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New Zealand media futures after #StuffMe

Julienne Molineaux

On May 3, the New Zealand Commerce Commission declined the merger application by Fairfax New Zealand and NZME (colloquially called StuffMe). This merger would have seen New Zealand’s two largest media companies – owners of almost 90% of all daily newspaper readership and the countries’ two largest news websites, plus other media assets – combine.

The applicants painted a compelling case for their merger: the two-sided advertising-readership business model that had funded commercial news organisations for over a century was broken. Overseas social media and search engine behemoths Facebook and Google were eating into their revenues and they needed scale to compete. The merger’s economies of scale would also enable them to remain profitable for longer, buying the new company time to figure out a new revenue model. The applicants called this “gaining additional runway”.

The Commission rejected this logic in a comprehensive and damning finding.

In our submission against the merger, a group of academics I was part of – Donald Matheson, Merja Myllylahti, Sean Phelan, Peter Thompson, and Geoff Lealand – made the case for plurality, a situation where there are many providers of news:

…A stated goal of the merger is to reduce duplication, as if two journalists covering similar events or topics is inherently wasteful. On the contrary, a democracy functions best with many voices and perspectives. (p. 14)

…there can be no public benefit from having fewer commentators on important issues or a reduction in the number of political, economic or social correspondents. On the contrary, the public benefits of journalism – the ‘marketplace of ideas’ eulogised by classic liberals – are enabled by giving expression to different perspectives and voices. To suggest otherwise is to ignore the wide body of media, communication and journalism research that shows how two news stories, both following the conventions of ‘objective’ reportage, can be marked by all kinds of subtle, and sometimes not so subtle, differences in their representation of an event or issue. (p. 16)

Our submission concluded that the challenges facing the applicant companies was essentially the same, merger or no merger. The merger itself was not a strategic response to a changing environment. It bought time – the additional runway – but it did not solve the underlying problem of finding a new business model. Indeed, unmerged, the companies might be better placed to adapt to the radically changing media environment:

The applicants have not come together to devise a strategy for their post-merger form as they are still competitors. It is possible that un-merged, the competitive pressure to devise and experiment with new ideas regarding survival in the digital environment will be stronger than if the merger proceeds. Post-merger, as the largest media company in New Zealand and distracted by the change process (which may take several years), the urgency, creativity and pressure for a radically new strategy may be diminished or postponed. The post-merger company will be larger and less flexible in its response to change. Further, a failure by the merged company to find a successful business model would be more devastating for the New Zealand news market than the failure of one of the unmerged companies (p. 26).

It is important to note that traditional media is still profitable: despite having to pay high corporate overheads, all Fairfax New Zealand newspapers are profitable, and NZME reported both audience growth and an increase in net profits for 2016 (Peter Thompson, Media Futures symposium). Traditional broadcasting is not dead yet, either: almost 90% of New Zealanders watch ‘linear’ television (television watched as scheduled; not recorded or on demand) and almost 80% listen to radio. But younger audiences are increasingly deserting legacy media for online tailored content – social media, streamed music, video on demand – in which news exposure is a peripheral activity, an accidental by-product of engaging with social media rather than the result of an explicit appointment with a news source – or are not engaged at all.

In 2015 the New Zealand online advertising spend for Facebook and Google was more than four times the combined online advertising spend for the applicants. The old business model is dying but it is not clear yet what the new business model will be. The Commission noted that their time frame for assessing benefits and detriments of applications was five years, and they expect a mix of print and digital news to continue to be produced in this time.

A positive outcome from the merger application is the public conversation about media futures. A symposium on this topic was held at Auckland University of Technology on 27th and 28th of April, and while day one outlined some problems with media, day two was devoted to possible solutions. Other predictions or suggestions have been made in light of the merger application being denied. These ideas include:

  • Markets can be regulated, as can companies such as Facebook and Google. Rick Neville described their practise of gaining advertising revenue by distributing content that they don’t pay for as ‘highway robbery’; the solution to this is copyright law reform. Taxing Facebook and Google and re-distributing the proceeds to content creators is another option. This may require international cooperation;
  • At present all major commercial media companies in New Zealand are owned by financial institutions. The declining profitability of news media may lead to financial owners deserting the sector in search of greener pastures elsewhere. This opens up space for other owners including regional entrepreneurs more closely connected to their communities, and people with a passion for journalism rather than profit extraction. The Wairarapa Times–Age is an example of a newspaper that has been profitable since de-merging from its corporate owners;
  • Back to the future: as large corporates sell their media assets, and the vacuum is filled by a range of smaller players, there may be a re-emergence of a New Zealand Press Association-type service to ensure good coverage of content across outlets;
  • New revenue models such as crowd funding service Press Patron, may help fund some journalists, blogs and news projects. Research into paywalls have concluded they do not raise much revenue but Press Patron’s founders say their research shows that voluntary contributions will have a higher uptake than paywalls and may even out-earn digital advertising;
  • If investigative journalism looks to be threatened, general taxation could support a journalism fund, a bit like New Zealand On Air for journalists. This is currently a Green Party policy;
  • New Zealand already has several publicly-owned or funded broadcasters: Radio New Zealand, Television New Zealand, and Māori Television. Additional funding that gap-fills in the news, current affairs, and documentary space, including online and on demand, will become important if other news organisations of scale disappear. This may include re-establishing a public service mandate for Television New Zealand, and ensuring adequate resourcing for Radio New Zealand and Māori Television. Content sharing is already taking place and looks set to become the new norm as newsrooms shrink. RNZ in particular seems keen to share its news and programming across platforms and ownership types.

News media business are currently in transition are there are a variety of futures. But given the gloomy outlook for digital revenues it may be time for policy makers to step up.

 

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Julienne Molineaux
About the author

Julienne Molineaux

Julienne Molineaux works for The Policy Observatory, where she is editor of the Briefing Papers. Julienne spent ten years working in a media archive, assisting researchers. While working there she did an MA in media politics. Her PhD from the University of Auckland was in public sector management and Julienne was one of the authors of the recent report The Governance of Auckland: 5 Years On. Along with five other colleagues, she co-authored a lengthy submission to the Commerce Commission on the proposed merger between the newspaper giants Fairfax NZ and NZME/Wilson & Horton.