Above the Fold: as two of our biggest media organisations face radical downsizing, Duncan Greive asks media leaders what’s going on, and what can be done about it. Today: the leaders of Stuff and a number of key independent news and magazine publishers.

This is part five of Above the Fold: 20 Media CEOs, Two Big Questions, a five-part series running all this week and featuring a selection of responses to two heady questions confronting the New Zealand media sector. Read the series introduction here and the full series here.

The week has been dominated by the hammer blow that came Wednesday, with confirmation that Newshub and its 200 staff will cease newsgathering from July 5th. It points to one a tragedy of the commons with video news: it’s in the form which is most viewed by audiences, but one in which there is an enormous surfeit of inventory, most of it made for free and distributed by wildly profitable platforms with household names like YouTube, Instagram and TikTok. 

When you have a tension between something which is expensive to make (video news) and a competing product which costs its host platforms nothing up-front (user-generated video), it’s hardly surprising that video news has been hit so hard. 

Still, the largest single employer of journalists as a category remains text-based news. The biggest organisations there are NZME (whose CEO ran with the broadcast group yesterday, thanks to its ownership of many radio brands) through its various brands, and Stuff, whose CEO Laura Maxwell offers some powerful arguments in favour of reform below. Her words should carry extra weight – Stuff remains likely the biggest single employer of journalists in the country, making it a true giant in this group.

Text-based news as a core product has some advantages over video-based news in a digital environment, in that it remains the only news form which has established scale audiences willing to pay for its products. The New York Times has the biggest news subscription in the world, Substack has created a powerful network for independent writers, while NZME has made an impressive play locally through the NZ Herald and BusinessDesk. Multiple other entrants exist, including the NBR’s pure subscription model, and Newsroom, NZ Geographic, Shit You Should Care About and The Spinoff, all of whom contribute below.

Still, even for these organisations, advertising revenues typically remain larger than subscription revenues – in some cases by very significant margins. And this income is dropping fast. As NZ Geographic’s James Frankham notes in a stunning submission below, “advertising turnover from magazines in 2012 was $210 million, and 10 years later it is $117 million, nearly halving over the decade. While magazines have innovated and built digital properties, the entire digital advertising take among magazine media for the 2022 year was just $36 million.”

Which is to say that there is no reason that what happened to Newshub won’t happen to publishers too – just more slowly. This is why the emerging consensus – across screen production and news – around a levy should be interesting reading for the suddenly very scrutinised minister for media, Melissa Lee. 

The following is a condensed and edited version of responses filed by these CEOs.

Laura Maxwell, CEO Stuff Group, which owns Stuff, Neighbourly as well as news brands including The Post and The Press, published in print as well as behind paywalls, along with video and audio

What’s the biggest issue in your corner of the media industry right now?

Without question it is the market power imbalance that impacts our ability to realise the value of our audience – it is a David and Goliath battle.

When products or market models fail it’s often that demand has waned and consumers have moved on to a new solution. But here’s the thing, Stuff has the largest digital audience in New Zealand of any local player – larger than Trade Me, larger than any other news organisation. So consumer demand for our product is not the issue, it’s the market power imbalance that takes 90 cents in every digital advertising dollar to offshore media tech companies.

That’s not from our incompetence but how the digital ecosystem works across advertising – something that I won’t go into here, but in summary it’s set up so the house always wins (and we’re not the house!). “So diversify your revenue streams!” I hear you cry – guess what, we’re doing that too. Yes we have reader revenue streams and we know we have a product people are willing to pay for and continue to pay for – but a digital subscription delivers far lower annual revenue per person than a print subscription.

So we cut our cloth and adapt our business. I can attest that, yes we’ve innovated, and we continue to on a daily basis. Digital transformation? We did that years ago and since Sinead Boucher bought the business we have totally transformed our tech stack to have the most agile and future-proofed architecture, using global leaders in their fields. Yes we’re using AI within our businesses to gain efficiencies, yes we’ve invested in technology to deliver our content in the ways that audiences favour, yes we’ve championed local news and yes we continue to send journalists to ask the questions that the public want to know and are core to a thriving democracy.

We certainly aren’t sitting here waiting for the world to turn backwards or to get a handout. The market power imbalance, unfortunately, is only getting worse with the rise of new AI players who train their tools on content they don’t create or own, or in most cases, pay for. That’s the kind of power imbalance we are talking about for local media companies. Sure, you can operate, but your profit margins are incredibly challenged, which poses issues for investment into our core business of journalism.

