Submission on the Merger Authorisation

Fairfax NZ Ltd and NZME/Wilson & Horton Ltd 8 July 2016

Dr. Julienne Molineaux

The Policy Observatory, Auckland University of Technology

Associate Professor Donald Matheson

School of Language, Social and Political Sciences,

University of Canterbury

Dr. Merja Myllylahti Project manager, Centre for Journalism, Media and Democracy

(JMAD), Auckland University of Technology

Dr. Sean Phelan

School of Communication, Journalism & Marketing,

Massey University Wellington

Dr. Peter Thompson

School of English, Film, Theatre and Media Studies, Victoria University Wellington

Associate Professor Geoff Lealand

Screen and Media Studies, University of Waikato

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Submission on the merger authorisation application byFairfaxNZLtdandWilson&HortonLtdContentsAuthors.............................................................................................................................1

1 Generalposition.........................................................................................................2

2 Definitionofthemarket.............................................................................................2

3 Increaseinconcentration;lesseningofcompetition.................................................10

4 Publicbenefitsandpublicdetriments......................................................................124.1 Plurality...................................................................................................................144.2 Diversity..................................................................................................................164.3 Regionalconsumers................................................................................................174.4 Specialisedjournalismandinvestigation................................................................194.5 Concentrationofownership...................................................................................204.6 Effectoncompetitiveness.......................................................................................254.6.1 Predatorypricing................................................................................................254.6.2 Suppressionofstart-ups.....................................................................................254.6.3 Coordinatedconduct..........................................................................................25

5 Thecounter-factual..................................................................................................26

6 Conclusion...............................................................................................................27

7 References...............................................................................................................28

AuthorsThissubmissionisfrom:Dr.JulienneMolineaux,AucklandUniversityofTechnology,julienne.molineaux@aut.ac.nz

AssociateProfessorDonaldMatheson,UniversityofCanterbury,donald.matheson@canterbury.ac.nz

Dr.MerjaMyllylahti,AucklandUniversityofTechnology,mmyllyla@aut.ac.nz

Dr.SeanPhelan,MasseyUniversityWellingtons.phelan@massey.ac.nz

Dr.PeterThompson,VictoriaUniversityWellington,peter.thompson@vuw.ac.nz

AssociateProfessorGeoffLealand,UniversityofWaikato,lealand@waikato.ac.nz

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1 GeneralpositionThissubmissionisonthemergerauthorisationapplicationbyFairfaxNZLtdandWilson&Horton Ltd. It focuses on the impact of the proposed merger on New Zealand newsconsumersandthegeneralpublicofNewZealand.Weoffernoopinionontheimpactoftheproposedmergerforadvertisers,norontheimpactofthemergeronthecommercialradiomarket.TheauthorsareallacademicsinNewZealanduniversitieswhohaveconductedresearchontheNewZealandmediaindustryandtheprofessionandperformanceofjournalism.We oppose the merger because we believe it will result in a significant reduction ofcompetition,andthatthiswillhavedetrimentalconsequencesonproductqualityfornewsconsumersandtheNewZealandpublicatlarge.Wedisagreewithmanyassertionsmadeinthemergerauthorisationapplicationandsupportourargumentsherewithevidence.

2 DefinitionofthemarketThedefinitionof ‘market’ iscrucial tocompetitionanalysis.Definethemarketwidelyandmorecompetitorsappear;define itnarrowlyandthere is lesscompetition.Theapplicantshavedefined‘market’inanonsensicallybroadmanner.Theyhaveincludedascompetitionalmost every possible source of information and entertainment available to NewZealanders;theirlistincludesanewswebsitethathasnotbeenlaunched,agossipwebsitethathassincefolded,andaUniversity-basedsitethatfeaturessummariesofresearch.1The1986CommerceAct(s.3)defines‘market’asbeingaboutsubstitution:amarketconsistsofgoodsand services thatareclosely substitutable [ouremphasis] foreachother. It is clearthatmanyofthecompetitorstheapplicantsnamedonotcompeteinthesamemarket;atbesttheyarepartialcompetitorsofferingpartialsubstitution.Therearedifficulties indefiningthemarkets inwhichFairfaxNZandWilson&Hortonareoperating.Themediasector isno longersoeasilydivisible–as itwaseven20yearsago–between newspapers, broadcasting, film and telecommunications. The Australian MediaandCommunicationAuthorityhasarguedthat‘regulationconstructedonthepremisethatcontent could (and should) be controlled by how it is delivered is losing its force’.2Nonetheless, the claims in the merger application concerning the fundamental shift in

1Unnamedwebsite(p.67oftheapplication);Scout(p.67);theBriefingPapers(p.49).2CitedinFlew.(September2012).Theconvergentmediapolicymoment.InstituteforCultureandSocietyOccasionalPaperSeries,UniversityofWesternSydney,p.5.Retrievedfromhttp://www.westernsydney.edu.au/__data/assets/pdf_file/0004/396373/ICS_Occasional_Paper_Series_3_3_Flew_Final.pdf

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audience news consumption patterns (e.g section 6.28-6.34) are overstated. Audienceresearchin2014byNewZealandOnAirandColmarBruntonsuggeststhatmanynewmediaplatformscomplementratherthansupplanttraditionalmediausageandthatevenifpeopledo access more content on new devices, the patterns of news consumption still reflecttraditional habits: radio and newspapers in the morning, and television in the evening.3Indeed, the applicants' own document (fig 16, p. 61) citesNielsen research showing that36%ofweeklyNewZealandaudiencesfornews/informationuseprint-only,whileafurther31%usebothprintandonline,suggestingnewspapersarestillusedby67%ofthepublic.Thusitiserroneoustoassumethatmediaconvergence,whichhasledtoincreasedplatformneutrality and content agnosticism in the advertising market, applies also to audienceconsumptionofcontent.Theapplicantshavemanybusinessunitsincluding:

- Dailynewspapers- Communitynewspapers- Sundaynewspapers- Stuff.co.nzandnzherald.co.nzwebsites- Magazines- Neighbourly.co.nz- Grabone.co.nz- Advertisingservices- Commercialradiostations

Source:Applicationpp.6-8andappendices1and2.Our submission is concerned with the news products: newspapers and the online newswebsitesstuff.co.nzandnzherald.co.nz.Thereisconsiderablesharingofresourcesbetweenthedifferentmediawithineachfirm;storieswrittenforprintnewspapersarealsowrittenfor online inclusion; regional and community newspapers within the same stable sharestories(e.g.Fairfax’sRodneyTimesandNorWestNewsBrief);regionalnewspaperstoriesareincluded on the main news websites, sometimes under their original mastheads (e.g.NorthernAdvocatestoriesonnzherald.co.nz);andradiohostsfromZBhavecolumnsintheNewZealandHerald.Thissharingofresourcesbetweendifferentmediaoutletswithineachcompanystrengthensthepowerandaudiencereachoftheapplicants,andmakesitharderfornewentrantstocompete.Astheapplicantsassert,newspapersandwebsiteshavemanycompetitorsfortheirreaders’attentionandmoney.However,thedistinctive‘product’madebyFairfaxNZandWilson&Hortonaremedia itemswitha focusonoriginalNewZealandcontentandnews,and thepublic and civic affairs of this country. (Note: relevant data on local content levels is

3NewZealandOnAir.(June2014)Wherearetheaudiences?BenchmarksurveyofNewZealanders’mediaconsumption.PreparedbyColmarBrunton.http://www.nzonair.govt.nz/document-library/2014-audience-research-full-report/

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redactedfromthepublicversionoftheapplicants’submissionandwearethereforeunableto comment on it) If themarket is defined in terms of this distinctive product, then theapplicants have fewer true competitors:MediaWorks, Radio New Zealand and TelevisionNewZealandbeingtheonlydailynewsproviders thathavecomparablescale (in termsofaudiencereach)andscope(intermsoftherangeofstoriescovered).Nonetheless,intermsof online reach,MediaWorks, Radio New Zealand and Television New Zealand rank wellbehindtheapplicants.4Whendefiningmarketboundaries,NewZealandnewscontentisnotsubstitutablewithanyother genre. This is partially true in the case of the wholesale side (advertising) wheremaximisingeyeballsistheaim,althoughthisdoesnotapplytolocal/regionaladvertisinginNewZealandasalocalshopinInvercargillhasnouseforreadersinAucklandorAustralia.But this conception is fundamentally incorrect in the case of the retail (audience) sidebecauseclearlynewsdoesnotsubstituteforothermediacontentgenres.MoviesonNetflixdo not fulfil the same function as news, and international news does not substitute fordomestic New Zealand news. The BBC does not cover daily events in the Waikato. ThedomesticmarketfornewsinNewZealandisdiscreteandthisiswherethereisariskofanover-concentrationofmarketpowerifthemergerproceeds.As the NERA paper commissioned by the applicants notes (table 4, pp. 29-38) there islimited substitutability, and thus limited price competition, on both the advertising andretail side for local/regional newspapers. This analysis also noted that the news contentbetweenmetropolitan and regional newspapers is different, and concedes (section 3.1.1p.21) that, although other media may impose some degree of price constraint, 'offlineplatformsliketelevisionarenottechnicallyinthesameantitrustmarket'.Thisunderminestheapplicants’insistencethatmediaconvergence/homogenisationcreatesasinglemarket.Indeed,theapplicants'documenttendstoconflatetherecognitionthatplatforms/receptiondeviceshavebecomemore substitutable,with thenotion thatmediacontent forms havebecome substitutable (e.g. section 16). As pointed out above,while the latter is partiallytrue on the wholesale (advertising) side it is fundamentally incorrect in respect of theaudience(retail)sideofthenewsmarket.Theapplicants suggest that several competitorshave thepotential toexpand their reach,shouldthemarketpowerofthenewlymergedentityabuseitsdominantposition.Potentialcompetition,orcontestability,referstoanidealworldwheretherearenosunkcosts, lowbarriers toentryandnewplayerscangainscaleandrevenuequicklyenoughtochallengethe incumbent before the incumbent can retaliate strategically against new competition.While there are lower entry costs in starting a website than printing and distributing anewspaper,itisnonethelesschallengingtogainscaleandrecognitionintermsofaudienceandrevenue,atlevelssufficienttochallengeexistingbusinesses.Manynewventureshavestarted but struggled with finances and to overcome reader preferences for established

