A couple of dates for your diary:
• The 'Sydney Morning Herald' and 'The Age' go tabloid on March 4 next year.
That's the easy one... The same plants already print the tabloid 'Australian Financial Review' and the switch is about as simple as adding another folder slitter. The redesign should be no problem.
The publisher says the metro dailies will have all the 'key content' of current issues - news, comment, business, sport, crosswords, letters, weather, the Domain property section (brought forward to Fridays), Drive car classifieds and MyCareer recruitment advertising - in a new tabloid format resembling that of the 'AFR'.
Others don't agree: One industry source told us Fairfax management "would have to have rocks in their heads" to contemplate the investment in further equipment which might be needed.
But let's start with the big question: Why do it?
Chief executive and managing director Greg Hywood says there is no doubt the company is operating in very challenging times:"Readers' behaviours have changed and will not change back. As a result, we are taking decisive actions to fundamentally change the way we do business."
Fairfax says it will cost $44 million a year less to print the papers elsewhere in the group, with a 62 per cent reduction in operating costs.
We'd guess the value of the plant employed is not a factor; most of what hasn't already been written off will need to be. Valuing the real estate on which the Chullora and Tullamarine sites stand is a far more significant factor. Both cities have grown to surround the large print sites and - as in the case of IPMG's Hannanprint relocation - valuable real estate (an estimated $65 million-worth) is freed up by moving out of town. After all, many readers have moved out themselves.
Costly and restrictive manning agreements are also likely to have been an issue, continuing to plague the publisher from years of management change and a culture once likened to 'the inmates running the asylum'.
Fairfax predicts that total savings from its package of measures - of which closing Chullora and Tullamarine are just part - will be $235 million a year by June 2015. Of this, $215 million would be achieved by June 2014, while associated one-off costs - including $63 million for print site redundancies - are a relatively modest $248 million, net of proceeds from land sales.
The 'Fairfax of the Future' costings estimate production at existing regional sites - presumably excluding newsprint and other materials - to be 62 per cent less expensive than in the current city sites. Fairfax says "indicatively, each $100 of operating costs at the two plants to be closed will be reduced to $38 of costs to be incurred at those remaining".
It isn't entirely the fault of the 'legacy' equipment - the double-width presses are better suited to the runs involved - but their inflexibility means that options such as narrower broadsheets (and shorter tabloids) have been relegated to the 'too hard' basket.
More modern double-width presses in the group (at Wodonga and Ormiston) can turn these tricks with less difficulty.
Here's the run-down:
1 Fewer copies to print
If the yearly fall is as little as six or seven per cent a year - and Fairfax lost and cut about twice that in the year to March 2012 - there will be about 160,000 of each of the 'SMH' and 'Age' to print during the week, and 330,000 and 210,000 respectively of the two titles on Saturdays.
There's every expectation that the damage will be worse as readers accelerate the switch to digital editions - a trend in which readers of the upmarket Fairfax metros have been in the vanguard.
Doubling the rate of loss would mean there were only about 135,000 weekday papers to print, plus 285,000 and 185,000 of Saturday editions.
The 65,000-70,000 copies of the 'Australian Financial Review' are already also shared with plants in Murray Bridge (SA), Brisbane, Hobart and Mandurah (WA). Here time for the job change is a bigger factor than the run itself.
2 A wider print window
Fairfax already sees an audience pattern in which readers rely on digital editions for breaking news, and turn to print for backgrounding and features. If they're correct, that means editorial and production deadlines can be earlier without upsetting readers.
The same is true of the regional dailies the group has to accommodate on the same plant. And as the 'Fairfax of the Future' model envisages the possibility of print editions being so unprofitable - current talk is of $65 million of metro losses - that they are cut altogether, it may all be academic.
3 Help is not close, but at hand
Rural Press had almost completed a programme of plant modernisation when it merged with Fairfax Media in 2007. All the relevant print sites produce back-to-back four colour
Since then, there have been continuing upgrades, including installation of a new - and by some accounts severely under-utilised - Goss Uniliner press at Ormiston, Brisbane.
Currently Fairfax has the following printing capacity near the metropolitan centres:
Sydney (with distances from centre)
North Richmond (67 km) - single-width manroland Uniset 70 pressline, with two-web heatset section, two UV towers and four coldset 2x2 towers;
Beresfield, Newcastle (156 km) - single-width manroland Uniset 70 pressline, six 2x2 towers;
Fyshwick, ACT (290 km) - double-width manroland Geoman pressline, including newly-commissioned UV.
Other plants in NSW include Tamworth and Dubbo, both slower/smaller single-width presses. The Chullora plant has five Colorman 4x2 presslines (192 cylinders).
Melbourne (with distances from centre)
Ballarat (115 km) - single-width manroland Uniset 75 pressline, six 2x2 towers;
Wodonga (320 km) - double-width Goss Uniliner S pressline, five 4x1towers.
The Tullamarine plant has three manroland Geoman 4x2 presslines.
Teaming the Beresfield/North Richmond and Ballarat/Wodonga plants could deliver 65,000-75,000 64-page (or in most cases, 80-page) tabloids an hour. Enough to complete the weekday metro 'main jacket' sections in a couple of hours, although current inserting system capacity at those sites would probably not be able to keep up. Weekdays, somewhat less than 20 tonnes of printed papers would have to be trucked in from each site.
