New Zealand is a wondrous bunch of two large islands and almost 600 others whose geography and geology contribute to a country consistently rated as one of the most “liveable” and where its 5 million population are, on average, among the world’s most wealthy.
US producer James Cameron is one of a steady stream of transPacific immigrants and says he is only going to make movies in New Zealand in future. For others, it has come to be seen as a bolthole of choice for Silicon Valley’s tech elite including PayPal co-founder Peter Thiel. Reid Hoffman, co-founder of LinkedIn, says: “Saying you’re buying a house in New Zealand is kind of a ‘wink, wink, say no more’. You’re getting apocalypse insurance.”
Everybody loves the volcanoes, mountains, and fjords of New Zealand whose largest city Auckland is 1,300 miles from Sydney and 6,500 miles from Los Angeles.
Youthful Prime Minister Jacinda Ardern has won global plaudits for swiftly tightening gun laws after last year’s Christchurch shooting, and for managing to contain the Covid-19 outbreak to a mere 20 deaths. A world best. But the country’s media industry has, arguably, suffered from the whims of foreign proprietors which seem, continually, to be surprised by the limited size of the market they have bought into.
In April, ahead of its ignominous exit from the Australian magazine market, Germany’s Bauer Media abruptly announced the shutdown of its local business with the planned loss of many of New Zealand’s favourite publications. That decision, at the start of Covid lockdown, was followed (in May) by the MBO of Stuff Ltd, the country’s largest newspaper publisher.
It operates the Stuff website, the country’s leading digital destination, and publishes The Dominion Post, The Press and The Sunday Star-Times in a portfolio of regional and community newspapers, magazines and agricultural publications. It reaches almost 90% of the population through its digital platforms.
The Auckland-based company (once owned by News Corp) had been acquired by Nine Entertainment, of Australia, as part of Fairfax Media in 2018. It had spent the intervening two years trying to sell it. The competition authorities had blocked a possible takeover by the listed New Zealand Media and Entertainment (NZME), owner of the NZ Herald (the country’s largest daily paper) and 50% of the country’s commercial radio stations.
Although both Nine and NZME had been hoping that the Covid-induced media crisis would soften official opposition to a “merger”, the Aussie owner couldn’t believe its luck when Stuff CEO Sinead Boucher phoned her boss in Sydney to enquire about an MBO. The deal was completed a few weeks later.
Although the acquisition was nominally priced at a headline-grabbing NZ$1, it was a bit more complicated than that and included Nine providing temporary working capital for the newly-independent company.
Nine retains ownership of the Wellington presses which have been leased-back to Stuff. In addition, as a result of the successful completion of the Stuff Fibre ISP sale in May 2020, Nine received 25% of the proceeds plus up to a further 75% over the subsequent 36 months, depending on Stuff’s ability to raise funding.
Stuff (the company’s odd name was dreamt up by Saatchi & Saatchi) employs about 900 staff, including 400 journalists. Its staff had agreed to 15% pay cuts in the April lockdown, while the management team swallowed 25% discounts. The CEO’s decision to reduce her own salary by 40% was a nice prelude to the post-MBO announcement that the workforce would be offered the opportunity to buy shares in the company. But that, and a recent decision to restore salaries to their pre-Covid levels, underlines the sense in which the cheery news must surely be followed by tough decisions and cutbacks. Some real pain seems inevitable. But, for now, there’s euphoria.
Staff had, predictably, reacted, with relief, to news of the MBO after a stressful few weeks during which the prospect of Stuff closing altogether had been raised by rivals. Speaking to many of her people by Zoom, the CEO reiterated that the purchase was not a silver bullet, and that she wasn’t some kind of “mini Rupert Murdoch”. She was treading a careful line between the excitement of “Look Mum, I own the company” and the realisation that it will be a battle to survive.
But we might expect some new approaches to the management and strategy of a beleagured media company from a happy, positive and hugely popular executive who could never have expected to get this opportunity.