4ChrisKeall.(23June2016).Fairfax-NZMEmerger:JusthowdominantareStuffandtheHeraldinonlinemainstreamnews?NationalBusinessReview.http://www.nbr.co.nz/big-ck-p

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news sources, or been proposed but never eventuated. As the annual media ownershipreports compiled by the Journalism, Media and Democracy Research Centre (JMAD) atAuckland University of Technology clearly demonstrate, the New Zealand media marketremains highly concentrated, and proposed new ventures, such as the non-profitjournalism.org, never materialised. 5 There is no recent example of a successful newcompetitor in the New Zealand news market that has grown sufficiently in size to be agenuine competitor to the incumbents. (This is not the case with advertising; witnessTradeMe).ThelastnewentrantintheAucklanddailynewspapermarketwastheAucklandSun (1987-1988),whichlastedonlyelevenmonths,despitethesubstantialresourcesof itscorporateowners.Therehavebeennonewonlinewebsites thatcarrya rangeoforiginalNew Zealand news content started in the last decade, except as the online versions ofexistingnewsorganisations.Earningrevenueonline ishard.TheNationalBusinessReviewrecently celebrated its 4000th subscriber, which is considered impressive but is hardly acompetitorforstuff.co.nzwithauniquemonthlyreadershipof2,044,000inMay2016(thelatestsurveyresultsavailable).Manynichesiteshavebeenestablishedbut,asweexplainbelow, these do not offer close substitution for the applicants’ products. Further, theystrugglefinancially,andforreadership,againstthealreadydominantmarketpositionoftheapplicantsandtheirhighprofilebrands.Thenotionofcontestability– thatcompetitorswillmagicallyarise tochallenge thenewlymergedapplicantsshouldtheyabusetheirposition–thereforeneedstobedismissed;itissimplynotplausibleinamarketthesizeofNewZealand,especiallygiventheexistinghighownershipconcentrationlevels.The merger application lists many competitors and potential competitors for the newly-mergedfirm–almostthirtypagesofthem.Butthesearepartialcompetitorswithamuchsmalleraudience,oftenwithanicheproductornichegeography,andtherebycoveringonlya fragment of the market covered by the applicants. They are not closely substitutableproductsandtheyarenotinthesamemarket.HereisapartiallistoftheNewZealandandglobalcompetitorstheapplicantsputforward(pp.46-51) inanattempttodemonstrate theamountofcompetition in theirmarket.Wecommentontheirsubstitutabilityineachcase:

- AlliedPressisaprivatecompanythatownstheOtagoDailyTimes(ODT)andarangeof other print and boutique television operations in the South Island. As theapplicantscomment,theODTdoescarrynationalandinternationalnews,butnewsfromoutsidesouthernNewZealandissourcedfromotherpublications.Forexample,AucklandnewsisreproducedfromtheNewZealandHerald,andwhiletheODThasoneaccreditedmemberoftheParliamentaryPressGallery,mostWellington-centric

5MerjaMyllylahti(2011-2015).JMADNewZealandMediaOwnershipReports.Retrievedfromhttp://www.aut.ac.nz/study-at-aut/study-areas/communications/media-networks/journalism,-media-and-democracy-research-centre/journalists-and-projects/new-zealand-media-ownership-report

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politicalstoriesonitswebsitearereprintsfromNZME,withwhomithasacontent-sharing deal. This deal, along with an advertising one, would come under threatshouldthemergerproceed,potentiallyunderminingAlliedPress’successfulbusinessmodel.TheapplicantsclaimAlliedPresscould‘readilyexpand’tootherpartsofNewZealandandhence ispotentialcompetition for theapplicants; the implausibilityofsuch a development is identified in our comments above about the feasibility ofcontestability. Revenue for Allied Press currently comes from impressive printpenetrationintheirlocalmarkets,6nottheirwebsitetrafficwhichwasranked143rdin theMay 2016NeilsonMedia View Survey7. Yet presumably any assault on thenationwidenewsmarketwouldbeonlineand likelyyield little revenue.Assaultingthe applicants’ daily print newsproductswouldhave veryhigh costs and thenewproduct would struggle to gain new readers fast enough to be sustainable. AlliedPress at present doesnot have the scale or scopeof news coverage tobe closelysubstitutablefortheapplicants’mainwebsites;whilecontestabilityexistsintheory,it is doubtful Allied Press would be able to scale-up sufficiently to provide closesubstitution.

- Scoop is a news aggregation website that produces a small amount of originalcontent;mostlyitgroupstogethercommentandpressreleasesgeneratedbyothers.Scoop currently has four full-time and one part-time staff members. Despitefundraisingeffortsandpaidpartnershipswithmanynewsproducers–whonotonlyprovideScoopwithfreecontentbutalsopaytobeassociatedwiththesite–Scoopcanonlyaffordverymodestsalaries intherangeof$30-40,000foreditorialstaff.8Scoop’sfocusandresourcingmeanitisnotaclosesubstitutefortheapplicants.

- Bauer Media Group’s magazines such as theNew Zealand Listener andNorth &

South,doprovidemorein-depthcoverageofasmallrangeofnewsstories,butarenot substitutes for broad news coverage or the news of the day function of theapplicants.

- The National Business Review covers business news not general news and, as

alreadynoted,hasasubscriberbaseof4,000.Manystoriesarebehindapaywallandare therefore inaccessible to most readers of Fairfax andWilson & Horton newswebsites.Thisisnotaclosesubstitutefortheapplicants’websitesintermsofscaleorscope.

- Business Desk has a focusonbusiness news and is behind apaywall, reducing its

audiencesize.Itprovidesbusinessstoriestoarangeofotherpublicationsandapaidsubscriptionservice for readerswhowishnewsdelivered to theire-inbox. Ithasa

6AlliedPress.‘TheOtagoDailyTimes’.https://www.alliedpress.co.nz/publications/otago-daily-times7ChrisKeall.(23June2016).Fairfax-NZMEmerger:JusthowdominantareStuffandtheHeraldinonlinemainstreamnews?NationalBusinessReview.http://www.nbr.co.nz/big-ck-p8GordonCampbell.(25May2016).EditorialComment.Retrievedfromhttp://www.scoop.co.nz/stories/HL1605/S00054/editorial-comment-gordon-campbell.htm

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staffofsevenjournalists.Thisisnotaclosesubstitutefortheapplicants’websitesintermsofscaleorscope.

- Hive News hasmost of its content behind a paywall. There is a daily summaryof

storieswithagovernmentandbusinessfocus,uptofivereadsperpersonallowedfreepermonth.Twoandahalfyearsold,HiveNewshastwolistedstaffmembersincludinghighprofile journalistBernardHickey,whostillwritesandcomments forothernewsorganisations.Thisisnotaclosesubstitutefortheapplicants’websitesintermsofscaleorscope.

- Interest.co.nzhasabusinessfocusgivingitanarrowrangeofcontent.Itistherefore

notaclosesubstitutefortheapplicants.

- TheSpinoffwebsitedescribesitselfasan‘onlinemagazinewhichcoverssportsandpopculture’.Itdoesnothaveastaffofreportersgatheringandanalysingthenews.Whilesomecurrentissuesarecoveredbythesite,thisisnotcomprehensiveandnottheprimaryfocusofthesite.Indeed,inanewsreportabouttheproposedmerger,SpinofffoundingpublisherandeditorDuncanGrieveconceded,‘Nota lotofactualreporting goes on…. And I, if I'm honest, can't ever see a period where we dobreakingnewsorhardnewsreporting’9.

