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It’s NO to StuffMe merger

It took 341 days to get there, but the Commerce Commission has finally rejected plans to merge two of the country's biggest media companies.

The four-person commission chose World Press Freedom Day today to announce Fairfax and NZME would not receive permission to create one mega media firm which would have owned 90 percent of our newspapers, half the commercial radio market and, crucially both the biggest news websites - Stuff.co.nz and nzherald.co.nz

It is possible now the two companies could appeal the decision to the courts, but they have argued time is against them as major changes in digital media swamp traditional media businesses.

The companies' position had been that without the merger they would be unable to cut their cost bases adequately to compete with Facebook and Google for digital advertising and thus preserve funding for quality journalism.

The Commission in its decision today acknowledged that, with Chairman Dr Mark Berry saying it recognises NZME and Fairfax face a challenging commercial environment as they seek to transition from their traditional print products to a sustainable online model. 

"However, the Commission disagreed with some of the scenarios they put forward about their respective futures without the merger," he said. 

"We accept there is a real chance the merger could extend the lifespan of some newspapers and lead to significant cost savings anywhere between $40 million to around $200 million over five years. However these benefits do not, in our view, outweigh the detriments we consider would occur if it was to proceed."

For consumers, the decision means no regulator-sanctioned loss of media voices and no one player controlling what and how the news will be covered.

After the commission ruling the NZX-listed NZME, owner of the New Zealand Herald and NewstalkZB, faces uncertainty over its ownership and future, while Fairfax NZ, a subsidiary of Fairfax Media in Australia is highly likely to disappear from New Zealand altogether through sell-offs and closures.

For the 3000-plus staff of the two companies, the rejection means a programme of cost cuts and job losses that will change the face of news media and could see hundreds of redundancies.

But the commission did not believe a merger would avoid cost-cutting decisions that would reduce quality and plurality.

It found the other alternative, the StuffMe monolith, would have dominated the online news market without sufficient chance of constraint from existing competitors like TVNZ, Newshub or Radio New Zealand or from any new entrants.

"This merger would concentrate media ownership and influence to an unprecedented extent for a well-established modern liberal democracy," Berry said. 

"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." 

The Commission said while it couldn't weigh in dollar terms the net benefits against the detrimental societal impacts we expect to see, "in our assessment this is not a finely balanced decision".

The two companies filed their merger application on May 27 last year, and the commission had delayed giving its verdict repeatedly as it struggled to assess the counter arguments.

Tim Murphy has written about the consequences of the Commerce Commission decision here.

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