Media give final view ahead of merger decision

Lawyers for NZME and Fairfax have made a final submission to the Commerce Commission ahead of its March 15 decision on the proposed merger. Photo/Jason Oxenham.

Media companies NZME and Fairfax have told the Commerce Commission that the argument over their proposed merger is a contest between "hard data" and "wishful thinking".

The commission is due to make a final decision next Wednesday on a proposal to merge New Zealand Herald owner NZME and Fairfax New Zealand.

In their final response to the commission lawyers for the media firms said differences between those who are for and against the merger was "a contest betwen hard data on the one hand, and wishful thinking on the other".

The lawyers said the parties had submitted extensive data about share of the advertising market, market trends in revenue, synergies, and efficiencies, and accounting expert reports on the logical and necessary conclusions from the data.

"In contrast, a large number of submitters in opposition have presented the commission with their views as to why the businesses have not been sucessful (although they have not run those businesses in the recent - accelerating - market conditions).

"They have also expressed hope that different combinations of businesses in market might present a better alternative to the proposed merger."

But the lawyers said the proposed merger had not been put to the commission lightly or early.

"The necessary corollary of that is that it cannot be put to the commission later, because later will be too late."

The lawyers said in relation to the digital space understanding the competitive trends involved recognising that the audience for news and entertainment was rapidly growing on mobile phones and that video was increasingly important.

"In that context, the Commission must also recognise the considerable advantages that the free to air operators have in producing news and entertainment for mobile
and video distribution.

"Equally there is a considerable degree of self-supply as consumers and businesses create and distribute their own video and text news and distribute it via mobile through Facebook, YouTube and other channels."

The media company's lawyers also pointed to a number of other producers which create competition in the opinion and investigative news space.

"Simply put, there is no exclusivity in the creation of news content, it is freely available.

They said there was no barriers to entry for anyone wishing to create news content and no barriers for the public to get access to it, particulary in the digital space.

The lawyers also point to a low level of antipathy about the merger by the public.

In summing up they asked the commission to give "full weight to the hard data, even though it leads to hard conclusions."

"The more wishful and nostalgic narratives, that have come from some commentators on the merger, needs to be put in context."

In a joint letter, NZME chief executive Michael Boggs and Fairfax NZ managing director Simon Tong said the commission appeared to have acknowledged when rejecting the Sky Television and Vodafone merger that local content providers were facing increased competition from global players.

In rejecting the merger, the commission had also appeared to acknowledge that consumers were accessing content anytime and anywhere on mobile devices.

"But it seems that the Commission simply could not be satisfied that no lessening of competition would arise, due to the "must have" nature of the exclusive premium sport content controlled by Sky TV," Boggs and Tong said.

"Of course, that is the point at which the two media mergers diverge," they said.

"While SKY has periodic monopolies over premium sports content, such as an All Blacks' test, and rigorously protect those rights, NZME and Fairfax do not have similar rights over their primary source of content, which is news. Other news/information providers...are all equally able to produce similar content, reporting on an All Blacks test, and equally can show a "fair use" video clip of relevant portions of an All Blacks test to report the news," the two media bosses said.

Two other anonymous submissions on merger have also been released by the commission.

One submitter who was "strongly opposed" to the merger said the music industry provided "very interesting example of a dramatic decline in the internet age that has recently been strongly reversed due the success of online streaming and payment for music on a song-by-song basis".

"It is my belief that it may only be a matter of time before the newspaper and news industry also find a more viable business model for the digital age and that a revival to a more profitable future will follow. This would parallel the experience of the music industry, which until recently many commentators thought might shrink away to almost nothing over the next 10 years," the submitter said.

Another anonymous submitter said that they have considerable respect for both NZME and Fairfax, although they were opposed to the merger.

"Despite my reservations, I empathise with the applicants' position and understand the market pressures that have compelled them to pursue a merger of their operations. I am hopeful that the applicants will find a solution to the challenges faced by the journalism community," the submitter said.

"However, I believe that a solution can and should be pursued through collaborative initiatives across the entire industry, rather than through the corporate consolidation of its two largest players. Regardless of the outcome determined by the Commerce Commission, the applicants have my best wishes in their pursuit of a sustainable business model," they said.