That existential crisis again

A Zoom presentation by Dr Gavin Ellis delivered to the Ponsonby U3A on 12 June 2020

The bad news is that journalism has taken a body blow during the Covid-19 crisis. And, like so many in my age group, the damage has been caused not so much because it tested positive to Covid-19 but because it has underlying health issues.

Since the announcement that the country would move into lockdown, close to 600 people employed in the news media have lost their jobs: 237 when Bauer closed down its entire New Zealand magazine operation, 200 from NZME including the closedown of Radio Sport, and 130 from the beleaguered MediaWorks (but not from  TV3, because MediaWorks was trying to flog it off). AGM closed three architectural magazines. There will be others that passed without notice.

Blame for the layoffs and shutdowns was laid at the feet – probably more appropriately the spike protein – of Covid-19. And it undoubtedly played a part. Media company cashflow during the lockdown declined by up to 70 per cent. But it was by no means the complete story. 

The most forthright explanation probably came from across the Tasman – from the executive chairman of Murdoch’s New Corp, Michael Miller. Announcing the printing suspension of 60 newspapers in Australia, he said: “Covid-19 didn’t create this crisis but it brought it to a head.”

I think the writing was on the wall for Radio Sport. There had been some odd messages coming out of NZME well before the pandemic, but other cuts to sporting staff were more directly linked to the shuddering stop that sport encountered in our lockdown and that of other countries. Some of MediaWorks’ cuts were probably in the works, so to speak, but again were made much worse by Covid-19.

The cuts blamed on the virus that I found most difficult to accept were those by Bauer when it shuttered its entire New Zealand magazine operation. It has viewed New Zealand with a jaundiced eye from its headquarters in Hamburg – ever since the gloss went off the once lucrative Property Press. Some of its New Zealand magazines were profitable but not enough to satisfy the German owner. I think it’s fair to say that the closure of the New Zealand operations falls into the “never waste a good crisis” category. The announcement itself was brutal. With no prior warning staff were instructed to connect to a Zoom presentation and were told it was all over. Some days later they were allowed back into the building to collect their personal belongings under the gaze of security guards.

As a result, we lost – we hope temporarily – some of our most significant cultural icons, in particular The Listener and New Zealand Woman’s Weekly that had been part of New Zealand society for more than three-quarters of a century. And titles like North & South and Metro had established their own place in a shorter timeframe.

It’s fair to say that the news media in New Zealand are in a bad way. Of course, they’ve been in a bad way before. Two world wars and a depression put paid to numerous newspapers, for example. But the industry has always been fluid. In the century between 1840 and 1940 we know that 468 newspapers were established in New Zealand.

And at least 321 of them died. More, in fact, because some died unmourned. In the early days of radio, small private stations were started in various towns. In 1936 the Labour Government decreed that the state would run broadcasting and they were absorbed into what became known as the New Zealand Broadcasting Service. When television took its first tentative steps in this country in the 1950s, we had companies like Pye and Bell Television trying to establish a market before the NZBS ended their aspirations in 1960 and took over all TV broadcasting. I remember how they began with The Adventures of Robin Hood with the devilishly handsome Richard Greene in the title role.

The point I am making is that media have been constantly changing and evolving. Even when it has been for the better, we have mourned the casualties. My wife Jenny Lynch – who is going to talk to you later in the year about her memoir “Under the Covers” – has the distinction of working on four New Zealand publications, all of which closed down – the Weekly News, Sunday Herald, Thursday magazine and, now, the New Zealand Woman’s Weekly. Such is change.

However, there has been a constant in all of that, certainly from the late nineteenth century onward – the existence of professional journalism. Publications and broadcast stations could come and go but when one vehicle went to the junk yard another vehicle took its place and journalists drove on. Sometimes the vehicle included new forms of technology and journalists had to learn new skills but basically, these related to how the news was delivered rather than the embedded principles of journalism itself. Journalists kept on gathering and distributing the news, be it big news from a ruined Napier in 1931 or little news like the council that maintained a road for 30 years before discovering it didn’t own it.

This time it is different. Our media sector is in general upheaval.

