Economics and surfing: How Greg Hywood became the last CEO of Fairfax Media

As editor-in-chief of The Australian Financial Review in the mid-1990s, Greg Hywood travelled out to Sydney’s south-west to attend the opening the publisher’s state-of-the-art printing presses on a 10.3-hectare site in Chullora.

This press plant, and its sister site in Melbourne, were the lifeblood of Fairfax, where the massive 400-page Saturday editions of The Sydney Morning Herald and The Age, were churned out, chock-a-block full of advertising and job, cars and homes classifieds,

The $630 million spent on Chullora and Tullamarine was designed for the bright future and huge printing demands of Fairfax’s newspapers.

But that future never panned out. And less than 20 year later, with the presses running at just 25 per cent capacity, Hywood shut them down. Now chief executive of Fairfax, he was launching the biggest restructure in the proud company’s 177-year history.

[L-R] David Housego, Roger Corbett, Gail Hambly and Greg Hywood in the chairmans office.
[L-R] David Housego, Roger Corbett, Gail Hambly and Greg Hywood in the chairmans office.

The “rivers of gold” had been sucked up by digital players like SEEK and Carsales at a rate of $100 million per year and the company had failed to respond, either through investing in its own digital rivals or meaningful cost cutting.

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Like many of the tough decisions the former journalist made during his near eight years as CEO, the Fairfax of the Future plan announced on June, 18, 2012 saw Hywood draw heavy criticism, most of all from Fairfax’s own newsrooms.

Alongside shutting Chullora and Tullamarine, Hywood also announced plans to cut 1900 jobs over three years across the entire company, strip out costs, focus on digital-first editorial, shrink the broadsheet Herald and Age down to a tabloid size and introduce digital subscriptions at the pair of mastheads on top of outsourcing sub-editing announced in 2011.

To shore up Fairfax’s balance sheet, Hywood would sell accommodation website Stayz for $220 million and sell down NZ online auction house Trade Me for $776 million.

But as he prepares to leave the company he started at as a cadet in 1976, Hywood doesn’t shy away from the fact that it has been a difficult period for all involved.

Walkley Awards winners.
Greg Hywood and Jefferson Penberthy in 1980.
Walkley Awards winners.
Greg Hywood and Jefferson Penberthy in 1980.

Julia Featherstone

“Journalists are born to ask questions, they’re born to not believe everything they’re told, that’s their job,” Hywood says.

“We knew that unless we did something and something profound these mastheads would not survive in any form. The decisions we took, as confronting and profound as they were, were the right decisions, so there’s no regrets.”

Not long after the announcement in 2012, Fairfax’s market capitalisation slumped to $847 million. Factoring in the 40 per cent of Domain it gave to shareholders, it is worth a little over $2 billion today.

After Monday’s historic shareholder vote approved a merger with free-to-air broadcaster Nine Entertainment, Hywood will leave Fairfax, assuming the deal is approved by the Federal Court next Tuesday.

Staff walked out in protest of Fairfax Media's staff cuts in May 2017.
Staff walked out in protest of Fairfax Media’s staff cuts in May 2017.

Joe Castro

Those who thought he would be the storied publisher’s last CEO were right – although it’s a story with a very different ending than some critics expected.

While it’s technically true the Fairfax name will be confined to the history books on December 10, Hywood’s tough decisions have turned Fairfax around and ensured its mastheads and journalism will live on.

Nine boss Hugh Marks will be responsible for the business Hywood devoted most of his career to and credits his counterpart for turning Fairfax around.

“Greg had a vision for what the business could be in the future and not necessarily was going to be inhibited by what it had done in the past. We’ll benefit from that hard work through the merger. That’s full credit to him and the people he’s worked with. That’s really what the merger is all about, it’s an extension of that strategy.”

AFR editor-in-chief Greg Hywood in 1997.
AFR editor-in-chief Greg Hywood in 1997.

Michelle Mossop

Hywood never expected to return to Fairfax after being sacked by Fred Hilmer in 2003, let alone to rise to eventually run the company. When he was appointed in 2010 he was the first chief executive with journalism experience in decades.

“I think it gave people a sense ‘he might know what he’s doing’. Whereas if someone had come from a finance or different background, it would have been a sense that they don’t understand journalism therefore every decision would have been wrong and it would have been a lot more difficult,” he says.

