Standing in the way or protecting democracy? A look at the Commerce Commission’s initial rejection of the NZME/Fairfax merger

  • Media
  • November 8, 2016
  • Damien Venuto
Standing in the way or protecting democracy? A look at the Commerce Commission’s initial rejection of the NZME/Fairfax merger

This morning the Commerce Commission published a preliminary decision, declining the merger between NZME and Fairfax.

Commerce Commission chair Mark Berry said the merger would result in one media outlet controlling nearly 90 percent of the nation’s print media market, a level of ownership bettered only by China in the international context.

This compelling reference to New Zealand’s future as a single-media state made its way into virtually every publication reporting on the news this morning and was also widely distributed across Twitter.

You were, however, less likely to see this reference in any of today’s print publications for the simple reason that they had already gone to the printers by the time the Commerce Commission sent out its press release this morning, a very clear and slightly ironic example of how media consumption has changed.

The point here is that no matter how quotable this reference might have been, comparing New Zealand to China on the basis of print ownership really borders on sensationalism in a diversified media landscape, most often led by digital.

The far more interesting comment really came after this comparison, with Berry pointing out 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.

As indicated by the numbers published in the document filed by the Commerce Commission, NZME and Fairfax do have substantial digital clout when combined.    

Over the previous year, NZME and Fairfax had an average combined reach on their websites of approximately 2.2 million unique online visitors per month, constituting around 55 percent of New Zealand’s population aged 10 years and over. The closest digital competitor, Newshub, reached only 13 percent of the population, ahead of RNZ with 11 percent and TVNZ with 9 percent.

More recently, in the month of September, a combined NZME and Fairfax would have had 15 times more impressions than the nearest competitor.

These numbers certainly do tell quite an anti-competitive story, particularly when viewed alongside the fact that, as the Commmerce Commission pointed out, Fairfax and NZME continue to drive the news cycle, breaking stories that are often picked up by other media organisations (throughout the US election, the 'old-school' newspaper journalists from publications like The New York Times and Washington Post have tended to break the big stories, leaving TV networks to mop up behind them). 

Protecting media diversity is certainly important in a democracy, but doing so at the detriment of financial stability of the nation’s major news producers would entirely defeat the objective.

As Tangible Media chief executive John Baker explains: “There would not be anyone that would not support the concept of diversity in media, but I personally can’t see that being achieved by forcing private companies to maintain unprofitable businesses, especially when our competitors are more likely to be global than local.”  

Old eyes

The Spinoff editor Duncan Greive says that blocking the merger would only make sense if the media landscape continues functioning at its current rate in the foreseeable future.

“This is the Commerce Commission standing in the way,” he says.

“I think it’s really a case of misunderstanding the reality of the contemporary media situation. There’s this arrogant assumption that the news will continue to be made.

“It assumes that if the merger doesn’t go ahead, things are just going to continue as they are. But everyone working in journalism knows that this is a very optimistic view [as Chris Barton's extract on The Spinoff attests]”

Of course, there are other models of funding to consider than 'homeless man buys Ferrari' ads on every story. RNZ is publicly funded, and while its funding has been frozen since 2009, the government could look at a different approach if the major news providers and democracy as we know it was in serious jeopardy (NZ on Air has acknowledged the shift and is looking to give money to a broader mix of media). Overseas, sites like Pro Publica continue to find ways to do great journalism, although there are few examples in New Zealand of successful paid-for news strategies, while The Guardian or First Look Media have found the elusive 'quiet billionaire/charitable trust' that doesn't mind losing millions on a failing business model if its work helps shine a light into dark places and serve the democratic function.  

While Sunday newspapers still reach a significant number of people, Greive feels the disconnect is most clearly evidenced in the over-emphasis placed on them in the report.

“The Sunday paper is not a cornerstone of our democracy,” he says.

“You have people assessing the situation with a view of the world as it was 20 years ago … The people making these decision are 50-plus, still doing the same things in terms of media consumption, still reading the Sunday paper.”

Greive argues that there are no guarantees that either of the news organisations will be able to sustain the level of journalism they currently produce.

“Private provision of the news as we know it today could breakdown,” Greive says. “Infrastructure costs are huge, and it’s totally plausible that due to an inability to move revenue, it could tip.”

And he says that if this should happen and lead to the collapse of either NZME or Fairfax, it would lead to some awkward conversations for the Commerce Commission.

“I would hate to have to explain to the New Zealand public two or three years down the line,” says Greive (chances are there wouldn’t be any #stuffme hashtags thrown around).  

Where to now?

Businessdesk reporter Pattrick Smellie says that “it’s still early days” and a draft determination is far from a done deal.  

“There will be much to keep legal advisers busy picking apart the various arguments the commission has raised,” he says.

Fairfax and NZME now have a chance to submit again and challenge some of the thinking before appearing at a hearing in December, which will determine whether or not the merger goes through (when asked to comment, NZME chief executive Michael Boggs sent a short statement saying the team is currently working on a submission to be made by 22 November, and we have asked Fairfax for a comment). 

For now, the executive teams at Fairfax and NZME are keeping a relatively low profile, but former Herald editor in Tim Murphy says the Commerce Commission’s preliminary decision would’ve come as a “big shock” for the executives.

This shock was certainly reflected in the NZME share price, which dropped from 66c before the announcement to 50c at the time of publishing this article.

Murphy goes on to say that it will be a major challenge for Fairfax and NZME to challenge this decision.  

“It looks like a very tall order to overturn this,” Murphy says. “Many of the 'applicants' [NZME and Fairfax] views are systematically debunked by the Commission, and it has found a risk to competition in not only the Sunday market and online news but 10 regional areas where the two companies overlap in products/titles.”

Murphy believes that in their response, NZME and Fairfax will have to offer a guarantee that regional and Sunday papers aren’t decimated in favour of a digital-first strategy.  

“They could promise not to a) put in a paywall, b) not to close a Sunday paper and put prices up but overall they still face the fact the Commerce Commission thinks no one - existing or potential - would be able to constrain the #StuffMe power in the online space.”

The Commerce Commission’s position on the ability of Fairfax and NZME to dominate the competition relies entirely on the fact they aren’t competing with Google or Facebook.

The Commerce Commission argues that Google and Facebook offer different things to the merging parties, with Google specialising in search and Facebook operating in the social sphere (both areas not occupied by Fairfax or NZME).

This essentially buys into the narrative that Facebook isn’t a media company in that it doesn’t produce any of its own content.

Viewed editorially this argument certainly does make sense. But they call it the ‘news business’ for a reason. And if the ‘business’ side (which is definitely being threatened by Facebook and Google) doesn’t turn a profit anymore, then the news side will invariably also fall off. And, unless a new funding mechanism is found, this might leave very little diversity to protect.  

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