NZCC sticks with status quo after 49 weeks deliberation

May 03, 2017 at 12:30 am by Staff


The inevitability of fewer newspapers in the future is a price New Zealanders should be willing to pay for not allowing their two biggest publishers to merge.

That's the view of the NZ Commerce Commission, which yesterday knocked back the application made last May for Fairfax and NZME to merge their New Zealand operations.

The decision - and the reasoning behind it - pretty much mirrors the NZCC's 'draft determination' of last November, when it said it was not satisfied a merger would not substantially lessen competition, or would benefit the public.

After a conference last December and further submissions from the applicants and others, it has not moved from that view.

A 357-page final decision declines clearance and authorisation for the merger, which would have seen NZME pay NZ$55 million in cash and give Fairfax a 41 per cent share in the expanded business.

At the outset the regulator indicated the media merger proposal was outside its experience, and the 357-page final decision labours issues which are all too familiar to industry insiders:

- the "challenging and rapidly changing commercial environment" in which news media companies operate;

- the "two-sided" nature of the market in which advertisers will take their business elsewhere as newspaper readership diminishes; and that

- advertising revenue is needed to meet the shortfall between newspaper sales revenue and production costs. "This poses a particular challenge

online, where Facebook and Google account for the majority of digital advertising revenue and news media providers struggle to generate substantial revenue directly

from readers," it says.

But it says the changing commercial environment for NZME and Fairfax is not due to reduced demand for their core product" with New Zealanders "strong consumers of news". The NZCC report says its decision "reflects that we have focussed on the

choices that readers and advertisers have", and how those choices impact on the publishers' commercial prospects.

It quotes a comment earlier this month by NZME managing editor Shayne Currie (in a March 23 article) reporting growth in print readership and saying that "if we can keep producing quality, relevant journalism, then I see our print products going well into the future".

Thus the Commission appears to be confusing the country's appetite for printed newspapers, and the publishers' ability to fund them.

Its focus is on plurality considerations, "particularly important in New Zealand given that current concentration levels of media ownership are already high by international standards" and says the merger would have consolidated the country's two largest news media providers. "NZME and Fairfax currently exert meaningful editorial influence over New Zealand's news agenda," it says.

"Given the importance of the news media to a well-functioning democratic society, we consider that any adverse effects from reduced plurality have the potential to be substantial."

Even if print retrenched even faster without the merger, it says the loss of quality and plurality would be significant, and the further decline in print "would be matched by the increased importance of online news".

It says "the highest potential net quantified benefit of around $200 million over five years", or potential increased longevity of some print publications would not be enough to offset the loss to the public, a conclusion it says "was not finely balanced".

Fairfax chief executive Greg Hywood says the decision will lead to more cost cutting. with further publishing frequency changes and consolidation of titles "an inevitability".

The decision "does nothing to address the challenge of the global search and social giants, which produce no local journalism, employ very few New Zealanders, and pay minimal, if any, local taxes," he added.

"We believe that the NZCC has failed New Zealand in blocking two local media companies from gaining the scale and resources necessary to aggressively compete now and into the future. Our impression from the outset is the NZCC seemed to be fixed in its assumption that the relevant competitive marketplace was restricted to only traditional media. No amount of market data, comparable decisions or studies from similar markets overseas could move them from that.

"In light of the NZCC decision, an even greater focus on cost efficiency will be necessary. Moving to the next stage of our New Zealand publishing model will involve reshaping how we deliver our journalism to local communities. Further publishing frequency changes and consolidation of titles is an inevitability."

Fairfax announced in March that it was cutting print editions of its Marlborough Express to three days a week from this month.

What happens now? While a cosy conspiracy to close titles such as took place among regional daily publishers in the UK in the 1930s would probably be illegal today, the year the NZCC has taken for its doubt and deliberation has seen staff at the two publishers get together in anticipation of the merger and as they unite against a common adversary. It's unlikely to be "game on" in the sort of competition for readers and advertisers the Commission envisions, ever again.

Peter Coleman

• Read the full determination

Pictured: NZCC chairman Mark Berry

Sections: Newsmedia industry

Comments

or Register to post a comment




ADVERTISEMENTS


ADVERTISEMENTS