BusinessMarch 17, 2020

Crisis upon crisis: Covid-19 and the NZ media


What does the pandemic mean for an industry already in peril? Duncan Greive surveys an anxious media scene.

The rapid global spread of the Covid-19 virus contains a paradox for media. It has generated enormous levels of interest in what is a multi-dimensional and fast-moving story, which has seen ratings and traffic volumes boom. Additionally, it makes a very strong case for the value of journalism, particularly its ability to spread reliable information in something close to real-time. 

Yet Covid-19 is also generating serious pain, with major advertisers in sectors such as travel, tourism and live events all forced to slash budgets, and many others holding off to wait for more clarity to emerge, with no concrete sense of when that might happen.

The pandemic is without modern precedent, in its implications for both health and the economy, and the difficulty of forecasting an end. So predicting how it will impact a sector like the media is very difficult. Yet the cancellation or postponement of much of the sporting world, live events and more suggests that the entire industry is likely to experience a supply-side and demand-side shock the likes of which it has never known. 

Remember, this is an industry that was already in severe peril, openly begging for government intervention, suspending dividends and with its listed entities plumbing new record lows with each passing week.

And now this: “We’re likely to see one of the greatest downdrafts in advertising we’ve ever seen,” analyst Rich Greenfield told Lucas Shaw, the well-sourced author of Bloomberg’s “Hollywood Torrent” entertainment industry newsletter. To get a sense of how this will play out in New Zealand, I spoke to sources throughout the media, all on condition of anonymity, because no one wants to openly discuss how bad things are in their own house, to get a sense of how events are impacting New Zealand’s media industry, and what is likely to happen as the situation evolves.

Pay TV

“Sky’s entire proposition is around sport now,” said one former TV executive. Historically it was more of a 50/50 balance between the movies and premium TV elements, yet under CEO Martin Stewart, who has been in the job a little over a year, the focus has shifted radically towards live sport. Key signifiers of this have included the purchase of the RugbyPass platform for US$40m, and the epic deal to keep rugby, which, in addition to its record price, included a 5% stake in the business. The reason for this recommitment is that live sport is one of the last remaining linear television draws, a product consumers will happily pay for, and advertisers want to be around.

What looked a smart series of moves a few weeks ago now sees Sky incredibly exposed to the wave of cancellations and postponements. With marquee events like Super Rugby, the NBA, MLB and NHL and the Masters impacted, and many more inevitably to follow, there is a massive content void. 

There is a limit on the immediate financial impact, as sources suggest that content not supplied by the sports leagues will not be billed. But the bigger danger is in customers, already worried about the broader economic impact, could start cutting subscriptions. It has been suggested that a break of as little as two weeks might prove season-ending for Super Rugby, which would have a flow on impact on Sky’s advertising take around weekend games.

It’s not a dead loss for Sky. Leagues need partners, and will be plotting alternative competitions – perhaps even an expanded ITM Cup, with more All Black participation than any since the 90s. And an increase in social distancing or self-isolation might prove a boon for streaming products like Neon or Lightbox. But the market has already issued its verdict, with Sky shares down 14% to $0.335c, a market capitalisation of less than $150m, less than a quarter of what it was just a year ago. So long as stadiums and arenas remain empty, that situation is likely to continue.

Free-to-air television

Television news ratings have been excellent lately, and the networks have had a relatively strong quarter for audiences. Despite that there is a general feeling of anxiety within the industry that bookings will rapidly dry up, given the lack of certainty around the ongoing impact of Covid-19. Networks are understandably taking a hard line with cancellations, which is likely to lead to clients holding off on future bookings until there is more clarity. No one wants to be stuck with $500,000 of TV slots if the country goes into lockdown.