When I appeared before the Epidemic Response Select Committee a few weeks ago to talk about effects on media I spoke of an existential crisis. Covid-19 is the last element of a perfect storm that could sweep away indispensable pieces of the media landscape. Part of that has already happened: We now have no nationally circulating current affairs magazines – either weekly or monthly. Long-form journalism has taken a major hit.

And the remainder of our private sector news media is very vulnerable.

NZME, publisher of the New Zealand Herald and a major broadcaster with networks like NewstalkZB, hasn’t paid a dividend since 2018 and has just told shareholders it won’t pay one this year. Clearly it sees its 200 layoffs and the axing of Radio Sport as buying it time, but it is not a solution to systemic issues.

When MediaWorks announced 130 job  cuts in its radio and sales areas its CEO Michael Anderson said Covid-19 had“completely changed the market that we operate in and this means that we must adapt to ensure our survival and sustainability in the coming months.” Survival and sustainability? Anderson was admitting the continued existence of the company was in doubt. And he made those comments aware that the sale of its TV3 television arm and Newshub were progressing.

Those parts of the business may now be thrown a lifeline if rumours of a sale to the US group that owns the Discovery Network prove correct. It remains to be seen how the radio assets will fare on their own.

Stuff – publisher of papers including the DominionPost, The Press, and the Sunday Star Times – been given a reprieve with the purchase of the company by its chief executive Sinead Boucher.

The previous owner, Australia’s Nine Entertainment, has given her some financial accommodation but she will need financial backers. And Stuff relies very heavily on newspapers whose circulation has been declining for some years. And let me put that in perspective: In the five years to September last year (the last time they were audited) the circulations of Stuff’s metropolitan dailies have roughly halved. So, too, has the circulation of the Sunday Star Times. And Sunday News has dropped by a whopping 62 per cent over that period. Its digital platform stuff.co.nz remains the dominant news platform but websites and mobile apps are notoriously poor at producing advertising revenue that can compare with the print equivalent. Stuff has made headway with voluntary subscriptions and Sinead Boucher says she has been gratified by the financial support forthcoming from readers.

The Herald’s paywall has 36,000 digital customers and another 34,000 who get it with their print subscription. That’s a good start but by my reckoning it doesn’t generate more than about $4 million in direct revenue a year. Not much compared to their total revenue of $371 million. Incidentally, I pay for it on the principal that news costs a lot of money to produce and if someone doesn’t pay for it, it won’t be there. The Herald’s net paid circulation hasn’t dropped as much as the Stuff papers – down about a third over that same five-year period. Its problem is debt amid declining revenue. Paying down what it owes is vital as far as the banks are concerned which is why it hasn’t paid a dividend for three years. As a result, its share price languishes. The question is: How long will investor patience last? There was a call from a shareholder to realise some of the locked-up value by selling off parts of the business. That resolution was shot down at the annual shareholders meeting yesterday. Just as well, too. It would only create more problems for what remains. But NZME has other immediate problems: the chairman Peter Cullinane resigned abruptly minutes before yesterday’s meeting, later saying he had lost the support of Australian fund manager shareholders. That dissatisfaction will not end with the resignation, of course. There will doubtless be further consequences. Apart from the dividend issue, that dissatisfaction follows the failure of NZME’s attempts to merge with Stuff (a proposal I opposed for a long time but grudgingly supported when it was suggested that, like Bauer, Nine could walk away from its New Zealand interests…meaning the loss of newspapers like the DominionPost, The Press and Waikato Times).

Collectively, private sector news media have limited time to sort themselves out but I’m not sure fund managers will be the right people to do it. The simple fact is that news media no longer represent a viable long-term profit-extraction business model.

That profit has gone to social media platforms that are able to appropriate news content without paying for it, then sell advertising off the back of that content. That has been a double blow for our media.

In Australia the federal government has had enough of free-riding by the likes of Google and Facebook and by the end of the year there will be mandatory payments required for the Australian news media’s content carried on their various platforms. Collecting that money won’t be easy but we should be joining with the Australians to recover some of the cost of newsgathering.

