Image: Tina Tiller
Image: Tina Tiller

MediaMay 10, 2021

TVNZ is all in online – and planning an ad-free Netflix-style subscription service

Image: Tina Tiller
Image: Tina Tiller

The state broadcaster is not waiting for the merger to imagine its future, reports Duncan Greive after a wide-ranging interview with TVNZ CEO Kevin Kenrick.

TVNZ is planning a major reimagining of its TVNZ OnDemand platform that will ultimately lead it into a post-linear TV future, CEO Kevin Kenrick has revealed in a wide-ranging interview on The Fold podcast. This includes multiple online-only channels, a major expansion of its digital news offering – and the bombshell confirmation of an ad-free paid subscription service.

“The future is going to require multiple monetisation streams – I think it’s going to be pretty hard to do it solely on any one,” says Kenrick, sketching a vision of TVNZ OnDemand that goes “beyond just being the on demand version of what we’ve got, to actually being the digital version of TVNZ that replaces broadcast”.

This will initially involve a re-platforming of TVNZ OnDemand which will ultimately allow for a far more complex product, including paid subscriptions. The new version could launch as soon as this year, though subscriptions won’t be turned on until the company judge the service has reached sufficient scale.

Kenrick has contemplated such an offering since at least 2018, but has never yet publicly committed to it. The driver to do so now is a realisation that, despite the explosive growth of TVNZ OnDemand’s audience and ad revenue – now in the mid-teens as a percentage of overall sales, he says – there is a strong sense internally that to maintain the same quality and scale will require a more diversified business. The pure advertising model has been its foundation for decades but will not be enough in a purely online future, with Kenrick saying that the new TVNZ will require “multiple different ways we can generate a return off of that content”.

The ad-free service is also an acknowledgement that, given the choice, many people will avoid advertisements. Chris Schulz wrote a plea for an ad-free version of TVNZ for The Spinoff just last week, while Bloomberg reported on the paradox of the online ad market in the US, where growth is massive, yet the tech is ropey, with the same ads served over and over. With Netflix having made ad-free a core part of its service, there is a sense that to compete for premium customers who have become accustomed to that, ad-free subscriptions must be an option for TVNZ.


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TVNZ’s strategy has in part been informed by the UK market, where Channel 4 operates with a similar ownership structure and remit to TVNZ, and has recently announced Future4 – a major business transformation project that includes a desire to have non-advertising revenue reach 10% of total revenues by 2025. This is largely driven by planned growth in All4+ – an ad-free version of its All4 service priced at £3.99, a significant discount on UK Netflix, which starts at £5.99. It’s a major piece of work, though, not just technically, but in part because of the way the rights to deliver shows are parcelled up.

“The challenge we had initially was, firstly we didn’t actually have the content rights – because you’ve either got subscription or ad rights,” says Kenrick, who confirmed that the majority of local content deals now require subscription rights alongside ad rights. “And secondly we didn’t have enough scale, because the costs of setting up that subscription [service] versus the return we’d get on it made it really unattractive. But we’re now reaching over a million viewers a week with OnDemand, and our growth rate – we’re on track to massively grow that. So I think you earn the right to do more, offer more services and more choice.”

Kenrick says that the government is aware of the strategy.  “We’re big fans of no surprises – I’ve never seen them work out that well,” he says. “So we’ve been very open with officials and with the minister about where we see the future going.” When asked whether he was aware of TVNZ’s plans, broadcasting minister Kris Faafoi would only say via email that “TVNZ has presented a range of options for the digital future of its business.”

The big shift

It comes at a time of major upheaval within the larger commercial media sector. Sky TV has a new CEO and a determinedly low share price, despite a much-improved online product suite and a growing overall customer base. MediaWorks has cleaved in two, with Three now under the control of Discovery, which is building a global paid subscription TV service of its own. Stuff is newly independent and re-positioning, while NZME recently celebrated two years since the launch of its NZ Herald premium product.

The biggest unknown remains the timing and shape of the proposed merger of TVNZ with RNZ.

The Labour government presses on with its planning, with a group chaired by former NZ First MP Tracey Martin working on a second business case for the merger. A combined entity would make Kenrick’s expanded digital news offering easier to create, through the addition of RNZ’s work to TVNZ’s existing offering, but there are quandaries presented by the apparent preference for a mixed revenue model, with some government funding and a larger chunk of commercial revenue. 

One media executive spoken to by The Spinoff, who did not wish to be named due to having a business relationship with TVNZ, wondered whether Kenrick’s announcement meant there was an online future in which some RNZ content remained ad-free, but only behind a paywall. There were other complexities too, with the idea of a public media entity that allowed ad-free experiences only for those with the means to pay: “You don’t want to live in a world where ads are a tax on poor people.”

