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Fairfax and Nine Merger Article

Fairfax and Nine Merger Article

Published on October 23, 2018 by Joshua Dale and Connor Molloy

In a dynamic and evolving media landscape, companies are attempting to find ways to innovate and remain competitive and profitable in a market that is becoming increasingly dominated by social media companies, whose market exposure is nearly beyond reach. Nine Entertainment (Nine) and Fairfax Media (Fairfax) have each decided that the only way for them to compete in this changing market, is to consolidate their resources and face the challenge together. Whether a merger is the best way forward for the companies is yet to be seen. Either way, it will substantially alter the products of each individual entity and its impact will be widespread in relation to how Australians consume information.

On 26 July 2018 Nine and Fairfax announced that they would be merging in an agreement that would see Fairfax shareholders owning 48.9% and Nine shareholders owning 51.1% of what would be a new multimedia conglomerate operating under the Nine name. The Fairfax name (which has been around for 177 years) will be lost, and with it, arguably the diversity that was protected prior to the amendments to the broadcasting legislation which occurred late last year. The merge is being framed as an opportunity for both companies to pool their assets and increase profitability, while continuing to produce the same diverse range of products. The two organisations currently operate in entirely different areas of the media. Nine focus on entertainment driven platforms and Fairfax largely prioritise the distribution of news. The reality may be, that the products are too diverse, and that this merge will deprive consumers of options in a market that is becoming increasingly one dimensional.

The Broadcasting Legislation Amendment (Broadcasting Reform) Bill which passed through the Senate late last year brought two major changes; the removal of the two out of three rule, which stopped the same company operating a newspaper, radio and television outlet in the same city; and the reach rule, which stopped a single television broadcaster from reaching more than 75% of the population. These amendments, although largely criticised, have created new opportunities for media and entertainment organisations and have made this merger possible.

The proposed merge is currently under review from the Australian Competition and Consumer Commission (ACCC) who have the potential to stop it from coming to fruition. The review process focuses on the foreseeable future (generally one to two years) and assesses ways in which the merger may result in competitive harm to the market. The ACCC use a ‘with-or-without’ test to try and analyse the situation in the event that the merger does or does not go ahead. Although the review will be extensive, it will focus on the modes of delivery of each company and given their diversity, it is unlikely that the proposed merger will be harshly assessed.

The new merged entity will be in control of various subscription driven platforms namely, Stan, the Age, the Sydney Morning Herald and the Australian Financial Review. Each of the outlets currently offers their own independent subscription, and it is likely that they will continue to operate this way for the immediate future. Stan is billed month to month and each of the three publications requires customers to purchase an annual subscription. It is likely that the organisations managing the subscriptions won’t change, however the product being advertised and purchased undoubtedly will.

The nature of the product being sold by each of these outlets will likely be heavily scrutinised in the coming months. Inevitably questions will be asked as to whether consumers should be able to walk away from their subscription on the basis that the product advertised (and the one they purchased), is materially different to the product that has been delivered.

Will a subscription for a Fairfax owned Australian Financial Review largely the same as a subscription for a Nine owned by Australian Financial Review? This raises a large number of issues for current subscribers, especially those who have only recently purchased their subscription. Although both companies have stated an intention to ‘…conduct its business in the ordinary course’ it seems reasonable that the product may change slightly.

In a media environment that has recently been dominated by a decrease in funding for independent media outlets ABC and SBS, as well as the growing input of companies like Facebook and Google, this merger has the potential to entirely alter the dynamic of traditional media in Australia. One entity having majority control of substantial broadcasting, radio and print media assets may have severe implications on the independence of the media in this country and on an individual’s ability to access information.

Undoubtedly the new Nine entity will be a large player in the industry, but given the enormous reach of Facebook and Google it seems as though there is more change to come for the consumer and it is unlikely to result in higher quantities of independent news sources.

 

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