INL Digital Edition April 15, 2020

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12 APRIL 15, 2020 Businesslink Coronavirus precipitates Bauer’s decision to quit Mark Jennings and Tim Murphy The decisions by German media giant Bauer to shut its New Zealand magazine operation and NZME’s axing of Radio Sport have been precipitated by the coronavirus. But the closures are also due to the deeper problems of the local media industry. The sudden announcement that Bauer, one of the world’s biggest media companies, is pulling out of New Zealand and closing iconic magazines like The Listener, North and South and Woman’s Day if it can’t sell them, sent a jolt through the media Industry. Radio Sport closure For industry observers, the decision was not a major surprise but the speed and suddenness of it was. The news media has been waiting for the dominoes to start falling. First to go was Radio Sport. Its owner, NZME, has been under sustained pressure for some time. With no sport events to cover, advertising collapsing and 25 staff on the payroll, the station had no chance of returning to profitability for years, or possibly ever, given that it was already struggling pre-virus. Bauer’s different Bauer’s decision is different. The privately owned German company’s annual revenue last year was roughly $4.2 billion. It boasts that every second German reads one of its magazines. It sold 433 million issues in Germany alone last year and owns 600 titles worldwide. It has a huge radio operation with 100 stations in Europe and 24 million listeners tuning in every day. In the UK it has 80 stations and a number of TV music channels. If any media company can withstand the ravages of coronavirus it is Bauer Media. The decision to get out of New Zealand was most likely made some time ago. All its magazines had been suspended by a Government edict that periodicals could not be deemed ‘essential services’ during the lockdown. It is understood the likely revenue outlook for its Property Press real estate publications, even with a relaxation of lockdown, was particularly keenly felt within the business. Wage subsidy refusal The fact Bauer decided not to avail itself of the Government’s wage subsidy was a further indicator that its decision was swayed by ongoing industry pressures. The virus just brought the decision forward. It couldn’t see much hope for magazines in a small scale market when traditional advertising is on what seems to be a never-ending downward path. Big international companies have better options than New Zealand. The Bauer decision stunned loyal readers of its magazines but it also seems to have woken up another group who have been partly responsible for the demise of local media – advertisers. Government focus needed In a media release entitled ‘Bauer is the Canary Down the Media Coalmine,’ the Association of New Zealand Advertisers (ANZA) urged Broadcasting, Communications and Digital Media Minister Kris Faafoi to broaden the focus of the recently established review of the Government-owned media assets, Radio New Zealand and TVNZ, to that of New Zealand media more widely. “There is the very real risk that the future of media in this country is a mix of only existing government owned assets, global online platforms and a small number of niche news offerings. We believe this would be an unacceptable outcome for New Zealand. Without diverse media, there are obvious risks for society, democracy as well as the economy as we work toward a post-Covid recovery,” Chief Executive Lindsay Mouat said. Free tax ride on digital platform The New Zealand media’s biggest problem, of course, is that advertisers who use digital platforms now spend somewhere between 80% and 90% of their money with Facebook, Google and other social media companies. These US companies have very few New Zealand employees, produce no news content and pay very little tax. Newsroom asked Mouat if he supported the idea of a revenue tax on the US giants’ local income which could, in part at least, be used to support the local news media. “The suggestion of revenue tax seems to be moving slowly. Fundamentally, we would struggle to do it alone, but the OECD, from what I see, is moving ponderously. And there is the ever present threat of reprisal from (US President) Trump. So, while at face value it could be the solution, it is probleamatic for a small state. “I wish I had the solution. I am not personally a fan of StuffMe, [the combining of Stuff and NZME through either a takeover or merger] because I prefer the idea of plurality, and Bauer’s magazine dominance suggests this isn’t a solution. But I think the government could buy some time through the use of NZ on Air or similar tools to keep the sector at least breathing, while bigger work is taken on, using the beginning of the PwC work in a broader context.” PwC Advisory Advisory firm PwC is working on a business plan for a new public broadcaster that would see the operations of TVNZ and RNZ combined into a single entity. One obvious solution to the current crisis would be for local advertisers to direct more of their spend towards local privately owned media, instead of Facebook and Google. Would ANZA recommend that to its members? Mouat said that he “was not able to comment on that today.” Facebook and Google may be more cost