MediaRoom: Hard yards for NZME as it eyes a ‘boomer’ 2025

Business analysts have praised broadcaster and publisher NZME for its efforts in recouping about half of advertising revenues lost a year ago, but hard times still saw its profit fall marginally.
Media industry experts who joined NZME’s half yearly update call on Tuesday deemed the company’s performance “pretty commendable”, and setting itself for a “boomer” in 2025 if the economy recovers.
That condition of economic recovery hung over most of the results briefing.
NZME said its operating revenue grew by 3 percent or $5m to $171m in the six months to June 30, against the same period in 2023.
On the face of it, given the damp retail sector and stubbornly low business and consumer confidence, any gain is a strong result.
But that $5m gain was in the context of a $10m fall in 2023, when compared with the year before. So it recouped about half the revenue lost between 2022 and 2023.
Ominously for the state of the business environment right now, the company said its 3 percent lift in revenues in the first half of this year was broken down into a 4 percent gain year-on-year in the first quarter, falling to a 2 percent lift in the second quarter. And now, in the third quarter it is forecasting just a 1 percent lift.
The fourth quarter, leading into spring housing sales, Christmas retail and summer, is usually NZME’s strongest. 
NZME chief executive Michael Boggs was cautiously optimistic, but noted that in the all-important real estate market, house for sale listings were still 20 percent below historical volumes.
“What we have seen in the first half is initially a large number of properties coming to market and then it has been quite quiet in the last couple of months, and lower value properties that do not spend so much on marketing.”
While the company was satisfied with its net profit being just down from $2m to $1.9m and its earnings before tax and other measures just up from $21.3m to $21.4m, it had also launched a $6m cost-cutting drive across the rest of the year. Two-thirds of that total would come from “people costs”.
“The difficult trading conditions and reduced confidence levels within the business community have seen the advertising market reduce year on year,” Boggs said.
NZME’s two big divisions – publishing and radio – both saw their earnings before tax fall, year on year, with the property site One Roof the only unit in positive territory, albeit by just $1.4m after a loss the year earlier.
One Roof is chasing Trade Me, the property advertising leader, but remains on average 80,000 behind in Nielsen’s online audience. One Roof has just 44 percent of its home market of Auckland’s ‘listings upgrades’ and 23 percent nationwide.
Higher spending by NZME radio on people costs (up $1m) and marketing and promotion (up $2.6m) saw that division suffer a 25 percent cut in its earnings before tax, despite lifting ad revenues by 1 percent in a constrained market.
The company said the extra promotional spend should reap benefits in this, second half of the year as it aims to lift The Hits and Coast in its bid for more impact in the music market, dominated by MediaWorks stations.
NZME radio is led by Newstalk ZB, which has been the country’s number one station since 2008. In overall radio market share, NZME (37.6) trails Mediaworks, which lifted to 52.4 in the latest GfK survey.
Australian-based analyst Roger Colman asked Boggs if, given NZME’s longtime “cultural” challenges breaking into the big time in audience share for its music stations, it would consider splitting the radio business in two to provide more focus.
Boggs said NZME radio’s share of revenue from the music market was greater than its share of audience but it wanted to lift performance overall.
One continuing success story for NZME is its income from digital subscriptions to nzherald.co.nz.  It added 7000 subscribers to 137,000 year-on-year, but has a target in two years’ time of hitting 190,000.
The Herald paywall brought in $11.1m in the six-month period, up from $9.8m in 2023. Subscriptions to printed papers still delivered $29.4m, down from $30m last year – in no small measure due to price increases boosting the company’s yield on every paper.
NZME wants its digital publishing function to make a margin of 15 percent (revenue over costs) by 2026 but that margin went backwards, from 7 percent a year ago to 5 percent in this half.
Boggs said nzherald.co.nz was about to introduce new paywall software which “will allow us to open and close stories, based on propensity to pay” and would make it possible to differentiate story and content pricing, for example, for overseas subscribers.
“We expect to see an acceleration in digital subscriber growth.”
Meanwhile, NZME was selective in its presentation of the website’s position in the market, saying in the first half financial presentation document that nzherald.co.nz was No 1. That was the one-off Nielsen result in June, but long-dominant site Stuff restored itself to first place in July, figures for which were out for 12 days before the NZME release. In July, Stuff was around 100,000-plus unique readers ahead of the Herald.
The NZME publishing division marked a milestone in the first half, with digital advertising (up 1 percent to $25.8m) now higher than print advertising (down 9 percent from $27.5m to $24.8m).
Forsyth Barr analyst James Lindsay gave NZME a thumbs up on the earnings call. He told Boggs: “Well done in a pretty tough environment, to produce a pretty commendable result.”
Colman went further, signing off with a firm air of hope: “Well done in the economic circumstances. If there’s a recovery, you should have a boomer in calendar 2025.”
Boggs took the compliment: “We’re with you, Roger.”
Deep in the NZME figures in its half-year results is a line item vacating what had been a provision in 2023 for potential payouts to the shareholders of BusinessDesk, which NZME bought in early 2022.
When BusinessDesk announced in November 2021 it had sold itself to NZME, it put the sale price at $3.5m with the potential at the end of December 2023 for a further $1.5m payment to BusinessDesk‘s principals if unspecified performance targets were reached.
NZME had since lowered that purchase price figure to $2,717,000 in cash in its subsequent public financial reporting. After 11 months of ownership, it also lowered the potential ‘earn-outs’ for the BusinessDesk people to $905,000, with a fair value of $413,000 put aside for each of 2022 and 2023 in readiness for the December 2023 trigger date. It’s possible the disparity is because these revised numbers are net, rather than gross numbers, with NZME having also covered some liabilities.
One note in the 2022 full year financial report says BusinessDesk had revenue of $3.08 million but recorded a loss of $131,000 in the period of that year that it was part of the NZME stable.
In NZME’s report for the full year 2023, after two years of BusinessDesk being part of the firm, it included a two sentence note in the Consolidated Financial Statements which declared no earn-out was payable. It released “all” amounts that had been set aside in the books.
Such a non-payment would usually reflect the failure of the acquired business to hit targets, in this case subscription revenues for the BusinessDesk product, and that the business reporting service had not contributed to the parent company as hoped at the time of purchase.
There have long been suggestions that NZME, with two complete business journalism teams in the Herald’s own business department and the autonomous BusinessDesk team, could look to eliminate some of the double-up. When The New York Times, for example, bought global sports site The Athletic, it soon followed that it eliminated its own Times’ sports department and made just The Athletic copy available to subscribers.
If BusinessDesk has not been the boon to extra subscription revenue that NZME anticipated, that streamlining scenario could yet come into play. One NZME insider, in recognising that possibility, remarked: “It might happen, but no doubt it’d be after some of those who did the deal in the first place have moved on.
Stuff’s team producing the nightly 3 News show have two months left in the old Newshub studios at Flower St in Eden Terrace before moving a few blocks down the road to a renovated studio in a Boston Rd, Mt Eden, building.
When Stuff first pitched to WBD NZ to win the contract for the 6 pm news show, it intended to create a studio in its Williamson Ave, Ponsonby, Auckland base. But after the deal was done it was discovered, among other things, the Stuff building had insufficient floor-to-ceiling space for what a TV news studio requires. A tight budget just got tighter…
Now, Stuff’s TV team will be part of up to 60 of the firm’s video and audio staff who will move homes to the Boston Rd building that housed Newshub’s The Project until late last year. A refurbishment will soon be underway for the new 3 News studio, with the TV contract understood to be for a year at a time.