Andrew Butler KC, Thorndon Chambers
Sarah Keene, Partner Webb Henderson
Jordan Cox, Partner, Webb Henderson [1]
Summary[2]
New Zealand’s news media industry is facing well-documented challenges. A particular challenge is the steady decline in the advertising revenue that previously funded much of the news media sector’s operations. Digital disruption has transformed how the public consume media content – much more online, much less paper – and is causing advertisers to look to digital channels that provide greater reach and allow for more precise targeting and personalisation.
To support the financial sustainability of the news media in a digital environment, the previous Labour Government introduced the Fair Digital News Bargaining Bill (Bill). Its explicit, self-described purpose is to support sustainable production of New Zealand news content. The new National-led Government has announced its intention to adopt the Bill, subject to a number of changes.
The policy justification for creating a model of state-backed mandatory digital-platform funding to support what are largely private-owned businesses rests on the importance of the news media to a functioning democratic society. The explanatory note for the Bill says this outright: “High-quality news content supports democracy, counters misinformation, and enhances social cohesion and ultimately the well-being of New Zealanders by providing trustworthy information.”[3]
Those benefits are widely recognised and we are not questioning them. The real question is whether the Bill is the best way of promoting them. Our concern is that a focus on replacing one source of funding (the Government, primarily through the Public Interest Journalism Fund) with another (digital platforms, arbitered by a government agency) is unlikely to materially improve, and may indeed undermine, media plurality, which is at the heart of a thriving news media ecosystem.
International experience – and the platforms’ own public statements – indicate that many of the advancements in platforms’ voluntary contributions to news media security could be unwound if they are forced to participate in a mandatory bargaining scheme. In other countries where models similar to the Bill have been introduced, digital platforms have had to reconsider the continued viability of providing services related to news – and in some cases, have chosen to withdraw those services. So the policy goal of the Bill –- provide a reliable revenue stream generated through privately owned digital platforms, with minimal room for Government discretion in place of a scheme that had the appearance of permitting Government control over news media content and perspectives – could end up delivering the worst of all worlds.
We suggest that, instead, the Government should look at ways to increase and incentivise private funding to diversify news media funding and promote media plurality. There are multiple ways it could do this. In this piece we explore two ways:
(a) Amendments to charities law to make news media production a charitable activity (and allowing subscribers to claim back subscription costs as a donation) would encourage increased private funding.
(b) Amendments to copyright law could support a licensing regime for news publishers to be compensated for the use of their content online.
With the risks of the actual and perceived effects of social media echo chambers, AI and political influence never more acute, we see diversity of stable news media funding as a critical way, and potentially the only reliable way, to bolster the waning strength of this important fourth pillar of democracy. Just as political parties are funded to support the executive function, civic-minded citizens and corporations interested in better democracy, public policy and accountable government decision-making should be incentivised to support news media. News media in turn should be enabled to attract a wider base of financial support from private supporters that care about the important (and expensive) job of holding the powerful to account in all sectors of New Zealand society.
Media funding sources
For all of the noise concerning the effects of digital disruption, advertising still makes up the lion’s share of domestic news media revenue. For NZME,[4] its publishing revenue in 2023 was $209.6 million, comprised of:
- $80.6 million from “reader revenue” (combining print subscriptions, retail outlet sales and digital subscriptions – i.e., paywalls);
- $110.5 million from advertising revenue (combining digital advertising and print advertising); and
- $18.6 million from “other” (including revenue from third party print and distribution as well as income from grants and other sources).
The grants that contribute towards the “other revenue” figure include Government funding from the Public Interest Journalism Fund (PIJF). The PIJF totalled $55 million across all projects and recipients and was completely allocated between May 2021 and June 2023.
Outside of the PIJF, there is some (much more limited) contestable public funding available through NZ On Air for non-fiction publications, including specialist journalism and current affairs projects.
While dwarfed by the value of reader revenue and advertising revenue in monetary terms, the PIJF had a disproportionately large impact on the perception of media plurality in New Zealand. Whether that perception was accurate or fair is not the question. The reality is that for better or worse a significant part of the public and political class saw the PIJF as providing an illegitimate means for a government to achieve news media reporting that focussed on the issues that if considered important and written from a perspective that it believed in. For reasons discussed below, if the Government wishes to support the news media, the model that it puts in place should not repeat the detrimental effects of the PIJF.
