Comment: Leading media company NZME is once again pinning its hopes on growth in advertising revenues being just around the corner, despite a negative market since November last year extinguishing past positive talk.
NZME, publisher of the New Zealand Herald and owner of Newstalk ZB, saw its statutory net profit fall 76 percent to just $2 million in the first half of this year, compared with 2022, amid multi-million-dollar falls in real estate, government and retail advertising.
Among the falls was its income from digital advertising, which had in the past compensated in part for falls in newspaper ads and radio spends. Chief executive Michael Boggs said the digital dollars could evaporate quickly as clients’ accountants and marketers decided to pause monthly spends.
But he told analysts the negative year-on-year results in advertising revenue every month since November were about to turn, with this month projected to buck the trend and grow by around 3 percent over August 2022 and similar growth for September.
The market might have recognised his optimism.
In April, at the company’s annual meeting presentation, Boggs showed a graph which would have seen its advertising revenue return to positive territory in May, based on what he called an “improving trend for NZME” in forward bookings.
But May, June and July weren’t positive. In the same graphic presented with NZME’s half year results on Friday, what had been predicted to be positive monthly growth in May turned out to have been between 5 and 10 percent down on the year before.
It was the same scenario at the full year 2022 results presentation in February, with the looming March month held up by the chief executive as a turning point, only for that to have turned out negative at the next reveal.
All media companies in tough times try to highlight green shoots, and the current economic climate and looming election campaign would trouble any revenue forecaster.
In terms of operating Ebitda (earnings before interest, depreciation and amortisation), NZME reported a $21.3m profit for the first half of the year, to June 30. Boggs said it expects its full 2023 year Ebitda to be at the low end of the $59-$64m range already forecast, meaning it expects to notch around $38m in this second half of the year.
One of NZME’s strong revenue growth lines has been income from digital subscriptions for nzherald.co.nz, which now has 123,000 paying customers, up from 113,000 at the end of last year. Boggs said the weekly price for individual subscriptions to Herald premium had been pushed up from $5 to $6 a week without much impact on “volume”.
The value NZME gained from those subscriptions was higher than for its corporate subscription packages for nzherald.co.nz and it intended to work with business customers to “yield manage” how much they paid over time. The numbers moving onto corporate subscriptions had exceeded expectations and NZME would monitor that to guard against it cannibalising income from individual accounts.
Digital advertising for the company’s publishing division, including nzherald.co.nz and other papers, fell 12 percent in the first half, but Boggs predicted that with the return to positive monthly growth for August and September, digital ad numbers would also increase.
The impact of Cyclone Gabrielle saw newspaper circulation revenue hit, with temporary cancellations and reduced retail sales seeing the publishing division’s overall revenue down by 5 percent.
NZME’s radio business, with the successful Newstalk ZB brand, performed relatively strongly in the first half with audio revenues off just 1 percent on the previous year and an improvement in radio market share by one percentage point.
Real estate advertising in newspapers was down 36 percent year-on-year, contributing to a total fall in real estate income of $4m.
Boggs said: “Business confidence, while still negative, has been recovering and interest rates are peaking. Real estate sentiment is improving. However, the economic environment remains uncertain.”
He said the combination of the election campaign until October, which traditionally saw some advertiser hesitancy due to uncertainty, and the Rugby World Cup which was usually positive for advertising, meant it was hard to predict how the final quarter would play out for NZME.
Asked by Australian market analyst Arie Dekker if the reduction in costs so far this year, which saved $3.9m, was from managing the costs or “rebasing them”, Boggs said it resulted from managing spending carefully. “Having said that, we are always looking at opportunities where we can be more efficient across the business.”
NZME’s radio revenues held up and so did the dominance of its flagship station Newstalk ZB in the latest radio audience ratings.
In the second GfK commercial radio survey for 2023, Newstalk was again the number one station by market share and by total weekly cumulative audience.
The station does so well among older audiences that the best efforts of the top music stations of its MediaWorks rival in specific, younger, demographics still leave them well behind.
Newstalk actually slipped in its nationwide audience share from 15.7 to 14.5 but the Breeze in second is still in single figures at 9.4, MoreFM third on 8.1, the Rock fourth on 7.8 and Mai FM and The Sound equal fifth on 6.0. From second to sixth are all MediaWorks stations, with Mai the standout growth story, rising from a 4.7 share to 6.0.
In the Breakfast slot nationally, Newstalk’s Mike Hosking was well ahead in first place, but again his share dipped from 23.3 to 21.1. For perspective, the equal-second-placed Breeze and More morning shows could muster just 7.9 shares.
In the cumulative weekly audience numbers, Newstalk fell from 696,100 to 677,600 listeners, ahead of The Breeze on 611,000 (down 14,500), More FM on 590,200 (up 2000) and The Edge basically stable on 573,800. Mai FM, while in seventh, added a hefty 43,000 listeners to move from 415,800 to 458,700.
Publicly owned RNZ is also part of the GfK surveys, but reported separately. It said on Friday its RNZ National station had a cumulative audience across the week of 532,400, down from 557,000 in the last survey. That would put RNZ National in fifth place overall, just ahead of NZME’s ZM.