- Politik hasa focusonNewZealandpolitics andpolicy,providinganalysisof issues

butitdoesnotcoverdailypoliticalnews.Ithasasmallstaff–onlyRichardHarmanisidentified-andisbehindapaywall.Thisisnotaclosesubstitutefortheapplicants’websitesintermsofscaleorscope.

- Investigate Daily does not have its own journalists covering the news of the day.

Most of its stories (surveyed 12 June 2016) are old and based around religiousthemes(suchas ‘thetruthaboutEaster’ innineparts).Theonlydailynewsstoriesare an aggregationof stories fromothernewsproducers under themenu tab ‘NZnews,breaking’.

- TangibleMediaproducesnichemagazinesandspecialistnews.Itdoesnotreporton

the news of the day, except news relevant to those in themarketing,media andadvertising industries (e.g. TheAll Blacks end their associationwithCoca-Cola andjoinupwithGatorade).Itsmagazinetitles–specialistlifestyletitles–dooffersomecompetitioninthemagazinemarketforWilson&Hortontitles.

- SkyTVandMāoriTVare listedaspotentialcompetition;again,seeourcomments

on potential competition (contestability) above. Māori Television’s mandate is topromote the use of te reo Māori; in an ideal world this would not preclude it

9PhilPennington.(12May2016).Couldonlinemediastepuppost-merger?RadioNewZealand.http://www.radionz.co.nz/news/national/303643/could-online-media-step-up-post-merger

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becomingamajorsourceofnewsandinformation,butitdoesconflictwiththeideaof the station becoming a close substitute for the general, mainstream news ofFairfax and Wilson & Horton. In order to tackle the applicants head-on in theirmarkets,Māori TVwould need a change to itsmandate. Thiswould be a politicaldecision, not an economic or business one. Sky TV could change its offerings toprovide accessible content that was a close substitute for Fairfax and Wilson &Horton,butitiscurrentlyexperiencingitsownissuesadjustingtonewtechnologiesandcompetitionin itsexistingproducts.10Ithasnotshowninnovativeandcreativeresponsestothedisruptionof itsoldbusinessmodel,whichsuggests italsowouldnothavethestrategiestothriveinthelocalnewsspace,wheretheincumbentshavetheadvantageofscaleandaudienceloyalty.

- Blogs.Generally,theblogslistedasprovidingsomecontenttoreaders(p.49oftheapplication) do not provide daily news reporting. Most blogs listed providecommentarynotnewsreporting,andinmanycasesrelyonjournalisticcoverageofeventsbythemainplayers, includingFairfaxandWilson&Horton,tobe informedabouttheeventinthefirstplace,andtosupporttheircontent.Fewblogshavepaidstaff with expertise in investigating stories and writing them up according tojournalistic norms. Scoop editor and journalist Gordon Campbell notes that blogsdon’thave the resources todonewsgatheringas theyhaveeven fewer resourcesthanlegacynewsrooms,andblogging’s‘strengthliesinitsanalysisandcommentary’.He further states that theproposedmergerbetweenFairfaxandWilson&Hortonthreatensthenewsgatheringcapabilityoftwonewsorganisations,and‘ifthere’sadeclineinnewsgatheringcapacity,thiswilldamagetheabilityoftheblogospheretocarryoutitsvaluablecontributiontothepublicdiscourse’.11

- GoogleNews,Yahoo!News,TheNewYorkTimes,BBCOnline,MailOnline,FoxNews,

TheGuardian,AlJazeeraEnglish,CNN,MSMNewsandBuzzFeed(pages49-51oftheapplication)donotproduceoriginalNewZealandnewscontentofanysignificance.Yahoo!NZ,forexample,hasonlyahandfulofeditorialstaff inNewZealandandismainly directed by its Australian parent Yahoo7.12As such, thesewebsites do notoffer close substitutes for the applicants’ distinctive core New Zealand newsbusiness. The case by the applicants that the market they are competing in is aglobal one applies a little better to advertisers but only weakly to audiences, forwhominternationalcontentdoesnotsubstituteforlocalcontent.

10PaulBrislen.(9June2016)TheSkodafonedealisdrivenbythebattlewiththedumbpipe.TheSpinoff.http://thespinoff.co.nz/media/09-06-2016/the-skodafone-deal-is-driven-by-the-battle-with-the-dumb-pipe/11GordonCampbell,G.(13May2016).GordonCampbellontheproposedmediamerger.Scoop.Retrievedfromhttp://gordoncampbell.scoop.co.nz/2016/05/13/gordon-campbell-on-the-proposed-media-merger/12MerjaMyllylahti.(11December2015).JMADNewZealandmediaownershipreport2015,page32.Retrievedfromhttp://www.aut.ac.nz/study-at-aut/study-areas/communications/media-networks/journalism,-media-and-democracy-research-centre/journalists-and-projects/new-zealand-media-ownership-report

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Theapplicantsmayconceivablycompetewithoverseasmediaoutletsforinternationalnews,even if nearly all of the international news published inNew Zealandmedia is bought infrom elsewhere.13No one can coherently argue that publications like The Guardian, TheNew York Times, BBC online, and others (application p. 49) are competitors in theproduction of news about the public life of cities like Auckland, Wellington, Napier,Christchurch.PalmerstonNorthandWhanganui.Therefore,wethinkthenotionofadistinctNew Zealand news media market must remain central to any definition of market andassessmentoftheallegedpublicbenefits(applicationp.74)ofthemerger.Astheapplicantsnote,theonlinenewsmarket ishardtodefineprecisely.NewswebsitessuchasYahoo!maynotbewellusedfornewsbutforotherservicessuchasemail,searchandasdefaulthomepages.Facebook isamajor sitewhere individuals comeacrossnews.However,muchofthatnewsisnotactivelysoughtoutbutinterspersedwithotheractivity.IntheUnitedStates,thePewResearchCentersuggestsonly12percentofFacebookusersgotothesiteseekingnews.14AsurveyofYahoo!NewZealandlocalnewswastakenonMay302016byMerjaMyllylahti.‘Localnews’consistedofonlysevenstories,ofwhichonlyonewas produced by Yahoo! New Zealand. Yahoo! New Zealand cannot be consideredsubstitutableforstuff.co.nzornzherald.co.nzintermsofthequantityorscopeoflocalnews,oritsnewsgatheringoranalysingcapacity.

Yahoo!NZlocalnewsMay302016:

13DonaldMatheson.(2012).Peoplelikeus:TheculturalgeographyofNewZealand'sinternationalnews.InM.Hirst,S.PhelanandV.Rupar(Ed.),Scooped:ThepoliticsandpowerofJournalisminAotearoaNewZealand(pp.128-140).Auckland:AUTPress;SeanPhelan&ThomasOwen.(2010).TheParadoxesofMediaGlobalization:OntheBanal"World"ofNewZealandJournalism.InternationaljournalofCommunication,4,27-5.14Mitchelletal.(2013).TheroleofnewsonFacebook:Commonyetincidental.PewResearchCenter,24October.Retrievedfromhttp://www.journalism.org/2013/10/24/the-role-of-news-on-facebook/

No.ofstories

Story Newssource

Totalnumber

Auckland 2 Zuri thegiraffe setsoffon roadtripMurder trial due to start inAuckland

NewstalkZB;Newswire NZ(owned byAAP)

2

HawkesBay 0 0Christchurch 1 Another jolt for residents of

ChristchurchNewswire NZ– story notretrievable

1

Wellington 1 Explosion at Wellington meatworks

NewswireNZ 1

Nelson 1 ThirdcaseofmeaslesinNelson NewswireNZ 1

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Source:https://nz.news.yahoo.com/local/

3 Increaseinconcentration;lesseningofcompetitionWhicheverwayyoumeasuremarketshare,theproposedmergerwillresultinasubstantialincrease in market dominance and lessening of competition in the New Zealand newsmarket.In thedailynewspapermarket, theapplicants’ combinedshareof themarket in termsofcirculation is 89.3%, with fewer than 50,000 readers of the total national audience of460,000readerscontrolledbyotherproviders.Weexplainhowextraordinarythisfigureisinaninternationalcontext,insection4.5.The following table is the circulation data from the Audit Bureau of Circulation for dailynewspapers,fortheperiodending31March2016.15Newspapertitle-dailies

ABCdatato31/03/16 Newspapergroup Totalcirculationbyowner

ThePress 57022 Fairfax 210965(45.9%)TheDominionPost 57367

WaikatoTimes 22831ManawatuStandard 10075TaranakiDailyNews 16317MarboroughExpress 6075TheNelsonMail 10598TheSouthlandtimes 20828TheTimaruHerald 9852 NewZealandHerald 131447 Wilson&

Horton/NZME199436(43.4%)NorthernAdvocate 12015

RotoruaDailyPost 7324BayofPlentyTimes 1411315AuditBureauofCirculations.Circulationdata.Retrievedfromhttp://newspaper.abc.org.nz/audit.html?org=npa&publicationid=%25&mode=embargo&npa_admin=1&publicationtype=19&memberid=%25&type=%25

