Former Herald editor-in-chief Gavin Ellis on the potential Fairfax-NZME merger

Yesterday, Australian media broke the story that APN News and Media and Fairfax were considering the merits of merging the New Zealand arms of their respective businesses.

This speculation kicked off with a report in The Australian saying that APN was poised to announce a split from NZME at its annual meeting on Wednesday.

At this stage, details are still unclear, but further reports coming out of Australia suggest Fairfax and NZME are in “exploratory talks to announce the demerger” of NZME and that corporate advisory group Grant Samuel is providing advice on a potential merger between the two local companies.

APN and Fairfax are both refraining from commenting to media at this stage.

“Fairfax continues to explore options for all its businesses including Fairfax New Zealand, but at this time there is nothing to disclose,” said an official statement from Fairfax.

Despite this silence, former New Zealand Herald editor-in-chief Gavin Ellis (who also spoke to RNZ today) believes the de-merger of NZME will “almost certainly go ahead tomorrow” but that this in itself will not result in a follow-on merger between the two competitors.  

“A merger between NZME and Fairfax is still very much in the realm of speculation,” he says.

This has not stopped the media from musing on what a potential merger might entail.

Even if the publishers agree to merge, there are still concerns that the Commerce Commission will not allow the deal to go through, given that it would centralise control of the newspaper industry under a single business.

But the newspaper business is not quite the same as it once was. And rather than competing with local players, New Zealand media companies are now pitted against digital juggernauts—which could motivate the Commerce Commission to allow the merger to happen (that was the argument that Bauer used when it purchased a range of titles from NZ Magazines).

New Zealand wouldn’t be the first country in the world to see a merger between two major news publishers, with Italian publications La Repubblica and La Stampa fusing to form a single digital media publishing group earlier this year. It’s also happened in Canada and, as Tim Murphy mentioned in this great Spinoff piece, Florida and other US states. As is the case across the world, these moves in were made in response to the decline in advertising revenue—online revenue numbers simply do not counter the losses in print advertising.

Locally, NZME’s profit from its media business was down 13 percent year on year to $22.7 million in its financial figures from last year.

Bringing together Fairfax and NZME could allow the two companies to share expenses and cut costs. It will also mean that there will be less duplication, as journalists no longer have to create a slight variation on a story published on another channel (when viewed in the global context we’re seeing massive wastage in this regard with one story being duplicated, with subtle changes, as many as 70 times, leading some to believe newsbots and AI will wade through the duplication to give you the best options will be the future of media). 

But this isn’t necessarily great news for journalists. 

“If the do merge, then we’re in for some serious ‘rationalisation,’ and rationalisation is just another word for job losses,” Ellis says.

This is of course exactly what happened when Canada’s Postmedia Group merged its competing newsrooms across Vancouver, Calgary, Edmonton and Ottawa.

To reduce costs, the company cut 90 of its staff.

In response, Postmedia’s president and chief executive officer Paul Godfrey said: “I wanted to make sure that both newspapers [in each of the four cities]would continue, and I think we have found the formula which, at least at this point in time, can mean the continuation of those publications.”

If his tone doesn’t sound convincing, that’s because it isn’t. Newspaper publishing is becoming increasingly removed from the consumption habits of modern consumers—so much so that, as Ellis points out, Fairfax has mulled limiting The Sydney Morning Herald and The Age to weekend-only models and that APN is selling off its regional papers.

“Newspapers are an inherently inefficient way of distributing information when compared to digital publishing,” Ellis says. “Ultimately, we will see print disappear. You are already seeing this the Sydney Morning Herald and The Age.”

Ellis believes weekend publications will eventually also disappear, but that this will only happen further down the track.

“This is the grim reality of mainstream media,” Ellis says.

Ellis says the publishers have to do something or they will eventually fail. The economics simply do not make long-term sense anymore. 

“The important thing is that we do as much as we can to retain quality journalism and this might mean looking at other commercial models,” Ellis says (but even then, with The Guardian losing around £1 million a week, the not-for-profit model also has its limits). 

Co-operation among local competitors is certainly becoming more common, as evidenced by the likes of KPEX, TVNZ and Fairfax’s deal and the collaboration between RNZ, TVNZ and Nicky Hager with the Panama Papers. That might stem the flow slightly. But unless the revenue leaking out of news media can be plugged, we will have to find an alternative way to fund it. And what form that might take is becoming an increasingly important debate. 

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