Sunday, February 11, 2007

IDG, Fairfax and the bottom of the trough

Time for another round of Old vs New Media. You know you love it.

In the blue corner, we have Colin Crawford of IDG, who says that for the first time, IDG's online revenue is rising by more than their offline revenue is falling.

The brutal reality that we’re facing today is the costly process of dismantling and replacing legacy operations and cultures and business models with ones with new and yet to be fully proven business models. However, we face greater risks if we don’t transform our organization and take some chances.

In the red corner we have Cameron Reilly, about whom no journalist I have ever asked has ever had any other opinion than the word "dickhead". Or sometimes "that bloody dickhead". Cameron, ready as ever to get stuck into Old Media, takes aim at Fairfax's James Farmer (in the... yellow corner?) who left a comment at the Australian Newsagency blog:

The vast majority of people come to a few sites to get their media fox, listen to a few radio stations, watch a few tv channels and read a few publications... we are what's commonly known as 'geeks' - most people are not.

Cameron says that unlike IDG, Fairfax's online revenue growth is not matching its offline revenue decline. Fairfax's last annual earnings report shows that its online operations are currently less than 10% of its business, but the shift is most definitely on. In total, Fairfax's Australian business generated A$297.7 million EBITDA (down 8.1%) on revenues of A$1,279.6 million (down 1.3%). Fairfax Digital contributed A$24.3 million EBITDA (up 268%) on revenues of A$96.4 million (up 75.6%) out of that.

The math is not hard, but we have a disconnect here. Is it just a matter of Fairfax "getting it" like IDG did, and finding the magic formula to turn around its consolidated revenue? Have they already got it, and it's just a matter of time before they hit the bottom of the revenue trough like IDG? Or is that strategy only workable for a publisher targeting the "geek" niche?

James may say that blogs are mostly irrelevant timewasters, but Fairfax's own blogs are booming, with a huge amount of comments (e.g. 83 on a blog entry about air conditioners!) showing a big mainstream audience who is gagging for good quality stuff. The numbers would suggest that James doesn't know what his own company is doing.

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