RPT-UPDATE 3-Australia's Fairfax to slash newspaper jobs as media landscape shifts

Tue Jun 19, 2012 2:18am IST

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* Fairfax to restructure Sydney Morning Herald, The Age

* About 1,900 jobs to go, sees annual savings of A$235 mln

* Media sector in major shakeup, News Ltd seen cutting staff

* Fairfax confirms Rinehart has lifted stake to 18.7 pct

* Fairfax shares rise 7.4 pct, market up 2 pct

By Victoria Thieberger

MELBOURNE, June 18 (Reuters) - Australia's Fairfax Media , publisher of some of the country's leading newspapers, will overhaul its top mastheads and slash almost one-fifth of its staff, the beginning of a widespread shakeup of Australia's media sector.

The media industry's old guard is struggling with a massive shift online, declining advertising revenues for newspaper and TV, and shrinking market share for free-to-air TV as consumers' choices multiply for news and entertainment.

Fairfax - which publishes the 181-year-old Sydney Morning Herald, Australia's oldest newspaper, as well as the Australian Financial Review and Melbourne's The Age - said it will cut 1,900 jobs over three years from its staff of 10,000.

It will also shut two printing plants and reduce broadsheet newspapers to tabloid formats as it refocuses towards online distribution.

"All the world's newspaper companies are experimenting with what sustainability looks like," said Margaret Simons, the head of the University of Melbourne's Centre for Advanced Journalism.

"There is no business model that can support the hundreds of journalists that are employed by companies such as Fairfax," she said.

In the United States, the Times-Picayune in New Orleans made headlines last week when it cut its print editions to three days a week, and in a conference call with analysts Fairfax said its options include a digital-only future if revenues continue to slide.

Trends in the United States point to even tougher times ahead, as the newspaper industry's efforts to boost digital revenue and cut costs fail to keep pace with declines in the print business, a Moody's report said this month, while online advertising sales growth is stalling.

Fairfax is considered vulnerable to a break-up or takeover, possibly by private equity, after its shares this month hit a record low below A$0.60 for a market capitalisation of A$1.4 billion ($1.4 billion), down from A$7 billion five years ago.

MORE CUTS LOOM

Mining magnate Gina Rinehart, the Asia-Pacific region's richest woman with a fortune estimated by Forbes at $18 billion, wants to increase her control over Fairfax but she is not looking to buy out the group, media reports have said.

Rinehart boosted her stake in the publisher to 18.7 percent from 13 percent, a filing by her company Hancock Prospecting showed on Monday, and she reportedly wants one or two board seats, which management has so far resisted. A call and e-mail to Hancock Prospecting seeking comment were not returned.

Fairfax's classified advertisements were considered "rivers of gold" as recently as a few years ago, but revenues have collapsed as online web sites take over markets for real estate, job and car ads.

Shares in Fairfax closed up 7.4 percent at A$0.650 against the broad market benchmark's rise of 2 percent.

Fairfax's announcement is expected to be followed shortly by news of a restructuring at its larger rival, News Ltd, Rupert Murdoch-controlled News Corp's Australian unit.

News Ltd controls around 70 percent of Australian newspapers, one of the most concentrated levels of media ownership in the world, compared with Fairfax's 30 percent market share.

News Ltd is preparing to announce job cuts of up to 1,500 staff from its work force of 8,000, according to a report on Monday on the Conversation, an independent web site run by former Age editor Andrew Jaspan.

The Australian, a News Ltd newspaper, said on Monday that executives would brief investors on the restructuring this week. A spokesman for News Ltd declined to comment on job cuts.

Communications Minister Stephen Conroy said the job losses at Fairfax were disappointing but the restructuring was part of a trend around the world as publishers adapt to the Internet.

"The Internet will continue its march and sectors that were profitable previously are going to struggle as the Internet cannibalises different parts of the economy. It's not something that you can stop, it is not something you can turn back," Conroy told reporters.

TV TROUBLES

Newspapers are not alone in feeling the revenue pinch of declining advertising, driven also by consumers cutting back on spending. In addition, free-to-air TV has struggled as audiences shift to pay-TV and other entertainment options online.

Ten Network, chaired by Lachlan Murdoch and Australia's third-ranked TV network, this month raised A$200 million in a deeply discounted share issue to boost its balance sheet, as quarterly revenue fell 12 percent from a year ago. Ten's share price has collapsed by two-thirds over the past two years.

Rival network Nine Entertainment's owner, CVC Capital Partners, is fighting to retain control of the business as hedge funds circle, with A$2.7 billion in debt due in February 2013.

Billionaire James Packer is hoping to bail out of the increasingly tough media sector completely, aiming to sell his media company Consolidated Media and its 25 percent stake in pay TV operator Foxtel to focus on his more lucrative gaming interests.

Fairfax Chief Executive Greg Hywood said the company's major newspapers were profitable and the changes unveiled on Monday were intended to ensure they remain so.

Of the 1,900 job cuts, about 20 percent would be from editorial, 20 percent from the printing plants in Sydney and Melbourne and the remainder from other parts of the business, Hywood said.

"They have had no choice, unfortunately," said Simon Marais, managing director of fund manager Allan Gray which holds 8.3 percent of Fairfax.

"You had the sense there was structural change happening and nobody was doing anything. The future is very uncertain and you have to ensure that you can be flexible," he said.

Fairfax publishes 400 metropolitan, regional and suburban newspapers and magazines, according to its web site, and owns radio stations and the country's top dating web site, RSVP.com.au.

Under the restructuring, the newsrooms of the Sydney Morning Herald and The Age will be integrated to cut duplication, and an online pay wall system will start in 2013.

The changes will result in one-off costs of A$248 million and lead to savings of A$235 million on an annualised basis by June 2015.

Fairfax also sold down its stake in its New Zealand auction web site Trade Me to 51 percent from 66 percent for proceeds of A$160 million. Fairfax said it plans to keep the majority stake.

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