5 things that could happen now regulator has rejected Fairfax New Zealand, NZME media merger

Fairfax NZ's Auckland headquarters: regulator's rejection of merger is a watershed moment.

​Traditional media keeps getting a pounding - and entering the fray at a sensitive time in New Zealand is the Flat Earth Society disguised as the country’s regulator, the Commerce Commission.

ComCom has rejected the proposed merger of Fairfax New Zealand and NZME, citing the likelihood of greatly reduced competition in the market. The argument: less outlets, less views, poorer society.

It beggars belief, of course.

Almost all new digital revenue goes to Facebook and Google - ComCom among the advertisers with the former.

Under a merger, the businesses would have been rationalised. Old jobs would have been axed but new jobs would have been created in what represented a chance for big but struggling media there to respawn.

What now? ​

The best media is, and always will be, a free media - a media free from the intervention of regulators. To channel Fred Dagg, they should just bugger off ...

Dozens, probably hundreds, of jobs will go. Print titles will be sold, slimmed or scorched. And global digital platforms that do not pay a cent in tax will continue to eat NZ media’s lunch.

For that, the commission will have blood on its hands.

The commission had deferred its decision a couple of times, which had given hope to proponents that the merger would proceed.

Fairfax NZ owns the country’s number one domestic website Stuff.co.nz, the Wellington-based Dominion Post, The Press in Christchurch, two Sunday titles, a handful of other regional dailies, and dozens of community titles.

It has been aggressively transforming its operations under former managing director Simon Tong and editorial chief Sinead Boucher. But the bottom of the bucket has a hole in it, and it has been difficult to add streams of new revenue at a pace faster than the print decline.

That said, the NZ business has been innovative by world standards, introducing ISP Stuff Fibre, expanding its hyperlocal venture Neighbourly (think micro-Facebook) and trying to establish an events business.

NZME owns the New Zealand Herald, a cracking good title, a good part of radio in NZ, and the daily deals site GrabOne.

The merger would have produced economies of scale, up to NZ$200 million, which ComCom recognised yet ignored. The businesses would have nicely complemented each other - a mix of print, radio, web and start-up enterprises. Some assets would have likely been sold off.

The debate over the merger has raged for a year. It has been a doozy of a stand-off.

On one side have been the editorial purists and ComCom, who argued any reduction in the plurality of voices in traditional media would be bad for Kiwis. On the other side have been those who believe traditional media is only part of the landscape. They trotted out lots of data about the impact of digital and social media on market share in regard to both audience and revenue.

In the end, the academics won.

To declare my interests, I fall in the latter camp. I have consulted to Fairfax NZ for the past two years and helped them with their editorial transformation. I also made a submission to the commission arguing the merger be conditionally approved. I have consulted to Allied Press, the Dunedin-based publisher of the Otago Daily Times and a dozen other titles. It opposed the merger - and stands to benefit if Fairfax sells off newspapers. Allied Press is an old-school outfit, but perfectly placed to gain some critical mass.

The merger parties could appeal. Executives at both companies have not been reticent about unleashing on the final judgement. The question is whether they have the time or inclination to go through another lengthy process with no guaranteed prospect of victory. They are likely to just get back to the problematic business of running media today.

I am not privy to what they will do, but I reckon it might look like this:
​

1. Fairfax goes for broke: Pretend it is your business. What would you do? I would take the biggest and best things going for it: Stuff (national web) and Neighbourly (local web). I would keep the most prestigious of print. I would set-up a dozen editorial bureaux across the country to power this and maintain local footprint as best as I could. I would deploy new channels for distribution. This would need to be expertly managed. And I would divest myself of the rest.​
2. So, print titles will go: Fairfax will have to sell titles. As much as it is on the teat of print revenue, any loss-making or marginal operations are a drag on its business. Mainly, print is a huge distraction - and as much as Fairfax can play at the edges, it will need to make the heart-wrenching and brutal decision to amputate limbs to survive let alone thrive. Well, that will be the rationale.
3. And jobs will go: No sooner had the merger been kiboshed, Fairfax Media boss Greg Hywood declared there would be “an even greater focus on cost efficiency”. (On the same day as this merger rejection, Fairfax Australia announced another 125 redundancies.)
4. Fairfax will likely sell NZ:  Australia might use this as an opportunity to cash out. Fairfax NZ has been a brilliantly-run, beaut little earner, but it might be time to set it adrift. You never lose selling out at a profit;
5. But others will emerge: The earth will not fall in. Some smaller operations will benefit, as mentioned Allied Press one of them. Could we see the re-emergence of family-owned or community-owned print too or, by crikey, start-up print? Why not? They are not encumbered by the huge labour costs or overheads of the big players.

For a country of four million people, about the size of greater Sydney, New Zealand has an incredibly vibrant media. I recently helped judge the NZ Canon Media Awards and was knocked over by the depth and volume of quality journalism across the spectrum of topic areas. I hope that continues.

However, ComCom wrongly believes it can hold back change or that it can mitigate the impact of the consolidation in traditional media experienced across the globe. Whatever happens from here, it will not be the status quo.

What does that mean for Australian media?

The NZ experience will be used by both sides of politics to shore up their arguments as the Turnbull Government continues to agonise over the antiquated cross-media laws it has inherited. South Australia’s Senator Nick Xenophon may find it a nice leveraging tool as he seeks concessions.

If there were any lesson, it shows the immense power a regulator can have - for right or wrong - on a nation’s media, poignantly, on World Press Freedom Day.

The best media is, and always will be, a free media - a media free from the intervention of regulators. To channel Fred Dagg, they should just “bugger off” from areas they do not understand and that are so highly volatile.

• Stuart Howie is the Executive Director of Flame Tree Media, a communications consultancy that helps set up DIY Newsrooms for businesses and causes. He is a former editorial director of Fairfax Regional (Australia).