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TVNZ. Photo/Getty Images

Bill Ralston: MediaWorks is selling Three, but TVNZ has its own problems

The state broadcaster could find savings and fresh profits by merging with a media rival, writes a former TVNZ news boss.

While MediaWorks' sudden declaration that it will sell Three has hit the news, it's worth noting that its competitor TVNZ has its own problems.

Reports that TVNZ is forecasting a $17 million loss in the 2019/20 financial year is guaranteed to bring on the usual kneejerk reaction from commentators, talkback callers and those who write letters to the editor, who will loudly demand salary cuts for the reported 133 lucky workers there who earn more than $120,000 a year.

If TVNZ’s net loss continues and becomes a permanent feature of its cash position, we should be asking why taxpayers bother to own a business that loses money.

Of course, its rival, MediaWorks, which currently owns Three, also loses its private owners money. But it, at least, has a lucrative radio arm that is keeping it afloat for the time being. However, the ludicrous price paid for the network by its previous owners has shackled the present owners to paying everything it earns and more to meet the cost of their acquistion.

TVNZ’s profits have been trending downwards for several years, not helped by the $60 million it spent renovating its Auckland headquarters. Aside from handouts from NZ On Air for some of its local programming, it has no other income stream to prop up its advertising revenue, as MediaWorks does.

There is a strong argument that TVNZ needs to be freed from state ownership so that it might absorb or be absorbed by another media company and gain profitability from the synergies that might result.

If, for example, it joined with NZME, publisher of the NZ Herald and owner of a strong stable of radio stations, the combined entity could offer attractive advertising deals across TV, radio and print.

It could lower the costs of all three by merging their “back office” operations and improve their performance through cross-promotion. In the process, the public could pick up a few hundred million dollars from the sale.

Potential partners for TVNZ aren’t just old media organisations: the newer kids on the TV block, such as Spark or Vodafone, could be equally viable contenders for a merger or buy-out of the state-owned broadcaster.

It’s okay, don’t panic, your favourite programmes would stay much the same. TVNZ 1’s news and current affairs would be safe; they attract a large audience. In my time as head of TVNZ news and current affairs from 2003-2007, this area generated more than three times in revenue what it cost to make the shows. I suspect it is much the same today. No private owner will axe the news, because it makes money that the rest of the network lives off.

Technology is shaking up the whole television business and eroding the profits of the traditional media. Streaming services such as Netflix, where I spend much of my viewing time, shrink the broadcasters’ audience and therefore their revenue. Sky TV is in a battle to survive against such newcomers, ably demonstrated by Spark’s screening of the Rugby World Cup and its recent acquisition of home-based cricket broadcasting rights. TVNZ has the same difficulty because of the new competition for entertainment, documentaries and sports programming.

No industry can remain the same indefinitely; the television model we have had for the past 60 years is outmoded. No government wants a continual and increasing drain on its cash and that is what TVNZ risks becoming.

Commercially, TVNZ has become an orphan. It needs to join a large media family like NZME, Spark or Vodafone to survive and grow. If it doesn’t it will atrophy along with its sales revenue.

This column was first published in the October 26, 2019 issue of the New Zealand Listener.