Wealth, we’re told, can’t buy happiness — although given the choice, most would prefer to be rich and unhappy than poor and happy.
Mark Zuckerberg last week learned a couple of salient lessons about the elusive links between the two.
The Facebook founder watched in horror as investors fled his social media juggernaut, after it failed to meet earnings targets and warned of slower growth.
The stock plunged 20 per cent in one day and continued heading lower on Friday, wiping about $US17 billion from the founder’s wealth.
But there was a more telling note in the accounts about the pitfalls of obscene wealth. So confining is a life in the full glare of public view, Facebook shareholders approved lifting the Zuckerberg family’s security costs from $US7.3 million to $US10 million per annum.
If Zuckerberg and his investors were left stunned by the sudden change in sentiment, the company hasn’t exactly hit the wall.
Revenue from advertising alone is expected to reach $US33 billion this year. That’s a global cash take that has been sucked from traditional media companies, increasingly draining the life from them.
A marriage of inconvenience
Fairfax Media chief executive Greg Hywood stood before the troops in the depleted Darling Island newsroom on Thursday, in a vain bid to quell fears about a future under the stewardship of Nine Entertainment.
The company, he said, would be called Nine after the “merger”. After 177 years, the Fairfax name would disappear. But, he assured them, quality, independent journalism under the new Nine leadership would “not just survive, but thrive”.
It wasn’t just the name that would be out the door. The Fairfax boss was going too, with a reported payout of $8.2 million.
Eight years spent desperately slashing costs faster than revenue falls just to stay afloat, incurring the wrath of reporters and readers, couldn’t have been pleasant, although at more than $7 million a year, the money has been good.
Fairfax Media’s slide began around the turn of the century, when start-up websites attacked its once rich classified advertising base in jobs, housing and cars. In just four years, it went from total dominance in classified ads to number three.
What the inexperienced board and management failed to understand was the link between journalism and advertising had broken. The internet had opened cheaper and better avenues. Anyone looking to advertise their wares no longer had to use a newspaper, radio station or television network. They simply could go direct.
As the decade wore on, thousands were shown the door in wave after wave of redundancies. And then, around four years ago, it seemed the worst had passed, that it might just survive.
The internet’s second assault
Just a few hundred metres of verdant field separates Fairfax from Google’s Australian headquarters on the western side of Sydney’s Darling Harbour.
Google has hoovered up office space in Fairfax’s Sydney digs in a telling metaphor for the two businesses. (ABC News: Ben Sveen)
Around five years ago, as its business really kicked into gear, Google could no longer house its ever expanding workforce. With all the layoffs next door, it seemed a logical move. Why not sub-let some vacant office space? Fairfax, constantly looking to squeeze costs, happily accommodated them.
It was a potent metaphor for what was to come. As time went on, and Fairfax staff shrank, the vacant floors were filled by Google.
For years, there had been bitter arguments from traditional media companies about search engines like Google pilfering expensive content. There was, however, a much greater threat looming.
Having largely lost the battle over classifieds, old world media still were pulling decent money from display ads. But Google, a pioneer of algorithm-based consumer targeting, took the upper hand. Facebook soon followed.
Based on searches you’d conducted, articles you’d read or ads you’d clicked on, advertisers suddenly were being beamed directly onto your browser and your social accounts.
Once again, revenue was under pressure. Fairfax redundancies became an almost annual event, last year shedding one in four from the newsroom.
Even its development of Domain, a digital real estate advertising business, underscored the parent’s vulnerability. It now stands alone on the stock exchange as Fairfax and its history is erased.
Nine’s journey to the brink
Nine Entertainment similarly has been through the wars. James Packer saw the writing on the wall a decade ago, selling his media empire for an exorbitant price to private equity groups shortly before the financial crisis.
Chaos ensued. As revenue plunged, its huge debts became insurmountable, leading to mass layoffs. Nine’s once unassailable crown slipped.
Even with Facebook’s plunge, it will still be worth more than 200 times the merged value of Nine and Fairfax. (Reuters: Dado Ruvic/illustration)
Worse was to come. Not only has its income been ravaged by the new media giants, it now is under attack on the entertainment front with the advent of the likes of Netflix. Just like advertising, those wanting entertainment can simply go direct.
A recent sudden spike in its share price, following the sale of its real estate, and an uptick in ratings — a measure that only accounts for its audience share with rival free-to-air networks — gave it the currency to buy Fairfax.
Prime Minister Malcolm Turnbull last week applauded the deal, declaring the merger would strengthen both.
The trends suggest otherwise. Digital advertising this year will account for half the $16 billion total. Television ads are expected to fall to around $3.8 billion while print media will attract just $1.5 billion.
These are structural shifts, not cyclical. Fairfax has a stake in Domain. The two companies have a joint venture streaming operation, Stan. That’s hardly enough to guarantee a future.
Even after Facebook’s calamitous plunge last week, it will still be worth more than 200 times the merged value of the two shrinking older generation media firms.
Is there any value in journalism?
Journalism no longer is a commercial proposition. Advertisers have abandoned it as a vehicle to an audience.
Consumers, long conditioned to being delivered expensive investigations and news subsidised by ads, blanch at the idea of paying full rate.
News Corp is facing the same pressures. Just like Fairfax, where the company desperately kept searching for answers to stay in the news business, its model is under attack. Its global scale may help.
The likes of the New York Times can generate a reasonable income from selling subscriptions. But America’s audience is huge and that model can’t be replicated here.
Perhaps the answer is a return to old-style benefactors. Jeff Bezos, Amazon founder and the world’s richest man, now owns the Washington Post. Maybe government has to play a bigger role, forcing the new players to fund newsrooms.
If a free press is crucial to a viable democracy, Mark Zuckerberg’s Facebook — which allowed itself to be used as a vehicle to manipulate voters during the 2016 US elections — certainly isn’t filling the void.
He may be rich. But it could well be at the expense of our happiness.