Our survival as a commercial entity rests upon our organisation being on the “right” side of the ledger in terms of reader/viewer/advertiser judgement. Integrity is the lynchpin of all that we do.
4.29While there can be no doubt that the free market and consumer choice exert a powerful influence on the behaviour of media organisations – including helping to define the boundaries of what is acceptable and unacceptable to the public – there are weaknesses in the argument of consumer sovereignty when applied to the news media.
4.30According to orthodox economic theory, markets operate most efficiently when consumers are left to make informed, rational choices that reflect the true costs and benefits of their consumption decisions, without the distorting effects of regulatory intervention.
4.31However, most also recognise that this ideal does not always exist in the real world and that in some circumstances intervention may be justified. The most commonly accepted rationale for intervention is market failure. This might occur when consumption of a product generates costs which are borne more widely than the individual (externalities), or conversely when the product confers benefits on the wider society which cannot be restricted to the individual consumer or be fully reflected in the price of that commodity (a public good). Market failure may also occur when the consumer’s ability to exercise choice is impeded either by a lack of competition or imperfect information.
4.32As part of the inquiry into media regulation in Australia, the Finkelstein Inquiry assessed the Australian media market against these accepted rationales for regulatory intervention.
The Australian newspaper market is far from the ideal truly competitive market which imposes considerable discipline on suppliers of products. In highly concentrated markets, and the Australian newspaper market is one such market, that discipline is dissipated and consumers have little choice and little power to influence what is supplied.
This adversely affects democracy. If everything that is worth saying is not said satisfactorily, informed debate on important political and social issues will be at risk. The privately-controlled free and open market will be impaired. Many ideas will be killed before they are heard. Democracy is the loser.
4.37In assessing the significance of “negative externalities” generated by the news media, the Finkelstein Inquiry was able to draw on a detailed meta-analysis of 21 surveys, spanning four decades, which examined public perceptions of media trust, performance, bias, power and ethics.
4.39The Report considered that these failures could at times cause serious and unjustified harms to individuals and society and were contributing to the erosion of public trust in the news media.
4.40The Report concluded that the existing self-regulatory regime to which Australia’s print media had traditionally been subject had failed to exert a powerful enough influence over standards and did not provide the necessary incentives to cope with the clear failures in the market.
4.41The theoretical justifications put forward in the Finkelstein Report for some form of regulatory oversight of the newspaper market in Australia have clear application in our own context. The specific examples of market failure – including the problems of externalities and information asymmetries – are structural problems inherent in the business of gathering and selling news. On the face of it New Zealand’s media market exhibits similar concentration of ownership and limited competition as identified in the Finkelstein Report. However, for reasons we will set out below, we view these market failures through a different lens and draw different conclusions about their implications for regulatory reform in the digital age.
4.42New Zealand’s media market is also characterised by concentrated ownership. Five entities dominate the print and broadcast markets: Fairfax Media New Zealand (part of the Australasian company Fairfax Media), APN News & Media (majority shareholders, Irish Independent News and Media and Australian equity fund Allan Grey), MediaWorks (private equity owned), Television New Zealand (state owned) and Sky (at the time of publication Rupert Murdoch's News Limited was in the process of selling its 43.65 per cent share in Sky to a range of institutional investors).
4.47Allied Press is the only surviving major independent media company. It publishes the Otago Daily Times, a stable of regional and community newspapers and also owns a number of local radio and television stations.
4.48The Finkelstein Report noted that highly concentrated media ownership posed a number of potential risks including limiting the extent to which ideas and information were contested, disproportionate influence of dominant media players and declining standards as a result of weak competition.
In 2012 it became apparent that the traditional business models of New Zealand print media were failing and the “digital first” approach was not (yet) making real impact on the bottom lines of APN and Fairfax. In New Zealand, commercial news media’s transformation from print to the digital environment has reduced jobs; remodelled newsrooms; expanded to non-core businesses and triggered asset sales.
4.52Myllylahti noted that while some New Zealand print assets looked likely to be offered for sale, there was also likely to be increasing focus on the potential of both digital audio broadcasting and the provision of high quality video on-demand services off the back of the Government’s billion dollar investment in ultra-fast broadband.
4.53The other important factor in assessing levels of competition is, of course, the rise of new publishing platforms which allow newsmakers to bypass the mainstream media, providing the public with alternative news sources. Social media networks like Twitter have fundamentally changed the environment in which news is broken and is increasingly used as an “official” channel for the dissemination of breaking news. Mainstream media must keep pace with this 24 hour continuous news cycle while at the same time undertaking their core functions of verification and contextualisation.
4.55We do not propose to repeat this analysis here except to restate a number of conclusions we reached which have a bearing on the level of competition and diversity in the New Zealand media market.
