Australian media giant Fairfax said on Monday it will slash 1,900 jobs and erect paywalls on its flagship titles in a major overhaul towards a digital future as print advertising revenues plunge.

As part of the plan, the Sydney Morning Herald and The Age in Melbourne will shift from broadsheet format to a more compact, tabloid size and two printing facilities will be shut.

Chief executive Greg Hywood called it a landmark event for the Herald, which began publishing in 1831, and The Age, founded in 1854.

"No one should be in any doubt that we are operating in very challenging times," he said in explaining why 20 per cent of the company's 10,000-strong workforce would be axed.

"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, which has newspaper, radio and digital interests, is the main rival in Australia to News Limited, Rupert Murdoch's Australian empire, which is also suffering and reportedly preparing for large job cuts.

Like media companies worldwide, Fairfax has faced sliding print advertising and circulation revenues and reported a 44 per cent plunge in first-half net profit to December 31.

Stock in the company has fallen more than 85 per cent in the past five years and management has come under pressure from the world's richest woman Gina Rinehart to do something about it.

Mining magnate Rinehart is Fairfax's major shareholder and on Monday revealed she had boosted her stake to 18.67 per cent from 12.58 per cent following a buying spree last week.

The company's shares rallied more than seven percent to 65 Australian cents, helped by a separate announcement that Fairfax sold a 15 per cent holding in its Trade Me subsidiary, raising Aus$166 million (US$167 million).

Fairfax said it will introduce subscriptions for the Sydney Morning Herald and The Age websites in early 2013, similar to News Limited, which already charges for access to its main title, The Australian.

Print versions of those two mastheads will shrink to the size of its Australian Financial Review newspaper from March 4, 2013.

The job cuts will come over three years and together with the closure of printing facilities in Sydney and Melbourne will result in annual savings of Aus$235 million from June 2014, the company said.

One-off costs associated with the changes will be around Aus$248 million.

The Herald said Hywood had told staff that 20 per cent of job losses would be from editorial, setting the scene for possible industrial action.

Last month, staff called a snap 36-hour strike after company moves to shift editorial production of several regional newspapers to New Zealand, with the loss of 66 jobs.

The Media, Entertainment and Arts Alliance union said it was seeking urgent meetings with the company while Communications Minister Stephen Conroy called the job losses 'terrible'.

"Fairfax have had to make, they say, some very tough decisions to survive as an organisation at all," said Conroy.

Hywood said the changes had come after 'considering the merits of a full range of structural alternatives, including a demerger'.

"The package of strategic initiatives is bold, and several are difficult, particularly as they will impact on some of our people," he said.

"However, we believe that they are in the best interests of Fairfax, our shareholders and ultimately the majority of our people."