In the first of a series on the major New Zealand media companies, sourced through anonymous conversations with senior executives, Duncan Greive assesses the state of NZ’s biggest TV network.

‘We’re buying to play on the channel, not to put it in the cupboard.”

In a single caustic line, MediaWorks’ head of content Andrew Szusterman captured the feelings of the rest of the TV industry towards TVNZ and its strategy of pouring expensive programming into its digital platform. He was speaking at the launch of MediaWorks’ new season, which entailed an hour of casual speeches punctuated by announcements mostly confirming the return of existing properties like The Block and Dancing with the Stars, followed by lunch and drinks for perhaps 200 people at an inner city restaurant.

The contrast with their rivals’ event couldn’t have been more pronounced. TVNZ’s equivalent occurred a few weeks earlier, at the new ASB Theatre in Auckland’s Wynyard Quarter, at the heart of the city’s renewal. The presentations were highly choreographed and reeked of money. They took over two hours to play out, in front of a packed house easily triple the size of MediaWorks’ showcase, before drinks and canapés stretching deep into the night.

Most telling was the emphasis on digital: TVNZ presented TVNZ OnDemand as a full-fledged channel, alongside 1, 2 and Duke. By contrast MediaWorks didn’t mention ThreeNow even once. This isn’t simply a matter of emphasis – it’s one of resource, too. What Szusterman was referring to in his speech was the huge cheques TVNZ has been writing to buy some of the most buzzed about television of the year – including critical faves like Killing Eve and Little Drummer Girl – to debut online, only to air on linear months later, if at all.

The strategy is one of the most divisive in media, seen in fairly binary terms as either genius or incredibly foolish, for reasons I’ll detail later. Who is right on this – the believers or the doubters – will define the legacy of TVNZ CEO Kevin Kenrick, and the future value of one of New Zealand’s largest cultural assets.

For as long as it has existed, TVNZ has dominated television in the country. For its first few decades this was by virtue of being a state-controlled monopoly supplier, part of the original NZBC. But even after competition arrived in the form of TV3, Sky and then the internet, TVNZ remained serene atop the ratings. As I write, the top five shows in New Zealand are 1 News, Country Calendar, Fair Go, Border Security (!) and Seven Sharp. All bring in over 400,000 viewers a week; all screen on TVNZ1, which also airs 15 of our top 20 shows by total audience.

This is the way it has always been, and for many years TVNZ acted as though it could never change. That it somehow owned New Zealand’s hearts and minds, without really needing to earn them. The enterprise felt remote, aloof – and even as it drifted slightly out of time and rejected attempts to influence its behaviour (see: the charter) it remained stubbornly ahead of its scrappier competitor.

Yet even as it dominated free-to-air TV, it wasn’t immune to the broader audience fragmentation affecting media. The network inevitably got caught up in the doom-laden perspective which infected all media for a clear decade following the GFC. “A couple of years ago all everyone was talking about was PUTS [people using television – Nielsen’s term for audience] decline,” said one exec of the mood at the network.

This was the year that definitively changed. In recent years TVNZ’s headquarters have had a sparkling refurb from architects Warren and Mahoney – they’re now easily the fanciest in New Zealand’s media – and its brands have had a corresponding streamline and polish too.

With this structure in place, the content has been adroitly re-shaped. In one astonishing year Seven Sharp has leapt at least two generations in tone, placing Hilary Barry, Jeremy Wells and even the electric Anika Moa into the 7pm slot without any noticeable ratings damage. It has poured money into a flashy 6pm news set which has helped bake in its advantage in opening the crucial evening primetime run. And it has meaningfully re-engaged with sports for the first time in decades – this year playing the Commonwealth Games, and announcing a partnership with Spark to screen the Rugby World Cup in 2019.

Much of this has been years in the planning, yet the timing has raised eyebrows at rival media firms. “TVNZ has realised the political atmosphere has changed,” says one rival executive. “They’ve emphasised public interest over the past year … the change in tone was relatively rapid.” After nine years behaving as a pure commercial animal under National, it’s as if TVNZ has decided it’s a social enterprise now Labour is in power.

It is particularly notable that, just as a new left-leaning government arrives with big yet vague plans for the sector, Mike Hosking was waved goodbye and, not long after, John Campbell was recruited. The emphasis it places on its New Zealand content has hugely increased, too, as well as the prominence of the likes of kids’ platform HEIHEI and youth-focused social video work from Re. The decision to promote its politics hour Q + A from the breakfast basement to Sunday prime-time sent a powerful message. All speak to a public-spiritedness which has been absent since the charter was abandoned with the arrival of the Key government.

It’s all defensible as part of a move to get younger, and to diversify audiences. Yet it’s undeniably in tune with the coalition’s thinking too. “[Kenrick] is very politically savvy,” said a rival TV exec admiringly. “He knows when to keep his head down.” And when to raise it up.

Make no mistake, though: TVNZ is still deeply and avowedly populist. It has started to take on Three’s dominance in reality with an offering of its own that is tonally different from its rival. Where Three’s franchises like Married at First Sight are epic, sprawling multi-night affairs which are at pains to ante-up the drama, TVNZ’s best reality shows were smaller, sweeter and often softer.

