Why the News and Fairfax restructures are different

Comparing the structural shakeups at Fairfax and News Ltd over the last two days, News' may have looked 'anti-climactic', but it was just as significant and came from a more positive place than its rival's.

There was a telling description of Kim Williams’ unveiling of his new strategy and structure for News Ltd. Today. ‘’Anti-climactic,’’ was the conclusion one of those asked for a response to the announcements by Sky News Business.

Actually it wasn’t – Williams unveiled a radical reorientation of News within the Australian media landscape – but the absence of the much-anticipated blood-letting that was one of the centrepieces of Fairfax Media’s restructuring earlier in the week meant that there was no body count in the headlines.

That doesn’t mean that there won’t be large-scale job losses over time, as there inevitably will be, (Williams would only say that they would amount to less than the 1900 announced by Fairfax) but rather that Williams was sophisticated enough, and in a strong enough position, to be able to avoid putting hard numbers and timing around them.

There are several dimensions to what News announced today. The major one was the proposed $2 billion bid for Consolidated Media and its Foxtel and Fox Sports interests (Kim Williams’ $2 billion bang) and the somewhat smaller acquisition of Australian Independent Business Media, the publisher of Business Spectator and Eureka Report.

The former represents a major shift in the balance of News’ Australian presence towards the electronic media, while the latter illustrates Williams’ ambition to grow the group’s presence online.

Those deals, and the investment in growth are a stark contrast to the gloomy, even desperate tone, of the Fairfax presentation with its focus on costs, jobs and the accelerating demise of its core metro print mastheads.

They overshadowed the other elements of Williams’ strategy which involves a major organisational restructuring which is in one sense a long over-due piece of house-cleaning but in another is part of that fundamental re-positioning of the organisation.

News embarks on its restructuring from a quite different position than Fairfax. Fairfax’s mastheads, its culture and its cost base were created and embedded by its former dominance of classified advertising markets, the so-called rivers-of-gold that have now evaporated, or at least moved elsewhere.

The classifieds dictated broadsheet papers, an up-market demographic and relatively small albeit affluent audiences, which in turn necessitated high-quality and expensive journalism. With most of that revenue gone and its audience migrating rapidly online, Fairfax had no option but brutal surgery and a bet on its only option for viability, its online presence.

News Ltd is different. It never had meaningful classified revenues or cost bases as generous as Fairfax’s. Its key papers are mass market tabloids with mass audiences. Despite suffering from the digital migration it retains mass audiences. It still has more than 13 million readers a week.

There isn’t quite same urgency in News, which is also part of a massive and massively profitable global media group, as there is within Fairfax even if it is tracking broadly in a similar direction.

The ‘’house-cleaning’’ aspect of Williams’ announcements relates to the group’s organisational structure.

News itself has described its structure as one of a federation of states, with each state having considerable autonomy and within each state a number of businesses having their own relative independence. Inevitably that means a lot of duplication of functions and costs and a lot of lost opportunities from co-operation within a more integrated and streamlined structure.

Some of that probably relates to News’ history. When Rupert Murdoch, against the odds, seized control of the old Herald & Weekly Times in 1987, he inherited a structure which bound the HWT, Advertiser Newspapers and Queensland Press together through cross-shareholdings rather than common management and processes. It would appear than in a broad sense he imposed News Ltd on top of the structure but left its outline intact.

Williams is centralising the group’s commercial and administrative functions while condensing 19 separate divisions into five, including three regional divisions in Victoria, NSW and Queensland. News Digital, which had been a separate fiefdom, will now disappear and be embedded throughout the operations. Editorial is shifting to seven-day rosters, national content pools and multi-platform distribution.

That re-orients the print business towards a digital future without News abandoning it or downsizing it and ought to release very sizeable cost reductions – and the cost of a considerable number of jobs – while simplifying the group’s Byzantine structures and creating the ability to leverage its dominant east coast footprint into its earnings.

It might appear anti-climactic but the combination of actions Williams outlined today represent a change within News that will feel just as radical to its people as those unveiled by Fairfax, only less brutal, made with less external pressure and driven by growth ambitions rather than issues of survival.

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