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Future uncertain for all five big news outlets

MediaRoom column: 2020 could see the biggest changes to our news media in more than a generation. Tim Murphy sets the scene.

The year opens with all five major New Zealand news organisations uncertain about their immediate or mid-term futures.

Three, the television business MediaWorks has put up for sale, should be the first to know its fate: a MediaWorks' change to its own shareholding is due for completion from a deal in Australia in March (details below), after which any deal to confirm the offloading of Three would become clearer. Complicating things is that any prospective buyer would know the TV market could be about to change fundamentally if the Government restructures TVNZ. A straight commercial deal is possible irrespective, but it would have a clear political backdrop.

NZME must decide whether to make a bid to buy its bigger rival, Stuff, from Australia's Nine Entertainment, and then re-apply to the Commerce Commission for permission to dominate the market - with the new political backing of NZ First after promises to keep newsrooms intact. That process would, on the face of it, take until late in the year at least. Nine has no other buyer knocking on its door and will have its fingers crossed that NZME can muster the capital, given NZME's own indebtedness and languishing share price, and the cojones to endure a second round (It was emphatically rebuffed in 2017) trying to convince the regulator of StuffMe's public benefits.

RNZ and TVNZ await a decision from the coalition Government on whether it will create a new single public broadcaster to replace them both. An indication of the Cabinet's intentions was expected before Christmas but delayed for further consideration, with NZ First expressing caution. If a new broadcaster is the favoured policy, disestablishing the existing duo and creating a new entity is surely a multi-year project.

It is possible that in this general election year New Zealanders will see their mass market, 'mainstream' news businesses in the process of shrinking from five to three entities: with the owners being the Government, NZME (owned in turn by Australian fund managers) and possibly the US broadcasting giant CBS (if its early interest in Three lasts the distance).

Money will be the first consideration: MediaWorks presumably isn't fussy about how much someone like CBS ultimately pays it to take the loss-making Three off its hands (there are consistent suggestions the TV business loses around $15 million a year). Nine is rumoured to have had unrealistic hopes for Stuff when it sought offers last year (one interested party says it turned down bids or part-bids in the $50m range, suggesting it wanted well over the hundred million mark), and the Government must decide if it can stomach giving up the $300m a year or so that it would forego by making its big TV channels commercial free as part of a new public broadcaster.

Politics also stands in the way of the two mergers. Politicians must decide if the public interest is better served by allowing fewer, theoretically stronger organisations to control our news or if greater contestable public funding for all media organisations is the best way for taxpayer subsidy of the public good of journalism.

Is NZ First's imprimatur enough to get NZME's hopes across the line, or does it need overt intervention from the Labour part of the coalition to encourage the proposal through the regulatory process? What form could that take? New Zealand is not yet at the nod-and-a-wink stage of political influence over independent decision-making bodies so some law change or direction under existing law would seem necessary.

The motivation for the two-into-one proposal for public broadcasting seems to come from the ominous global competition grinding down TVNZ, and, in turn, the ominous local competition from the non-dividend-paying TVNZ grinding down Three. Both organisations' mid-term financial prospects, all things being equal, seem grim without relief. Making the public TV channels ad-free would free commercial dollars for Three to pursue, but quite how the taxpayer would find the money to replace the foregone $300m in funding of its public TV channels is another thing. Redirecting all $80m of current NZ on Air funding to the new body is one, part, answer.

The NZ Media Ownership 2019 report, issued in December from the AUT research centre for Journalism, Media and Democracy (JMAD) quotes Prime Minister Jacinda Ardern saying "doing nothing to address the challenges facing public broadcasting in New Zealand is not an option."

The report says: "The influx of global video streaming services brought more bad news for the sector, which continued to fight for its financial viability."

The report lists 13 separate streaming services available in this market and said last year saw "an influx of subscription video-on-demand (SVOD) services adding to the worries of television broadcasters.

"Apple and Disney launched streaming services and the UK based Acorn also entered NZ. Additionally Sky TV and Spark launched new sports services and Stuff introduced Play Stuff."

Overall, the report found financial results for NZ media companies in 2019 "were far from uplifting as they reported declining revenues and profits."

The JMAD studies since 2011 "have explained how financial ownership structures were undermining the viability of media companies...

"During 2019, the future of the entire private broadcasting sector was placed in the hands of two financial firms American Oaktree Capital and Sydney-based Quadrant Private Equity.

"At the time of writing Oaktree Capital owned 60 percent of MediaWorks and Quadrant was the process of acquiring MediaWorks' second largest owner QMS.

"If that merger goes through as expected the private equity firm will become the second biggest owner of MediaWorks. This also means MediaWorks would be 100 percent owned by Oaktree Capital and Quadrant."

The report concludes: "Private financial entities regard media companies not as structured wholes but as assemblages of business units that ought to be continually restructured to maximise profit rates."

Certainly, once the Quadrant purchase of QMS goes through in March, the MediaWorks' sale (or, less likely, closure) of Three will be a top priority.

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