Stop the press for a man­age­ment f iasco

The Weekend Australian - Review - - Books -

THERE are two stun­ning rev­e­la­tions in Colleen Ryan’s lat­est book on the Fair­fax saga, one at the start and the other at the end. They dis­til in hard num­bers the cost to the com­pany and its share­hold­ers of mis­takes made by its board and man­age­ment a decade ago, at a time when me­dia groups glob­ally were be­ing chal­lenged by the ma­trix of noughts and ones known as dig­i­tal tech­nol­ogy.

Even the dam­age in­flicted by War­wick Fair­fax Jr’s takeover fi­asco in 1987 pales in com­par­i­son. In the early 2000s, at a time when Fair­fax was del­i­cately poised to make a re­turn po­ten­tially to the in­flu­ence and prof­its that it en­joyed in the 1970s and 80s or rush head­long for the knacker’s yard, it chose the knacker.

Iron­i­cally, the rev­e­la­tions Ryan pro­vides are es­sen­tially the same num­bers put dif­fer­ently. In case the reader missed the sig­nif­i­cance the first time (on page 12), by the time they reach the other book­end 246 pages later, it hits like a sledge­ham­mer. Eight bil­lion dollars of mar­ket cap is now tied up in realestate.com.au, carsales.com.au, and Seek. That ba­si­cally came out of Fair­fax, and Fair­fax is worth $1.3 bil­lion. That is the scale of the tragedy.

Ryan is quot­ing Daniel Pe­tre, Kerry Packer’s on­line guru from the late 90s, who she re­ports has just sold a small on­line busi­ness to Fair­fax as the com­pany con­tin­ues to strug­gle with the ir­re­versible changes wrought by dig­i­tal tech­nol­ogy, and its busi­ness con­tin­ues its death spi­ral in re­sponse to re­lent­less cost-cut­ting and fall­ing rev­enues.

Fair­fax: The Rise and Fall is a fas­ci­nat­ing read. Ryan, draw­ing largely on Gavin Souter’s books trac­ing the com­pany’s early his­tory, takes the reader from the be­gin­nings of the Fair­fax fam­ily’s me­dia em­pire in the mid1800s through to the fam­ily ten­sions in the 1970s that led even­tu­ally to War­wick Jr’s dis­as­trous 1987 takeover, on which much has been writ­ten, in­clud­ing by Ryan.

But I want to fo­cus on what hap­pened af­ter the con­sor­tium led by Cana­dian Con­rad Black took con­trol of Fair­fax from the banks at the end of 1991, and even more specif­i­cally af­ter he was forced to sell, lick­ing his wounds, in 1996.

The rise is a great story, but the de­cline and fall of Aus­tralia’s once most pow­er­ful me­dia group fills the reader with a mix­ture of anger and sad­ness. It is sad be­cause the peo­ple who watched the group — its friends, em­ploy­ees, and even its ri­vals and read­ers — could see this com­ing like a slow-mo­tion train wreck. This is no ben­e­fit-of-hind­sight ex­er­cise.

Ryan in­ter­twines the two pow­er­ful forces at work on Fair­fax by the time Black fi­nally sold out of Fair­fax to tend to chal­lenges else­where in his em­pire. The con­stant con­trol strug­gles and board­room fac­tion-fight­ing that slowly drained its strength and pro­duced some bizarre man­age­ment changes di­verted the com­pany as dig­i­tal was hav­ing a ris­ing im­pact, par­tic­u­larly on the way we com­mu­ni­cate.

For Fair­fax, th­ese changes were par­tic­u­larly omi­nous and cer­tainly more threat­en­ing to its tra­di­tional busi­ness, clas­si­fied ad­ver­tis­ing rev­enue, than for its main ri­val, News Limited (pub­lisher of The Aus­tralian). News re­lied more on rev­enue from its mass cir­cu­la­tion news­pa­pers and was part of a larger global group that in­cluded a US movie stu­dio and a tele­vi­sion net­work. Its Aus­tralian news­pa­pers are less than 1 per cent of its busi­ness.

The classifieds that nour­ished Fair­fax from its ear­li­est days had, by the 70s, pro­vided the group with the com­mer­cial strength to em­ploy the best writ­ers and run the most im­por­tant sto­ries in com­par­i­son with its ri­vals. The Syd­ney Morn­ing Her­ald in the 80s was ar­guably the coun­try’s most pow­er­ful pa­per. In its hey­day be­fore War­wick Jr moved so fool­ishly, it was con­tribut­ing $60 mil­lion a year to Fair­fax’s be­fore-tax profit. This was a lot of money in those days. Its week­day edi­tions would barely be break­ing even to­day.

Strong prof­its led to bold jour­nal­ism and creative pub­lish­ing. Fair­fax led the way in de­vel­op­ing new ti­tles and pay­ing good money for the best edi­tors and writ­ers. It had the money to pro­tect its mast­heads from those who tried to use the defama­tion courts to sti­fle in­quiry. Sup­ported by its clas­si­fied rev­enues, it could af­ford to ig­nore threats by com­pa­nies or gov­ern­ments to with­draw ad­ver­tis­ing (as Bond Cor­po­ra­tion and Wran La­bor did in the 80s) when re­portage on their ac­tiv­i­ties got a bit hot. The threat to with­draw ad­ver­tis­ing usu­ally re­sulted in the pa­per in­ten­si­fy­ing its in­quiries.

