Fran O’Sullivan’s view

Failure of media marriage attempt means companies can focus on other ways to beat Facebook and Google

The proposed NZME-Fairfax merger is effectively dead and should now be buried instead of chewing up more time and funds in legal appeals. It just needs one or other of the parties to read the last rites.

Then both companies can focus on their own quite divergent strategies and examine other partnership options to reach the scale that is necessary to successfully play in the big pond with Facebook and Google.

Those divergent strategies were apparent yesterday in the wake of the Commerce Commission decision to decline authorisation for a merger of the listed company NZME and Fairfax Media’s New Zealand offshoot.

NZME CEO Michael Boggs was prudent in his public statements. There were no plans to cut staff. It was business as usual. NZME would focus on its six-pronged strategy. The proposed merger was simply another strand. Not a be all and end all.

The NZME share price was hit but recovered some ground after Boggs’ shareholder briefing.

Contrast that with the rhetoric from the Fairfax chief executive. Greg Hywood said that in light of the decision an “even greater focus on cost efficiency will be necessary”.

“Moving to the next stage of our New Zealand publishing model will involve reshaping how we deliver our journalism to local communities. Further publishing frequency changes and consolidation of titles is an inevitability.”

Hywood has undoubtedly told it straight from the shoulder from the Australian company’s perspective.

But he has not shown much empathy towards his NZ team. They were undoubtedly spooked when he told the commission’s December conference it would be the “end game” if the merger didn’t happen.

The reality is that the NZ media sector is in play.

Other opportunities will unfold. And in any event a breakup scenario for Fairfax NZ would not necessarily be a negative if it opened the way for new ownership of provincial assets.

The whole saga is reminiscent of the various failed attempts by Qantas and Air New Zealand to hook up more than a decade ago after the Kiwi airline’s fortunes took a tumble in the wake of the 2001 bailout.

Doomsday scenarios were painted. Air NZ told the Australian regulator (ACCC) it needed the alliance to survive, and Qantas said the deal was in the national interest by underwriting its longer-term health. Similar arguments were mounted here.

But their plans were ultimately rejected by competition regulators on both sides of the Tasman.

One interesting aspect was that the lengthy period involved gave Air NZ enough time to get its house in order and be in a stronger position when the competitive gloves came off.

NZME is also in a stronger position than it was when the merger application was announced a year ago. It has disengaged from its former Australian parent company, listed on the stock exchange in both countries and posted credible financial results.

This does not shield the company from the challenges posed by Facebook and Google. But it does place it in a stronger position for the next marriage attempt.

It just needs one or other of the parties to read the last rites