Loads Of Sugar Needed For Fairfax-NZME Merger To Go Down

I was being way overly optimistic recently when I suggested  NZME and Fairfax should continue some competition in its politics, sports and investigative journalism to add a spoonful of sugar to the harsh medicine for journalism. Judging by the unvarnished concerns of the Commission issued today – comparing the print market competition to China if approval were given on the current application —  it will take quite a bit more than that to make the merger go ahead. It is only the preliminary report from the Commission declining the application for a merger. The big thing to watch now is how that judgement affects the NZX share price of NZME in this country and, to a lesser extent, Fairfax in the ASX. Many of  us felt that MediaWorks was fooling itself when it said that if approved, the combined media company needed to sell off one or the other of nzherald.co.nz or Stuff.co.nz to deal with new competition from Google and Facebook.

The combination of the two was the whole point of the merger — to make a dominant player to compete with the growing influence of Facebook and Google taking away advertising. This preliminary decision is a major step for market competition and for the media business in New Zealand. Many journalists will bone relieved that the Commission has taken into account the effect of the proposed merger on their trade. The question is what happens next.Unknown-33

 

WHAT THE COMMISSION SAID TODAY

The Commerce Commission has today published its draft determination on NZME and Fairfax’s application under the Commerce Act seeking authorisation to merge their media operations in New Zealand. The Commission’s preliminary view is that it should decline to authorise the merger.

The proposed merger would bring together New Zealand’s two largest newspaper networks and two largest news websites. The Commission has assessed the impact of the merger on competition in both advertising and reader markets for a number of media platforms as well as the overall impact on quality and plurality (diversity of voices).Unknown-31

The Commission’s preliminary view is that the merger would be likely to substantially lessen competition in a number of markets, including the markets for premium digital advertising, advertising in Sunday newspapers and advertising in community newspapers in 10 regions throughout New Zealand. It also considers the merged entity would be likely to increase subscription and retail prices for Sunday newspapers and introduce a paywall for at least one of its websites.

“Chairman Dr Mark Berry said the merger would result in one media outlet controlling nearly 90% of New Zealand’s print media market. This would be the second highest level of print media ownership in the world, behind only China. The merged entity would also control New Zealand’s two largest news websites — nzherald.co.nz and stuff.co.nz — which together have a population reach more than four times larger than the next biggest domestic news website. Further, the merged entity would own one of New Zealand’s two largest commercial radio companies. All this would result in an unprecedented level of media concentration for a well-established liberal democracy.”

“Our preliminary view is that competition would not be sufficiently robust to constrain a multi-media organisation, potentially with a single editorial voice, that would be the largest producer of national, regional and local news by some margin in New Zealand,” Dr Berry said.

“NZME and Fairfax each play a substantial role in influencing New Zealand’s news agenda. Competition between the parties drives content creation, increases the volume and variety of news available in New Zealand and assists with objectivity and accuracy in reporting. Our view is that the removal of this competitive tension would likely lead to a reduction in the quality and quantity of New Zealand news content both online and in print, with potential flow-on effects in television and radio.Unknown-32

“We recognise that the merger would achieve net financial benefits through organisational efficiencies. However, while we cannot quantify the detriments we see with respect to quality and plurality of the media, we consider that detriments resulting from increased concentration of media ownership in New Zealand would outweigh the quantified benefit we have calculated. In particular, the potential loss of plurality has weighed heavily in our draft decision. On this basis, we propose to decline the application.”

 I wrote this on November 4                                    

A SPOONFUL OF SUGAR NEEDED …

  It might be overly optimistic. But I am hoping NZME and Fairfax might add a spoonful of sugar to make their merger just a tiny bit more palatable. The sweetener would be some competition to remain. Next week, the Commerce Commission is expected to announce its draft decision on the merger. For hundreds of staff the draft will be an indication about the future should two of New Zealand’s biggest media firms be united into one local company.

Approval would set the scene for large-scale redundancies and reduce the number of independent and unique voices in the media. This is big bananas and it is make or break time for New Zealand news media. Realistically, ComCom is unlikely to say No.Unknown-33 Approval may not be assured as was originally claimed by some.

But the Commission is bound to look at the counterfactual argument: What would happen if it stopped the merger going ahead. The companies would have a tough time surviving on their own if the merger was halted.

One of the failings of the Commerce Act is that the competition watchdog cannot set any conditions for clearance. I’m hoping the two companies can volunteer to retain competing coverage in politics, sports and investigative journalism.Unknown-32

Competition is important in journalism, just as it is in other businesses. There is no guarantee of such an offer with Fairfax or NZME. They cannot be required to maintain separate news teams to ensure they get the go-ahead. But the two companies should beware the opportunity to diminish their offering to the bare minimum.In my opinion, that would hasten the lost faith in news.

Business Desk reported on October 7:

On October 7 MediaWorks says a merged Fairfax/NZME news operation should have to sell one or other of the New Zealand Herald or Stuff websites to get regulatory approval  MediaWorks said s would combine NZME’s flagship New Zealand Herald newspaper and nzherald.co.nz website, a portfolio of radio stations including Newstalk ZB, and the GrabOne daily deals site with Fairfax’s suite of newspapers including the Sunday Star-Times, Dominion Post, The Press, the stuff.co.nz website and various magazines, including New Zealand House & Garden. MediaWorks,“The Commerce Commission should also consider potential public detriment as a result of the proposed merger, due to the fact the merger will significantly reduce media plurality in New Zealand and reduce the number of viewpoints that are available to the audience,” MediaWorks said, adding that if a merger goes ahead, the entity should be required to divest either nzherald.co.nz or stuff.co.nz.

That seems highly unlikely since that level of market dominance is exactly what makes the combined operation commercially viable.

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4 thoughts on “Loads Of Sugar Needed For Fairfax-NZME Merger To Go Down”

  1. Jock Anderson says: I thought this proposed merger was a cheeky longshot and still do…How does shrinking ownership increase competition??? And how do these companies define competition???

    1. Which is why so many are surprised. I’m betwixt and between On one hand its crazy to enable a monopoly. On other it will buy time to find a solution for the survival of local journalism.

  2. On Stuff website today 30 editors have purportedly signed a letter to the Commerce Commission supporting the Fairfax/NZME merger…Do not eat breakfast before reading this letter…Who ordered them to sign, who didn’t and what happens to those who didn’t???

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