If a merger of the country's two largest newspaper and online news publishers is blocked it will be the regions that suffer, the Commerce Commission has been told.
The commission has held the first of two days of hearings at its Wellington offices to hear submissions on the proposed merger of NZME and Fairfax NZ, which it has indicated it will block.
NZME owns major brands including the New Zealand Herald and Newstalk ZB, while Fairfax owns the Stuff website and papers The Dominion Post, The Press and a number of regional dailies.
Print newspapers make up the bulk of each organisation's revenue - 85 per cent for Fairfax and 60 per cent for NZME - but circulation and associated revenue is declining.
Simon Tong, Fairfax NZ's managing director, said print readership wouldn't hit zero, "but hands up here people who still use cheques...print as a model will get to that at some point".
"Frankly, there are two of us - two executive teams, two marketing teams...two of everything, where there is an opportunity to make some reductions there that would allow us to stay in the communities a lot longer," Tong said.
Fairfax still considered its regionals to provide an edge, but the reality was they were increasingly unaffordable to run.
Sinead Boucher, executive editor of Fairfax, said half or more of the company's editorial staff were outside Auckland, Wellington and Christchurch - but it was the big centres where the money was to be made.
"It's not going to be Auckland, Wellington and Christchurch that suffer [if the merger doesn't go through]. It's going to be Marlborough, Nelson, Timaru, Manawatu, Taranaki - those small places."
NZME chief executive Michael Boggs told the panel that revenue declines would impact on quality, and "the people that sit in this room".
That outlook was balanced by Grant McKenzie, chief executive of Allied Press, publisher of the Otago Daily Times, who said their circulation had dropped about 21 per cent over the past 10 years - a relatively good performance.
He said that could be because his company didn't have a digital first policy. Online revenue for Allied was only about 1 per cent.
"Why wouldn't it decline when you are putting everything online for free, and there is no incentive to buy a newspaper?"
Earlier, both NZME and Fairfax argued they were not each other's major competition, and other organisations including TVNZ, Radio NZ and Mediaworks were strong competitors in a "digital first" environment where traditional print and broadcast boundaries were broken down.
But another organisation that loomed larger over the discussion was Facebook, which takes a growing share of advertising, despite not producing news content.
Shayne Currie, managing editor of NZME, said Facebook founder Mark Zuckerberg was "by far the world's most powerful editor" and presided over a "phenomenal beast" that was "100 per cent our main competitor and constraint".
About 50 per cent of the Herald's mobile traffic came via Facebook.
Commissioner Sue Begg asked, given that, whether competition with Facebook and content on it "would drive you to have more cat videos on your website?"
Currie cited a recent investigation into the hair trade in China that took months and significant investment, and said every editor in the country was striving to produce quality, unique journalism.
"A lot of people's views of the quality of journalism in this country comes down to the first 12 stories on a homepage...that is like an iceberg, it is the 10 per cent of what lies beneath, which is the 90 per cent of other great content.
"But people talk about cat videos because that's what they click on, unfortunately."
Both NZME and Fairfax representatives submitted there were low barriers to entry in online news. Boucher cited the success of The Spinoff, saying it now had more than 500,000 readers: "That is a quarter of Stuff's traffic, within a year or so growth".
However, counsel for TVNZ and Mediaworks told the panel they did not consider themselves to be able to be a competitive constraint on the proposed merged company any time soon.
They provided evidence related to this in a closed session.
Alex Nicholson, corporate counsel for Mediaworks, said although everyone in the industry now accepted the "digital first" approach, in reality it was very difficult to go from a broadcast company to a digital news one.
Companies like NZME and Fairfax that came from a newspaper background had a sizeable head start, Nicholson said, and people used to writing for TV or radio had a significantly different skill set.
Last month the Commerce Commission issued a draft determination rejecting the proposed merger on the basis it would threaten the range of voices, opinions and issues that the news media might cover, therefore producing an outcome not in the public interest.
The Commission's final decision is expected in March next year.