MediaRoom: Stuff floating on cloud Nine

What is to become of Stuff Ltd, owner of the country's biggest news website, big community website Neighbourly and a substantial stable of metro and regional newspapers?

Its owner, Australia's Nine Entertainment, could not find a buyer by its (extended) deadline of June 30 so has opted to keep running the company until some solution presents itself.

Nine's chief executive Hugh Marks was here last month deciding what to do with this unwanted but undiscarded asset and he spoke of "positioning ourselves for a brighter future".

If he wants bright, he could focus on some of Stuff's journalism projects which continue to innovate and continue to reach two million people a month online, easily the largest audience in New Zealand.

Not so bright right now is the financial outlook. Stuff's profit and advertising revenues continue to fall at steep declines annually (14 percent down in revenues and 23 percent down in profit for the first half of this financial year) and sales of its newspapers are shrinking at a pace well beyond that affecting its major media rival NZME.

If Nine is now to run Stuff, rather than flick it as it did its regional newspaper company in Australia, it will need to start reducing costs. Marks told bidders for the company had appeared to believe Stuff's profits would continue to slide, something he disagreed with.

So, to stop profits sliding and achieve an acceptable return from the Kiwi business in a highly challenged advertising market, Nine will need to make any cuts to its expenses substantial and lasting.

Hygiene and cleansing

Marks spoke of "some hygiene and strategy on the ad sales side that should really lead to some positive differences" - which was ominous. Hygiene in corporate speak often means a ritual cleansing or removals.

He also said: "The thing we need to do now for Stuff is to prove to the market that actually we can stabilise its financial performance at a profitability level. Once you do that, then everyone's perception of the business will change quite dramatically."

Stand by for some big calls. Stuff has not been sitting on its hands under previous owner Fairfax Media. It closed or sold dozens of community and specialist newspaper titles last year with the loss of scores of jobs. It made its Marlborough daily paper a twice-a-week product. It cut its regional sports journalists, its lifestyle editorial team, Auckland community reporters and nine of 65 news directors.  

The low-hanging fruit, in business parlance, has been picked and consumed. Some of the higher stuff is gone.

Now it gets to root and branch changes.

A Trans-Tasman distraction

Nine made it clear when it merged with Fairfax last year that the New Zealand and regional newspaper businesses would be a distraction for head office executives. But right now they are living that distraction. They have a full year financial result to announce in a fortnight in Sydney and Stuff's contribution to revenues and profit just can't be worth much of that executive time.

If the boom drops, what could go first?

Could one of its two Sunday newspapers, Sunday News, be finally put out of its misery (it sells just 12,062 copies a week)? Or more of the regional papers reduced to bi-weeklies or even closed for good: the once mighty Waikato Times is a shadow of its former circulation, and papers in Taranaki, Southland, Timaru and Nelson must be on the list for a financial hygiene check under Nine.

You'd have to think The Press, Christchurch, which has risen to the challenges of that city's bleakest hours, would be safe from downgrade or closure, as must be the Dominion Post in Wellington, serving as it does the capital city and appearing on the radar daily of the country's political and bureaucratic power brokers. But as notionally important as they are, both have slipped to 39,000 sales a day from 90,000 a few years ago and their advertising is relatively thin apart from on Saturdays.

Too big to break up?

The big website calls on journalism and advertising sales from within all those centres, so would continue to need that support irrespective of the fate of the print editions, an integration that makes it difficult to sell the digital asset shorn of legacy costs.

Stuff has tried other digital ventures, like a power company, video streaming, a broadband fibre business and the Neighbourly community website. This week it announced Play Stuff - a new home for video content from a number of local and international sources.

These ideas might all have merit. Some might bring in some money. But they and the legacy print and digital news businesses have to start improving the bottom line sometime soon to keep holding Nine's cost guys at bay.

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