effective and offer a more targeted approach to customers but there is precedent for local advertisers taking a wider view. In the past 30 years, individual advertisers have, on numerous occasions, “over invested” in TV3 to retain competition in the television market. Television advertising While all local media will be looking for advertisers to recognise the social benefit in supporting the producers of news and current affairs, TV3 will be hoping the New Term-Lending Facility to help businesses Venkat Raman Reserve Bank of New Zealand (RBNZ) has introduced a longer-term funding scheme for commercial banks as a part of its support to the Business Finance Scheme announced by the government last fortnight. RBNZ Governor Adrian Orr said that the new Term-Lending facility (TLF) will help promote lending to businesses in New Zealand. The TLF is similar to the recently announced, Term Auction Facility (TAF), and both provide liquidity to the banking system, he said. Access to money Mr Orr said that the new facility will ensure access to funding for banks at low interest rates for up to three years duration, which is longer than the Bank’s other liquidity facilities. “We are working in-step with the government and the country’s banks to provide the economic support that is crucially needed Reserve Bank of New Zealand Governor Adrian Orr (INL File Photo) during this uncertain time. New Zealand’s financial system remains sound, with strong capital and liquidity buffers. We are confident that the financial system is well placed to respond to the impacts of coronavirus,” he said. Assistant Governor and General Manager (Economics, Financial Assistant Governor and General Manager Christian Hawkesby (RBNZ Photo) Markets and Banking) Christian Hawkesby said that RBNZ is currently engaging with banks on the operational details of the scheme, aimed at launching the first TLF operation in May. Mitigating effects “As previously announced, the Reserve Bank’s Monetary Policy RBNZ Deputy Governor Geoff Bascand (INL File Photo) Committee has worked to mitigate the severe economic effects of COV- ID-19 by reducing the Official Cash Rate and implementing a Large Scale Asset Purchase programme, he said. “In addition, RBNZ has deferred the start of increased capital requirements and is delaying historic support it has enjoyed in the past quickly resurfaces. Television, which these days carries a lot of ads for retailers and manufacturers of FMCG (fast moving consumer goods), is being hit hard by the impact of Covid-19. In Australia, Network Ten, the country’s third-ranked free-to-air television broadcaster will be run by a skeleton staff after the Easter long weekend as it temporarily closes down other operations to reduce cost, according to a report in The Australian newspaper. To date, MediaWorks’ highly profitable radio operation has subsidised its television arm, which loses millions every year. Radio advertising down Industry sources with a good knowledge of the radio market say that advertising is down 40% for the major stations and up to 70% for regional stations. This will be seriously impacting the cashflows of MediaWorks and NZME, the country’s other big radio operator. Additionally, MediaWorks’ recently acquired out-of-home (billboard) advertising business will also be suffering badly. Another industry source described the out-of-home market as “temporarily dead.” MediaWorks has responded by asking all staff to take a 15% pay cut but more radical action, or government help, will be required if Three is to avoid being the next domino to fall. Beyond Three, other local media businesses have been troubled, with NZME this week adding to its Radio Sport closure with a round of cuts to editorial and external columnists for the New Zealand Herald, including a plan to almost halve its number of sports journalists. Stuff Ltd owner, Nine Entertainment of Australia, which has tried and failed to sell the New Zealand operations, this week announced plans to take A$260 million of costs out of its business. It would be fanciful if the Stuff subsidiary was immune from stringent reductions and possible masthead and staff cuts. Across the Tasman, Rupert Murdoch’s News Corporation has ended the print publication of 60 community newspapers, moving them first online and reviewing operations further. Mark Jennings and Tim Murphy are Co-Founders and Co-Editors of Newsroom based in Auckland. The above article has been published under a Special Agreement. planned regulatory initiatives, to allow banks to focus on lending to their clients during the disruption of COVID-19,” he said. Do dividend pay-out Deputy Governor and General Manager (Financial Stability) Geoff Bascand said that RBNZ has agreed with banks that there will be no payment of dividends on ordinary shares during the current health crisis. “We have also agreed with the banks that they should not redeem Non-Common Equity Tier 1 capital requirements. This is to support the stability of the financial system during this period of economic uncertainty. The restrictions take effect from today under revised Conditions of Registration issued to all locally-incorporated banks. They will remain in place until further notice, with the aim of relaxing them when the economic outlook has sufficiently recovered,” he said.
