Pandemic papers: Ministers ignored Treasury warning about $50m Covid media package

The Government was told cutting Kordia's transmission fees wouldn't make a material difference to the struggling media sector and didn't help print.

Treasury warned ministers against proceeding with the $21.1 million option in advice dated April 9.

But two weeks later the option was almost half the spend in the Government's $50 million media package.

Treasury advice about support for the media sector was among the hundreds of documents included in today's document dump.

It said the primary impact of Covid-19 and the lockdown on the sector was the dramatic decrease in advertising revenues for all commercial media entities. Radio Sport and Bauer Media had already closed.

It warned the pace and magnitude of revenue losses far exceeded the immediate ability of the sector to reduce costs and all commercial players were likely confronting immediate
to near-term liquidity or solvency challenges.

Two weeks later, Broadcasting Minister Kris Faafoi warned "several" media companies were at risk of failure.

Officials said cutting transmission fees from the state-owned Kordia "will not by itself make a material difference to the risk of media company failure".

The option only affected broadcast companies - not print - and only provided short-term liquidity support not long-term solvency which officials understood to be the more material issue.

"Therefore, we do not recommend proceeding with this option.

"In this environment, we suggest ministers think about levers that will make a real and
significant difference, both in the short and long-term, to directors of entities who are making assessments as to whether to keep trading," Treasury officials said.

But on April 23, the Government included it in its media package.

Further work was required but Treasury had a preferred option. The option was entirely redacted.

"Government funding for some media company input costs over a period of time is unlikely to be sufficient, but could be used to complement more significant changes."

When Faafoi presented the media package to Cabinet on April 22, Faafoi said cutting Kordia's transmission fees was low risk and provided immediate relief as the Crown could reimburse the costs.

"Funding these costs ... provides a form of short-term liquidity support to a wide range of broadcasters."

Faafoi said the proposal intended to provide immediate relief only, in particular by providing some cashflow certainty with the aim of preserving journalistic output.

The $50 million package, which was agreed to, included:

• $21.1 million to completely cut transmission fees for 6 months.
• $16.5 million to cut by 80 per cent contribution for NZ On Air screen content in 2020/21.
• $1.3 million for government departments to purchase organisation-wide news service subscriptions.

Faafoi said revenue for the media sector was down 40 to 70 per cent even with wage subsidy support.

Many companies were at risk, he said.

"At the same time, media have a vital role during the response period in ensuring ongoing access to reliable and up-to-date news coverage and keeping New Zealanders connected while in lockdown.

"Private media are critical to supporting the production of news and journalism and ensuring our democracy has a strong and independent fourth estate."

Commercial media entities employed more than 1500 journalists, and the majority of journalism in New Zealand was produced by private media, Faafoi said.

"Even an enhanced public media could not on its own sufficiently compensate for a significant loss of private journalism providers."