Bad news, inconvenient truths

by Andrew Fowler

IF NEWSPAPERS WERE reporting about anything else, the headlines would be telling of the apocalypse to come. But journalists have a habit of failing to report bad news about themselves and are particularly inept at revealing the serious difficulties of the organisations that pay their wages. The fact is newspapers, which grew fat on reporting the misfortunes of others, go to great pains to avoid telling their readers the truth about their own woes. The Australian Financial Review in 2015 reported to great fanfare that its weekend paper’s circulation had improved by 1 per cent to 62,643 over the 2014 June quarter. That was certainly true, but the real story was buried: sales of the paper’s main editions, Monday to Friday, were in terrible trouble, down 6.5 per cent, to just 57,243 a day. The AFR even tried to spin that collapse with the argument the newspaper’s rate of decline was slower than that of its main rival, the Australian. Finally the story boasted that a ‘strong growth in digital readership’ was ‘largely offsetting the decline in the print audience’. It said nothing about the collapse in print advertising revenue which would mirror its collapse in readership, and which no amount of clicks on its online pages could replace. As Australia’s only business daily, if the Fin can’t be straightforward about the problems of its ‘business’ model, what hope is there that other members of the print media will take the lead and be honest with its readers?

The fact that newspapers put the best gloss on their circulation numbers is nothing new. History is full of colourful stories of brutal battles, as editors fought to win over a rival’s readers. What’s different today is that no one is winning the new circulation battle. All newspapers are losing readers. The problem for the newspaper industry is that, as circulation continues to slide, the ‘rivers of gold’ – classified advertising – are also fast drying up. Much of that advertising has migrated to websites, where advertisers get targeted exposure to a desired demographic for a fraction of the cost that newspapers once charged. Falling revenue coupled with catastrophic readership decline, as newspapers give content away free online, has caused a structural king hit on the industry: thousands of journalists have lost their jobs; newspapers have shut and information has been ‘commodified’ as journalists shape their news coverage to win the chaotic battle for attention on the internet.

The shrinking revenue and collapsing readership have driven newspapers downmarket in a quest for greater numbers – vastly overstretching the remaining journalists who survived the most recent cull to fill the space, both in the print editions and on the internet versions of the papers. The 24-hour news cycle, which has effectively abolished the old-fashioned deadline, means news stories might be forever updated, but there is no time to push deeper into them. They are continually refreshed, but not developed.

This ‘thin’ journalism threatens to undermine the most important role of the traditional media. More than two hundred years ago Edmund Burke is credited with coining the phrase the Fourth Estate to describe the role newspapers play in resolutely holding to account the other three estates of the realm: the courts, the judiciary and the legislature. Now with the Fourth Estate rapidly disintegrating – and with it a crucial role in the democratic process – any other industry would be shouting its woes from the rooftops. But just the opposite is true. Newspapers are largely in denial, or blaming everyone else for their plight. In one fit of pique News Corp chief Robert Thomson wrote a blistering missive to the European Commission, which was investigating Google’s power in Europe, accusing Google of ‘undermining the business model of the content creator’.

The fact that the print media was having trouble dealing with the new competition should have come as no surprise. Just as the decline of newspaper sales – and even more significantly their profitability – is still being skirted around, more than a decade ago the early warning signs of the trouble to come were being arrogantly brushed aside.

IN 2004, THE board of John Fairfax Holdings Ltd commissioned a report by one of Australia’s most respected journalists and publishers, Eric Beecher, hoping he could show the company the way forward. Beecher’s credentials were impeccable. He’d started as a reporter on the Age before heading abroad to work on the Sunday Times and the Observer in London and the Washington Post in the US. In 1984, at age thirty-three, he became the youngest editor of the Sydney Morning Herald, and later editor-in-chief of Rupert Murdoch’s Herald and Weekly Times group.

Not only did he understand the intimate workings of Fairfax and the Murdoch opposition, Beecher also brought with him an unusual mixture of journalistic excellence and business nous: he had set up the hugely successful Text Media Group, which profitably produced newspapers, magazines and books. Fairfax had been so impressed by the company they’d recently bought it for nearly $66 million. The focus of Beecher’s report about Fairfax’s business model and future was the internet. He was in the process of telling the directors how to deal with it in order to turn their company around. He painted a grim picture of the future, a possible ‘catastrophe scenario’ in which the company’s main form of revenue, classified advertisements, might migrate to the internet where all those web-based sites with low overheads and cut-price advertising rates were simply waiting to pounce.

