Pulp Friction

Every year around this time, Australia’s newspaper executives gather to hear the same grim news. This year the Pacific Area Newspaper Publishers Association’s late winter convention was addressed by futurologist Ross Dawson — who told the crowded room of poker-faced newspaper publishers, newsprint would be extinct within twelve years. Like a vulture hovering over a twitching corpse, John Hardigan, CEO of News Limited in Australia argued the death of newsprint will provide the industry with new markets to dominate and control: “We have the opportunity to move from setting the agenda each morning….to actually owning the agenda. All day. Every day. Within a decade, most Australians will own a smart device of some sort. Some believe this is terrible news for publishers…I disagree.”

Call it a case of wishful thinking. Early last month, News Corpse’s Australian newspaper reported, “Fairfax Media should axe its Melbourne and Sydney daily print editions and focus on e-readers and online to boost earnings, a report says. An 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.” Not surprisingly, News did not report that Hardigan or his boss Rupert Murdoch had any plans to axe their own print editions of the Australian or the Daily Telegraph.

Judging by the old fashioned newspaper wars that are still raging here in Sydney, the publishers aren’t really paying too much heed to their trade organisation’s dire forecasts. Here in Darlinghurst 2010, Fairfax has been littering our back lanes with throw away copies of their real estate supplement, the Domain. In response, News has been dumping both the Wentworth Courier and Central Magazine at almost every last outlet available to free distribution newspapers in the inner east, making Central even more irrelevant.

The battle for the eastern suburbs’ advertising market escalated into an all out war in late 2007 – when the ACCC voided the Courier’s advertising contracts with real estate agents. Under the terms of that contract, real estate agents were obliged to commit 75% of all “house for sale” ads to the Wentworth Courier. Most of the ads were paid for by vendors, who were unaware that the agents were receiving commissions for the sale of their house as well as a commission for selling ads into the Wentworth Courier. Following complaints from the Hub and other local newspapers (including the Sydney Morning Herald), the ACCC ruled that “the contracts directly limit the volume of print display advertising that real estate agents advertising properties in the eastern suburbs can place with competing publications.”

Three years later, in an all out jihad against “the Eastern Suburbs real estate bible”, the Fairfax media empire has launched a predatory pricing war to attract the lucrative local real estate media market away from Rupert Murdoch’s Wentworth Courier. Last week, Fairfax announced it had achieved a net profit of $282 million for the recent fiscal year, compared with a net loss of $380 million in the prior year.  Fairfax has been using its profits to undercut the Courier, subsidising losses while selling ads in Domain below what it costs to market, edit, design, distribute and ultimately print a tabloid newspaper: making it impossible for any independent local market player from the Spectator to the Beast to the Bondi View to participate in the lucrative, local real estate advertising market. Not that the ACCC would give a damn. In a town where Woolies and Coles dominate the entire food chain, anti trust laws in Australia are a joke.

By comparison, just across the lagoon, last month in California, a state appeals court upheld a land mark predatory pricing case against a large national newspaper chain (funded by global banking interests). A state appeals court upheld a $21 million damage award to the Bay Guardian, saying its principal competitor, the SF Weekly, had engaged in predatory price-cutting by selling ads below cost. For years the SF Weekly, a subsidiary of the Village Voice newspaper group had been luring advertisers away from the established, local player by selling ads below cost in order to drive their competitor out of business. From San Francisco to Sydney, newspaper publishers continue to aggressively fight for their share of a shrinking print pie. In a world of competing media outlets and ever new technologies, there is little doubt that newsprint will go the way of junk mail and the am radio, like other old fashioned media, newspapers will continue to compete for market share in an ever changing media landscape.

Meanwhile, down on Oxford Street, the fight between Australia’s two gay national chains has reached a feverish pitch.   Struggling to attract commercial rates in their glossy SX Magazine, Evolution Publishing has responded to the Sydney Star Observer’s foray into Melbourne by launching a new depression era tabloid called the City Voice (no relation to this newspaper). Ads in the wafer thin City Voice are reportedly being sold as cheap as woodchips in what can only be termed a predatory pricing strategy that is bound to generate even more pulp friction in a brutally competitive market.