Fairfax business writer says Fairfax-NZME merger fails simple test

Rod lets rip. Horton wants NZ Herald or suburban newspapers spun-off as a condition of merger. ODT frets it could get frozen out of ad, newswire networks. With special feature audio: Rod Oram savages deal.

A Fairfax contributor is calling on the Commerce Commission to decline the application by Australian companies APN and Fairfax to merge their respective New Zealand operations (Fairfax NZ and NZME).

Submissions on the proposed merger have been made public on the ComCom’s website (browse them all here).

Among them is one from Sunday Star Times business columnist Rod Oram, who lacerates the deal.

He lets rip:

The proposed merger of Wilson & Horton Ltd. (NZME) and Fairfax New Zealand Ltd. to create a near monopoly in newspapers and a dominant position in New Zealand media fails a simple test.

The two companies don’t explain how their new entity will make more money. Without money, they can’t provide more and better journalism they’re promising. Without better content, they won’t make more money.

Thus the merged entity would be stuck in the same doom-loop destroying many media companies worldwide. Content providers get poorer while content aggregators such as Facebook and Google get richer by accumulating users and capturing advertisers.

The Sunday Star Times writer goes on to detail the challenging online advertising environment, which Facebook and Google have come to dominate to a remarkable degree.

While paywalls represent an alternative source of online revenue, Fairfax and NZME maintain in their merger application that they have no premium content plans because paid content would ruin their ability to exploit social media (something NBR disputes).

Mr Oram says the applicants' business case is "at best unconvincing." 

He adds that if the combined company fails, "the nation will lose significant media resource."

The columnist also takes issue with the Fairfax-NZME claim that the merger would increase editorial standards.

He writes, “The applicants’ journalistic case for their merger is highly problematic. It would likely lead to fewer journalists, fewer voices, less diverse opinions, and more editorial control vested in fewer hands."

Mr Oram says this problem could be addressed with an editorial charter including a pledge to maintain editorial independence and diversity, plus a pledge to be transparent about data collected on readers. Without such a charter, the merger should be declined, he says.

Possible editorial impact has already been seen, with a BusinessDesk wrap-up of NZME's first day of trading after its recent listing on the NZX — run by both the NBR and the Herald — mysteriously losing two paragraphs describing NZME's poor debut, and criticism from an analyst (read the full version here).

Elsewhere in submissions, former NZ Herald editor-in-chief Gavin Ellis echoes Mr Oram’s opinion that the merger would lead to fewer editorial voices. Mr Ellis says it could be placed in the hands of a smaller number of senior editorial staff.

Make the spin off Herald or suburbans
Michael Horton’s submission reiterates his opinion, recently published in NBR, that the merger of Fairfax and NZME will create a near-monopoly in the world of print. Although it’s unfashionable and in decline, print still accounts for a big chunk of each company’s revenue and profit – helping to underwrite their efforts online.

Mr Horton (whose family once owned the NZ Herald and now owns a printer) urges the Commerce Commission to order the carving out of either Fairfax Media's Auckland suburban newspapers or NZME's flagship NZ Herald if it lets a proposed merger go ahead. 

Don't freeze out ODT
And Allied Press, publisher of the Otago Daily Times, frets that after they merge, Fairfax and NZME will freeze it out of longstanding news service and advertising bureau arrangements that provide it with national reach.

The Commerce Commission is due to release its decision on August 22, although the deadline is subject to possible extension.

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