Waikato 0 0Otago 0 0Northland 1 Person dies in truck in

NorthlandNewswireNZ 1

Dunedin 1 Inappropriate driver lurksaroundschool

Newswire NZ,YahooNZ

1

11

Hawke’sBayToday 19238WanganuiChronicle 9424WairarapaTimes-Age

5875

OtagoDailyTimes 34578 AlliedPress 38548

(8.4%)GreymouthStar 3970 AshburtonGuardian 4375 Independent 4375(.95%)GisborneHerald 6096 Independent 6096(1.3%)TOTAL: 459420The applicants also have substantial holdings in the Sunday and community newspapermarkets.Calculations of market share based on daily audience or readers of the five big newscompaniesinNewZealand–FairfaxNZ,Wilson&Horton,MediaWorks,RadioNewZealandand Television New Zealand – done by Peter Thompson of Victoria University and theCoalition for Better Broadcasting, gives the combined market share of the applicants at32.6%,morethananyotherplayer.Itmakessensetolookatthiscross-mediummarketasthese companies are the only providers of daily New Zealand news comparable to theapplicants’ distinctive product. Peter Thompson has also calculated the HerfindahlHirschmannIndex(HHI)forthefivemainnewsproviders.Wediscussthisfurtherinsection4.5 of our submission, and there aremore details about both sets of calculations in thesubmissionmadebytheCoalitionforBetterBroadcasting.TheratingsforthetopwebsitesinNewZealandbyuniquemonthlyaudiencesimilarlyshowthatforNewZealandnews,theapplicantshavebyfarthelargestonlinemarketshare.Theircombined readership ismore than three times thesizeof theirnext rival,TelevisionNewZealand:TopsitesinNewZealand,byuniquemonthlyaudience(000s)1 Google 3,0252 Facebook 2,4843 MSN/Outlook/Bing/Skype2,4504 YouTube 2,0465 Stuff.co.nz 2,0446 Microsoft 1,9267 TradeMe 1,7858 nzherald.co.nz 1,7049 NZgovt 1,670

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10 Yahoo 1,24811 Wikipedia 1,16612 TVNZ 91613 InlandRevenue 91114 ANZ 85215 TheWarehouse 79716 Apple 79517 Blogger 76518 Amazon 72719 AskSearchNetwork 66620 AirNewZealand 66222 Newshub 64749 RNZ 407143 OtagoDailyTimes 143Source: Nielsen Media View survey, May 2016. Reproduced from the National BusinessReview,23June2016,http://www.nbr.co.nz/big-ck-p

It isclear, then, that theapplicantsaremajorplayers in theNewZealandnewsmarket,andthattheirmergerwillsubstantiallyincreasemarketdominanceinwhatisalreadyoneof the most concentrated news markets in the Western world (see 4.5 below). Thequestionthenbecomesoneofweighingpublicbenefitsanddetrimentsforthemerger.

4 PublicbenefitsandpublicdetrimentsTheapplicantsarguetherewillbepublicbenefitsarisingfromthemerger.Theysuggestareallocationof resourceswillbepossibleonceduplication iseliminated,enabling themtoprovidewider coverage of issues, and quality improvements. This is problematic for tworeasons. The first is that these promises are good intentionswhich cannot be taken intoaccountinanymitigationofdetriments:theCommissionhasnostatutoryabilitytoacceptbehavioural undertakings (s69A Commerce Act). They are promises the applicants simplycannotbeheldto;theymustthereforebedismissedfromconsideration.Secondly, theapplicants’ case for thesebenefits isweak.On theonehand, they say theyneed tobe in aposition to compete stronglyover content, but, on theotherhand, theirstrategy seems toconsist solelyofgainingeconomiesof scaleby reducing staff, includingjournalists(contentproducers).Giventheclaimstheapplicantsmakeabouttheseverityof

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therevenuepressurestheyface,revenuesavingswillnotallbereallocated;thenewfirm’scostsmustbereducedoverall.Reallocatingresourcestoprovidemoreandbettercontentispotentiallypossibleinagrowingmarketbutmuchlesslikelyinashrinkingone.Becausetheapplicationisdevoidofideasastohowthemergerwillenablethenewfirmtoadapttotheinherent problems facing the traditional news businessmodel, the assumption that scaleandreducedcostsalonewillworkisunconvincing.Ifrevenuescontinuetofall,whatthen?Willmorejournalists’jobsbelost,willtherangeanddepthofcoveragebefurtherreduced,andwillagreaterfocusoncheaperclickbaitstorieswinoutattheexpenseofthepromiseddiversity? Without a new strategy, any increase in coverage for minority issues will bepartialandshort-lived.The applicants also predicate quality on an anti-competitive environment of marketdominance,whichmustberejectedoutofhandconceptually.Theapplicantsclaimthat,post-merger,they

willbeincentivisedtoinvestbecausethecreationofqualitylocalnews/informationandtheeditingofqualityinternationalnews/informationwillcontinuetobethewayit differentiates its digital offering from other media and from the multitude ofconsumerandotherthird-partygeneratedcontentavailableonline[ouremphasis].(para1.12(c),p.5)

Quality content is given as the new firm’s competitive advantage, but nowhere do theapplicantsdefinewhat theymeanbyqualityorhowthismightbemeasured. Indeed, theoverriding consideration when discussing content is the need to ‘deliver content thatattractsconsumerattentioninanincreasinglycompetitivecontent/attentionenvironment’(para1.6p.3).Theparties’owneconomicconsultants,NERAEconomicConsulting,concedethattheycannotobjectivelymeasure‘qualitydetriments’because‘thedimensions…canbewideranging,particularly in regards tonewscontent,andthiscanmakeassessingqualitychanges difficult and subjective’ (p. 19).We are left with the impression that ‘quality’ isequivalent to reader attention or views. For further discussion of the inadequacy of thisconception, see our comments in 4.1 on plurality, 4.2 on diversity, 4.3 on regionalconsumersand4.4onspecialisedjournalismandinvestigation.Themergerapplicationasserts that thepartnerswouldpursueahigh-quality (rather thanmass journalism) strategy, but their track record suggests the reverse. Theweakening ofcompetition would intensify the current market trends. We suggest that the mergedcompany would likely narrow the market, effectively treating all consumers as differentdemographicsoffast-foodcustomers,becausethosearethemarketincentivesitcurrentlyrecognises.ThereisasevereriskthatotherpartsofthenewsmarketinNewZealandwouldbeneglected,evenmoresothanatpresent,withnegativeeffectsonthepublicgood.Thereis little inthewayofhistoricaloroverseasevidencetosupporttheapplicants’claimsthatmergers lead to a company that ‘cover[s] more stories, invest[s] in more investigativejournalism, and cover[s] more minority issues/sports than the two Parties each couldseparately’(p.80).

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4.1 PluralityPlurality in media markets refers to many providers. Plurality lessens as ownershipconcentrationgrows.Theconcernsdemocratshaveaboutmarketpowerinmediaindustriesisnotaboutextractingmonopolyrentsbyincreasingcoverpricesoradvertisingrates; it isabout the ability to influence, control and circumscribe the ‘marketplace of ideas’, andinhibitthepossibilityofavibrantpublicsphere.Pluralityinthemediasystemisimportantineveningoutthepowerofdominantinterests,groupsandperspectivesinsociety.Thepublicbenefitsofpluralitymaybe intangibleanddifficult toquantify,but theyareneverthelessveryrealandpotent.Assessing intangiblebenefitsanddetrimentsarewithinthescopeoftheCommerceCommission’sremitsoweaskthattheybegivenweightintheevaluationoftheapplicants’proposal.A statedgoalof themerger is to reduceduplication,as if two journalists covering similareventsor topics is inherentlywasteful.On the contrary, ademocracy functionsbestwithmanyvoicesandperspectives.Itisthisdistinctiveaspectoftheproduct–theroleofnewsinademocraticsociety–thatmakesmediamarketsdifferentfromothermarkets,creatingunique public benefits and detriments. We repeat: these are within the scope of theCommerce Commission’s deliberations, and should therefore be incorporated into anyanalysisoftheproposedmerger.Itistruethatarangeofperspectivescannowbefoundontheinternet,andthatthepublicdoeshavemoreaccesstomoreinformationthaneverbefore.Yettheworldofcontentonthe internet is not substitutable for (a) New Zealand news (see our comments on closesubstitution,andthecurrentdominanceoftheapplicantsintheNewZealandnewsmarkets,insections2and3above)and(b)muchcontentontheinternetisnotproducedaccordingtotherigourofprofessional journalisticnorms.Whiletheremaybemanyvoicesavailableonline, thosetendforthemostpart tobeunheardorunread,andarewithoutsignificantpublicauthorityorprofile.Theapplicants’companies,alongwithMediaworksandthetwostate-owned media organisations, occupy dominant positions in public debate in NewZealandbecauseofthesizeoftheiraudiences,theirbrandpositionsasfacilitatorsofpublicopinion and their assumed cultural authority.NewZealand’smedia systemalready tendstowardsoligopolisticownership structures inwhich ‘[i]mportantopinionsare representedbuttherearenooronlyweakinstitutionalguaranteesagainstthepredominanceofcertainopinions’. 16 The Sustainable Governance Indicators project measures cross-nationalsustainablegovernance; it listsNewZealandalongwithHungary,RomaniaandTurkey, at

