WHY FAIRFAX HAD NOWHERE ELSE TO GO!

By - CTL
July 31, 2018
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By Marcus Honesta.

Sunday mornings around the Honesta mansion flat are usually a fairly civilised and quiet affair. Traditionally they start with a wholesome brekkie, and then to balance Mrs. Honesta’s more radical right wing views, I sit her down in front of the tele and insist that she takes a dose of what this week the liberal left has on offer through the somewhat unbalanced ranting’s of Comrade Cassidy and his band of merry insiders (The Insiders, 9am ABC TV). If there is a 1970s Communist Party view to be championed, you can rest assured the band of four will carry the flag proud and unreservedly into battle.

It was therefore hardly surprisingly that in this episode their steely gaze was fixed upon the largest media related story from this week or indeed the last few years in our Nations history; the possible merger of Fairfax and the Nine Network.  With the usual collection of suspects on the couch, the conversation turned form desperation to despair for the loss of a once great friend..

Gone they whaled. Another great masthead of integrity, decency and champion of the working class was to bite the dust. If you were wondering just what all the fuss was about, they were referring to the Fairfax’s publications which include: The Age and The Sydney Morning Herald, The Australian Financial Review, etc and the overall consumption of them, by the evil and insidious Nine Network. The Age and Herald so thin these days you can barely wrap the rubbish in them.

However, lamenting the demise of truly independent journalism Karen Middleton was almost beside herself with grief at the potential loss of integrity, the heinous possibilities such an evil capitalist merger might entail.  She was not alone; to support their grave concerns they turned to yet another balanced and well meaning champion of the people, the former manager of the Rock Band “The Ramrods”, and celebrated pig farmer.

Not to disappoint, however, looking older then Methuselah, and all his 157 years, Paul John Keating, the 24th Prime Minister went on one of his famous, yet these days some what out of touch rants:

“The Australian Competition and Consumer Commission to put the Nine-Fairfax merger under “high scrutiny”, and declared Nine has the “ethics of an alley cat”.

Keating said the takeover was “an exceptionally bad development”.

If Nine had a majority of the stock, as announced, it “will run the editorial policy,” he said.

Keating said that for more than half a century, Nine had never done anything other than display “the opportunism and ethics of an alley cat.

“There has been no commanding ethical or moral basis for the conduct of its news and information policy. Through various changes of ownership, no one has lanced the carbuncle at the centre of Nine’s approach to news management. And, as sure as night follows day, that pus will inevitably leak into Fairfax.

“For the country, this is a great pity”.

But Keating said the media free-for-all the Turnbull government was permitting under its new law would “result in an effective and dramatic close down in diversity and with it, opinion’.

“It is true that the technology has brought a myriad of voices to a public, eager for diversity of information.

“But the atomisation of web-based content, much of it other than local, cannot in terms of impact, be compared with the big local media players, particularly in consolidations of the kind announced today.”

The “takeover of Fairfax by Channel Nine will change the news landscape of Australia altogether.”

Keating said that notwithstanding the disruption caused by international platforms such as Google and Facebook “the answer for Australia is diversity of income streams for Australia’s majors and not a closedown in news and content with major print being taken over by major television”.

Keating has had some major run-ins with Fairfax over the years. But he had a different tone towards it on Thursday.

“Fairfax spent decades missing all the signals about the rise of the digital economy when it could have put itself in a position of relative commercial independence”. This in his rant is the only thing he got right.

“That notwithstanding, the current management has, in the circumstances, done a better than reasonable job in creating income sources to allow the company to preserve its editorial independence, especially in print.” I just wonder where he was heading here?

Keating said that if the government really had its way, Australia would face this much closed down landscape without the ABC being an independent national broadcaster. The ABC has played its own roll in helping Fairfax’s demise by supporting Google through buying search optimization services for its own online products through the digital giant.

“On competition grounds and that of the imperative of local diversity, the Competition Commissioner should put this proposal under high scrutiny,” Keating said.

He said that while the web brought increased diversity “the big wholesalers of news and information in Australia have always had the dominant impact. They have been the big dogs on the block. Today’s announcement means that in future, they will operate as a pack.

“The cross-media rule at least split that dominance, giving the community various streams and alternatives within which to think. Today’s announced takeover of Fairfax by Channel Nine brings the big wholesalers back with a vengeance. And with it, were it to be permitted, a major shutting in of diversity”.

