Anyone still enthusiastic about legacy media, especially print, should go and read yesterday’s statement from the ACCC which cleared the way for Kerry Stokes’ Seven West Media (SWM) to buy the Sunday Times and perthnow website from the Murdoch family’s News Corp.
On the face of it approval should not have been given because Stokes and Seven West will have a monopoly on print in Perth and WA. And with the Seven TV network in Perth and the rest of the state, he and his company will be a dominate media in the west generally – with limited competition from the ABC (but not commercially), Ten, Nine and News Corp through the Australian, some radio stations and plus Fairfax through a news website.
But such is the state of health of print media in that state (and the rest of the country), that the ACCC gave its approval to the deal to stave off the inevitable – the closure of the Sunday Times and shutting down of the website at some future date (which was probably a lot closer than anyone thinks).
Investors treated the news as bad news and Seven West shares closed at 70.5 cents, down 2.7% yesterday.
The ACCC’s decision and the reasoning provided in yesterday’s statement seems to clear the way for other media merger deals in Australia, especially in print, and possibly in NZ where the issues are similar.
It is a recognition that print (newspapers and magazines) are on their last legs and that allowing them to merge and create monopolies is not going to be harmful to competition (but there is a cost to diversity of public opinion which is a completely different question).
In a statement the ACCC said it “will not oppose the proposed acquisition of The Sunday Times and perthnow.com.au from News Corporation by Seven West (which is controlled by Kerry Stokes. Seven West media is about to lift its stake in Sky News owner, the Australian News Channel from 33% to 50% in a joint venture with News Corp).
“The ACCC received a significant amount of feedback about diversity and quality of news from consumers in Western Australia. We also listened carefully to concerns raised by businesses who advertise in West Australian newspapers,” ACCC Chairman Rod Sims said in this morning’s statement.
“Following an extensive review, the ACCC has reached the view that the proposed acquisition is, on balance, not likely to substantially lessen competition for either consumers or advertisers.”
“On the consumer side, the large decline in print newspaper readership formed a major part of our analysis. Many consumers in Western Australia are now getting their news online or from other sources,” Mr Sims said.“With regards to SWM’s ownership of thewest.com.au and the proposed acquisition of perthnow.com.au, we gave consideration to other online news alternatives for West Australians, including Fairfax’s WAtoday.com.au and ABC News’ dedicated Western Australian website.”
"Although some advertisers raised concerns about the loss of competition for advertising opportunities, most acknowledged that print advertising was of declining importance and identified other advertising options they could switch to if WAN attempted to increase rates.
“Advertising expenditure in print newspapers in Perth is in steep decline. Most of the advertisers we spoke to after publishing the Statement of Issues are spending less on print newspapers than a few years ago and are finding alternative ways of reaching target audiences, including via digital media,” Mr Sims said.
This thinking would seem to clear the way for News Corp to but the regional dailies and community papers from APN (in which News is the dominant shareholder with a 14.9% stake). News is offering $36.6 million for the papers houses in ARM, the regional publishing arm of APN.
News and APN have mounted similar arguments to that mounted by Seven and News in Perth.
And across the Tasman, Kiwis will probably be facing a print monopoly next year, if the ACCC’s thinking is replicated.
Even though the NZ Commerce Commission, has delayed its decision on the proposed purchase of Fairfax Media’s NZ print assets by NZME (which was spun out of APN in June), the arguments for the deal (which will see Fairfax getting a 41% stake, $NZ55 million in cash and two board seats), are very similar.
They are, the rise of the internet, Facebook, Google, the decline in newspaper advertising, readership and sales, and the need to consolidate to survive this remorseless pressure.
But the ACCC’s reasoning is also bad news for Seven West Media, Fairfax and News Corp so far as their print interests are concerned.
The ACCC has given investors a big, big hint – print, especially newspapers in WA (and some magazines) are in virtual terminal decline and this deal will only postpone the inevitable. Back in 2011. Seven West Media was formed when Stokes’ Seven Network was merged with West Australian Newspapers (in which Stokes had a dominant minority holding). The merged company was valued at $4.1 billion – yesterday Seven West had a market value of $1.09 billion.
But for there is a big message from the ACCC’s decision for Fairfax as it focuses on the decision it has said it will make on the printing frequency of the Age in Melbourne, the SMH in Sydney, the financial Review nationally and probably major regionals like The Canberra Times, the Newcastle Herald and the Illawarra Mercury. The message is that the decision fairfax is pondering is inevitable.
And For News Corp, it is a similar story – even though it has boastfully said that it will not follow Fairfax down that route. It is already contracting with the decision to sell the loss-making Sunday Times and close seven metro weeklies in Melbourne. The APN purchase is a form of expansion for News (but a relief for APN, which is 14.9% owned by news, which would have approved of the sale decision).
Further contraction in print for News is not far away, especially with a warning from directors in the annual results that some assets in its news and information business face possible further impairment this year is revenues and sales continue to fall. That impairment warning has also been issued against its cable TV business (which is Fox Sports in Australia).
The gloomy scenario painted yesterday by the ACCC about print in WA and generally is one that all investors should heed.
