Institutional investors dominate NZ's media company ownership

Institutional investors now dominate the ownership and governance of New Zealand media companies, says the sixth annual update on local media ownership from AUT's journalism, media and democracy research centre.

"For the first time in six years, our media companies are exclusively owned by financial institutions and it is in their interest to push structural changes through," the report's author, Merja Myllylahti, says in a review of a sector in which two major mergers are proposed – between news publishers NZME and Fairfax  as well as Vodafone and Sky Television.

Media owners have largely pulled out of the sector, she notes.

"Many of the directors have no declared media interests but have directorships in financial firms and corporate advisory businesses.The board structures of media corporates support further consolidation."

The report lists the most significant events in New Zealand media ownership this year as: NZME separating from its Australian parent APN News & media, to become a standalone NZX-listed company; Rupert Murdoch's News Corp selling its NZME shares, inherited as a result of the APN split; the proposed merger between NZME and Fairfax; Vodafone proposing a merger with Sky Television; and TV3 owner MediaWorks getting a new board and senior management.

NZME, publisher of the New Zealand Herald newspaper and website and the Newstalk ZB radio network among other assets, is 85.6%-owned by financial institutions, she says.

Ms Myllylahti painted a grim outlook for traditional news publishers, saying merging was "not a solution for NZME's and Fairfax's troubled business models.

"The market challenges remain the same."

She noted a report by David Kaynes, an Australian-based analyst for multinational investment bankers Citi, reported in Australian media yesterday, suggesting Fairfax's flagship titles in Australia have "no future if digital revenue continues to decline.

"The only way for the merged company to stabilise its revenue in the short-term is to implement cost savings and cut hundreds of jobs, and it is its intention to do so," Ms Myllylahti says.

The report notes that media and telecommunications consolidation is accelerating in many countries.

"The relations and dependencies between news media corporations, social media companies, search engines, chat providers, and news app companies became increasingly intertwined and complex" this year.

NZME and Fairfax are arguing they must merge to have a chance of competing with global platforms like Facebook and Google, which are becoming go-to venues for news while hoovering up digital advertising revenues, which are far smaller than the total pool of advertising spend once available to newspaper publishers.

That's in spite of new evidence the total proportion of all ad spending committed to digital channels is growing fast.

The Standard Media Index, a measure of New Zealand advertising spend, shows some 31.6% of total ad spending was on digital from January to September this year, compared with 26.2% in the same period last year and 11.6% for the same period five years ago.

(BusinessDesk)