NZME hopes for 'Facebook' millions after cost cuts return it to profit

Wednesday, 24 February 2021

NZME chief executive Michael Boggs says it would like to reach the kind of deal that Seven West Media struck with Google in Australia in the wake of moves there to regulate relationships between the media and tech giants.

Media company NZME has expressed hope it could reap millions of dollars from social media giants in the wake of moves in Australia to make Facebook and Google pay for news shared on their sites.

The New Zealand government has not committed to follow a move by the Australian government to require internet search and social media firms to negotiate content deals with publishers.

But NZME chief executive Michael Boggs said on a conference call with analysts that the company was looking forward to engaging with politicians here “on what they are looking to do”.

NZME was watching international regulatory developments and the progress of commercial agreements with “keen interest” as both could have implications for the New Zealand media market, he said.

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Facebook toyed with banning the sharing of news in Australia following moves there to force it to compensate publishers for news shared though its site, before talks and a back-track.

“Our government is currently saying they are getting advice on the topic.”

Boggs noted that Australian media company Seven West Media had reportedly signed a deal with Google entitling it to annual payments worth about A$30m (NZ$32m) a year.

“We would welcome values in that range,” he said.

“Even if they were adjusted for population size as opposed to audience size, they would still be significant values for our organisation.”

NZME shares have quadrupled in value since last April as a measure of confidence has returned to the media sector.

Boggs suggested social media firms could come under pressure from their own advertisers if they instead took the course toyed with by Facebook in Australia of blocking the sharing of news on their sites.

There was a “two-way value exchange” between internet businesses and publishers and that had been recognised in the proposed Australian law, he said.

“But I think what you are seeing is Facebook is realising the engagement that comes with quality content is really important.

“One of the largest media agencies in Australia last week started saying we may as well stop advertising on Facebook because it is not going to have quality content and negotiations and therefore we shouldn’t be putting advertising on it.”

That highlighted the importance of journalism and “trusted news” for those platforms, he said.

NZME on Wednesday reported a net profit of $14 million for 2020, which turned around a $165m loss it suffered in 2019 after booking a $175m write-down.

But the result was achieved by the company slashing its costs by 14 per cent, in part by axing about 15 per cent of its workforce, or more than 200 jobs.

It also reported that it succeeded in negotiating rent relief on some of its commercial tenancies.

The cuts helped NZME reduce its payments to employees and suppliers by $41m.

The company said it expected to be able to resume paying a dividend to shareholders in the second half of 2021, after suspending dividends in 2018.

The bulk of the annual profit was earned in the second half of last year.

NZME had trebled its net profit during the first six months of last year to $3m, despite reporting a 13 per cent drop in revenues to $158m during that period due partly to the impact of Covid.

Its annual revenues, which included $9.6m in government wage subsidies, slid 10 per cent to $331m, “reflecting the significant impacts of Covid-19 on advertising”.

Boggs said the initial shock of Covid saw advertising revenues across NZME’s business fall by close to 50 per cent.

“It’s very pleasing that we ended 2020 with advertising revenue in some areas approaching levels similar to 2019,” he said.

The company revealed in its annual report that its improved second-half performance had allowed it to join fellow media firms Stuff and MediaWorks in repaying voluntary wage cuts requested of staff during the Covid lockdown in April.

NZME shares have quadrupled in value since April and were trading at a three-year high above 90 cents on Tuesday, ahead of the result.