Faafoi would not be drawn on how a paid subscription would interact with the accessibility of TVNZ’s content, pre or post-merger, saying only that “TVNZ is required to make its content available to all New Zealanders. This will not change.”

The future is online

It seems clear that TVNZ is pushing into the future with full force, betting that more planning and strategy will allow it to be the natural controller of any merged entity. Kenrick, a decade into his time as CEO, might not stick around to run it, but if TVNZ can present as having the more well-rounded out strategy, it might be viewed as the naturally dominant player.

After staring oblivion in the face a year ago, during the lockdown-driven advertising collapse, the major media entities have had an unexpectedly strong year, driven by the frothy bubble economy. TVNZ’s ability to build and scale its operation has been significantly aided by the pandemic, as it controlled costs through some high-profile redundancies, and by savings on overseas content contracts that failed to be fulfilled due to major production delays.

This had the effect of accelerating its push into local content, while also producing huge savings. A TVNZ source suggests it is on the verge of its most profitable year in a quarter century – earnings it can retain and reinvest thanks to an agreement with government to suspend its dividend

It all ladders up to an organisation which has gone from a digital laggard – a few short years ago TVNZ OnDemand was not even part of its annual upfronts presentation to advertisers – to one that is fully embracing a digital future, and openly talking about the end of the current linear delivery service. With the streaming wars in full swing internationally, the push seems existentially important – to survive against the likes of Netflix and Disney+, everything needs to be on the table.

Keep going!
Image: Tina Tiller
Image: Tina Tiller

MediaMay 5, 2021

Advertising is dead. Long live advertising

Image: Tina Tiller
Image: Tina Tiller

As Apple cracks down on ad trackers and subscription models take hold, all signs point to the decline of online advertising. But don’t count traditional ads out yet, writes former Mediaworks head of news Hal Crawford – they’re popular because they work.

A year ago, when I was casting around for gainful employment as a former media executive, I came up with the idea of cobbling together a news site based on digestion. Digestive issues, I reasoned, affect a huge proportion of the population and yet get cursory treatment in mainstream media. The audience for gut news isn’t geographically limited. I knew enough about digital platforms and news to find an audience. I could do most of the actual work myself, and eventually hire a reporter. Based on a rock-bottom CPM [cost per thousand ad impressions] sold through a third-party network I reckoned I could make a living. News meets science meets [food] intolerance. Magic, right?

I took the idea to some trusted and knowledgeable friends in media and tech, and was greeted with silence. Eventually someone broke it to me.

“Mate, you want to stay away from display.”

Repeat every day: Stay away from display. The business I had been in – news supported by “display advertising” – that had paid my salary for decades, was toxic. If you’re not a global digital platform with billions of users, relying on ads is a game you can only lose.

Advertising has changed hands. It is no longer owned by content companies; it now belongs to digital platforms. This is one of the bigger economic and cultural shifts of recent times. The media industry has been upended and news in particular has suffered. Perhaps as a result, advertising is now under close examination, and many of the examiners have decided it is a somewhat seedy enterprise.

The front page of Neeva, the search engine created by a group of former Google executives to challenge Google.

The anti-ads trend

One poster-child of the anti-ads movement is the Neeva search engine. This would-be competitor to Google, founded by former Google employees, is currently in alpha. It provides a personalised search engine which users say at the moment isn’t quite as good as Google. The other thing about the search engine that isn’t quite as good as Google? You’ll have to pay to use it.

“If a site wants to show you an ad or a good [search] result, that’s a basic conflict of interest,” Neeva co-founder Sridhar Ramaswamy said in newsletter The Takeoff. Ramaswamy wants $5-$10 per month from each user for his product, which incidentally appears to borrow other peoples’ content extensively to provide its value-add.

The incredible thing about this rather long-odds startup is that Ramaswamy worked on Google’s ad product for 15 years, eventually becoming the search giant’s ad chief. He says he doesn’t think ads are evil, but then he mentions it was paedophiles exploiting ad tech that broke him at Google. He also believes tracking cookies, the foundation of digital display value creation, are “creepy”.

Cookie pile-on

He’s not alone in that feeling. Apple and Google are introducing changes that will deliver a one-two blow to third-party cookies, the things that allow advertisers to follow you around the web with infuriating results. Already Apple has banned these cookies on Safari, its web browser, and last week released a new version of iOS that requires apps to get permission to track users. Presumably a high proportion of users are currently unaware they are actually being tracked in apps and will decline the request.

