NZ media in existential crisis

The following is a submission I made today to the Parliamentary Epidemic Response Select Committee chaired by Simon Bridges. The committee sat for four hours hearing from media groups about the effect of the Covid-19 crisis. I said I could not over-emphasise the urgency of the issues facing our commercial media. One chief executive told me the industry needed to be “immediately put in emergency triage”. However, like all emergency care, that is only the beginning and I urged the adoption of a three-stage process to create a new, sustainable media ecosystem.

Statement to the Epidemic Response Select Committee 15 April 2020

1. My name is Gavin Peter Ellis. I am a media researcher and consultant whose association with the industry extends over more than 50 years. I am a former editor-in-chief of the New Zealand Herald and oversaw the introduction of both its digital editorial production systems and the nzherald.co.nz website. I hold a doctorate in political studies and have taught at undergraduate and graduate levels at the University of Auckland. I am the author of three books on news media structures and governance and have contributed chapters to seven other books on news media. My latest research paper, in collaboration with Dr Denis Muller of Melbourne University, was an analysis of New Zealand and Australian media coverage of the Christchurch mosque attacks. I act as a consultant on media issues and my most recent assignment was as an independent advisor to the Ministry for Culture & Heritage CEO Working Group advising the Minister of Communications on the future of state-owned media.
2. I have been asked to make some framing remarks to set a context for today’s hearing. While I have consulted industry representatives in preparation for the hearing, the following remarks are my own and may not represent the views of individual media organisations.
3. As I was preparing these remarks, I received news of the loss of 200 jobs – 15 per cent of its workforce – at NZME. We were all already aware of the abrupt closure of Bauer Media with the loss of 300 positions. Yesterday two more magazines also announced closure. Nothing brings home more graphically the dire situation in which New Zealand media find themselves in the Covid-19 crisis. I fear that these job losses will not be the last.
4. What is happening here mirrors what has happened elsewhere. The New York Times has gauged the pandemic’s effects on newspapers, magazines and digital media companies across the United States. All told, it estimates 28,000 employees of news media companies have been laid off, furloughed or had their pay reduced since the arrival of the coronavirus. In Britain, Enders Analysis, an independent analyst firm, estimated that up a third of frontline journalism jobs could be lost in “a critical industry with existential threats” during the emergency.
5. Advertising revenues in New Zealand are in free-fall. Declines since the lockdown have been between 50 and 75 per cent. No medium is exempt. Some have been further impacted by the loss of community newspaper and magazine publication during the lockdown. All report dramatic loss of cashflow. Their concern is that this decline in advertising demand will last well into the post-lockdown period. And media companies are also worried that the effect on advertising due to the Covid-19 crisis will mirror what occurred after the Global Financial Crisis: Up to thirty per cent of revenue lost at that time did not return. Exacerbating this revenue freefall is the ongoing issue of parasitic social media that make wholesale unpaid use of New Zealand media content and drain offshore more than 70 per cent of the $1.26 billion annual digital advertising spend. This is the central issue behind the long-term decline in New Zealand media, yet Government use of these digital platforms has grown exponentially and only a fraction of its digital spend goes to local media platforms.
6. Media companies are doing their best to cut costs but, frankly, most were bare-bone operations going into the crisis and the measures they are now taking – redundancies, salary cuts etc – will jeopardise some of their operations. All-of-business reviews that are now underway will inevitably recommend contraction.
7. It is no secret that traditional commercial media were in trouble before the lockdown and the closure of Bauer magazines and Radio Sport are more a reflection of those underlying issues than Coronavirus. However, as a result of these systemic problems, they went into the Covid-19 crisis with little or no financial buffering. Some may have had a little borrowing headroom but not enough to safely see them through.
8. The bottom line is that all commercial media are in trouble and their needs are immediate. Without help in some form, there are no guarantees that an institution vital to the preservation of democracy will survive. We hear the refrain “Government is not in the business of propping up failing enterprises” and in ordinary times there is virtue in that approach. However, these are not ordinary times and the news media are not ordinary enterprises. Just as the world’s governments deemed some financial enterprises “too big to fail” during the Global Financial Crisis, New Zealand must take the view that its private sector news media are “too important to fail”.
9. Government must not make the mistake of thinking that it will preserve the media landscape solely by ensuring that state-owned media – Radio New Zealand, Television New Zealand and Maori Television – weather the storm. These are vital components of New Zealand media that must have Government support, but they must not constitute the whole. There are inherent dangers in a system where state media – whose independence from government can be undone by a Parliamentary majority – is strong and private sector media is debilitated. Any initiatives by Government to support the industry must take a whole-of-sector approach.
