Fairfax is tanking, with New Zealand’s portion down 10% (15% in Australian dollars)

The Fairfax Media Limited(ASX: FXJ) share price is down 1.9% today to 79.5 cents, after the media group announced big falls in publishing revenues across both metro and community media and in New Zealand.

Revenues for the first 17 weeks of the second half of the 2016 financial year (FY16 2H) for the group as a whole is down 2 to 3% compared to last year.

  • In Metro Media, publishing revenues are down around 6%
  • Australian Community Media is down around 13%
  • New Zealand is down around 10% in local currency (15% in Australian dollars)

The general group performance is looking a lot less scary due to the performance of their radio broadcasting division.  But the harsh truth in the publishing division is that they are staring at a sunset industry.

Fairfax’s results again show that the slow death of newspaper publishing continues unabated. Fairfax itself has admitted that the seven-day-a-week publishing model is dead, and will give way to either weekend-only or more targeted printing for most publishers.

But the company is successfully transitioning away from that business. Stan, the subscription video on demand (SVOD) rival to Netflix and a joint venture between Fairfax and Nine Entertainment Holdings Co Ltd(ASX: NEC), will exceed 500,000 active subscribers this month. The service is currently expected to reach cash flow breakeven during the 2018 financial year.

While publishing remains a core component of Fairfax’s business, digital revenues are growing strongly, but until they become the dominant factor, Fairfax’s overall revenues are more likely to continue falling.

For investors, Domain is almost as valuable as the whole company, with the other business thrown in for free, which could make Fairfax a tempting investment.

Digital is a crowded space and it doesn’t have the same geographical loyalties that brick and mortar newspaper companies have been able to rely on.

As newspapers bring more of their subscribers online, this same audience becomes available to other competitors in a way that someone who buys one paper might never have purchased the other one as well.

There are a lot of people that are still going to have to lose their jobs while the industry itself searches for a way to deliver real value that is unique to their organisation.

Companies like Fairfax are unlikely to undergo the change to digital without substantial losses in people.

 

– Mike King, Motley Fool

 


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  • Effluent

    Worthwhile content still counts – I will happily go online and pay for content that gives value, such as films with a plot, news that isn’t slanted, opinion pieces that give me pause for thought, including some that I disagree with; What I will not pay for is endless gossip about the Kardashians, sob stories about people who are in troubles of their own making, or worst of all, opinion pieces full of loathing for western civilisation and the benefits it has provided to the world.

    I wonder if Fairfax et al would be in so much trouble if they started printing news and opinion which was less of an insult to the intelligence and political viewpoint of the majority of their paying readership.

  • XCIA

    There are only so many hours in the day and as we need to allocate more time to working and travelling, we become more discerning where we spend what precious time is left. We (well most of us) want factual accounts of news. We do not have the time to waste reading between the lines sorting fact from fiction or the writers’ opinions. I would say that MSM, especially Granny have left it too late.

  • herewego

    Same thing applies to other media – such as Sky (sorry missed discussion yesterday)
    They need to cut the baggage and stop making me buy crap channels (which cost them real $$ and make the choice to subscribe at $80 either Yes or No) and focus on what is of value – Sport.

    Focus on a mid tier pricing for sport ($40-45/month) and stop making me spend $80 – but “basic” at $50 and sport for $30 more. At $80/month for the sport I watch – going to the pub and buying the mates a round or 2 twice a month is a real alternative.

  • Ross15

    The writing has been on the wall for Fairfax ( as a whole) for a while –since they sold Trademe. They are ranting about going digital but they have already sold one of the better digital companies around –so when they sold they had to have absolutely desperate for cash or to put it another way -stuffed.

  • Terence Hodgson

    Talking to my friendly cafe-owner, he told me he buys 4 copies of the DomPost a day and reckons each gets read by at least ten people. Multiply 10 people by, say, 400 cafes around NZ and you get 4,000 “free reads” of newspapers with not a cent changing hands. Not sure I’d like to have to factor that into any business proposal!

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