Former Fairfax CEO and key architect of the Fairfax/Nine merger Greg Hywood says the unprecedented coming-together to create one of Australia’s biggest media companies has not been a success.

In a sit-down interview with Mumbrella after Hywood announced his departure as chair of lobby group Free TV, the media veteran said the clear indicator of failure was Nine Entertainment Company’s (NEC) share price.

“It’s barely where it was at the beginning,” he said. “I don’t think investors who look at that would consider it a success at this stage … that’s the mark of it.”

To put that non-success in numbers: NEC traded at $1.72 on the final day in 2018 before the Fairfax deal went live, it went to a high of $3.33 in 2021 and was at $1.66 on the Unmade Index as of the time of writing.

One of Australia’s biggest digital and print operations merged with its biggest broadcaster and it’s now worth less than where Nine alone began.

“What I think was supposed to happen was that Nine goes … through the sort of transformation that Fairfax had put itself through, that Nine and [real estate listings business] Domain integrate themselves so that the marketing inventory of Nine and the breadth of influence of Nine would help Domain really expand … that was the opportunity.”

That focus on Domain as the vehicle of growth was the key.

“Domain had an enormous potential for growth, but what it required was a very substantial level of recurrent marketing and advertising, and it had the advantage of Nine’s marketing inventory.”

“From my understanding, and I wasn’t there, I don’t think that the two organizations managed to be able to pull that off – for whatever reason, they couldn’t do it.”

So why wasn’t Nine able to undergo the transformation required? Hywood declines to speculate, but he does keep talking.

“The point is you don’t bring two organizations together and that’s the end of it,” he said. “It’s not enough just to take out the costs that you don’t replicate because you’ve got one organization instead of two. That’s not enough. You’ve got to rethink the whole business.

“As a CEO of a media company, you go in each day assuming someone’s gonna steal your lunch, you know it’s decision, another hard decision, and then another harder decision, and then the hardest decision you’ve ever made, every day.”

Hywood has implicitly answered the question. Nine hasn’t yet re-thought and re-engineered the whole business. It hasn’t yet made the hard decisions.

Hywood looks younger than his 70 years. He’s had enough time for several major career phases, beginning as a junior reporter at the Australian Financial Review in 1975 – no cadetship because he had an economics degree – before establishing himself as a reporter, then an editor, and finally an editor-in-chief and publisher, all within the Fairfax group.

He tells Mumbrella that before he left Fairfax the first time in 2003, he had already made the shift beyond pure editorial to commercial responsibility.

“[Fairfax CEO] Bob Muscat made me publisher and editor-in-chief of the Financial Review, which meant that I was also responsible for the commercial side of the business as well as the editorial side,” he said. “It was a bit of controversy because for the first time within a paper, the commercial and editorial side was put together.”

The shift to commercial responsibility not only defined the rest of Hywood’s career but also set the scene for a confrontation over Fairfax’s strategy. Hywood had toured Silicon Valley and knew the future lay with the internet and digital distribution.

“I came back and became an advocate, a very strong advocate, and we did a lot of good stuff within the limited amount of money that the company was giving us, we set up websites for jobs, homes, and cars.”

Those sites were MyCareer, Domain and drive. com .au .

“We had market leadership online right up until 2003, but then the board disinvested and it was decided by the then CEO [Fred Hilmer] to invest in other emerging internet businesses rather than focus on the core business of the company, which was jobs, homes, and car advertising.

“The view was that the profits out of the newspapers in those categories were so great that you didn’t want to dilute them by going into too heavily into online, and that there was always an opportunity to do that down the track. That was just a catastrophic mistake.”

The strategic differences led to Hywood’s exit.

“ Those of us who were very close to the business were in despair about it. In the end, relationships broke down and I was given the flick,” he said. “It was a huge change for me because, you know, I was a media person, but I went into government in Victoria.”

He became the CEO of Tourism Victoria. In the meantime, Fairfax ran through CEOs looking for answers – Hilmer, David Kirk, Brian McCarthy – before Hywood returned in 2010. As the new Fairfax CEO, he was facing a mountain of debt, declining revenues and a big entrenched workforce.

“ From outside, it might’ve looked simple. We actually had to reinvent the business, do it a totally different way. We had to take it from an analog business, which was physically printing papers, putting them on trucks and delivering them to front lawns and to news agents, to doing it over people’s telephones.”

The story of how Hywood and his team transformed the business, taking out 35% of costs and diversifying revenue, has been told many times. Over 2100 jobs were eliminated, about a third of the old company, and printing plants were closed.

We don’t dwell on it, because Mumbrella is more interested in what comes next: the sale of the entire business to Nine (technically an acquisition, but characterised as a merger).

“We did it [transformed Fairfax]. But you don’t flick a few switches and that happens. You have to completely dismantle one business and completely build a new business. The one thing that publishing had was subscriptions. It was a mixed advertising and subscription model.”

This is what Nine the broadcaster did not have, beyond streaming service Stan.

“ The next step for Fairfax after rebuilding the publishing industry from analog to digital, rebuilding Domain into a good, strong business – was that you needed scale and you needed to integrate and get scale across the sector. You needed multiple points to get that display advertising. The expectation was either Seven or Nine.”

Fairfax successfully lobbied the government to change media laws that restricted cross-platform ownership.

“And so we merged with Nine very deliberately. Even though we had discussions with Seven, they didn’t work out for a variety of different reasons,” he said. As the name of his company disappeared, Hywood departed.

“I’d been at Fairfax for eight years. I’d done my bit. I was ready to hand that over.”

Hywood went on to become the chair of TV lobby group Free TV, a job he resigned from last week. For the first time in 50 years he is no longer directly involved in media, which is perhaps why he is able to now size up exactly what has and hasn’t been achieved at Nine.

So to return to the original question: in the seven years since the deal was done, why hasn’t the Nine business gone through the same kind of radical cost-cutting reinvention endured by Fairfax in the early 2010s? In getting to the real reason behind the failure, Hywood refers back to the attitudes he came across through the years of transformation.

“Most people hate change. They just want to do the job that is designated the same way, or perhaps a bit better than the person who’d been there before,” he said. “They didn’t want transformation or massive changes to anything. It was an anathema to them.”

“The change that I thought was quite exciting, other people just didn’t want, and that was evident in publishing and it was deeply evident in television. I think because salaries are bigger, there’s more to lose.”

“I think that television is a bigger sense of entitlement and the desire for no change ran much deeper even than the minimal desire for change in publishing.”

Hywood ends the interview reflecting how fortunate he has been in his career – “I’ve had the best time” – and reminding Mumbrella that searching for lasting success in media is a fool’s errand.

“ I always used to see media as: you are looking across a raging river and there’s a series of small islands. You swim to one island and get on that, and you take your breath. Then you look at another island and you swim to that.”

Selected excerpts from this interview are available on this week’s Mumbrellacast. The full interview will be posted as a special Mumbrellacast edition shortly.

As a decades long time subscriber to SMH I stopped subscribing/reading in 2020 because the Herald had been NEGd. Complete shame.

He’s objectively right. They have had several issues – first and foremost TV T(Total TV), Publishing, Domain and Stan operate as four completely separate business with no clear mandate to cooperate except where they have been able to work it out without leadership direction.

Secondly the media businesses have very strong cultures of promoting from within and ignoring external advice – publishing leadership is almost always an ex writer and they have mixed levels of charisma, drive and commercial know how.

They also tend to appoint their mates (more journalists) into key roles where they don’t have the right experience.

Add to the mix the internal politics which arose from having product and technology operate as its own business unit and you have a recipe for very slow action, a lack of clear direction and quality thinking.