The RNZ National total audience slide has been notable over the past three years. In 2020, it topped all the commercial stations with 703,000 weekly listeners and as recently as a year ago was a full hundred thousand higher than it has recorded in this latest survey.
The Edge is most popular station nationwide with young adults 18-34, holding out ZM, which in turn leads with the 25-54 age bracket, and the Breeze knocked Newstalk ZB from its top perch with mature listeners 45-64, finishing on 231,600, a lead of 7000.
Newstalk was number one in the Wellington market, but saw its share fall from 20.2 to 15.3, ahead of The Breeze on 9.9; in Christchurch Newstalk fell away a little from 19.6 share to 17.0, ahead of More on 10.8, and in Auckland Newstalk dipped from 17.2 to 16.0 to comfortably remain on top of The Breeze on 10.5.
NZME’s claim on number one station is one thing. MediaWorks’ claim on music market dominance is another. For the market overall, NZME’s share fell from 38.1 to 37.0 and MediaWorks was marginally higher to 51.7 (up 0.2).
Vale .. JP
An elaborate prank played out in Australian media this week. It involved a private equity manager with links to NZ’s MediaWorks.
An obituary to the career of Jonathon “JP” Pearce appeared in The Sydney Morning Herald’s obituary columns. JP was a managing partner at Quadrant which, with American investment fund Oaktree, owns MediaWorks.
The obituary suggests that JP was not a loved figure in Australia’s finance sector.
“An awkward memorial service will be held at Deutsche Bank Tower where JP’s former colleagues at Quadrent [sic] will need to make 90 seconds of small talk for the first time in 8 years (unpaid leave will be recorded for the event.)” The notice included this cutting observation of: “JP’s prickly way with other human beings who did not offer him any obvious value.” And finished with “Vale JP. Often wrong, never in doubt.”
Pearce, or JP, was a frequent visitor to Mediaworks’ Auckland HQ in the weeks before the decision was made to shut down Today FM. Ex-employees say staff relations were not his strong point. JP is understood to be leaving Quadrant.
The prank was good enough to inspire two other newspapers, The Australian and The Australian Financial Review to report on it.
Meanwhile, acting MediaWorks CEO Wendy Palmer who had to carry out the sudden closure of Today FM and cope with the considerable fallout just weeks after arriving at the radio business is staying on.
Quadrant’s Barclay Nettlefold, a board member of MediaWorks, said “Wendy is a highly capable leader and has proved to be a steady pair of hands over the past six months… the board is confident Wendy is the best person to take the business forward over this next period to continue to grow its market-leading radio, outdoor and digital platforms.
Stuff will be chuffed with its latest Nielsen monthly unique audience result, seeing its total readership rise above the two million mark even after creating three paywalled sub-sites that siphoned off some of its deepest and best content.
Stuff launched The Post, The Press and The Waikato Times as subscription news sites and regular Stuff readers would have seen big names and regular content disappear from the free main site.
Nevertheless, Stuff remains a hearty number one in the metrics for July, with 2,035,000 readers (up by 100,000 over June) and almost 200,000 above its perennial rival nzherald.co.nz, which had an even better jump of 11.6 percent.
Next was TVNZ, at 960,000, RNZ on 880,000 and Newshub at 876,000.
Fast and Independent
On Tuesday night about 100 media industry leaders or stakeholders gathered in Auckland for the official launch of a new industry body, Independent Media Agencies New Zealand (IMANZ).
Twenty eight of NZ’s independent advertising agencies (ones that are not part of big international conglomerates) have formed the group to promote the benefits of dealing with New Zealand-owned media agencies.
The chair, Alex Radford, took a poke at the independent agencies’ bigger, overseas-owned, competitors. “When advertisers choose to work with independent agencies, they’re often choosing to work with experienced and more senior, locally based media strategists and operators with greater commitment to local people and whenua”
Those attending were treated to a panel discussion chaired by the NZ Herald editor at large, Shayne Currie, with Matt Headland, managing director of Stuff Brand Connections; Jodi O’Donnell, commercial director, TVNZ; Carolyn Luey, chief digital, and publishing officer at NZME; and Carsten Grueber, country manager, TikTok NZ.
The topic for discussion was ‘Innovation and Agility: The Competitive Edge of Independent Media Agencies in New Zealand’ but it quickly evolved into a wider discussion on the state of the media.
Several themes emerged – traditional advertising is down and there wasn’t a lot of optimism about it bouncing back quickly.
Most of the big legacy media organisations are still in the midst of a transition to digital and are trying to speed it up. Digital is the focus – and, by definition, legacy assets like free-to-air TV, print and to a lesser extent traditional radio will not get much, if any, further investment.
The media companies talked about being fast and responsive when advertising agencies came to them with ideas … and willing to give anything a go. TVNZ’s O’Donnell talked about the successful integration into Shortland Street of a campaign to lift the image of nursing.. If you have got the money and an idea that works you can get it written into the soap opera.