4.57However, we also noted a number of caveats: despite the massive proliferation of publishing online, only a small percentage of this new publishing activity is focused primarily on the generation and dissemination of original, local, news and current affairs. For example, we identified only a small number of professional, internet-native entities for whom this was the primary focus: these included sites such as Scoop, NewsWire, BusinessDesk, allaboutauckland.com and interest.co.nz.
4.58Alongside this relatively small pool of original content creators, are a number of news aggregators, such as infonews.co.nz, Voxy.co.nz and Yahoo!New Zealand, who generate little if any original news, but instead filter, organise, repackage and re-publish content drawn from multiple other news sources.
4.59Similarly we noted that while New Zealand has an active blogging community, including over 200 individual and collective blogs largely concerned with commentary and debate on New Zealand news and current affairs, only a small proportion of these provide reportage and generate original news with any regularity.
4.60Even the most prolific and high profile bloggers attract only a small fraction of the audiences which mainstream media sites attract each day. In order for a story broken on a blog site to gain momentum, it typically must percolate up through the social media ecosystem into the mainstream media.
4.64While based on a small sample, this research suggests that the majority of New Zealanders currently continue to rely on a comparatively small pool of mainstream providers – foremost amongst them TVNZ, MediaWorks, Fairfax New Zealand and APN News & Media – for authoritative accounts of domestic news and current affairs.
4.65This analysis leads us to conclude that while “new media” are making a significant impact on the New Zealand news market, and providing some competition and accountability for mainstream media, the imbalance in resources and audience share means these effects are, for the moment, modest.
4.66Another rationale for regulatory intervention advanced by Finkelstein was the extent to which consumers’ judgements and choices around news are impaired because they are not in a position to assess whether a report is fair and accurate or whether important facts have been omitted.
4.67Again, while we agree in principle with this analysis, it is arguable that the internet and interactive publishing are significantly altering this imbalance in favour of the reader/consumer. One of the core functionalities of web 2.0 is the facility to comment on and share content. Most mainstream media organisations have embraced this technology and are fostering user interaction.
4.68As discussed above, the internet has also given rise to many alternative sources of opinion and commentary: critiquing the mainstream media’s account of events is an important function carried out by many of these new media publishers.
4.69Powerful search technology also allows consumers to access primary materials, academic research and expert opinion on almost any topic. Citizens caught up in major news events anywhere in the world are able to transmit images and reports of these events instantly. While it often falls to professional media organisations to verify such reports, the fact is, news consumers now have a variety of competing sources from which to draw their own conclusions.
4.70In short, in the age of mass participatory media, audiences are no longer the passive recipients of information. They are often inquiring and sometimes, better informed than the traditional news sources.
… not everyone is equally knowledgeable or equipped to engage in critical disputation – so it is imperative that the basic facts presented in the news be subject to basic professional standards. Most people still want to be able to believe what they read.
4.72The processes of gathering, verifying and contextualising news is expensive and time consuming. It can also be financially risky. The benefits of these activities accrue to the whole of society, and are never able to be reflected in the cover price of a newspaper – giving rise to the so called “public good" problem. Arguably, the decision to make premium news journalism available free online has exacerbated this problem.
4.75Another rationalisation impacting the market in 2011 was the closure of TVNZ7. The channel was launched in 2008 as a commercial-free public service digital broadcaster with a strong focus on news, current affairs and documentaries. Although TVNZ is state-owned, it is no longer bound by any specific public service charter with respect to its programming mix.
4.76Unlike the Finkelstein and Leveson Inquiries, our own review was not driven by scandal or a perceived crisis in public confidence in the mainstream media. It was driven instead by concern at the gaps and inconsistences which had arisen in the regulatory environment for news media as a result of convergence. However, as we explain in the introductory chapter, the underlying concern is about professional standards and accountability and how these can be applied in this era of ubiquitous publishing. In order to address this question it is important to assess how well New Zealand’s news media (mainstream and new) are performing against their own professional and ethical standards. Such an assessment is an important indicator of whether the current regulatory environment is in fact providing the necessary level of accountability to maintain public trust in the news media.
4.77In reaching their own conclusions about the adequacy of the existing news media standards bodies in their respective countries, the Finkelstein and Leveson Inquiries were able to draw on a very significant body of research and oral and written submissions specifically addressing the issues of news media standards and public trust.
4.80Despite this lack of detailed research, it is possible to draw some tentative conclusions about the public’s perception of the news media’s performance drawing on a range of different sources including:
4.82As part of the research, survey participants were asked to assess the news media’s overall performance and were also quizzed about their awareness of news media standards and their perceptions of how well the news media complied with these standards.