16SustainableGovernanceIndicators.(2015).Qualityofdemocracy:Accesstoinformation.Retrievedfrom:http://www.sgi-network.org/2015/Democracy/Quality_of_Democracy/Access_to_Information/Media_Pluralism

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thebottomofitsOECDmediapluralismindex.17Mediapluralismwillonlygetweakerafterthemerger,andunderthereducedjournalisticworkforceofthenewcompany.Thereisstrongevidencethatpluralisminmediacontentisafactorinmaintainingstructuralpluralism:awidedistributionofpowerinasociety.18Itfollowsthatadiversifiedownershipstructureismorelikelytoensurethatarangeofvoicesinsocietyisheard.InsomepartsofNew Zealand’s media sector, that pluralism is almost non-existent, as homogenous orgenericrepresentationsofeventsarerecycledandrepackagedacrossbusinessunits.Thereis alreadya veryhigh concentrationofownership in thenewspapermarket. It is also thecasewithnewsagencies,NewZealand’sthird-partyprovidersandwholesalersofnewsandvisualswhichproduceoriginalcontentthatisthenon-soldtomediaoutlets.Newsagenciesare widely regarded in media policy, including by UNESCO, as important elements of anational communication infrastructure.19When theNewZealandPressAssociationceasedtrading in 2011, US-based Freedom House noted that New Zealand was one of only ahandfulofcountriesservicedonlybyforeign-owned,andforeign-run,newsagencies,whichitcalled‘aseriousblowtomediadiversity’.20Plurality ispartlyasimplematterofthenumberof journalistsemployedtoproducenewsstories.Itistellingthattheapplicantsusedtherelativelytrivialcaseof‘havingonejournalistataparticularaccidentscene,ratherthantwo’(p.74)astheirexampleofreducingwastefulcoverage, so that they can simultaneously both save money and redirect resources.However, tomakesubstantialcostsavings theapplicantswillhavetoreduce ‘duplication’acrosstheboard.RodOramestimatesthatNZME’s(Wilson&Horton’s)demergerfromAPNadds$7.5Mtocostsalone.21Theapplicantscurrentlyhave13fulland11associatemembers

17SustainableGovernanceIndicators.(2015).Qualityofdemocracy:Accesstoinformation.Retrievedfrom:http://www.sgi-network.org/2015/Democracy/Quality_of_Democracy/Access_to_Information/Media_Pluralism18Forexample,RodneyBenson&DanielC.Hallin.(2007).HowStates,MarketsandGlobalizationShapetheNews:TheFrenchandUSNationalPress,1965-97.EuropeanJournalofCommunicationVol22(1):27–48.doi:10.1177/0267323107073746;RodneyBensonandMatthewPowers.(2011).PublicMediaandPoliticalIndependence:LessonsfortheFutureofJournalismfromAroundtheWorld.Washington,D.C.FreePressPolicyReport.Retrievedfromhttps://www.freepress.net/sites/default/files/stn-legacy/public-media-and-political-independence.pdf;GavinEllis&PeterThompson.(2016).RestoringCivicValuestotheNewsMediaEcology.PolicyQuarterly12(2)37-40.Availablefrom:http://igps.victoria.ac.nz/publications/files/67dc16ba25a.pdf;DesFreedman.(2014).Thecontradictionsofmediapower.London:Bloomsbury;MartinHirst.(2010).News2.0CanJournalismSurvivetheInternet?NSW:Allen&Unwin;MartinHirst,SeanPhelan&VericaRupar(2012).(Eds.)Scooped:ThepoliticsandpowerofjournalisminAotearoaNewZealand.pp.96-113.Auckland:AUTMedia/JMAD;KariKarppinen.(2012).Rethinkingmediapluralism.NewYork:FordhamUniversityPress;DenisMcQuail.(2010).MassCommunicationTheory(6thed).London:Sage.19G.Gerbner,H.Mowlana,&K.Nordenstreng,(1993)Theglobalmediadebate:Itsrise,fall,andrenewal.ABC-CLIO.20FreedomHouse(2012).NewZealandCountryReport:FreedomofthePress.Retrievedfromhttps://freedomhouse.org/report/freedom-press/2012/new-zealand21RodOram.(26April2016).MakingmoneyfromamediamergerbetweenFairfaxandNZME.Retrievedfromhttp://www.stuff.co.nz/business/opinion-analysis/81394782/rod-oram-making-money-from-a-media-merger-between-fairfax-and-nzme

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ofthePressGallery;itseemshighlyunlikelythatthenewlymergedcompanywillcontinuewithsomanymembers.Therewillbeacorrespondingdecreaseininstitutionalknowledge–an essential requirement in holding political players to account – should Press Gallerymembershipfall.Anyreductioninitsnumberswillreducetheimpactonthequantity–andquality – of political reporting. A smaller Press Gallerywill reduce the coverage given toroutine political events such as Select Committee hearings, where Ministers and seniorpublic servants are questioned about their agencies’ track records. Themore sensationalpolitical journalism, for example covering slanging matches in Parliament, will dominateevenmoreasthequieterandmoreroutinereportingofhearingsandreportsdrop.Therewill be fewer experienced staff to investigate issues across awide range of policy areas,leading to a serious public detriment: a decrease in the ability of the public at large toparticipateininformedpoliticaldebate.The Press Gallery example serves to illustrate the bigger point: there can be no publicbenefitfromhavingfewercommentatorsonimportantissuesorareductioninthenumberof political, economic or social correspondents. On the contrary, the public benefits ofjournalism–the‘marketplaceofideas’eulogisedbyclassicliberals–areenabledbygivingexpressiontodifferentperspectivesandvoices.22Tosuggestotherwiseistoignorethewidebodyofmedia,communicationandjournalismresearchthatshowshowtwonewsstories,bothfollowingtheconventionsof‘objective’reportage,canbemarkedbyallkindsofsubtle,andsometimesnotsosubtle,differences intheirrepresentationofaneventor issue. It isthereforenotpersuasivetodescribeamergerthatwillamplifytheseself-interestedtrendsandtendenciesasa‘publicbenefit’.

4.2 DiversityAnylesseningofpluralityalsolessensdiversity.Apluralityofprovidersdoesnotguaranteediversity of views, but without plurality there can be no diversity. In addition to fewerjournalists, the applicants’merger scenario will result in fewer editorial decision-makers,decidingwhichandhowmany journalists and columnists toemployunder amerger. Therisks of the chief editor of themerged newspaper company having a narrow outlook, orreproducing political, ethnic or gender biases, or disliking certain individuals, is twice aslargeasintwoseparatenewspapercompanies.

22Seeforexample:StuartHall,Critcher,C.,Jefferson,T.,Clarke,J.&Roberts,B.(2013).Policingthecrisis:Mugging,thestateandlawandorder(35thanniversaryed.).Basingstoke:PalgraveMacmillan;DanielC.Hallin.(1986).TheUncensoredWar:TheMediaandVietnam.Berkeley:UniversityofCaliforniaPress;DenisMcQuail.(2010).MassCommunicationTheory(6thed).London:Sage;SeanPhelan.(2012).Mediapower,journalismandagency.InMartinHirst,SeanPhelan&VericaRupar(2012).(Eds.)Scooped:ThepoliticsandpowerofjournalisminAotearoaNewZealand.Pp.80-95.Auckland:AUTMedia/JMAD;GayeTuchman.(1978).Makingnews:Astudyintheconstructionofreality.NewYork:FreePress.

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Other areas where a drop in plurality of voices may be experienced is the number ofcolumnists.TheNewZealandHerald,forexample,lists14columnistsontheOpinionsectionofitswebsite,andemploysothersinitsspecialisedsections,aswellascartoonists.Fairfaxemploys a similar number of specialised writers and has its own cartoonists. A mergedcompanywouldbeunlikely to retain the servicesofall these staff. Indeed, theirbusinesscaserestsonsuchreductions.Theapplicants(p.77)quotetheUnitedKingdomOfcom,‘wenote that a diversity of viewpoints can be formed within an organisation and betweenorganisations. Both are relevant to the question of plurality.’ Yet the applicants’ wholebusinesscaseforthemergerrestsonreducingpluralitywithintheneworganisation,whichwillreducetheirpotentialfordiversity.ConcernsaboutdiversityareespeciallypertinenttoMāori and other minority ethnicities (Pasifika, Chinese New Zealanders, and so forth),whose interestsandconcernshavebeenpoorlyservedhistoricallybyNewZealandmediaproviders.23We therefore have reason to believe that,contrary tothe assertion of theapplicants,themergerwillexacerbatethesetendencies,becauseofthestructuralpressureson largemedia corporations to appeal to a mass audience aligned withthedominantculturalidentityandamythical'middleNewZealand'.