Beecher understood the threat extremely well. With some of the money Fairfax had just paid him, he bought precisely such a company: Crikey, an online niche magazine for business and politics. This was an insider’s view he was sharing with his old employers. His ‘key argument’ was that if the board rated the risk of classified advertisements deserting its newspapers at any more than 10 per cent, it should take decisive action as an insurance policy. He told the directors that the financial success of Fairfax ‘directly subsidises the health and effectiveness of the most important quality journalism in this country’. Beecher advised the board to act quickly because ‘there is now a realistic possi- bility of the “catastrophe scenario” occurring over the next two to four years’.

After Beecher had finished speaking, one of the directors, Roger Corbett, walked to the head of the board table. Corbett, who had made his name and money as CEO of the Woolworths supermarket chain – he had grossed up to $100 million in payment shares and options – clearly did not like what he had just been told. As Beecher remembers, Corbett ‘picked up a copy of one of Fairfax’s hefty Saturday broadsheets, bulging with classified ads, from a nearby pile. He didn’t want anyone coming into that boardroom again saying that people will buy houses or cars or look for jobs without “this”, he told his fellow directors. He then dropped the paper onto the table with a thud.’ It turned out to be a missed opportunity. Fairfax might not have taken Beecher’s advice but he certainly took it himself. The following year, Beecher went on to set up three further successful online media ventures: SmartCompany, Eureka Report and Business Spectator.

AT THE HELM of Woolworths for sixteen years, Roger Corbett had steered the supermarket chain to a pre-eminent position in the Australian retail sector – the company posted soaring profits and killed off the opposition. But while Woolworths was a huge company with a formidable international reputation, its approach to selling beans and cake mixes was not necessarily right for running a publishing behemoth like Fairfax, with its string of newspapers, prominent among them the Sydney Morning Herald and the Melbourne Age. Five years after Beecher raised the alarm the Fairfax board gave the job of leading the company to the person who most doubted his warnings. On the day in 2009 that the directors appointed Roger Corbett chairman of the board, Corbett insisted that the Fairfax board had fixed Fairfax’s problems.

‘Fairfax, like most companies, has challenges ahead,’ he said, ‘but the decisions taken in the last few years by management and the board have, I believe, put Fairfax in a position which is envied by media companies around the world.’ It was not an especially high bar. Most of the other media organ- isations in the world were in a shocking state and with Corbett at the helm of Fairfax, the Australian company would follow them down. Under his chair- manship Fairfax lost almost two-thirds of its value, and by the 2012 annual report his main focus was laying off 1,900 staff – slashing costs to achieve what he hoped would be an annual saving of $235 million by June 2015.

It didn’t stop the rot. All the major Fairfax newspapers continued to lose money. Without profitability there would be less funding for serious inves- tigative journalism – an expensive business demanding significant resources of time, labour and money, and what was worse, it didn’t always produce a result. The kind of journalism that speaks truth to power and is essential to keep a vibrant democracy functioning has become an unintended victim of Fairfax’s business woes.

It’s a loss that reverberates long and hard in Australia. The fact that in 2012 the Sydney Morning Herald won the nation’s most prestigious journalism award, a Walkley, for its exposé of corruption in New South Wales, indicates how deep the well of substantial journalism had been at Fairfax. Given the cuts the well will probably soon run dry. In an attempt to compete with the internet, the company had first allowed free and unfettered access to its newspaper sites, then it introduced a partial paywall. Though customers were paying to read the papers, the classified advertisers were charged much lower rates than for the print editions. Consequently the classifieds raised nowhere near the same amount of money online. Ten years ago the newspaper could bring in $40,000 for each classified page. Fairfax had been selling hundreds of those pages on Saturdays alone. Now they were down to a handful. The classified ads were drying up faster than the washing on a Sydney summer’s day.

