It looks pretty tough to be in the media. The traditional newspaper barely makes it to the fish and chip shop and no headline attracts my eye these days. There was a time where I could cheat by reading the free copy in the staffroom. There was also a time when I made sure there was a copy in the staffroom. Now it is an unwelcome distraction from my phone which provides free information from whatever social media platform I like, with my preferred bias built-in.
I am just old enough to vaguely recall the abolition of the Broadcasting Fee, a $110 ‘NaZis on Air’ annual charge to fund New Zealand produced broadcasting. A campaign of civil disobedience started by Lindsay Perigo in 1995 and pursued by the Libertarianz Party succeeded in 2000 with the fee being abolished after 150,000 people hadn’t paid. I mention this now because the supporters of that campaign generally used the poor quality of TV and radio as their justification for not paying. The majority missed the entire point of the campaign which was more of the ‘taxation is theft’ variety.
To avoid any ambiguity, the quality of the content of the various media providers now is not relevant to why I’m writing this article. The perceived bias’ of those providers is also not the point. The point of owning a media enterprise is the sale of advertising space. This is achieved by making the content that accompanies the advertising space interesting enough for you to divert your eyes toward it. If you think their purpose is the conveyance of unbiased facts, you probably have a pile of adult teeth under your pillow and a sign for the tooth fairy outside the door. As for media bias, that is a compelling reason why any media still owned by the state should be privatised urgently.
Now that any cause for confusion has hopefully been eliminated, let’s look into the reasons for the decline of media as we once knew it, harried by a regulatory boot. I don’t go to the cinema often these days so I can’t recall whether you watch an advertisement about the perils and penalties of movie piracy prior to the movie. I suspect telling people who pay to watch movies, not to watch pirated movies for free didn’t quite reach the target market anyway. Piracy was thought to threaten the entire media industry, justifying the passing of ‘Sky-Net’ anti-downloading legislation.
In 2013 a fine of $557 was handed down to a 50-year-old man who claimed while defending himself, that it was the doing of his children as he barely knew what a BitTorrent was. (Paradise by Coldplay was the downloaded song in question. I think the public naming of the offending child would have been embarrassing enough). I’m not sufficiently interested to research efforts of the Recording Industry Association of New Zealand until now, however, it was reported by the NZ Herald at the time that pursuit of piracy had cost RIANZ $250,000 yielding a $1,200 return so I suspect they’ve given up the chase.
Six years later the industry has changed substantially and nobody will be surprised to learn that the 2011 Sky-Net legislation is an obsolete dinosaur. A few out of the 7.7 billion minds that are the global free-market developed alternatives, adapted to technological change and consumer demand and piracy is now a small cost of doing business. The Trabant is my favourite example of why legislators are incapable of participating in the economy but the Sky-Net laws are one of tens of thousands of additional irrefutable examples.
In a world of Netflix, ad-free Youtube, Amazon, Snapchat, Tick Tock etc, the industry that could loosely be described as media has morphed, evolved and triumphed in a manner that nobody predicted in 2011. What about the radio, television and their news equivalents that we might describe as traditional media? Are they on an inevitable spiral down to the scrapyard where they belong? Should an advocate of the free-market accept their demise as an indication that their audience has moved on? The situation in New Zealand is a little more complicated. The dog eat dog laissez-faire shitfight exists only in the minds of the most dogmatic socialist.
In terms of network ‘free to air’ television, the major players are Three, owned by Mediaworks, Prime owned by Sky TV and TVNZ, owned by the Government. Three (including Three Life and Bravo) being up for sale is not new as it has long been up for sale as part of a failed package, integrated with radio, but the sale of the TV arm by itself is a new development. TV3 has been losing $5 to $10m a year while it is estimated that the Sky-owned Prime loses much more annually but is retained as a free-to-air sports extension of the Sky business (itself having posted a $608m loss this year, but does plan improvements through its streaming arm). Depending on who is telling the story, Mediaworks either received a bailout loan from the Government of $43 million in 2011, or a payment deferment on its frequency licenses for four years. In any case, the business has not looked financially attractive for a very long time, if ever.
Is this because the free-to-air model is simply dead? Is the market too small for so many players? Is TVNZ simply outcompeting an inferior business? The more I dig into this, the more complicated the situation appears. One aspect of this market, however, is still clear. TVNZ is owned by the Government. The Government is no longer expecting dividends from TVNZ for the foreseeable future, and the SOE is nonchantly expecting to lose $17.1m over the next financial year coupled with a $20m investment in content over the next three years, including securing rights to broadcast the Blackcaps for several seasons.
This is where the rot in the ‘competitive market’ becomes evident. Mediaworks is losing millions because it cannot compete with a TVNZ that doesn’t have to make a profit and is spending millions securing content that is unafordable for the privately owned rival. What could possibly be the eventual fate for the Three television wing in that market environment? How could it ever look like an attractive product to a new owner? It would never matter how much money was poured into it, to produce different and exciting content and secure free to air market share against pseudo-corporate cronyism. Theoretically, TVNZ can spend without fear of collapse or consequence with the backing of New Zealand’s Government and its $80 billion annual budget. If the free to air model is broken then yes, the participants should fail and they should fail only because the concept is unsustainable, not because the competitor is guaranteed taxpayer funded survival.
