In the third contribution to Scoop's "The State of NZ News Media" public conversation series, economist Bill Rosenberg provides a summary of the deregulation and foreign ownership changes in media from 1964 till now and discusses their impact on news culture. He concludes with a strong call for regulation and increasing public funding for public service news services. Bill's article was originally published in January 2014.
News Before Profits
By Bill Rosenberg, January 2014
In New Zealand and internationally, news services are under stress.
Developments in technology are creating new forms of media, allowing the public more choice. Combined with discontent with the conventional media, this undermines their main income source: advertising. Meanwhile, the companies controlling our news media are increasingly focussed on finances rather than news values. What's more, they are owned and run by corporate investors and executives whose skills lie in extracting more money from the business. These are mostly overseas investors who have honed these skills and have the financial backing to do it.
The main traditional alternative, public-service broadcasting, is severely weakened and under continual attack from those who see no purpose in it or who think it blocks their commercial advantage.
As a result, news values are under threat.
How did New Zealand get to this state?
The beginnings can be seen in Rupert Murdoch’s takeover of the Wellington daily, the Dominion in 1964, though limited by the then overseas ownership laws. It was part of a shift from family controlled to corporate newspaper ownership. During the 1980s, television broadcasting was opened up to the private television channel, TV3, and the Sky TV pay television network . These developments did not have to lead to the current situation. Things could have been different if public-service broadcasting had remained strong, limits had remained on foreign and cross-media ownership, and quality had been maintained through measures like local content requirements and limits on advertising. Instead these developments were Trojan horses for what followed.
During the late 1980s, the Lange-Douglas Government corporatised the public broadcasters into SOEs with commercial objectives. Television New Zealand (TVNZ) faced competition for its advertising revenue from its private competitor while a falling share of its income came from public funding .
In 1989 broadcasting was deregulated through the Broadcasting Act 1989. There were no standards set for public-service broadcasting, no promises of funding, and no requirements for local content. There were no limits on cross-media ownership or dominance other than the weak general competition laws. A Broadcasting Commission (NZ On Air) was set up as the sole method of funding local content, including Radio New Zealand. The Radio-communications Act 1989 deregulated allocation of broadcasting frequencies by using an auction system intended only to ensure the government received the highest price. This could hardly have suited the newly-established Sky better. The first auction, from which it was by far the biggest winner, was called only three days after the Act’s passage, because Sky was “anxious for the tender to commence as soon as possible” according to an official history .
Despite an environment intended to assist private broadcasting, TV3 was commercially unsuccessful and faced bankruptcy. Its receivers and Treasury lobbied to allow it to go into foreign ownership. In the meantime, Murdoch’s News Corporation was itching to increase its ownership of New Zealand news media. This included wanting to buy TV2 from a government making continual threats to privatise one or both of TVNZ’s channels. In 1991, the new National Government abolished all restrictions on foreign ownership of the news media other than the ineffectual conditions applying to any foreign investment.
Important features of the deregulation were then made near-impossible for future governments to change. In 1994 the government signed the General Agreement on Trade in Services (GATS), part of the new World Trade Organisation. New Zealand’s exceptionally broad commitments mean that no future government may restrict overseas ownership of broadcasting nor require locally-produced content.
"toaster with pictures "
Michael Fowler, deregulatory head of the US regulator, the Federal Communications Commission under Ronald Reagan, described television as “just another appliance. It’s a toaster with pictures.” In other words, broadcasting was nothing more than another commodity for which ‘the market’ would make the best decisions for everyone. The same view was taken by the designers of New Zealand’s deregulatory laws. To Treasury and other advocates of the model, audiences were ‘consumers’ rather than listeners, viewers or citizens. In fact the direct ‘consumers’ in this market are not the audience but the advertisers. MediaWorks, the owner of TV3, FOUR and RadioWorks, gets 99% of its revenue from advertising .
