Media companies are facing an existential crisis as advertising revenues plummet due to the coronavirus pandemic, and MPs are being told that the Government needs to step in immediately.
The Epidemic Response Committee heard from several media companies this morning imploring the Government to redirect its advertising from the likes of Facebook and Google to provide immediate cash relief, while special tax status and different ownership models should be considered as longer-term solutions.
Prime Minister Jacinda Ardern, in a press conference this afternoon, said that the Government will continue to advertise with Google and Facebook because that's where New Zealanders are.
Earlier this morning academic and former Herald editor Gavin Ellis said advertising revenue for media companies was estimated to drop between 50 and 75 per cent, and there was concern that it would not return even after the Covid crisis was over.
"No medium is exempt from that," he told the committee.
"I'm fearful if the financial standing of the owners of MediaWorks and Stuff decline sufficiently, they may be minded to follow Bauer and simply close New Zealand operations.
"We must ensure that doesn't happen."
Bauer's closure also meant the loss of more than 200 jobs - though Ardern has noted that Bauer had refused to take the Government's wage subsidy.
Yesterday NZME, which owns the Herald and Newstalk ZB, announced it was making 200 positions redundant and asking higher-paid staff to take a 15 per cent pay cut for 12 weeks.
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The heads of Stuff, NZME, TVNZ, MediaWorks, RNZ, Newsroom, The Spinoff and Businessdesk are on the agenda to appear before the Epidemic Response Committee, which is chaired by National Party leader Simon Bridges.
The committee is also hearing from Ellis, as well as Broadcasting, Communications and Digital Media Minister Kris Faafoi.
Existential crisis for media
Ellis told the committee said the job losses at Bauer and NZME were unlikely to be the last as advertising revenue was "in free fall".
He said Facebook and Google gripped at least 70 per cent $1.26b in global digital advertising.
"The Government uses Google and Facebook at an exponentially growing rate, and only a fraction of their digital spend is going to local digital platforms."
He said media companies were in crisis, and without some help the industry would not be able to survive in a form suitable for a free and democratic country.
"They went into the crisis with very little in reserve …they've got no fat to play with.
"All commercial media are in trouble. Their needs are immediate."
It was ironic that advertising revenue was plummeting at a time when unique daily browsers of media websites had skyrocketed as people sought timely and factual information, while social media platforms were awash with misinformation.
He said governments are not normally in the business of helping private media companies but "these aren't normal times".
"There is a special case to be made. They're not too big to fail, but they certainly are too important to fail."
He said the magazine industry was also in an existential fight and in need "for resurrection".
There was an immediate cashflow need for media companies, but the Government could also help by putting its digital advertising spend into local media companies.
The Government could also help facilitate the NZME merger with Stuff, which he said would buy those companies more time, and help MediaWorks sell its TV arm.
He also suggested special tax status for media companies - as low-profit but public service-oriented services - and a cross-party conference to discuss a long-term solution.
He said the entire media ecosystem needed to be reviewed once the media companies' immediate needs were met.
Minister Faafoi responds
Faafoi said the Government would make announcements within a week, but no final decisions have been made.
He has asked media companies how much the Government was spending on advertising with them, and a possibility to increase present cashflow was to bring future spending forward.
The Government's short-term solution could include moving Government advertising towards local companies and reducing the transmission costs for broadcasters, he said.
A plurality of voices in the media was essential, he added, but Bauer had decided to leave the New Zealand market before the coronavirus crisis hit.
Longer-term solutions might include looking at different ownership models of media companies, as well as how the Government supports media content in a sustainable way.
He defended the Government's decision to shut down magazines and some community newspapers because they were not essential services, saying it was based on public health principles.
Redirect 'millions and millions' of Govt advertising dollars from Facebook and Google to NZ companies - NZME
NZME managing editor Shayne Currie said April advertising revenue had halved, and it was a "critical time" for media companies at a time when they should "stand proud" for what they have produced during the Covid crisis.
