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Follow the money, part three: Where New Zealand's news media is finding pots of funding gold

Follow the money. It’s an axiom that journalists have believed in for years and a guiding light when it comes to holding the powerful to account. But that phrase is increasingly pertinent to those who run media businesses. As advertising money flows away from traditional channels towards large tech firms, the old business model of selling space around the news is creaking. And that has led to a range of experiments from publishers and broadcasters hoping to keep the lights on – and to keep shining those lights into dark places. Erin McKenzie dives into the local news media feed and finds plenty of experiments, but no simple answer to the funding conundrum.

By Erin McKenzie | September 18, 2018 | features

Read part two of Follow the Money here.

Get up, Stand up 

If 2017’s EY Business Journalism Awards are anything to go by, not all brands appreciate the need to step aside. New Zealand journalists proved their integrity last year when many boycotted the awards after a badly handled conflict of interest.

It disqualified an NBR series that was critical of Fuji Xerox New Zealand, which was one of EY's audit clients. With NZ Listener journalist and judge Rebecca Macfie's suggestion that the two EY judges simply remove themselves from the judging ignored, she was prompted to resign. 

NBR showed solidarity with its journalist by withdrawing all entries from the awards and it was followed by others, including NZME, Fairfax and RNZ.

When editor Duncan Bridgeman shared the news of the conflict of interest and NBR’s decision to withdraw its entries, he said: “Journalism is meant to act as a public watchdog and does so without fear or favour. If corporate sponsors can’t accept that, and instead do the exact opposite, what business do they have running these awards?”

He isn’t the only one at NBR raising questions about the involvement of corporate sponsors as a means of supporting journalism. Publisher Todd Scott, who was NBR’s chief executive and sales chief before buying out long-time publisher Barry Colman in 2012, considers himself a passionate advocate and supporter of journalists and doesn’t see corporate sponsors as the way to go.

“I’ve got some real concerns over the number of, particularly new media, that are relying on sponsorship or corporate welfare to fund their newsrooms.”

Despite the reassurances that are given in contracts, Scott says we have to accept the only reasons corporates offer the funding is because they believe they will get something favourable in return.

“It could be all above board but as long as that type of funding exists, there’s implicit expectation that you’d never hang a sponsor out to dry.” 

And sponsors aren’t the only funding model Scott has called into question. Earlier this year, NBR publicly stated it would not pay any media agency commission, saying the "gravy train reign is over”.

Scott took to Twitter to report agencies boycotting NBR, with phone lines going dead and email bookings and enquiries stopping. However, it didn’t seem to concern him as he said clients’ needs always come first and “agencies are not the client”.

Another tweet said: “Focus on the mission not the commission” and, for Scott, that mission is increasing subscribers, which he sees as the only way to ethically fund journalism. 

“There are no conflicts of interest if what you are doing is delivering a service to member subscribers or readers that pay for content. They don’t control how you write it, they simply want to support ethical, intelligent, unbiased journalism.”

Right now, NBR has over 5,000 individual online subscribers committing $35 a month to its offering and 181 subscribers paying varying amounts for company-wide access via their IP addresses, but he hopes to reach a short-term goal of 10,000 monthly paid online subscribers. From there, it will set its sights on 30,000 and then, as he told RNZ’s Colin Peacock, 100,000. 

He says there is too much free content out there and the reason it’s free is because advertisers, corporates and PR companies all have a hand in it.

“If Donald Trump has proved anything in America, it’s that you need to be cognisant of who you are relying on for your media. Who do you trust? Who do you rely on? Absolutely there are 10,000 subscribers out there.”

To get the numbers up, Scott says NBR plans to broaden its content outside the silo of business news and get involved in the business of science and the business of medicine.

“What’s exciting about it is when we get to 10,000 monthly online paid subscribers, we will be even less reliant on advertising support and that money we generate from paid subscriptions will be reinvested so that we can broaden the overall appeal of our offering,” he explains. 