In addition to this economic injustice facing the owners of Mediaworks are more considerations for golden boy Kris Faafoi (is there anything he doesn’t do?) resulting from an advisory group made up of bodies including RNZ, TVNZ, the Treasury, NZ On Air, the State Services Commission, Ministry for Culture and Heritage, Department of Prime Minister and Cabinet, Te Puni Kakiri, Ministry for Pacific Peoples, and an ‘independent expert’. That reads more like a list of opportunities to save money than a body to improve New Zealand broadcasting.
I’m at risk of descending into a very complex rabbithole, so will cut to the chase on the Government’s activities before moving on to the other player distorting the normal market behaviour in this industry. The government advisory group is rumoured to be considering the merging of RNZ and TVNZ with NZ on Air or another option that would have to be accepted by cabinet, disestablishing all the bodies in favour of creating a public media entity operating across an unspecified number of platforms.
My simple response to this is “why?” What problem currently exists that would be solved by all of this activity? It is difficult to sift through all the bureaucratic jargon to identify exactly what this electronic sleeping pill costs the taxpayer annually. The public broadcasting budget is $148m and Radio NZ eats up approximately $8 million of that in addition to $1.8m capital funding for RNZ and RNZI which extends broadcasting to 17 stations in the Pacific region. It would be hypocritical for me to point out what mind-numbing dosh spews out of this frequency at various hours of the day, catering for every possible interest niche and eccentric dullard with a radio, given what I had written earlier. So I’ll simplify my objections by saying that if it cannot survive without taxpayer subsidies and cannot attract sufficient advertising revenue, then it should go the way TV Three looks to be going; the scrapheap at the end of memory lane.
The same quality control applies to TVNZ. Instead of private businesses being wiped out by a state-owned entity operating in ‘godmode’, it should be sold and stand on its own feet in the competitive market. Is free to air television an obsolete concept? Selling TVNZ is the only way to find out. I cannot think of one essential purpose state ownership of radio and television offers. If the counter argument is that a government broadcaster is essential then I have some horrible history books you need to read.
The other regulatory monster that needs to be reined in is the Commerce Commission, though Communist Commission would be far more appropriate given the purpose for its existence and the powers it is able to exercise. This includes the arbitrary ability to order businesses in any commercial sector of its choosing to open their books and participate in a compulsory investigation of whether they are charging too much for their services or making too much profit. How much is too much? Only the Commerce Commission knows.
This regulator is another monolithic obstacle to negotiate for any businesses that may have identified merging with rivals as the best opportunity for future prosperity. It must be convinced by the relevant parties that doing so would not unreasonably stifle competition in the market. In a small country of five million people, how many participants greater than one is market competition? Only the Commerce Commission knows, or more correctly, has the power to decide. What if the Commerce Commission is wrong? Opportunity cost is an invisible concept that is difficult to present into economic calculations but to put it simply is the choice that could have been made instead of the choice that was made. The Commerce Commission’s decisions are difficult to prove wrong without a collapsed entity or two following its rulings, though even that responsibility is sufficiently abstract to be very difficult to measure. In any case, it doesn’t matter because if you fail to challenge their decisions in court, the Commerce Commission isn’t wrong.
Recent high profile merger processes the Commerce Commission have prevented include NZME and Fairfax (now known as Stuff) and Sky TV with Vodafone. The former was applauded as a victory for media diversity by trade union E Tu which acts for journalists but is evidently blind to the precarious position of most traditional media operators. In a time when anybody can create an internet blog site for a few hundred dollars, there are no barriers for entry should the merger have gone ahead. There are plenty of risks of a slow decline into history in a small market with a few million customers now it has been prevented.
A commercial difficulty, otherwise known as a “market failure” by the left and pronounced in deadpan monotone by anyone with sense, can be traced back to governmental or regulatory interference with a frustrating ease, by advocates of getting government’s fumbling paws out of the economy. Re-allocating malinvestment (i.e. not throwing your money at stupid activities) can’t be done without visible pain for those who relied on that financial stream until now, while the previously invisible opportunities leaving money in the pockets of those it initially belonged to, take time to appear. That, apart from ideologically motivated deliberate dishonesty, is the only justification I can see for people who attack the reforms that enriched after they deregulated, while standing on a manifesto that doesn’t feature their reversal.
Getting to the bottom of the difficulties in a sector of diversities that render defining it nearly impossible is something I haven’t achieved in a simple opinion piece. I doubt anyone would read a book that claimed to do so because the rapid changes in the world of media would render it instantly out of date by the time it was finished. Much simpler is identifying the biggest and most obvious obstacles to fixing the difficulties. They’re so resistant and slow to change that they’re obsolete by the time they’re finished and they’re easily recognisable as being the same cause of however many public policy problems you might attempt to solve.
When you consider the infinite causes and campaigns New Zealanders form groups to solve, would removing the Government from just a couple, as a policy experiment, be an unreasonable request?