ACCC voices concerns over Bauer’s $40m Pacific Magazines buyout

The deal between German-owned Bauer Media and Seven’s Pacific Magazines has hit its first hurdle, with the Australian Competition and Consumer Commission (ACCC) voicing its concerns, particularly around how it will impact the viability of both publishers’ weekly titles.

Woman’s Day and New Idea, along with Take 5 and That’s Life were the four titles named in the announcement from the ACCC, with the commission saying they are direct competitors and the deal would thus remove competition from the market.

ACCC chair Rod Sims isn’t satisfied by the initial review of the Bauer Media and Pacific deal

But, Seven CEO James Warburton said he doesn’t think the watchdog has fully considered all aspects of the deal.

The ACCC has taken a “narrow view” of the “competitive dynamics and constraints”, according to Seven, and ignored the competitive constraints of the industry.

“Advertising spend on consumer magazines represents only 2% of total advertising spend in Australia, whereas internet advertising spend accounts for more than 46% of total advertising spend in Australia,” said Warburton.

“At a time when the ACCC itself is looking at the impact of digital platforms on traditional media businesses and in the face of proposed government reforms to redress the imbalance between traditional media businesses and the dominant digital platforms, the concerns that have been expressed seem misplaced.

“The transaction represents an opportunity to provide a stronger base for these titles to compete into the future against digital platforms.”

Bauer agreed with Seven, with Adrian Goss, Bauer Media general counsel, saying the publisher was surprised the deal hadn’t passed preliminary approval.

“In view of the ACCC’s own findings in its recent Digital Platforms Inquiry, we are surprised that it has not cleared the acquisition at this stage. While we are confident of receiving clearance in the New Year, the ongoing uncertainty is enormously challenging for Pacific Magazines’ staff and the business more generally. Bauer Media has always seen the acquisition as a positive step towards ensuring the sustainability of print magazine publishing in Australia,” said Goss.

Both Seven and Bauer said they would continue to work with the ACCC as the deal progresses, with Bauer saying it still expects the deal to be completed in early 2020.

ACCC chair Rod Sims, however, said the commission was “acutely aware” of the complexities of the industry.

“Pacific Magazines and Bauer are the only magazine publishers in certain categories, and their titles appear to compete head-to-head on content and cover price,” Sims said.

“We are acutely aware of the dramatic decline in magazine revenue, both in terms of lost advertising and reduced sales. The trends in the media sector were considered closely in our Digital Platform Inquiry final report published in July. Many magazines titles have closed over recent years, and more titles will close irrespective of this deal.

“However, competition within markets has an important role to play to protect consumers, even in declining markets,” Sims said.

“The key Bauer and Pacific Magazine titles remain profitable, and in some cases average more than 1m readers per issue.

“If Bauer bought Pacific Magazines, Bauer would remove its closest competitor in certain segments. Our preliminary view is that this would allow Bauer to reduce the effort put into content production and the range of content, or to increase prices.”

And despite the rise of online publications, Sims said, consumers still value print products.

“While there is free online content available that resembles the content in these magazines, many consumers still value the physical format of magazines, the packaging together of stories, puzzles, prizes and other content, and the style of the articles produced by each magazine,” Sims said.

“Our preliminary view is that many readers have a strong preference for print magazines in the key weekly categories.”

Beyond just the readers, the ACCC is also concerned about what the merger would mean for content acquisition, including photographs and articles.

The body is welcoming submissions from interested parties by 14 February, with the final decision to be made by 2 April.


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