SYDNEY: Fairfax Media should close its daily print newspapers and spend $50 million giving away 100,000 e-readers to boost digital consumption, according to a leading analyst.
By cutting print editions in key Sydney and Melbourne markets, Fairfax would reduce print and distribution costs and save up to $275 million per year, analyst Macquarie Equities Research says.
If Fairfax was able to retain 40% of advertising revenues under a new digital content delivery model, the company could then lift earnings for FY 2010 to $55 million, up from Macquarie's current year estimate of $50 million, with the numbers getting better as a greater percentage of advertising revenue is retained.
"The first step towards implementing this model is only likely to occur after initial figures of e-reader penetration hit a specific target - say 10,000 - at which point FXJ would be in a position to review elements of its print and distribution cost structure with a view to removing some print runs/truck rools/shifts," Macquarie analyst Alex Pollak said.
"The other significant challenge for FXJ is to work its advertisers around to matching the print prices for advertising for the online product," said Pollack.
"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 online model would have a chance."
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