TVNZ will need Crown support if revenue keeps shrinking, Treasury says

The state-owned broadcaster forecast it wouldn't meet the commercial objectives under the TVNZ Act.

The Treasury advised the previous administration to think deeply about its ownership of commercial broadcaster Television New Zealand, which will need a Crown lifeline if the collapse in advertising revenue continues.

Officials put a report back in front of ministers in February this year after a scheduled meeting with TVNZ's chief executive and chair didn't go ahead, saying if the broadcaster's revenues continue to fall Crown support will be needed to keep it operating, something that could happen as soon as 2021. The report was among a number of documents published on the Treasury's website in response to an Official Information Act request.

The state-owned broadcaster forecast it wouldn't meet the commercial objectives under the TVNZ Act, which are to provide a commercial return, quality content including local content, and provide channels free of charge.

"Under current settings, TVNZ's revenue and profitability is in a long-term decline and the Treasury does not see TVNZ's financial position improving," the report said. "This means that without structural change, ministers would eventually need to provide ongoing operating funding for TVNZ to continue broadcasting."

The Treasury said a sale of the broadcaster could potentially deliver the highest value commercial option and that it was unclear what TVNZ offered from a public policy perspective that couldn't be achieved through other mechanisms. The paper said the Ministry for Culture and Heritage wanted to do more work on the issue, and had an early view that TVNZ "remains important to keeping the contestable funding model, via NZ On Air, viable" and "serves a more diverse audience demographically than strictly commercial considerations would dictate, and this is reflected in the range of NZ On Air content that it carries, both for mainstream and more specialised audiences, compared with other broadcasters or platforms."

Speculation of a merger between TVNZ and rival free-to-air broadcaster MediaWorks surfaced last year, although the Commerce Commission's rejection of a tie-up between publishers NZME and Fairfax New Zealand was seen as largely quashing the likelihood of such a deal getting over the line.

New broadcasting minister Clare Curran has said TVNZ will stay in Crown ownership and is promising a shake-up in public broadcasting with an extra $38 million a year set to beef up public interest journalism and programming.

In the Oct. 25 response to the request, TVNZ said the report was "an excellent summary of where things were" in February and since then things have deteriorated with rivals MediaWorks and Prime TV's performance worsening, Australian broadcasters struggling and TVNZ writing down the value of its Disney contract.

TVNZ reported a profit of just $1.4 million in the June 2017 year due to the Disney writedown, although revenue slipped 2.5 percent to $316.5 million and underlying earnings more than halved to $17.4 million. The broadcaster's annual report, tabled in Parliament yesterday, shows TVNZ's net profit was just 0.6 percent of equity and underlying earnings were 5.5 percent of revenue, both substantially lower than the previous four years.

The documents also show the Treasury recommended ministers consider further use of the mixed ownership model for other Crown entities, in a similar fashion to the New Zealand Superannuation Fund and Accident Compensation Corp investment portfolio taking a stake in Kiwibank. The March 2017 report singled out Transpower as the "single most value-adding option", however, then state-owned enterprises minister Todd McClay's handwritten remarks on the paper said "I didn't ask for this, send it back to them!!".

Another paper shows the Treasury was approached by an unnamed party in February wanting to buy its 25 percent shareholding in Christchurch International Airport. The report noted double right of refusal with Christchurch City Council and Ngai Tahu, although the preamble to the documents said ministers chose not to proceed with the deal.


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