Merger misguided then, and now

Kris Faafoi. Photo: NZ Herald
Broadcasting Minister Kris Faafoi. Photo: NZ Herald
Haven't we been here before?

Last year, two of New Zealand’s biggest corporate media companies told the Government they were struggling in a commercial environment in which spectacularly large online companies harvested their work, their clients and what might otherwise be their share of the revenue.

The Australian-owned media companies sought a merger, so they might create a single media entity to dominate print and online news, to attract more advertisers and to produce the sort of economies of scale that would help them make more money.

The Commerce Commission and members of Parliament (except for NZ First) balked at the idea, worried - justifiably - that it is far too dangerous for democracy and to the viability of locally-owned media businesses to vest too much power in a single, uber-large entity.

And then, something changed.

Broadcasting Minister Kris Faafoi last week announced Cabinet had approved the creation of a business case looking into at the formation of a super-sized, merged media entity to meet the demands and the challenges of the future.

Merging TVNZ and RNZ would happen as New Zealand media faced increased and increasing competition from Google and Facebook, and in the face of declining revenue shares.

Such a situation brought "risks for the future viability of New Zealand’s public broadcasting operators, RNZ and TVNZ, and the Government needs to address those risks", he said.

And thus, the Government appears poised to do what the Commerce Commission would not allow NZME and Stuff to do: forge a mega-merged media company in a small market where a single editorial voice carries a significant amount of power.

In knocking back the NZME/Stuff merger proposal, the commission warned of the loss of plurality and near total market dominance if one media outlet got such a significant, near monopolistic advantage over its competitors.

This would be the case, too, if RNZ and TVNZ - operations with broad national reach - were merged. One government-owned, multimedia voice would disseminate content to a disproportionately large number of households, a new competitor to private business.

Naturally, they would need to be resourced adequately to ensure the Government’s investment was not wasted on a model that could fail and to get there, taxpayers will shoulder some of the burden.

This would be slightly less difficult to swallow if the merged entity was retooled to be a pure public broadcaster — one there for the public good — but that would come with a cost so prohibitively high that taxpayers might wonder why so much money could not be spent elsewhere.

It is already clear TVNZ management plans to redouble its efforts to ensure the merged company competes for the same advertisers that already support privately funded media businesses.

In an email to advertisers, TVNZ said it fully supported "the critical role of advertising in building brands and driving sales" and it would "continue to proactively champion the need for New Zealand businesses to reach large relevant audiences as an integral part of any future public media plans".

So, at least one of the two merger partners considers this a chance to push further into the crowded broadcast and digital advertising markets — a chance that would no doubt need to be further supported by enhanced government funding.

It took more than two years for the Government to come up with a plan to examine a proposal to help our taxpayer-owned media face the challenges that beset all players in our small media landscape.

That it looks set to explore a plan that would create a business with the potential to dominate that landscape - a plan considered even as the sector warned against a mega-merger - suggests an even rockier ride ahead in a new era of state-sponsored competition.

 

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