*contains graphic material

As is well-known, Fairfax (FXJ) are restructuring their business significantly. The essence of the restructure is 1,900 redundancies, a digital paywall, fully integrated print and digital content, tabloid format, and merged newsrooms for the SMH and the Age.

This all makes great sense, and should have been done at least 5 years ago. Since the Hilmer days and even earlier FXJ have a unique habit of eroding shareholder value by either doing nothing (not buying into Seek or Business Spectator), or doing the wrong thing (establishing a separate digital unit). It’s refreshing to see them doing something right for once.

I want to argue that now might be a good time for FXJ to consider merging the Age and SMH mastheads into a single, national paper – the Australian Morning Herald (or whatever). This was no doubt discussed internally, and rejected, for a few reasons:

• Too radical a step: The FXJ board is not known for their adventurous instincts, and with a merging of newsrooms and a shift from broadsheet to tabloid, it might have been considered too much to swallow.
• Cashing in the brand equity of SMH and The Age: both papers have been around for 150+ years, and are trusted news brands. Cashing these brands in on a risky new masthead brand is, well, risky.
• The Sydney/Melbourne problem: one of the historic objections to a national masthead has been about how to address the differing local preferences of the Sydney and Melbourne audiences, which would in practice account for 70%+ of readership. Conventional wisdom has always been that if the perception is that the title is Sydney-centric, Melburnians won’t read it and vice versa. The biggest stumbling block is the NRL/AFL rift between the 2 cities – what do you put on the back page?

By pooling newsroom resources the SMH/Age will be half way to a single paper – the last step is the masthead. I think there’s some good arguments why FXJ should consider this last, radical move.

1. It’s a positive story: When the SMH and the Age re-launch as a tabloid, readers (and shareholders) will be acutely aware they are reading a compromised, cutdown, cheaper version of their newspaper. FXJ will be hard pressed to sell a tabloid format paper produced by less journalists as an improved product.

However by combining mastheads into the AMH, FXJ can create a better product than either the standalone SMH or Age. It will be entirely possible for FXJ to make  significant cost-savings and yet still introduce to the market the best newspaper in the country (realistically that’s currently the Australian). When was the last time FXJ could go to consumers, shareholders, and even their own staff with a story of optimism?

2. Potential path to sales growth: It’s not complicated; the AMH can be marketed and sold in SA, QLD, WA, NT and TAS. With cost-savings from merging the titles FXJ might be able to afford a significant marketing campaign to launch the title, with an aim of offsetting any potential loss of audience in traditional Melbourne/Sydney markets.

3. Longer sunset for print: FXJ and every other newspaper owner (even if they won’t admit it) know they are managing the decline of their traditional print revenue base. Somewhere in FXJ there exists a spreadsheet that extrapolates advertising and circulation revenues and estimates the point at which the SMH and Age printing presses will need to be switched off. They both have similar readerships, so it’ll probably be simultaneous.

One combined masthead, however, buys some valuable time (as long as the circulation for the AMH is bigger than either the SMH or Age). Even an extra year will give FXJ more crucial planning time to enter the digital future.

4. A stronger digital brand: while having separate brands for Sydney and Melbourne makes a lot of sense in print, in digital it’s less clear cut. Readers consume news from all over the world, with little respect for geography. e.g. bbc.co.uk is a Top 10 news website in Australia.

Having separate digital brands for Sydney and Melbourne makes little sense because of the different ways in which people consume online content to papers. Having huge AFL coverage in the SMH is a problem because it (a) is a roadblock that needs to be traversed by the reader in order to get to their true interest and (b) takes up valuable space in the paper. Online, if you’re interested in NRL, you can easily find the NRL section of a site, and there are effectively no space restrictions as to how much content is there. You are not forced to wade through pages of AFL to get there, and the NRL is not squeezed for space.

Of course, there’s a number of practical issues with the AMH strategy, not least of which is making major changes to a product set that’s only expected to be around for another few years. Other issues are the investment required to print, distribute, and report on states other than Vic/NSW. I should stress that I ONLY think this would be a good strategy if it can deliver further cost-savings over and above FXJ’s current announced plans. If it can do that, then I think it’s worth considering.