Boucher was born Sinead O’Hanlon in Belfast, in Northern Ireland, on the very day in June 1970 that two young girls became the first females to die in the 30-year civil war which became known as The Troubles. Those deaths in a Derry house fire virtually marked the start of the war which, ultimately, claimed the lives of more than 3,500 people.
The bombs, bullets and kidnappings persuaded many to leave Northern Ireland which (three years later) included the O’Hanlon family who settled in Christchurch, New Zealand’s second largest city after Auckland.
The young Sinead went to school locally but had no settled ambitions. After dropping out of law school at Canterbury University, she did a six-month journalism course and, in 1993, became a local paper reporter for the company she now owns. Six years later, she moved to London and worked at the Financial Times and Reuters. She returned to her Christchurch newspaper as assistant editor, charged with revitalising its website. That was the start of her longtime immersion in digital news.
Sinead Boucher was appointed Chief Executive Officer of Stuff in August 2017 after four years as group executive editor. Three years later, she bought the company.
New Zealand media pundit Gavin Ellis greeted the MBO enthusiastically:
“No-one, least of all Boucher, will under-estimate the challenge of owning the country’s largest publisher and we can expect change now that Stuff has been freed from the stultifying effect on Nine Entertainment’s reluctant ownership. We may, for example, see initiatives in digital platforms that build on the Stuff Supporter initiative as an alternative to paywalling. Boucher has been the champion of Stuff’s digital strategy and is likely to continue to drive that side of the operation. However, she also knows that print still represents the bulk of revenue and cannot be neglected. How the declining fortunes of the newspaper business are handled remains to be seen but, as owner, Sinead Boucher has an opportunity to employ some innovative thinking that may not have resonated with a board of directors in Sydney.”
Some of that new thinking has already begun. In June, Stuff cut ties with Facebook, which had previously driven 15-20 % of its web traffic. The site stopped its advertising last year, accusing Facebook of failing to make meaningful reforms after a gunman killed 51 Muslim worshippers in Christchurch and live-streamed the atrocity on the platform. The CEO recently, said: “The general morass of hoaxes, fake news and things: we felt like it didn’t fit with us and we didn’t feel comfortable being there (on Facebook).”
Boucher says: “We have a history of launching and growing successful non-media businesses off our media assets. For example, we used Stuff to grow Neighbourly into a scale hyperlocal social site which has a rapidly growing marketplace within it, and we used both of these sites to launch Stuff Fibre, an ISP, which was regularly voted the best provider in NZ. Core to our strategy is finding and forming strategic partnerships with other businesses or entrepreneurs in areas where we can combine our assets and knowledge with theirs to turbocharge the growth of new businesses and revenues. We are developing some exciting plans at the moment but aren’t quite ready to divulge them.”
But Stuff has some pressing priorities.
Former parent company Nine had reported that Stuff operating profit fell 24% to A$28 million on revenues down 10% to A$243m in the 12 months to 30 June 2019. In the following six months, revenue was slightly up to A$129 million but post-tax profit fell to A$8 million. Just four years ago (when Fairfax Media itself was still independent) Stuff had made A$55 million of EBITDA (a 21% margin).
Stuff revenue reflects the print-bias, with a 50:50 split between subscriptions and advertising (less than 50% digital). Revenue is believed to have at least halved during the lockdown. The company has consistently managed to remain profitable, but this week’s lockdown may bring new pressures if it is extended beyond the provisional three days.
The renewed lockdown has been an unwelcome jolt to the NZ media and advertising industries which were slowly crawling back towards pre-Covid activity levels.
The Stuff CEO had previously said: “There has been a huge amount of public and business support and a lot of approaches from potential investors or people wanting to take various stakes in the company or to do various deals with us.” She was taking her time “to work out what we want and, in the meantime, trading along quite happily” with ad revenues “rebounding, not to pre-Covid levels but at encouraging levels for us.” She won’t be feeling quite so relaxed now.
