A Hail Mary pass from NZME
In this week's MediaRoom column: NZME throws a Hail Mary pass but has the government got its hands full already with media crises?
Media company NZME's latest attempt to win backing to join its rival Stuff Ltd seems to rest on the highly speculative proposition of giving the government some kind of 'Kiwishare' or legal right to enforce journalistic separation and independence of the combined, giant business.
Newsroom reported in August that the government had been sounded out about a StuffMe 2, with sources in Wellington then sure some kind of political waiver was being mentioned by those pushing the plan.
Stuff denied involvement and NZME wouldn't talk about 'speculation'. But now, three months on, it has been forced to tell the stock exchange it is, indeed, in talks with Stuff's Australian owner, Nine Entertainment, about buying Stuff. Moreover, a political dimension is being explored. So much for 'continuous disclosure' to the investment community.
It was Stuff, the website not the company, that broke the news of the 'Kiwishare' proposal by which NZME could offer the government special rights over the combined business' journalism.
Much talk since has centred on the Kiwishares held onto by the governments of the day when they sold Air New Zealand and then Telecom. But of course in those cases the state was keeping a share or interest in something it already owned, and countering public opposition to a no-strings-attached sale of such strategic public assets.
In this case, NZME would be giving away some private control to the state over historically independent commercial media. Which is a vastly different thing. Is there even a legal status for such a gift to the state of influence over your publicly listed company's affairs?
The proposition seems to suggest a Kiwishare would ensure the Stuff business' newsroom would remain separate and independent from its putative owner, NZME's joint New Zealand Herald and NewstalkZB operation.
But under the original, failed StuffMe merger application, separate newsrooms and editorial decision-making were also part of the sell. NZME's editors even offered the Commerce Commission a commitment to act independently.
A Kiwishare, should the government think it wise to accept it, would also provide the minister or ministers who legally hold the Kiwishare with unprecedented, if indirect, influence over the scale, resourcing and deployment of a substantial chunk of the country's print and digital journalism.
It is the kind of dealmaking in the public-private sphere that a certain former New York real estate developer and 'Art of the Deal' author (surname Trump) might countenance. Legal and political opposition to a deal? "How about we chuck the regulator/government of the day a share of the thing. They'll think they have influence and it will give us cover for bypassing laws or regulators," the dealmaker might say.
Some commentary since the Kiwishare aspect was revealed this week has focused on the Commerce Commission's firm rejection of the original merger proposal by Stuff and NZME, and has noted the commission chair at the time has moved on. But that overlooks the fact the High Court and then the Court of Appeal were equally dismissive of StuffMe, noting the risks to media plurality, editorial independence and diversity and range of content for New Zealand audiences. StuffMe bombed repeatedly at both the regulatory and legal hurdles.
Both companies have struggled since, as global digital platforms continue to soak up advertising dollars and audiences move away from paying for newspapers to free news websites or social media feeds.
Stuff Ltd was put up for sale by Nine and when it got no takers it marked it as an asset held for disposal. Revenues and profits continue to drop at substantial rates at each half-year financial presentation.
NZME has been trying to pay down its high debt, ending dividends to shareholders to do so, and thus seeing its share price on the NZX drop as low as 38 cents on November 6, making its market capitalisation then less than $80m. On Wednesday it had revived to 44.5 cents, but still in the low zone where the NZX lists stock prices by the half cent. It listed at 86 cents in 2016.
The timing of this proposal, under discussion since probably July but certainly since August, is both mind-focusing and awkward for the Government.
While a print-digital media business cries for some kind of get-out-of-regulation free card, MediaWorks has chimed in with the threat of sale or closure of its Three network, including the Newshub journalism operation, and a working group has proposed the state replace its TVNZ and RNZ media businesses with one new public broadcaster.
'Never waste a good crisis', Communications Minister Kris Faafoi might be suggesting to his government colleagues:
If the state broadcasters are merged and part of TVNZ is made non-commercial, that would open possibilities for more advertising revenue for Three or whatever its private successor might be, if it survives the political decision-making process.
If the state then allows the two struggling print-digital private companies to get together, in return for some degree of control over the fate of private journalism as well, that could breathe life into that part of the sector. The government could be seen to be doing its all to support public interest journalism in the name of a healthy democracy.
But, but, but. Who says the government - the taxpayer - could afford to give up TVNZ's advertising revenue and cover costs of the new combined broadcaster direct from taxes? And who says a combined NZME (with Stuff) could really achieve whatever commercial outcomes NZME is foreseeing if it gets a green light and a benevolent Kiwishareholder?
Who really thinks the state ought to have a say on how private media companies deploy their newsrooms?
And, most pressingly, what's to be done about Facebook, Google and the other global platforms that are part of (not all of) the cause of commercial media companies' woes? Putting 1 +1 together does not necessarily get 2 or 3 if some relief isn't forthcoming to the news media companies from that quarter.
Former Herald editor-in-chief Gavin Ellis argued on the Stuff website on Wednesday that any deal over a Kiwishare ought to go hand in hand with some kind of levy on the big global platforms on the revenues they suck out of the local media ecosystem - to be used to fund journalism here.
Sound as that kind of intervention is, it seems a tall order to pull off, plus undertake the biggest reform in public broadcasting in generations, and save Three, NZME and Stuff from themselves going into an election year.
NZME has thrown its Hail Mary pass, late and desperate, but has Faafoi got his hands too full to grab it and run?
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