In television, the repeal of controls on overseas ownership allowed Canadian media company Canwest to take control of TV3, buying up radio stations as well to create MediaWorks. However in 2007 it sold out to Australian investment company, Ironbridge, in a debt-laden deal which in 2013, forced MediaWorks into receivership. It was rescued by a consortium of investment groups and banks . The experience and motivation of such investors is financial. Ironbridge’s defence against the charge that it was buying MediaWorks despite no media experience was: “Ironbridge did not know much about waste either before buying EnviroWaste” .
tv by dollars
Surveys showed that the outcomes of financially-driven television rapidly became clear. For example, primetime TVNZ news showed a “marked decline in item length and a preponderance of brief sound bites” between 1985 and 1992. The emphasis shifted “from issues relating to politics, economics and industrial relations towards those of crime, human interest and natural disaster”. Over a similar period, commercial breaks increased from 12% to 23% of the bulletin  and in children’s programming, animated cartoons multiplied five times, replacing documentaries, news, craft, science, natural history, music, drama and Maori programmes .
Local content shrunk, particularly on private channels. In 1999, Canwest’s TV3 and TV4 screened no new local drama or comedy shows. With pressure from the new Labour-Alliance Government and NZ On Air funding, local content increased. But in 2012, TV3 and FOUR together still broadcast less local content than either Māori Television or TV One. First-run local content fell across the seven main free-to-air channels every year from 2008 to 2012 . The Public Media Project estimates that in 2012, NZ On Air supported only 12.6% of first-run local content .
Prime TV, established by Australia’s Prime Television, was bought in 2006 by Sky. This kind of sale would be banned in many other countries because it greatly increased Sky’s bargaining power in bidding for sports and other programmes. Prime is now a “showcase” to lure free-to-air viewers into subscribing to Sky which has steadily amassed the best programmes. This creates a vicious circle of further boosting Sky’s viewer numbers and buying power.
Sky was founded in 1987 by business pillars of the New Right, including wealthy supporters of Rogernomics. Murdoch’s INL took control in 1997  but sold out in 2013. By June 2013, 49.0% of residential households subscribed to Sky. It has a pay television monopoly and a powerful position in television broadcasting. In other countries, it would be forced to offer major sports events live to free-to-air channels. In effect, it has become the principal base for new channels, despite the attempt to provide a neutral base for digital broadcasting through non-profit Freeview.
Internet-based sports and other commercial video services will provide competition for some of Sky’s offerings, but won’t necessarily threaten Sky’s dominance. Those are games Sky can play too, with deep pockets.
The 2013 switchover to digital broadcasting reinforced Sky’s privileged position. No digital frequencies were set aside for non-commercial television, which forced regional operators to either buy access at commercial rates or cease broadcasting. Only nine of the 20 regional channels are operating on Freeview, including only three of eight non-commercial channels . The leading private public-service broadcaster, Stratos, and its successful non-profit associate, Triangle Television (now Face TV), have in effect given up the battle and are now broadcasting solely on Sky.
Sky’s dominance increasingly looks like Telecom’s telephone network monopoly which led to its forced break-up. Broadcasting policy would be little different if it had been written by Sky.
The Labour-Alliance Government elected in 1999 found itself unable to do more than urge broadcasters to increase local content (with a little success). It tried to raise TVNZ’s standards by imposing a public-service charter but failed because it did not fund TVNZ for the changes needed.
More successful was the creation of Māori Television and two fully-funded channels on Freeview, TVNZ6 and TVNZ7. Māori Television surprised opponents with its success in becoming effectively New Zealand’s only true public-service television channel. TVNZ6 and TVNZ7 drew in increasing audiences with their advertising-free children’s programmes, documentaries, current affairs and full-hour news programmes but they were funded only to 2012. TVNZ closed TVNZ6 in 2011. The funding was cut in 2012 and TVNZ7 closed. The three channels had however shown that public-service television could attract a sizeable and loyal audience.
