The Endgame begins
The cliché goes that the definition of insanity is doing the same thing repeatedly and expecting a different result.
The two big media companies, Stuff and NZME, have failed now to persuade a High Court judge to let them merge, having failed comprehensively to convince the Commerce Commission of the same thing.
Will they do it again, and seek leave to appeal this decision to the Court of Appeal? Someone high in the decision-making process might just be mad enough to do so.
The merged StuffMe giant would have controlled both big news websites, 90 percent of all newspapers including the morning papers in Auckland, Wellington and Christchurch, all three Sunday titles, and half the country's commercial radio market. Its combined newsroom would have been three times bigger than the next largest, at TVNZ.
BusinessDesk reports Justice Robert Dobson and lay member Professor Martin Richardson dismissed the appeal, finding the regulator was entitled to place significant weight on the loss of media plurality if the merger went ahead, a key point of contention raised by the publishers. The Court issued a media release today summarising the decision with the full judgment to follow once commercially sensitive information has been redacted.
The statement includes a comment from Justice Dobson on the issue of plurality, saying "we consider it is appropriate to attribute material importance to maintaining medial plurality" and that the risk of losing a wider voice "is clearly a meaningful one, and if it occurred, it would have major ramifications for the quality of New Zealand democracy".
Which is pretty much what the Commission and most journalism analysts have said all along.
The boards and executives of the two companies probably need to look at themselves now. They've either been bloody-minded with shareholders' money and time (the process has already taken 19 months) or they have allowed their legal advisers way too much bombast and false confidence in driving them on. They have put the taxpayer to a not insubstantial cost, as well, with the legal machinations along the way challenging the Commerce Commission.
All eggs rested in one basket, all reputations on the one big vision to create a monopolistic media giant in this country to buy time in the fight for digital revenues and eyeballs with the global platforms including Facebook and Google. 'Extending the runway' never seemed much of a convincing argument for reducing consumer choice and homogenising the supply of news and opinion.
Since the merger was first sought, NZME has listed on the NZX at 86 cents and traded away in the shadow or hope of this Hail Mary play. Immediately before Justice Dobson's decision declining the appeal the NZME share price was sitting at 87 cents. This morning the shares had not moved, possibly indicating even the market had given up on the merger possibility.
Fairfax NZ, which will soon change its name to Stuff after its market dominating website, lost its CEO Simon Tong during the long interregnum. NZME lost its chairman, Sir John Anderson.
The two companies probably lost a bucket of opportunities to pursue other paths as the There is No Alternative proponents doubled and trebled down on the bet that StuffMe would eventually emerge.
If there is no appeal, and the StuffMe beast is left buried, watch both companies talk up their separate futures; swearing off the Kool Aid and convincing themselves that competing against each other is cool and each has a unique set of strategies, assets, and talents to win.
Both have told staff and the market through the court process they were working on a business-as-usual basis, launching products and services and in the case of Fairfax doing deals to partner electricity and health insurances providers, and launching an on demand video service through its broadband brand StuffFibre. NZME is to launch an employment website Yudu and Stuff also developed its jobs and career offering.
Fairfax has scaled back some newspapers, converting the Marlborough Express to three days a week and planning a similar future for the Nelson Mail.
It went into the High Court case having sought permission from the Court to keep its future plans secret, even from the NZME people — an unusual move allowed by the judge.
Interestingly the growth in online audiences for Stuff.co.nz and nzherald.co.nz has started to stall.
Stuff is over the 2 million unique readers a month milestone and managing to stay there but not experiencing the surges it once experienced. The nzherald.co.nz site steadily closed in on Stuff in the first half of this year to be nudging 2 million itself, and just 126,000 monthly readers behind, only to fall away from June, when a much-touted new Herald website was launched. By November, the Herald trailed Stuff by around 245,000 readers a month, the same as in March. The November results were Stuff at 2,116,000 and nzherald.co.nz 1,871,000.
The Commission, and the Court, have found putting those two big audiences and advertising platforms together would have resulted in an uncompetitive market and on balance would have been detrimental to the public. The Sunday and regional/community newspaper markets were also ruled beyond such a merger.
So what now? Greg Hywood, the CEO of Stuff's owner Fairfax Australia said during the long battle that if a merger was denied, Fairfax in NZ would move immediately towards what he called 'the endgame". He didn't specify what that would mean for a digital company saddled with numerous newspaper titles but the term carried its own comment.
NZME was to be the name and home of the merged super company. Its chief executive Michael Boggs had a record of putting businesses together and taking them apart at Tower Insurance. It has performed bravely in its stressed print division but less so in its glamour 'radio and experiential' businesses. It will not end up with Fairfax Australia as its 40 percent shareholder, and won't have to pay Fairfax $50 million as set out in the merger plan, but it too faces strong headwinds as holder of a stable of costly newspapers in a digital world.
Both companies will need to restructure and cut their costs. Jobs will likely be lost in relatively large numbers around the country, although perhaps not as many as could have gone in a merged venture.
A disappointed Boggs told the NZX today his company had not sat on its laurels.
”We will continue to examine shareholder value-enhancing strategic initiatives leveraging our strong brands and audience reach, while enhancing the competitiveness of content generation and distribution," he said in a masterpiece of corporate speak.
“NZME has great people, brands, audiences and customers and a sound strategy to grow shareholder value. We remain very much of the view that the New Zealand media sector is an exciting place to operate and, while there are headwinds in some areas, there are real opportunities in others. NZME is well positioned to take advantage of those opportunities,” he said.
The StuffMe itch has not entirely subsided, however, as NZME told investors it might consider scratching it again: taking time to "review the full judgment when released in coming days, including the option to appeal the decision".
Fairfax (Stuff) chief executive Sinead Boucher was also disappointed by the decision but made no mention of a possible appeal, saying Fairfax NZ had also "certainly not stood still".
"We have taken massive steps forward as we continue to diversify our revenue streams and end the year with a dynamic portfolio of digital products and services. The last several weeks alone have seen us launch Stuff Pix and Done, as well as energyclubnz, and there will be more to come," she said.
Stuff reported Hywood as saying the merger would have brought synergies that would have "sustained journalism at scale in New Zealand for many years", but Fairfax's New Zealand business had continued to implement its own strategy and shape a separate future.
As a final indignity, the High Court awarded costs against Fairfax and NZME and in favour of the Commerce Commission.