk saying it - as if the worst is over.
For a while, the build up to the end of each financial year was characterised by hundreds of redundancies, with journalists often bearing the brunt.
That didnât happen this year. And when the printing rationalisation with News Corp was announced, it had more the feeling of a long-overdue dawning of sanity between the two bitter competitors, than another desperation round.
Of course, a lot has changed in the last few years.
On the one hand, Fairfax lost many great journalists. Indeed, without their redundancies from Fairfax, Guardian Australiaâs ranks wouldnât be half as strong as they are.
And the problem with that is the loss is immeasurable: as the public, we simply donât know what we donât know as a result of the people who would have been able to tell us being missing.
But the companyâs three great mastheads - The Age, The Sydney Morning Herald and the Australian Financial Review - survived, and stabilised. None of them are what they once were, but all of them are still admirable products. And that was by no means always certain.
Thatâs a result of CEO Greg Hywood pulling off a tightrope walk I never thought he could manage. He took the costs out necessary for survival, but he didnât kill the patient during the operation.
Of course, there were blunders along the way. Most notably, for a while management took on the same view as the outside world that weekday printing would soon be dead.
That drumbeat reached the outside world. It looked like a managed retreat, because for a while thatâs what it was.
But it dawned just in time: closing the print editions would kill the mastheads, and didnât actually make business sense.
For all the talk about thriving as an online only product, itâs rarely worked. Look at the shadow The Independent newspaper has become in the UK.
Sadly, the change of heart came too late to avert some of the damage done to advertising sentiment. What media agency wants to make a recommendation to a client of including a dying medium in the schedule?
But perhaps, like television, itâs not dying; itâs just mature.
I suspect with the stability the long term print deal signals, it may herald a subtle change in advertising sentiment towards newspapers. I wouldnât be surprised to see an upwards blip.
Not that the glory days will return of course. Newspaper copy sales will continue to fall, Iâm sure. And classifieds are of course gone, never to return.
But the print product now looks set to survive long enough to build out those paywall strategies which have been so much harder than they looked.
Not that the Fairfax share price can be explained by the fortunes of its print operation.
When it comes to public interest journalism, thereâs no justice in the market. Much of the value Fairfax titles deliver to Australia in keeping its readers informed of the activities of those in power will never reflect on the bottom line.
Without newspapers (and the ABC) thereâd have been no Royal Commission into the banks.
But Fairfax has also played its other cards shrewdly.
The last decade saw Fairfax foolishly get rid of real estate savant Antony Catalano (for the first time), only to see him create a mighty rival in The Weekly Review, which they ended up having to buy.
But combined with Domain, it became Fairfaxâs last trip down the classified river of gold.
Last yearâs float released value in Domain that still underpins Fairfaxâs own share price. By coincidence, like its parent, Domain is also a $1.8bn company, and Fairfax still owns 60% of the shares.
And there are other valuable assets.
Macquarie Media - the parent of the thriving 2GB-3AW talkback radio axis - also hit a 13 year high on Friday, giving it a market capitalisation above $270m. Fairfax still owns 54%.
And in the best example of value creation for shareholders, Fairfaxâs joint streaming venture with Nine Entertainment Co - Stan has been a triumph.
Stan has become a domestic challenger to Netflix, with arguably a better content offering. Thatâs good going, in not much more than three years. Both sidesâ initial investment of $50m each looks like money well spent.
I must admit, at the time I was much more cynical about that investment in Stan. It felt that the might of Netflix would be impossible to beat. And I was convinced most of the money would be spent on buying back ads in Fairfax titles as a way of artificially maintaining an ad revenue number
But I was wrong. They built something real.
But itâs also another demonstration of the weird economics of paid content.
I pay far more for my AFR subscription than I do for Stan. Yet I spend far more hours re-bingeing on the likes of Breaking Bad than I do reading the paper, much as I love it.
I suspect though that the other thing lifting the share price is that when it comes to the consolidation of media ownership, the game is now afoot.
After a long delay, Ooh Mediaâs acquisition of Adshel and JC Decauxâs purchase of APN Outdoor has finally kicked things off.
Here There & Everywhere is presumably on the breakup track, having sold Adshel. Its ownership of Australian Radio Network doesnât make much sense in isolation.
Meanwhile to Nine, the news and opinion radio output of Macquarie Media must look like a tempting fit. As, of course, would the other half of Stan.
Also add into the mix the fact that News Corp is clearly on the way out of the door with its local and regional newspapers, possibly with some sort of private equity-driven deal.
Fairfax would unlock a lot of value for its shareholders if it could get a slice of that action with its regional titles.
Not that it would be good for those working for them, or necessarily for readers either. Cost cutting is the name of the only private equity game.
But Fairfax might also be a buyer rather than seller of assets. Or failing that, a senior partner in a merger with a TV network.
Seven would make sense because of its ownership of The West Australian. But itâs heavy debt load creates a more confusing picture.
And the Stan partnership with Nine, and the talk radio attraction, makes sense too.
But most amazing of all of this is that itâs all a possibility.
Six years ago, the idea that Fairfax would be anywhere near the largest media company seemed hopeless.
When Fairfax launched the new âIndependent. Alwaysâ positioning five years ago, it seemed a little like whistling past the graveyard.
But maybe, just maybe, theyâve come back from the dead.
Rocky mountain high
Which seems a good point for me to knock off and enjoy reading those papers. Or in the unlikely event that the weather permits, take a stroll towards Rocky Cape.
As ever, I welcome your emails to tim@mumbrella.com.au and apologise in advance for my inevitably tardy replies. And my colleague Abigail Dawson - abigail@mumbrella.com.au - will be running the newsdesk today and tomorrow.
In the meantime, have a wonderful weekend.
Toodlepip...
Tim Burrowes
Content director - Mumbrella
Mumbrella | 46-48 Balfour Street Chippendale NSW 2008 Australia
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