Radio New Zealand has demonstrated that public-service radio can attract a strong audience and respect from other media. Its National network’s Morning Report and Checkpoint programmes are acknowledged news leaders, and it provides the only serious current affairs radio programmes outside volunteer-run access radio.
Two groups, The Radio Network (TRN) and RadioWorks, a MediaWorks subsidiary, dominate commercial radio, with 85% of its listening audience in 2013: 42% and 43% respectively . TRN bought Radio New Zealand’s extensive commercial radio network when it was privatised in 1996. It is owned by the Australian Radio Network. It in turn is owned by NZME. - NZ Media and Entertainment (the new name of APN News and Media), one of New Zealand’s largest newspaper owners (see below) and until February 2014, Clear Channel Communications, one of the largest and most controversial radio broadcasters in the US . Both groups bought out numerous independent stations over the last two decades. They collaborate through their marketing joint venture, The Radio Bureau, which has a near-monopoly on selling radio advertising for commercial radio. It says this is (unsurprisingly) “unique in the world” .
radio for advertisers
Increasingly, network branded programming is centrally broadcast or pre-recorded, losing local content. The ‘brands’ are designed for advertisers rather than listeners. The Radio Bureau says each radio station brand targets “a slightly different psychographic segment of the market, which, for advertisers means little or no wastage” . It says New Zealand commercial radio is “arguably the most deregulated in the world” .
As in television and radio, two companies dominate newspaper publishing. Fairfax and NZME. (formerly APN) together had 90% of daily newspaper circulation in June 2013, according to Audit Bureau of Circulations data .
Fairfax, part of the major Australian media empire, bought the newspaper arm of News Corporation’s INL in 2003. In 2013 its newspapers had 49% of daily newspaper circulation. It owns two of the three Sunday newspapers, ten dailies, over 60 give-away community newspapers, and over 20 magazines.
NZME took over the major newspaper publisher, Wilson and Horton, in 1995. Until 2012, NZME (then APN) was controlled by Irish media magnate, Tony O’Reilly, through his company, Independent News and Media, which still has a 17.6% shareholding. In 2013, NZME. had 41% of daily newspaper circulation, 27% from the New Zealand Herald. It owns 10 regional newspapers including 6 dailies.
Media researcher Merja Myllylahti estimates that “financial institutions which don’t have any inherent interest in media now hold 55.6% of NZME. shares and 56.5% of Fairfax Media shares” .
Both companies are facing falling circulation and advertising income. Circulation of Fairfax dailies fell 17% in the five years 2008-2013, while NZME.’s fell 18% (and 27% since 2003) . Sharebrokers Forsyth Barr said in 1999: “the business of newspaper publishing is selling advertising” , yet newspaper advertising turnover fell over 30% from $780 million in 2008 to $540 million in 2012. They have responded with outsourcing, centralising production, restructuring and staff cuts.
slide to the bottom
A 2007 survey of New Zealand journalists showed it was a common experience that newsrooms had been pressured to do a story because it related to an advertiser, owner, or sponsor. Over two thirds thought commercial pressures, job losses and lack of experienced journalists, due to low pay, were compromising the media’s watchdog role and investigative journalism. They were concerned about the lack of analysis and oversimplification of stories. 
Newspapers lost the primary role in investigative reporting to public-service television when it functioned. Public-service television barely survives. With a few notable exceptions, our top investigative journalists are no longer in newspapers or television. They are freelancers like Nicky Hager and Jon Stephenson, who too often are ignored or even scorned by our newspapers. But commercialised news media are now failing to even report the news in an informed, thorough and independent way.