The importance of media plurality
Media plurality is widely accepted, including by the Commerce Commission, to mean:[5]
- ensuring there is a diversity of viewpoints available and consumed across and within media enterprises; and
- preventing media capture, i.e. any one media owner or voice having too much influence over public opinion and the political agenda.
Media plurality is important because a well-functioning democratic society requires that its citizens are exposed to a wide range of viewpoints. A diversity of views in news media supports democracy by ensuring the public is informed about key issues in society (recognising that “the public” encompasses a range of interests, priorities and perspectives) and providing an avenue for public institutions and government officials to account for their actions. Avoiding media capture reduces the risk of a powerful media owner exerting outsized influence on the political process or public opinion.
The importance of maintaining plurality in the media has widespread acceptance. This was observed by experts commissioned by the Commerce Commission in 2016:[6]
There is a general agreement in the democratic world that news and other media play an essential role in informing citizens thereby enabling their participation in public debate and democratic decisions. A thriving news sector ensures that people have access to information about the events and decisions which affect their lives, and have a better understanding of the world in which they live. It exposes its readers to views and analysis which both support and challenge their own ideas, and – through its investigative reporting – can shed light on important issues of the day and hold the powerful to account.
The state of media plurality in New Zealand
The Ministry for Culture and Heritage commissioned a report from Sapere in 2021 to assess the implications that competition and market trends will have for media plurality.[7] That report considered four criteria for assessing media plurality in New Zealand:
- Availability of media sources (diversity of views): The diversity of views in local/regional news in New Zealand is at high risk of concern due to the continuing trend of downsizing and the uncertainty relating to the viability of local news in the medium term. The availability of media sources in national news is at medium risk in the medium term.
- Consumption of media sources (reach and concentration): There is a decline in the consumption of local/regional news and a trend towards increased consumption of national news.
- Impact or influence over news media sources (impartiality, reliability, importance and relevance):This component of media plurality in New Zealand was at low risk of concern for local/regional news and national news at the time of the report, in light of the fact New Zealand ranked 8th for independence of the media and press freedom in 2021 and New Zealand had (at the time) relatively high trust in media (48% of New Zealanders reported trusting the news, as compared with 38% average).
However, New Zealand’s ranking in the World Press Freedom Index has since dropped from 8th in 2021 to 19th in 2024. This reflects an increased risk of influence over news media and diminished impartiality and reliability.[8]
Similarly, in the most recent Sustainable Governance Indicators report, New Zealand scored 4 out of 10 for media plurality in 2022.[9] This score means that the media market in New Zealand is characterised by oligopolistic ownership structures and while important opinions are represented, there are no or weak institutional guarantees against the pre-dominance of certain opinions. A greater score suggests that the media market provides a better balance of pluralism of opinions while a lower score suggests greater bias and that certain opinions are not published or are marginalised.[10] New Zealand’s rating has decreased over time: in the first report, in 2009, New Zealand scored 7 out of 10.[11] For the sake of comparison, in 2022 the USA scored 8 out of 10[12] and Australia scored 5 out of 10.[13]
4. Internal plurality (contextual factors safeguarding plurality and diversity of voices): There is a lack of diversity within national news organisations, considering the light-handed regulation of ownership and local content and limited ethnic representation among journalists in New Zealand.
The link between funding and media plurality
Media plurality requires funding plurality. It is difficult to ensure a diversity of viewpoints if most of those viewpoints are being chosen or funded by a small, non-diverse group of people. And to avoid a small number of people having undue control over news media coverage, it is important that there is more than a small number of people funding that coverage.
There is a risk of concentrated control over news media, actual or perceived, if there is a lack of diversity in funding sources, or if that funding is provided or controlled by the same entities that the news media is meant to scrutinise. The risks can arise whether that funding is capital-based (from the owners of the news media business) or operational (such as grant funding).
Ensuring funding plurality does not just consider the number of different funding sources. It also depends on the nature of those funding sources. As the PIJF has demonstrated, Government involvement in the funding process can have an outsized impact on the perception of media plurality.
