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Analyst Recommends Axing Herald, The Age and Give Away E-Readers

05 Aug 2010

Axing its Melbourne and Sydney daily print editions and focusing on e-readers such as the iPad will boost the bottom line according to analysis from Macquarie.

 

Analysis from Macquarie has found dropping print editions of The Sydney Morning Herald and The Age and delivering content via e-readers such as Apple's iPad could boost earnings from the two papers to $55m -- $5m more than the bank's 2010 forecast.

 

Analyst Alex Pollak also suggests Fairfax could get the ball rolling by spending about $50m to give away 100,000 e-readers to seed the migration of readers away from print.

 

"The point is such a move is likely, but not in its entirety on day one -- a seismic structural shift like this will take time for Fairfax to convince both advertisers and consumers alike of its merits," he said.

 

As reported in The Australian, this comes a day after News Corporation boss Rupert Murdoch flagged plans to charge for content on more tablet devices and predicted his The Times of London paid for website would be a success.

 

Fairfax has engaged consultants to perform a review of the company's five-year strategic plan compiled by chief executive Brian McCarthy, which Macquarie expects to be released in conjunction with its 2010 results.

 

Macquarie believes the plan includes a proposal to combine the editor in chief roles for both the print and online versions of key mastheads.

 

According to The Australian, Macquarie said today the plan could also contain the idea of the elimination of print editions of the Sydney and Melbourne dailies altogether.

 

"We believe that a more far-reaching examination of the Fairfax business cannot be ruled out, including the elimination of newsprint altogether in The Sydney Morning Herald and The Age," said Pollak.

 

Macquarie's analysis suggests full-year 2010 revenue from The Sydney Morning Herald and The Age, including their Sunday editions, would be around $600m.

 

But Macquarie conceded challenges existed, including initial figures of e-reader penetration.

 

"The other significant challenge for Fairfax is to work its advertisers around to matching the print prices for advertising for the on-line product," Pollak told The Australian.

 

"The iPad is an interesting test case; if advertisers are happy to pay as much for iPad eyeballs (on the Herald application as it stands today) then the pure on-line model would have a chance."

 

Source: The Australian


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