In the wake of the shocking revelations about Three, Duncan Greive assesses the health of New Zealand’s six big media companies.

Winston Peters has studied the cold, pitiless heart of a certain strand of New Zealander for four decades now, and has become our foremost expert on both expressing its feelings and trolling it into voting. “Good riddance”, he said in response to news MediaWorks has put its TV business up for sale, into a market with no obvious buyer. 

Peters is simply behaving rationally as he cheers when Three, easily the most animated Beehive newsroom of the past 30 years, is announced as being for sale, and faces an uncertain future. Political commentator Ben Thomas noted the potential conflict of interest which exists between all media and those who regulate them. “In 2008 dogged reporting from all outlets of off-book donations to Winston Peters and NZF led to a parliamentary censure, John Key ruling Peters out of coalition, and NZF being turfed from Parliament,” he wrote. “Unrelated: Peters says ‘good riddance’ to journalists facing job losses.”

Broadcasting minister Kris Faafoi has indicated he will make an announcement describing what the government will do to help the ailing sector before the year’s end. Yet given that MediaWorks is already amputating Three like a gangrenous limb, the only plausible conclusion is that whatever he plans to announce, MediaWorks are already convinced it will not be enough to make a difference to its embattled TV operation.

Which is likely to further hurt one of the three decent-sized private sector newsrooms in the country. The worst case scenario – not at all an implausible one – is that it just ceases to exist. Then there would be just two, that of Stuff and NZME. For now.

Journalism would, of course, not be the only casualty. Three screens over 30 hours of various types of television journalism a week, along with hundreds of stories delivered across radio and online. But it’s not the core business, which is everything from reality television to comedy to drama, a large chunk of it made in New Zealand, by and for New Zealanders. Were it to fall, all that disappears too. 

The business has become far less viable due to competition for both attention and advertising, in large part from Google and Facebook, neither of which create content in any volume themselves. 

We should not mourn changing behaviour. But the lack of a viable business model for the creation and distribution of news and cultural content in New Zealand should give us all pause. Whatever the government announces in the coming weeks, that is the scale of the challenge it faces – a media bleeding out in front of its eyes, with all the flow-on consequences around information and culture that implies.

With that cheery thought in mind, this seems a decent time to assess the health of our six largest media entities (the business model, not the journalism). Because one thing is absolutely certain: MediaWorks might be the one breathing hardest right now, but none of us are living our best lives.

Assessments are the author’s own. Magical GIFs by the one and only Toby Morris. Listen to a special episode of The Real Pod on the revelations (or click here for iTunes)

MediaWorks (main brands: Three, The Edge, Mai FM, More FM, Newshub)

First up, the sickest. Breaking off your biggest and most beloved brand is not something anyone does in any but the most dire of circumstances. Those who’ve been calling MediaWorks’ sirens a bluff all winter have to admit that something is seriously wrong now. As the Herald’s Damien Venuto pointed out in his excellent (paywalled), (pay the money, folks) feature on the saga, Three’s biggest asset for a long time was the younger and more urban demographic it targeted and attained. That left it uniquely exposed when that audience, by its very nature early technology adopters, started playing around with new screens. 

At the start of this decade, the iPhone was just-born, and the tech was annoying – VPNs for Netflix, mucking around with torrents and USBs. But every year, it got easier, and those in their teens and twenties never developed the same habits as their older siblings. While there’s no big public-facing number for total TV audience on a nightly basis, a gut check says it might have halved for Three. 

Yet MediaWorks’ other assets, chiefly its huge radio network, and lately a sophisticated outdoor advertising company, have survived the technology revolution pretty well. Radio has proven a resilient medium, especially in cars and at some workplaces. And while people are glued to their phones, they are less so when walking around, meaning bus shelters and billboards remain great places for mass-market campaigns. Successive ceos battled hard but couldn’t fight behavioural change, especially when undercut by the zero content cost opponents at YouTube and Facebook. They finally admitted defeat on Friday. Over the next few months we’ll find out whether Three, easily the New Zealand media’s greatest taker of punches, has another round in it.

Sky (main brands: Sky Sport, Prime, Sky Movies, Soho, ESPN)

Another caught in the rip of technological and behaviour change. For the longest time it was the great leviathan of our media, a sprawling inland empire in industrial Penrose, taking money from one in two New Zealand households. Everyone simultaneously loved its content and hated its prices. Most paid up regardless.

Sports organisations were either showered in money, if they had power, or effectively had to pay for play, if they didn’t. Others tried to get onto its turf: Telecom and Telstra came and had half-hearted goes at it, beating a retreat when they realised just how deep Sky’s pockets were. The barriers were immense: not just the cost of content, but the infrastructure required to deliver it, too. 