Though the Government aims to protect news media as the Fourth Estate, the trends described above suggest that there is an increasing threat to perceived impartiality in news content in New Zealand. Consequently, protecting pluralism in the news media requires ownership diffusion of news media outlets and diverse non-public sources of funding.
Given the policy intent is to support “high-quality news content”, it seems problematic that the Bill creates no link between the funding to be received and the production (or quality) of news content. It would be open to a news media entity to take the funding and then spend it on non-news activities, or even pass it through as dividends to the owners.
While there are many overseas examples of alternatives to public funding of news media, New Zealand has not yet fully explored the potential for greater media plurality through increasing the number of funding sources for funding news media.
The risks of simply replacing state funding with compulsory platform funding
Replacing the PIJF with the compulsory digital platform funding model outlined in the Bill does not increase the number of funding sources. It swaps one source (the Government) for another source (platform operators). There is no improvement to diffusion or diversity in a one-for-one swap.
Further, this switch would not meaningfully change the nature or control of funding. While the money ultimately comes from the digital platforms, the Government (either the Minister, the Broadcasting Standards Authority or another yet-to-be-determined regulator) would still be responsible for deciding:
- which digital platforms are subject to the Bill;
- which news media entities receive funding under the Bill; and
- which offer will be accepted (either the platform’s or the news media entity’s) following an arbitration.
This level of government control maintains the potential for perceived partiality concerns. For example, the arbiter could favour offers put forward by news media entities that have supported key Government policies. Or conversely, if a news media entity had been particularly critical of the Government, the arbiter could reject that publisher’s arbitration offer – or the Minister could refuse to register them at all.
Funding plurality could be harmed further under the Bill depending on the amount of money involved. The PIJF was a relatively small, fixed amount: $55 million over two years. The amount of funding that the digital platforms will contribute under the Bill is unknown and uncapped. It could be significantly greater than the PIJF. The bigger the number, the more control the platforms and arbiter have over the recipient and the worse the effects on plurality.
The proposal to introduce compulsory platform funding to replace state funding as a solution to news media funding issues runs the risk of impeding the potential benefits that digital platforms can offer to news media. Those harms will be felt by news media entities and the general public – the very groups that the Bill is intended to support. This is because there is no incentive for digital platforms to distribute news content if such activities will require the digital platforms to provide compulsory funding. There is a risk that digital platforms could withdraw services rather than be captured by the Bill.
This proposal may cause more harm to news media by diminishing voluntary funding by digital platforms. There are a range of these programmes and products already in place, and news media entities benefit from a collective bargaining authorisation that allows them to co-operate and jointly negotiate against digital platforms. While the Bill attempts to leave existing agreements in place, they face an uncertain future – especially when they come up for renewal.
There are also risks to innovation and investment by digital platforms in their news-related products. Meta’s submission on the Australian Treasury Department’s review of the News Media and Digital Platforms Mandatory Bargaining Code opposed that law on the basis that it deterred investment and innovation by digital platforms.[14] The submission mentioned both the Facebook Australian News Fund and the Newsroom Sustainability and Digital Transformation Fund as examples of grant funding provided by Meta to eligible publishers in Australia. Meta also argued that it enables publishers to receive direct benefits from referral traffic (which they can monetise and capture new audiences) and indirect benefits such as brand awareness and community building, and revenue from products that it has built in collaboration with the news industry.
A compulsory funding framework would also reduce to zero the incentive for platforms to roll out new news-related products and services to market, that benefit publishers and/or consumers. New Zealand could be left behind in the dissemination of attractive news products available in market. Some of those products, which might include AI-based source checking and other valuable services for news, might otherwise enhance the quality of news available, not just its reach. It appears that it seems the innovation impacts of compulsory funding were given little weight in the recent Select Committee process.
Future opportunities and alternatives
We see two primary areas of reform that have the potential, either alone or combined, to increase the number and diversity of funding sources and ultimately strengthen media plurality.
First, there is an opportunity for New Zealand to encourage increased private funding of news media in New Zealand through introducing tax incentives. Encouraging private funding of news media can promote the dissemination of control in news media over different interested parties which will help promote greater diversity of voices in the news.
