Fairfax’s cash cow of daily classified ads was no longer generating enough revenue, and its digital advertising just wasn’t growing fast enough.
Sydney: One of Australia’s oldest names in newspapers ceased trading Wednesday as Fairfax Media Ltd. succumbed to the digital era and was swallowed up by Nine Entertainment Co.
The takeover of Fairfax, named after an English immigrant who bought the Sydney Morning Herald in 1841, creates Australia’s largest multimedia company with assets spanning television, radio, print and subscription streaming. The company’s shares rose 2.3 percent on their last day of trading.
The deal opens a new chapter for Australia’s first television station Nine, which was formerly owned by the billionaire Packer family and relisted in 2013 after a disastrous leveraged buyout and debt-for-equity swap. But even if Nine successfully digests Fairfax, can it fight a war for advertising dollars with Facebook Inc., YouTube Inc. and Google?
Are they a good couple?
It’s hard to think of two more unlikely bedfellows. Fairfax’s big three mastheads, the Australian Financial Review, the Sydney Morning Herald and The Age have brought down corrupt politicians and union leaders, laid bare misconduct in the financial industry and exposed some of the worst cases of corporate excess. Nine, one of Australia’s three main free-to-air broadcasters, is known for its sports and shows like Love Island and Married at First Sight. Unless opposites really do attract, there’s plenty of scope for an abrasive clash of cultures.
What’s in it for Nine?
Fairfax’s traditional cash cow of daily classified ads is long diminished thanks to the Internet, and its digital advertising just isn’t growing fast enough. But the company does have two trophies, which account for most of its value: a half share in streaming service Stan (Nine owns the rest), which is the main local rival to Netflix and has around 1 million subscribers watching shows such as “Billions”; and a controlling stake in property advertising company Domain Holdings Australia Ltd., which like Fairfax has a market capitalization of about A$1.4 billion.
What’s next?
The estimated savings of at least A$50 million ($36 million) from the deal wins Nine some breathing space as it integrates Fairfax’s newsrooms. Beyond that, the takeover hinges on how well Nine sells to advertisers the collective audience that watches, reads and listens to its expanded empire. That could involve sprinkling Nine’s property-renovation television shows with ads for Domain, or it might mean plugging Stan’s new content on every title in the old Fairfax portfolio. The trouble is, Nine isn’t immune to the pressures from new media, either: television’s share of ad spend in Australia has fallen from 30 percent in 2003 to 24 percent in 2017.
Who wins and loses?
Fairfax shareholders are selling up close to the bottom. Fairfax shares were worth A$3.49 apiece in May 2007, but Nine’s offer in July valued them at just 93.9 cents. Staff at Fairfax’s more than 160 regional publications, including the Newcastle Herald, may also fair badly. Deal documents value all the titles at as little as A$100 million and describe the outlook as “relatively poor.” Nine’s timing was better. It secured a cash-and-stock deal when its shares were close to a record. They’ve since slumped by about one third. There could be one other class of winners: crooked executives and lawmakers. They’ll be hoping investigative journalism also dies with Fairfax.