Fairfax boss warns of 'end game' if merger disallowed

The commerce commission hearing on the merger of NZME and Fairfax NZ in Wellington. Photo / Marty Melville

The chief executive of Australasian news publisher Fairfax Media, Greg Hywood, warned Commerce Commission hearings on the proposed merger between NZME and Fairfax's New Zealand assets that it would "become endgame" if the merger was disallowed.

"We don't have the capacity of deep pockets of private money to subsidise journalism," said Hywood. "There are many proprietorial models where wealthy individuals and families, for social and political influence, own media companies, but we have shareholders and they demand that these publishing businesses stand on their own feet."

Unless the merger was allowed, "it becomes endgame", he said.

On the other hand, listed company status was a protection against loss of editorial independence, said Hywood, who was in Wellington for the second day of the Commerce Commission's public hearings into the proposed media merger, which the commission rejected in a draft determination last month, fearing loss of media plurality.

Today's hearings concentrated on the impact of the merger on media plurality - the range of opinions, issues and approaches to coverage that the two news groups currently produce. Unquantifiable detriments to media plurality outweighed the clear commercial benefits of merging, the commission found.

Both publishers say a merger is essential if they are to survive commercially. A final decision is due from the commission in March.

Failure to merge would be more a threat to plurality, with numerous assertions during the two days of hearings that Fairfax would have to consider withdrawing from regional towns and concentrate its news-gathering in the three main centres if the merger could not proceed because the costs of regional news-gathering would be unjustifiable.

Answering questions from commissioners on the potential for less competition in journalism if the two largest news producers merge, executive editor for Fairfax in New Zealand, Sinead Boucher, suggested that the greatest source of competition for journalists today was getting information from the "army of PR people and spin doctors" seeking to prevent information becoming public.

Both Boucher and New Zealand Herald editor Shayne Currie also rejected as "appalling" and "surprising" the suggestion in some submissions that companies would have fewer avenues to put their points of view if the merger proceeded.

The extent of actual competition between Fairfax and NZME titles was "very overstated", said Boucher.

There would be more likelihood of a diverse range of news being produced if the merger meant that "we could stop the replication of commodity news" and allow reporters to chase more issues.

"There would be no change in the way that reporters operate and independent decisions are made. Nothing in the merger changes that all. It would just stop journalists running on the same hamster wheel."

Robin Foster, a UK-based media expert retained by the commission, warned that "one man's duplication is another man's plurality".

The hearings went into closed session this afternoon to assess 'counterfactual and quantified benefits', at which the news executives were expected to outline in some detail the commercial implications of not being allowed to merge in a market where newspaper advertising remains by far the principal source of group revenues, but are falling precipitously year on year. Online advertising spend is both smaller in total and disproportionately captured by global online giants such as Facebook and Google.

Commissioner Sue Begg queried whether Fairfax owning 40 percent of the merged group would constitute a controlling stake, whose sale could lead to the loss of plurality the commission fears.

A lawyer for Fairfax argued that there were public interest protections available if that happened because the sale would require Overseas Investment Office approval.