New Zealand has an existing legal framework that can be harnessed to incentivise private funding through amendments to charities law by making donations to non-profit news organisations non-taxable.
This approach is not unprecedented. Canada, for example, amended its charitable tax laws to support non-profit news firms.[15] This was done via a tax measure introduced under the Income Tax Act on 1 January 2020 which created a new category of qualified donees, being a ‘registered journalism organisation’ or ‘RJO’. RJOs are exempt from paying income tax, RJOs can issue donation receipts for gifts they receive, and can receive gifts from registered charities as well as from individuals and corporations. Digital news subscribers can claim a ‘digital news subscription tax credit’. The Charities Act 2005 in New Zealand provides a framework for enabling a similar kind of tax measure as entities that are registered as charities receive tax exemptions and any donations made to such entities are tax deductable. It would open to for-profit news media entities to carve out a non-profit division focusing on public interest journalism that would be eligible for these benefits, while leaving the more financially viable components free to continue operating on a commercial basis.
It is true that charities reform could reduce government revenue. But there is already public funding, through the PIJF and other means. The Government’s reason for not extending the PIJF model was not that the cost was excessive – it was because that direct funding “increases risks of eroding public trust in the media”. There are no such risks with charitable funding. The Government would have no say in how much was donated, who it was donated to, or what the recipients did with it.
Secondly, reforms of the Copyright Act 1994 could enable a licensing scheme for news media content. This has been implemented in some form in Europe, where the EU directive on copyright law created a “neighbouring right” for news publishers to claim compensation for any reproduction and communication to the public of news content in digital form.[16] The rights do not extend to hyperlinking and the use of “individual words or very short extracts” of press publications. The European model is not without flaws – for example, the enforcement of international copyright has presented challenges, and negotiations to determine compensation have not always run smoothly – but it does promote media plurality better than the proposed mandatory bargaining code.
In New Zealand, the Copyright Act already provides for copyright licensing schemes without any “neighbouring right” concept, and there is a pre-existing licensing body – the Media Copyright Agency – which is not “neutral” (it represents publishers) but is not government-controlled. Some amendments might be required to bring the actions of digital platforms in aggregating and snipping content within the scope of licensable activities. This will support the market-based initiatives already in place, such as the Google News Showcase arrangement.
Either – or both – of these reforms offer a way to support news media production without exacerbating the existing negative trends for media plurality, risking freedom and independence of the news media. New Zealand’s should focus on encouraging an increase in the number and diversity of sources of news funding to better advance the quality news that New Zealanders deserve.
[1] The authors are grateful to Jia-Lee Lim for her assistance in the preparation of this article.
[2] The views expressed in this article are the authors’ own. Webb Henderson acts for Google on a range of matters, but the views in this article do not necessarily reflect those of Google.
[3] Fair Digital News Bargaining Bill, General Policy Statement https://www.legislation.govt.nz/bill/government/2023/0278/latest/whole.html
[4] Unlike Stuff and many other news media firms, NZME’s financial reports are publicly available due to NZME being listed on the NZX. See the breakdown of publishing revenue and expenses on page 24 of NZME’s 2023 full year results: https://api.nzx.com/public/announcement/426526/attachment/412990/426526-412990.pdf.
[5] p 177 [1401], NZME Limited and Fairfax New Zealand Limited [2017] NZCC 8.
[6] Dr David Levy and Robin Foster “Impact of the proposed NZME/Fairfax merger on media plurality in New Zealand: Expert review of the Commerce Commission’s Draft Determination Document” (16 November 2016) at 2.
[7] p 35, The implications of competition and market trends for media plurality in New Zealand
[8] Reporters without Borders, ‘World Press Freedom Index 2024’ https://rsf.org/en/index
[9] p 33, SGI New Zealand 2022 Country Report
[10] https://www.sgi-network.org/docs/2022/basics/SGI2022_Codebook.pdf
[11] https://www.sgi-network.org/docs/2009/country/SGI09_NewZealand.pdf
[12] p 23, SGI USA 2022 Country Report.
[13] p 29, SGI Australia 2022 Country Report.
[14] Meta’s response to the Treasury Department’s review of the news media bargaining law (May 2022).