Project Runway sharply aped the extraordinary product integration of The Block while projecting a more humane working environment. Better yet was The Great Kiwi Bake Off, a near-perfect show exploding with colour, surreal humour, a sharply diverse cast and a pair of superb hosts in Madeleine Sami and Hayley Sproull – collectively it felt like a giant leap forward for the whole genre.

The same couldn’t be said of Heartbreak Island, an entertaining shambles of a show which had mediocre ratings but became an OnDemand sensation, enough (along with sharply exploiting multiple nation’s screen subsidies) to justify a second season. Along with announcement of the return of Julie Christie’s iconic Celebrity Treasure Island and an unnamed renovation show, it suggests TVNZ remains committed to aggressively targeting Three’s core business.

Is this appropriate behaviour for a Crown-owned entity? MediaWorks CEO Michael Anderson has publicly agitated for TVNZ1 to be made commercial free, while other executives privately seethe at the way TVNZ has exercised its market power lately. The irony of the current status of TVNZ is that neither party really loves it the way it is. National would prefer to sell it, but couldn’t stomach the political turmoil it would cause. Labour would have it commercial free if the price tag wasn’t so alarming.

Despite the uneasy status, there is monumental upside to government ownership as a commercial entity – chiefly that the level of dividend returned is a conversation, rather than a hard imperative. And your board and shareholders themselves don’t actually touch the money, nor do they materially benefit from it. This is always helpful, but during this era it’s almost unfair. TVNZ already had a serious incumbent’s advantage in being the only channel in existence when a big chunk of current New Zealand grew up. The rest of the television sector had largely given up on that superannuitant audience, instead waiting for the day it became a fair fight as that generation died off.

This is why the massive and unanticipated loss-leading foray into digital caught everyone off guard. It’s one thing to use the volume and corresponding ad dollars to exercise control over existing linear audiences, but quite another to resource a platform using money that would otherwise flow to the state, and instead use it to actively harm the privately owned media competition.

That’s the origin of the bitterness in Szusterman’s comment at the top – and while referring to the online as a cupboard is a laughable caricature, he’s right to imply that its audience is more fragmented – and that both MediaWorks and Sky would have aired a number of TVNZ OD shows in prime linear slots.

What is up for fierce debate is the intelligence of the strategy, and whether crown ownership is allowing TVNZ to do something no rational private owner would consent to. One rival exec called buying major rights for online “stupid”. On Kenrick’s musing about launching an ad-free TVNZ OD subscription product, the same executive pointedly commented that “it would be interesting to see if the government allows that”.

The thinking behind the emphasis on digital as a platform is clear: TVNZ1’s huge audience is ageing fast. This is a way of taking the revenue from one older generation to subsidise the creation of a platform and content for a younger one. (This is the opposite of what happens in the rest of government, so should be commended on that level at least).

Yet rival executives suggest that digital has critical dynamics which make it different from linear – and that TVNZ’s apparent dominance there might be both artificial and short-lived. The most stinging criticism came of the idea that buying a few tentpole shows and getting a tech lead over MediaWorks will be enough to create a large and loyal audience for years to come. “Media companies don’t get to own the platform anymore,” said a rival. “That’s total fantasy. If you’re not a tech giant with 1000 engineers you don’t get to own the platform.”

While TVNZ has moved on commendably fast from calling Netflix a fad to being able to boast of 100m streams in 2018, it is potentially underestimating the scale of the tech challenge. Many new televisions sold in New Zealand have a small white button which takes you direct to Netflix, part of the reason it now reaches a shocking 27% of New Zealanders on a daily basis – ahead of both Three and TVNZ2, per NZ on Air’s research.

TVNZ OD is far less accessible. Keeping your product prominent and functioning on a sprawling array of platforms is phenomenally difficult – keeping sites and apps operating on hundreds of browsers and operating systems is a technical nightmare, and one that is not poised to get easier any time soon. Once you’re in the product, Netflix has class-leading UX, an ad-free environment, and is projected to spend up to US$13 billion on content in 2018.

So while TVNZ has opened up a large and telling lead over MediaWorks and Sky in terms of the quality of its online product and the programming for it, it remains a huge and insurmountable distance behind Netflix.

Still, for all its challenges and uncertainties, TVNZ should end 2018 in a confident mood. It has had one of the best years in recent media memory, across content, platforms, brand and strategy. It has become less aloof and more collaborative, with ongoing relationships with Stuff, NZME and Māori Television. It is extremely focused, with no radio assets or online news service of any consequence to distract it. Most significantly of all, it has judged the changing political weather superbly. So while its future remains riven with enormous challenges, it is in comfortably the best position of any of the major New Zealand media.

Running order

Monday December 10: TVNZ

Tuesday December 11: Stuff

Wednesday December 12: Sky

Thursday December 13: MediaWorks

Friday December 14: NZME

Saturday December 15: RNZ

Sunday December 16: Spark, Bauer, Māori Television

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