IT WOULD BE easy to blame the problems facing Fairfax on a succession of bad board decisions, but they were not alone in failing to understand the immensity of the threat from the internet companies that had captured such a large slice of the classified advertising market. Murdoch papers were no better. News Limited, owner of the Australian, the Melbourne Herald Sun, the Sydney Daily Telegraph, the Adelaide Advertiser and Brisbane’s Courier-Mail – in all, 70 per cent of the nation’s daily print output – also suffered a similar form of denial that the industry was in trouble. Like a double act, one year after the other both News Limited and Fairfax pronounced that everything was fine with their companies and the future was rosy. First, in 2011 Greg Hywood, appointed as Fairfax CEO by Corbett, told attendees of the AN Smith journalism lecture at Melbourne University, ‘The future of journalism has never looked stronger.’ He said this was because of the internet, not despite it. ‘Our readers want our journalism in a variety of formats. Tracking and fussing about print circulation is an outdated and nearing irrelevant form of measurement in the world media companies now inhabit.’

One year on, at the same gathering – named after one of the found- ers of the Australian Journalists’ Association, the precursor to the Media, Entertainment & Arts Alliance (MEAA) – News Limited’s then-CEO Kim Williams assured the gathering that there was much to be positive about: ‘Robust continuing and truly great journalism; sustainable business models for print and shiny new business models in digital media; and a heightened and voracious appetite from consumers for diverse news and information across their spectrum of passions and interests.’

One reading of their statements could suggest that Hywood and Williams were both spruiking nonsense – Hywood with his schtick that ‘ journalism has never looked stronger’ and Williams’ of ‘truly great journalism’.

Organisations like the MEAA often do their best to raise the alarm with strong campaigns against job losses and innovative ways to help journalists become more creative, but elsewhere in the industry there is often hostility when confronted with how traditional journalism has been so weakened by the media’s failure to deal with the rise of the internet. The present crisis marks a bookend to the Watergate era, where journalists revelled in their reinvigorated role as the Fourth Estate, to hold the other three pillars of state to account.

Now a weakened media is more easily controlled by huge PR budgets, and journalists with often little time but to cut and paste a press release. The decline in power is best exemplified by the fact that two of the biggest stories in journalistic history – the all-pervasive spying by the US National Security Agency and the leaking of nearly three-quarters of a million secret and sensi- tive US military and diplomatic cables – ended up being published through non-mainstream organisations: NSA contractor Edward Snowden contacted a freelance journalist Glenn Greenwald, while US Army intelligence analyst Chelsea Manning turned to Julian Assange and WikiLeaks.

IT WAS THE timidity of the New York Times to publish an earlier story on the NSA, a mixture of a fear of a reader backlash in the aftermath of the 9/11 attacks and a desire to please the US government, that lost it the Snowden revelations. In Manning’s case, he tried to contact the Washington Post, but the paper, famous for breaking the Watergate story, was not interested. The New York Times did not return Manning’s call.

Yet for some journalists there is no crisis in the profession. They seem in denial, echoing their masters’ voices that the problem is manageable. The fact that two of the most important whistleblowers in history turned to non-mainstream outlets because the traditional media was not trusted – or was simply not interested – is met with a shrug of the shoulders.

Or the argument that some found equally acceptable: journalists did not expose government wrongdoing in the case of the Iraq War because it might be seen as unpatriotic. It was an argument that went to the heart of media manipulation: the war on terror could always be used as a vehicle to silence government critics. And what was worse, many journalists found it was acceptable. Another journalist literally rolled her eyes at the notion that traditional newspapers were an important part of democracy because they introduced readers to a broad range of subjects, unlike the ‘narrow cast’ inter- net where readers zero in on their special interest and avoid being exposed to other stories.

But the biggest nonsense being peddled is that money does not make a difference to a news media’s independence. The funding cuts to the ABC, for example, were dismissed by one on-air interviewer as irrelevant to the quality and fearlessness of its journalistic work.

This form of thinking is akin to climate-change denial. Confronted by overwhelming evidence to the contrary, there’s an inclination to turn away from an inconvenient truth.

From Griffith REVIEW Edition 51: Fixing the System © Copyright Griffith University & the author.