Media firms face even leaner times despite record audiences

Friday, 27 March 2020

Radio advertising is being hard hit, sources suggest.

ANALYSIS An eclectic mix of Kiwi workers have joined the likes of doctors, nurses and police in being deemed to work for 'essential services'.

Supermarket workers, couriers, internet support staff and – yes – journalists fall into the category.

Fridge and washing machine repairers appear to be latest workers to be added to the list of those having their day in the sun.

But in the case of media businesses, there is not much chance of them profiting from any heightened interest in news reporting, much of which now revolves around reporting on the pandemic.

Stuff chief executive Sinead Boucher says the demand for journalism has 'never been higher'.

* Television channel three 'a good business' struggling in a skewed market**

Newspapers are one of the 'essentials' still being delivered to homes.

'The audience for Stuff has been at record highs, driven by the public need for information and analysis around the Covid-19 situation and we can see that is mirrored across other publishers.'

Newspapers are particularly popular among the older people who have been identified as being more vulnerable to the virus, she notes.

'But news publishers in New Zealand are largely dependent on advertising revenue and there has been an impact on advertising as a knock-on from the disruption that key industries such as travel are experiencing.'

Analysing which of New Zealand's big-four media businesses might suffer most from that is a bit like trying to pick apart the experiences of 'Marvin the paranoid android' from The Hitchhikers Guide to Galaxy when parking cars at the restaurant at the end of the universe.

Outdoor advertising had been one of the bright spots of the advertising market, but the lockdown has changed that.

'The first 10 million years were the worst, and the second 10 million years, they were the worst too. The third 10 million years I didn't enjoy at all. After that I went into a bit of a decline.'

But Oliver Lockett, an analyst at British researcher GlobalData, is forecasting the most affected sub-sectors of advertising will be out-of-home and events advertising, as people go into isolation and large public gatherings are cancelled worldwide.

On a slightly more cheery note, Lockett says advertising can play a significant role in the global response to the coronavirus, with companies able to build brand value through socially-conscious advertising and public relations.

'Those that take this proactive approach will fare better both during and after the crisis,' he forecasts.

No surprises though that newspaper, online and radio business NZME, owner of the New Zealand Herald, warned on Monday that it was expecting its results this year to be negatively impacted by the pandemic.

'The extent to which NZME's financial performance will be impacted is impossible to predict at this time,' the company announced to the NZX.

NZME's share price has halved this year, falling to 20 cents on Thursday, which values the business at just $39 million.

Nine – the Australian owner of Stuff – has got off only a little more lightly, having lost 40 per cent of its market value so far this year.

Stuff chief executive Sinead Boucher says audiences are at all time high.

It also revoked its 2020 financial guidance last week, warning that the forward advertising market was becoming 'increasingly difficult to reliably predict'.

'Marvin the android' would probably note that the pandemic appears particularly badly-timed for the country's third major privately-owned news-gathering operation, television channel Three owner MediaWorks.

Ostensibly, it is still in the throes of seeking a buyer for its television business, which includes its Newshub television and radio journalism arm.

NZME, like many media businesses, has withdrawn its financial guidance.

Returning MediaWorks TV to profitability will be an even more daunting task with the threat of a depression hovering over the economy.

On Thursday, MediaWorks announced it was stopping work on all its local entertainment shows, including Dancing with the Stars and The Block NZ, for the time being.

The potential suitors tipped to be most likely try to turn around Three – Australian media businesses Seven, Nine and Ten – have headaches of their own, of course.

But, ironically, if Lockett is correct, it is the rump of MediaWorks' non-television business – which its United States majority-owner Oaktree had been expected to hang on to for while – that could be most impacted by the coronavirus downturn.

MediaWorks took over the New Zealand arm of Australian outdoor advertising business QMS last year in a non-cash deal, to diversify its business.

Its other major non-TV activity is radio.

An industry source said radio advertising was suffering disproportionately at the moment as it was predominantly bought by small and medium-sized firms seeking to drum up immediate, local trade.

Then there is Sky Television, which is expecting to be hit by the suspension of most live sports.

Despite doing little news-gathering of its own outside of dwindling sports news, it has also been classified as a media business and hence an 'essential service' by the Government.

Sky shares have declined by about 60 per cent since the start of the year and it has also withdrawn its profit and revenue guidance.

It has responded by offering tailored deals to customers to 'offer them more value' and dissuade them from cancelling or downgrading their subscriptions.

But it told the NZX on Wednesday that it was too early to assess the implications of those moves saying 'these remain very uncertain times'.

'Sky continues to work on various initiatives with rights-holders, and is reviewing work programmes in light of the Covid-19 restrictions,' it said.

Like other firms, all four media businesses may at least have the ability to claim a $7029 wage subsidy for each full-time employee, if they experience a 30 per cent monthly sales drop.

All also have high-enough revenues to potentially benefit from 'tailor-made' coronavirus assistance that Finance Minister Grant Robertson says the Government, Reserve Bank and the Treasury are working on for larger firms with annual sales over $80m.

Glenn Smith, managing director of Radio Bay of Plenty in Whakatane, says smaller media businesses are in much the same boat as bigger ones, with regard to the downturn.

The company has 20 staff including two full-time journalists, producing 93 news and farm bulletins each week, and is still in grief mode from the Whakaari tragedy, he says.

It is 'a big deal' running a full-time newsroom from a town of just 15,000 people, especially in an area where many people don't have internet access and few get newspapers, he says.

'People are really reliant on us.'

In April, the company would normally expect $140,000 to $150,000 of revenue, but 'right now, it's $74,000 and falling' and May looks even worse, Smith says.

A Government official said on Friday that community newspapers were not regarded as an essential service.

Mark Ebrey, editor of the Taumarunui Bulletin which has a print run of about 4000, said that meant he would only be able to disseminate news online during the lockdown.

'We are a small isolated community. None of the dailies really circulate here.

'It doesn't make much odds to me – I am a one-man band and most of my advertisers have pulled the plug for the duration, but it is an essential service getting local information to a community that can't get it from any other source.

'The national media doesn't say what is happening at the local clinic.'

In the fourth book of The Hitchhikers Guide to the Galaxy series, Marvin – now many times older than the universe itself due to time travel – finds his pessimism rewarded.

He dies happily, with the final words 'I think… I feel good about it'.

Perhaps the analogy won't go that far.

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