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New Zealand blocks media merger to defend diversity

New Zealand’s competition watchdog has blocked a merger between the country’s two main newspaper groups in the interests of defending media diversity, shrugging off concerns its decision threatens the groups’ financial viability.

Wednesday’s ruling on a proposal from New Zealand Media and Entertainment and Fairfax NZ comes as global regulators face a swath of contentious mergers and growing concentration in an industry facing falls in circulation and advertising revenues amid heightened digital competition.

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

NZME and Fairfax NZ, which together control about 90 per cent of daily newspapers in New Zealand and most online news providers, had warned regulators they would have to cut reporting should the merger be blocked. That would “result in less media investment and less plurality than if the parties were able to merge”, they said in a joint submission to the commission. 

Thirty editors at Fairfax NZ and NZME appealed directly to the commission in a separate submission, warning “many jobs will inevitably be lost” if the merger was blocked.

NZME and Fairfax NZ said on Wednesday they were disappointed by the decision. 

Greg Hywood, chief executive of Fairfax Media — the parent company of Fairfax NZ that on Wednesday said it would axe 125 newsroom jobs in Australia — said the commission’s decision showed a lack of understanding about the commercial realities of the industry.

“The pace at which our global competitors are dominating advertising spending and changing the rules for others is not slowing,” he said. “In light of the NZCC decision, an even greater focus on cost efficiency will be necessary.”

Both media groups could still challenge the decision in court.

The commission signalled in a draft decision last year that it opposed the merger, ushering in months of lobbying by NZME and Fairfax. But the regulator did not waver, arguing competition between NZME and Fairfax NZ encourages investment in quality news.

Mark Berry, commission chairman, said the merger would have unduly concentrated media ownership and influence.

“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,” he said.

Fairfax and NZME are under financial pressure. Fairfax NZ said revenues from print advertising were NZ$200m (US$143m) in its fiscal year to the end of June 2016, and warned they could continue to decline at 15 per cent a year. NZME’s print revenues fell 10.9 per cent year-on-year to NZ$118.1m in the six months through June 2016.

The trend towards consolidation among traditional media groups is increasing amid stiff competition for advertising from digital groups such as Facebook and new online entrants to the industry, including BuzzFeed and Huffington Post

In the UK, rival newspapers are teaming up on advertising sales operations while the trend towards consolidation continues in the US, where Gannett, the owner of USA Today, recently attempted to buy Tronc, formerly Tribune Publishing and owner of titles including the LA Times. 

This video was first published on March 16 2017

Via FT