Investors cheer media losses

A tale of two losses it may well be, but both Seven West (SWM) and Fairfax Media (FXJ) have found favour on a day of brittle investor confidence.

Traditional media is facing a bleak future as new technology drains audiences and leaches revenue from businesses that once captured the attention of investors and the power elite.

The Fairfax result this morning was dominated by shrinkage; of revenue, earnings, employees, costs and debt.  Often portrayed as a company locked in a death spiral, attempting to slash costs faster than earnings drop, there were some encouraging signs on its much vaunted transformation, particularly with the take-up of digital subscriptions.

The statutory result, a $16.4 million loss, includes a $444 million impairment charge on regional, printing and agricultural divisions.

Given Fairfax is priced on worst case scenario, the hint of good news on its digital strategy and the fact that revenue declines slowed, lifted the stock price 1.7%. It was aided by a slightly better than anticipated final dividend of 1c.

But the extent of the incompetence, arrogance and inexperience of previous management has been borne out this week.

Fairfax’s revenue base has been decimated by Seek, Realestate.com.au and Carsales, which this week reported a combined $334.2 million in earnings with respective rises of 8%, 26% and 17% respectively.

Seven West’s $69.8 million loss included $295 million of impairments, mostly related to its magazine division.

Its Perth based newspaper, as a monopoly, is holding up better than many others but chief executive Tim Worner is under no illusion about the extent of the structural challenges facing the operation.

Investors greeted the result with enthusiasm, sending the stock almost 4% higher. Television accounts for the majority of the earnings and Worner believes it can maintain its dominant position in the market.

He also brushes aside the challenges facing free to air television from the NBN. Its introduction, he believes, will enhance Seven West given it is in the business of creation and control of Australian programs.