APRIL 15, 2020 Businesslink NZME-Stuff merger now becomes life-saving necessity Tim Murphy Inside, the pressure building on the government to step in and save news media businesses before it is too late. For months, some parts of the news media have been sending out SOS messages publicly and in intense lobbying in the shadows of bureaucracy for urgent Government financial and regulatory help to keep them alive. The notable biggies The most notable were MediaWorks, which raised the possible closure of its Three Television Network, and New Zealand Herald publisher NZME and its rival Stuff Ltd, which were pushing hard for a dispensation from government for a previously legally rejected merger of their operations. Government agencies and ministers heard the noise, and the New Zealand First Party was an early adopter of the StuffMe II merger argument. But, with their own plans for a restructure of the two Government-owned broadcasters, TVNZ and RNZ, stalled by a reticent Cabinet, the powers-that-be did not seem to know how to respond to the urgent private media pleas. The Covid-19 pandemic and economic collapse has changed all that. Will the two media giants be allowed to merge? (RNZ Image) As with other industries stricken by the sudden suspension of operations and evaporation of customers and revenue, some of the bigger private media players are on their knees. The perilous state of their books and the possibility of insolvency and, as with the closure of Bauer Media’s magazines, disappearance of jobs and media voices, has put the Government response on extreme alert. Urgent matters supersede promise Increasingly, the indications from the Minister of Finance Grant Robertson last week that some ‘medium-term’ measures to assist the industry were being contemplated are now overtaken by a need for something urgent within Inland Revenue to waive penalties, interest for businesses Venkat Raman The New Zealand Inland Revenue Department has said that it will write-off any penalties and interest for businesses that are unable to pay taxes on time due to the impact of COVID-19. “Don’t worry about contacting us right now. Get in touch with us when you can,” a notification said. The Department said that its officials are working to provide essential services for business and individual customers. Payments, including Working for Families customers, will still be made. “We would like employers to continue to file their returns as normal so that we can help to make correct payments to people. This would help IRD to work our the right amounts for people and helps the Government continue to respond to what is happening in the economy,” the notification said. Contacting IRD during the lockdown The frontline services of IRD have been closed, phone services are limited and hence the most effective way of accessing services or seeking information would be online (www.ird.govt.nz) through MyIR. “IRD is still working on all critical matters related to tax entitlements and payment obligations. We know these are matters causing real stress and uncertainty and we are working urgently to provide as much certainty as quickly as we can. Please use our online services to contact us – preferably through your myIR account on our www. ird.govt.nz/covid-19 Ministry of Social Development (MSD) is responsible for the administration of the wage subsidy. For more information, please contact www. workandincome.govt.nz/ covid19support Wage Subsidies The Department has tax-related guidance for employers about the wage subsidies. As Finance Minister Grant Robertson has emphasised, employers must pass on the wage subsidies to the employees for whom these have been disbursed and any breach will be treated as fraud. All deductions (such as PAYE, KiwiSaver and child support) should be made as normal. If the total wage (the subsidy plus the employer funded pay) amounts to the same wages as previously, the pay and deductions on their payslip should be the same. Employers won’t be liable for income tax or GST on the subsidy received from MSD and will not be entitled to an income tax deduction for wages paid out of the wage subsidy. Payment Options The notification said that IRD would understand if a business is unable to pay its taxes on time due to the impact of Covid-19. “Get in touch with us when you can and we will write-off any penalties and interest,” it said. If a business can pay, there are several options - with internet banking or using myIR are the easiest. Businesses can also make credit card or debit card payments over the phone or set up direct debit payments through their myIR account. For further details on alternative ways to pay your tax see: https://www.ird.govt. nz/managing-my-tax/make-apayment/ways-of-paying Westpac Branches Only some Westpac branches will be open one day a week, on a Wednesday, during the COVID-19 lockdown. Customers who can pay their tax bill at their local Westpac branch will be unable to do so until they can visit a branch on its open day. https://www.westpac. co.nz/who-we-are/covid-19/ branches-and-atms/ Instalment arrangements IRD is enabling more flexibility and lowering the threshold for instalment arrangements set up in myIR. The new minimum repayment rates are: Weekly $20 (previously $50); Fortnightly $40 (previously $100); Monthly $80 (previously $200). “We recognise this is a concerning time for tax agents and customers and we want to support you wherever we can through any current audits or disputes. We know that you are under a lot of pressure and uncertainty currently, and we want to work with you on a case by case basis. This may be by delaying the progress of an audit or dispute for a period,” the notification said. IRD has decided to extend the timeframe for filing Basic Compliance Packages (BCPs). The new due date is June 30, 2020. Please forward questions on this to bcp@ird. govt.nz weeks. We could, as early as next week, learn of immediate measures the state can take to relieve cost and divert revenues to media companies. No one measure would help all the entities, broadcasters and print/digital, big or small, in the same way. So a menu of interventions could follow. There is understood to be a firming view among industry insiders that a green light for changes to the Commerce Act or an instruction to the Commerce Commission to make media mergers achievable - thus preventing the possible demise of one or both of NZME or Stuff - is winning favour. Whether that translates to approval for such a drastic and politically tricky measure by the Cabinet is another thing. Plurality and