Yet while it was an early and enthusiastic internet player – Sky offered $5 mobile passes in the mid-’00s, pre-smartphones – the decision to break Chorus off from Telecom and roll fibre out nationwide was the beginning of the end. It created a competitive market for hyper-fast internet, and started putting it to everyone’s door in a relatively compressed timespan. It removed the delivery vehicle moat, while it would take years for Spark Sport to have a serious go, the barrier to attack is now nil. Add smart TVs, Netflix, YouTube, infinite pirate sports streams, and you have a recipe for trouble.

Yet new ceo Martin Stewart has charged in with enormous energy, shaking off the entropy of the late Fellet era. Almost all the old senior executives have left, replaced by those loyal to his vision. It has bought an international streaming provider in RugbyPass, lost one very big sport (home cricket) while retaining the one it really had to (rugby). The price was high, around $400m, and a 5% ownership stake. Thus far, the sharemarket is entirely unmoved. 

For all that, Sky remains easily the healthiest of the private sector media companies, with strong cashflow, a large base of committed satellite customers, and immense upside if it can (finally) develop a good suite of digital products.

NZME (Main brands: NZ Herald, Newstalk ZB, Hauraki, ZM, GrabOne)

There’s an alternate reality journalists at the Herald must dream on at times. One in which then-ceo ‘Hurricane’ Jane Hastings didn’t derail their planned paywall roll-out in 2014, and they’re five years, not five months, into the digital reader revenue project. One thing we’ve learned from our own Members model is that it’s a long, slow grind of testing and knowledge accumulation. NZME would be world class at selling online journalism by now, and likely have the local market all but locked up.

Instead it’s racing against time to outpace the decline in print advertising revenue as it builds the digital payment base out. It has some big advantages. The Washington Post arc platform should allow it to test and learn as well as anyone in the world, and its radio revenue can subsidise capital investment to bridge it into the future. It has committed to paying down its large debt, and slimming out middle management in a bid to get as many people as possible on the tools.

Its share price remains low though, a reflection of the reality that even if it makes it through the transition, the glory days of fat newspapers funded by full page ads at the front and classifieds in the back are long gone. Many still live with the memory of that swaggering, powerful newspaper. To acknowledge it’s gone and will never return (its share of the local ad market has halved) is hard but necessary. The scenario no one discusses, but is very plausible in the future: splitting the Herald and its other print products off from the radio brands, just as MediaWorks is doing with Three).

Stuff (Main brands: Stuff site, Dominion-Post, Christchurch Press, Stuff Fibre, Neighbourly)

There’s no ceo in media I admire more than Sinead Boucher. That she’s a former newspaper editor probably helps, but it’s more for what she has done with her company, under the most trying circumstances. 

Just a few short years ago Stuff was code for the worst, most cynical excesses of digital media. It had no purpose other than the mindless pursuit of extreme clicks, and used every trick in the playbook, from misleading stories, unattributed and unlinked write-offs (still a plague on the industry), mindless-tweets-into-three-paragraph stories. And it ran Al Nisbett, a frequently racist cartoonist, in multiple newspapers.

Today Stuff has a full-time climate change section, gives extraordinary young journalists like Florence Kerr, Charlie Mitchell and Henry Cooke power and freedom, and is amongst the most vibrant news organisations in the country in terms of its output. 

It has also used that hydrant of traffic to start a number of side hustles, selling everything from broadband to insurance to video on demand. We’re always told we need to innovate in the media – Stuff has innovated with prodigious dedication.

Yet when this dynamic company was put up for sale earlier this year by its new owners, Nine, it didn’t get a single bid it considered satisfactory. Every year its profit shrinks by big chunks, falling from $70m in 2015 to $30m this year. Follow that curve into the not-too-distant future and it’s clear that absent some major change, the wall is approaching. Is the current owner just going to milk it for cash then abandon it beside the road? It’s a horrible thought which cannot be discounted.

Even if the government is unsympathetic to MediaWorks, spare a thought for Stuff. Those hard at work in New Zealand did not choose to have callous and unloving Australian owners. When they tried to buy time by merging with NZME, the pompous relics at our Commerce Commission refused them permission, in what remains the single most embarrassing decision of its shambolic recent history. 

In short: few have battled harder than Stuff. Yet few are in a more challenging position. 

TVNZ (Main brands: TVNZ 1, TVNZ 2, TVNZ OnDemand, Duke, Re:)

TVNZ in its present form costs roughly $300m a year to run (a similar number to NZME, Stuff and MediaWorks – and an argument for consolidation, were that allowed). It has some extraordinary assets: Country Calendar, 1 News and Seven Sharp still haul in huge audiences, the last great massive national audiences left outside of All Blacks games. It has a stable of reliable, recognisable talent, and has cherry-picked the best MediaWorks identities as they are tossed out or leave in a fury. Its technology is gleaming, from the giant screen which makes its news pop, to TVNZ OnDemand which, while imperfect, is galaxies ahead of ThreeNow.

