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Fairfax eyes digital future as profit falls

Fairfax eyes digital future as profit falls

by Reporter 0 comments

Simon Parker

Fairfax Media, owner of The Sydney Morning Herald, The Age and Domain.com.au, will continue its push towards digital media after reporting a 41 per cent drop in net profit to $96.7 million for the first half of the 2012 financial year.

“While the results are disappointing, over the last six months Fairfax Media has driven change through the business and we have done it in the midst of a severe cyclical downturn in our major markets,” chief executive and managing director Greg Hywood said.

My Hywood acknowledged that parts of the Fairfax business remain wedded to the newspaper division, which he described as “the old business model”.

The group’s digital operations recorded a 14 per cent rise in revenue on the same period last year.

“These businesses are now of significant scale, generating total sales of $189.8 million for the half year, and play a pivotal role in the success of our multi-platform strategy,” My Hywood said.

“Digital platforms continue to build audience share and value. The fact that two of our key metro mastheads, SMH and Age, had print and digital audience growth of 26 per cent over the last five years augurs well for continued growth.

“Online ad yields on our main digital platforms are up 18 per cent when compared with the same period last year.”

My Hywood’s comments were made on the same day that Tony Blamey, general manager real estate, Fairfax Marketplaces (owner of Domain.com), told Real Estate Business that mobile media was now a viable third channel in its own right.

“We’re leading the market [in mobile], and we’re approaching one million app downloads. One third of agent enquiries are now coming from mobile.”

Mr Blamey added that listing numbers and agent subscriber levels have continued to grow for Domain, which stemmed in part from the necessary "marketing investment" Fairfax had made in the Domain brand.

The Fairfax Media result appears to contradict calls by Ted Pretty, former group managing director at Telstra, that REA Group – owners of realestate.com.au - needs to engage more with print publications if it’s to succeed long term.

“REA’s Achilles heel is its seeming unwillingness to embrace its brothers at News to ensure its franchise is unassailable in the long term,” he said in a letter to the editor, published in yesterday’s Australian Financial Review.

REA Group is majority owned by News Limited.

“For real estate, unlike the jobs, travel and dining verticals, there is a strong case to be made for a bundled offering of online advertising with high-quality regional/local print, particularly when the local agents own a chunk of the print.”

His letter was in response to comments made by REA Group CEO Greg Ellis that Fairfax’s recent purchase of the Melbourne-based The Weekly Review was a bad move by the publisher.

It also comes immediately after REA Group announced a 32 per cent jump in net profit for the half year to December 2011.

Fairfax Media, which saw its revenue for the period drop by five per cent on the corresponding period, to $1.23 billion, also announced a three-year plan to reshape the company around core capabilities in content delivery and advertising sales.

Mr Hywood said: “Only 30 per cent of our current expenditure is on our core functions of producing editorial content (which is our major way to differentiate ourselves from other media business) and selling advertising.

“We will be changing that mix as well as reducing overall costs, through a variety of measures, including: reducing print and increasing digital distribution; sharing content across platforms; centralising sales, systems and services; focusing on audience versus circulation; reducing duplication; partnering and outsourcing; increasing efficiency and flexibility; and building capability.

“Fairfax of the Future will deliver more earnings growth through cross-platform content – from a sustainable cost base. We have established a project office to ensure this process is completed.”

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