Redundancies, requested pay cuts and annual leave were ways the company has tried to offset the advertising losses, while Radio Sport had closed and magazines and the sport section had been downsized.
Twenty two community newspapers have also been unable to publish, and columnists have been cut, reducing the plurality of voices.
Currie said the Government could pump its advertising money into New Zealand media companies.
"Too much money is going to the Facebooks and Googles when the New Zealand media has equal if not more share of the New Zealand audience.
"That's millions and millions of dollars that would make a huge, instant impact for us."
He applauded a model in France where global media giants have to pay for other companies' content that appears in their search engines - though how that will be enforced remains to be seen.
Currie said 70 per cent of the company's advertising came from small to medium businesses, which had dried up during the lockdown.
The company had signed up to the Government wage subsidy but Currie said it was not a "panacea", nor was the NZ Herald paywall, which included 21,000 digital subscribers plus another 30,000 print subscribers.
The wage subsidy was only making a difference at the margins, he added.
He said the advertising model remained "vital", and based on other companies' experiences, it may take years for the paywall to be able shore up the business to the point where it could, for example, fund more journalists.
NZME had been seeking Government support to buy Stuff, with previous attempts being shot down by the Commerce Commission.
Currie said NZME still believed it would be an important way to preserve jobs and the viability of the industry in the long-term.
"We should be allowed to merge. That will sustain us well into the future and keep that plurality well into the future."
Ad revenue has 'dropped off a cliff' - Stuff
Stuff chief executive Sinead Boucher said the country's largest national website was facing nervous weeks and months ahead.
"What's really taken our breath away is the speed with how these issues have crystallised into a fight for survival."
She said Stuff had not yet made any redundancies, but did not rule that out in the future.
Ongoing Government support was necessary - either through NZ on Air or through other mechanisms - because advertising revenue has "dropped off a cliff", more than halving in the weeks since March and looking "particularly dire" for April.
Stuff's problems had been compounded with the cancellation of major events and the inability to publish weekly community newspapers and magazines during the lockdown.
She said the Government should shift its advertising from global social media giants to New Zealand media companies, and also consider special tax breaks, for example based on the number of journalists hired.
"In times of crisis, the need for journalism has never been greater."
Asked to comment on whether the sharemarket investment model suited the media, she said all models should be explored and shareholders in media companies were probably not doing the best compared to other investors.
Broaden public media review to look at all local media - TVNZ
TVNZ chief executive Kevin Kenrick said the media industry was not sustainable even before the Covid crisis.
He added his voice to the chorus to move Government advertising funding from global companies to New Zealand companies.
"Audiences for local media have never been greater than they are right now."
Other ways the Government could help was reducing transmission and licensing costs, adding that the licence fee for local content costs four times the price of buying international content.
Kenrick said local programming supported New Zealand talent, and a quota for local content existed in other countries and should be considered here.
The Government's review of public media should be broadened to look at local media, and he asked whether looking at a TVNZ-RNZ merger was the best use of finite resources "right now".
He said Government money for media content should look at local content, including both entertainment and news, irrespective of whether it's being produced by private or public companies.
Asked why the state should continue to fund TVNZ when Netflix was its major competitor, Kenrick said the state didn't fund TVNZ.
Stop TVNZ dipping into 'finite pool of advertising' - MediaWorks
MediaWorks chief executive Michael Anderson said some local shows have been lost because production has stalled for the lockdown.
He said state-funded TVNZ was dipping into a "finite pool of advertising", and addressing that was one way to help MediaWorks' TV arm, which is up for sale, become sustainable.
A sustainable industry needed to preserve a plurality of voices, and that included public and private media entities, he said.
More Government money for local content would "likely" make MediaWorks more financially viable, but Anderson said decisions about the structure of the industry should not be made "on the run".
Anderson supported Kenrick's comments about how prohibitive the cost of licensing fees and transmission costs were.
