Dr Merja Myllylahti, JMAD October 10, 2017 Status: denied and appealed NZME & Fairfax merger

Outline About Fairfax Media NZ (now Stuff) and NZME Reasons for the merger Arguments against the merger Commerce Commission draft decision and hearings The final decision Comments about the decision Appeal to the High Court What has happened/changed since?

Merger application on May 2016 On 27 May 2016 Fairfax and NZME applied for the Commerce Commission’s merger approval. According to the Commerce Act, the commission needed to first assess if the merger would substantially lessen competition in a market. If the commission could not give clearance to the merger due to competition concerns, it then needed to assess it by applying the public benefit test. The public benefit test involves a balancing of the public benefits and detriments that would, or would be likely to, result from the merger.

Fairfax Media NZ – now Stuff The company: Stuff – formerly Fairfax Media NZ Owned by: Financial shareholders. In September 2017, 3 substantial shareholders - investment management firms - owned 21% of its shares Main newspapers: The Dominion Post, The Press, Sunday Star-Times, Sunday News Main online site: Stuff Main neighbourhood website: Neighbourly Broadband company: Stuff Fibre

NZME, formerly APN News & Media The company: NZME Owned by: Financial shareholders. In September 2017, 9 financial institutions owned almost 97 % of its shares Main newspaper: The New Zealand Herald Main online site: nzherald.co.nz Main radio assets: The Radio Network with 130 radio stations including Newstalk ZB, Radio Sport Group buying site: GrabOne

The merged company NZME and Fairfax have a duopoly in the New Zealand print newspaper market, and they dominate online news. The combined market share of Fairfax and NZME newspapers is approximately 89.3 percent of which Fairfax’s market share is 45.9 percent and NZME’s 43.4 percent In 2017, the total ‘brand audience’ of The New Zealand Herald and nzherald.co.nz 3.2 million In 2017, the total ‘brand audience’ of Fairfax newspapers and Stuff 3.5 million

The merged company Combined revenue in 2016 NZ$802.6 million, and the earnings before interest, tax, depreciation and amortization (EBITDA) NZ$133.7 million. If the merger goes through, Fairfax Media shareholders in Australia will own 41 percent of the new company Number of employees approximately 3,300 – 700 jobs expected to go if the merger goes through

Reasons for joining forces NZME and Fairfax: It would enhance the two companies competition in advertising market against Google and Facebook Would enable the two parties to invest in “high quality local and regional news” Would help the two companies to compete against global news information companies such The New York Times, The Daily Mail, CNN etc. Paradoxically, NZME has a content sharing agreement with the Daily Mail and Fairfax Media with The New York Times

Submissions raised concerns Multiple parties made submissions against the merger, and the main reasons outlined were: Merger would lessen competition Would create a monopoly in news content Would dominate in advertising It is not in public interest, does not meet public benefit test Would erode journalistic capacity and quality Too much editorial power Concentration of editorial power Would harm small independent publishers and hinder newcomers

Commerce Commission hearings Commerce Commission’s draft determination in November 2016 denied a merger approval In December, the commission held hearings in Wellington about the merger and different parties presented their views Here are some views expressed by Fairfax and NZME bosses: http://www.stuff.co.nz/business/industries/87237197/fairfax-nzme- media-merger-conference-opens

ComCom final decision May 2017 On May 3, 2017, the Commerce Commission’s final ruling of the merger was against it and the merger was denied The commission chairman Dr Mark Berry stated that “This merger would concentrate media ownership and influence to an unprecedented extent for a well-established modern liberal democracy.“ “This level of influence over the news and political agenda by a single media organisation creates a risk of causing harm to New Zealand’s democracy and to the New Zealand public.”

ComCom final decision May 2017 The commission further stated that the merger would likely reduce quality of news and diversity of voices (plurality) available for New Zealanders It said that “competition between NZME and Fairfax leads them to produce higher quality content than would otherwise exist with the merger. This competition incentivises investment in editorial resources, motivates journalists and editors in their day-to-day work and acts as a safeguard to plurality.”

Dr Merja Myllylahti, JMAD The decision is in the public interest as no one single company controls most of the online and print news in New Zealand.  There is no winner in this situation - there will be negative consequences including job cuts, potential closure(s) of businesses and recycling of content. We may see rapidly emerging news deserts in regions.  The merger would not have been a salvation for the companies. There was no guarantees that this merger would have solved their fundamental revenue problems.

Dr Peter Thompson, BPMT Media academic and Chair of Better Public Media Trust Commerce Act itself needs revision. The government needs to review media ownership regulations and ensure that there is adequate funding for public service media provisions across all platforms. Public funding for independent investigative journalism should also be considered.

NZ Herald editorial “The commission's decision is wrong.” Google and Facebook eat advertising revenue, and “cannibalise the costly news gathering, features and investigative work of newspapers, broadcasters and websites that create their own content.” “They are forcing publishers that still invest in journalism to trim their costs and become ever more agile to remain profitable.” “The merger was proposed for that purpose. Blocking it does not remove the problem or make it any less necessary for the industry to cut costs and find news to survive.”

High Court appeal In May 2017 Fairfax and NZME announced that they will take commerce commission’s decision to the High Court. Fairfax said that the decision was "breach of natural justice and procedural fairness".  The companies will argue that the commission overstepped its remit, and could not rule about the issues such as plurality. The High Court hearings are starting on October 16.

What has happened since then? RNZ has become a powerful multimedia broadcaster – new funding from the government The National Business Review has become a multimedia operator with radio and video programming New digital-only news outlet Newsroom has emerged The Spinoff has launched a investigative journalism fund – crowdfunded Commercial broadcasters under pressure TVNZ, MediaWorks and Sky TV

NZ media ownership reports Have been published annually since 2011 Available on AUT online http://www.aut.ac.nz/study-at-aut/study- areas/communications/research/journalism,-media-and-democracy- research-centre/journalists-and-projects/new-zealand-media- ownership-report JMAD Facebook group https://web.facebook.com/groups/208337106193631/?ref=bookmarks