“It was difficult enough anyway. In one redundancy round our reporters were standing outside newsagents telling people not to buy the paper because the quality was going down, that was a low point.”

Former SMH managing editor and Media, Entertainment & Arts Alliance president Stuart Washington fought many battles across the table from Hywood as a journalist and union member.

Greg Hywood and award-winning Fairfax investigative reporter Kate McClymont in 2013.
Greg Hywood and award-winning Fairfax investigative reporter Kate McClymont in 2013.

“I’m a critic of Greg Hywood, I’m a critic of cut, cut, cut,” he says. “But, I think the thing people miss out on is that he and Roger Corbett managed to engineer a period of unprecedented stability.”

Washington is no fan of the merger with Nine and believes Hywood’s cuts hurt the quality of Fairfax papers. But he gives his former CEO credit for dealing with the chaos before him at board and executive level and laying out a plan for the future.

“I hated it as a journalist who loves quality journalism, but as a business journalist, if you don’t cut your costs ahead of revenue declines, you kill your company. That’s the hard truth of it.”

Hywood rejects the notion redundancies hurt the quality of Fairfax’s journalism.

“I just don’t agree with that. Technology meant we could measure much more accurately what readers wanted, therefore we didn’t have to commission as many stories. Frankly, the numbers of reporters was pumped up because of the huge profits of the papers in ’80s and ’90s, and that was seen as the norm, but it wasn’t,” he says.

“We started focusing much more tightly on what really made a difference. We’ve invested more in investigative reporting than was ever the case in the past.”

Hywood reinforces editorial, which made up a third of the workforce, was always the last port of call for cost-cutting, and even then, Fairfax kept as many frontline reporters as it could.

“I think the attack was quantity equals quality. That’s never the case,” he says hours before the Financial Review‘s Jonathan Shapiro won the 2018 Walkley Award for business journalism, marking the 11th straight year Fairfax Media has won the award, and AFR Magazine won best newspaper inserted magazine for the sixth year in a row.

Fairfax CEO Greg Hywood at Monday's historic shareholder vote to merger with Nine.
Fairfax CEO Greg Hywood at Monday’s historic shareholder vote to merger with Nine.

Christopher Pearce

“We took a greater level of confidence when we understood the strategy Greg was putting in place, and it was a fairly radical strategy,” Martin Currie Australia research analyst Patrick Potts said.

“Instead of protecting the print operations it was the realisation the audience is moving away from a print product and digital was the future. That meant a fairly painful restructure of the Fairfax business, for us as shareholders, we thought that was the appropriate thing to do given the challenging outlook.”

Hywood’s world view is grounded in what he calls his Financial Review education which advocates deregulated markets and an economy open to foreign competition.

The Melbourne-born executive had two stints in Canberra as a reporter and then bureau chief in the ’80s and had success as a reporter, including a Walkley Award in 1980. His time in the nation’s capital would prove pivotal to how he would operate as Fairfax CEO.

“Hawke came in and that was just an incredible period of reform. That was where the Financial Review view of the world was being put in place. When I came back to Fairfax in 2010, the lessons I learnt reporting on that period were really instructive,” Hywood says.

“Hawke and Keating went through into a period of delivering economic reform when at times they didn’t have their cabinet colleagues, let alone caucus, let alone the Australian people. But, they sorted out that unless there was economic reform Australia would slide into third-world obscurity. I’d seen them as a reporter in Canberra confront these issues, make these calls, offend their colleagues, upset their party, but be proven to be correct because they’d taken advice and figured it out.”

On a much smaller scale, Hywood says, he applied his reporter experience to Fairfax.

“We’d taken advice, we’d worked through the issues, we’d found what the story was, I was a reporter – this is a story – the story is this business has to profoundly change and let’s get on with it.”

Hywood's world view is grounded in what he calls his Financial Review education which advocates deregulated markets and ...
Hywood’s world view is grounded in what he calls his Financial Review education which advocates deregulated markets and an economy open to foreign competition.

Christopher Pearce

It could have been very different for the Melbourne-born Hywood, who in 1975 graduated with a degree in “economics and surfing” from Monash University.