4.83When asked whether New Zealand news media were providing “adequate coverage” of what they felt to be the “important current events and issues of the day”, 65 per cent of respondents said “mostly” and 23 per cent “sometimes.” Respondents were also asked whether they felt “reporting errors” (inaccurate or incorrect reporting) were a problem for New Zealand news media. Just over a quarter of the sample felt that errors were a problem, with the remaining evenly divided between “no” (38 per cent) and “don’t know” (36 per cent). Those with higher educational qualifications were significantly more likely to think errors were a problem with 32 per cent of those with a Bachelor’s Degree perceiving errors to be a problem (compared to 26 per cent of the general population). A third of those of Asian or Indian ethnicity also perceived errors to be a problem.
4.84Less than half (39 per cent) were spontaneously aware of the existence of professional standards which apply to the news media. When prompted with definitions of media standards, 60 per cent said they had heard of them. The highest level of awareness was around broadcasting standards. Of those who were aware of the standards, less than half felt they knew where to find them – equating to 24 per cent of the total population.
4.85After the standards were explained, respondents were asked to rate their importance. Slightly less than 70 per cent of the sample regarded the standards as “extremely important”. The most commonly cited reasons for regarding these standards as important were the need for accuracy, honesty and balance, the need to prevent bias and to protect the public’s rights.
4.86When asked to nominate the three media sources they regarded as best complying with news media standards, television ranked highest (nominated in the top three by 70 per cent of the sample) followed by newspapers (57 per cent) and Radio New Zealand (42 per cent). After these three sources there was a marked fall-off in compliance rankings, with newspaper websites nominated in the top three by only 28 per cent of the sample, commercial radio by 20 per cent and other news websites by 10 per cent. Twitter was ranked in the top three news sources for reliability by 15 per cent of the sample and Facebook by one per cent.
4.87There was a strong correlation between the media sources regarded as most compliant with standards and those regarded as most reliable.
4.88 In the first instance anyone wishing to complain about a news item must attempt to resolve the issue directly with the publisher. Currently there is no publicly available data about the level of such complaints, although a number of newspapers run prominent daily corrections columns.
4.89Anyone dissatisfied with the publisher’s response is able to appeal their decision to either the Press Council or the BSA.
4.90Analysis of the volume and type of complaints appealed to these two bodies over the past five years shows both bodies have seen an increase in the number of cases coming to them for adjudication.
4.96Like the BSA, the Press Council has also experienced a marked increase in the total number of complaints received over the past four years. The total number of complaints received annually increased from an average of 72, between 2004 and 2008, to an average of 128, in the last four years. These numbers peaked in 2012 with a total of 157 complaints.
4.98In part this is likely to be a consequence of the greater flexibility with which the Press Council has been able to respond to the digital publishing environment. Not only has it extended its jurisdiction to its members’ websites, its executive director has also taken an active role in resolving complaints relating to a number of non-member websites such as Scoop, Yahoo!New Zealand and MSN NZ.
4.99This has meant the Press Council has been forced to grapple with a range of new ethical and practical problems arising from the digital publishing environment. Some of these issues relate to journalistic processes and practices around the publication of user-generated content or content sourced from social media including Facebook and Twitter. Other issues relate to the architecture of the internet itself and the implications for complainants and publishers when contested content remains available on search engines – or in other cases hidden behind pay walls.
4.101Our Issues Paper made a number of bald assertions about the role and importance of the news media in a liberal democracy. As we noted in the previous chapter, these assertions were met with a degree of scepticism from some submitters. Some were highly critical of the mainstream media’s standard of reporting. They questioned whether impartial reporting and fact checking were in fact still core capabilities of the news media and whether public interest journalism remained a serious pursuit for commercial media driven by the twin demands of ratings and revenue.
4.102Perhaps not surprisingly, some of the strongest criticisms of the mainstream media’s performance came from those commenting on our proposals through online consultation forums such as that hosted by Public Address in February 2012. Issues raised included “ratings, ego and 'hit' driven media”, selective reporting, institutional and political bias, inaccuracies and a failure to engage in substantive issues. A number of commentators suggested that new media publishers, including part-time bloggers, who were not subject to commercial constraints, were an increasingly important alternative news source.
4.103However, as we highlighted in the preceding chapter, not all submitters regarded part-time bloggers and other new media commentators as the panacea to mainstream media failings. Criticisms of some new media publishers focused on the lack of adherence to any ethical code, the publication of unsubstantiated information, including damaging allegations, the publication of information suppressed by the courts, and a failure to adequately differentiate between opinion and fact.
Comment can be very homogeneous, and redneckery, bias, and basic inaccuracy can prevail when a discussion builds up a head of steam. I have got into web discussion on legal issues and completely killed the conversation by correcting the inaccuracies which made up most of the commentary. But commentary does not always self-correct mistakes or deliberately damaging material online. And the material may stay in cyberspace until removed.