Hywood moves too fast on Fairfax digital future plan

Whether the latest Fairfax writedown, a $1bn charge, is a full stop or a comma is yet to be seen.

Fairfax chief Greg Hywood moved too fast towards digital. Picture: Hollie Adams

Another significant writedown at Fairfax Media (FXJ) represents a punctuation point to what has been a period of traumatic change and upheaval within the group.

The $1 billion charge against the publishing company is the sixth revaluation of the business in chief executive Greg Hywood’s 5½ years at the helm.

During his tenure, Fairfax has axed more than 2000 jobs, sold various businesses and recently announced a plan to merge its New Zealand operations with those of rival APN News & Media.

In May, Hywood outlined plans to introduce a weekend-only publishing model for flagship mastheads, The Sydney Morning Herald and The Age.

Whether this latest writedown is a full stop or a comma is yet to be seen. The conventional wisdom is to blame a decline in print advertising revenues.

“The adjustments we are announcing today are appropriate as we recognise the challenges this business continues to face in rural and regional markets,” Hywood said yesterday.

“We continue to develop initiatives and consider opportunities for this business.”

After decades of mismanagement and standing still, Fairfax was applauded for making tough decisions when it announced the closure of printing presses and a digital-first strategy.

It is true digital is now part of the daily media diet of consumers. It’s also right that this is a period of convulsive and traumatic change for the entire industry. Writedowns are par for the course in a disrupted media sector up-ended by new technology.

However, the less conventional wisdom is that Hywood moved too fast by positioning an organisation that was, and is still, largely print focused for a digital future. The strategy has put unbearable pressure on a business in which revenue from digital advertising has not grown at a sufficient rate to bridge the gap created by falling print revenues.

The majority of spending by advertisers on digital advertising is going to Google and Facebook. Combined, they accounted for 76 per cent of all new online advertising spending in 2015, according to a report by influential analyst turned venture capitalist Mary Meeker, a partner at Kleiner Perkins Caufield & Byers.

Yet, Australia’s news media sector remains significant, according to the latest News Media Index statistics.

Figures released by industry trade group NewsMediaWorks show the sector reported advertising revenues of $576 million in the second quarter of calendar year 2016.

The recent results also captured the true size of the sector for the first time with total industry advertising revenues of $2.34bn in fiscal year 2016.

One thing is clear: multiplatform business models make money and will do so for many years to come.