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Analysis by Dr Bryce Edwards – “Democracy dies in darkness.” That’s the motto of the Washington Post, and it refers to the role the news media plays in ensuring democratic political systems work.

It’s also an idea that’s been spoken about a lot in the last couple of weeks as debate heats up about the Government’s current, and potential, role in keeping the New Zealand media alive and kicking. Of course, there is hyperbole and self-interest in some of the pleas being made by journalists and company executives, but there is also no doubt the industry is in a major decline, which will have an impact on politics.

“Market failure” is another phrase increasingly being used to describe the decline of the “fourth estate” function of holding powers to account. The phrase comes with the consequent notion that this failure should be met with government intervention. The market failure is the notion that traditional media outlets are now unprofitable, which might lead to some – such as TV3 – collapsing, with negative consequences for democracy.

Therefore, there all sorts of hard decisions for the Government to make about the future of the media, about its ownership of public broadcasters, it’s role in funding private media and, generally, its regulation of a sector that is in crisis. Some of these issues were canvassed earlier in the year in my column, The State of the NZ media.

Today, the state-owned broadcaster TVNZ has released its annual report, announcing a 44 per cent decline in profits, down to $2.9 million – see Chris Keall’s TVNZ profit halves, cans dividend. According to this report, “CEO Kevin Kenrick says the company’s financial results are reflective of challenging market conditions.”

And it comes after recent news that TVNZ is also forecasting a $17m loss for the next financial year. Rival MediaWorks is already making large losses from its TV3 channel.

This week also saw the NZME (owner of the New Zealand Herald and Newstalk ZB) announce its profits are down, though its new paywall service is surpassing targets – see: NZ Herald Premium subscriptions hit new milestone, NZME half-year operating Ebitda at $19.4 million.

The article also reports on its main competitor’s recent financial results: “Last week, Australian-owned publisher Stuff (formerly Fairfax NZ) reported a 24 per cent fall in full-year Ebitda to A$28m ($30m) on annual revenue that declined 10 per cent to A$243m ($246m).”

Campaign “for democracy” by TV3’s MediaWorks

The latest round of media industry soul searching has been pushed along with a lobbying campaign by MediaWorks (the owners of TV3, Magic Talk radio, etc), that called for the Government to take action in order to ensure their television channel was not forced to go off air, or collapse in some other way. A number of MediaWorks items were broadcast or published that were designed to pressure the Government to step in and help save the industry.

The most important was an opinion piece on MediaWorks’ Newshub website from its chief news officer, Hal Crawford, who argued that loss-making media outlets like his were in danger of going out of business, which would lead to problems for democracy: “this is a good old-fashioned market failure. The thing that we need, that society needs, is not only under threat, it’s not being provided right now. The small public broadcasting news operations and the commercial players can no longer provide enough news to keep our society healthy at a local and national level. Unfortunately, all the cliches about the free press and democracy are right: we need news to keep this lemon on the road. When markets fail, governments must step in” – see: The problem with news in New Zealand.

The news boss also argued that the many ways TVNZ is being protected by the Government is having ill-effects for competitors such as TV3: “Being one of their competitors, I’m angry about this. I’m angry that the market for television advertising in New Zealand is distorted by this bizarre, anti-competitive set up. I’m angry that my newsroom, Newshub, is part of a business struggling to keep its head above such polluted waters. I’ll be damned if I lay off one more person or say ‘no’ to one more important assignment without expressing it: TV in New Zealand is broken. And it could have a big impact on news in this country.”

For Crawford, the answer is for the state to start funding independent news media operations across the board, in the same way that it funds the judicial system. And elsewhere it has been reported that MediaWorks has been lobbying Government for them to directly fund their Newshub service.

In conjunction with Crawford’s plea for Government help, various other MediaWorks staff and journalists went public, in what has been described by one media-watcher as “an extraordinary” campaign. For instance, AM Show host Duncan Garner broadcast his plea for the Minister of Broadcasting, Kris Faafoi – an old friend of his – to intervene to essentially save their jobs and profession.

This is all covered very well by former news manager at MediaWorks, Mark Jennings, who is rather scathing – see: Garner’s strange outburst fitted PR strategy – and by RNZ’s Colin Peacock – see: A media cry for help.

According to Jennings, Garner’s broadcast was “cry baby stuff”, and he asked: “What prompted it? Is the axe hovering over his and other news shows at Three? Probably.” Jennings is unimpressed with what he sees as the unprofessional use of Garner and other MediaWorks staff (Crawford, Patrick Gower, Sean Plunket) in a PR campaign for the company: “using its own journalists, on its own platforms, to attack a competitor feels like a misstep. It’s the sort of thing the Rupert Murdoch-owned media does in Australia when it attacks the ABC, or others, to further its own commercial interests.”

