Kirk calm in face of Fairfax furore

Fairfax's former chief executive, David Kirk, pictured in Dunedin during a visit in May, hints at...
Fairfax's former chief executive, David Kirk, pictured in Dunedin during a visit in May, hints at changing New Zealand media opportunities in the future. Photo by Peter McIntosh.
It's 8pm on a cool Sydney evening and David Kirk is trying to persuade me to drink what's left of his bottle of beer.

It's not that he doesn't want it - on the contrary, it appears - but his glass is half full and he's concerned that I don't even have one.

For someone who has been in the news for days for accepting a $A4.1 million ($NZ5.1 million) golden parachute from his former employer - just months before it announced an annual loss of hundreds of millions of dollars - Mr Kirk is remarkably relaxed.

We have agreed to meet at the corporate headquarters of the mighty Macquarie Bank, where he has just addressed an event organised by the Centre for Independent Studies (CIS), to discuss how New Zealand should close the economic gap with Australia.

Just the previous day, he had returned from watching the All Blacks wallop the Wallabies in Tokyo, and seems more concerned about being asked to decide which rugby team should join the Super 15 franchise than the fuss about his Fairfax payout.

His departure from one of Australia's top corporate jobs just before Christmas last year was part of a messy boardroom battle that may not be over for some time yet, despite the company's new chairman insisting otherwise at its AGM this week.

He warns me he is going to be "charming but unhelpful" on the subject. But while we mostly talk about what is wrong with New Zealand, he seems happy to drop heavy hints that he has unfinished business in the media industry - and is even prepared to say that radical solutions might be required.

Mr Kirk's three-year tenure at Fairfax Media is of more than just passing interest to Kiwis who continue to live on this side of the Tasman.

In Australia, the company is best known for publishing the Sydney Morning Herald, Melbourne's The Age and the Australian Financial Review (AFR). But it also owns a swag of newspapers in New Zealand, including The Dominion Post, The Press and the Sunday Star-Times, as well as magazines such as TV Guide, Cuisine, NZ Gardener and NZ House & Garden.

Under his reign, the company pursued an aggressive expansion strategy, which cost billions of dollars and saw its digital division dramatically increase in size.

In Brisbane and Perth, where it did not have established newspapers, it launched online-only mastheads. And in 2007, it filled in the gaps in the rural areas by merging with the Rural Press group, in a deal worth $A2.9 billion.

While it has been criticised in Australia for failing to stem the loss of classified advertisements to competitors, that is not the case here. Mr Kirk was personally responsible for its decision to fork out a whopping $700 million for online auction site Trade Me - a sum that initially bewildered analysts on both sides of the Tasman.

The deal was announced the same week Rupert Murdoch bought MySpace, and Mr Kirk is quick to note he is not the one who is now experiencing buyer's remorse.

Trade Me contributes around $85 million a year to Fairfax's coffers, whereas MySpace, which has absorbed many more millions, has yet to make a profit.

"The old John Fairfax Holdings from five years ago today contributes only 35% of our total earnings," he noted in a speech to the Sydney Institute just over a year ago.

His attempt to future-proof the company was not universally acclaimed, however.

As production processes in particular were streamlined, many hundreds of staff were made redundant and several editors either quit or were sacked.

Not surprisingly, former staff, and some current staff, remain bitter about what they claim has been a focus on cost-cutting at the expense of quality journalism.

Mr Kirk has frequently rejected the charge, and it is certainly true that newspapers in New Zealand and Australia have not suffered nearly as much as those in the United States and Europe.

Many have in fact increased their readership and some have even boosted their circulations. But critics remain concerned that Fairfax's new media assets are cannibalising its old ones.

This week, Seven Network chairman Kerry Stokes claimed he had taken a "serious look" at Fairfax before deciding to spend $A264 million on Consolidated Media instead.

"We weren't satisfied that its publishing model had a long-term future. Those concerns remain," Mr Stokes told the AFR.

To be fair to Mr Kirk, in hindsight he picked the worst possible time to take the helm at Fairfax. His strategy might have worked had the global financial crisis not hit. But it was really the Rural Press merger that seems to have sealed his fate.

The merger was widely seen as partly a defensive move to prevent a potential takeover, which Mr Kirk has repeatedly denied. Before the credit crunch it seemed possible for almost anyone to raise huge amounts of cash, he has noted.

But crucially, it brought two members of the Fairfax family back into the company, more than two decades after the Fairfaxes lost control in a disastrous privatisation attempt.

John B. Fairfax and his son Nicholas are these days Fairfax Media's single largest shareholders. Even though they own less than 10% of its shares between them, there is no doubt who is in charge.

John B. Fairfax is widely believed to have engineered Mr Kirk's departure, replacing him with his trusted financial lieutenant at Rural Press, Brian McCarthy.

But the major conflict was between the Fairfaxes and chairman Ron Walker. John B. Fairfax wanted to get rid of Mr Walker too, and eventually went public with his concerns. In an extraordinary spectacle of shocking governance, other directors publicly disagreed.

In October, Mr Walker agreed to step down and was replaced by Roger Corbett, a former head of grocery giant Woolworths in Australia.

Mr Corbett is highly regarded by Australian investors for wringing the maximum possible profit out of companies and some believe he and Mr McCarthy - who also has a reputation for slashing costs - will make a good fit.

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