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What if this was only the beginning? (image: Tina Tiller)
What if this was only the beginning? (image: Tina Tiller)

MediaMay 18, 2021

A blockbuster media deal could tie Three up with CNN and HBO

What if this was only the beginning? (image: Tina Tiller)
What if this was only the beginning? (image: Tina Tiller)

Three’s parent company Discovery is in talks to merge with AT&T’s media assets, with huge implications for New Zealand if it goes through, writes Duncan Greive.

What just happened?

News broke yesterday of a proposed mega-merger that would collect massive global brands like HBO, CNN, Discovery, Warner Brothers and more in a media behemoth which would become one of the most diversified screen media companies in the world. The combined entity has flowed out of AT&T – America’s Spark, essentially, which bought a whole bunch of media in 2016, apparently on a whim as it’s now looking to offload it. The combined company would be a major player in everything from movies to sports to news to drama to reality TV – and considerably expand the scope of a major player in the streaming wars. 

If all its shows and rights deals were combined under one roof it would be one of the broadest line-ups among all the streamers. It would need a lot of figuring out – making 24 hour news and sport fit alongside reality and drama won’t be easy – but it’s easily the most fascinating media deal since Disney’s acquisition of Fox in 2019.

How does it impact New Zealand?

Among the thousands of media properties owned by the potential goliath is a little TV channel at the bottom of the world known as Three, which might be on the verge of its second ownership change in less than a year. Another huge part of the deal? The local branch of Warner Brothers is included too. They’re one of the biggest production houses in the country – and easily our most prolific makers of imported reality TV formats. This year alone they’ve worked on The Bachelorette, Drag Race Down Under and the Great Kiwi Bake-Off.

What’s the best case scenario for Three?

Around 20 years ago, Sky TV bought Prime to serve as a shop window for its stunning line-up of pay TV channels – bringing delayed All Blacks games and major HBO shows to free-to-air. There is a version of this merger which sees these brands all taken out to the large network of free-to-air stations the cable giant would own, and having them function as promotion for a new streaming colossus. Tova O’Brien breaking stories on CNN NZ at 6pm (and serving as the local correspondent for a global audience), before an evening of local reality TV souped up by global budgets and distribution – with major sports and drama rights for good measure? It really could happen. 

And the worst case?

It could also swing the other way, with the New Zealand linear asset seen as too small and obscure, with the company’s focus all brought to bear on the streaming product. It might keep a local sales office, and a sprinkling of productions – just enough to maintain a local presence for a dual advertising-funded / subscription product offer. The gulf between those potential outcomes shows just how little we know about what this media leviathan might do with its vast empire.

What could it mean for TVNZ?

It kinda puts the RNZ merger in perspective, huh? And probably makes the case more unassailable, in some ways – if you’re playing in video now, you need as much scale as you can muster. And, potentially, a lot more vertical integration. All those reality shows I mentioned before, that Warner Brothers NZ is making? All fun, talkable, high quality work – and all playing on TVNZ. If Warners becomes exclusive to Three, or its own streaming platform, both the rights to shows like the Bachelor franchises and a large and skilled chunk of the local production sector could become inaccessible. For TVNZ, which is betting more and more on local, that would be a double blow.

It might also prompt TVNZ to accelerate both the fuelling and the launch of its own subscription service, news of which broke just last week, and is looking more important by the day.

How is Sky feeling right now?

HBO. Discovery channel. CNN. Just a few of the flagship Sky TV properties which would be changing hands if this deal goes ahead. And while Sky still has years to run on some of those key contracts, and can offer a strong and steady cashflow to the new entity, it will inevitably cause major consternation at Sky HQ. Disney and Netflix were enough to deal with, but the merger of these assets creates a new media company with scope which looks eerily similar to Sky’s – only at global scale.

How should the government view all this?

A few years ago, the Commerce Commission went on a blocking spree, getting in the way of a merger of Vodafone and Sky TV, and NZME and Stuff. It is powerless to impact decisions made in Hollywood and on Wall St, which tower over all local media entities. Indeed, if this goes through it would create one of, if not the largest media player to ever have a significant presence on the ground in New Zealand. It arguably makes the likes of the Public Interest Journalism Fund and the RNZ-TVNZ merger more urgent, given deep-pocketed global competition, while offering much less certainty of outcome. 

Is it actually, definitely, really happening?

This remains unclear – for now. These deals are horrendously complex, and involve multiple shareholders and regulators needing to sign off. But where prior rules might have prevented such huge linkups, the current mood seems to be to let these groups partner up. 

Given the opposition – from Amazon Prime, Netflix, Apple TV, Disney and more – there is no shortage of competition. But getting the deal done is only the start – thereafter the snake has to rest and digest for months if not years (this is why those working at Three should rest easy for the time being), creating opportunity in its vacuum. 

Make no mistake though – if this deal does go through, it will have a major impact on the local market, with none of our major screen players without exposure to its backdraft. The 2010s were a torrid decade for media. So far, the 2020s are shaping up to be even more tumultuous.

Correction: An earlier version of this story suggested that Bravo was part of the global deal – it’s only the local office which is implicated. The Spinoff regrets the error.

Keep going!
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.


Follow The Fold  on Apple Podcasts, Spotify, or your favourite podcast provider.


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.