There are of course alternatives such as blogs, access radio and television, citizen journalism, private non-profit public-service media, local online-only news sources such as Scoop, and thousands of international internet sources. Some do a good job of increasing opportunities for people to participate in public life, and need support for that. But they do not replace mainstream media in forming a common view of ‘what matters’ in the news. Nor do they draw their audience from outside their own immediate circle of interest. So they tend to weaken rather than strengthen shared understanding in the community. That lets the mainstream media set what counts as "reality," even though it is superficial and open to political and corporate spin. The mainstream media is still needed as well as the newer alternatives – but it is not doing the job society needs.
How could it be different? According to Transparency International, “New Zealand is said to have the most deregulated media market in the Western world” . Few other similar countries put up with such low expectations of social responsibility and the effects of the purely profit-driven news media that is present here, let alone the dominance by just a few media companies.
We are experiencing a market failure in providing sufficient quality news, analysis and investigative journalism for a healthy society. The failure will intensify with the loss of the advertising income that subsidises news services. This increasingly urgent situation justifies regulation which addresses the failure without threatening media freedom.
Sky should be broken into a content provider and a neutral network provider which third party channels can access at cost. All providers should be required to share coverage of sports and other events of national significance with free-to-air channels.
A specialist broadcasting authority should administer tighter rules to ensure no single commercial provider ever becomes so dominant again. New competition rules should severely limit cross-media ownership.
The government should renegotiate international commitments such as in the GATS agreement. It should introduce local content requirements for broadcasters and controls on overseas ownership of media companies that are important to the nation.
Digital frequencies should be available to not-for-profit radio and television at reduced or no cost. NZ On Air funding should be available to regional providers which meet public-service criteria.
The market failure in investigative reporting should be recognised by providing funding for such reporting to all forms of news media through an independent organisation.
Radio New Zealand should continue to be funded as New Zealand’s national public-service radio. But the government should also fund a national public-service television channel and online national electronic ‘newspaper’ with specific responsibilities for investigative journalism.
We need much stronger protection for the independence of public funding and media organisations, to make them as free as possible from political and corporate influence. This effect comes partly from government and advertisers holding the purse strings. A ring-fenced levy such as one on all media advertising and pay television subscriptions could help fund these activities . The governance of these organisations should be reviewed to ensure their boards and directors are independent and primarily have expertise in journalism and broadcasting.
Invitation To A Public Conversation
From Scoop.co.nz Editor Alastair Thompson
Dear Scoop Reader,
This is the third in a series of articles in a "The State of the NZ News Media - Public Conversation" hosted by Scoop.co.nz.
You can subscribe to receive the contributions as they are published by signing up to the "Operation Chrysalis" mailing list on the Operation Chrysalis homepage HERE.
Each article will have a conversation thread attached to it on a public Loomio group which can be accessed HERE.
I look forward to engaging with you in this public conversation of the coming two months.
Scoop.co.nz Editor and publisher
Many of the following are useful sources for further detail of the matters discussed here.
1. Smith, P. (1996). Revolution in the air! Auckland, New Zealand: Longman, describes this and provides a worthwhile history of the developments in television until the mid 1990s.
2. Hope, W., & Myllylahti, M. (2011). Media-communication ownership In Aotearoa-New Zealand: Legacies and contemporary trends. Foreign Control Watchdog, (128), 50–68.
3. Radio Spectrum Management, New Zealand Government. (2011, February 3). First auction | Radio Spectrum Management. Radio Spectrum Management. Retrieved January 18, 2014, from http://www.rsm.govt.nz/cms/customer-support/about-us/a-brief-history-of-regulation-of-radiocommunications-in-new-zealand/first-auction.
4. Vaughan, G. (2007, May 9). Ironbridge gets CanWest but happy to stay listed. Dominion Post, p. C1. Wellington, New Zealand.
5. Myllylahti, M. (2013). JMAD New Zealand media ownership report 2013. Auckland, New Zealand: AUT. Retrieved from http://www.aut.ac.nz/study-at-aut/study-areas/communications/profile/media-networks/journalism,-media-and-democracy-research-centre/journalists-and-projects
6. Vaughan, G. (2007). Agent for private equity in NZ. Press, C4.
7. Hope, W., & Myllylahti, M. (2011). Media-communication ownership In Aotearoa-New Zealand: Legacies and contemporary trends. Foreign Control Watchdog, (128), 50–68.
