State-owned broadcaster Television New Zealand is committed to Igloo, its joint venture with pay-TV operator Sky Network Television, despite writing down its stake and missing subscription targets.
TVNZ chief executive Kevin Kenrick told Parliament's commerce select committee the broadcaster anticipates it will be a longer wait of the Igloo joint venture to start making money, which was why the company wrote down the value of the investment last week. TVNZ had previously told the committee it expected Igloo would take between four and six years to breakeven. National Party MP Chris Tremain said there were about 6,000 subscribers, short of the forecast 15,000.
"Entering into a pay-TV business is not for the faint hearted, there is a long period of investment," Kenrick said. "The reason we've taken the impairment is because we think the indication is that it is going to take longer than what we originally thought for Igloo to be a profitable business."
"A lot of these new technology businesses you've got to be in the long haul really for the results to come through," he said.
TVNZ invested $12.25 million for a 49 percent share in Igloo in 2012, but reduced its shareholding size to 34 percent last year. The broadcaster recognised a $6.1 million impairment and loss from associates in the six months ended Dec. 31, saying it wrote down its remaining investment of $4 million in Igloo due to the uncertainty of when future profits from the budget set-top box venture with Sky TV might be seen.
When asked whether TVNZ was repeating the same mistake it made with previous failed subscription service, TiVo, chairman Wayne Walden said TiVo probably failed "because it was using to some degree very old technology, so that was an investment that wasn't well founded."
"The decision to go into Igloo was the right one, as it does now give the company the opportunity to participate in a particular market segment that we're not currently in," Walden said.
TVNZ affirmed it was on track to reach its 2014 financial year guidance of $16.8 million, and said it was continuing to look for expansion opportunities as it competed in an increasingly "dynamic" market.
In September last year SkyCity Entertainment Group bought prime real estate from TVNZ for $10.6 million. The Auckland land deal saw TVNZ sell off its Hobson St sites which sit directly opposite land already owned by the casino operator.
In tandem with the SkyCity deal, the broadcaster reached an agreement with government last year for a dividend relief to cover refurbishment costs of its main Auckland building on Victoria St West.
Kenrick would not be drawn on what the refurbishments will cost the company, saying he expected that once completed it would reduce maintenance costs.
TVNZ management was questioned over an internal investigation into the use of its building for political meetings by former general manager of Maori and Pacific programmes Shane Taurima, who unsuccessfully sought the Labour Party's candidacy for the Ikaroa-Rawhiti by-election last year.
Kenrick said he was "absolutely gutted" over the potential misuse of the resources.
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