Capacity at Canberra hasn't been taken into consideration in these calculations, but this site - and that in Brisbane - could contribute to the production of supplements and displaced work.
The 'Fairfax of the Future' proposals provide chief executive for printing and logistics Bob Lockley with a $42 million budget for "plant transfer and capital expenditure".
While he has not responded to a GXpress Magazine request for comment, it's clear Lockley could employ the allocation in a variety - or a combination - of ways:
• add limited additional facilities to the existing plants, such as faster/bigger/extra folders, platesetters, and more mailroom capacity at Ballarat and North Richmond;
• move one or more of the displaced presses - those at Tullamarine are more modern and flexible - or the one from Fairfax's Ormiston site, to extend the nearer regional sites; real estate values rule out centring all Victorian production on Tullamarine;
• invest in one or more inkjet digital press lines to print strategic or microzoned elements - the 'Financial Review', perhaps - nearer to its readership with later deadlines. Fairfax is also understood to have studied plans to print parts of its daily print requirement on inkjet digital presses at 'satellite' plants, with the combination of Océ print technology with newly-announced manroland finishing systems among options.
While the figures presented to analysts account for the proceeds of land sales from closing Chullora and Tullamarine, nothing is provided for plant sales. Moving the presses and mailroom would be expensive, but the equipment is probably worth more to Fairfax than to an (inevitably overseas) buyer. Earlier discussion of plans to shut the Chullora plant included the possibility of relocating the 'legacy' presses elsewhere - probably to New Zealand - as well as provision of a new smaller plant to print the metro titles.
4 Knocking out the stuffing
Casual weekend readers of 'The Age' and the 'Sydney Morning Herald' are accustomed to picking a section off each of two piles - and newsagents hate the logistic nightmare of wrapping and throwing home-delivered copies - but change is in the air. News Limited this month began centralising newspaper distribution and delivery, with a pilot scheme in Brisbane's southside which cuts the number of delivery rounds from 56 to three, and takes over customer payments. Delivery territories will average 10,000 points across all titles.
The initiative is likely to result in the emergence of third party delivery contractors, and it would be surprising if Fairfax were not to take advantage of the economies of scale they will be able to offer.
A step further could see inserting or collation of issues and their supplements - perhaps with polybagging and even digital printing - at these sites. As News International has in the UK, the task of inserting is moved downstream.
These factors lead us to the view that closing Chullora and Tullamarine - and printing the metro dailies at regional sites - is possible if challenging. The $42 million allocation would not deliver any new sites, but would go a long way towards tweaking production capacity and efficiency.
Moving one or two of the closed presses to a regional site would cause industrial outcry, but is not out of the question, nor is the possibility of moving the Ormiston press suggested by one industry source.
The two-year timescale is adequate if not generous. And sets a deadline which may concentrate the minds of other stakeholders.
A lot could happen in that time... including of course, a change of heart/ownership - or a change of guard - in the Fairfax boardroom.
Yes... and no: Let's not pretend everyone agrees about this
So yes, we believe the Fairfax plan to move printing from Chullora and Tullamarine to existing regional sites is possible... with compromise, but not beyond what is likely to be realistic and acceptable in two or three years' time. As we mentioned, GXpress has not received any help from Fairfax Media in reaching that conclusion.
Others however, disagree.
One industry source with ample experience to support his arguments told us current circulations would have to at least halve in order to have 'The Age' and 'SMH' printed elsewhere within Fairfax's regional printing facilities. "I believe that would be an impossible task given the volumes currently produced in those plants," he says.
"If circulations continue to fall at a similar rate as they have over the past two or three years, Fairfax will need other capacity to produce the circulation, and this would mean new smaller sites elsewhere."
He told us it was "a nonsense" to believe there was enough capacity at regional sites such as Ballarat, Newcastle and Wodonga. "And given the under-utilised assets they have - and Ormiston is an example - why would any newspaper board or executive be embarking on a strategy that includes more investment in print metal?"
He says Fairfax would be unable to continue with current printed editions without either partially retaining those sites or building smaller new sites, or printing with News Limited, and claims the inability of Fairfax and News to strike a printing agreement is "a poor reflection of the current management structures at both organisations".
Logistics rule out printing supplements and preprint sections elsewhere, says the source. "The volume, travel/logistics of transferring product on pallets would be way more expensive and slower," he says. "Transferring preprints on discs would need special equipment and trucks, so is out of the question."
One option put to us was that Fairfax might relocate the double-width Goss Uniliner press (pictured) it installed in Ormiston in 2008. "They are currently producing about 60 tonnes a week on a machine that is capable of producing more than 400 tonnes a week, and the current tonnage could easily be handled by APN and Horton Media," we were told.
GXpress understands that one strategy considered was to use funds from the sale of the Tullamarine and Chullora real estate to fund new sites, but a source told us, "it's unlikely -you'd have to have rocks in your head to spend money on printing machinery in these times.
"I'm sure analysts would not have a clue if closure is possible or not and would assume Fairfax have a plan."
While Fairfax had canvassed closure of Chullora, senior management within the group were apparently taken by surprise by the announcement that Tullamarine would also shut.
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