Coronavirus precipitates Bauer’s decision to quit New Zealand

Coronavirus precipitates Bauer’s decision to quit New Zealand

Auckland, April 3, 2020

The decisions by German media giant Bauer to shut its New Zealand magazine operation and NZME’s axing of Radio Sport have been precipitated by the coronavirus.

But the closures are also due to the deeper problems of the local media industry.

The sudden announcement that Bauer, one of the world’s biggest media companies, is pulling out of New Zealand and closing iconic magazines like The Listener, North and South and Woman’s Day if it can’t sell them, sent a jolt through the media Industry.

Radio Sport closure

For industry observers, the decision was not a major surprise but the speed and suddenness of it was. The news media has been waiting for the dominoes to start falling. First to go was Radio Sport.

Its owner, NZME, has been under sustained pressure for some time. With no sport events to cover, advertising collapsing and 25 staff on the payroll, the station had no chance of returning to profitability for years, or possibly ever, given that it was already struggling pre-virus.

Bauer’s different

Bauer’s decision is different. The privately owned German company’s annual revenue last year was roughly $4.2 billion. It boasts that every second German reads one of its magazines. It sold 433 million issues in Germany alone last year and owns 600 titles worldwide.

It has a huge radio operation with 100 stations in Europe and 24 million listeners tuning in every day. In the UK it has 80 stations and a number of TV music channels.

If any media company can withstand the ravages of coronavirus it is Bauer Media.

The Bauer brands

The decision to get out of New Zealand was most likely made some time ago. All its magazines had been suspended by a Government edict that periodicals could not be deemed ‘essential services’ during the lockdown. 

It is understood the likely revenue outlook for its Property Press real estate publications, even with a relaxation of lockdown, was particularly keenly felt within the business.

Wage subsidy refusal

The fact Bauer decided not to avail itself of the Government’s wage subsidy was a further indicator that its decision was swayed by ongoing industry pressures. The virus just brought the decision forward. It couldn’t see much hope for magazines in a small scale market when traditional advertising is on what seems to be a never-ending downward path.

Big international companies have better options than New Zealand.

The Bauer decision stunned loyal readers of its magazines but it also seems to have woken up another group who have been partly responsible for the demise of local media – advertisers.

Government focus needed

In a media release entitled ‘Bauer is the Canary Down the Media Coalmine,’ the Association of New Zealand Advertisers (ANZA) urged Broadcasting, Communications and Digital Media Minister Kris Faafoi to broaden the focus of the recently established review of the Government-owned media assets, Radio New Zealand and TVNZ, to that of New Zealand media more widely.

“There is the very real risk that the future of media in this country is a mix of only existing government owned assets, global online platforms and a small number of niche news offerings. We believe this would be an unacceptable outcome for New Zealand. Without diverse media, there are obvious risks for society, democracy as well as the economy as we work toward a post-Covid recovery,” Chief Executive Lindsay Mouat said.

Free tax ride on digital platform

The New Zealand media’s biggest problem, of course, is that advertisers who use digital platforms now spend somewhere between 80% and 90% of their money with Facebook, Google and other social media companies. These US companies have very few New Zealand employees, produce no news content and pay very little tax.

Newsroom asked Mouat if he supported the idea of a revenue tax on the US giants’ local income which could, in part at least, be used to support the local news media.

“The suggestion of revenue tax seems to be moving slowly. Fundamentally, we would struggle to do it alone, but the OECD, from what I see, is moving ponderously. And there is the ever present threat of reprisal from (US President) Trump. So, while at face value it could be the solution, it is problematic for a small state.

“I wish I had the solution. I am not personally a fan of StuffMe, [the combining of Stuff and NZME through either a takeover or merger] because I prefer the idea of plurality, and Bauer’s magazine dominance suggests this isn’t a solution. But I think the government could buy some time through the use of NZ on Air or similar tools to keep the sector at least breathing, while bigger work is taken on, using the beginning of the PwC work in a broader context.”

PwC Advisory

Advisory firm PwC is working on a business plan for a new public broadcaster that would see the operations of TVNZ and RNZ combined into a single entity.

One obvious solution to the current crisis would be for local advertisers to direct more of their spend towards local privately owned media, instead of Facebook and Google. Would ANZA recommend that to its members?

Mouat said that he “was not able to comment on that today.”

Facebook and Google may be more cost effective and offer a more targeted approach to customers but there is precedent for local advertisers taking a wider view.

In the past 30 years, individual advertisers have, on numerous occasions, “over invested” in TV3 to retain competition in the television market.

Television advertising

While all local media will be looking for advertisers to recognise the social benefit in supporting the producers of news and current affairs, TV3 will be hoping the historic support it has enjoyed in the past quickly resurfaces.

Television, which these days carries a lot of ads for retailers and manufacturers of FMCG (fast moving consumer goods), is being hit hard by the impact of Covid-19.

In Australia, Network Ten, the country’s third-ranked free-to-air television broadcaster will be run by a skeleton staff after the Easter long weekend as it temporarily closes down other operations to reduce cost, according to a report in The Australian newspaper.

To date, MediaWorks’ highly profitable radio operation has subsidised its television arm, which loses millions every year.

Radio advertising down

Industry sources with a good knowledge of the radio market say that advertising is down 40% for the major stations and up to 70% for regional stations. This will be seriously impacting the cashflows of MediaWorks and NZME, the country’s other big radio operator.

Additionally, MediaWorks’ recently acquired out-of-home (billboard) advertising business will also be suffering badly. Another industry source described the out-of-home market as “temporarily dead.”

MediaWorks has responded by asking all staff to take a 15% pay cut but more radical action, or government help, will be required if Three is to avoid being the next domino to fall.

Beyond Three, other local media businesses have been troubled, with NZME this week adding to its Radio Sport closure with a round of cuts to editorial and external columnists for the New Zealand Herald, including a plan to almost halve its number of sports journalists.

Stuff Ltd owner, Nine Entertainment of Australia, which has tried and failed to sell the New Zealand operations, this week announced plans to take A$260 million of costs out of its business.

It would be fanciful if the Stuff subsidiary was immune from stringent reductions and possible masthead and staff cuts.

Across the Tasman, Rupert Murdoch’s News Corporation has ended the print publication of 60 community newspapers, moving them first online and reviewing operations further.

Mark Jennings and Tim Murphy are Co-Founders and Co-Editors of Newsroom based in Auckland. The above article has been published under a Special Agreement.

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