RNZ’s Colin Peacock was also sceptical about the campaign, concluding: “It remains to be seen if the minister is persuaded by these very public and self-interested pleas for help – and the loftier claims that democracy could die in media darkness. After years of accusing the industry’s critics of talking too much about its problems, it’s extraordinary that a media company is now using its own outlets to do the same – and push them firmly into the face of the government at the same time.”

The owner of another media outlet, the Spinoff’s Duncan Greive, assisted the MediaWorks lobbying campaign, publishing an interview the same day as the Crawford piece with MediaWorks CEO Michael Anderson. In this, Greive reports the feeling in the TV company: “a rising sense that no matter what they do, no matter how hard they fight, how many titles they cut or people they make redundant – that absent some kind of radical intervention, their business is beyond saving” – see: Contemplating the end of Three.

In this interview, the MediaWorks CEO makes it clear that without government intervention TV3, as well as other outlets, might close, and this would impact on politics: “A democratic government has to protect democracy… I have to believe it’s true of any elected government. If that’s true, then a government would need to do what it needs to do to make sure that there’s news diversity. And certainly the government could never find itself in a situation where [there’s] a monopoly on broadcast news. Just for the perceived conflict, you know. It doesn’t work for democracy.”

Debate over the future of TVNZ

A big part of MediaWorks’ angst is the way the Government is treating its main broadcaster, TVNZ, which continues to exist in a state of neither being fully commercial nor a fully public service broadcaster. For although TVNZ’s channels are mainly commercial, the current Government has declared that it’s no longer expected to deliver a dividend to the taxpayer.

To MediaWorks this is a form of subsidy, which gives it an unfair advantage in competing with the private broadcaster. All the while, TVNZ continues to hoover up much of the broadcasting advertising market, leaving MediaWorks unprofitable.

However, even TVNZ is now deemed to be unprofitable, as covered in John Anthony’s Plot thickens for TVNZ as a $17.1 million loss looms. Apparently, TVNZ’s decline represents “its worst financial result in a decade… despite its advertising revenue holding up.”

Furthermore, the article comments that “The falling profit comes as debate around the broadcaster’s future intensifies and the Government comes under increased pressure to deliver on work it’s doing to strengthen public media. Possibilities for TVNZ’s future include the removal of ads for TV One, returning to a charter and merging with RNZ.”

These solutions are highly-favoured by MediaWorks, as well as a number of other commentators. The above article reports that one public media lobby group would like to see this: “Better Public Media Trust director Myles Thomas said he hoped TV One went non-commercial and believed it would happen.” Thomas is also quoted: “The minister has made some intonation that something big was coming.”

Making TVNZ an ad-free service would apparently cost about $150m a year, and would effectively turn TVNZ1, and maybe other channels, into a public service broadcaster.

But former TVNZ broadcaster Mike Hosking thinks that would be a mistake, saying that “If the Government are going down the upheaval track, there will be more tears and disappointment than there will be problems solved” – see: TVNZ’s in trouble and they should blame their own bad decisions, not Google.

Hosking argues that turning TVNZ into a proper public service broadcaster wouldn’t really fix anything but just become a subsidy for elites: “given few watch, would anyone really care if TVNZ 1 started showing a lot of Māori programmes, bird documentaries, foreign travel shows, and long-format interview specials? No. But having worked for TVNZ under the charter invented by the last Labour government I can tell you for nothing it is not a recipe for any sort of success. But if success is not your guiding principle to start with, then it becomes a sort of creative outlet for the worthies and the single agenda ‘artists’ who have previously plied their trade at the NZ On Air application box”.

Another former TVNZ broadcaster, Damian Christie, takes the opposite approach, suggesting that it’s the NZ On Air model that is broken, with an unhealthy focus on ratings which is preventing quality TV from being made – see: The truth about public service television in New Zealand.

For Christie, it would be a mistake to go back to the old days of TVNZ’s Charter, and concludes that “public service television and advertising don’t work well together.” His suggestion is this: “Why not make TVNZ 1 commercial free and have TVNZ 2 offset at least some of the costs?”

Others wonder if we have gone beyond these old possibilities, with Finlay Macdonald saying that nostalgia for public service broadcasting and other current proposals for change ignores the fact that “Some of the best current affairs ‘TV’ is now found online” – see: An ad-free TVNZ? Technology has moved on, why can’t we?.

Similarly, see Anna Rawhiti-Connell’s No way back from media’s forbidden fruit. She argues that although the news media is indeed in a precarious position, the answer has to be bigger than just trying to save TVNZ and MediaWorks. For example, the 6pm news model is not necessarily worth saving.