“We’d go to lectures, or if the surf was up down on the Mornington Peninsula, we’d jump in the car and go down there,” Hywood recalls.

Towards the end of his degree, he began considering journalism. Before finishing up he walked into the university careers counsellor office.

“I said, ‘Look, just in case, if anyone comes here looking for journalists, I’ll put my name down’ … He said, ‘Well, no one has ever done it,’ and I went, ‘Well, I’ll put my name down,'” Hywood says.

Hywood got a job as an economist at Holden. But, as fate would have it, the careers office would have its first inquiry about graduates looking for a job in journalism. Trevor Sykes, who was running the Financial Review‘s Melbourne bureau at the time happened to move in across the road from Monash.

“I thought, ‘Gee, for a B-grade salary, I could hire a few cadets and start my own cadet training program! Sort of’,” Sykes says.

Sykes decided to jump across the road and have a look through the recent Monash graduates. He went through the list and picked out Larry Kornhauser – of the Rich Lister property developer family – and the only one who’d flagged he wanted to be a journo – Greg Hywood.

Hywood, who’d been working at Holden all of six weeks, continued his search for a journo gig and when Sykes’ offer came in he also had an offer from The Herald & Weekly Times, which later on in 1980s was bought by News Limited.

Hywood never expected to return to Fairfax after being sacked by Fred Hilmer (pictured) in 2003, let alone to rise to ...
Hywood never expected to return to Fairfax after being sacked by Fred Hilmer (pictured) in 2003, let alone to rise to eventually run the company.

Jim Rice

After just in a year in Melbourne, Hywood headed to Canberra. He rose through the reporting ranks, including stints as London and Washington correspondent until his return from the US in 1993 saw him make the switch to management of EIC and publisher of the Financial Review. In 1998 he made the move to the Herald as EIC and publisher, before taking on the same role at The Age in 2000.

Following the shift to the commercial side, Hywood became frustrated with a number a decisions being made above him. Hywood clashed with then CEO Hilmer, who declined to comment for this story, over where Fairfax should invest and how it should measure its readership.

Tension between Hywood and Hilmer boiled over. Hilmer was doing a restructure and Hywood was not part of it. With his two sons in private schools in Melbourne, no family wealth and little work experience outside of Fairfax, Hywood was “freaked out”.

A 1992 book review of David Osborne and Ted Gaebler’s Reinventing Government put Hywood on the radar of Terry Moran, who was secretary of the department of Premier and Cabinet in Victoria. Moran was head of the state training board when he read Hywood’s review, which outlined a new vision for how public service would need to be run.

Moran would hand copies of the book out to ministers and executives. When, nearly a decade later, Hywood got punted from Fairfax, Moran called.

“He’d tried hard in your game and not been able to alert many people to the strategic challenges that the traditional media faced,” Moran says, sitting in the the Barangaroo delivery office in Sydney.

“I thought, ‘Well, we could get him onto the library board,’ and I think he enjoyed that.”

Hywood would have a successful career in government, rising to chief executive of Tourism Victoria before in 2010 he received a call from executive search firm Spencer Stuart; “Fairfax chair Roger Corbett was looking for new board members and would he be interested?”

Greg Hywood has spent 35 of the last 42 years at Fairfax.
Greg Hywood has spent 35 of the last 42 years at Fairfax.

Ryan Stuart

“The way I’d sum up my sense of Greg is that he was a conviction economist, but he could marry that with a real-world understanding of how things worked on the ground,” Moran says.

“I think his heart was still trying to find a way to give Fairfax as a professional organisation the opportunity to adapt to a changing environment, which was partly technology driven and partly driven by further consolidation of ownership.”

Hywood left government to join the Fairfax board in 2010. By the end of the year, to his surprise, he was appointed acting CEO when the board fell out with Brian McCarthy. Hywood assumed the role full-time in early 2011.

“I think one of the watershed things is we had Bain do an assessment of the newspaper industry around the world and the likely trends,” former Fairfax chairman Roger Corbett says.

“It caused us to start to take the action to rationalise the business much earlier than News Corp, because News had the advantage of being able to support loss making papers through other avenues of the business, and kept the costs up much longer than we did.”

