Publisher NZME is confident it can make a commercially viable business if allowed to take over the assets of its rival, Stuff, even while guaranteeing journalist numbers and keeping open declining regional newspapers.
Asked by journalists whether such a deal could be profitable enough to satisfy its shareholders, NZME chief executive Michael Boggs said: "Absolutely."
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His comments followed New Zealand First leader Winston Peters announcing his party would support NZME's proposal to make specific editorial commitments under a $1 'Kiwishare', which the government would own in the merged entity and which would give a time-limited guarantee to keep journalists employed and existing titles open.
There was no immediate investor reaction to the Peters announcement, with the NZME share price unchanged in early NZX trading, at 40.5 cents. The New Zealand Herald publisher's shares have traded this year between a high of 62 cents per share on March 21 and a low of 37.5 cents on Nov. 7.
Communications Minister Kris Faafoi is expected to comment before Parliament sits this afternoon, but his office said it was unlikely there would be a Cabinet decision on the proposal before Christmas.
The original merger proposed by the two firms was rejected by the Commerce Commission in 2017, which was concerned at the potential loss of plurality in the media sector. That decision was backed in appeals to the High Court and the Court of Appeal.
Commission chair Anna Rawlings told members of Parliament's economic development, science and innovation committee, that the renewed merger, including the Kiwishare option had been discussed publicly in recent months.
"If an application was to come to us we obviously would consider it fresh again, applying the same kind of review that we did last time in a market some years on," she said.
But she noted that the government could choose another form of regulatory intervention, as it did when for the creation of Fonterra in 2001.
"Whether some other form of regulatory intervention is to be preferred by government is a question for government and not for the commission."
Faafoi is also bringing together a public broadcasting reform package, reflecting the growing concern among government ministers that both local news coverage and entertainment production is at risk if there is no government intervention, and that the vacuum would be filled by 'fake' news or information of doubtful origin.
The public broadcasting package appears likely to merge Radio New Zealand and TVNZ, and redirect NZ on Air funding to support a national public interest broadcaster.
Peters appears to have decided to get NZ First out ahead of Labour on an issue that he characterised as vital to the quality of New Zealand society. Faafoi was unaware of Peters' intention to make this morning's announcement at Parliament, which was attended by NZME chairman Peter Cullinane and senior executives.
ACT party leader David Seymour questioned Peters' motives, suggesting he was supporting news media - with whom he has long had testy relations - because he hoped for softer treatment following recent reports using leaked information about the party's fund-raising vehicle, the New Zealand First Foundation.
"Is Winston Peters wielding regulatory power over Stuff?" said Seymour.
A research note issued by investment house Jarden last month said the Kiwishare proposal would "not be easy" to push through with the government, but not impossible.
There were "natural incentives for the combined business to continue to invest in content that drives audience ... to positively leverage a nearly $600 million combined cost base and make savings where duplication doesn't deliver value."
Boggs confirmed the Kiwishare would include commitments to keep titles open and employ particular numbers of journalists, although only for a two-to-three year period, when there would be a review of the arrangement.
"We see the Kiwishare as a long term commitment and it will be regularly reviewed based on market circumstances at the time," he said, indicating that ongoing deterioration in the market for local news media would lead to attempted renegotiation of its terms.
NZME and Stuff first applied to the Commerce Commission to merge in 2016 and were surprised to be refused permission on grounds that the combined entity would reduce media 'plurality' - the number of different media outlets providing alternative coverage being important for democratic, if not commercial, reasons.
That decision prompted challenges as far as the Court of Appeal, which upheld the commission's decision, prompting a rethink which has led to the proposal to negotiate a Kiwishare arrangement that would perhaps then see the government issue a directive to the competition regulator to allow the merger to occur, subject to 'plurality' guarantees.
Boggs confirmed that NZME would keep running its NZ Herald website in competition with a separately staffed Stuff website, but said decisions on issues such as how many Sunday newspapers to publish and whether one site might go up-market and include more paywall content than the other would be a management decision for the future.
"That would be up to the editors of each of those two businesses," Boggs said.
Both NZME and Stuff remain profitable, but have watched earnings slide over the last decade and more as advertisers gravitated away from news publications and websites to Google and social media platforms such as Facebook. The slide in Stuff's earnings has been far faster in recent years than NZME's, with a Dec. 2 report in the Sydney Morning Herald quoting sources close to the company as saying it was facing a very uncertain future.
"There's no way to make it leaner," the SMH source was quoted as saying. "The newspapers need to consolidate to at least be able to cut some costs to survive. There's not the scale to survive on subscriptions - it's going down the gurgler."
Boggs said there were opportunities for back-office consolidation between the two businesses, even as they kept journalists and titles open.