The work of journalists and a free press are as important to our democracy as the work of elected members of Parliament. And so the dramatic deterioration in the financial fortunes of the newspaper business has a significance that goes way beyond the interests of Fairfax and News Ltd employees and shareholders.
It was Rupert Murdoch no less who said the internet will destroy more profitable businesses than it will create, and while many would argue with that as a general proposition it is certainly true of his own and other similar media empires.
The journalists of Fairfax, just like those at News Ltd, are being read by more people than ever before. The internet has dramatically expanded their reach. In the past five years, Fairfax’s metropolitan mastheads have seen their audience increase by 26 per cent.
But at the same time, the internet has devastated the revenues of newspapers. The digital world offers vastly more efficient platforms for advertising, especially classified advertising, than print could ever do. It is the better mouse trap.
So how to make a buck? ‘‘Charge for content’’ is the answer and here more challenges arise. We have been used to getting news on the web for nothing, so there is great resistance. The financial newspapers have a head start because the business community are accustomed to paying for financial information.
General publications are still struggling to make a pay model work. Some, like The Times in London, have gone for an impermeable paywall – if you don’t pay you cannot see their site. So far that doesn’t look successful.
The other approach, which The New York Times is using and Fairfax will adopt, is metered use. Readers can access so many articles a month for free, after which they have to pay.
JPMorgan has recently estimated the impermeable paywall converts about 3 per cent of the previous ‘‘free access’’ audience to paying customers, whereas metered use models convert about 30 per cent. Only time will tell for sure.
At the same time we have the mining billionaire Gina Rinehart building up a stake in Fairfax and demanding seats on the board. Already there are knee-jerk denunciations of her as a malignly motivated predator, as well as sycophantic ‘‘Gina the saviour’’ puff pieces.
Let us be clear-eyed about this. Rich people have bought newspapers and television stations for a variety of reasons. Almost all of them have enjoyed the opportunity to exercise influence, especially over politics and politicians who rarely disappoint in the deference they offer in return.
But, for the most part, moguls have primarily sought to make money from their media assets. Murdoch is a good example. With a few exceptions he runs his newspapers with the aim (not always realised) of making a profit.
Many are concerned that Rinehart’s motives are not commercial and that she is seeking control of Fairfax purely to exercise political influence. She is apparently a woman of strong opinions, especially in relation to issues that affect her iron ore investments.
Now there is nothing wrong, or unusual, with wealthy proprietors expressing their views in their newspapers. They do it all the time, either directly or by choosing editors and writers who learn to do their master’s bidding without the need for too much overt direction.
Many journalists object to this, but you have to ask why it is illegitimate for the person who owns a newspaper to determine the editorial direction of the newspaper they own.
Despite this, most newspapers have sought to portray themselves as being objective. They do that not least because they seek a wide audience, embracing readers of many different opinions.
And so it was that the very first edition of The Sydney Morning Herald was published on April 18, 1831, with Alexander Pope’s couplet printed under its masthead: ‘‘In moderation placing all my glory/While Tories call me Whig – and Whigs a Tory’’.
Clearly you can get more for your advertising and more influence if you are read by Whigs and by Tories.
Rinehart has an additional challenge in that unlike most media moguls, by far her most important business interests are not in the media. If she were to control Fairfax, there would be a constant question as to whether the papers’ coverage of issues related to mining was fair and balanced.
The worst world for Fairfax shareholders would be if Rinehart were to achieve effective editorial control of the papers without taking over the company and paying a control premium.
They would then run the very real risk that the papers’ value, hard copy and digital, would be diminished by a perception that they were pushing not just a proprietor’s political views but the commercial interests of that proprietor too.
This would affect readership and advertising. Of course, the more a paper is seen as a mouthpiece for the proprietor’s personal agenda, the less influence it will have as readers turn to more trusted publications.
In that sense if the objective of Rinehart is to exercise influence, it may be at odds with the shareholders’ interest in maximising the value of the company.
So it is not unreasonable for the board to say to her: ‘‘If you want to exercise editorial control over the company, then make a takeover bid and after you have bought it, it is yours to manage or indeed mismanage to your heart’s content.’’