10. Similarly, it would be folly to give more weight to ‘the new’ than to traditional media. Newspapers may have a limited remaining lifespan, and the same may be said of linear broadcasters. However, newsrooms across the country operated by these entities are the engine-rooms of news production across all platforms. That includes the start-ups whose existence depends on canvassing the output of their mainstream media colleagues for the feedstock of their ideas. If the large media operations fold, news production folds with them and cannot be restored by journalists working alone or in small groups. Journalism organised at scale is a core element of meeting the public’s right to be informed and of holding power to account.
11. It would be unwise to write off traditional media as no longer being the public’s media of choice. Since the announcement of the lockdown, audience growth has been phenomenal across all media. Our domestic digital news platforms have attracted far more unique browsers than during the Christchurch mosque attacks, with the largest attracting weekly audiences of around 11 million browsers and all reporting exponential growth. The average daily unique browsers aggregated across all local digital news platforms has risen from about 620,000 before the crisis to more than one million, with a peak of close to 1.2 million on the day of the lockdown announcement. Radio and television audiences have increased 20-60 per cent, with news attracting even higher growth, and newspaper sales have also risen. Broadcasters report audiences “flocking to the news”. Collectively this reflects a public need to access timely and factual information from trustworthy sources at a time when social media is awash with rumour and falsehood.
12. It would be remiss of me not to include in this submission the plight of our magazine industry. They are also in an existential fight and, in the case of the iconic titles closed without warning by Bauer, a desperate need for resurrection. Magazines were not included in the essential business category in spite of the fact that magazine publishers send files to print over the air, print largely without human contact, and distribute through the recommended contactless channels. They offer high economic and social benefit with very low risk. Magazine media represents thousands of jobs, 250 companies, and products consumed by more than 70 per cent of New Zealanders. Many of them are indispensable mirrors of our unique culture and habitat. Unless magazines are urgently granted the same essential business status as other media, further titles will fail and the future of that element of the media sector will be in jeopardy.
13. I cannot over-emphasise the urgency of the issues facing our commercial media. One chief executive stated that the industry needed to be “immediately put in emergency triage”. However, like all emergency care, that is only the beginning and I urge the adoption of a three-stage process of Government assistance:
    1. Immediate Assistance: The most urgent need is to help media organisations to replace lost cashflow. The quickest form of aid is the re-prioritising and re-purposing of Government advertising budgets –spend it now and spend all of it in New Zealand media. For broadcasters, suspension of regulatory and transmission levies are also obvious targets. Tax breaks being made available to small business should extend to news media regardless of size. Loans could be made available but the ability of some organisations to repay debt is already constrained. Grants should be made available to media but should not be in the form of NZ on Air programme/subject-specific spending. The need is for across-the-board funding to maintain operations. Put bluntly, do not expect media to be able to trade their way out of Covid-19 unaided. In addition to potential financial assistance, magazines (and those community newspapers not given concessions) need the simplest form of aid: Let them publish.
    2. Post-lockdown facilitation: Facilitate and fast-track restructuring that will buy media time to find longer-term solutions. Plans to create a new entity from TVNZ and RNZ should proceed. In the private sector, Bauer has shown the catastrophic effect of withdrawal from the market and the owners of both Stuff and MediaWorks have indicated a desire to sell New Zealand assets. Financial conditions in their other markets could induce them to ‘cut their losses’ in this country and follow the Bauer example. Cities and towns without newspapers and a single television news source are unacceptable outcomes. Every effort must be made to preserve, within alternative structures, the functions that these companies fulfil. In this phase Government should introduce special tax categories for news media similar to the L³C model now being offered to some media operations in the United States (low-profit enterprises deemed tax free in recognition of public service objectives). Government must also address the corrosive and financially debilitating effect on local media of foreign search engine and social media platforms. The European Union and Australia’s ACCC intend offer credible approaches to the problem.
    3. Post Covid-19 reconstruction: Redefine the media ecosystem and replace outmoded ownership structures with more sustainable models. I have suggested the convening of a ‘Bretton Woods’ conference to set new parameters and policy settings from which a sustainable mixed-model media sector can emerge.
14. The committee might usefully seek answers to the following questions:
    1. What is the magnitude of the required cash injection to keep our media functioning in the short term?
    2. How much does Government spend on advertising each year across all its sectors and how much of that expenditure goes to international search engines and social media?
    3. How quickly can this spending be re-scheduled and what is the best way it can be applied to local media advertising inventory?
    4. What steps can Government take to fast-track the state-owned media restructure and a merger between Stuff and NZME to forestall potential closure by Nine Entertainment of its New Zealand subsidiary?
    5. What steps can Government take to facilitate a sale of MediaWork’s television assets to forestall potential closure by Oaktree Capital of that part of its New Zealand holdings?
    6. What tax concessions could be made to improve the possible local purchase of community and regional newspapers or radio stations in danger of closure?
    7. Would Government consider becoming the convenor of a cross-party supported conference to produce a blueprint for media reconstruction?