FAIRFAX MEDIA says it will continue printing editions of the Herald and The Age despite a leading analyst predicting the presses would stop within three years because the company would not ''tolerate'' losses associated with the shift in revenues from print to digital.
In a note to clients the Goldman Sachs media analyst, Christian Guerra, has said he expected Fairfax would close the two mastheads by 2015 at a cost of $250 million. He predicts that by the beginning of the 2015 financial year the operating losses for the two papers could be in the region of $95 million.
The increasing fragmentation of the media landscape, a tough ad market, and an acceleration of revenues away from print to digital were all cited as reasons for his bleak outlook on the publisher's metropolitan titles. That division is particularly exposed because 80 per cent of its $1.2 billion revenues come from print, according to his estimates.
Fairfax's Metro Media chief, Jack Matthews, said the report was based on some ''flawed assumptions'' and did not take into account the $44 million in annual cost savings that the closure of the Chullora and Tullamarine printing plants would yield.
Mr Matthews said the introduction next March of compact editions of the Herald and The Age was proof that Fairfax was not walking away from the printed editions. ''On the contrary we will be making them better for the future rather than see them diminished,'' he said.
Goldman Sachs did not change its neutral position on the stock.
The Fairfax board met yesterday and was reported to have discussed the issue of slashing the value of the mastheads by up to $1 billion. A spokesman for Fairfax could not comment.
The warning from Goldman Sachs comes before the company's full-year results later this month.
In a separate note Goldman Sachs revised up its forecast for the overall media market, after strong growth in the online sector.
Mr Guerra predicts the ad market will grow 1 per cent in the second half of 2012, up from a decline of 1.8 per cent, meaning the market would grow by 4.1 per cent in the current financial year.
The year after he predicts it would grow by 4.3 per cent.