Media

MediaRoom: NZME’s big reveal

Tim Murphy previews NZME's results as its market value drops to a record-low on a bad day on the sharemarket. Could there be a signal of possible leadership change, and will the NZ Herald's paywall and new websites be enough to offset lost ad revenues?

Media company NZME reports its annual results on Tuesday, with attention sure to focus on its mooted purchase of rival Stuff Ltd and the number of subscribers and level of revenue its nzherald.co.nz paywall has brought in over its first eight months.

Shares in NZME, owner of the Herald, regional newspapers, NewstalkZB and a clutch of music stations, hit a new low of 34 cents on the NZX on Monday morning as stocks dropped across the board and investors awaited the 2019 financials. NZME's market capitalisation fell to just $66.8 million. The shares have been marooned beneath the early 40 cents range since the beginning of the year, having dived after the company stopped paying dividends to shareholders last financial year.

Monday morning's new low for NZME's share price on the NZX

NZME reported debt of around $90m in its First Half results in August last year. The combination of debt and languishing share price present a challenge to its plans to raise the money for the possible purchase of Stuff that it has been lobbying politicians over, seeking some kind of Kiwishare workaround of Commerce Commission objections.

NZ First leader Winston Peters has already endorsed the NZME plan, at a media conference attended by the company's top brass, but Labour and other parties have been more circumspect about the concentration of media power and journalistic voices.

NZME will be expected to offer some indication on Tuesday of its intentions over Stuff, and both its funding and political options. Increasingly, putting its operations together with Stuff appears the only big play the NZME strategists can come up with - having first sought a merger back in 2017 before repeated rejections by the commission, High Court and Court of Appeal.

Leadership changes?

If it can't be sure of a political intervention changing the regulatory playing field, it may struggle to convince banks or other lenders to back a Stuff move.

Some foreshadowing on Tuesday of change in leadership is also considered possible given the pressure the business is under.

The prolonged, depressed share price could find new life if the company announces its big spend on digital plays such as the Herald paywall and the real estate digital classified site OneRoof has come off. 

NZME last reported 15,000 paying subscribers for the Herald site's premium content, with 24,000 further print subscribers taking up their right to free digital access. The paywall has had saturation promotion in NZME's newspapers and its sites, and with its premium content settling in beside the non-premium tabloid home page news it is likely to have drawn many thousands more into the ranks of those happy to be charged.

Overall, the website has kept most of its general audience, despite much of the content being available only to paying subscribers. In January, nzherald.co.nz's monthly unique users measured by Nielsen were 1.67 million compared to 1.84m a year earlier. The market leader, Stuff, was 1.94m in January, down marginally from 1.97m a year earlier but extending its lead over nzherald.co.nz from 137,000 to 271,000. 

Under 100,000 sales?

Revenue from the paywall would have to keep growing strongly to offset expected falls in print advertising (down 6 percent at the last Full Year financial results) and newspaper sales (the Herald continues to outperform the market, down by 8 percent year on year to September, but likely to go under the 100,000 daily sales mark in the next audit).

The OneRoof site was the company's other promising digital revenue venture when it last reported to the market. It needs to show not only that the site has a good proportion of real estate listings (which it did as at August) but that it is bringing in strong revenues to pay back NZME's investment and to offset other revenue line declines.

Chief executive Michael Boggs has indicated in the past that digital classified ventures such as the Yudu employment site and Driven motoring site needed to lift performance to guarantee their own survival - so an announcement on their fates could be made.

Last year, NZME reported Full Year ebitda (earnings before interest, tax, depreciation and amortisation) of $54.7m, down 17 percent on 2017, and net profit after tax of $11.6m, down 44 percent.

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