4.3 RegionalconsumersNewspapershavehistoricallycomplementedtelevision’sfocusonAucklandandWellington-centredpolitics,withawiderrangeofnewsfromdifferentregions.TelevisionNewZealand,forexample,hasconsideredclosing itsDunedinbureauanumberoftimesandretaineditonlyunderpoliticalpressure.24RadioNewZealand is closing itsQueenstownofficeat theendofJuly,andinrecentyearshasalsoclosedofficesinTaurangaandPalmerstonNorth.25FairfaxandWilson&Hortoncurrentlymaintainacommitmenttoregionaljournalismandtocommunityjournalism,throughthelargenumberoflocaltitlestheyown.Inmanymarketsthecompanieshaveamonopolyordominantpositionover localnewsprovision.There iscurrently latent competitive pressure on them to maintain reporters on the ground inregionalmarkets, for fear of leaving a gap for other newsmedia companies – including,unmerged,eachother.Amergedcompanywouldbeunderlesspressuretomaintainsuchapresence,andwouldmakeitharderforlatentregionalcompetitiontoariseagainstalocalnewsproviderbackedbytheresourcesofthecountry’slargestnewscompany.

23See,forexample:JennyRankine,AngelaMoewakaBarnes,BelindaBorell,RaymondNairn,&TimMcCreanor.(2014).ContentandsourceanalysisofnewspaperitemsaboutMaoriissues:Silencingthe‘natives’inAotearoa?PacificJournalismReview,20(1),213-233;DonaldMatheson.(2010)Mindingthegaps.MediaInternationalAustralia136:35-41;RobertLoto,DarrinHodgetts,KerryChamberlain,LindaWaimarieNikora,RolindaKarapu,&AlisonBarnett.(2006).Pasifikainthenews:TheportrayalofPacificpeoplesintheNewZealandpress.Journalofcommunity&appliedsocialpsychology,16(2),100-118. 24HamishMcNeilly.(2November2015).TVNZtokeepDunedinreporter.Retrievedformhttp://www.stuff.co.nz/national/73612739/TVNZ-to-keep-Dunedin-reporter25GuyWilliams.(2July2016).RNZconfirmsresortofficeclosing.OtagoDailyTimes.Retrievedfromhttp://www.odt.co.nz/news/queenstown-lakes/388927/rnz-confirms-resort-office-closing

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Itisnotlikelythatresourceswouldbefreeduptocoverawiderrangeofregionalandlocalissues.Bothcompanies’massmarketstrategiestodateandthereductioninlocalcoverage(suchastheclosureofD-SceneinDunedin)thathasoccurredoverthelongertermprovidecontraryevidence.TheapplicantshaveoverlappingcommunitypublicationsinWhangarei,Rotorua,Hamilton,Coromandel/Hauraki, Taupo, Taranaki, Hawke’s Bay, Napier, Hastings, Manawatu, KapitiandWairarapa (Appendix 15, p.127-128). Clearly themerged unitwould notmaintain allthesecommunitypapersand,iftheyarecloseddown,thereisarealthreattolocal/regionalnewsprovision.

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4.4 SpecialisedjournalismandinvestigationTheexistenceofalargernumberofnewsmediacompaniesisparticularlyimportantintheprovisionofspecialisedformsofreporting.InasmallcountrysuchasNewZealandwithfewnews companies, there are fewer outlets for controversial stories. Jon Stevenson’sinvestigationofSASoperationsinAfghanistaninthemid-2000s,forexample,waspublishedbyMetroin2011onlyafteranumberofotherpublishersbaulkedatit.26Shrinkthenumberof media companies, and the risk increases in the future that publicly important butcontroversial stories will be unable to find a publisher. At the very least, a reduction inmedia companies will reduce the number of independent decision-makers makingjudgementcallsoncontroversialstories.SpecialisedreportinghasreducedinNewZealandjournalisminthemediumtermandisavulnerable aspect of the news offering. It remainsmore of a characteristic of newspaperoutlets, incontrasttothemoregeneralistandpersonality-ledapproachintelevisionnewsjournalism. Each of the applicant companies currently employs some journalists withspecialisations, such as Simon Collins (New Zealand Herald social issues correspondent),JuhaSaarinen(NewZealandHeraldtechnologyblogger),orPaulGorman(ChristchurchPresssciencereporter).Thesejournalistsdifferfromspecialisedjournalistsatmagazinesorblogs,where there is a narrow audience, because they translate specialised stories for broaderaudiences. The Prime Minister’s Science Advisor has described these specialists as ‘anincreasinglyrareresourceinmediaoutletsstrugglingtocompeteinachangingmarket’.27Itwould takeonlyamoderateweakeningof competition resulting fromthemerger foranymarket-basedincentivetoshrinkoreliminatesuchspecialists.Given the concerns raised above, it is extraordinary for the parties to blithely suggest –underthebriefheadingof ‘publicdetriments’–that ‘therewillbenomaterialdetrimentsarisingfromtheTransaction’(p.80).Thelogicseemstobe:‘qualitydetriments’aredifficulttomeasure,thereforelet’sassumetherearen’tanyatall,becausemeasurablephenomenaare the only things thatmatter and everything else ismerely ‘subjective’. The argumentrestsonaverynarrowconceptionofpublicbenefit,andignoresthespecificpublicinterestfunctionsofmediaandjournalism.Italsocompletelyignoresthebodyofresearchproducedby New Zealand media scholars since the deregulations of the 1980s and 1990s on thenegativeeffectsofmarketandcommercialforces.Televisionnews,forexample,underwentsignificant change in this period, with the elimination of local television and acommercialised approach leading to a ‘morselisation and depoliticisation of news’, withconsequentdetrimentstopublicdiscourse.28

26RussellBrown.(26April2011).Moresecretsandlies.PublicAddress:HardNews.Retrievedfromhttp://publicaddress.net/hardnews/more-secrets-and-lies/27PeterGluckman.(26July2013).Scientists,themediaandsociety:Wherearewenow?OfficeofthePrimeMinister’sChiefScienceAdvisor.Retrievedfromhttp://www.pmcsa.org.nz/blog/scientists-the-media-and-society-where-are-we-now/28JoeAtkinson.(1994).TheState,theMediaandThinDemocracy.InA.Sharp(ed.)LeapintotheDark.AucklandUniversityPress,pp.146-177.Seealso,forexample,WayneHope(2012).‘NewThoughtsonthe

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4.5 ConcentrationofownershipThe New Zealand news media market is already highly concentrated. The JMAD NewZealand media ownership reports from 2011-2015 show that there is now an effectiveduopolyintheprintnewspapermarketheldbythetwocompaniesproposingthemerger;aWilson & Horton and MediaWorks duopoly in commercial radio markets; and Sky TVdominance in pay-television. The Sustainable Governance Indicators describes the pre-merger situation inNewZealandmediaasalreadyoligopolisticanddominatedby foreigncompanies.29Underthemergerscenario,NewZealand’sprintnewspapermarketwouldbeoneofthemostconcentratedintheworld.Onlyfivecountrieshaveoneownerwithover50percent ownership of the daily newspaper market, and this figure includes China (stateowned)andEgypt(stateowned),asthelistbelowshows:Thedailynewspapermarket-Marketshareoftopcompany%China-GovernmentofChina100%Egypt-GovernmentofEgypt72%Australia–NewsCorporationandassociatedMurdochcompanies57.5%Chile-ElMercurioSAP54.9%Ireland-IndependentNewsandMedia52.0%Turkey-DoganGroup46.4%Switzerland-Tamedia44.3%Portugal-Cofina42.4%Sweden-Bonnier41.3%Russia-KomsomolskayaPravda39.6%SouthAfrica-NaspersGroup35%UnitedKingdom-MurdochGroup32.5%Brazil-GloboGroup28.4%

Source:Noam.(2016).WhoOwnstheWorld'sMedia?:MediaConcentrationandOwnershiparoundtheWorld.Oxford:OUP.

Theproposedmergerwouldseetheapplicants’combinedshareofthemarketintermsofcirculationtobe89.3%,secondhighestonthislist.