NBR in the future—they won’t know that it stood for National Business Review. People will know it stands for exclusive, intelligent content that’s not freely available and you have to subscribe to.”

Looking beyond its content offer, NBR is investing in technology to keep up with how its current and potential future subscribers want to read, watch, listen and engage with it. The first will be a new website in July that’s seen half a million dollars of investment before a mobile app launches later in the year involving additional investment. 

Merger she wrote

NBR’s plan is well underway, and, given the pressure on its previously lucrative print product, it needs to move fast. The same goes for NZME and Stuff, but their hope to face the changes and move forward together as one has not gone quite to plan.

In 2016, the two sought approval for a merger in response to their business models being undermined by the international giant, aka Facebook and Google. The merger proposed to bring the two newspaper networks and corresponding online news sites under common ownership. The Commerce Commission’s preliminary view was that the merger would be likely to substantially lessen competition in advertising and reader markets – specifically Sunday newspapers, online news and community newspapers in 10 regions. 

It also indicated that the merger would not be of such a benefit to the public that it should be allowed. The decision was later upheld by the High Court and that ruling is being appealed in the Court of Appeal. Should that be successful, the two companies will renegotiate the commercial terms of the deal.

Reflecting on the last two years, NZME’s Currie says early on there was uncertainty about what the merger would mean for journalists, but as the legal process has been drawn out, that has settled. Now, the attitude he sees is heads down, business as usual to do the best job they can.

Similarly, Stuff editorial director Mark Stevens says since the “no” came out, it’s cracked on and run its own race and points out “the amazing work that’s come out from both companies, journalism is strong and healthy at the moment”.

However, Stevens does add there was some irony in the decision to deny the merger. “There was a lot of concern during the Commerce Commission process around losing the plurality of voices and the irony is if we are not there we will be losing plurality of voices.” 

During one of the hearings conducted in the lead up to the decision, Fairfax Media chief executive Greg Hywood stated emphatically that preventing newspaper publishers from making necessary commercial decisions would spell an “end-game” for the business.

“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.”

Hywood also did not shy away from explaining what this would mean for the local business. 

“In light of the NZCC decision, an even greater focus on cost efficiency will be necessary,” he said. “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.”

That statement has since become a reality, as it announced in February that 28 mastheads would be sold or closed. This followed Fairfax Media reporting its net profit, after tax, for the six months to end of December reached $38.5 million, a 54 percent drop on the prior corresponding period. 

For the local arm of the company, now rebranded as Stuff, the six-month interim results released in March showed print advertising revenue fell by 14.9 percent and audience subscription dropped by 4.3 percent.

And according to the New Zealand Herald, as of 22 April, half of Stuff’s revenue comes from its top five mastheads, including The Dominion Post, The Press and the Sunday Star-Times, while non-print revenue accounted for 17 percent, up from five percent just four years ago. 

Since the announcement to sell or close mastheads, there have been three rounds of closures, amounting to 25 closed titles, one sold title (Avenues magazine) and two under review (Clutha Leader and Kaikoura Star).

Stuff was unable to find buyers for the closed mastheads and, as a result, 38 jobs have been lost. 

When 15 of the closures were announced in May, chief executive Sinead Boucher said: “This outcome isn’t what we all would have ideally wanted, and once again I really want to thank those affected for all their hard work over many years.” 

Stevens says the step away from those mastheads is not an exit from content, audiences or the readership in those areas. And he points to Stuff.co.nz and Neighbourly as modern versions of the same service.

“We have hundreds of thousands of members on [Neighbourly] and it makes absolute sense that we use that to showcase our local and regional journalism wherever we can.”

Meanwhile, Stuff’s remaining Monday to Friday metropolitan and regional newspapers have been reimagined, going from broadsheet to compact format.

Again, Stevens does not see this as an exit from its content and audiences, saying there’s been investment in quality content and journalism going out in them. 

Want to read more? See the other chapters here.

This story was originally published in the 2018 Media issue of NZ Marketing. To subscribe, click here.

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