8. Cocker, A. (1996). “A toaster with pictures”: The deregulation of broadcasting in New Zealand (PhD Thesis). University of Auckland, Auckland, New Zealand. Retrieved from http://hdl.handle.net/2292/2026
9. Data in this paragraph from: NZ On Air. (2013). 2012 Local Content New Zealand Television. Wellington, New Zealand: NZ On Air. Retrieved from http://nzonair.govt.nz/news/newspressreleases/pressrelease_2013_04_24.aspx
10. Public Media Project. (2014). NZ TV’s digital division creates a marginalised majority. New Zealand: Public Media Project.
11. Rosenberg, B. (2008). News media ownership in New Zealand. Campaign Against Foreign Control of Aotearoa (CAFCA). Retrieved from http://canterbury.cyberplace.org.nz/community/ CAFCA/publications/Miscellaneous/mediaown.pdf
12. Public Media Project. (2014). NZ TV’s digital division creates a marginalised majority. New Zealand: Public Media Project.
13. See http://www.radios.co.nz
14. Rosenberg, B. (2008). News media ownership in New Zealand. Campaign Against Foreign Control of Aotearoa (CAFCA) , p.43ff. Retrieved from http://canterbury.cyberplace.org.nz/community/ CAFCA/publications/Miscellaneous/mediaown.pdf
15. The Radio Bureau. (2006). TRB’s Role. The Radio Bureau. Retrieved January 19, 2014, from http://www.trb.co.nz/standardPage_v2.asp?id=239
16. The Radio Bureau. (2006). New Zealand radio market – Segmentation. New Zealand: The Radio Bureau.
17. The Radio Bureau. (2006). The Radio Bureau - History of NZ Radio, NZ commercial radio history. The Radio Bureau. Retrieved January 18, 2014, from http://www.trb.co.nz/StandardPage.asp?id=180
18. See http://www.abc.org.nz.
19. Myllylahti, M. (2013). JMAD New Zealand media ownership report 2013. Auckland, New Zealand: AUT. Retrieved from http://www.aut.ac.nz/study-at-aut/study-areas/communications/profile/media-networks/journalism,-media-and-democracy-research-centre/journalists-and-projects
20. Calculated from Audit Bureau of Circulations data at http://newspaper.abc.org.nz/audit.html, various years.
21. Diversity key for media play. (1999, February 27). Press, p. 22. Christchurch, New Zealand.
22. Hollings, J., Lealand, G., Samson, A., & Tilley, E. (2007). The big NZ journalism survey: Underpaid, under-trained, under-resourced, unsure about the future - but still idealistic. Pacific Journalism Review, 13(2), 175–197.
23. Transparency International New Zealand. (2013). Integrity Plus 2013: New Zealand National Integrity System Assessment. Wellington, New Zealand: Transparency International New Zealand. P.262. Retrieved from http://www.transparency.org.nz/2013/http:/transparency/2013/Integrity-Plus-2013-New-Zealand-National-Integrity-System-Assessment
24. There is a useful summary of possible public service broadcasting models and funding mechanisms in Thompson, P. A. (2011, November 10). Show me the money - funding possibilities for public television in New Zealand. Presented at the 2011 SPADA Conference, Auckland, New Zealand. Retrieved from http://www.victoria.ac.nz/seftms/about/staff/peter-thompson/Show_Me_the_Money_Thompson-SPADA_2011.pdf
Bill Rosenberg has been Economist and Director of Policy at the New Zealand Council of Trade Unions (NZCTU) since 2009. As well as having published on economic and labour issues, globalisation and trade, he is the author of a number of articles on the news media including the report “News media ownership in New Zealand”. The views in this article are his own.