* 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 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
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
"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
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
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
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.
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
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
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
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,
"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,
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
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