Yet the old Pig Farmer has as usual completely missed the real story – the facts. And the simple fact is that the rivers of gold have dried up.

For all the screaming, all the rhetoric, what all have failed to recognise was the truth in the prediction made a decade earlier by Marshall McLuhan. “The classified ads (and stock-market quotations) are the bedrock of the press,” he observed. “Should an alternative source of easy access to such diverse daily information be found, the press will fold.”

The incongruity in that business model – profits from ads for jobs, houses and cars bankrolling the journalism that is vital to a functioning democracy – took several decades to play out. The “newspaper business model”, as it’s now derisively known, has imploded. People no longer line the streets outside newspaper presses at night to be the first to see the ads. The internet has poached most of Australia’s newspaper classified advertising. The money that financed quality journalism for a century is disappearing, with no likely replacement.

If you need any more proof of this axiom, just look at the importance that Domain.com.au has within the Fairfax group. If Domain.com.au was trading around $3.90 a share, it gives it a market capitalisation of more than $2.2 billion. The 20017 Annual Report published the following:

“Revenue and income for the Group was lower than the prior year at $1,749 million (2016: $1,838 million). After significant items of $59 million loss (2016: $905 million) the Group generated a net profit after tax attributable to members of $83.9 million (2016 Loss: $772.6 million). Earnings per share increased to a profit of 3.6 cents (2016: loss of 33.3 cents).”

Of all the world’s newspaper companies fighting for survival, few were as vulnerable as Australia’s 172-year-old Fairfax Media, publisher of the Age, the SMH and the AFR. No other major global newspapers depended as much on profits from classified advertising as the SMH and the Age when the internet arrived. Ten years ago its flagship newspapers were generating 56% of their revenues from classified ads, compared with 18% at the New York Times and London Daily Telegraph, and 25% at the Chicago Tribune and Los Angeles Times.

As recently as a few years ago, the two Fairfax flagship newspapers earnt combined profits of around $200 million. Today they barely make a cent. A decade ago they each carried around 200 pages of classified advertising a week; that’s now down to some 50 pages, and still falling. The company’s market capitalisation is billions less than it was a few years ago. The giant Sydney and Melbourne printing plants are in the process of being closed down.

The internet has changed all of this. It is the first mass medium in history with almost no barriers to entry and practically unlimited content-carrying capacity. These two factors have converged to create millions of websites and blogs, and billions of web pages, resulting in the collapse of online advertising rates for all but highly specialist or unique websites. And that has created another dilemma you won’t read about in the press – the commodification of news. There’s news everywhere on the internet, most of it free, so why would readers pay for an old-style, all-purpose newspaper “bundle” on a website when they can access content that is often deeper and richer on niche sites?

At the centre of this tragedy is the Fairfax board of directors. In the absence of either a proprietor or a majority shareholder – the common ingredients of most successful media companies throughout history – Fairfax has been run by a board with one distinguishing feature: lack of industry knowledge or expertise. The board has never understood the scale of the challenge posed by the internet. It never saw the size of the looming crisis and never made plans for a worst-case scenario. If it had, the mindset of the whole company, from chairman to copy kid, might have been radically different. The company would have tried new and different strategies to adapt. Some would have failed and some succeeded, but simply acknowledging the dilemma would have made a huge difference to the outcome.

Maybe, just maybe it’s already too late. When it comes to the question of who will pay for “accountability journalism”, the light at the end of tunnel appears to be an oncoming train. Maybe someone will conjure up a workable configuration to pay for the thousand-plus journalists who cover the beats that underpin Australia’s civil society. Maybe the ABC will fill the missing gaps (maybe this is where all the Fairfax journo’s will end up, given their left leaning proclivities) with more funding from governments who understand the importance of investing in well-resourced journalism to protect the democratic system. Maybe universities or philanthropists (the Guardian) will become the next Murdoch’s and Fairfax’s.

Or perhaps what looks like an impending train wreck is actually more like the other great media revolution in history, the period of uncertainty in Europe around 1500AD at the juncture before and immediately after the invention of the printing press, when even the revolutionaries couldn’t predict what would happen next.

The outcome of that media revolution was a golden age. The arc from Gutenberg to Google, extending over five centuries, saw the invention, refinement and institutionalisation of journalism, supported by an unconventional funding mechanism, that secured its central place in civilised society for a long time.

What happens next will profoundly affect journalism and society as a whole.

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