Convergence: yesterday’s media buzzword is now the new normal

Once upon a time our major media companies and telcos were none of each others’ business. Now they are all up in each others’ business because of ‘convergence’ driven by digital technology and the internet. TVNZ’s board told the government it won’t be getting a return in this crowded market and this week media bosses told Mediawatch the big players can’t all survive in it much longer.  

Last Monday, Stuff launched a new online video platform – Play Stuff – offering more than 10,000 videos to stream from sources such as the BBC, TVNZ, Reuters and Vice.com alongside its own video stuff.

In its own promo video, a familiar face from TV – Carol Hirschfeld  – and the less familiar Paddy Buckley, formerly the local manager of online service Quickflix, declared it “New Zealand’s new home for video”.  

Stuff also has Stuff Pix offering Hollywood movies on demand for paying subscribers – one of a suite of different businesses Stuff operates online to make a buck these days alongside the core business of news. 

But not so long ago job titles like ‘head of video products’ and ‘head of video, audio and content partnerships’ would have made no sense when the company was a simple newspaper publisher called Fairfax Media.

Similarly, while Spark still sells phones these days just like its predecessor Telecom, it’s now in the online video game big-time too.

It has its own subscription video on-demand service Lightbox and it will be streaming the Rugby World Cup in October. EPL football’s new season kicking off this weekend is exclusively live on the Spark Sports app. 

Spark’s chief financial officer David Chalmers is also its ‘executive lead for sport’ and this week he told an industry conference in Auckland it has plans for more coverage in territory once dominated by Sky TV. 

Spark’s sports chief David Chalmers. Photo: PHOTO / RNZ Colin Peacock

At the same event, New Zealand’s second-biggest telco Vodafone announced a new digital TV box preloaded with Sky, Netflix and TVNZ OnDemand apps.

All of this is the fruit of ‘convergence’ – the digitally-driven shift that’s made adversaries and allies out of companies which were once none of each others’ business.

But it is also making the long-term survival of several of them uncertain. 

What’s convergence?

Twenty-five years ago telecommunications and television were very different businesses using different technologies on distinct networks.    

The former mostly involved two-way voice communication – or ‘phone calls’ in plain English. Sending a fax or a picture down the line from home was pushing the technology of the times. 

Broadcasting was strictly one-way stuff back then – signals via transmitters to aerials on our homes over the publicly regulated airwaves.

Telecoms, TV and broadcasting began to intersect when satellites took off but it was digital technology that mashed the two together from the late 1990s onwards. 

Convergence means our big media companies – public and private – are all operating online along with the former phone companies.

In recent years, foreign invaders like Netflix and Amazon Prime have arrived to crowd the market even more, while Facebook and Google-owned YouTube also offer ever more hours of video for free. 

First convergence, then consolidation? 

TVNZ chief executive Kevin Kenrick / Photo RNZ Colin Peacock

Fears for the future of New Zealand’s major news media companies in this crowded and overlapping market were aired at the 2019 Digital Convergence Symposium run by TUANZ in Auckland this week. 

“There’s a lot to think about. We have these global players that are well-funded and resourced and they’ve also got to deal with getting this new audience which doesn’t necessarily tune in for the 6 o’clock news,” said technology writer Sarah Putt reporting back on RNZ’s Nine to Noon and the IT Professionals Techblog.

And there’s a lot to think about for the government too.  

“If we carry on the course we have now, the big global entities will completely take out the business case of our traditional media companies,” broadcasting and digital media minister Kris Faafoi told Mediawatch last December.

“When I arrived in this job a number of traditional media players said: ‘if this continues, we’re gone’. They may no longer be in existence in three or four years,” he said.

At the time he said he was “willing to have a conversation” with them.

Last month, they took him up on the offer. 

Behind closed doors Mr Faafoi and New Zealand on Air chief Jane Wrightson met with executives from news media outfits including TVNZ, NZME, MediaWorks and RNZ.

It remains to be seen just how the government responds as he rethinks the government’s policy. 

But one move he’s already made is to cut TVNZ some financial slack.

As a state-owned company, an important part of TVNZ’s mission has been to pay a dividend to the Crown. 

It’s most recent Statement of Performance Expectations (PDF) says starkly: “Given the forecast financial performance and the need for further investment to maintain future relevance, the Board does not anticipate paying a dividend in the foreseeable future.”

