The six-month interim results are out for our two largest print news media owners Stuff and NZME. It is no secret that print has battled with years of declining advertising revenue and departing audiences and there is no doubt the tough financial results have taken its toll. The key lowlights being Stuff’s subsequent closure of 28 regional print mastheads, and an obstinate Commerce Commission which has repealed repeated merger attempts by NZME and Stuff. However, in some quarters, the recent financial findings show that the fall in print revenue has slowed, with suggestions that the worst is over. We ask media experts and publishers what they glean from the financial findings – bearing in mind the unpredictable and circulating beast that is the media industry.
Stuff has nailed its colours to the mast, announcing the possible sale or closure of 28 of its regional newspapers and magazines and confirming the five closure of those last week. The ploy is a result of print revenue challenges and a move to strengthen its digital services.
Stuff’s departure from hardcopy isn’t a surprise. Stuff’s chief executive and managing director, Greg Hywood, said back in 2016 that unless Fairfax could obtain a merger it would become “the endgame”.
The half-year financial results reflect the digital shift; lower advertising revenue was offset by 33 percent growth in digital revenue.
Stuff’s total revenue declined by five percent in local currency terms and its earnings before interest, taxes, depreciation, and amortization (EBITDA) declined by 24 percent.
Print advertising revenue fell by 14.9 percent and audience subscription dropped by 4.3 percent.
It’s important to note, digital and non-print revenue represent just 17 percent of Stuff’s total revenue.
It is vital for Stuff that it’s digital and non-print revenue can climb above print, which currently represents just 17 percent of Stuff’s total revenue.
Hywood is confident the exit of 35 percent of its print publications will deliver additional EBITDA and that sustained digital growth will outweigh its print revenue.
However, others aren’t so sure as shown when Hosking claimed to New Zealand Herald back in February that “Fairfax is a company in trouble”.
On the other side of the fence, NZME had less movement and less inclination to depart from its print services. It was NZME’s first full financial year following the departure from APN and the financial figures showed a full-year profit of $20.9 million with its EBITDA at $66.2 million; down two percent from the previous year.
NZME’s total pro forma revenue showed a decrease of four percent for the media giant. Again, its digital performance showed healthy growth, outperforming the market with digital revenue growth of 18 percent.
Additionally, the NZME’s radio platforms total revenue fell by four percent year on year, however, it’s radio and experiential revenue returned to growth in the fourth quarter.
In the print space, the NZME’s total pro forma print revenue was down by seven percent. Print advertising revenue took a fall by nine percent and print circulation revenue dropped by three percent.
NZME chief executive Michael Boggs says he was satisfied with the financial performance of 2017 having endured the headwinds of print advertising. He admits it was worrying times after a particularly weak third quarter due to election coverage and a slowing property market but was happy to see a recovery phase for its print platform in the final quarter.
Boggs points to NZME’s leading audience reach coupled with strong digital growth, as well as a managed decline of print revenue as key highlights in the financial findings. He adds that there are ongoing market share gains in a number of areas, including print advertising.
“New Zealand print advertising revenue was estimated to decline by 12 percent in 2017, compared to our 10 percent. Total market net circulation volumes to the third quarter of 2017 declined an estimated seven percent, but our volumes declined five percent.”
Boggs believes the fall in print revenue slowed due to NZME’s strong focus on the integrated sales model, which has seen supported growth. Despite Fairfax disclosing its increased focus on digital platforms – NZME reassures it will continue to focus on desired audiences across print, radio and digital platforms.
“Rather than selling a platform or channel, it is about leveraging our data and insights to identify the audience and then secondly the channel through which to reach that audience. This approach works well for our advertisers and often expands how they want to advertise.”
Boggs remains insistent on the merger and labels it as a priority for NZME. He further states the merger will improve efficiency and competitiveness of New Zealand content generation and delivery in an increasingly fragmented market.
“NZME believes the transaction would be positive for New Zealand, its employees and shareholders due to enhancing the competitiveness of locally produced content for our news, sport and entertainment offerings.”
Head of investment at FCB David Turner didn’t believe there were any surprises in the financial findings as such but pointed to the positive signs in NZME’s print performance and radio growth.
“It is extremely promising to see local providers benefiting across their digital assets and managing to secure a better share of the budget (instead of it all going offshore).”