He said the Government should only advertise on global platforms if there was no option to use New Zealand media companies.
MediaWorks had 1200 staff and Anderson said the company cared deeply about hanging on to its staff, some of which had contracted Covid-19.
The two critical points the company needed were certainty about the future of the media industry, and allowing businesses to start operating as soon as possible because that would turn the advertising tap back on.
RNZ very 'privileged'
RNZ chief executive Paul Thompson said it was privileged to be funded by taxpayers, and RNZ shared its content with NZME, Stuff, TVNZ, Newsroom and MediaWorks.
The arrangement was not commercial and spread RNZ's content to more people, but it also allowed more staff at those media companies chase other stories, which added to the diversity and plurality of voices.
Thompson said 90 per cent of its funding came from the Government, but some of its commercial revenue - from collecting transmission costs - has been reduced.
RNZ had made an unsuccessful bid for NZ on Air funding, but Thompson said he realised the private sector would be first in that queue.
He said some staff had been tested for Covid-19 but thankfully no one had tested positive.
NZ Community Newspapers Association: Many will go out of business
Association president David Mackenzie said community newspapers provided local content that was absent in daily newspapers and social media content.
But two-thirds of its 80 members had been unable to publish because of the lockdown, he said.
They were almost completely funded by print advertising, and no one knew what the business model will look like post-lockdown.
Breaking even in the next 18 months would be a "great achievement", he said.
"We need cash to survive, we need local businesses to survive."
Local advertisers needed reasons to advertise again, and community newspapers needed to be able to publish, he said.
Many of its members were in "good health" prior to the Covid crisis, even though it wasn't a "pot of gold" industry, but he said the current crisis would see many go out of business.
Many members felt unfairly treated because weekly community newspapers were not allowed during the lockdown but daily newspapers were.
Govt could match PressPatron donations - Newsroom
Newsroom co-editor Mark Jennings said the existing business model meant that advertising was based on website visitors, leading to click-bait stories leading media websites.
Newsroom had tried a different business model with different revenue streams, including 12-month contracts with advertising partners.
If the economy is struggling when those contracts expire, that could have repercussions for Newsroom, Jennings said.
Newsroom readership had skyrocketed four- to five-fold during the Covid crisis, and donations through PressPatron had also shot up.
The Government could make those donations tax deductible or even match them, Jennings said.
"If that was to happen, that would be transformational for a player like us."
Jennings said NZ on Air could start a special fund for journalism projects.
Reader revenue a lifeline for The Spinoff
The Spinoff managing editor Duncan Grieve said a massive increase to its "reader revenue programme" through Spinoff members has been a lifeline.
"We would be in a similar position to NZME if we had not had that lifeline. We've had stunning growth there and that has given us the tools to survive the lockdown."
The Spinoff, like Newsroom, also had longer-term commercial partnerships that could dry up over a longer timeline.
Solving the industry crisis was not easy, Grieve said, and the solution had to include all mediums, regardless of their scale or prominence.
NZ On Air was a respected vehicle that could fund journalism and "do a lot more very quickly".
"Some level of triage needs to happen."
Copyright law reform should be considered
Businessdesk chief executive Pattrick Smellie agreed with Jennings in that it was already too late for NZME-Stuff merger, and it would lead to a "clean out".
He said a reform of copyright law could change the model of who pays for what content, and that could see Google and Facebook paying for the articles featured on their platforms - though Smellie added that it was a complex issue.
Robust journalism needs to be protected - PM
Ardern said yesterday that the Covid crisis showed the need for "robust" journalism in a media landscape that was dealing with plummeting advertising revenue.
"Whilst covid may not be entirely responsible for some of what we're seeing in some places, it's exacerbated existing issues," she said.
"We are looking at bringing in a response to that very shortly."
She said the first stage would be "triaging", but a longer-term solution was also being worked on that would look beyond the current pandemic.
"We have been in regular contact with the large media outlets around what we're working on, and they've given us a sense of their status."