Domain on sale as Fairfax topples like the Twelve Apostles

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The Twelve Apostles

It is a vile and scurrilous accusation that during Greg Hywood’s time as chairman of Tourism Victoria the Twelve Apostles became Eight. The last of the iconic limestone stacks to collapse was in 2005, just before Greg arrived.

It is a damn good gag though and fits well the narrative of a chief executive who, in his next job, presided over the demise of Australia’s greatest newspaper mastheads.

These, the Sydney Morning Herald, The Age and Australian Financial Review are but a shadow of their former selves and today’s foreshadowing of a spin-off of Fairfax Media’s Domain business will merely expedite the decline.

Like the Twelve Apostles, the Fairfax asset base is shrinking. It should be said, in Greg Hywood’s favour, that newspapers were in serious structural decline during his stewardship, globally, and he simply managed this decline; and many say as well as expected.

There was more however which might have have been done to save journalism and buttress the cache of the venerable Fairfax brand; or at least more endeavoured.

Rupert’s results: no end in sight to the destruction of mainstream press

As of the deadline for this article, Fairfax shares remained in a trading halt and details of the Domain transaction are yet to be made public.

According to the AFR however, which, like its rival national daily, The Australian, boasts a rich history of rewriting press releases one day early, there will be a stock market spin-off of 30 per cent or 40 per cent of Domain.

Presumably, Hywood and co will take the opportunity to raise capital via the share market float (the another, less likely, option is a pro-rata issue of shares) and the question is, will this capital be deployed to prop up the Fairfax rump, the journalism, or reinvest in the growth asset Domain, the money-spinner?

Whatever the case, 30 per cent or 40 per cent of Domain’s dividends, its financial returns, will henceforth flow to the new owners; this income will not sustain newsrooms of the future. In this, the transaction is a watershed; it marks the decoupling of Fairfax’s former “rivers of gold”, its classifieds, from its journalism.

From a corporate, rather than a journalistic perspective, the deal is likely to be welcomed and ought to boost the share options of company executives.

Yet there are some fancy market valuations being ascribed to Domain. Yes, it has been growing 15 per cent at the profit line and almost 10 per cent in revenue terms but it trades on a mighty earnings multiple.

Analysts tend to ascribe the sort of valuation to Domain which its larger rival in the property ads space, News Corp’s realestate.com.au, commanded at the same juncture in its growth trajectory.

This seems an optimistic view. Over the past 18 months, property prices have kept rising but volumes have eased: fewer houses are being sold. Prices have risen beyond the capacity of new owners to enter the market, and even beyond the capacity of many existing owners to “trade up”.

Interest rates are close to their nadir in a 30 year cycle so it may be a good time to flog this thing. And Domain is sheltered quite nicely by the desire of its customers, the real estate agents, not to be squeezed by one dominant player (REA), but to deal with two parties which compete on price.

For public interest however, for mainstream journalism, the sale of Domain represents another nail in the coffin. It demonstrates that management no longer views classified ads as a way to fund journalism. The white flag has been brandished and flutters limply over the headquarters at One Darling Island Road.

Staff confide, though it remains hearsay, that even the Domain signage is ready to go up.

The recent management shakeup has pushed transactional company-types further to the fore over robust editors and journalists. The strength of Fairfax had always been that its journalists pretty much ran the place and, unlike arch-rival News Limited, mostly refused to bend to the corporate will and the agendas of company executives and directors.

That era is well and truly over now. Advertorials, commercial deals pre-empting stories, caving in to complaints even from PR people. The editorial leadership is feeble, full of ambitious, untalented types whose KPIs (Key Performance Indicators) include incentives to get rid of their own staff.

Morale is poor and editorial authority has vanished in a morass of click-bait and managerial capitulation. It is too late now to reverse the slide.

There are many who cheer on the demise of mainstream media. In an ideal world it would be good to have the present surge of social media, the democratisation of media, alongside a robust mainstream press which could stand up to the PR nonsense and the legal threats of powerful vested interests.

This is not the case. The internet has won. Quality press is now niche, a disparate thing, even within the very decaying media houses of the mainstream.

The other corporate objective being discussed by Fairfax management is a tie-up with the Nine Network. Commercial TV is also under severe financial pressure thanks to the internet and there is not much room in the market for the commercial networks (as well as the two state-run stations). The latest profit result from Seven Network says it all.

As businesses, as assets, TV and press are not particularly compatible, or “synergistic”. In a merger, the main cost savings would come from eliminating one of the two head offices and, with it, the concomitant fat of plush executive and director salaries. This too, however, is the key impediment to merger negotiations as neither the Nine bosses nor those at Fairfax will feel especially compelled to write the corporate script for their own obsolescence.

  • JJ Gittes

    Having dealt with Fairfax mgt in the past there was a high degree of smugness and complacency which comes from market dominance. While the forces they face are global, their own hubris has contributed in large part to where it is now. Business and politicians will be content with an erosion of scrutiny. The public will regret it.