New Zealand digital advertising revenue amounted to almost $NZ1.3 billion last year, with search engines and social media accounting for more than 70 per cent of that total. If we used the same basis being talked about under the Australian scheme, this country could recover $80-120 million a year. A fund of that magnitude would fundamentally alter the fortunes of journalism in this country.

It could be used to simply provide a subsidy to existing companies. Or it could be used to fund state-owned media. I don’t see either option as good use of that money.

But let’s not hold our breath on Google and Facebook handing over any cash without one almighty struggle. Their behaviour might politely be described as arrogant. My view of them is considerably blunter than  that. Let me give you an example of how they operate. When the income Google declared for tax purposes in New Zealand was shown to be suspiciously low, they doubled it – to $36 million. At the same time, they increased the “service fee” they paid to head office six-fold…to a whopping $511 million. This is the sort of behaviour I’ve come to expect from these social media transnationals. We can’t bank on them.

Irrespective of the success in making Facebook, Google and the like pay for what they freely appropriate, we need to use this crisis to fundamentally rethink the structures in which we house our journalism. I use that phrasing deliberately. We need to fashion our media organisations not like normal companies that exist to produce a profit for its shareholders, but as enterprises whose principal purpose is sustaining journalism in the long term.

I have suggested the convening of a gathering that I have called Bretton Woods 2. Bretton Woods, of course, was the conference called to reset the world’s financial systems near the end of the Second World War. We need a broad church gathering to reset New Zealand’s media landscape.

We need mechanisms that will support a tiered system of media if we are to prevent journalism becoming a niche activity.

Let’s look briefly at state sector media – the area that is easiest to maintain through government’s theoretically deep pockets. RNZ is already funded from the state purse but TVNZ was a contributor to those coffers. No longer. It hasn’t paid a dividend to the government. And it is increasingly reliant on government-funded NZ on Air to pick up local production costs. That is why there is a proposal to create a new entity into which RNZ and TVNZ will be absorbed to make a more cost-effective and sustainable organisation. I have to declare an interest here because I was a member of the advisory group that made the recommendation to Government. The proposal is still being investigated but let me set your mind at ease: There is no suggestion it will mean RNZ has to carry advertising.

State-owned but editorially independent organisations are cornerstones of journalism in this country and must remain so. But they are not the only cornerstones and they most certainly must not be the entire house. There are enormous dangers in total reliance on the state when journalism’s principal democratic function is to hold power to account.

Bretton Woods 2 would obviously include state-owned media as one vital tier, but it must also find ways to sustain other levels of journalism outside that sector. It must find new ownership and governance structures for organisations of the scale of Stuff, NZME and MediaWorks. These are the groups that are large enough to hold national-level power to account because they have audiences too big for government and the commercial sector to ignore.

The first of the good news is that the sale of Stuff to its chief executive opens the way for a new approach to both its ownership structure and governance. Sinead Boucher has given a commitment to staff shareholding.

Journalists employed by the French group that publishes Le Monde are financial stakeholders in the enterprise and participate in the elections of upper management and senior executives. Their control has been diminished after unwise expansion led to a huge debt burden. Financiers took a controlling interest and its major shareholder is now a Czech businessman. However, Le Monde’s original structure and the lessons from its recent ownership changes are things that she should look at. If journalists have an ability to influence the boardroom and management, there may be greater attention to that core purpose of journalism.

There are other options available that aim at sustainability rather than profit distribution. I’m a fan of the trust model, exemplified by The Guardian’s Scott Trust. Its central objective is “to secure the financial and editorial independence of the Guardian in perpetuity”.

Stuff would be a good candidate and Boucher has the capacity to bring it about. Staff shareholding and trustee governance are compatible concepts.

Our Bretton Woods 2 gathering should look at ways in which there could be legislative incentives to adopt new structures and governance – tax write-offs and future tax-free status being two options. This would be on the basis that they became effectively not-for-profit organisations providing a public service. In the United States and Britain there are special business categories that recognise this sort of thing. They were originally set up to accommodate services such as rest homes but there is growing acceptance that they could also extend to news organisations. Realistically, that is the financial future of sustainable large-scale private sector news media.

