Media Flash Confidential

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Thursday, November 23, 2000 - 3.30am Update

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The Age Fails To Appear ... Again

* TENSIONS are running at fever pitch this morning between the Melbourne office of The Age and its Fairfax Sydney headquarters, as the Spencer Street broadsheet again fails to hit the streets.

* STEVE HARRIS, Publisher and Editor-in-Chief, is today presiding over the second-only 'no-show' of The Age in its 146-year history. First-ever non-publication was on AFL Grand Final Day after a clumsily-handled industrial dispute in September. More than 250 workers, mainly members of the Australian Manufacturing Workers Union, supported by journalists, blockaded the newspaper building overnight. No copies of The Age were distributed, according to the newspaper's receptionist.

* CRAIG JOHNSTON, of the AMWU, told Southern Cross Radio: "No-one's going in, and nothing's coming out." More than 500 people attended the blockade in the Lonsdale Street area alongside the paper's delivery docks.

* THE DISPUTE centres around next year's move from Spencer Street to new print works at Tullamarine, as well as the failure to negotiate enterprise work agreements at the newspaper.

The Spin

* NIGEL HENHAM, Director of Communications at The Age, issued a statement at 11.30pm last night, headlined 'Industrial Action Disrupts Production of The Age'. No mention of the industrial dispute was made at the newspaper's website, or those of The Sydney Morning Herald or Australian Financial Review when this special Media Flash went to press. The Internet edition of The Age went online earlier than usual, just before midnight.

* "Production and distribution of The Age is being severely disrupted following industrial action by printing unions at The Age's Spencer Street plant tonight," said the statement.

* "JOHN FAIRFAX HOLDINGS LIMITED, The Age's parent company, has been negotiating new enterprise agreements relating to Spencer Street production and the new plant facility under construction at Tullamarine.

* "The industrial action, which involves blockading entrances at Spencer and Lonsdale Streets, occurred after unions broke off discussions with the company. This followed earlier undertakings to the Australian Industrial Relations Commission not to take unprotected industrial action.

* "Fairfax is endeavouring to resolve these issues as soon as possible to enable normal distribution to occur. The Age sincerely apologises for any inconvenience caused to readers, advertisers, newsagents and customers."

Historic Shutdowns

* STEVE HARRIS, and most other Fairfax Publishers, were forced to put their signatures to a Sydney-prepared statement, shutting out Age and other journalists, in September, when Fairfax called a pre-Olympic showdown over industrial disputes.

* FRED HILMER told the recent Fairfax AGM that the Olympic coverage and Melbourne shutdowns had cost $25 million. Melbourne Age executives are complaining loudly that their team re-energising works over the past three years are being cut down by unnecessarily tough industrial tactics dictated by a Sydney culture. The Melbourne executives say the Sydney-based Fairfax HQ team simply do not understand the differences between Sydney and Melbourne workings.

* HARRIS hints at this in staff newsletter, Agenda, distributed this week, and leaked to us overnight by Age journalists: "It has not all been good news. The industrial dispute in September meant that for the first time in The Age's 146-year history we did not distribute a paper to our readers; we are still experiencing lateness in delivery due to a number of issues (although there are encouraging signs of improvement); Saturday's circulation has declined and there are unresolved issues in the production area."

Cost Blow-Outs

* STEVE HARRIS warned staff of the problems ahead: "Like most other media companies pre- and post-Olympics (and GST), we have also experienced softer economic trading conditions that have seen a fall in advertising revenues in some of our key categories such as real estate ... we need to unequivocally ensure our costs do not outstrip our revenue growth. Clearly, if our revenue growth has slowed, and in some areas they are below forecast, we need to have a commensurate containment of, or reduction in, costs to meet departmental budget commitments."

* FRED HILMER, half-way through his five-year contract term as Fairfax CEO, is sending some strange signals to Fairfax staffers. His most recent missive was a seminar held at McKinsey & Company on Monday last week (Nov. 13) when he spoke on strategy, networks, approximations and communications.

* "I mean, RUPERT MURDOCH doesn't have a strategy, RUPERT MURDOCH just decides what to do, bang, gives out the orders and it's done ... I think that's wrong. I think after a couple of years now with a very heavy strategy responsibility I'm still firmly of the view that strategy's important. But I think that it works and it's formed in ways that are a little different, not perhaps the ways that one practices or teaches."

