5 Apr 2020

A blame guide for the Bauer Media shutdown

From Mediawatch, 9:11 am on 5 April 2020

The news that Bauer Media is shutting down has been met with shock, sadness, and a wave of conflicting recriminations.

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Photo: Bauer

Bauer blamed the Covid-19 crisis for its decision to close its New Zealand titles including Metro, The Listener, North & South and Woman’s Day.

The government blamed Bauer

In turn, some bloggers, newspaper industry figures, magazine publishers, and Bill Ralston blamed the government.

All the contradictory finger-pointing made it hard to know how to apportion anger and disappointment over the closure.

At Mediawatch, we’re here to help. Over the last couple of days, we’ve put together this allocation of blame for the demise of New Zealand’s best-loved magazines.

The Internet

Blame allocation: 50 percent

The internet is the background radiation to every crisis in mainstream commercial media.

Much of the advertising that used to go to conventional media has been funnelled toward two giant tech companies - Google and Facebook - at an ever-increasing rate in recent years.

Even the government, which says it wants to save media, is sending a big portion of its ad spend to the tech giants.

A graph comparing newspaper revenue to Facebook and Google revenue in the US

A graph comparing newspaper revenue to Facebook and Google revenue in the US Photo: Thomas Baekdal

But Google and Facebook aren’t the only threats lurking on the internet for the likes of Bauer, NZME or Stuff.

When Facebook was still just a glimmer in Mark Zuckerberg’s eye, TradeMe was hoovering up the revenue that used to be spent on newspaper classified advertising.

A host of other internet companies have chipped away at the markets that used to be dominated by mainstream media.

They’ve combined to erode the ad-supported media funding model, to the point where it’s now virtually unviable on a large scale. 

Bauer may have been slightly insulated from that trend thanks to the large and steady subscriber base its magazines enjoyed, but ads still made up the majority of its revenue.

Its business model was being worn away long before it had to deal with a global pandemic and some damaging government regulation.

Government for not making magazines an essential service

Blame allocation: 10%

If you listen to Bill Ralston, the government summarily executed Bauer when it decided magazines wouldn’t be able to deliver and sell print copies during the Covid-19 lockdown

The truth is a little bit more complicated.

As Broadcasting Minister Kris Faafoi pointed out, Bauer had been looking to offload its New Zealand holdings for some time before the Covid-19 pandemic.

He rightly argued it had been struggling, and its long-term outlook was poor.

But his boss's contention that Bauer was just using Covid-19 as cover was more questionable.

The government has often acknowledged that New Zealand’s commercial media companies are in an existential crisis.

When Faafoi was appointed broadcasting minister in 2018, he told Mediawatch that several of those companies had indicated they would shut down if nothing changed.

“I have to be mindful of that because plurality of voices in journalism is extremely important. If we keep public funding strictly for public media entities and things continue in the way they have told me [about], they may no longer be in existence in three or four years and we will only have one voice for media," he said.

Some recent copies of Metro magazine

Some recent copies of Metro magazine Photo: Supplied

It’s hard to marry that with Prime Minister Jacinda Ardern’s blithe assertion that Bauer “should have kept going” after the government effectively cut off what remained of its income during the Level 4 lockdown.

“This is what happens when a publisher of any sort cannot get their product to market,” says James Frankham, Magazine Publishers Association board member and Kowhai Media owner.

“We can’t get into supermarkets at present. We can’t get through the postal service. It’s a heck of a problem and it’s no surprise really that Bauer realised they were in an untenable position.”

Faafoi has claimed that Bauer never asked for its magazines to be designated an essential service.

Magazine Publishers Association chief Sally Duggan disputes that, saying she worked closely with Bauer on a submission arguing for its products to get that designation.

In any case, without being able to sell their magazines, Bauer’s German owners faced the prospect of losing money indefinitely to retain some increasingly marginal publications in a distant country. 

That may not have been the single biggest factor in its decision to close, but it almost certainly accelerated its exit.


