MediaWorks’ owners have called time after years of losses from its TV division. Sources say the company will announce it is for sale – if no buyers emerge, it will close within months.
Three is facing the biggest crisis in its three decade history today, as its ownership will soon announce the channel is for sale – and if no buyer can be found, it will be shut. A senior television industry source says that MediaWorks’ senior executives have been briefed about the plans, which involve the breakup of the company into two parts. The profitable radio and outdoor advertising assets will stay with current management, while the television operations will be made into an independent entity. “If they don’t sell the TV channel, they’ll close it,” the source told The Spinoff.
When asked about the timeframe, the source suggested a deal would need to be in place before the end of the year. “It will all be done by Christmas, one way or another.” When approached, a senior MediaWorks source confirmed the planned breakup and sale, though denied closure was being considered. Sources suggest that staff at MediaWorks will be told of the plans this morning.
MediaWorks is ultimately owned by Oaktree Capital, a US hedge fund which acquired it through buying its debt in 2012, assuming full ownership in 2015. A source suggests that Oaktree has told MediaWorks’ executives that it will no longer allow cashflow from its profitable radio and outdoor advertising businesses to subsidise its loss-making television operation, leading to the demand for a sale. At the same time, its Flower Street headquarters will be put on the market, for either leaseback to Three, should the channel be sold, or as a standalone real estate asset if a buyer is not found.
The split will not be easy. Its radio, online and television news operations were merged into the joint Newshub in 2016, and the companies flagship The AM Show broadcasts across radio and television. A combined sales team sells across its range of products, and there has been significant consolidation of its online assets.
Yet it is not a complete surprise. Signals from the channel have been increasingly desperate over the past six months. Multiple senior executives have left this year, and CEO Michael Anderson gave an interview to The Spinoff in which he openly contemplated a New Zealand with only one TV newsroom. This was followed by an editorial from his head of news, and a stunt on its morning news broadcast AM Show in which host Duncan Garner dimmed the studio lights and made a direct plea to broadcasting minister Kris Faafoi.
There was a fresh round this week, with revelations key comedies were being cancelled or severely trimmed. This was followed by an impassioned editorial on The Project that evening, with host Jesse Mulligan pointing the finger at the government for its acceptance of a $17m loss at TVNZ as evidence its private sector competition was being disadvantaged. Reaction to the pleas have differed, with a significant portion of the media believing that the situation was not as dire as MediaWorks was making out. When interviewed on RNZ’s Morning Report, Mediawatch’s Colin Peacock said programming changes were “being used as a lobbying tool to exaggerate MediaWorks’ problems.”
Along with the public statements, there has been an intense private lobbying campaign by MediaWorks to try and force the government to make structural change to the industry. Anderson and other executives have met with minister Faafoi to discuss ways it might help the channel, namely by decommercialising TVNZ 1. The meetings have manifestly failed to achieve the desired result.
“They’ve had a go with the government and the government’s not interested,” a source told The Spinoff. “They’re just going to leave it to the market.” The Spinoff approached Faafoi for comment, and a spokesperson said “The minister doesn’t have any comment, and it would be best to talk to MediaWorks.”
The ramifications of the sale or closure are immense. Three is responsible for around 30% of the local television production industry’s New Zealand-facing work, with the likes of Warner Brothers, which makes a large amount of commercial reality television for Three, particularly exposed. Hundreds still work at Three, and it retains one of the three largest private sector newsrooms in the country. Its political coverage has always been as strong as any in the industry, with the likes of Jane Young, Linda Clark, Duncan Garner, Patrick Gower and Tova O’Brien forming a formidable lineage of political reporters.
In the event of a sale or closure, the fate of shows from commercial hits like 7 Days and The Block NZ to award-winning current affairs programming like The Hui would all hang in the balance. The timing is instructive – yesterday saw the closure of the year’s most important round of NZ on Air funding applications. Three typically receives millions of dollars in direct or indirect subsidies through the state broadcasting funder. Yet, as its much-diminished comedy slate showed, the channel appeared concerned with reducing all future liabilities – even comparatively small ones, such as the license fees required to air shows like New Zealand Today.
The outcome of the sale-or-closure will be very closely watched by TVNZ. If it is to close it will inevitably have the effect of gifting a sizeable chunk of Three’s audience to TVNZ 1 and TVNZ 2, with a corresponding uplift in its advertising book. In an interview with The Spinoff earlier this year, TVNZ CEO Kevin Kenrick said it has “got to be three times bigger than what we are to have critical mass.” This would be one route to a major increase in scale.
Yet there is also a plausible scenario in which a buyer is found. In 2017 CBS acquired the then-struggling Ten network in Australia, and has led a successful turnaround. The same could happen here, especially as a network owner could pipe in content at a reduced cost – the lack of an owner in the media has long been seen as Three’s major issue.
The price tag for Three is comparatively small – a source speculated that it could be less than $50m, an extraordinarily small sum for a business which just a decade or so ago was valued at well over $500m. This is a reflection of changing consumer habits, with the rise of internet-delivered video on demand, and of an advertising market pulverised by the arrival of Google’s YouTube and Facebook. All parts of the media have been affected differently by these forces, with radio and outdoor advertising least impacted. It’s these durable businesses which are now the focus of MediaWorks’ future – with Three now imminently moved on or turned off.
duncan@thespinoff.co.nz
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