Rinehart and the myth of editorial independence

The business of publishing is about monetising unique content that readers are willing to pay for. The notion of editorial independence or editors that are immune to management interests are myths that distract from this purpose.

One of the big objections offered by the "Rinehart resistance” is the threat the world’s wealthiest woman poses to Fairfax’s "editorial independence." I would argue that this is a flimsy aspiration, and when folks advocate it they are invariably seeking autonomy from proper oversight and accountability.

Perhaps Terry McCrann, who like all News Limited (and, in the past, Channel Nine and ACP) journalists has had to live with the reality of reporting to a private media owner, puts it best. In a missive today, McCrann addresses Fairfax:

"You picked a fight you could never win. On the utterly ridiculous basis that the board should have no say in a company's core product. You probably try to draw a line between 'the product', the paper, and its journalism. It is a line that only exists in the fantasies of journalistic pomposity.”

It is silly to conceive of editorial teams as genetically impartial and impervious to imposing their preferred agendas on the products they deliver. All editors and producers control the content that is broadcast by their platforms.

All content is, therefore, a manifestation of the individual manufacturer’s personal biases. This is true of private radio and television, newspapers, and online channels alike. Think about it. Do Channel 7 and Channel 9 project the preferences of David Leckie and David Gyngell? Of course they do.

A related criticism of Mrs Rinehart is her request that, as a Fairfax board member, she is able to influence the business’s employment decisions. This is an absolutely reasonable entitlement that all board members of all private companies possess. In media land, owners hire and fire their editors and senior managers as they please. To pretend otherwise is a fiction.

A third misconception is that Mrs Rinehart will be able to "control” Fairfax with a 20 per cent shareholding and two to three board seats. This is nonsense. In contrast to Rupert Murdoch, she will never have the luxury of "super-voting" shares that facilitate control with a minority equity interest. As a very substantial shareholder, Mrs Rinehart will be influential, to be sure. But that is an owner’s legal and economic right.

As Malcolm Turnbull points out, Mrs Rinehart will only truly control Fairfax if she decides to buy the entire business. Assume she does, and, as some people fear, imbues it with a far-right-wing agenda. That would, of course, be her prerogative. But it would result in the marginalisation of Fairfax’s products to a very narrow audience. The business would, as a consequence, lose its most valuable asset: its broad-based consumer market. Mrs Rinehart would simply end up preaching to the converted. This approach is, therefore, oxymoronic.

In my column yesterday, I argued that with a share price near 20 year lows, Fairfax is in demonstrable need of believers; investors who are willing to support it with deep financial resources and endure years of structural adjustment. Mrs Rinehart is evidently one of the few people in the world happy to do so. Her actions have already been a force for catalysing constructive change, with the board yesterday announcing an expedited reengineering project.

This debate helps reminds us what Fairfax is, and what it is not. Fairfax is a for-profit, private media enterprise. Its number one priority is making money for its shareholders by creating products that its customers value. To be clear, Fairfax has no mortgage on longevity. By fighting for sustainable profitability, Fairfax will secure its long-term survivability, and be able to continue offering employment to Australia’s many talented journalists.

Fairfax is not a public broadcaster with an unalloyed responsibility for producing broad and "balanced” products. As I explained in 2010, this is the role of the ABC, which has been unfairly maligned over the years by members of the private media. The ABC owns the "commodity” news and commentary space, and supplies products where private markets are not willing to do so.

If you want to build a valuable business model, don’t compete against the ABC. It is not going away. Your job is to add "monetiseable” value to the core news domain by originating more analytical, experiential, and, most importantly, unique content that your users will pay for.

Christopher Joye is a leading financial economist and a director of Yellow Brick Road Funds Management. The author may have an economic interest in any of the items discussed in this article.


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