By Charis Palmer, The Conversation
Today's major loss and writedown of mastheads and goodwill by Fairfax will make it more difficult for the company to resist the demands of major shareholder Gina Rinehart, say media experts.
Fairfax has posted a $2.7 billion loss, and made a large non-cash writedown of $2.8 billion on the value of its mastheads, goodwill, customer relationships and software.
The company has also seen a $140 million charge as a result of its redundancy program, with annualised cost savings of its “Fairfax of the Future” initiative amounting to $56 million, just the start of a cost reduction program that is expected to deliver benefits of $235 million by mid-2015.
“The pressure for them now is resisting Gina Rinehart,” said Andrea Carson, who is researching he future of broadsheet newspapers at the University of Melbourne.
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“I'm sure she'll come back wanting a seat on the a board. Looking at those figures and the future of the company it's going to be very hard to reject her.”
Martin Hirst, Associate Professor of Journalism and Media at Deakin University agreed.
“To me the end game now for Fairfax is how long they can hold out from a hostile takeover? It makes way for someone like Gina Rinehart to fulfil their ambition to own the paper,” Professor Hirst said.
Revenue was down 6 per cent for the year at $2.3 billion, with early FY2013 revenues tracking down 10% below the prior year, a trend Ms Carson said was significant given the declines of previous years.
“On the face of it, it looks like what we all expected – it's a company in a lot of trouble and it isn't showing a strong long-term future.”
Professor Hirst said Fairfax will need to consider dropping some of its daily print editions, and have another look at its redundancy scheme.
Ms Carson said the issue of reduced print editions is likely to be discussed by the company's management again after the delivery of this result. Fairfax has already announced plans to move its broadsheet newspapers The Age and The Sydney Morning Herald to “compact” editions in March next year.
“My personal view is I wouldn't be surprised if they might skip that step and go to an online masthead Monday to Friday, with print editions on the weekends,” Ms Carson said.
She said other options for Fairfax include selling off some high-value assets to focus on its content and masthead businesses.
Fairfax has already sold down 15% of its New Zealand-based Trade Me business to help pay for its redundancy program.
