Pattrick Smellie: A debate about media ownership

A final decision on the proposed merger should be made by March 15.
TOM PULLAR-STRECKER/FAIRFAX NZ

A final decision on the proposed merger should be made by March 15.

OPINION: New Zealand is witnessing something unusual in the process unfolding around the proposed merger between news publishers Fairfax NZ and NZME: a debate about news media ownership and regulation.

In Australia, among other countries, fierce lobbying and politics has long been a standard feature of the news industry.

In New Zealand, almost never. Sputtering protest about the apparently punitive underfunding of state-owned broadcaster RNZ is about as close as we tend to get.

The Commerce Commission appearst to be on weak ground refusing a merger between Fairfax Media and NZME based on the ...
BUSINESSDESK

The Commerce Commission appearst to be on weak ground refusing a merger between Fairfax Media and NZME based on the detriments of media plurality, Pattrick Smellie says.

What might explain this?

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For a start, New Zealand is a small market so there's less at stake commercially. Fairfax's New Zealand assets, for example, were disclosed to be worth about A5 cents to the company's share price, currently around A84c.

To date, a sense of commercial inevitability has always overwhelmed any concerns about the media ownership convergence that has been under way for more than two decades.

A second possible explanation: the absence of aggressively political media owners.

Even when Rupert Murdoch's News Limited owned 45 per cent of Independent Newspapers – prior to the sale of its New Zealand titles to Fairfax in 2003 – Murdoch never played the political games here that he has with his titles and TV assets in Australia, the United States and United Kingdom.

A third possible explanation for this relaxed environment: a generation of political leadership that with an expressed preference for markets.

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In fact, the Commerce Act was amended in 1986 to exclude consideration of editorial independence and influence on public opinion from the Commerce Commission's public benefit test. Economic efficiency is the primary test.

Meanwhile, in free-to-air television, there has been almost nothing to debate, with only MediaWorks challenging state-owned TVNZ. These days, neither is in any stronger position than the traditional news publishers as on-demand streaming threatens their business model.

MediaWorks' US owners, Oaktree Capital, want to exit but can't find a buyer. The same would apply if TVNZ was ever for sale, which it won't be.

The traditional media's watchword today is survival, and it expected that not only to be understood, but be a good enough reason to allow the NZME/Fairfax merger to proceed.

The commission's draft rejection of the proposal landed like a large rock in an otherwise placid pond.

Legal submissions lodged this week against that draft decision look strong: both the Commerce Act and common law precedent suggest the commission is on weak ground refusing a merger based on detriments to media plurality that it says it can't measure when the commercial benefits are clearly defined.

The point is not that media plurality doesn't matter. It does. The applicants and their critics agree on that, although they take different views about the impact of the merger on the variety and contestability of the news that gets reported.

The debate now emerging is whether it's the competition watchdog's role to care.

As the applicants and their critics have both pointed out, many countries regulate to deal with 'social policy' issues like media plurality and ownership.

That option remains open to a government, should it be concerned about concentration of news media ownership, just as it did in the case, for example, of other industries with a dominant player. Think Fonterra.

Asked this week whether there were any circumstances where the Government might get involved in response to the merger proposal, Prime Minister John Key gave what is either a revealing or a holding pattern answer: "It's preferable if the Commerce Commission can adjudicate rather than the Government legislate. I can't completely rule it out, just haven't looked at it," he said.

No doubt he would rather it stayed that way.

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