The problem is more “the whole internet and 20-something years of radically changing human behaviour.” The public is now consuming our media in very different ways, and this isn’t about to change: “our VPN using, ad-blocking, Netflix smorgasbord-loving selves indulge in behaviour every day that contributes to the strangulation of the model that sustains and supports the things we hold so dear.”

A mega-merger of broadcasters?

The current rumoured proposals for TVNZ also involve merging the broadcaster with RNZ, and possibly Māori TV. The existence of this proposal has been confirmed by Nanaia Mahuta, according to Maori TV’s Heta Gardiner: “The Minister of Māori Development has officially confirmed a merger involving TVNZ, RNZ and Māori Television is an option that’s been discussed at Government level. Nanaia Mahuta confirmed the option has in fact been placed on the table but it wasn’t her preference” – see: Māori Development Minister confirms consideration of MTS, TVNZ, RNZ merger.

For the best analysis and discussion of the proposal, see Duncan Greive’s Assessing the TVNZ, RNZ and Māori TV merger that everyone is talking about. He says, “the case for a megamerger is compelling” and this option “is likely the cleanest way of averting this growing media crisis.”

After describing the merits of the individual broadcasters, Greive says the merger would be good for democracy: “the problem-solving it does for commercial media is ultimately less important than the upside it contains for the country and its democracy. A combined government mega-media agency would help paper over one another’s cracks, and create a kind of rebooted NZBC, one which could safeguard New Zealand against some of the chill political winds blowing around the world.”

Of course, there continue to be noises about two of the biggest private media companies merging – see Tim Murphy’s StuffMe 2: the return of the beast. He discusses the fact that a merger of Stuff and NZME would require legislative change from the Government, “along the lines of the law which allowed Fonterra to be created”.

And in another recent column, Murphy forecasts some big cuts and possible closures coming in the Stuff empire – see: Stuff floating on cloud Nine.

Hard decisions for the Government

The Government has indicated that it will respond to debate about TVNZ later in the year, and it’s currently undertaking a larger review of media under the watch of broadcasting minister Kris Faafoi.

Thomas Coughlan says the Government has some hard choices to make, and “the problem is fairly simple: take TVNZ non-commercial, or prop-up MediaWorks with cheap Government loans and NZ On Air funding. Either way, a lot of money is on the table” – see: The Government won’t help MediaWorks – there’s no money.

The problem for Faafoi, Coughlan says, is that the necessary money is not available: “what work he manages to achieve will be heavily constrained by how much the Government and viewers, are willing to spend on broadcasting. Currently, the answer is ‘not a lot’.”

The answer, according to economist Shamubeel Eaqub is for the Government “to find a way to tax Facebook and other internet companies more before their dominance of the advertising market kills off local media companies” – see Dan Satherley’s Taxing internet giants key to saving media industry – economist.

Eaqub says: “Ultimately if we want to fix the media, we have to create long-term sustainable funding that is not up at the whims of politics.” But he doubts that the current Government is going to be bold enough.

The NBR’s Brent Edwards has recently interviewed Kris Faafoi about some of these issues, including whether the Government will front up with the necessary cash – see: No silver bullet for news media problems (paywalled).

Edwards reports: “Faafoi said it was really important that the country had a strong fourth estate and that was why the government was intent on ensuring the future of public broadcasting.” And as to the whether Faafoi thinks the public would care if TV3 goes under, he says: “I hope they would because, as a former journalist, I do think having a strong fourth estate is important.”

Edwards has also written about some of these difficult issues facing the Government, arguing that there’s a simple choice to be made about TVNZ: “to either throw it to the commercial wolves – let it sink or swim but, let’s be clear, it would sink – or turn it into a fully-fledged public broadcaster” – see: MediaWorks’ pleas raise new fears for journalism and democracy (paywalled).

But helping out TVNZ would not, Edwards says, resolve the situation and might lead to other difficulties: “if we accept a healthy news media is critical to a well-functioning democracy then taxpayers do have some interest in their survival. It would be a sham democracy if the public became reliant on a single public broadcasting behemoth to provide them with news, analysis and commentary. But if taxpayers’ money is going to be used to sustain journalism, how would the government ensure an equal playing field? All media organisations would surely deserve some support, not just those television channels that cried loudest.”

And if it all goes badly, then Edwards foresees a degraded democracy without a proper media helping inform the public: “Perhaps democracy will be played out solely on social media as individual parties and candidates spin their messages directly to voters. But the day politicians do not have to worry about critical journalism, or even about someone pleading on the telly, then that’s the time to worry.”

Finally, it seems that ultimately Labour and National don’t much like public broadcasting, and this can be seen in their reluctance, so far, to properly fund it – see Duncan Greive’s article, One chart which reveals NZ’s incredible 30 year decline in public media funding.

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