This article originally appeared in the NZ Herald.
Responses to the proposed merger between Nine Entertainment and Fairfax Media in Australia illustrate the different attitudes towards media unions on both sides of the Tasman.
The New Zealand Commerce Commission has rejected the merger of Sky Network Television and Vodafone New Zealand, as well as the NZME and Stuff amalgamation.
Meanwhile, the response to the Nine and Fairfax proposal was reasonably positive, although Fairfax journalists were more positive than their non-Fairfax colleagues.
The Australian Financial Review (AFR) — a Fairfax publication — had the bold front page headline “Fairfax-Nine merger to fight Facebook, Google”. Its journalists wrote: “Neither side of politics is opposed to the deal. Prime Minister Malcolm Turnbull said the deal would make two strong Australian brands more secure while Bill Shorten (the Labour Opposition leader) said it remains to be seen if the merger was positive or negative”.
Under the heading “A strong new foundation for fearless journalism”, the AFR editorial had this to say: “The friendly takeover provides a first mover advantage that leaves the other big media companies partnerless, after the Murdochs’ News Corp was gazumped for the Ten Network by CBS, and with Kerry Stokes’ debt-laden Seven West Media newspapers stranded in the West”.
The AFR editorial went on to say: “Nine’s board has signed up to the Fairfax charter of editorial independence” and it was important that traditional news is valued “amid the disillusion over the lack of credibility of much social media and the deliberate distortions of fake news”.
Not surprisingly, The Australian, which is owned by News Corp, took a different view under the front page headline “The Day Fairfax Died”.
The Australian could have added that traditional media, in general, is struggling as its daily readership has fallen from 446,000 to 300,000 since the end of 2009, while its weekend readership has declined from 853,000 to 608,000 over the same period.
Meanwhile, Fairfax’s Sydney Morning Herald daily readership has fallen from 797,000 to 433,000 over the same period and its weekend readership from 1,056,000 to 633,000.
The Australian’s media editor wrote: “The deal marks a dramatic turn for the 177-year-old company (Fairfax), sparking anger among staff and prompting the journalists’ union to call for the deal to be blocked”.
“If the deal is approved by regulators (mainly the Australian Competition and Consumer Commission) and shareholders, the new entity would be valued at more than any local broadcaster — including Kerry Stokes-controlled Seven West Media and US media giant CBS’s Network Ten — and could lead to further media mergers.”
The proposed merger will bring together the AFR, Sydney Morning Herald and The Age in Melbourne, as well as Nine’s second-placed free-to-air television network which broadcasts National Rugby League games and the Australian Tennis Open from next year.
In addition, it will have two fast growing digital businesses — Domain, the real estate website, and the streaming service Stan, Australia’s answer to Netflix.
The new group will also include the talkback radio station 2GB, where Alan Jones and Ray Hadley top the ratings.
The Australian’s editorial on the Nine/Fairfax deal was under the heading “Media match faces rocky road”.
A major point was “the unbridled power of digital behemoths Google and Facebook to ride roughshod over local audiences, snaffle the lion’s share of advertising that once would have been reinvested to serve local audiences, and pilfer the news coverage, pictures and analysis produced by others”.
The editorial added: “The Facebook-Google duopoly, which nabbed 85c of every digital advertising dollar in the US last year, operates beyond media rules and pays little tax in Australia”.
The Australian’s editorial was reasonably supportive of the Nine/Fairfax merger with its final point being: “global forces as much as local decisions will continue to shape what Australians read and watch”.
Traditional media are in deep trouble in Australia, partly because millennials have switched to social media. These trends are evident in Deloitte Australia’s annual Media Consumer Survey.
The 2016 survey of baby boomers (those born between 1946 and 1964) and millennials (born between 1980 and 1994) determined that their primary news sources were as follows:
- Television news stations: Boomers 54 per cent and millennials 18 per cent
- Online newspapers: Boomers 12 per cent, millennials 14 per cent
- Print newspapers: Boomers 7 per cent, millennials 5 per cent
- Radio: Boomers 12 per cent, millennials 5 per cent
- Social media sites: Boomers 6 per cent, millennials 28 per cent
- Online news not associated with newspapers: Boomers 3 per cent, millennials 10 per cent
- Don’t follow news: Boomers 4 per cent, millennials 11 per cent
- Other: Boomers 2 per cent and millennials 9 per cent.
These figures are consistent with other countries, including New Zealand, and is one of the main reasons why the Australian competitions regulator is expected to approve the Nine/Fairfax deal.
Meanwhile, the NZ Commerce Commission has a different point of view.
This was illustrated in my June 23 column, which covered the proposed merger between NZME and Stuff.
The Commission rejected the view that Facebook and Google represented stiff competition to the Herald and Stuff websites.
The Commission argued that readers who want serious journalism will go to the Herald or Stuff websites, rather than Google or Facebook, with the latter sites rated by popularity rather than reliability, timeliness or importance.
The regulator rejected the NZME/Stuff merger and its decision was upheld by the High Court. The decision has been appealed.
On June 9, 2016 Sky Network Television announced that it was in discussion to merge with Vodafone New Zealand. Its share price soared 78c, or 17.4 per cent, to $5.15 on the day.
On February 13, 2017, the Commerce Commission rejected the proposal and Sky TV’s share price fell 57c, or 13.1 per cent, to $3.78.
The commission noted that to grant clearance it “would need to be satisfied that the proposed merger would not be likely to substantially lessen competition in any market in New Zealand”.
It believed that “the proposed merger would have created a strong vertically-integrated pay TV and full service telecommunications provider in New Zealand owning all premium sports content”.
The commission has a strong New Zealand bias whereas overseas commentators look at the media sector from a global point of view.
The world is changing rapidly and Sky TV’s subscriber numbers have declined from 852,679 at the time of the 2016 Vodafone announcement to less than 800,000 at present.
The company’s share price has fallen from $5.15 after the proposed merger was announced to $2.64, while the benchmark NZX50 Gross Index has risen 27 per cent over the same period.
The Commerce Commission isn’t obliged to protect struggling companies but it should be fully aware of local and global media trends.
The recently released NZ On Air “Where are the Audiences?” report shows that the weekly reach of pay TV had declined from 68 per cent of all New Zealanders four years ago to 52 per cent, while the online video reach (Facebook, YouTube etc) had risen from 49 per cent to 72 per cent over the same period.
Streaming services (Netflix, Lightbox etc) have a weekly reach of 48 per cent of all New Zealanders while this sector wasn’t measured four years ago.
Perhaps the best way to conclude is to quote Nine Entertainment’s chief executive Hugh Marks, who said after the Nine/Fairfax merger announcement: “We all know media is changing, inevitably and constantly. And this deal is not about where media has been. It is all about where media will be in the future”.
Unfortunately, our Commerce Commission seems to be looking at the media sector with a strong emphasis on the past and a limited focus on the unprecedented changes occurring in the global media sector.