* FAIRFAX staff say they having to grip with HILMER'S address, reprinted in AFR Boss, said: "I think firstly you ignore the basic rules of strategy at your peril. Anybody who thinks that it's OK to pour money into businesses where your don't have - the cornerstone of any strategy is sustainable competitive values - anybody who does that is obviously going to lose money." With the current annual $40 million loss by NIGEL DEWS' f2 fairfax Interactive Network, staffers query if they can rely on the Hilmer theory.

'At Your Peril'

* FRED HILMER continues: "You ignore the rules or the laws of economics at your peril."

* STAFF say they are also intrigued by HILMER'S words of last week: "Another solid rule of strategy is that, where possible, you avoid head-to-head conflict. It's a rule I taught. It's been well proven in the military environment. If you want to take someone on in a frontal attack you need six to 10 times the overwhelming force. Otherwise, the defender has the huge advantage and you just lose as you try to attack the barricades. Ad so that's again a lesson to ignore at your peril."

* MELBOURNE senior Age staff say, that in light of the company's rigid stand on negotiations, they are finding it impossible to reconcile Hilmer's academic musings with the realities of financial loss of a newspaper that can't even find its way to the streets. Again, HILMER of last week: "As a consultant you have a lot of time. You're given an assignment and you work on it. As a writer in a university you have infinite time because you just change the deadlines. It's not like newspapers which have to go to press every night."

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Face the F- Facts Fred

* THE F-WORD around Fairfax is f2.

* And FRED HILMER, Chief Executive of John Fairfax Holdings, needs to quickly face some cold hard facts about the f2 Interactive Network money drain-pit that is losing about $40 million a year. Instead of losing money on simply providing free-to-screen content under Fairfax banners, why not sell the content to portal providers and turn it all into an instant profit-maker? There are plenty of buyers lining up to buy content: Telstra, i7, ninemsn and Isis to name a few. The newer online portal would-be's are legion.

* NIGEL DEWS, $550,000-a-year f2 CEO, has established an efficient info factory. Internet keyboarders click an f2 button, then the free info flashes onto their screens. Yet his division is dragging down Fairfax Group share prices from $5 to high $3s in the past month-and-a-half.

* THE HILMER METAPHOR is a factory where consumers pay plenty for a paper-wrapped product that emanates from one factory door. The customers, however, get it for free if they line up at another warehouse door marked 'Online'. For a McKinsey man, the answers should be obvious. Fairfax people are good at thinking as independent business units, but few seem to take the group approach.

* IAN CROWTHER'S well-run Fairfax Community Newspapers is a prime example of opportunity. Here is an efficient, organised resource open to the rest of the Fairfax group. It has an army of on-the-ground FCN journalists, photographers ... and most importantly, ad sales people. All could be doing a group job, wearing their Fairfax blazer: ad people could sell FCN, The Age or Sydney Morning Herald, f2, Big Color Pages and City Search. Just as importantly, the city suits could be closing down-the-line group deals with the big St Kilda Road and North Sydney ad agencies.

* CROWTHER has a Sydney-based group that covers most of the suburbs, yet not once do these Fairfax products promote over Fairfax products such the SMH, Australian Financial Review or other divisions in their ad columns. Why? In Melbourne, where STEVE HARRIS'S Age circulation is stagnant under 200,000, why not use the weekly 1,000,000-circulation of the 20 FCN titles run by NEIL COLLYER for an intelligent marketing campaign for the daily? Why not use the marketing expertise that produces hundreds of real estate advertising pages a week in the suburbs, in an integrated advertising FCN-Age-Melbourne Property Guide buy for agents? Why not also secure the suburban and regional business community economies as participants in the Fairfax operations? After all, it is the one company ... isn't it?

* HILMER is half-way through his five-year contract at the head of Fairfax. As recession conditions appear on the national horizon, McKinsey style may have to give way to some old-fashioned streetwise group management: one that simply doesn't pander to a Sydney mind-set, but realises that the Australian marketplace extends beyond GPO postcodes.

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