diversity Previous rejections of the StuffMe proposal were firmly based on concerns about the plurality of media voices, diversity and a risk to democracy of narrowing ownership of all major newspapers and both the country’s biggest news websites to one entity, owned predominantly by Australian fund managers. Officialdom seems to have been spooked that a real risk to NZME and Stuff has firmed - and a merger, however politically unappealing, is the only answer. The two companies had worked out, as far back as Friday, March 13, before the extreme effects of Covid-19 had been felt and before a nationwide lockdown was on the horizon, terms for NZME to buy the Stuff operations off Nine Entertainment of Australia. It was decided even then to communicate to anyone who would listen that a deal for the two companies was the equivalent of a life or death requirement. No one would question that the companies are both in a worse position now. NZME closed its Radio Sport station and has laid off half its Herald sports desk, invited voluntary redundancies, enforced mandatory leave for staff and made company-wide cuts. The publications of both companies 13 are bereft of print advertising, other than for their own products and services and the Government Covid-19 campaign. Exploring funding options Both NZME and MediaWorks have talked of exploring funding from the multi-billion dollar state wage subsidy scheme. Stuff’s position has not been made public. Possibly complicating the path ahead for one of the industry players under pressure is that its top boss is understood to have recently applied for leading executive roles in Australia, including at that country’s biggest outdoor advertising company, Ooh Media. If the Government has to move fast, ahead of any commitment to change the Commerce Act, it is unlikely it would take equity stakes in private media companies to shore them up to prevent failure. But it could offer bailout loans in the way it did for Air New Zealand. The immediate measures, when they come, will aim to keep the businesses running while a longer-term strategy for public and private media and how they are funded is completed. The Government took its time picking up on the media SOS. Is it now on a rescue mission or one to recover the corporate bodies? Tim Murphy is Co-Founder and Co-Editor of Newsroom. The above article has been published under a Special Arrangement. Essential Workers Leave Scheme launched Staff Reporter The government has launched a new Leave Scheme to protect essential workers from loss of income if they take leave to comply with public health regulations. Workplace Relations and Safety Iain Minister Lees-Galloway and Social Development Minister Carmel Sepuloni announced the Scheme in Wellington today as a part of the efforts to mitigate the adverse effects of Covid-19. They noted that while a number of essential businesses continue to operate under the current lockdown conditions, many are facing a significant loss of business. Wage Subsidy applied “This scheme is for them and allows them to pay those workers who need to take leave due to the COVID-19 Public Health guidance at the same rates as the Wage Subsidy Scheme of $585.80 per week for fulltime workers and $350.00 per week for part-time workers,” they said. Mr Lees-Galloway said that that the government is ensuring that essential workers have the ability to take leave, and do not feel pressured to come to work if they are vulnerable, sick or otherwise unable to work. “The Essential Workers Leave Scheme will enable them to self-isolate and continue to receive an income in these circumstances. It scheme supports those who are unable to work from home and need to self-isolate, or are at higher risk of becoming sick with COVID-19, or have a higher risk person in their bubble,” he said. Not all workers in essential businesses will be in this position, but for those who are, it is a significant problem. For some workers this could be for the duration of the lockdown. Mr Lees-Galloway said that the government is ensuring that communities are supported as people stay at home to stop the spread of COVID-19. Focus on three groups Ms Sepuloni said that the Scheme, which will become effective at 12 pm on Monday, April 6, 2020, will be administered by her Ministry. “The Scheme will focus on three groups of essential businesses workers and employers will be eligible to apply for those employees under the scheme,” she said. They will include (a) Workers who are self-isolating in accordance with public health guidance because they have contracted the virus or have come into contact with someone who has contracted the virus (or have a dependent they need to care for who is sick or self-isolating) (b) Those deemed at higher risk if they contract COVID-19, in accordance with public health guidance and as such should self-isolate for the duration of the lockdown (and potentially longer) and (c) Those who have household members who are deemed at higher risk if they contract COVID-19, in accordance with public health and as such should self-isolate for the duration of the lockdown (and potentially longer) to reduce the risk of transmitting the virus to that household member. Ms Sepuloni said that officials are preparing guidance to support employers and employees to discuss what it means to be at higher risk. This guidance will be made available online before the scheme goes live on Monday, she said. The payment process “Payments will be four-weekly with the option for essential businesses to re-apply for those same workers after four-weeks, or make further applications for additional workers who are eligible at any time, while the scheme remains open,” Ms Sepuloni said. Mr Lees-Galloway said that employers accessing the scheme should pay workers at either their usual weekly income before COVID-19, if this is less than the relevant rate provided; or a minimum of the full leave rate, if the workers’ usual income before COVID-19 exceeds the relevant rate, and in that case also make best endeavours to pay at least 80 percent of the workers’ usual income before COVID-19. Employees who are on other forms of paid leave should be paid at their usual full rates of pay. “The scheme will be available for at least the period while the nation is at Alert Level 4 public health restrictions and Ministers will review the Scheme after eight weeks to consider uptake and future needs,” Mr Lees-Galloway said.
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INL Digital Edition April 15, 2020

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