Who really benefits from the proposed TVNZ-RNZ merger?

AUCKLAND, Today: GroupM NZ chief investment officer Steve Tindall sees fish-hooks in the proposed TVNZ-RNZ merger. In an opinion piece, written for M+AD Daily, he elaborates …

Broadcast and Media Minister for the Labour government, Kris Faafoi, announced plans to fully merge TVNZ and RNZ by mid-2023.

“The new public media entity will be built on the best of RNZ and TVNZ, which will initially become subsidiaries of the new organisation,” Faafoi said.

“It will continue to provide what existing audiences value, such as RNZ Concert, as well as better reaching those groups who aren’t well served, such as our various ethnic communities and cultures.”

Both organisations are to be dissolved into a new entity where initially RNZ remains commercial free, however TVNZ would still have some commercial imperatives but would not have to pay a dividend to the Government with the combined company existing as a ‘not for profit’ model.

Faafoi noted that the current structure was focused on radio and television and that this would need to evolve to future-proof New Zealand’s public media.

“Ultimately this will result in higher prices for advertisers beyond the inflationary pressure currently being experienced.”

“New Zealanders are among some of the most adaptive audiences when it comes to accessing content in different ways, like their phones rather than television and radio, and from internet-based platforms,” he said.

An establishment board will be appointed next month to oversee the detailed design of the entity and the change process, with the aim of having it operational by 1st. July next year. Regarding funding, those decisions will be announced in the budget.

The Government believes this will also help the wider health of New Zealand’s media sector.

Content
Faafoi stated “we know what we want this new entity to achieve, and a legislated charter will set out the entity’s purpose and objectives,” and added, “that the entity would provide trustworthy news as a core service.

Its obligations would include having to provide public media content to all New Zealanders, including groups who are currently under-serviced or under-represented.”

Personnel
TVNZ has recently appointed former National Party MP Simon Power as CEO. He’s taking over from Kevin Kenrick, who is stepping down in February after nine years in the role.

“From the current information, it’s impossible to say definitively what the content output is going to consist of – there are some signals that point to a potential detrimental effect on the NZ media eco-system.”

Power was the MP for Rangitīkei from 2008-2011 and as part of Sir John Key’s government held roles as Minister of Justice, Minister for State Owned Enterprises, Minister of Commerce and Consumer Affairs, and Deputy Leader of the House.

“It’s well known that New Zealand’s media sector, both public and private, is facing unprecedented challenges with competition from the likes of Google and Facebook, declining revenue shares, and changes in when and how audiences access their information and entertainment,” current Broadcasting Minister Kris Faafoi said last year.

RNZ’s ceo is Paul Thompson who was appointed in September 2013 from the Fairfax group. Thompson was hired by RNZ to upgrade its digital media presence.

Hypothesis
From the current information that has been officially made available it is impossible to say definitively what the content output is going to consist of, however there are some signals that point to a potential detrimental effect on the NZ media eco-system.

Firstly, Minister Faafoi comments that the media outlets’ current structure “was focused on radio and television”, whereas in reality TVNZ’s on demand service is currently, arguably world leading, and is continually beating audience targets.

Secondly, if TVNZ is a ‘not for profit’ then there is no requirement for audience performances that draw in advertising investment. As audience measurement records illustrate very clearly, the NZ consumer enjoys a lot broader content repertoire than news and public service broadcasting.

“Ultimately, this will result in higher prices for advertisers beyond the inflationary pressure currently being experienced.”

It is unquestionable that there will be a fiscal responsibility requirement laid down by the establishment board, in an environment of reduced revenue as a result of reduced audiences, this would lead to a lowering of content investment likely to lead to a further diminishing of audiences, more critically not only for linear, but also for online services.

It is likely other media owners will benefit from a movement of advertiser spend to Discovery and Sky, as well as other NZ channels. It is even more likely however, the biggest beneficiaries in audience movement would be the streaming services with no advertising opportunities, and for advertising revenue, the giants of Google and Facebook, thereby pushing NZ media investment profit offshore.

Ultimately this will result in higher prices for advertisers beyond the inflationary pressure currently being experienced.

If the forecast audience decline in TVNZ1 content is correct, and the advertising revenue declines further as a consequence, then ultimately the industry rumour that the government’s intent to make TVNZ1 commercial free may become the reality.

The corresponding loss of advertising revenue would be highly unlikely to offset the economies of scale of ‘one newsroom’, one of the most expensive resources in a media company.

If so, this means that the subsidy the government would have to commit to would increase over time.

It is unlikely that any government would prioritise investment in a media company over healthcare, education, transport, housing etc. leaving only greater taxation in some form.

It’s difficult to see at this stage how any stakeholder in New Zealand media, including the people, could substantially benefit from these proposals.

They’re not too difficult to find however, if you look further afield.

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• Steve.Tindall@groupm.com