The biggest concern has to be for Three, which was announced as being for sale in October of last year. As recently as last week there were industry rumours of an imminent transaction, yet that process has been made far more difficult by the events of the past week. “Any sale would need to be approved by a board,” said one TV executive, “and no one’s flying, so you couldn’t actually get people in a room to make a decision.” Even if they meet remotely, no major transactions seem likely with the world under this much stress.

Another executive pointed to Three’s recent issue with getting its news to air as a worrying signal. “When you see that it tends to be a sign a media organisation is through cutting fat, and into bone.”

The broad sentiment among those who work in and sell the media is that Three is the most imperilled of all the major media companies, and that the next few weeks are crucial to its chances. TVNZ, while still exposed, is in a far better position, with a large cash stockpile, and the ability to go to the government for a loan should the downturn be prolonged.


The great cockroach of the media might have finally met a worthwhile opponent. The medium has thrived in part because its well-defined audiences and scalable distribution makes it of real value to small-to-medium sized businesses, so it can make even relatively tiny markets work. On a recent trip to Gore I was surprised to find an NZME office – but I shouldn’t have been, it also has offices in Dannevirke and Waipukurau.

The downside of this small business focus is that such clients book direct, and are less likely to long-term plan than larger nationwide clients, who often book through agencies. These will follow soon enough though – an agency radio booker I spoke to said that over the weekend they had calls from travel companies saying “get me off air immediately”, but that otherwise they were “waiting for the onslaught”. (Incidentally, media and advertising agencies, often run on a global basis, are already starting to order all staff to work from home to ensure business continuity contracts are upheld).

Another media planner talked about the potential implications for radio if measures around public gathering tighten further. “If we’re self-isolating, some channels will benefit. But commuter radio will be hit really hard.” If this happens, MediaWorks (owners of Three, a large radio network and outdoor advertising powerhouse QMS) will be doubly exposed, as out-of-home advertising on billboards and bus shelters will become near worthless.

Print and online

The fast-moving and complex crisis has generated a huge amount of online audience interest. The Spinoff’s March pageviews are up 63% year-on-year, while a source says Stuff’s are up more than 20% (off a far higher base). The Herald has also seen huge audiences for coverage of Covid-19 across both premium and free, while last week Newshub had the most Facebook interactions of any New Zealand news site – a first in the time I’ve been monitoring it. 

Yet the black clouds hanging over the economy cannot help but impact the major news media players too. Travel has been a huge growth area for print over the past few years, and this area of marketing is certain to be slashed, in line with the freezing of long-haul flights.

Worse is how hard it is hitting specific areas of the travel industry. Cruises have been an epicentre of a number of outbreaks, and are banned from New Zealand ports until at least the end of June. But the industry will likely be decimated for far longer, given that Covid-19 is dramatically deadlier for older people – precisely the target demographic for cruises, who have been some of the biggest advertisers in travel sections in recent years.

Perhaps most concerning of all is the fate of the recently-revived NZME-Stuff merger deal, seen as the best shot for the industry to consolidate and thrive. Executives at NZME (publishers of the Herald and broadcasters of half NZ’s radio brands) have been publicly and privately lobbying for legislation to bypass the repeated commerce commission rulings against it. Yet given the hammering NZME shares have taken – they closed at an all-time low of $0.27c yesterday – even with record low interest rates, it might struggle to raise the capital to buy it. 

Yet for all NZME’s struggles, spare a thought for Stuff. Despite its heady traffic numbers, print still pays the bills, and it is as exposed as NZME to the downturn in travel, events and tourism, but without the relative safety of radio to help it through.

The common thread: who’s buying?

The biggest funder of our media remains advertising, and the market for it it thrives on certainty. On knowing what it is selling, and to whom. But with so much of this situation entirely without modern precedent, the ability of many sectors to forward plan is close to nil. “In a normal world, the marketing would go somewhere,” a veteran media executive told me. “But we’ve never seen anything like this. The big accounts are run out of Sydney, Singapore or Hong Kong.

“It’s just really easy to cut New Zealand.”

Keep going!