Merger decision due, media chief out

6:13 pm on 9 March 2017

Analysis - Simon Tong's future as managing director of Fairfax Media was as uncertain as the future of the media company he led.

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The Commerce Commission is set to rule on the Fairfax/NZME merger next week, but the Fairfax NZ head will not be sticking around. Photo: RNZ

Mr Tong resigned as head of Fairfax NZ today, and will leave the media company to work at ASB Bank next Friday.

His departure date will come just two days after the Commerce Commission is due to rule on a proposed merger of Fairfax Media and rival publisher NZME.

While Mr Tong's resignation was a surprise today, he told the commission in December he himself could be a victim of the cost-cutting that would follow if New Zealand's two biggest publishers were mashed together.

"Frankly, there's two of us, two executive teams, two marketing teams, two IT groups, two everything. There's an opportunity to make some reduction there," he said.

"The majority of the synergies are coming out of roles like mine."

In a final effort to sway the competition watchdog, Mr Tong and NZME chief executive Michael Boggs wrote to the Commerce Commission this week.

They warned that without the merger, the two companies would be forced to further cut costs and that would harm their ability to report the nation's news comprehensively.

Tong's legacy at Fairfax

Mr Tong was not steeped in the media industry, coming from a background in IT and financial services.

Fairfax head Simon Tong will step down from fairfax NZ to work at ASB Bank.

Fairfax head Simon Tong will step down from Fairfax NZ to work at ASB Bank. Photo: Fairfax

"I personally hadn't read a newspaper for a number of years prior to joining [Fairfax Media in 2013], believe it or not," he said in December.

On his watch, the company diversified into broadband services, launching the Stuff Fibre brand, and organising events such as food festivals.

He also collaborated with other under-pressure media companies to create the joint adverting service KPEX and share online video content with TVNZ. Fairfax and NZME also started sharing printing plants in 2014.

He drove the company's "digital-first" strategy, which prioritised building online audiences over publishing newspapers and magazines. This followed the lead of the parent company across the Tasman.

Fairfax Media's news website stuff.co.nz is the country's most popular site by some distance, recording more than two million users a month in late 2016.

Finding the money in media

But the non-paying online audience is not especially lucrative.

While Fairfax's big mastheads in Australia - like the Sydney Morning Herald and The Age - introduced paywalls obliging regular readers to pay for online access, Fairfax in New Zealand shied away from this.

"It's very clear that if we were to create a paywall for general news that that would create a fantastic opportunity for our competitors. There's no maths that I've seen that suggests that a paywall for general news will work," said Mr Tong.

He told the Commerce Commission in December that printed publications still accounted for 85 percent of Fairfax revenue, down from 95 percent three years earlier.

Clearly, the rising online audience is not bringing in nearly as much money as the dwindling numbers still buying their papers.

Many Fairfax daily papers have recorded double-digit annual falls in circulation last year and revenue was also falling as Google and Facebook increased their share of online advertising income.

"It's not a fabulous picture. The speed is increasing and I see no abatement in international markets that show it's going to flatten out," said Mr Tong in December.

Fairfax Media's current chief operating officer Andrew Boyle will take over next Friday.

For him - and his colleagues at the company - the horizon is dominated by next week's decision on the merger his predecessor backed so strongly.

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