Fairfax master of its own Domain
The restructure creates five divisions, and the new heavyweight is Australian Publishing Media, which contains all the group's print and online news-oriented assets including The Age, The Sydney Morning Herald, The Australian Financial Review and regional media. It will be run by Allen Williams, who successfully consolidated Fairfax New Zealand. Another key appointment is Ed Harrison, who crosses from being the commercial director of the old Metro Media division to preside over sales across the enlarged publishing division.
The other divisions are digital ventures, which will house transaction-oriented online businesses including Stayz and RSVP; Fairfax Radio; Fairfax New Zealand; and the new Domain division, which houses the Domain business and the group's Metro Media Publishing real estate and specialist publishing joint venture.
The big Australian Publishing Media division will have four units - news media, business media, life (or lifestyle) media and community media - but key support functions for them including sales, marketing, business planning and information technology management will be rationalised to create a unified support platform.
Chief executive Greg Hywood said in February that the group was on track to deliver annual cost savings of $251 million a year by June 2015, but that more savings were being sought. This restructure delivers some of them, as Fairfax deals with the structural shift from print to online media, the pressure on revenue that accompanies the change, and a cyclical downturn in activity and advertising demand that began during the global financial crisis and is persisting.
More changes will come as Fairfax reshapes itself for the new media environment. It's a balancing act as the group looks to use its resources more efficiently by sharing and networking them at all levels while maintaining and developing the separate identities of its key media brands.
Domain's move into the spotlight might be the thing that interests Fairfax investors the most.
Morgan Stanley estimated in August last year that Fairfax's digital media business was worth $704 million and that within that total the successful Domain business was worth $474 million. That was based on a multiple of 12 times estimated earnings.
Morgan Stanley's argument last year was that the value of Fairfax's digital business was not being reflected in the group's share price, which hit a low of 36¢ in mid-October. The shares have bounced back, but at Thursday's 1¢-lower close of 61¢ in a weak market, they still only valued Fairfax at $1.43 billion, making Domain a key and potentially still not fully recognised asset.
Hywood said on Thursday that making Domain a "stand-alone division" recognised the significance of the real estate sector for the group. The move is also going to make it easier to value Domain inside Fairfax, and as a potential spinoff or outright asset sale. In a tough media market, that can't hurt.
NBN a simple rewire
There's a bit of work to do before the ACCC and NBN Co produce a final access undertaking governing NBN's wholesaling of broadband to telco retailers. But only a bit, and when they are done they can get ready to do it again later this year.
There is agreement on a price cap, agreement that the NBN can recoup reasonable costs and make a reasonable return, and agreement on a structure that allows elements of the 27-year access regime to be locked in for shorter periods.
The ACCC wants a few more things, including greater oversight over the withdrawal and introduction of new NBN products to ensure they do not become a Trojan Horse for price rises, the ability to review and change the mix between NBN access prices and usage prices if usage goes up (that should drive usage prices down as usage increases) and the removal of non-price terms from the undertaking including response times and service levels.
NBN will be happy to negotiate non-price terms directly with the telcos, and won't push too hard against the other proposals.
Of course, a Coalition government would fundamentally change the NBN project, rein in the NBN and, if reports are correct, also allow wholesale competition. A renegotiation of the NBN's access regime is therefore likely to be needed after the September election. The work that has already been done should make for a relatively simple rewrite.
mmaiden@fairfaxmedia.com.au
Frequently Asked Questions about this Article…
Fairfax Media has reorganised into five divisions to eliminate duplicated management functions and create clearer profit centres. The aim is to use resources more efficiently as the group adapts from print to online, cut costs and make high-performing assets — like Domain — more visible to investors.
The restructure creates Australian Publishing Media (which houses The Age, The Sydney Morning Herald, The Australian Financial Review and regional media), a Domain division (Domain business plus the Metro Media Publishing real estate joint venture), digital ventures (transaction-oriented online businesses such as Stayz and RSVP), Fairfax Radio, and Fairfax New Zealand.
Fairfax plans to rationalise support functions — sales, marketing, business planning and IT — into a unified platform across publishing units. This is part of the group's program to deliver annual cost savings (the company previously targeted $251 million a year by June 2015) as it responds to declining print revenues and shifting online dynamics.
Separating Domain into its own division highlights the real estate listings and search business as a clear profit centre, making it easier to value. That visibility can support potential outcomes such as a spinoff or asset sale and helps investors see how much of Fairfax’s value comes from its digital real estate operations.
Morgan Stanley estimated Fairfax's digital media business was worth about $704 million and that Domain alone was worth roughly $474 million, based on a multiple of 12 times estimated earnings. The analysis argued that the digital business value wasn’t fully reflected in Fairfax’s share price at the time.
Yes. Fairfax intends to share and network resources at all levels to improve efficiency while maintaining and developing the separate identities of its key media brands. It's described as a balancing act between centralising support and preserving distinct brand identities.
According to Fairfax’s CEO Greg Hywood, making Domain a stand-alone division recognises its importance and will make it easier to value — which opens the door to the possibility of a spinoff or outright sale. The article presents this as a potential outcome, not a confirmed plan.
The article says the ACCC and NBN Co have largely agreed on a price cap, cost recovery and a structure for the access regime, but the ACCC seeks more oversight on product changes and pricing mix. It also notes that a change of government could prompt a renegotiation. Investors in telcos or infrastructure should watch final terms, ACCC oversight measures, and potential post-election changes that could affect wholesale access and competition.
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