Paul McBeth is the editor of The Bottom Line and Curious News, having worked at BusinessDesk for 15 years, two of which were under NZME ownership. He was a director and shareholder of BusinessDesk’s publisher, Content Ltd, when it was sold to NZME.
There’s nothing the media likes more than talking about itself.
News agencies gleefully jump on the shortcomings of their rivals, and they puff out their chests in touting every little success, no matter how insignificant.
Your correspondent can well remember dashing up a report in the late 2000s about Fairfax Media – then the owner of the Stuff stable of publications – buying back some interest-bearing notes after Standard & Poor’s had cut its credit rating to a sub-investment grade rating BB+. And yes, we called them junk.
But it’s vanishingly rare to actually see one company drop the threat of defamation against another, as is the case where Stuff has reportedly put The Spinoff founder Duncan Greive on notice over his dive into creation of the Stuff Digital subsidiary.
Especially when Stuff was open to talking to endless suitor NZME about a deal with some of its mastheads, which the Auckland-centric company saw as a chance to extend the reach of its OneRoof listings business south of the Bombays.
And there’s nothing like having some competitive tension with dominant online classifieds business Trade Me also said to be having a sniff at the Stuff assets.
Which begs the question as to why one of the nation’s majors felt the need to flex against a 10-year-old mid-market player, whose clear-eyed commentary on the media industry is regarded highly.
As Greive said, it’s hard for news organisations to take the moral high ground when demanding transparency from others if they’re unwilling to be frank about their own businesses.
Take note
That’s a good lesson for the antagonist of NZME’s board, Jim Grenon, if he’s successful in his ousting of the media company’s board. Or at least coming to an agreed upon – and dignified – exit of some of the company directors.
His letters to fellow NZME shareholders, which seem as though they were begrudgingly released, offer some clear analysis of the media group’s cash flows and inability to strip out costs outside the covid-19 crisis – a time when there was a little more forgiveness for taking deeply unpopular actions.
And he’s got a point.
NZME has made some headway to stemming the tide over the past decade, with its $54.2 million of operating earnings in 2024 a 15.7% margin on revenue of $345.9 million. In 2019, that earnings margin was 13.6%, but it’s still down from the 18.3% margin in 2014, when revenue was $445.8 million.
But that’s also against a backdrop of a steady group decline.
Over the past decade, NZME’s print advertising has slumped almost 70% to $55 million, faster than the 66% decline in newspaper ad revenue to $165 million, while print subscriptions have more than halved to $45.7 million.
Yes, the gains in online advertising and digital subscriptions have been heartening for the group, with $22.6 million coming from online subs and $51.3 million generated in digital ads.
But the shrinking headcount and smaller wage bill haven’t kept pace with the falls in revenue, with NZME’s wage bill accounting for 43% of revenue in 2024, compared to 40% in 2019 and 36% a decade earlier.
And even the $27.2 million of ad revenue coming from OneRoof has a hefty $10.6 million from print.
In an industry-wide online ad spend of $2.17 billion, that’s but a drop in the ocean. Especially when online ads were attracting $589 million a decade ago.
Yesterday’s news?
There’s a reason why NZME doesn’t tend to come up on the Reddit or Sharesies forums. Legacy media doesn’t inspire the imagination the way it used to when it could fall back on the rivers of gold from classifieds advertising.
And if you’re looking for some pithy takes from engaged retail investors, you’d be better off hunting them out on the slightly more mature Sharetrader forum.
In fact, don’t be surprised if the drums beating for a return of Trade Me to the public markets inspire the investing public.
Sure, it’s a mature business with 25 years under its belt.
But it’s also highly profitable. When private equity firm Apax Partners paid $2.56 billion to take the firm private in 2019, its earnings margin was almost 66% on $250.4 million. Heck, its net profit margin was almost 39%.
And in its latest financial statements lodged with Companies Office, that earnings margin remained a healthy 62% in the June 2023 year.
With former Fairfax stablemate Domain looking likely to depart the ASX as US real estate giant CoStar lobbed in a A$2.8b billion for that business, a freshly spruced up Trade Me might make just the replacement for Aussie fund managers wanting an online ad firm for their portfolios.
Unsurprisingly, the phony war for the Trade Me investment banking mandate has begun in The Australian’s DataRoom.
With those sorts of numbers being bandied about, it’s easy to wonder how the likes of NZME and Stuff continue to dominate the headlines of the local business pages.
But then we did warn you that us media-types love staring in the mirror.
Image from AbsolutVision on Unsplash.
