NZME and Fairfax merger represents media evolution, not contraction - so approve it

I’m still shaking my head.

Yes, that Donald Trump was elected President. But also at the staggering and anachronistic decision by New Zealand’s competition watchdog to reject the proposed NZME and Fairfax NZ merger.

In a 195-page draft determination, the Commerce Commission found the merger would substantially lessen competition in the market.

The commission stated NZ would only be behind China for concentration of newspaper ownership. A merged company would account for 90 per cent of daily newspaper sales in the country - a far more dominant position than Rupert Murdoch has across Australian media.

On every front, from a reduction in competition in discrete local markets through to the impact on ad buyers, the report paints a grim picture post-merger. It is particularly damning of how the merger would materially diminish the plurality of views across NZ.

​Amid the mash-up of analysis from economists, academics, media experts and consultants, and more statistics than Wisden, the report fails to see the forest for the trees.

The commission holds “good judgement” as one of its core values - and “to understand the environment in which we operate and the impact of our actions”.

But the report appears blind to the dynamics and realities of today’s media environment.

Here are four reasons why:

1. New Zealand has a diverse media, a plurality of views - and will post-merger

With a population the size of Sydney, New Zealand is spoilt for media choice - a plethora of metropolitan, regional and community newspapers covering every nook and cranny of the country, commercial TV, publicly funded radio and TV, a host of websites attached to traditional media, as well as new media platforms.

Around digital, consider this. By 2020, the amount of information produced online will treble. Amid this cacophony of communication, consumers will want content that is created and delivered to them via their channel and device of choice. Flexibility and innovation cannot be optional extras for companies like NZME and Fairfax as they seek to compete with global behemoths like Facebook, Google and YouTube. 

By merging, they are in a position to better serve Kiwis. With varied interests, NZME and Fairfax NZ would complement each other. Together, they would serve both national and niche audiences - providing quality journalism and entertainment via print, radio, video, online, social and so forth. The Kiwi conversation would be endless, from talkback radio through to community chats on Neighbourly.

That’s not variety? 

2. The commission is doing print no favours

Imposing restrictions on an industry under duress does not make sense.  

I’m a lover of print. To declare my interests, I’m a former editorial director and editor for Fairfax Australia. I have consulted for Fairfax NZ but also for independent Australian and Kiwi publishers. 

What is as clear to me as it has ever been is that organisations that do not transform from print-centric models to environments where innovation is at the core will wither and die. That is the global experience. That is the NZ experience. 

In the past five years, metropolitan daily newspaper circulation in NZ has dropped 25 per cent - and it continues to decline. ​

Webbed wonder: Fairfax New Zealand's online success story, Stuff.co.nz

This is media rebirthing. It reflects audience and advertising trends. It reflects social patterns. It is enabled by technology. It is called progress. And it is healthy.

The rub for publishers is that newspaper subscription and ad revenue still overwhelmingly funds those businesses and their journalism. These companies do not want to jettison print and require print to be stronger for longer as they move their respective business models to a solid digital footing.

For its part, the commission takes a “let’s freeze time” approach. But it applies a double standard too.

On the one hand the commission presumes the status quo will apply if it prevents the merger. That is, things will bob along as now, with the current level of disruption. “... We have taken a pragmatic approach by conducting our competition analysis on the basis of the status quo scenario as we consider it to be the most conservative from a competition point of view,” the commission states. Sounds more optimistic than conservative to me.

On the other hand, the commission presumes there would be significant rationalisation and reduction in competition if the merger proceeded. Print titles would go, the cost of advertising would be jacked up and the Fourth Estate as the independent force we know it would be destroyed.

Would a merged company seek to close newspapers? Perhaps. But nobbling NZME and Fairfax’s ability to scale up or transform their business models might be a catalyst for rationalisation too. In the end, it is a fluid situation - and it is the bigger media picture that counts, not just the fortunes of print publishing.

3. The merger represents evolution not contraction

The commission’s role, of course, is to analyse all before it and do its best to predict what might or might not happen in regard to competition. However, with or without the merger the media landscape will change. Old jobs will go, new jobs will be created. Newspapers will close, new enterprises will be launched.

This is media re-spawning.

It reflects audience and advertising trends. It reflects social patterns and how we choose to consume information. It is enabled by technology we all use. It is called progress. And it is healthy.

This is an inconvenient truth for the commission, which wants to regulate market forces beyond its control. In the process it is blocking two companies starting to emerge from the fog of uncertainty that has surrounded the media landscape.

One of the commission’s strategic objectives is to create an environment where “consumers and businesses are confident market participants”. Its draft determination only fuels further uncertainty.

If the commission wanted evidence of the real market difficulties today then it might have referenced US report Internet Trends that found Google and Facebook accounted for three-quarters of all new online ad spending in 2015. Simply, ouch.

4. A free media is a less regulated media

It is surprising the commissioners have not reflected on the conversation in Australia where media is considering the greatest deregulation in decades.

In the 1980s, Prime Minister Paul Keating said media tsars had to make a choice - they could be princes of print but not queens of screen. Back then, the staples of a daily media diet were radio, the 6 o’clock TV news, and the morning or afternoon newspaper.

Today, media is far more complex - and for regulation to be fair it must take into account the gamut of traditional and new media. Competition has only increased for traditional media players. Further restricting their operations would be counter-intuitive and it why the Turnbull Government is considering a rewrite of Australia’s restrictive cross-media laws.

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What happens next? The commission is taking submissions until November 25, before conference hearings in early December and a final decision next year.

It is hard to imagine that the commission, so unequivocal in its draft decision, would backflip on the merger come its final determination scheduled for March 15. Yes, the Ides of March.

With so much at stake, we can expect to see significant pressure and lobbying on the Key Government. The matter could end up in the High Court.

A less combative path would be for the merger proponents to re-submit and for the commission to reassess the greater media context.

NZME and Fairfax could provide guarantees around maintaining a prescribed level of service in markets of concern. As well, the merged company could take a number of other measures, such as appointing an internal ombudsman or community advocate, as is common in the US, and/or subject itself to regular independent “news and opinion” audits as another check and balance.

In the meantime, we hope common sense prevails and this merger is given a chance to breathe new life into the NZ media market.


* Stuart Howie is the director of Flame Tree Media. He is a former editorial director of Fairfax Regional Media (180 publications across Australia). He is a former editor of the Illawarra Mercury, Ballarat Courier and deputy editor of The Canberra Times. He has consulted for Fairfax NZ and other independent publishers in New Zealand and Australia, and sets up DIY newsrooms for non-media players.