Google is taking a different route, introducing a type of web tracking, FLoC, that groups people into anonymous bunches using AI. FLoC will become the standard tracking tech in Chrome, its dominant browser, and tracking cookies will be banned. I’m hoping this means I won’t still be looking at ads for coffee machines three months after buying one.

Sceptical competitors and commentators see both moves as paying lip service to user privacy while strengthening the competitive position of the giants. In any case, they come at a time when ads in general and ad tech in particular are suffering something of a reputational crisis.

Getty Images

Targeting as the bad guy

Governments around the world are moving to regulate the way their citizens are advertised to in a way that was unnecessary in the offline world. The EU privacy regulator, speaking in a market that already requires cookie consent, earlier this year called for a complete ban on targeted advertising.

The NZ Privacy Act, which came into force in December last year, has no explicit requirement on cookies, but the Privacy Commission says that any business collecting personal information must be transparent about its use. New Zealand, along with the rest of the world, is experiencing a kind of immune response to advertising tech, summed up in the now-mainstream idea that “if you’re not paying for the product, you are the product”.

So what happens now? Hamish McKenzie, the NZ co-founder of editorial innovator Substack, is eloquent on the benefits of abandoning advertising altogether. Substack, a subscription newsletter system, has been set up to create a direct relationship between audiences and writers: you pay the writer in order to read. No third parties. The Takeoff newsletter, mentioned above, is on Substack.

“The ad model for media is busted,” wrote McKenzie on his blog. “Subscriptions align incentives between readers and writers. Instead of producing work that might appeal to a mass audience and can therefore be attractive to advertisers, writers are incentivised to serve their readers.”

This alignment of interests has been noted across the mediasphere, and subscriptions have been widely seen as the way forward, and not just in news. With the broad uptake of Netflix and the “software as service” model, subscriptions are everywhere. The essence of the subscription pitch is that when audiences are clients, businesses behave and content improves.

One important question, given this beneficial alignment, is why many media businesses were ad-supported in the first place. Substack’s McKenzie says it’s because in the past media companies had a choke-hold on distribution and the opportunity to make more money. Could it really be as simple as that?

Substack co-founder Hamish MacKenzie. (Photo: Supplied).

A zombie business model

Advertising may be out of fashion, but it would be premature to sign its death certificate. In fact, the imperfect three-way relationship between audience, publisher and advertiser is currently experiencing a big rebound in the US, where quarterly revenue is up by more than 25% year-on-year for many ad-supported digital sites. The situation in NZ is similar in terms of overall digital ad spend, with industry body IAB reporting substantial increases in all forms of digital advertising – including display – in the final quarter of 2020.

The NZ financial news site BusinessDesk provides an interesting case study in how ads and news come together in the wild. BusinessDesk existed for years as a finance news wire service, before in 2020 moving to publish direct to audiences through a subscription model. The subscriptions have fuelled rapid growth, but publisher Matt Martel says BusinessDesk is now selectively taking advertisements as well: “We can do this without advertising, but our runway would be a lot longer.”

Martel says advertisers really wanted to be let in. As a publisher, it must be awfully hard to turn down money from an advertiser who loves your content and wants to support it. From an advertiser’s point of view, the opportunity to be part of something admirable is powerful.

There is an element of psychological need in the drive to advertise, but there is also plenty of hard financial reality. What the EU Competition Regulator seems to have missed in its impetuous call for a ban on targeting is how devastating that would be economically. Tens of thousands of small businesses rely heavily on cheap and accurate digital marketing to reach customers.

Death of a thousand subscriptions

In writing this article, I did some accounting I should have done a long time ago: adding up the total cost of all my digital subscriptions. They came to over $1500 a year. At this stage, every new $5/month feels like another straw on the back of the mangy camel of my finances. I am beginning to experience subscription fatigue.

Whether this is a personal thing or a wider experience may determine how far subscriptions can be pushed. Given the demand for advertising that good content brings – as demonstrated by the BusinessDesk experience – it may be that we’ll never find out whether subscriptions alone would be enough to support a healthy media ecosystem.

Despite the warnings of my colleagues against display and the poor reputation of ad-tech, advertising is going to continue to play a big role in financing what people read, watch and listen to. I don’t think that’s a bad thing. Who knows, one day I may need to do some [gut news-related] marketing myself.


In this recent episode of The Spinoff’s media podcast The Fold, Duncan Greive is joined by New Zealander Hamish McKenzie, co-founder of Substack, to talk about a new era of publishing. Subscribe and listen on Apple Podcasts, Spotify or your favourite podcast provider.