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Media companies doing it tough

After fighting the good fight for over a decade, Fairfax Media (ASX: FXJ) seems to have finally accepted the inevitable.

The company yesterday announced job cuts and cost savings over the next couple of years, in the largest shake-up to hit the print media sector to date. Up to 1,900 jobs are expected to go, and the company is targeting $235 million in savings.

In addition, Fairfax will be closing a printing plant in Sydney and another in Melbourne over the next 24 months.

Speaking on Sky News Business this morning, media forecaster Ross Dawson suggested that print newspapers will be effectively extinct sooner rather than later. Dawson said:

“Australia in fact looking as if [extinction is] coming by the end of the decade…the issue for Fairfax is survival”

Meanwhile Sky News Business is also reporting expectations of job cuts and a restructure at Fairfax’s main competitor News Corporation (ASX: NWS), as that company’s print division struggles with similar challenges.

Both companies will be hoping that recent and future decisions can stabilise the decline of their print mastheads, and provide a solid –if smaller – foundation for growth.

The S&P / ASX 200 index (ASX: XJO) (Index: ^AXJO) has fallen 36% over the past five years. News Limited – thanks mostly to its US cable and filmed entertainment businesses – has done slightly better, losing only 28%, while Fairfax Media has lost a full 86% of its value over the same period.

The media sector has been something of a sharemarket graveyard over that period, with Ten Network Holdings (ASX: TEN) down 82%, Seven West Media (ASX: SWM) down 84%, and Nine Entertainment having to postpone plans to list on the ASX while its private equity owners stabilise the business.

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Scott Phillips is an investment analyst with The Motley Fool. You can follow Scott on Twitter @TMFGilla. Take Stock is The Motley Fool Australia’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it’s still available. This article contains general investment advice only (under AFSL 400691).

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