Thursday, May 14, 2009

Declining classified advertising for Fairfax mastheads

Report from Eric Beecher on Crikey about classified advertising decines at Fairfax. I doubt if the problem is largely cyclical.

Here's a story you won't read in The Age or The Sydney Morning Herald tomorrow:

This newspaper is publishing 50 fewer classified advertising pages each week than it was a year ago, according to the latest research by Goldman Sachs JB Were. This reduction in advertising translates into at least $1 million off this newspaper's profits every week compared to a year ago.

That is the picture that emerges from the latest Goldman Sachs JB Were page-count statistics of Fairfax's major newspapers, released today. They present difficult reading for anyone who cares about the future of newspapers, and raise further doubts about the competence of the Fairfax management and board as trustworthy custodians of Australia's two greatest newspaper mastheads.

According to Fairfax CEO Brian McCarthy, speaking three months ago, the problems afflicting newspapers are purely cyclical.

"I have been around long enough to know this is only a short-term thing," he said.

"The law of economics will take place ... It's just a matter of working through the cycle."

He also argued that Australian newspapers are not affected by the same structural problems afflicting US and UK newspapers because Australian newspapers are better managed.

Today's page-count numbers -- continuing a trend that has been unfolding throughout this year -- show that average classified advertising pages in The Age, SMH and Financial Review were down 55% year-on-year in April, following declines of 47% in March, 41% in February and 40% in January. At the SMH, employment ads fell 60%, real estate 50% and autos 80%. At The Age, employment and auto ad pages declined by around 65% in April, while the decline in real estate pages fell 65% compared to last year. At the AFR, display classified property ads fell 62% and employment fell 49% on a year ago.

Another alarming trend to emerge from today's Goldman Sachs research is a large reduction in the total pages being published by the three Fairfax flagship newspapers. Each paper is running around 100 fewer pages each week than it did a year ago -- supporting the anecdotal evidence that as well as lopping off pages they no longer fill with ads, The SMH, Age and AFR are cutting hard into editorial pages to save costs (and deprive readers).

Every stakeholder in Fairfax -- readers, staff, shareholders and Australians who value their newspaper institutions -- should be praying that the company's CEO is correct in his thoughtfully historic analysis that the collapse in profits at his flagships "is only a short-term thing". And that he is also right about his contention that great management will save Australian newspapers from the maelstrom that is decimating the American press.

They should also be praying that Rupert Murdoch was wrong in his prognosis of newspapers last week:

There is no doubt the traditional newspaper business model has to change, even though the present situation I think has been greatly exaggerated by the current recession ... classified revenues are undoubtedly migrating to the web, probably not to return.

If Murdoch is right about classifieds never returning to newspapers, the $100 million+ that has evaporated from the annualised profits of The Age and SMH will also never return -- and that would raise a troubling question about the viability of the two newspapers that used to be the best in Australia.

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