The but is coming in all of these appraisals. Audiences are significantly down across the board, particularly on TVNZ 2, which targets a younger demographic. In the days of constrained supply of television, we all watched what the government put in front of us. Now, when we turn on smart TVs, it’s easier to watch Netflix than TVNZ, via the big direct button on so many remotes. As well as being relatively affordable, it’s also ad-free, which is becoming an audience expectation.

Existing linear television watchers are drifting away in big chunks. A large number head to TVNZ OnDemand, but once they become VOD users they are not nearly as loyal as they once were to One. And younger consumers are worse – more likely to recognise Logan Paul than John Campbell. TVNZ is limiting advertising on its OnDemand platforms as a way of building its audience, but there’s no guarantee that they will be able to lift that volume without viewers balking in the future. Or that competing inventory on YouTube (which has zero costs of production) won’t keep the price stubbornly low.

The big trump card it has is the one MediaWorks has been furiously pointing to all winter – that, as revealed by The Spinoff, it has simply told the government it will no longer return a dividend, a position it has accepted. What’s to stop the lack of a dividend becoming a small, then larger annual top-up? Nothing at all. Additionally, if Three were to close, it would naturally be the biggest beneficiary in terms of audience increase. Another conflict of interest for its owner.

None of this takes away from the fact this a very well-run business, with the strongest brand in New Zealand media. But it does explain why the private sector media looks across at it with a combination of lust and anger, and longs for an owner as rich and generous.

RNZ (Main brands: RNZ, Concert, RNZ site)

Remember a few years back, during the height of the Key government, when partisans of a certain stripe seized upon RNZ’s frozen funding as the height of political malfeasance? You don’t hear that too much anymore. That’s not because its budget has dramatically risen, though it has inched up lately. It’s more because being frozen in 2009 would be the most sordid wet dream of any media executive.

That it has been well-run under Paul Thompson, who replaced the somnambulant Peter Cavanagh in 2013, is undeniable. Its presenting lineup has been refreshed (though another is likely due), it has become the local market leader in podcasts, and its content sharing with other media has hugely expanded its reach and relevance. It has continued to evolve despite a complete absence of strategy and vision from the government, largely due to Clare Curran’s bumbling turn as broadcasting minister. Rumours that it might be merged with TVNZ continue to build, a move which would contain both promise and peril. 

But seeing as this is about assessing financial health and future prospects, let’s stick to that. RNZ will be fine. No other media organisation in New Zealand can say that with as much confidence. And with every round of job cuts, title closures or channel sales in the private media, its relative scale grows. As an avid listener, I’m happy that an organisation I listen to nearly every day remains in good health. But surely even the most ardent RNZ fan doesn’t believe it should be the only game in town.

The fate of Three clearly hangs in the balance, and much of the reaction to its potential sale or closure has focused on poor strategic decisions it has made, or the forces acting on television, as if they are not also shaking all the rest of the media. Many who are observing this are no doubt doing so from within businesses facing their own radical disruptions too. Yesterday afternoon I walked past a location which was once a Civic Video, which in 2002 fined me $90 for the late return of John Waters’ weirdo classic Pink Flamingos. It’s now a children’s clothing store, and I have no idea where I could rent Pink Flamingos.

It’s tempting to view the demise of television channels in much the same way as we did the end of video stores. It wasn’t the end of movies, just the start of a different way of distributing them. (This is not to say that film isn’t wrestling with its own challenges).

Television will survive, one way or another. Or at least, TV shows on screens will. There are major challenges around the distribution of local content, but they will be resolved. 

Journalism is different. It has been indirectly funded, through advertising, since its birth. Advertising no longer sustains it, nor will it ever again. The new advertising giants make no journalism, nor have any interest in doing so. We are facing a New Zealand in the not too distant future in which information becomes a tightly held and costly commodity (the new premium Herald is $200 a year, the NBR twice that), with access to it limited to those who have the facility to pay for it. 

There will be a limited and entirely government controlled free-to-access media, with perhaps a sprinkling of small independents such as ourselves and Newsroom (both of us would have our own challenges, were we anything like big enough to justify this story, incidentally).

In this scenario, the total number of journalists in this country is well under 1000, and the regions are vast news deserts (the current pilot of government funded regional reporters has hired a grand total of eight journalists).

It’s important that those who are watching Three’s struggles, its potential demise, understand what it represents. That it is the first major system change. But that there are more coming.