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Regulator delays Fairfax NZ/NZME decision

Wednesday, 15 March 2017
By Print21

NZME's new building, Victoria St West, Auckland

New Zealand’s corporate regulator has pushed back by another month its decision on the proposed merger of Fairfax NZ and NZME.

The New Zealand Commerce Commission (NZCC) says it needs more time to properly assess new information it’s received following its draft determination in November in which it stated it ‘would be likely to decline’ authorization of the merger:

The Commerce Commission’s preliminary view is that, on the basis of the information provided to date, it is not satisfied that the merger will not have, or would not be likely to have, the effect of substantially lessening competition in a market. The Commission is also not satisfied that the merger will result, or will be likely to result in such a benefit to the public that it should be permitted. Therefore, the Commerce Commission’s preliminary view is that it would be likely to decline to grant authorisation for the merger pursuant to section 67(3)(c) of the Commerce Act 1986.

The NZCC has now published submissions it has received from industry stakeholders during its consideration of the proposed deal.

A 42-page anonymous submission opposing the merger says the two media companies have ‘greatly underestimated the ongoing reach and importance of print’:

The Applicants have claimed that print is not a relevant market to analyse, and have encouraged the Commission to instead focus on digital revenue. Of particular concern, the Applicants have made some incorrect claims that greatly underestimate the ongoing reach and importance of print.For example, within their submission on the draft determination, the Applicants made the following claim:

“Only 13% of New Zealanders get their news from print.”

This false claim was repeated several times.

The Commission may wish to ask the Applicants to clarify the exact proportion of New Zealanders who read their print newspapers, using more robust data sources such as circulation statistics. In New Zealand, Nielsen found that 67% of news consumers read a print newspaper (in 2014).

Regardless of the exact audience reached via print, newspapers are still the primary source of income for each of the Applicants. For Fairfax, 85% of revenue derives from print, while the figure is 60% for NZME.

As noted earlier, only 12% of revenue comes from digital sources. Consequently, it is clear that print provides the vast majority of income funding their journalism. The Applicants also have the largest journalism teams in New Zealand, which are funded almost entirely through print revenue.

The Applicants have asserted that one of the biggest benefits of the merger, is that it would allow them to enhance their position within the digital advertising market. In particular, they claim that the merger would allow them to gain a significant competitive edge over Google and Facebook.

Because the Applicants have redacted their digital revenue projections within the public version of their submissions, it is difficult to comprehensively scrutinise their exact plans for increasing digital advertising revenue. However, quantifiable industry trends highlight that their current overreliance on digital advertising as their primary source of online revenue is not a sustainable business model.

Perhaps of greatest concern is that news organisations still rely on their print product as their primary source of revenue. In Australasia, it has been estimated that more than 80% of publisher advertising revenue still comes from print products. As detailed within Section 1.1, Fairfax New Zealand and NZME only earn 12% of their revenue from digital sources.

Fairfax NZ's new offices, Ponsonby, Auckland

Fairfax operates New Zealand’s largest print media network, with nine daily and three weekly newspapers, 61 community publications, 10 magazine titles and six websites, including stuff.co.nz. It also has a minority shareholding in social media site, Neighbourly.

NZME owns eight daily and two weekly newspapers, 24 community publications, six magazine titles, 10 radio stations and 38 print and radio-related websites, including nzherald.co.nz, as well as a number of individual sites including Grabone, Shop Green and Adhub.

A decision on the merger was expected to be handed down on March 15 but has been pushed back to April 11.

 

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