By Richard Pook, GM Platforms, Partners and Operations at Dentsu Aegis Network.

Local Media in Crisis

For some time now, the New Zealand media industry has been a victim of advertisers’ growing preference for measurable, targeted digital media options like Facebook and Google. Even so, nobody could have predicted just how quickly COVID-19 would wipe out some of our best-known institutions. Bauer has been the first major casualty, closing its doors just one week into lockdown, with hundreds of jobs lost and titles like METRO and Woman’s Day now a thing of the past.

Chances are that very little of this lost traditional activity will start up again. Entire media channels and business models will be confined to history.

I have always expected digital transformation to be a force of great change in the media industry but thought that this would happen over the next three to five years. COVID-19 has intensified the pressure on local media business models, forcing these changes to unfold in a matter of months, not years. 

Short Term Support

Many of these local media businesses have immediate and existential challenges. They have much weaker balance sheets and tiny cash reserves compared with their big tech rivals.

The Government will play a crucial role in ensuring that these businesses make it through the next few months. They have already dished out millions in wage subsidies, but there are other things they can do to help.

Government are one of the biggest spenders on google and social media. Buying New Zealand instead will provide an immediate boost to their revenue. Suspending Kordia television transmission costs would save millions in running costs. Letting magazines and local papers publish in lockdown could also help, although it’s questionable whether the depressed print ad revenue would be enough to cover publication costs.

A Total Rethink

These measures are life support, but they don’t address their chronic problems. The patients were sick long before Covid-19 came along.

When we return to some semblance of normality, how will the businesses that do make it through forge a path to long-term prosperity? 

There needs to be a major rethink on how local media and journalism operates, how it’s structured and funded. The government will play a crucial role in defining this future. It needs to be a wider debate with both public and private media at the table

As Kevin Kenrick, CEO of TVNZ put so eloquently at the recent Media Select Committee hearing: help the industry to help itself. Encourage and embrace consolidation, like the Stuff NZME or the Sky Vodafone merger. This is already happening globally; Comcast bought SKY UK and Disney bought FOX. These were huge but necessary consolidation plays to combat big tech. It’s naïve to think that NZ is any different.

We’ll need to address the outdated ownership structures. Look at any of the stock prices of the listed NZ media companies and you’ll see that the current ones aren’t working. They are low revenue, low profit companies. There are different ways of delivering and funding journalism at scale without the same commercial pressures. The Guardian Newspaper Trust is an excellent example of this.

They are other innovative ideas. In France, a new law requires google to pay for any local news stories that appear in their search results. Changing the tax status to a more favourable one for low profit businesses would help, as would changing the way NZ on Air content and budgets are deployed. We should look at all these options seriously here in New Zealand.

Digital or Die

More broadly, capitalising on the accelerating shift to digital will be crucial. Consumers will expect entertainment and media to be a seamless digital-first experience. Significant investment in technology infrastructure will be required. 

For the agencies that are around post COVID-19, they will also need to focus their activity in areas that are more desirable in the digital economy: partnering with global tech firms and their technology; reorganising themselves around their clients’ data; doing a better job of delivering integrated solutions that support digital transformation; buying and reselling content and experiences. Clients will pay good money for all of this if it’s done right. 

It will be a challenge to pivot suddenly and profitably in a market the size of New Zealand, but those that succeed will build healthy, sustainable businesses and reap their rewards in the years to come.