NZ Media Stocks – The Pain Game Continues

  • Jul 09, 2020 NZST
  • Team Kalkine
NZ Media Stocks – The Pain Game Continues

Summary

  • MediaWorks chief executive Michael Anderson would step down at the end of the year; witnesses a significant $25 million loss. 
  • MediaWorks is in talks with a “potential buyer” concerning the sale of its television arm. The announcement of the deal is expected in the near term. 
  • Jobs losses and revenue hit driven by the decline in the advertising revenue is creating a conundrum for the media players.
  • Traditional media players are also facing growing threat from the pool of content/updates on social media platforms.
  • Some media companies have availed the Government’s support through the wage subsidy scheme to provide support to the staff.

New Zealand’s media industry continues to be under the scanner amidst COVID-19 induced disruptions. The media platforms remain under the radar as Kiwis appear vigilant concerning the pandemic situation, eyeing for new updates on the country’s health crisis, strategic movements and assess the lockdown situation.

However, the nation’s media companies which seem to be battling social media forces are bracing for collateral damage with the dwindling advertisements adding to the financial woes. 

Besides, when the relevance of media and journalism remains a top priority to ensure that people stay watchful, it is a matter of scrutiny as to how the disturbance and turmoil in the economic scene seem to be driving related players. 

MediaWorks CEO steps downs amidst Financial Chaos

The pandemic crisis has even engulfed large NZ media players, and the resignation of MediaWorks Chief Executive Michael Anderson is a stark reminder that the choppy ride awaits for some NZ media companies.

MediaWorks is a multi-platform media company operating on varying platforms including radio, television, and digital covering range of events. The radio brands such as The Edge and The Rock are owned by Mediaworks along with the TV station Three. 

Mr Anderson, who has led the company for the past four years driving growth in the radio and television divisions, would step down at the end of the year. Michael Anderson indicated that when he joined MediaWorks, his focus was to “bring stability to the company” and to ensure individual sustainability and competitiveness of “all arms of the business”. 

The resignation follows the announcement of the monumental loss of $25 million encountered by Television channel Three owner MediaWorks for the year ending 31 December 2019, conveying that it faces an uncertain future. Significantly, the loss includes a monumental decrease in the advertisement revenue that seems to plague the media industry post the COVID-19 outbreak. 

He lately supervised the merger of the MediaWorks with New Zealand out-of-home, digital media, and production business of QMS Media Limited. The strategic move by the multi-platform media company was taken in September last year with the focus to expand the market control in New Zealand and provide it with the largest audience base. 

MediaWorks is currently planning the sale of its TV business shortly and has involved UBS for assisting in identifying buyers for selling the business which has been making losses. While Mr Anderson refrained from unveiling the buyer, he indicated the expectation of announcing the sale of business soon by the company, with negotiations underway with one party.

Job Layoffs Spurge During Crisis

The media and journalism companies appear to be in serious trouble as evident through the myriad of jobs losses. In the wake of such troubling scenario dominating the operations and continuation of the media players, the related stocks remained under the scanner. 

ALSO READ: Pour Yourself a Cup of Coffee and Catch Sight of Global Unemployment Scenario

Faced with the challenging situation, New Zealand’s Media company NZME has earlier axed 200 jobs post the lockdown, representing 15% of the total workforce. The other cost-saving measures such as a reduction in director’s fee and suspension of some of its products during the lockdown were also taken to offset the financial challenges. Meanwhile, MediaWorks had also announced 130 job losses during the pandemic. 

NZME Limited (NZX: NZM) urged the Government’s support to the media companies for protecting the jobs of employees owing to the adverse pandemic impact on the sector. Meanwhile, the media company was earlier in discussion with Nine Entertainment Co. Holdings Limited for the acquisition of Stuff, however, withdrew clearance application post the decline of interim injunction.

NZME lately welcomed Barbara Chapman as the new chair of the company. NZME intends to pay dividends between 30% to 50% of NPAT reported, subject to company’s success in achieving its debt reduction target and meeting the capital requirement along with ensuring that its financial and operating performance is in line. Notably, the company’s net debt reduced to $74.7 million as at 31 December 2019, while it further decreased to $62.0 million at 31 May 2020.

Source: NZX Update

Social Media Magnifying Impact for Traditional players

The impact of the lockdown seems to be further accentuated through the accelerated trends towards social media adoption. The access to the endless pool of content at any time of the day has replaced the time boundedness that radio or television sources demand. It has gobbled a significant chunk of revenue from the traditional media and journalism, impacting the profitability and sustainability of many businesses. 

German-owned Bauer, known for its magazines published, has shut down its New Zealand business, affected by the lockdown.

Any Bright Spots?

NZ Government has adopted a range of cash-supplementing measures which includes the wage subsidy scheme allowing the employers to stay afloat by ensuring timely compensation to their employees. Many media companies facing financial crunch have availed the wage subsidy schemes. 

New Zealand’s pay-television operator Sky Network Television Limited (NZX: SKT) renewed supply deal with Optus offering satellite capability for ten years with more flexibility. The revised contract enables Optus for building and launching Optus 11, which is a software-defined Ku-band satellites having greater functionality compared to the existing satellite. 

The talented journalists and reporters of New Zealand in the current situation are facing massive issues concerning their job security which lies in a conundrum with the disruptions. At the same time, the questions still linger on the sustainability of not only small but large players on the media platform, while additional Government support is currently awaited by the companies. 

 


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