The bal­ance of me­dia power be­tween Fair­fax and News shifted, though, dur­ing the 90s, as News in­vested more in its ti­tles, par­tic­u­larly The Aus­tralian, while Fair­fax be­came in­creas­ingly ab­sorbed in its in­ter­nal power strug­gles and out­side threats from its un­sta­ble share reg­is­ter and from cor­po­rate preda­tors, mostly in the form of Kerry Packer and Ru­pert Mur­doch.

Nei­ther group had an inkling at this stage how much change dig­i­tal tech­nol­ogy would in­flict on news­pa­per rev­enues, but it was clear one thing was hap­pen­ing — clas­si­fied rev­enue was start­ing to fall as peo­ple dis­cov­ered an ar­ray of new ways to buy and sell on the in­ter­net, in many cases with­out charge.

As the Fair­fax board and man­age­ment tur­moil reached a crescendo in 1998 with the sack­ing of Fair­fax’s most se­nior edi­to­rial ex­ec­u­tive, John Alexan­der — and then of Bob Mus­cat, the chief ex­ec­u­tive who had fired Alexan­der — out of the blue the board ap­pointed aca­demic and man­age­ment con­sul­tant Fred Hilmer.

On hear­ing of Hilmer’s ap­point­ment, lead­ing me­dia an­a­lyst Roger Col­man re­marked, ‘‘ This is great news for News Cor­po­ra­tion.’’ Even the chair­man at the time, for­mer Packer side­kick Brian Pow­ers, ad­mit­ted to a se­nior edi­to­rial ex­ec­u­tive that ‘‘ this is an ex­per­i­ment’’. It could be added — and no doubt the ex­ec­u­tive was think­ing this too — that this was not the time to in­dulge in ex­per­i­ments.

Packer’s view on Hilmer at the time is couched in words not re­portable in this, a fam­ily news­pa­per.

Ryan de­votes a chap­ter to the bum­bling, sham­bolic pe­riod of Hilmer’s man­age­ment, widely re­ferred to as the ‘‘ lost years’’. That he stayed in the role for seven years un­til 2005 is tes­ta­ment only to the fact that the board over­see­ing his time at the helm was equally dys­func­tional.

Ryan gives Hilmer credit for recog­nis­ing that the in­ter­net was go­ing to change the in­dus­try, but also points out he couldn’t grasp that the rea­son Fair­fax had been so strong, and had sur­vived a decade of in­sta­bil­ity, was its clas­si­fied rev­enues — the ‘‘ rivers of gold’’, as Mur­doch orig­i­nally de­scribed them.

Hilmer set up the much-ridiculed F2 dig­i­tal di­vi­sion on the top floor of the Syd­ney Mar­itime Mu­seum, within sight of Fair­fax’s Dar­ling Park head­quar­ters, but suf­fi­ciently dis­tant for it to have lit­tle con­nec­tion or even rel­e­vance to Fair­fax’s core com­mer­cial busi­ness — the classifieds.

In­stead, he fo­cused on a web di­rec­to­ries por­tal called Ci­ty­search, on which he spent more than $130m. He spent just $8m de­vel­op­ing web­sites for the crit­i­cal cars, jobs and prop­erty web­sites. ‘‘ He didn’t un­der­stand how we made our money,’’ one se­nior edi­tor told Ryan (with some bit­ter­ness, she notes).

Then there was the in­ter­minable search for ways to mea­sure jour­nal­ists’ pro­duc­tiv­ity, and the man­age­ment strat­egy days (the day at the Olympic pool at Home­bush where ex­ec­u­tives were handed ‘‘ a whis­tle, a pair of gog­gles or a swim­ming cap . . . to de­ter­mine which team you are on’’ was greeted with some cyn­i­cism).

It was about this time, while Hilmer was throw­ing money at F2 and Ci­ty­search, that op­por­tu­ni­ties to buy into start-up web­sites that were po­ten­tial ri­vals for Fair­fax’s crit­i­cal clas­si­fied ad rev­enues — carsales.com.au, realestate.com.au and Seek — came along.

Th­ese op­por­tu­ni­ties were well known at the time, as were the con­se­quences of Hilmer’s de­ci­sions. As a busi­ness colum­nist writ­ing for The Aus­tralian, I was for­tu­nate enough to re­ceive a phone call from one se­nior edi­to­rial ex­ec­u­tive Hilmer had sacked be­cause of dis­agree­ments over dig­i­tal strat­egy. This for­mer ex­ec­u­tive told me in de­tail what he and oth­ers had been urg­ing Hilmer to do — to put

Fred Hilmer; be­low,

Gina Rine­hart

Newspapers in English

Newspapers from Australia

© PressReader. All rights reserved.