Significant shakeups in media ownership in recent months point to the struggles the industry faces as funding challenges continue to plague owners. We ask, is advertising the future and how are companies approaching a mixed-funding model in the face of consolidation and digitisation.
According to the JMAD New Zealand media ownership report for 2019, we are seeing the biggest structural changes to media in over a decade. RNZ’s restructuring of concert radio; the possible sale of Three to the Aussies; the sale of Lightbox to Sky and the broadcaster’s move towards paywall VOD services; newspaper paywalls at the NZ Herald – all significant moves in terms of media ownership and pay models contributing to a media landscape that is seeing more movement than New Zealand has earth tremors.
And that’s not even the full picture. Since the publication of the report, there has been even more movement; the possible merger of TVZN & RNZ into a super public broadcaster has be floated by Government; magazine publishing giant Bauer Media has terminated its New Zealand operations; Ovato New Zealand have announced a new publishing division; Neon and Lightbox are to merge and the sale of Stuff to Sinead Boucher for $1. Not to mention the many job losses the industry has seen as a result of these seismic shifts – and the Covid-19 climate.
With the help of industry insiders and experts we unpack the latest developments in New Zealand’s more traditional media – sometimes described as a rather fraught environment – as we question the future of advertising in media ownership in the country.
A fraught fight?
This fraught environment is, however, nothing new. “There has been a decade of fraught in the New Zealand media, and it is continuing,” says Dr Merja Myllylahti, lecturer at the Auckland University of Technology and JMAD report co-author.
“In the first JMAD report back in 2011 we noted that because of their ownership structure and the pressures coming from those structures, New Zealand media companies ‘have continued to economise and started to digitalise’, and these developments have led to the closure of a 20 year old weekly business paper, job losses for journalists, printers, advertising and distribution workers.
“Fast forward to 2019. In our last report from December 2019, we warned that the New Zealand media sector, and news ecosystem was in serious trouble. We predicted that “we are likely to see shrinking number of media companies in 2020,” Myllylahti says.
In the face of the proposed changes we are seeing in the public sector and the challenge commercial media face in order to remain viable, Broadcasting, Communications and Digital Media Minister Kris Faafoi again referred to the fraught media landscape.
“It’s well known that New Zealand’s media sector, both public and private, is facing unprecedented challenges with competition from the likes of Google and Facebook, declining revenue shares, and changes in when and how audiences access their information and entertainment.
“The Government must ensure New Zealanders have a strong independent public media service for decades to come, which means ensuring public media assets are fit for the future and able to thrive amid the changing media landscape,” the Minister said in February of this year.
This was in response to the Government announcement that they will explore the case for a new public broadcaster mashed together from the existing two, TVNZ and RNZ. Despite this announcement and the Minister’s assessment, Myllylahti says that the Government has been very slow to respond to the media’s crisis for years.
“The Covid-19 crisis has shown how important the public broadcasters are in delivering the people relevant, accurate and updated information and news. The details about the super-sized public broadcaster are still lacking, and how good or bad it will be, depends on the structure and financial structure of the new entity. One thing which is important is to safeguard RNZ and its mandate as a public interest broadcaster,” she says.
What is pleasing to notice is that TVNZ performed really well in the first half of its financial year, and its profit saw a substantial jump. Prior to the Covid-19 Lockdown, the company said that its primetime news programmes and live sport did exceptionally well. While this type of programming has been affected by the global pandemic, Myllylahti hopes that the broadcasting company will continue to invest in news and current affairs.
As for where we stand with regards to the merger, Jodi O’Donnell, TVNZ sales director says that pre-Covid-19, discussions were on-going with the purpose of strengthening public media. “MCH tasked PWC to prepare a business case, and then Covid-19 came along. TVNZ awaits decisions from the Minister,” she says.
Given the huge economic challenges the media is facing – only further intensified due to Covid-19 – Myllylahti believes that the Government has to urgently come up with creative solutions to support media. “Why not issue ‘coupons’ for households to buy print or digital subscriptions or memberships in New Zealand media or something like that? Would tax breaks or tax subsidies work? Urgent subsidies are needed now, but at the same time long-term solutions to support essential media have to be considered,” she says.
