Digital competition and not print issues have emerged as the focus for the New Zealand’s Commerce Commission assessment of the proposed merger of the NZ print and radio assets of APN News and Media, and NZ print assets of Fairfax Media – and for that reason the deal has a good chance of happening.
And it is clear the primary focus will be on the digital/website operations of both media giants, Fairfax’s stuff.co.nz and APN’s (NZME’s) nzherald.co.nz websites and their competitors and that will be something of a template for other media companies around the world contemplating similar deals.
In fact digital is increasingly the focus of all media companies around the world via paywalls, free access, advertising, the rise of ad blockers and the monsters that are Google and Facebook.
The approval of APN’s shareholders would also be required for the merger, as may the consent of the Overseas Investment Office (OIO). The OIO has yet to provide confirmation. The proposed merger of Fairfax New Zealand and NZME would see the APN company, NZME, float on the NZX and then acquire the New Zealand assets of Fairfax Media, which would end up with an expected stake of less than 50% in the combined media business.
The NZ Commission’s scrutiny will be watched throughout the print media world for guidance and support. The digital competition issues in NZ will be of interest to every media company around the world looking at a merger with a rival – whether it is between Seven West Media and News Corp Australia’s Sunday Times in Perth, or in Gannett’s bid for Tribune Publishing in the US.
In its statement the Commission singled out a number of issues, including whether there are separate print and digital news and advertising markets supply issues (such as would a merger allow a reduction in competition?).
The Commission will look at the most obvious issue – whether there’s a material overlap in online advertising and the supply of news and entertainment via stuff.co.nz and APN’s nzherald.co.nz websites.
“There has been movement among a number of media companies both internationally and within New Zealand towards the introduction of charges for readers to access online content, known as a paywall,” the regulator said in its issues paper.
“We will assess whether or not the merged entity would have the ability and incentive to introduce such a paywall and whether or not this would encourage other content providers to follow suit.”
Like other publishers are (such as News Corp), APN and Fairfax Media are pushing the idea that they can’t compete in the online ad space against the likes of Google and Facebook without combining their resources, and that audiences and advertisers don’t care which platform they use to get information.
And like more and more print companies, both have adopted a ‘digital first’ strategy prioritising online editorial and advertising over their traditional print businesses (as Fairfax has in Australia, along with the likes of the Financial Times internationally and a host of big UK dailies).
"We will examine the extent to which both advertisers and readers view different media as substitutes," the regulator said. "As part of this assessment on the reader side, we will consider the extent to which content is created with a specific platform (print, digital or radio) in mind."
The Commission said it will look at whether there are separate ‘content’ markets, defined by subject matter or news focus, and will also assess “the extent to which advertisers have a preference for specific media for specific needs”, such as using Google or Facebook ads over the websites of the two companies, stuff.co.nz or the nzherald.co.nz.
The Commission says it will also assess whether Fairfax and NZME are competing with the likes of Facebook and Google, and if that rivalry would constrain a merged entity’s ability to raise prices.
In addition to the digital issues, the Commerce Commission will look at any competitive overlap in the Sunday newspapers market, between daily papers in Hawke’s Bay and Waikato. But these appear to be of secondary importance. and can be easily fixed by small scale asset sales. many Kiwi newspapers are specific to regions where there is little competition.
The Commission says the main competition issues raised by the proposed merger include whether the companies would be able to increase prices or reduce the quality of services, it said. But it said it would also have to consider what would happen if the merger did not go ahead.
More specifically, the commission will consider: whether separate product markets exist for the supply of online and print advertising and content; The closeness of competition between the merging parties and other suppliers; The ability for new suppliers to enter or for existing suppliers to expand, by extending the range and geographic coverage of their operations; The ability of customers to exert substantial influence on the price the merged entity charges and on other terms; The ability and incentive of the merged entity to restrict access (or provide access on less advantageous terms) to upstream printing assets, or the KPEX digital advertising sales platform.