Blame allocation: 15%

Bauer didn’t ask for a wage subsidy or other government assistance on offer. It probably could have stayed afloat longer if it had.

But this is a multi-billion dollar company navigating a financial crisis. Its German owners didn’t grow up subscribing to The Listener or reading the pioneering journalism of Metro.

They likely saw numbers heading in the wrong direction, concluded there was little hope of them turning around, and decided to cut their losses.

That's callous, but it’s hard to see their incentive for staying the course without stronger government regulation. 

Having said that, there are legitimate gripes with some of the company’s decisions in the lead-up to its closure.

Former employees could point to moves like the quick establishment and closure of Paperboy, its decision to cut Metro back to bi-monthly publishing, and its attempt to consolidate its well-known titles under the newly established ‘Noted’ brand online as strategic missteps.

Covers from the now defunct Paperboy magazine.

Covers from the now defunct Paperboy magazine. Photo: Bauer Media

There are also complaints over how it handled its exit.

Much has been made of the company’s last-minute attempt to sell its magazines to the government for $1, but that could be seen more as an attempt to get out of paying its staff redundancy than a realistic offer.

Employment lawyer Michael Quigg told Stuff staff now have a case for making unjustified dismissal claims over Bauer’s lack of consultation on their redundancies.

E tū representative Paul Tolich said staff were given half an hour’s notice before being told the business was folding. "This is one of the worst processes I've seen for a long time... it's a shocker,” he said.

Now it’s shut, Bauer's owners aren’t fronting up to explain their decision. They’ve hired the Auckland PR firm Sherson Willis to handle comms for them. Maybe they’re more focused on acquiring other magazines.

Government failing to regulate internet companies

Blame allocation: 5%

Facebook paid $43,000 in taxes in New Zealand in 2014. Google paid $392,000 in 2017. 

Neither of them have been subject to the same checks and balances that restrain mainstream media, despite the fact they’re huge publishers competing in the same ad market. 

That status quo has been challenged in recent times, with the government floating a digital services tax, or Facebook tax in June last year. 

Ardern has said that she considers Facebook and other social media companies to be publishers, though that hasn’t been backed by meaningful regulatory action outside of the non-binding ‘Christchurch Call’.

Bauer Media

Bauer Media Photo: RNZ/Dan Cook

Could things have been different for Bauer if the tech giants were taxed fairly, and some of that money was diverted back into public interest journalism

What if Facebook had been subjected to regulatory action for promulgating dangerous conspiracy theories, supercharging the distribution of fake news, and allowing a propagandic mass murder video to circulate widely on its platform?

That would have helped, but it wouldn’t have changed the fundamental problem facing ad-supported media. 

Google, Facebook, and other tech companies have a better business proposition than their media rivals. 

They can offer more highly targeted ads at a cheaper rate. Companies can see exactly who their ads are reaching and how effective their spend has been. 

That’s hard for the media to compete with, even on a level playing field.


Blame allocation: 20%

Bauer’s problems didn’t start with Covid-19, but the virus likely made its prognosis terminal. 

Even before the government nuked its subscription and point-of-sale income for the duration of Alert Level 4, the company’s ad revenue was plummeting, with little hope of a revival. 

Bauer chief executive Brendon Hill pointed to that revenue drop off in his statement announcing the company’s shutdown.

“We understand the New Zealand Government’s decision to move to Covid-19 Level 4, but it has put our business in an untenable position. Publishing in New Zealand is very dependent on advertising revenue and it is highly unlikely that demand will ever return to pre-crisis levels.”

As Duncan Greive writes in The Spinoff, magazines have demands that make them uniquely vulnerable to a crisis like Covid-19.

“They have long production cycles, frequently extending to months. Advertising, what little there is in this market, is often booked even further out again. Think about that in the context of the clear and consistent message from the government: that we do not know how long the lockdown will last, that some regions might escape it earlier than others, and areas could return at any time. This makes perfect sense from a public health perspective, but has obvious flow-on impacts for businesses with long lead times.”

The lesson in this, as it is in all other parts of life, is that Covid-19 is ruining everything.