In April, Government unveiled a $50 million package to help the media industry which has seen advertising revenues plummet and scours of job losses. “Almost all businesses have been hugely challenged due to the impact of Covid-19, most are under financial pressure. However, now is not the time to be silent, nor is it the time to double down in pure digital advertising without the presence of mass reach brand promotion. Keeping brands top of mind is especially important now as many consumer behaviours have changed during Lockdown,” says O’Donnell.
Advertising and ownership
While there has been no new movement in the sale of MediaWorks’ TV offering, Three, there has been significant movement in the Video on Demand services in New Zealand. Disney+ has entered the market and in July, Lightbox – recently brought by Sky – will merge with the pay TV provider’s VOD service, Neon. The acquisition by Sky means that the merged service will have a slightly stronger offering to compete with Netflix and other major subscriber VOD operators.
“My reading of this is that Spark was giving Lightbox away as a loss-leading carrot to ensure it maintained its customer base in the transition period to ultra-fast broadband. Spark has weighed up the costs and benefits and has decided that the cost of maintaining the Lightbox service in an environment where exclusive premium content rights are becoming more competitive was no longer off-set by the benefits of increased market-share in the broadband/mobile side,” explains Professor Peter Thompson of Victoria University of Wellington.
With this move by Sky, The Herald’s underperforming paywall and TVNZ push on its OnDemand service, it would seem that many bigger players are pushing consolidation in an effort to channel new models for revenue in the face of falling advertising revenue. “The likelihood of the New Zealand media market consolidation as we have seen in the rest of the world seems inevitable – however navigating this is likely to be very challenging for many in this industry. What we know is that advertisers will always need effective mass reach platforms to promote their products and services and that is why we have been honing our online offering,” says O’Donnell, adding that year-on-year growth in the broadcaster’s digital space has been strong while the company has maintained strong traditional TV audiences and advertising revenue.
“Digital is where TVNZ competes hugely today, and we plan to keep growing these offerings as quickly and user-centred as we can. TVNZ OnDemand offers premium digital advertising which is effective and allows viewers to enjoy a fee-free service in a world where subscription fatigue is setting in. It also provides another opportunity for advertisers to promote their brands.”
The likes of O’Donnell, however, still face a big challenge from international players such as Google and Facebook. Most digital advertising money in this country goes to such platforms, and until the digital advertising market structure changes, it continues to be hard graft for our media in terms of gaining digital advertising dollars. In Australia and the UK, governments are looking into platform companies monopoly in digital advertising. Perhaps, something should be done here too.
So, while advertising may well be a part of the funding model of media companies for years to come, Myllylahti doesn’t believe it’s the best funding option. “Reader revenue and subscription revenue as a whole is the way forward, and these models are something that governments are able to support. For example, in Canada and Australia, governments are considering subsidy models for newspapers digital subscriptions,” she says.
Interestingly, the New Zealand Government, on behalf of 32 government departments and four departmental agencies, will fund subscriptions or memberships from news services for these Government departments for the 2020/21 year. This will bring forward up to $1.3 million worth of payments to small to medium New Zealand organisations producing broad public interest journalism at a national level and delivering it via subscriptions and memberships, from June 2020.
Print circulation of New Zealand newspapers has been declining for a decade. NZME and Stuff are not financially in great positions, and independent media outlets are dependent on donations, memberships, subscriptions and advertising sponsorship. When times get rough, and if these companies lose money, people lose jobs, it is obviously not great news for local news providers.
While a ‘Stuff-Me’ merger would have consolidated NZME and Stuff, notably in allowing more options to sell advertising through all the publications – which would have made life harder for some of the smaller independents as well as Allied press/ODT, unless the declining (advertising focused) business model changed then the merger would likely have failed further down the road. “I don’t think it would have saved many journalistic jobs in the medium-long term, and it’s not clear that NZME’s shift to a paywall has made enough difference to sustain it or whether that would have worked for a merged entity,” says Thompson.