PublicSphereinAotearoa/NewZealand’inM.Hirst,S.Phelan,V.Rupar(Eds.)Scooped:thepoliticsandpowerofjournalisminAotearoa/NewZealand.pp27–47.AucklandAUTMedia/JMAD;andMcGregor,J.,&Comrie,M.(Eds.)(2002).What’snews?:ReclaimingjournalisminNewZealand.PalmerstonNorth,NZ:DunmorePress.29SustainableGovernanceIndicators.(2015).Qualityofdemocracy:Accesstoinformation.Retrievedfrom:http://www.sgi-network.org/2015/Democracy/Quality_of_Democracy/Access_to_Information/Media_Pluralism

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Thequestionofhowmuchconcentrationofownership istoomuchhasbeenansweredindifferent ways in different countries. In Canada, the Canadian Radio-Television and aTelecommunicationsCommission (CRTC)proposed in2008thatany transaction, suchasamerger, leading to one corporate group controlling less than 35% of the pay televisionmarketwillnotbeseenasdiminishingdiversity.Transactionsleadingto35-45%controlwillberegardedaspotentiallydiminishingdiversity,andthoseleadingtoover45%controlwillberegardedasconstitutingexcessiveconcentrationandrejectedoutright.30IntheRepublicof Ireland–a liberaldemocracywith roughly the samepopulationasNewZealandandasimilarmediasystem31–controlofan‘unduenumber’oftelevisionstationsiscalculatedbythe Broadcasting Authority of Ireland as control ofmore than 25% of licensed broadcaststations,aswellasamorequalitativemeasureofacompany’sability,throughitsaudienceshare,‘toinfluenceopinion-formingpower’.32IntheUnitedStates,theDepartmentofJusticeusestheHerfindahl-HirschmanIndex(HHI),regardingascoreofbetween1500and2500asevidenceofmoderateconcentrationandascoreofgreaterthan2500asevidenceofahighlyconcentratedmarket,withanincreaseinscore of more than 200 raising concerns. 33 The Coalition for Better Broadcasting’ssubmissiononthismergerapplicationincludesHHIestimatesbasedonprojectedsharesofthe dailyNew Zealand news audience (retail sidemarket) across platforms for themajornews media companies (including Fairfax, Wilson & Horton, MediaWorks, Radio NewZealandandTelevisionNewZealand).Thissuggeststhatthemergerwouldpushthelevelofnewsmediaconcentrationabove2500,constitutingasubstantialandproblematicincreaseof466intheindex.Meanwhile,theHHIforamarketlimitedtothenewspapersector(hardcopy and online) was found to increase from an already problematic index of 3865 to amassive 7649 as a consequence of a Fairfax-Wilson&Hortonmerger. If one regards thenewspaper retailmarket as a discrete sector separate from broadcasting (and at variouspoints the applicants' own document acknowledges this) theseHHI projections suggest asubstantial problem with existing concentration and the creation of a single dominantmarket actor bordering on monopoly power in the event of a merger. Although theCoalition for Better Broadcasting acknowledges some figures were estimated, neither ofthese HHI calculations can be dismissed and both suggest amergerwould not be in thelong-terminterestsoftheaudience.Weakly competitive environments do not have strong reputations for fostering publicdebate, partly because they provide opportunities for abuses of power. In Ireland, forexample,IndependentNewsandMediaiscontrolledbyacompanyownedbyDenisO’Brien,30EliNoam.(2016).WhoOwnstheWorld'sMedia?:MediaConcentrationandOwnershiparoundtheWorld.Oxford:OUP.31DanielC.Hallin&PaoloMancini(2004).Comparingmediasystems:Threemodelsofmediaandpolitics.Cambridge:CambridgeUniversityPress.32EliNoam.(2016).WhoOwnstheWorld'sMedia?:MediaConcentrationandOwnershiparoundtheWorld.Oxford:OUP.33UnitedStatesDepartmentofJustice.(19August2010).HorizontalMergerGuidelines.DepartmentofJustice.Retrievedfromhttps://www.justice.gov/atr/horizontal-merger-guidelines-08192010

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whoaggressivelypursueshiscriticsinthecourts.O’Brienhasinitiatedovertwentycasesinthe Irish High Court since 2010, including twelve against othermedia organisations whohavebeencriticalofhisbusinessaffairs.Healsothreatenedtosueasatiricalwebsite,andsought an injunction to stop RTE, the Irish public service broadcaster, from reporting aparliamentaryspeechthatquestionedhisbankingaffairs.34O’Brienisapowerfulfigureinasmall country.While there isnoobviousO’Brien figureon the immediatehorizon for theproposedmergedentity,thisisasimpleexampleofthedangersarisingfromallowinghighlevelsofownershipconcentration.Suchhigh levelsofconcentration increasetheriskthatmediapowerinthepublicspherewillbeabused,andreducesthelikelihoodofinvestigativejournalismholdingthepowerfultoaccount.ThemediaproprietorRupertMurdochoffersanevenmorestarkexampleofthecorrosiveeffectsofconcentratedmediaownership,givenhis power to shape political discourse in the United Kingdom and elsewhere.35A similarconcentrationofpoliticalpoweraswellascommercialpower,with theriskofbothbeingabused,ismorelikelyinNewZealandunderthemergerscenario.Thereisalsoacasefordefiningthenewsmarketnarrowly.Manyinternationaljurisdictionsthat have considered this question emphasise that print and broadcast markets do notoverlap significantly enough to be considered active competitors. 36 Balmer cites, forexample,theUnitedStatesDepartmentofJusticeconclusionthatnon-newspapermediadonot sufficiently constrain theprices thatnewspapers charge for salesoradvertising tobeconsidered as operating in direct market competition. In New Zealand, television newsproviderscontinue toemphasiseAuckland,packagednews, imagesandpersonality,whilenewspaper companies are able to provide longer articles, analysis and a wider range ofnewscontent.Theconvergenceofmediainthedigitallandscapemeansthoseassumptionsare a little less secure. But given that the news product of a newspaper is not directlycomparable to the product of a television news provider, even when both are providedonline,thedegreeofsubstitutabilityisopentoquestion.Onthatview,theconcentrationofmarketpowerafterthemergerwouldbeevenmoresevere.Theshareoftheprintmarketis89.3%ofdailyprintcirculation,withlessthan50,000readersofthetotalnationalaudienceof460,000readerscontrolledbyotherproviders.Ahealthymarketdependsontheemergenceofnewplayers.NewZealand’snewsmarketischaracterisedbya low rateof start-upsandahighdegreeof vulnerability.Online,onlyasmallnumberofnet-nativeplayershaveemergedsincethemarketdevelopedatthestartof34ColmKeena.(14May2016).Holdingcourt:DenisO’Brien’slonglistoflegalactions.TheIrishTimes.Retrievedfromhttp://www.irishtimes.com/news/crime-and-law/holding-court-denis-o-brien-s-long-list-of-legal-actions-1.2647302.RoyGreenslade(29October,2015).WhydoesIrishmediamogulDenisO'Brienlaunchsomanylegalactions?Retrievedfromhttps://www.theguardian.com/media/greenslade/2015/oct/29/why-does-irish-media-mogul-denis-obrien-launch-so-many-legal-actions35StevenBarnett(2013).Levesonpast,presentandfuture:Thepoliticsofpressregulation.ThePoliticalQuarterly,84(3),353–361;DesFreedman.(2014).Thecontradictionsofmediapower.36R.E.Balmer.(2013).CompetitionandInvestmentinTelecommunicationsandMediaMarkets.Lugano:UniversityofLugano.

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thecentury.Themajorjournalisticplayers,leavingasidenon-profitblogs,areScoop,whichreceives 344,000 New Zealand visitors a month, Neighbourly, which receives 100,000uniquevisitors,andTheSpinoffwith150,000monthlyusers.Noneofthesearefinanciallysecure, and they are unable to rely on a free at point of view, advertising-led model.Neighbourly ispart-subsidisedbyFairfax. Scoop sought$50,000 inpublic contributions tosustainitspublicgoodjournalismin2015.TheSpinoffissustainedbybrandplacementandsponsorship, the editor’s other work37and, recently, a $20,000 grant from Creative NewZealandforitscommercially-sponsoredbookreviewsection.Throng,anentertainmentblogthat expanded into the United Kingdom, Australia and Canada, closed in 2015, blamingadvertising agencies’ conservatism. 38 It is evident, then, that despite some healthyreaderships,alternativenewsoutletssuchasblogswouldnotbeable tocompeteagainstthenewmediagiant.AsScoop’seditorGordonCampbellpointsout,‘theblogospheredoesnot have the resources to compensate for the reduction in competition (and the loss ofjournalisticresources)thatwillbetheinevitableoutcomeofthismerger’.39Theapplicants includeanumberof international studies in supportof theirarguments.Anumberofthesestudieshavebeencitedoutofcontextandingeneraltheydonotsupporttheclaimsof themergerproposal.LarsNord,who iscited intheapplication(pp.77-8) tosupporttheclaimthatthereisnonecessarylinkbetweennewspapercompetitionandthequality of content or diversity, was studying the degree of competition betweennewspaperswithin regions in Sweden. In New Zealand, almost no newspapers competeregionallyandhisargumentaboutthenegativeeffectsofcompetitionarethereforehardtoapply. In addition, Sweden has three larger newspaper groups (Bonnier, Stampen, andSchibsted),whicha2008studysuggestedheld69%marketshare(citedinNoam2016),andanumberofsmall,regionalchains.40InNewZealand,undertheproposal,therewouldbeasingle highly dominant newspaper owner, so there is no fair analogy with the argumentmade by Nord. Certainly his work does not support the near complete elimination ofcompetitioninamediasector.Hetoldus:‘Iwouldnotfavormediamergersonthenationalleveliftheresultisoneownerofalldailynewspapers(exceptone)’.41Public benefits aremore likely to accrue in a diversified and openmarket. The currentlyweak competitive situation is likely to be made considerably worse by the merger.Suppression of innovation in the market would reduce the offering available to newsconsumers.