Kevin Kenrick told the Digital Convergence Symposium this week the government has accepted that. 

“We’re not asking for a handout or a subsidy. We think there is more value to the government in the current market in us investing to create a sustainable future than maximising near-term dividend yield – and they agree,”  he told Mediawatch.

What do we the public get from TVNZ being let off the hook?

“You will see a significant increase in local content and the mix between local and international will shift markedly towards local. You will see investment in an online future and making that content available across more devices,” he said.   

But removing the obligation for a commercial return to the Crown coffers will not mean a less-commercial orientation at TVNZ.

Kevin Kenrick also told Mediawatch TVNZ will refine the data from TVNZ On Demand users to allow advertisers to tightly target ads to online viewers.

That’s not unexpected. 

“Consumers of online video are pretty clear they pay with their wallet, their data or their time. We’re in an ad-funded world,” he said after last year’s revamp of TVNZ on Demand. 

Which media companies could vanish?

Kevin Kenrick also told the TUANZ gathering there will be ‘consolidation’ of major media companies in our market but he wouldn’t tell Mediawatch which ones will go under or be taken over.

“Everyone’s got an opinion but nobody knows,” he said.

“Unless New Zealand starts a breeding programme and we get more consumers or we get a whole lot more businesses wanting to advertise, the market is what it is,” he told Mediawatch. 

“I don’t think it’s sustainable in a business that is high-cost to participate in. We have the same number of mass-reach free-to-air TV channels as Australia,” he said to illustrate the point.

(It’s a point made in the past by Michael Anderson, the Australian CEO of TVNZ’s big TV rival MediaWorks – though he was at pains to claim it’s unfair he has state-owned commercial TV rival in TVNZ parking tanks on his lawn).

NZME – which owns half the country’s radio stations including Newstalk ZB and publishes the New Zealand Herald and other local newspapers – has also told shareholders not to expect dividends while it wrestles with its digital future. 

Last year it failed in a long-running and costly bid to merge with Stuff. The competition watchdog deemed that anti-competitive.

Back then chief executive Michael Boggs warned “the status quo is not an option” and he told TUANZ, the convergence conference, that consolidation was inevitable. 

But, like his TVNZ counterpart, he wouldn’t name the vulnerable names for Mediawatch either.

“I can’t predict that but with telecoms companies now in the market too, there will be less players in the future,” he said.

NZME chief executive Michael Boggs / Photo RNZ Colin Peacock

The likes of Spark, Vodafone and Netflix create almost no local content or news, unlike NZME and Stuff. 

Could news disappear from companies like NZME and Stuff, where once it was the core of the business? 

Michael Boggs insists news is still at the core of NZME.

“But it is vulnerable. Since we started that (merger) process with the Commerce Commission, 150 journalists have gone from the regional markets. That’s about 30 per cent and its not a great trend,” he said.

However, had a merger been given the green light, hundreds of journalists’ jobs would have been cut if the two companies had consolidated into one.

“Without consolidation there’s going to be more pressure as a whole,” Michael Boggs said. 

It rankles with the former newspaper publishers that while media companies are all creating multi-media content online because of convergence, broadcasting is still prioritised by government policy through funding for RNZ, Māori TV and NZ on Air. 

Last year Stuff strongly argued the case for more contestable funding available to private media publishers.

“The most efficient and effective way to support the sustainability of diverse and quality
journalistic coverage in NZ would be to allocate any increased public funding to fund the
content, not specific entities. This would involve allowing public and commercial providers to
contest for funding of coverage of topics, issues, and areas that would likely otherwise miss
out due to market failures.”

– submission to Public Media Ministerial Advisory Group, March 2018

“New Zealand on Air is funding organisations other than TV and radio now if you have a story to tell and that gives us  a chance to access some of the public money,” Michael Boggs told Mediawatch.  

“I do find it a bit ironic that RNZ over the years has said they haven’t had a budget increase and asked ‘please, please give us some more money’ and the government has done that,” he said. 

“I wish I had someone to go to to say I haven”t had as much advertising over the last few years so could someone give me some more advertising,” he said.

Michael Boggs could ask NZME’s shareholders and investors for more investment to cover shortfalls in ad revenue while it goes through its digital transition, but they are keener on getting returns from the business not putting more money in. 

Shareholders and owners of New Zealand’s private media will have tough calls to make in the crowded and converged media market in coming months and years.  

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