TVNZ has emerged as a single bright light among our big media companies with an increase in profits, but as Mark Jennings writes, the result signals more pain for its embattled rival MediaWorks.
TVNZ has reported a half-year profit of $15.8 million, an improvement on the same period last year of 47 percent. The state owned broadcaster has defied the trend and lifted advertising revenues by 3 percent. This is in contrast to the other major players NZME, Stuff and Sky that have all reported lower advertising revenues of between 4 and 10 percent.
TVNZ CEO Kevin Kenrick was “pretty chuffed” to have increased ad sales when the overall television advertising market declined by 3 percent, year on year.
“It has been really pleasing to get growth in top-line revenue. This is the strongest revenue growth we’ve had in 10 years.”
Four factors underpinned TVNZ’s revenue growth and increased profit.
1.Kenrick’s deal-making ability
Kenrick has shown himself to be the master of the deal. Last year he pulled off a coup by licensing the free-to-air rights for the Rugby World Cup from Spark. Spark’s pioneering effort in video streaming the Cup was always going to put TVNZ in the box seat and Kenrick has maximised the opportunity. Not only did the RWC bring in new advertising money from global sponsors that operate brands in New Zealand, it also sucked out a huge amount of local ad money. Money that rivals had no chance of competing for.
The RWC delivered nearly three million viewers to TVNZ. Its programmers must have salivated over the promotional base it gave them for the network’s other shows.
Kenrick is going for a one-two punch having done a deal with the other big sports rights holder, Sky, for free-to-air coverage of the Tokyo Olympics later this year. Sky has traditionally given the rights to its own free-to-air channel Prime. This time, new Sky CEO Martin Stewart has bypassed Prime and handed the prize to Kenrick.
Because he had options, Stewart will have negotiated a better deal than Spark did but Kenrick has assured himself of another revenue ramp and a big chunk of audience he wouldn’t otherwise get. And, he has TVNZ 2 to scoop up the non-sports watchers.
2.TVNZ News and Current Affairs
The strength of TVNZ’s news and current affairs has been key in audience and revenue retention. Try as it may, MediaWorks has not been able to make any sustained impact on the TVNZ juggernaut.
In the most commercially important audience segment – 25 to 54 year-olds, TVNZ dominates the 6pm to 7.30 pm slot.
If we go back to the peak viewing month of July, 1 News averaged 167,300 viewers a night compared to Newshub’s 91,300.
Seven Sharp averaged 110,200 to The Project’s 71,300. By the end of the year, with lower summer viewing levels kicking in, Seven Sharp was holding up around the 100,000 mark with The Project down to 59,000.
Neither of the two networks’ early morning shows are doing particularly well. In July, TVNZ’s Breakfast was averaging 36,000 and Three’s AM Show 23,700. These figures aren’t as bad as they appear because the shows are three hours long and viewers come and go during that period, but both programmes will be losing money.
Breakfast, with John Campbell at the helm, is safe because conventional theory has it that whoever wins the mornings also wins 6pm. MediaWorks, however must seriously be wondering if the cost of continuing to compete in this slot is worth it. The fact the AM Show is simulcast on radio station, Magic Talk, is helping it hang on.
3. OnDemand starts to pay off
TVNZ’s streaming service is now a real player in the market or as Kenrick likes to put it, “this overnight success has been five years in the making.” In 2019 TVNZ served 95 million streams and is now reaching nearly 350,000 people a week; making it a significant channel in its own right. The ‘disrupt yourself before someone else does’ idea is starting to work for TVNZ with ad revenue for OnDemand up by 26 percent for the half, year on year.
Kenrick has had a stroke of luck in this area. Shortland Street had turned out to be a brilliant allrounder. Not only does it still draw big audiences on TVNZ 2 – it accounted for nearly 15 percent of all streams.
Operating expenses increased by just over $5 million dollars or 3.45 percent. Given that TVNZ has been steadily adding new programmes to its OnDemand platform and dropping international shows for more expensive local ones, costs appear to be well under control. Last year, Kenrick announced plans to “simplify core business systems and processes and adopt contemporary ways of working to maximise productivity.” In other words, he plans to drive down labour costs as TVNZ looks to hold its own against Netflix, Amazon and Disney, as well as local competitors.
MediaWorks missing out
The share of the advertising market that TVNZ and MediaWorks each end up with is never made public but traditionally the two networks swap figures so they can benchmark their own performances. The latest exchange must have left MediaWorks’ CEO Michael Anderson and Commercial Director, Glen Kyne feeling despondent. TVNZ has clearly taken some share off MediaWorks. While the RWC would’ve been a factor, it is unlikely to have been the only one. Three has not been able to sustain its improved rating performance allowing TVNZ to get back on top.
Key executives – Head of TV Content, Andrew Szusterman; Head of News, Hal Crawford and his deputy Richard Sutherland, and Head of Communications, Charlotte McLauchlan — have all jumped ship. Chief Financial Officer Barry Sadlier is leaving in a few months.
Putting the loss-making TV operation on the open market in October 2019 hasn’t helped advertiser confidence.
The loss of revenue share will mean bigger losses for the TV arm and, worryingly for Anderson, his rock solid and profitable radio business is now under sustained attack from NZME’s stations. Former MediaWorks’s executive, Wendy Palmer, has tuned up the NZME operation and is starting to have a impact. All round, it is not a pretty picture for MediaWorks.