Fairfax’s new strategy won’t work for readers, advertisers or its staff – and management knows it: Gome

The media death spiral began in earnest this week. Fairfax went first with its shock announcement on Monday that it is dramatically downsizing its media business shedding nearly 2000 jobs.

Tomorrow, News is expected to make a similar shock announcement with 1000 jobs to go. Many of these jobs will be editorial and, by the end of this week, possibly 500 of Australia’s finest and aspiring journalists will be taking redundancies and asking what next. At least they will go on and invent a future for themselves.

The bad news is that those journalists remaining at Fairfax and News face years of uncertainty. The two media giants that have raked in profits decade after decade are facing a future where they have one focus: managing decline. And instead of making the bold move to really understand how the marketplace is fragmenting and morphing, they continue to fix their gaze on each other in a fight to the death.

Who will emerge alive from this duopoly death spiral? News – without a doubt. Why? Our friends at Fairfax have cobbled together an unsatisfactory strategy that even the CEO Greg Hywood knows won’t work.

Basically, the company has looked at two choices. The first option was taking a sledgehammer and breaking it all up. Dismantling the organisation and selling it off in bits was too awful to contemplate. And, besides, you lose valuable economies of scale so your costs soar.

The second alternative is to make the bastards pay. Hywood has resisted erecting paywalls around The Age and The Sydney Morning Herald for as long as he could. He knew that after decades of getting the news for free, readers will balk at having to pay. Just go and read the negative and at times vitriolic comments at the bottom of The Age and SMH stories from many rusted on readers who swear they will never put their hand in their pocket and pay for news “they can get anywhere.” He also knows the marketplace, which will continue to fragment and never deliver him the large volume of readers or profits he needs to stem the decline.

So in order to stave off the inevitable, Hywood has announced a centralisation model which is really a huge virtual newsroom that then dishes out commodity news to the different states and to different platforms. And that is the next death knell for The Age and SMH. Already they stand accused of having lost contact with their city communities. As a demoralised Fairfax workforce works even harder with fewer staff to pump out commodity news, their papers will look more like The Australian: nationally focused, authoritative, aloof and struggling to stay ahead. This leaves the door open for many smaller, highly targeted niche publications that will take their news and tailor it to their communities.

Meanwhile, the advertisers have spent the last decade, while Fairfax was dithering, experimenting with a range of different forms of media and working out where they get the best results. There are now many more ways for them to spend their advertising dollar, including product placement, blogs and social media. Many still want brand protection by advertising with traditional media, with its prized church and state barriers. But they either want to be partners on highly targeted publications which reach deep into vertical communities – and for this they will pay premium rates – or they will pay very low rates to reach large volumes of consumers.

As The Age and SMH move further from their hyper-local focus on their cities and its people to a generic commodity type news that focuses on broad subject areas such as politics, media, business, culture, crime and sport, advertisers will find they get a low rate of return on their spend – even if they have spent peanuts.

Someone reading a political story on a homogenised news site called The Age – whether it is in print, phone, iPad or computer – is not in the frame of mind to look at an ad for a new book, or a computer, or a phone system or a financial product. Not when you have – a fingertip away – a highly targeted site that is clearly connected to the mindset of its community, many of whom have expressed clear intentions to research or buy the products and services of its advertisers.

The advertisers will also twig that Fairfax is trying to have it all ways. In order to keep readership numbers high as their content gets locked up, they will increasingly be tempted to dumb down. Already advertisers have noted that there is a difference in the quality of content between Fairfax in print and online, with more celebrity low-brow content on The Age and SMH online than in print. The reason is that Fairfax is trying to drive high volumes online to their transaction websites and these tend to be focused on low-brow stuff like dating, cars, jobs and babies. Sales staff continue to try to sell to the highly prized traditional AB audience to advertisers online while knowing full well the content is being skewed towards building volume.

Now there will be a further muddling of the “brand”. So-called premium content will be locked up. Stuff outside the paywall will be even more skewed towards grabbing any passing unique visitor to try and get them to subscribe or transact. And there will be the hapless advertiser desperately trying to get attention in all that noise!

So, in my humble opinion, Fairfax should have headed in a completely different direction, which may well happen if Fairfax gets broken up, sold off and sensible people know what to do with these great brands.

As for those journalists out there looking for work, we (Private Media) are currently looking for a sub editor, a marketing manager, two junior reporters, and a high-level publisher for one of our publications. Another door opens…

Amanda Gome is the founder of SmartCompany and the chief executive of Private Media.