On the same day that scrip in new digital media giants Facebook and Google hit yet another record high Fairfax Media Limited (ASX: FXJ) hit back with a response in kind.
It’s to merge its printing operations in Australia with News Corp (ASX: NWS) in order to produce around $15 million per year in annual cost savings for Fairfax.
Once sworn enemies it seems the structural change in the media industry is forcing these two unlikely bedfellows together in an unexpected way, with Fairfax shares up 3% to 80 cents in response to the news.
News Corp should also enjoy some cost savings, although the news is less material to it given its far bigger scale than Fairfax.
Zooming out a little the bigger question is whether printed news has a long-term future in Australia at all, with many leading newspapers internationally reportedly running at a loss as advertising revenues dwindle behind reader numbers.
Much of the value in Fairfax Media now derives from its major ownership interest in digital real estate advertising business Domain Holdings Australia Ltd (ASX: DHG), which is in a competition for market share with News Corp’s majority owned REA Group Limited (ASX: REA).
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Motley Fool contributor Tom Richardson owns shares of REA Group Limited, Google and Facebook. The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.