Turner later states a limitation that needs focus for both media owners is the removal of current transactional impediments which exist and ensuring ease of trade between media agency and media owner.
He still believes that print has a place in our media environment if it can be used effectively.
“Our recent Westpac Women in Leadership partnership with NZME was a perfect example of this. The print medium offered a great base platform to reach our core audience, then NZME’s other assets allowed the possibility to amplify beyond this.”
He continues the conversation by saying that although print audiences are declining it remains an important part in a retailer’s communications plan and still garners an audience which isn’t easily targeted elsewhere.
“It is still possible to achieve efficiencies in print, however, this comes down to the quality of ad agencies trading techniques and their ability to effectively negotiate relative to market performance and projections.”
Turner claims diversification of offerings is the key to offsetting the continued decline in ad expenditure. He says each needs to find alternative techniques outside of their current models; pointing out NZME’s paywall as a suggestion if done correctly. He also says while Stuff has branched out into energy and fibre, it’s lack of diversification will be a challenge for it.
In terms of the Fairfax print dieback, Turner believes it’s going to be much of the same for its regional papers. He says that Stuff is traditionally strong in the regions and need to manage the changes with care to limit the wider impact on its business.
Following the foiled merger plans, Turner shares his disappointment with the Commerce Commission saying it’s failed to consider the biggest challenge; fending off global juggernauts.
“In order to do this, consolidation is key. We can’t sit back, our local media companies need to take a stand in order to have any possibility to compete/exist in the future. As with many others, I do not entirely agree with the commerce commission’s decision and they have failed to consider the biggest challenge for these two companies, a challenge which doesn’t come from within New Zealand.”
Turner adds competition in the market is not a concern referring to TVNZ, Newshub, Radio New Zealand and others being capable of keeping NZME and Stuff on its toes.
“Although a merger will still see further titles closed and job losses, the greater benefit will be a strong, single company who will work towards a common goal and for the benefit of local journalism, as opposed to two companies fighting against each other.”
Head of investment at Publicis Media Bridget Soljan also states there are no notable surprises in the financial findings, showing a continued slump in print media revenue. Soljan predicts there will be a continued shift towards digital arms, which will continue to develop, expand and grow.
Soljan says newspapers will continue to decline but to a lesser degree as movements start to plateau. She feels as though advertisers will continue to keep them afloat via traditional approaches coupled with big retailers with short-term in-store sales goals.
“Magazines will continue to be utilised for the environment (rather than the reach) with the increased creation and integration approaches across their multi-platforms.”
Asked why advertisers are still attracted to print Soljan says: “It is driven largely by the environment, who is your audience and what you are trying to deliver? For newspapers, it could be the target market (if older), it is generally perceived as a more credible and premium medium.”
Soljan says it was a shame to see the departure of 28 regional print mastheads but it was inevitable if local and national businesses weren’t prepared to advertise them. In terms of the merger, Soljan looks at the decision with a balanced perspective.
“There are definitely pros and cons to both, on one hand, competition is good, especially for advertisers. It helps keep pricing honest when there are alternatives, on the other hand, combined forces for journalism and content rather than fragmentation would be a positive for advertisers and consumers.
“Realistically, it is not sustainable for either as status quo, so if the merger continues to be denied, someone (or both) are likely to lose.”
Richard Pook, general manager of Amplifi at Dentsu Aegis Network believes print will continue to be an option for clients as long as reach holds up. He says there is an attraction in an integrated NZME package of content, radio and digital.
Pook believes concerns with New Zealand’s media landscape lie in the lack of scale to support two large ad-funded news websites and while he understands Stuff’s ploy to leverage alternate revenue streams such as Stuff Fibre, Stuff Pix, Done, where the margin is higher, there will still be stiff competition and established players.
Pook later claims Stuff may need to consider subscription options in coming years to make the numbers up.
He adds the recent cut back on print mastheads may cause accelerated decline and offers an interesting grasp on the merger or non-merger as it is.
“As an outsider who moved to New Zealand in February last year, I don’t think that the merger would have had a huge impact on the diversity of comment and thought. Most of the political discourse seems to be located around the centre already, and news comes from so many other sources. I think the risk of them disappearing altogether would have a much greater impact on New Zealand’s media landscape and wider society.”