Merged Fairfax/NZME should have to sell a website, says MediaWorks

The proposed merger between Fairfax and NZME got approval from the OIO last month, and still needs NZME shareholder and Commerce Commission approval to go ahead.

MediaWorks says a merged Fairfax/NZME news operation should have to sell one or other of the New Zealand Herald or Stuff websites to get regulatory approval, because of the high barriers to entry to an alternative, credible national news organisation.

The proposed merger between Fairfax Media's New Zealand assets and NZME got approval from the Overseas Investment Office last month, although the deal still needs NZME shareholder and Commerce Commission approval to go ahead.

A merger would combine NZME's flagship New Zealand Herald newspaper and nzherald.co.nz website, a portfolio of radio stations including Newstalk ZB, and the GrabOne daily deals site with Fairfax's suite of newspapers including the Sunday Star-Times, Dominion Post, The Press, the stuff.co.nz website and various magazines, including New Zealand House & Garden..

MediaWorks, which owns free-to-air television channels TV3 and Edge TV and commercial radio stations The Rock, More FM, The Edge and RadioLIVE amongst others, has its own digital offering in the form of the newshub.co.nz website. Its submission to the Commerce Commission opposes the merger, which it says will "result in a substantial lessening of competition in the national market for online news."

It says there are significant barriers for new players to enter the online news market, due to the "high costs of running a credible and national news organisation which collects and sources news across the country" and those barriers will be exacerbated by the merged entity's dominance.

"The Commerce Commission should also consider potential public detriment as a result of the proposed merger, due to the fact the merger will significantly reduce media plurality in New Zealand and reduce the number of viewpoints that are available to the audience," MediaWorks said, adding that if a merger goes ahead, the entity should be required to divest either nzherald.co.nz or stuff.co.nz.

MediaWorks disagreed with the idea that there's online news competition from Facebook, Google and international news sites, saying the first two are simply platforms for content dissemination, while international news sites don't compete on coverage of most New Zealand events, but source information from local providers when there's a story of global interest.

"If the merger proceeds, there will be one dominant digital news organisation, with very tough conditions for any other digital news content provider both in the national market for online news and the national advertising market," the submission said.

If the merger doesn't go ahead, it's likely that NZME and Fairfax would keep exploring merger options, with various merger permutations involving TVNZ, NZME, Fairfax and MediaWorks possible, including MediaWorks merging with NZME or Fairfax. That would mean greater competition than from the NZME/Fairfax merger "as there would be at least two competing digital news organisations with similar market share," MediaWorks said.

MediaWorks is owned by US hedge fund Oaktree Capital, which is said to be seeking to sell its New Zealand broadcasting investment.

In contrast, Communication Agencies Association of New Zealand (CAANZ), which represents 90 advertising agencies who collectively bill 95 percent of agency billings in New Zealand, supported the merger, which it says will be "positive for advertisers and agencies through the creation of a New Zealand-focused media entity that can offer a compelling, high-quality, data-rich, and brand-safe environment for advertisers on a sustainable footing."

CAANZ said the agency buying model for advertising has changed, where different "channels" - such as TV, radio or online - are seen as more substitutable dependent on the audience the agency wants to reach.

"In that context, CAANZ is increasingly seeing advertising clients choosing to expand beyond or switch entirely out of print advertising channels when they/their agencies consider that they can most effectively reach their total audience objective through alternative media channels," chief executive Paul Head said in the submission.

The merger would "be an attractive media partner for advertisers and agencies to reach their audiences as effectively as possible," Head said. A merged entity would have more ability to keep the print edition running and this might mean it would be seen as an advertising option for longer than it otherwise would be, he said, while the improved data analytics of a merged entity would make it more attractive to advertisers.