How recent power posturing sped up Fairfax's decline

The blocking of successful Rural Press chief Brian McCarthy from Fairfax's levers of power, particularly in the digital space, distracted the company in its hour of greatest need.

Alan Kohler gets most things right, so it is all the more disappointing that he joins in the current rewriting of the recent history of Fairfax, as authorised by the present board and administration. His recent commentary (Killing Fairfax, or making it unwell, July 24) sounds like little more than another justification for why the 'old guard' journalists had to get back in charge.

After Fairfax’s purchase of Rural Press, Brian McCarthy became deputy to chief executive David Kirk with responsibility for the print businesses only. One of his great frustrations – and for many others, including me – was that he couldn’t influence digital strategy, which was dominated by Digital chief executive Jack Matthews, reporting directly to Kirk.

When I became Fairfax Metro NSW and ACT chief executive and publisher midway through that year, The Sydney Morning Herald was being “managed for decline", without any strategy in place to either protect or convert to digital revenue, what in essence was still a strong real estate classified and display advertising base. A clear indication of where minds were at was provided by my first look at the new Darling Island building, which was to become Fairfax’s new Sydney headquarters.

Even at this late stage in the media revolution (2008), the silos were still to exist. There was still obviously no plan for a sensible integration or digital strategy in which the whole business shared. Sydney Morning Herald staff selling advertising could offer only print; digital staff only digital, while the majority of competitors in all media were offering packages across platforms to maintain revenue share.

It is true that the 'newsroom of the future' on the editorial floor of the Darling Island building included provision for journalists working on the SMH website, but the SMH editor and management had no control over what went online, or the strategy. Nor was significant progress possible on apps based on editorial excellence because of ongoing disputes about strategy, control and development.

While its employment and motor vehicle classifieds revenue base had all but gone, the SMH  at this stage was still making good profits. A restructure of the newspaper format and the advertising department improved profitability and 'managing for decline' was a phrase no longer heard. However, the 'rivers of gold' had created what was obviously an unsustainable cost base. The average per head editorial cost at The Sydney Morning Herald was around 20 per cent more than that of The Age. This was one reason other areas of the business wanted to insulate themselves from the SMH. Printing costs, driven by over-investment in the Chullora plant and a very generous workplace agreement, were also far in excess of any benchmark. It left the business a sitting duck when the GFC started to bite in 2009.

The Age at that time was also making good profits. However, in the various commentaries and histories, little has been made of the management restructure in 2008 that made marketing manager Antony Catalano redundant. Catalano had The Age’s best (some might say only) relationships with real estate agents. To set him loose without a contingency plan was foolhardy. When he launched his publishing joint venture with real estate agents, it not only wiped around $15 million in profit from The Age, but lost potential content and revenue for the Domain real estate website.

Catalano’s departure also added another significant force to what was referred to in Sydney as the “management in exile”. This group of former senior Fairfax executives based in Melbourne was popularly believed to be the preferred channel for the regular leaks to The Australian and Crikey, which played a part in creating the climate for the sacking of Brian McCarthy.

In Fairfax: The Rise and Fall, Colleen Ryan appears to suggest that all McCarthy and other former Rural Press executives brought to the table was cost-cutting; that they didn’t understand the difference between regional and metro journalism. She and other former senior Fairfax journalists who have written on the subject fail to mention that during this period, for the first time in its distinguished history, The Sydney Morning Herald won the Daily Newspaper of the Year title, and then repeated that success the following year. The Sun Herald also was twice awarded Sunday Newspaper of the Year.

In December 2009, when all divisional chief executives were asked to make presentations to the board about future strategy, there was clear agreement between the Sydney and Melbourne publishers about the need for a publisher-chief executive role across both cities, responsible for both print and digital publishing and the implementation of publishing strategy. The role would replace three existing roles.

McCarthy wanted to appoint Allen Williams to this position. Indications in the boardroom while I was present were that his recommendation had support. But the chairman, Roger Corbett, cut short discussions. His motives became very clear over the next 12 months.

The final recommendations of his consultants, Bain and Co, were not substantially different to the McCarthy plan. Window dressing removed, the major exception was that Corbett wanted Jack Matthews in the metro publisher position. McCarthy believed Matthews was not the right fit because not only did he have a poor track record within Digital for achieving targets, he had made his low esteem of journalists known in several speeches.

After his appointment, Matthews said openly that he knew nothing about newspapers. Unfortunately the decisions that were taken under him confirmed that. Sacking top newspaper advertising staff lost the business commercial knowledge, relationships and revenue, as is now acknowledged internally. The slashing of promotional circulation also hurt advertising confidence for little gain on the other side of the ledger. The later change to tabloid and the reduced circulation figures were a recipe for advertisers to drive hard bargains on rate and, in turn, continue the decline of metropolitan Fairfax revenue. That helped bring forward the mass redundancy program, hitting at the heart of Fairfax’s claim to journalistic quality.

It is ironic that more than two years after McCarthy’s sacking, Allen Williams, his original nomination, was called in for an expanded version of the role originally envisaged. And Matthews has been moved on by the “talented, modern journalist” (Alan Kohler’s description) brought on to the board to replace McCarthy, and who appointed Matthews in the first place. What a waste of more than three years at a critical time in the company’s history. 

Any chance Fairfax's metro newspapers had of being better than “the competition you have when you have to have competition” was lost in the 12 months that chairman Roger Corbett worked to undermine McCarthy. In my mind, that will always be Corbett’s legacy. But then again, Jack Matthews reckoned I was joined at the hip with McCarthy.

Lloyd Whish-Wilson was Fairfax NSW & ACT publisher/chief executive  2007-2011. Previously he had been Rural Press chief executive/general manager for ACT, Vic, and Tasmania. He is a former journalist.