OPINION: The Commerce Commission’s decision to reject the merger between NZME and Fairfax will have a long-term negative impact on the New Zealand media and the standard of journalism.
The commission has stuck to its original preliminary view issued last November that the merger would “substantially lessen competition in advertising and reader markets – specifically Sunday newspapers, online news and community newspapers”.
Curiously, the effect of denying the merger is likely to have the same outcome.
Driven by falling revenues and the technology cost pressures involved in coping with the changing media environment, the two big media companies will have to further trim costs through downsizing staff in key areas, restricting the amount of travel by journalists and photographers and, in all likelihood, eventually reducing the output of news in their papers and online.
* Commerce Commission sinks Fairfax/NZME merger
* Why did the two publishers want to merge?
Fairfax has already tried to reduce the cost of its many regional and metropolitan newspapers by effectively “networking” its news operation, feeding stories out to those papers and exchanging news stories so as to avoid duplication of resources.
That is likely to be only a temporary solution and economics is likely to dictate that some, if not many, of its newspapers will have to close or suffer a reduction in the number of days they are published.
The prospects for NZME are not much better, although its ownership of lucrative radio networks is likely to allow it to struggle on longer.
The biggest problem both newspaper groups face is that online advertising revenues are incapable of supporting their news websites which, in turn, give away their content for free. Some agreement between the two companies may see the erection of paywalls around their sites, Stuff.co.nz and NZ Herald, which would allow them to recover revenue from subscribers.
To date, both companies have been wary of the paywall model in case one of the pair decides to maintain free access and therefore attract greater readership.
The example of the New York Times paywall that allows readers a restricted number of free views before demanding they subscribe is the likeliest scenario.
Both companies, presuming that any legal appeals against the commission decision fail, will press on with attempting to expand their operations. Industry rumours last year said Fairfax closely explored an option of merging with MediaWorks, which owns radio stations and TV3 and already operates a merged newsroom.
Fairfax is said to have dropped the deal because of cost, but it may once again return to the concept in an effort to slim its staff costs while diversifying its revenue base across papers, television, radio and online.
The commission feared a significant loss of competition should the two companies merge, despite the fact that TVNZ, TV3 and Radio New Zealand all maintain news websites and have a significant share of the media market and audience.
While the merger would mean what was effectively two voices in the market became one, it is interesting to note the recent emergence of other news websites such as Newsroom and The Spinoff providing different original news content.
It is difficult and, in the long term, impossible for news organisations to maintain a quality output of news if their budgets are being continually cut.
The loss of quality will reduce the number of readers and viewers and eventually those companies will go out of business as advertisers move their money to other more productive outlets.
It is not just Fairfax and NZME that are suffering severe financial pressure. TVNZ has imposed staff cuts in its newsroom. TV3’s Newshub is likely to be working on an extremely tight budget.
Survival will depend on how well the media companies adapt, find new sources of revenue, and collaborate so as to continue to provide the high quality news operations we have today.
– Commentator Bill Ralston is media consultant and former head of TVNZ news