Publishers reveal loss of control
Publishers have a problem because people don't care where news comes from or where they read it.
That's a central argument in an application seeking permission for the merger of New Zealand's two huge publishers, NZME and Fairfax, filed to the Commerce Commission yesterday.
Fairfax operates the largest print media network in New Zealand and six websites, including stuff.co.nz and NZME owns eight daily and two weekly newspapers, 24 community publications, six magazine titles, 10 radio stations and 38 websites, including nzherald.co.nz.
The application argues that doesn't matter because they don't control social media and search engines or the smartphones and tablets most people use to access them.
"Rather than seeking out a predetermined news and information platform, consumers are increasingly being directed towards particular news and information content through social media, web-based searches or apps," the application says.
This access to news via a "side-door" is a loss of control for publishers.
In Australia and other countries less than one third of online news and information is accessed direct to a publisher's own platform.
"The value chain is disrupted and traditional publishers are reliant on third parties to reach their audience," the application says.
The percentage of Fairfax New Zealand's content consumers access via Facebook is blanked out in the public version of the application as is the percentage of NZME's mobile content accessed via social media and the percentage of content both buy from other media companies and agencies.
The application says it's increasingly difficult for online news providers to implement paywalls because readers just migrate from owned websites to social media platforms.
Also, blocking software makes it difficult to collect advertising revenue.
Google and Facebook, by having platforms that directly link to consumers, "capture the economic value from the consumption of content without generating the content themselves".
It's estimated more than 50 percent of online advertising expenditure in New Zealand is now being placed with Google and Facebook, with that figure being 64 percent in the US.
The extent of the demise of print is revealed starkly in the application.
New Zealand is among the world leaders in internet penetration, with 91 percent of people being active users in 2015.
Smartphone ownership has risen from 48 percent of people in 2013 to 70 percent in 2015.
They are now the key device for accessing news.
More than 2.5 million New Zealanders access Facebook each month, including 1.9 million every day, with each person checking Facebook on average 14 times per day.
"As a result, New Zealand media companies that are committed to bringing high quality local, regional and national news/information to New Zealanders must do so today in an entirely different media environment from that prevailing even five years ago."
Publishers make their content available via social media platforms but there's a loss of control.
The applicants argue they also still face competition from Mediaworks (Holdings) Ltd, Television New Zealand Ltd and Radio New Zealand who have all been adapting to the new digital environment.
There's no estimate of job losses, just a statement that "the merged business will be incentivised to retain talented journalists".
The final structure of the merger is yet to be decided but essentially Australia's APN will demerge and separately list its New Zealand assets, branded as NZME, and NZME will acquire Fairfax's New Zealand assets for a mix of new shares in NZME and cash.
Fairfax Media's shareholding in NZME after the acquisition of shares in NZME is expected to remain below 50 percent, the application says.