MediaWorks’s sale of its loss making TV network to global giant Discovery Inc ensures our first privately owned station will stay afloat and take the fight to its arch enemy TVNZ for a while yet, Mark Jennings reports

Just when it looks like all hope is lost, the television gods inevitably smile on Three. So many times in its 31-year history, the grim reaper has shown up at its door only to be repelled by the indomitable spirit of its employees, a friendly bank, or the optimism of a new owner.

The announcement that New York-based Discovery Inc has agreed in principle to buy the TV business had the champagne glasses clinking at Three’s Flower Street headquarters in Auckland.  

Once again, the bullet had been dodged, a looming scale-down or shutdown had been avoided, maybe not forever but at least for now.

The network that has brought so much innovation and competition to the local scene in drama (Outrageous Fortune), comedy (7 Days), and news (hour long bulletins, Nightline) will soon be back in the hands of a broadcaster, and one with global scale.

Being owned by private equity firms Ironbridge (2007-13) Oaktree (2013-2019) and Oaktree and Quadrant (2020) has not worked out well for Three.

None of them have been able to bring the expertise, contacts and direct investment that the network needs to compete with TVNZ’s dominant market position.  

Discovery operates in 200 countries, produces a huge amount of video content and has US$300 million of free cashflow. It has the know-how and the money to turn the tables on TVNZ.

But what’s in it for US giant with a market capitalisation of US$11billion? Well, it seems to like playing in smaller markets and it is one of the things that differentiates it from its competitors. It runs successful free-to-air stations  in countries like Norway, Denmark and Poland and has been building up its operation in Australia. It stuck its toe in New Zealand waters by buying free-to-air minnow Choice TV in late 2019.  

Simon Robinson, Discovery’s president, Asia/Pacific, says the company likes New Zealand. “We believe in this market. It’s a good media market that we can work well in. We think MediaWorks TV has some great assets and has a great place in the market.”

Discovery is essentially buying the Three and Newshub brands at what is probably a rock bottom price. MediaWorks CEO Michael Anderson says the price was “fair” but there were other considerations.

“We were not just seeking the best price, we wanted to it to go to someone who could add value to TV and make it a sustainable business – that was our guiding principle.”

According to MediaWorks’ chairman Jack Matthews, the buyer needed to have “ very strong financial capability, understand TV, understand the market and understand localism. There are very few companies around the world that can do that.”

For Anderson and Matthews it’s been a marathon haul. They put Three on the open market nearly a year ago and signed the deal with Discovery at 11pm on Sunday night.

‘It has been an unusually long and interesting process. It was progressing quite well, then came Covid and we had to work intensely hard in the business and at the same time on keeping the deal going,” said Anderson.

Asked if he felt relieved when the sale went through, Anderson replied: “Relief, in that we achieved it when all the commentators were saying you won’t be able to sell it, it is worth nothing and you will end up closing it, yes. When we went down and spoke to the newsroom the reaction was unbelievably positive. I told them that we [MediaWorks staff and management] deserve the outcome because they had helped achieve it against all the odds.”

Mediaworks’ news operation, Newshub, looks to be secure in the short to medium term but it will be under pressure, like the rest of the network, to lift the lacklustre ratings. Discovery’s Robinson confirmed as much.

“Ratings are a KPI we focus on. Yes, the ratings have been down [recently] but we focus on the longer term trend.”

Robinson doesn’t seem to buy into a claim advanced by Anderson that the television market in New Zealand is “skewed” by TVNZ’s structural dominance and state ownership that cushions it from commercial imperatives that MediaWorks and others have to adhere to.

“Michael’s opinions are Michael’s opinions. We’re are not focused on competitors, we’re focused on what we can do.”

One of the things Discovery can and will almost certainly do is ramp up Three’s video on demand and streaming services.

Its own advertising-supported streaming platform called dplay is being rolled out around the world and there is no reason to think it won’t be the same here. It is likely to be technically superior to MediaWorks’ current offering and include a lot more content.

The sale will bring more changes to the ever-changing media landscape in this country.

A focused, well resourced Three will make life more challenging for TVNZ, which itself is trying to ward off Netflix and YouTube by investing more in local content and its own digital platforms.

Mediaworks, is already the undisputed market leader in radio with powerhouse stations like The Edge, More FM, The Rock and Mai FM but NZME-owned stations have been making ground in what is essentially a duopoly market. Matthews was quick to point out that, freed of the loss making TV business, MediaWorks will be focused on reasserting its dominance in radio.

“TV took a disproportionate amount of resource and not having to manage a complex, under-stress business allows us to concentrate on radio and our outdoor [billboard] business where there is a lot of opportunity, especially in digital [technologies].

“Our shareholders are also comfortable investing in businesses that are meeting the return they expect. We are the clear leader in radio but we plan to lift our game.”

Mark Jennings is co-editor of Newsroom.

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