Fairfax Media managing director Simon Tong has stressed the need to diversify the streams of revenue feeding into the business. And today, the company has taken a rather unorthodox step in this direction by announcing the launch of Stuff Fibre, a joint venture with New Zealand Fibre Communications Limited selling high speed, unlimited fibre connections.
Tong admits while Fairfax is heading into untested waters with this initiative, it makes strategic sense given the business can no longer rely only on advertising to survive.
“Advertising revenue will always be a big part of the business, but we just don’t want it to be the only thing, so around two years ago, we decided to look for options for other revenue,” Tong explains.
Examples of this approach already coming to fruition can be found in Fairfax’s events business and its investment in Neighbourly, but Tong says these two arms of the business are still relatively small.
“They’re going great guns, but they’re some way from producing really significant revenues,” he says.
Tong stressed this move should not be understood as move away from journalism but rather a means by which to keep it going.
“We’re really proud of the fact that we’ve kept so many journalists in their roles around the regions, and we really want to maintain that because that’s what makes us different,” he says.
“The question isn’t ‘how many journalists do we have’, but rather ‘how do we pay for the level of journalism we’ve got today in the future.’”
Tong says the addition of Stuff Fibre essentially provides another means by which to monetise its enormous audience, particularly in the online space.
“We’ve deliberately set about building the largest audience we could with Stuff, so that it gave us the opportunity to look at what our options might be … Now that we have that substantial audience, it’s about how we can generate money.”
As with any new venture, there is, of course, a level of risk when it comes to entering a new space—particularly one that’s already occupied by several strong competitors.
“There is a risk that comes with this, but we have a group of people running it that have spent their lives in this area,” Tong says.
“We haven’t just taken a bunch of commercial people out of media and stuck them in there.”
The Stuff Fibre team is led by New Zealand Fibre Communications managing director Sam Morse, who is supported by Rob Tihanyi (chief of customer experience and people), Geoff D’Audney (chief technology officer), David Chapman-Smith (chief commercial officer) and John Simmons (finance and strategy director).
“These are five gentlemen who have spent their lives in telcos,” Tong says.
Because fibre is a regulated market and because Kiwis are adopting it quickly, Tong believes Fairfax has a good shot at winning some market share from competitors.
Asked whether Fairfax was looking to partner with a few content providers (much like the other broadband players), Tong said this was really up to Morse and his team.
“What we will focus on in the meantime is creating a simple experience to purchase a couple of products, the best customer service possible and those simple things.”
He goes on to saying that in today’s media context the “perceived risks don’t seem that material”, given that a continuation along the current trajectory does not bode well for the business.
“Standing still is not an option,” he says.
“What’s the other option? The other option is to leave having said I’ve managed costs down as far as I could and I got out of the way before it completely fell from the sky … At least here we’re having a crack.”
Tong concedes that just focusing on digital advertising simply isn’t sustainable, due to Google and Facebook’s strength in this space.
“We’re the best-performing traditional media player in digital by some way, but the capability of Facebook and Google is just phenomenal,” Tong says.
“Even at full throttle, we’re barely keeping pace with those guys. The further we’ve gone, the more obvious it’s become that we need to expand our horizons.”
The Fairfax boss stops short of blaming the global players for trying to displace all media in New Zealand, instead saying we’ve been caught up in the crossfire between them.
“They’re really competing with each other, and we just happen to be collateral damage,” he says.