Perhaps the new lockdown will increase the attractiveness to Stuff of involving some of NZ’s high net worth individuals in a refinancing plan. Presumably, some of those Silicon Valley emigrants would love to help ensure the survival of Stuff and “friendly money” can be very low-cost. But it is only a few months since Boucher and her team celebrated their escape from foreign ownership. Might the company merge after all? Boucher told Flashes & Flames: “We are enjoying being able to make our own decisions and plans for the future which, at this stage, do not factor in that kind of merger”.
Whatever the eventual funding, the company’s future success may depend on four steps:
1. Strategy: Recognising the imperatives
- Building strong online user revenues to reduce advertising-dependence – like newspapers everywhere. It has started to invite donors (cf The Guardian) and, while most have signed up for recurring payments, total revenue is less than NZ$2m so far. Paid-for digital channels may be the only way to shift the dial.
- Rationalising newspapers and magazines, to slow the decline of print. Divesting regional papers would make sense, although the CEO says “Not at present”.
- Reducing fixed costs
2. Brands: Building new, paid-for digital channels
One of the publisher’s biggest burdens may be the two-year-old name “Stuff” which, confusingly, is the brand for the company and also its market-leading web site. A new strategy demands some new branding as well as a shift in revenues.
3. Collaboration: Stuff will need to establish strategic partnerships variously with broadcasters, retailers, technology firms and others, in order to deliver:
- Video and audio products and services
- E-commerce revenue
- Development funding
Such deals may, ultimately, be the price of escaping from the growing nightmare shared by traditional media companies everywhere. They can’t continue indefinitely to grow online traffic that is effectively funded by advertising tied to falling print audiences. Otherwise, you know how that would end.
4. Community: Building a national consensus for the protection of news media through a commitment to ‘public service’ and all-media collaboration. A charitable foundation might help.
The developing story of Sinead Boucher media entrepreneur may be more important than you think. New Zealand is punching above its weight in influence and inspiration in a world where it still ranks only no. 40 in GDP. Even with another lockdown this week, this smart country is showing all those larger countries how to bring Covid-19 under control.
The Stuff CEO enjoys substantial public support. The return to local ownership of some of the most important mastheads has resonated, as have her plans for staff ownership and a charter for editorial independence. The tailwind may help her to develop practical ways in which the country’s news media, in general, can be protected.
It is reasonable to think that NZ could become a pacesetter among governments seeking to ensure that independent news media can survive nationally and locally – and not be squashed by “foreign” digital monsters. Stuff could start by persuading its government to join near-neighbour Australia which will soon become the first major country to require Facebook, Google et al to pay for news content provided by media companies under a royalty-style system. But that might only be the start of the legislation needed to protect “public service” news in the longterm.
Such a strategy seems feasible in New Zealand whose media has visibly suffered at the hands of disinterested foreign owners. The popular thrill at the MBO of Stuff is unmistakeable and may yet persuade the government to provide some emergency, short-term funding for Stuff, in order to reduce the pressure.
Sinead Boucher’s transformation strategy will be played out on the public stage. Even her proposed moves towards employee shares may help to strengthen the place of the news platform (perhaps together with those of her rivals) as a national resource worthy of protection. She’s a great advocate: “The thing I really love about the industry is, despite everything, journalism is still really important. It has a sort of purpose behind it. It has an ability to to make people think and change how they see the world.”
But there’s a long way to go in pursuit of her 2025 vision of Stuff as “New Zealand’s most trusted company and a diversified business that has led the way in developing a model to support and grow high-quality NZ journalism”.
Like legacy companies everywhere, it needs some help.
For all the international screaming about the need to “save” journalism, no government will be persuaded to protect companies over the longterm until they can prove their sustainability. Continuing revenue decline and a constant search for cost-savings to avert bankruptcy will keep governments away.
That is the opportunity for Stuff and its CEO.
Put simply, an imaginative, financially-sound (and community-serving) long-term strategy could attract the kind of legislative and financial protection necessary to sustain it.
It could also become another way in which little old New Zealand shows the rest of the world how to do it. No pressure, Ms Boucher.
