Peter Thompson examines some legitimate funding concerns around the new public media merger to see if the sky is really falling
Comment: The Government’s plans to establish a new public media entity comprising RNZ and TVNZ, with additional direct public funding of $109 million, were always going to be controversial.
Some submissions on the bill setting up the new entity, known as Aotearoa New Zealand Public Media (ANZPM), have expressed concerns about the potential for the organisation to distort market competition, arguing it would use public funds to out-compete commercial rivals or that its non-profit status would confer an unfair advantage.
Unsurprisingly, the news that ANZPM would be receiving an additional $84.8m, re-allocated from NZ On Air, had many stakeholders up in arms. The well-known screen producer John Barnett predicted this would mean local production company closures and even the demise of some genres of local programming.
But is the sky really falling?
The $84.8m includes RNZ’s current funding from NZ On Air of $42.6m, which was not contestable anyway. The other $42.2m comes from the contestable pot and is still expected to pay for external commissions. So the assumption this money will simply disappear in-house is suspect. The problem is that the bill does not currently specify how the funding must be used.
The commercial media sector frequently complains about any public media provision from which it derives no benefit. For example, there was vehement opposition to the (abandoned) proposal for an expanded, non-commercial RNZ+ even though it would not have competed for advertising or mainstream audiences. In another instance, a broadcaster shamelessly used its own presenters to bemoan an uneven playing field because TVNZ had suspended dividend payments.
The commercial media sector’s vested interests therefore need to be differentiated from its legitimate concerns about the merger.
A key gap in the ANZPM Bill is the lack of specificity on the balance the entity must strike between commercial and Charter objectives – the latter are set out in clause 13 of the bill. Insofar as the Charter obliges ANZPM to provide media services that carry commercial opportunity costs (such as content aimed at minority demographics), there is undoubtedly a need for public subsidy. In an increasingly competitive environment where every eyeball and dollar count, programmes that cost more, attract lower ratings or generate less advertising revenue than cheaper alternatives simply don’t make commercial sense.
NZ On Air’s contestable fund is intended to make under-provided local content genres viable. However, the funding agency is not vertically integrated – that is, it does not operate a distribution platform. This means applicants must have a distribution agreement to guarantee audience reach. Unfortunately, this puts commercial commissioners in the position of gatekeeper and subjects the contestable fund to the very market constraints for which it is intended to compensate.
For example, when the non-commercial TVNZ6/7 channels were discontinued in 2011-2012, the government claimed the programming could still be provided through NZ On Air. But only two programmes (Back Benches and Media 7) found broadcast channels willing to schedule them.
Even with the offer of full production subsidies, commercial media outlets often decline to carry programmes if they compare poorly with alternatives that deliver higher margins. So as competition for audience and advertising has intensified, the level of subsidy required to overcome opportunity costs has increased. Although the NZ On Air funding is transparent, accountable and funds many excellent local programmes, it was never able to provide a full range of public service genres.
Will ANZPM make better use of this funding? Theoretically, a not-for-profit operator should be more capable of absorbing the opportunity costs attached to a public Charter. However, the bill makes no mention of ANZPM being non-profit (in contrast to the business case published by the Ministry for Culture and Heritage). Treasury has advised the Minister of Finance to implement measures ensuring ANZPM maintains its commercial performance and the 2022 Budget anticipates a claw-back of $306m in surpluses over six years.
If the new entity’s direct public funding is used to directly compete for revenue against commercial rivals that are not eligible for such funding, then there is a legitimate concern about market distortion. Similar objections were previously raised in relation to the TVNZ Charter when public funding was used to out-bid rivals for the rights to the Beijing Olympics. There is therefore a need to ensure ANZPM uses its funds primarily to deliver the Charter, not simply commercially out-perform its rivals.
There are mechanisms that might alleviate such concerns, such as requiring publicly-funded content to carry reduced advertising, or be directed toward genres aimed at under-served minority interests. But another option would be to oblige ANZPM to operate as a ‘public service publisher’ in conjunction with NZ On Air.
The temporary Joint Innovation Fund arrangement between RNZ and NZ On Air was an example of this model. This vertically integrated the funding agency by ensuring a designated distributor (RNZ) for content produced by other companies and retained the benefits of contestable commissioning. Importantly, such an arrangement could synergise the relationship between the ANZPM, NZ On Air, and local producers without inviting allegations of market distortion. It would surely be a more attractive option than seeing public money subsidising FBoy Island …