Thursday’s proposed deal by Nine to swallow up Fairfax Media marks the sad end to the 177-year-old company, which has plunged from powerhouse to pint-sized in just a few decades.
Mismanagement, the changing media landscape, declining advertising revenues and a fall in newspaper circulation have all contributed to the death of the Fairfax brand.
At the same time savage cost cutting and the sacking of editorial staff have resulted in an exodus of skilled talent from Fairfax’s newsrooms, reducing the quality of the final product.
There are fears Fairfax’s stable of more than 100 regional mastheads could be dumped
The proposed cash and scrip takeover this week by Nine Entertainment to form a $4.2 billion newspaper and television company was arguably the only way Fairfax could survive in the current market.
The deal still needs to be approved by shareholders and regulators but if it goes ahead the merged business will be the second-largest media company in Australia after News Corp Australia, publisher of The Daily Telegraph.
Fairfax was established in 1841 when British journalist John Fairfax bought The Sydney Herald with business partner Charles Kemp for £10,000.
Kemp’s share in the newspaper, now named The Sydney Morning Herald, was bought out in 1853, and the company rebranded to John Fairfax and Sons in 1856.
In 1940 John Fairfax and Sons opened a New York office and in 1951 The Australian Financial Review was launched as a weekly newspaper, before becoming daily in 1963.
Also during the 1950s the company established television station ATN and merged The Sunday Herald with The Sunday Sun to form The Sun-Herald.
Fairfax reached the height of its powers in the 1970s and 1980s, when the company bought radio operator Macquarie Broadcasting Holdings, Newcastle Newspapers and a 14.9 per cent interest in the Herald and Weekly Times.
From its headquarters on Broadway in the heart of Sydney, the publicly listed company had grown over 140 years to become one of Australia’s largest media conglomerates, with ownership of newspapers, radio and TV stations.
The empire began crashing down in 1987 when fifth-generation Fairfax family member Warwick Fairfax Jr, then aged 26, decided to seize control of the company by privatising it. This disastrous attempt lasted just three years, with the business falling into receivership in 1990.
Canadian media tycoon Conrad Black teamed up with Nine Network owner Kerry Packer as part of the Tourang consortium to rescue Fairfax from its debt troubles in 1991.
This pursuit for Fairfax was assisted by Malcolm Turnbull, who was then a director of Tourang and a prominent lawyer working for Packer.
Packer, who died in 2005, ended up dropping out of the consortium, leaving Black to buy Fairfax and float it on the Australian Stock Exchange as Fairfax Media in May 1992.
Prime Minister Turnbull was asked yesterday what Packer would think of Nine Network buying out Fairfax 27 years later.
“Kerry was a very pragmatic businessman and he would recognise the media landscape has completely changed,” the Prime Minister said.
“The ability of two businesses like that to be able to consolidate will put them in a stronger position to compete and in a stronger position to support quality journalism, whether it’s in print, online or on TV.”
The arrival of internet advertising in the 21st century took Australian media companies by surprise, with classified advertising in printed newspapers rapidly drying up.
Fairfax Media’s ads in the SMH and The Age — referred to as “rivers of gold” — once reportedly comprised 90 per cent of the company’s ad revenue but have since dwindled.
Fairfax began looking for other revenue sources and established property group Domain in 1999, bought out the publishing assets of Independent Newspapers Limited from New Zealand in 2003 and acquired online dating site RSVP in 2005.
The fall in advertising spend forced Fairfax to cut costs, reduce staff numbers and shift the product offering to a digital-led publishing model.
Media analyst Steve Allen from Fusion Strategy said the turning point for Australian media was when advertising agencies abandoned the print advertising-led model in favour of digital.
“The significant thing happened five or six years ago when media agencies turned their back on print, and it wasn’t necessarily advertiser-led,” Allen said. “The media agencies could get a bucket more money by persuading their clients to go into digital.”
Bringing Fairfax under the Nine umbrella will reportedly save $50 million a year on back-end operations for the combined businesses, but questions persist over whether the takeover will be good for Nine’s shareholders.
Morgan Stanley equity analyst Andrew McLeod wrote in a research note that Nine may be forced to sell some of Fairfax’s assets to improve its financial position.
“Scale is increasingly important and we see both cost-out prospects and growth synergies between a number of assets,” he wrote.
“To justify the premium and create shareholder value … we expect Nine will have to deliver higher cost-out, higher revenue growth and also exit some non-core Fairfax assets.”
There are fears Fairfax’s stable of more than 100 regional mastheads could be dumped as part of the merger, with Nine chief executive Hugh Marks telling investors some lower-growth businesses, including regional publishing, “may be better serviced by being part of some other environment”.
But he added that he imagined the new company will continue to invest in Fairfax’s 160 regional mastheads and websites.
TIMELINE OF TERRIBLE DECISIONS
2018
JULY 26
■$4.2b takeover of Fairfax by Nine.
J ULY 18
■Fairfax and News Corp Australia to share printing networks.
FEBRUARY 21
■Fairfax announces sale or closure of most of its NZ print publications.
■ 54% fall in Fairfax net profit.
2017
DECEMBER 12
■Fairfax signs up to a partnership with Google to boost advertising.
NOVEMBER 16
■Domain lists as a $2b company.
JULY 2
■Fairfax fails to entice private equity buyers to take it over.
JUNE 19
■Journalists strike after hearing of massive redundancies.
APRIL 5
■Fairfax to cut costs by $30m.
FEBRUARY 13
■First-half net profit of $83.7m.
2016
AUGUST 10
■Fairfax has a full-year net profit loss of $893.5m.
MARCH 17-18
■Fairfax journalists strike hearing 120 editorial jobs would be axed.
■Fairfax rejects reports it’s buying a stake in Nine Entertainment.
2015
AUGUST
■ Fairfax makes $87m profit.
JUNE 30
■Fairfax loses defamation action by former Treasurer Joe Hockey.
MARCH 31
■Macquarie Radio Network merger with Fairfax’s radio network.
FEBRUARY 6
■Billionaire Gina Rinehart sells $306m stake in Fairfax Media.
2014
NOVEMBER 20
■Fairfax‘s Greg Hywood declares the media group is in good shape.
AUGUST 14
■ Annual earnings back in the black with a $224m profit.
2012
DECEMBER 1
■Fairfax chairman confirms Gina Rinehart cannot join board without agreeing to its governance rules.
JUNE 17
■Fairfax axes 1900 jobs and ends broadsheet format for the SMH.
AUGUST 23
■Annual net loss for Fairfax blows out to $2.73b for 2011-12.
FEBRUARY 1
■Gina Rinehart becomes Fairfax’s biggest shareholder.
2011
■John B. Fairfax and his family company sell stake in the company.
2010
■Gina Rinehart amasses Fairfax shares.
EARLY 2000s
■Fairfax buys NZ’s Independent Newspapers Limited in 2003, dating site RSVP and Stayz in 2005. In 2007, John Fairfax Holdings changes name to Fairfax Media.