It is also, I believe, the future for the lower tiers of our media – regional and local news outlets, and the digital start-ups that are now making significant contributions in the niches they are carving for themselves.

There are alternatives, of course, to trust ownership. Co-operatives offer real possibilities, particularly for local media. I can see my local community paper better serving its local audience under that structure than as part of a content-sharing national organisation that no longer reaches down to street level.

Personally, I would like to see our media in New Zealand hands. I am unimpressed by the record of the various foreign owners of our media companies. No good has come of it.

Ownership and governance are one part of the solution but we also need innovative approaches to how we financially support journalism.

NZ on Air has already broadened its reach beyond broadcasting but, apart from its direct funding of RNZ and a pilot scheme for reporting ‘local democracy’ which has recently been extended, it is in the business of funding specific content applications. That is not the way to sustain an entire newsroom or news enterprise. Bretton Woods 2 would need to find equitable ways, say, to make bulk grants from a clawback from Google and Facebook if a trans-Tasman approach called them to account.

And equitable funding would mean finding ways to accommodate all forms of ownership, including ‘the family firm’: Our best example of that is Allied Press, publisher of the Otago Daily Times, which continues to serve the lower South Island under the assiduous guidance of Sir Julian Smith. Their public service should be recognised, too, and they should be entitled to funding.

There is real potential, particularly at regional and local level, for what I might call altruistic private ownership.

These are the levels at which closure is a real threat and, with the right incentives, individuals or families could step up to ensure continued news coverage in the area. I’ll come back to that in a moment.

I spent most of my career in newspapers and, as the coffee mug in my study states, “I love the smell of newsprint in the morning”. But I do not want to see Bretton  Woods 2 becoming bogged down in seeking ways to keep putting ink on dead trees, or ensuring you can listen to Checkpoint on a radio.

The means of delivery is incidental, although I do wish some bright young thing would find a way of digitally replicating the experience of reading a newspaper.

No, it is the journalism that is important. And we must find ways of preserving that.

I’m heartened by what I see happening with the digital start-ups. These are proving resilient. The Spinoff last week notched up its 10,000^th subscription-paying member. Newsroom reported a spike in reader donations and Businessdesk announced that its financial position allowed it to hire four more staff. And one of the Bauer casualties has launched a new architectural magazine (yes, print magazine) called Here. So far, of course, they are serving niche audiences.

The problems really lie with our bigger companies – groups that over time have bought up other operations to the point where our media industry is highly concentrated. A small number of corporations own a large number of print and broadcast outlets and dominate the news websites.

It’s the same in Australia and in the past month they have experienced the devastating effect of that concentration. News Corp announced that more than 100 local and regional newspapers will become digital only or disappear entirely. There will be widespread sharing of the same material. You can imagine the job losses.

The vast majority of our regional newspapers are owned by either NZME or Stuff. A decision  to walk away from regional or local publishing by either or both could be catastrophic for those communities. I’m not convinced that there are sufficient benefits to warrant the level of concentration we have in our media and we should be looking at (and this is an awful word) disaggregation. I’m not talking about the sort of blunt instrument that shareholder wanted to take to NZME. Rather I mean carving off the regional and local interests that, frankly, don’t get much attention from their large owners. I’m certain the oft-stated benefits of shared services could also be achieved through co-operative arrangements. And local ownership would provide greater incentives to keep the operations going.

Some years ago, I was talking a former member of Margaret Thatcher’s Cabinet, Lord Fowler, about the future of media ownership. He said: “I doubt we will see another media mogul, but we may see the rise of media squires”. By that, he meant local people who took on the running of the local media outlets out of a sense of duty to the community in which they had deep ties. Surely that is a better alternative than closure. And if not a media squire, then a media co-op or even a media club.

I don’t pretend to hold all the answers to the media’s plight. There is a real need for innovation and some truly blue skies thinking. But I’m optimistic.

Someone once told me that there are cathartic moments that can be exploited for positive change.  Covid-19 is our cathartic moment and, just as Bauer took advantage of a crisis, so can we…but with much more positive outcomes.  Start clamouring for Bretton Woods 2 and the resetting of the New Zealand media landscape. After all, you have a stake in the outcome.