This however didn’t happen, and in May Sinead Boucher bought Stuff for $1. “I didn’t have a preferred outcome between this sale and the sale to NZME,” Boucher said at the time. “I started off being a very strong supporter of the consolidation. It’s no secret media has been very disrupted in the last few years. I knew that NZME had a strong footing and could have taken it into the future, but when it became clear that wasn’t going anywhere I started to think about what the alternative would be.”
Parent company Nine had been looking to sell the business for a while, creating fears in the market the New Zealand arm would be folded, leading to an even smaller local media landscape.
“New Zealand is really well serviced by some great media companies and great journalism. But this has all been challenged, not just by the Covid-19 crisis but by the shift in advertising, particularly towards some of the social networks. That advertising is a direct funder of the journalism that underpins a healthy society. I think across the board you would have seen new approaches to build revenue streams. For example, Stuff has built a huge scale of trust, and the trust that comes with that journalism has allowed us to build up and turbo charge the growth of new businesses such a Neighbourly. Same with Stuff Fiber, we grew a really strong business up to the point where we could sell it to a new owner. That’s been a strategy of ours.
“At the same time, we always try to create really modern ways to service our advertisers and find innovate ways to meet their needs. I think there will be a lot of things we’re willing to try and do over the next few months,”
Myllylahti adds to this, saying that if you believe in the good quality national, regional and local reporting, “it is time to support your media outlets now.”
Much has been said about the closure of the New Zealand arm of Bauer Media, and much is still unknown. But, out of it is surely opportunity for smaller, locally-owned companies to make their moves in an effort to breath new light into the magazine sector.
One such company is Ovato New Zealand, which recently announced the launch of a new publishing arm set to help support the magazine industry following the closure of Bauer Media. Ovato Publishing Solutions or OPS is set to be positioned as a supportive service for the magazine brands in New Zealand.
Paul Gardiner, managing director of Ovato New Zealand says that following the closure of Bauer Media and the loss of its titles, it is expected they will be picked up by small to medium publishers across the country. “The New Zealand magazine market will be fragmented going forward and there is an opportunity for new and smaller magazine publishers to leverage back end publishing services by partnering with OPS, maximising efficiencies for their business. This full service model for magazine publishing is centered around enabling publishers to do what they do best, which is to create great content, while at the same time being able to tap into a non-competitive shared support network that makes it easy for them to get their content to market and in the hands of consumers.”
He says that when it comes to the impact the closure of Bauer titles will have on advertising, in the short-term the money may move to other channels but it’s hard to tell as the market is so depressed following the Covid-19-forced Lockdown. “Bauer only had approximately 50 percent readership of the magazine market which surprises so many people – however what they did well was make it easy for advertisers to use magazines effectively. The magazine market needs to regroup to pick up from where Bauer left and have a collective voice/offering for advertisers. This is why we have set up the Ovato Media Bureau which will give independent magazines a voice in agencies.”
Sally Duggan, executive director at The Magazine Publishers Association NZ remains optimistic about the industry despite its challenges, saying that there has been a reported 30 percent uptick in magazine subscription sales YOY post-Alert Level 4, particularly among lifestyle, home and food magazines.
“Despite the Bauer closure – which saw the loss, at least temporarily, of titles like the Listener – the magazine market remains rich and vibrant, with mass circulation magazines like TV Guide; beautiful lifestyle publications like NZ House & Garden, and a whole host of specialist publications with highly engaged audiences. The MPA’s focus will be on reminding Kiwis – and particularly marketers and advertisers – that these great magazines are out there, and that they are the perfect environment for uncertain times. Research insights consistently show that magazines are trusted and engaging, and that they lower stress levels among readers,” concludes Duggan.
This article was originally published in the June/July 2020 issue of NZ Marketing. For an updated and more detailed 19-page report on the ‘Future of Media’ in the country across several mediums, get a copy of our December/January 2020 issue, here.