When he returned, Hywood was shocked to find Fairfax still dealing the strategic questions that led Hilmer to oust him in 2003. There was a noose around Fairfax’s neck and change was needed. Hywood would work with a core team of general counsel Gail Hambly, strategy boss Dhruv Gupta and chief financial officer David Housego.

“I could see the company was confused. It hadn’t determined a clear direction for the future. You get the defenders of the past and then you get those that want to run forward. Every decision we made was about the digital future not the print past.”

During Hywood’s time away, Fairfax cut investment in digital classifieds, scared off by the dotcom crash, after establishing marketing leading positions in Drive, Domain and MyCareer in the ’90s.

“The mistake [Fairfax made] was the internet was about new businesses, not about securing the traditional businesses. If that funding had have gone into securing the traditional jobs, homes, cars business online, it would have been a very different outcome,” he says.

Much to his frustration, Fairfax was still using the circulation metrics Hywood fought against in his previous stint, which inflated numbers and fooled nobody.

“There were all these sorts of rorts being built up over the years. There’d be events and there would be a newspaper on the seat the event organisers would have bought for a cent. There was a massive production of unprofitable circulation, but the point was the advertisers had figured it out,” he says.

Analysis revealed readership figures were a third less than Fairfax circulation was claiming, so Hywood cut the metric, which allowed him to cut production, close printing plants and massively reduce costs.

The cost-cutting regime would cause tension between Hywood and the editorial floor. Seasoned journalists broke down in tears at what became regular Friday farewell drinks as redundancies hit, brewing to a point where in May 2017 staff from newsrooms across the country walked out of the job for an entire week, an unprecedented protest at more cuts.

“If we hadn’t had done profound and deep cost-out these mastheads would have folded some years ago. But, we knew you don’t cut costs to glory. We knew we had to run a parallel process of trying to address the stress on revenue. We really needed to focus on building new revenue streams,” he says.

Domain was a business which was ticking along in Sydney’s inner east, west and north, with a small position in Melbourne since the late ’90s but wasn’t getting much investment. It became a cornerstone of saving Fairfax.

Hywood would pump money into Domain, which was originally founded in 1998, to get listings and agent parity with REA Group. Hywood also bought 50 per cent of Antony Catalano’s Metro Media in 2011 for $35 million; acquired the remaining 50 per cent for $72 million and folded it in Domain.

Fairfax also partner with Nine in 2014 for the later launch of streaming service Stan, considered a key growth asset with the potential to drive earnings under the merged business.

Hywood understood the power of Fairfax mastheads to drive these new businesses. The marketing power of the Herald and Age, which included at-the-time controversial front page wraparound ads, helped charge Domain and Stan’s growth.

“What we needed to be able to do to extend the life of journalism was have a lot more flexibility with advertising formats,” he says.

“You make power for people who can take your forward and you break the power of people who will hold you back. What we needed to do was say ‘editorial team, focus on the content, focus on the journalism, but there will be decisions made that aren’t traditional decisions but are going to be really important for the business’. So we started wrapping the paper.”

Nick Falloon, who took over as chairman in late 2015, says Hywood consulted well, empowered his management team, and was always open to debating ideas.

“I don’t think other than someone who had worked as a journalist in this place could have achieved what he achieved. I think it was an advantage, albeit, he wore a lot of criticism and there would have been some personalities that have made it hard for him personally.”

Many of the criticisms lobbed at Hywood have revolved around bonuses, which peaked after he purchased a Maserati in 2014, which he’s since sold.

While the car was a newly introduced, cheaper $140,000 model, Hywood admits “you don’t get everything right. It didn’t send a great signal, I can see that.”

However, he labels suggestions his bonuses were linked to cost cutting as a “total misconception”.

“I didn’t make a cracker from sacking journalists because the publishing business was not growing until very recently. I was one of the few ASX 100 CEOs who didn’t have a short-term bonus for three years in a row. The bonuses for the corporate team were based around the earnings growth we were getting through Domain and the high proportion of digital revenues we were getting.”

When the day finally came to vote on the merger with Nine, an emotional Hywood, addressing Fairfax shareholders for the last time, cited his oft-spoken line about delivering a public good within a commercial model.

“That public good is that we ask questions of the institutions and people in power that they cannot or will not ask of themselves. This is the higher calling of our business.”

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