37Fahy,B.(26May2015).Inside:TheSpinoff.StopPress.Retrievedfromhttp://stoppress.co.nz/news/inside-spinoff38ReaganCunliffe.(18December2015).It’stimetoturnoutthelights.Throng.Retrievedfromhttp://www.throng.co.nz/2015/12/its-time-to-turn-out-the-lights/39GordonCampbell.(13May2016).GordonCampbellontheproposedmediamerger.Scoop.Retrievedfromhttp://gordoncampbell.scoop.co.nz/2016/05/13/gordon-campbell-on-the-proposed-media-merger/40Noam,E.M.(2016).WhoOwnstheWorld'sMedia?:MediaConcentrationandOwnershiparoundtheWorld.Oxford:OUP;EuropeanJournalismCentre.(2016.)MediaLandscapes:Sweden.Retrievedfromhttp://ejc.net/media_landscapes/sweden41LarsNord,personalcommunication(email).

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4.6 EffectoncompetitivenessThe proposedmerger would have the effect of significantly reducing competition in theNewZealandnewsmediamarkettothedetrimentofconsumers.FairfaxandWilson&HortonhavenotclarifiedwhattheyintendtodowiththeStuffandtheNew Zealand Herald websites, but, yet again, taking one out of the market wouldconsiderably limit New Zealanders’ choice for news content. The two parties may wellcompete for advertising dollars with the companies like Google and Yahoo, but theycertainlydon’tcompetewithTheDailyMail,MSN,CNN,BBC,andTheNewYorktimesforlocalnews.

4.6.1 PredatorypricingWhiletheapplicantsdenythis ispossible,goodintentionscannotbethebasisofanalysis.Larger media companies can clearly engage in predatory pricing. The merged companywould be in a strong position to drive smaller players out of the newsmarket by under-cutting them on price. It is widely thought that this strategy was adopted by NewsCorporationintheUnitedKingdomnationalnewspapermarketin1992-1994,whereitcutthepriceofTheTimesandTheSun,severelyweakeningsomeofitsrivals.42

4.6.2 Suppressionofstart-upsTheapplicantsclaimthatmergerisnecessaryinordertoprovidetheresourcesforthemtocompete with transnational players. However, a corollary of this argument is that thecompanywouldhaveresourcestosuppresssmallplayersandstart-ups,eitherbymatchingtheir products, undercutting them in advertising rates or buying them up. Fairfax, forexample, bought the independentDunedin freenewspaperD-Scene in 2008only to latercloseit.

4.6.3 CoordinatedconductTheproposedefficienciesarising fromde-duplicatingcoveragepoint toan increase in thelikelihoodofcoordinatedinteractioninthemarket.TheUnitedStatesDepartmentofJusticenotes thatmarketswith significant concentrationare susceptible to suchconduct, statingthatfreecompetitionislesslikelywhencompaniescanpredicteachother’sactionsorwhen

42R.Brennan,P.Baines,P.GarneauandL.Vos.(2008).Contemporarystrategicmarketing.2ndedn.Houndmills:PalgraveMacmillan.

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the dominant player is likely not to be price sensitive to actions by others in themarketbecause it would be unlikely to lose customers to them.43The relative separation of thebroadcastandnewspapermarketsmakesthis likely inthiscase.Theextenttowhichbothapplicant companies already partner with broadcasters (in Fairfax’s case, Television NewZealandcontentispublishedonitswebsite)alsosuggestsalogicofcoordinatedinteractionisalreadypresentinthemarket.

5 Thecounter-factualTheapplicantssaythemergerisnecessarybecauseofthechangingmarkettheyoperatein,wherebytheyfacecompetitionforadvertisingfrominternationalgiantssuchasGoogleandFacebook, while simultaneously competing with small low-cost internet start-ups forreaders. While merging will allow the applicants to gain some efficiencies in terms ofeconomiesofscaleandreduceduplication(includingincontent),theydonotexplaintheirstrategy to gain advertising revenue from the likes of Google and Facebook. It is therevenue side where the real challenge lies. Reducing costs – including by reducing thenumberofjournaliststheyemploy–willbuythecompaniestime,butdoesnotsolvetheirmain problem. Therefore, the problems facing the firmswith or without themerger areessentiallythesame.Theapplicantshavenotcometogether todeviseastrategy for theirpost-merger formastheyarestillcompetitors.44Itispossiblethatun-merged,thecompetitivepressuretodeviseandexperimentwithnewideasregardingsurvivalinthedigitalenvironmentwillbestrongerthan if themergerproceeds. Post-merger, as the largestmedia company inNewZealandanddistractedbythechangeprocess(whichmaytakeseveralyears),theurgency,creativityandpressureforaradicallynewstrategymaybediminishedorpostponed.Thepost-mergercompanywillbelargerandlessflexibleinitsresponsetochange.Further,afailurebythemerged company to find a successful businessmodelwould bemore devastating for theNewZealandnewsmarketthanthefailureofoneoftheunmergedcompanies.Thissubmissionfocusesonthelikelyimplicationsofamerger.Itisimportant,however,tonotethattheapplicantcompaniescouldadoptother,non-mergerresponsestothecurrentnews business climate, responses that do not reduce competition. Either company couldfocusonaudiencenichesforsomeofitsbusiness,offeringreadersacompelling,distinctiveandqualityproduct;thenotionthatqualityiscontingentontheapprovalofthemergerisnotcredible.Inthisscenariotherewouldbeactivecompetitioninthenationalnewsmarket43UnitedStatesDepartmentofJustice.(19August2010).HorizontalMergerGuidelines.DepartmentofJustice.Retrievedfromhttps://www.justice.gov/atr/horizontal-merger-guidelines-0819201044RodOram.(3July2016).Mediamergerwillshapejournalism’sfuture.SundayStar-Times.Retrievedfrom,http://www.stuff.co.nz/business/opinion-analysis/81637193/rod-oram-media-merger-will-shape-journalisms-future

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aseachcompanyaddressedtheaudience(s) indifferentways.Thecompanies,particularlyFairfax, could disaggregate titles further so that they offered amore distinctive regionalproposition.Paywallsandotherchargingmechanismsremainanoptionforregionalnews,wheremanyofthetitleshaveamonopoly;paywallshavealreadybeenimplementedbytheAshburtonGuardian,TheGisborneHerald,WhakataneBeaconandtheGreymouthStar. Inthis strategy, competition would be indirect, as each pursued the diverse needs ofconsumerswitharangeoftargetednewsproducts.AlliedPress,thenextlargestnewspapercompany in New Zealand after the applicants, which publishes the Otago Daily Times,odt.co.nz,anumberofsmallernewspapersandproducesregionaltelevision,pursuesalocalnewsstrategythatsuccessfullycompetesinthisindirectwaywithnationalnewsbrands.Thecompetitionamongnewscompaniesforconsumersalsotakesplace,insomemarkets,through diversification of their products and services. In somemarkets, it is common fornews organisations to leverage their reputations with their audiences by vouching forservices or providing them various special offers, including travel, books, internet serviceprovision, fitnesspackagesor insurance.45InNewZealand, forexample, theStarGroup inChristchurchcompetesinthelocalmarketintermsofabroadercommunityservicebrand.Among its services isaneventmanagementcompany,whichbenefits fromthemarketingreachofitsnewspapersandtelevisionstation.

6 ConclusionNewZealandalreadyhasaheavilyconcentratedmediamarketfornationalandlocalnews.Weopposethismergerbecauseitwillfurtherstrengthenthedominanceofthetwolargestmedia companies. Theundertakings the applicants give for greaterdiversity arenot legalundertakingsandcannotbeconsideredwhenweighingpublicbenefitsanddetriments.Thereisapaucityofinternationalacademicevidencetosupporttheapplicants’claimthatthere would not be significant negative impacts on the public good from the proposedmerger.Infact,mostscholarshipsuggeststhecontrary.Inparticular,thereisevidencethatmergersbetweenlargemarketplayershavetheeffectofreducingpluralityofperspectivesand diversity of content. The literature also points to a significant risk to freedom ofspeech.46These are significant public goods which would be put at risk in the proposedmerger.Howa scenariowhere therewill be fewer journalists employed to produceNewZealand-specificnewscanbeconstruedasa‘publicbenefit’isquiteamystery.45InternationalNewsMediaAssociation.(15December2015).RevenueDiversificationBeyondTraditionalPrintandDigital.InternationalNewsMediaAssociation.Retrievedfromhttp://www.inma.org/report-detail.cfm?pubid=18446See,forexample,NatalieFenton(2011).Deregulationordemocracy?Newmedia,news,neoliberalismandthepublicinterest.Continuum,25(1),63–72;andC.EdwinBaker(2001).Media,MarketsandDemocracy.Cambridge,UK:CambridgeUniversityPress.

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