And it’s not like we don’t protect other industries in Aotearoa – when retailers were going to the wall thanks to international online shopping businesses, the government legislated for GST on imported goods. There’s the “Netflix tax” of 2016. These are all attempts to level the playing field in our small economy for local businesses that contribute to our economy as employers, providing work for ancillary businesses and paying company tax.

What do you think is the best idea you’ve heard (or thought of) to provide a durable long-term fix?

The Fair Digital News Bargaining Bill, including the capture of the implications of future technology. Not a handout. Won’t guarantee business success – as it shouldn’t! But it will bring all players to the table to negotiate commercial deals and it will provide space for some local businesses who have a sound strategy, execute well and have a relentless focus on the customer, to survive and hey, even thrive. 

Amber Easby, CEO of The Spinoff, which publishes on its own platform, along with a range of podcasts and video series on social and audio through a mixed commercial and audience revenue model

What’s the biggest issue in your corner of the media industry right now?

I think the biggest looming issue for digital media is accessibility.

While flawed, an advertising-based model has traditionally allowed for media plurality and the journalism produced has been widely available. Now, audiences have less money and more places to spend it. The same is true for advertisers. The rapid decline in advertising revenue means there will be a greater shift towards subscriptions in digital media – a tough sell in a small market, which, even if successfully executed from a business perspective, will limit who can access that content. 

And while state-owned media plays an important role in our ecosystem, it should not be the only local journalism freely accessible to New Zealanders. 

What do you think is the best idea you’ve heard (or thought of) to provide a durable long-term fix?

Unfortunately, there is no single best idea, no silver bullet. As an industry, we need a few things to fall into place to ensure long-term durability – advertisers to spend more with local platforms, audiences to support the work if they are able, regulation so local news organisations are fairly compensated by global tech companies for content use and, ideally, some sort of funding to stimulate sustainable growth in the sector.

Mark Jennings, co-founder of Newsroom, which publishes on its own platform, along with a range of podcasts and video series through a mixed commercial and audience revenue model 

What’s the biggest issue in your corner of the media industry right now?

I think the media is like a low income family – we are caught in a cost of living crisis. Our costs are going up but our income is either static or in some cases (those entirely dependent on advertising) it is nose diving. This is squeezing the already tight profit margins (if there are any) and the only way most media companies can reduce costs is to shed staff. Cutting the number of journalists starts a vicious cycle of less content followed by lower readership and less revenue.

What do you think is the best idea you’ve heard (or thought of) to provide a durable long-term fix?

I don’t think there is one single idea that can help get us to a sustainable future. But I think there could be a package that might work. This would include locally owned news media being exempt from paying tax, subscriptions to local news content being tax deductible and direct government support for local media funded by a levy on digital advertising as suggested by Victoria University’s Peter Thompson. It would impact the global giants Google and Meta (although not hugely). These companies dominate digital advertising because no local player can ever obtain their scale or cost efficiencies.

James Frankham, publisher of NZ Geographic, which has diversified revenues, and board member of the Magazine Publishers Association

What’s the biggest issue in your corner of the media industry right now?

The biggest issue is that I can’t see a future for what we do. 

This isn’t due to a lack of imagination. New Zealand Geographic is about as diversified as a media organisation can get – we develop photogrammetric technology for marine science applications, produce VR content for schools, offer institutional and personal digital subscriptions over a metered paywall, run an on-demand television service and events, have business partnerships in travel, science, conservation and, yes, publish a print magazine. 

All of this activity has shored up the organisation, and right now all of it appears to be going fine. We have survived the internet, the GFC, the pandemic… but I’ve never been so unsure of what the next couple of years holds. This is due to the unavoidable conclusion that the digital media economy only works if you own a sizable portion of the internet. And the expectation that with the advent of AI, all bets are off.

Traditionally, the magazine stool has three legs – retail, advertising and subscriptions. Only the latter works online, and it doesn’t work very well. Driving traffic to a website from social, search and direct channels, pulling the levers of a metered paywall, maintaining a subscription-based ecommerce platform, and expecting a positive result out the end of the pipe makes our legacy print product seem like a money tree.

As an example, a recent feature on the ongoing fallout for Cyclone Gabrielle victims in Hawke’s Bay cost us $14,000 to write and photograph in the field. Tens of thousands of people read the feature, but few were paying subscribers. Having said that, it is a privilege to produce this work, and while some stories are expensive and time-consuming, others work out cheaper – our story on the machinery of deceit behind the proposed Fast Track Bill gained the same audience with no field work at all. 

However writing and shooting stories where those stories happen is what longform magazine features is all about – it’s a slower and more considered version of journalism; more comprehensive, less reactionary, more analytical, more focused on the consequences and outcomes for our society and environment. This is an important distinction because news journalism is not defined by its speed or volume but by its relevance and value to New Zealanders.

The paywall model does work, but the eclipsing power of the tech giants looming over the media industry starve local publishers of the only commodity that matters online – attention. Meta and Google have been internationally successful because they have attained a mass that makes it possible to retain users almost exclusively on their platforms, capture the advertising returns, and offshore their profits to avoid local taxation. It is not illegal or evil, it is simply expedient and without regard for local consequences.

This has made the digital transformation not only difficult for magazine media, but it may turn out to be pointless too – digital subscription income is limited, digital advertising income almost non-existent. We have watched as the poster children of digital journalism have withered on the vine in the region it was most promising and lavishly-funded: Vice and Buzzfeed News are closed; as are Gawker and The Messenger. Analysts in the US have called it an “extinction event”. Why would an outlet in New Zealand lean into a commercial proposition with such limited prospects?

I sit on the board of the Magazine Publishers Association, and can report a sense of deep unease across the sector. Advertising turnover from magazines in 2012 was $210 million, and ten years later it is $117 million, nearly halving over the decade. While magazines have innovated and built digital properties, the entire digital advertising take among magazine media for the 2022 year was just $36 million.

More recently, Meta has moved away from promoting links, especially to news, and Google has whittled down returns on digital advertising to a couple of bucks per thousand impressions.

News media in New Zealand is approaching a brick wall, built by the platforms and facilitated by past governments. It is not a free or fair market to operate in, and may ultimately result in the end of journalism as we know it. I appreciate that comments like this will inspire an eye roll from those who believe that media should just “innovate”, but the digital economy is rigged in favour of international platforms, and government seems luke-warm about intervening, as if the clean combustion of market economics cannot be tampered with. However the failure of journalism in New Zealand will have serious consequences for our identity as a country, our economy or our democracy. 

This government has an opportunity to create the conditions for a fair media market in New Zealand, but will they do it? This is the question that keeps me awake at night.

What do you think is the best idea you’ve heard (or thought of) to provide a durable long-term fix?

I was one of the disembodied heads reading notes over Zoom to the Fair Digital News Bargaining Bill Select Committee while trying to appear like I wasn’t reading notes. I was following submissions from Stuff and NZME, and while our organisations are vastly different, the concerns were the same. Almost.

New Zealand Geographic was a party to the News Publishers Association collective bargaining effort, but Meta never engaged, and Google dismissed us. This has created even more distortion in the market – we’re now competing against both the platforms, and those who have done deals with the platforms. (No magazine publisher has managed to broker a deal with either Meta or Google.) So while the proposed Bill is better than nothing, it doesn’t guarantee that smaller players or those that specialise in longform journalism will benefit – in fact it may make conditions worse. 

The best idea, I believe, is being drawn up by Gavin Ellis alongside Sir Peter Gluckman at Koi Tū: The Centre for Informed Futures. He proposes to levy the platforms on their domestic revenue to create an independent fund with negotiated payout criteria that is fair for all news media. It will power journalism from an independent body. (The PIJF was government funded, and criticised for bias at a time when government was operating under expanded powers.)

A levy is not difficult or complex, and it need not cost the platforms much – just a 1% levy would result in funds equivalent to the Public Interest Journalism Fund, a 2% levy would be a game-changer. The government already levies all manner of goods to protect local industries – why not a levy to protect democracy?

Lucy Blakiston, CEO, Shit You Should Care About, a Gen Z-targeted organisation which curates and presents global news across Instagram, TikTok and Substack

What’s the biggest issue in your corner of the media industry right now?

I feel like somewhat of an outsider writing about this because my “corner” is both really small (I’m a team of one) and very large (96% of our audience lives outside of New Zealand). In my incredibly humble opinion, the biggest issues are competing with TikTok (and other social media sites, but mostly TikTok) to get truthful stories to young people, and – boring, but – being able to pay the people who make the content that will do this.

As for issues that don’t directly pertain to me, but that worry me – it’s hard to see a future for the un-sexy stories. You know, the ones that change the lives of the little guy. I’ll be honest, local stories are not the ones we tell, which is why I’ll ride hard for the people who focus on them. Everyone wants everything to go “viral” and that’s not realistic, nor is it responsible. And it’s a direct result of the media industry competing with tech giants (an ill-matched contest.)

What do you think is the best idea you’ve heard (or thought of) to provide a durable long-term fix?

Not a new fix at all, but turning my focus from selling advertising to selling friendship. It sounds bleak, and won’t work for everyone, but figuring out a way to offer people something that they literally can’t get anyone else (your energy, your love) seems to be one of the things that works for us. Also, some hefty investment in the media would be nice 𓆩♡𓆪