The broadcaster recently unveiled plans to offer a paid, ad-free tier to its OnDemand platform. South Pacific Pictures founder John Barnett says it’s not too late for a rethink.
For two long years in the mid-80s I sat through hearings to determine who would be awarded a licence to operate what would be New Zealand’s third channel, our first not to be owned by the government.
Thirty-five years ago the government could, and did, control the airwaves. And so, at enormous cost, four groups of applicants presented their credentials and their planned operational approaches to the decision-making panel: some competent assessors, and some with very little, if any, understanding of television governance, finance or audience.
The four applicants were all related to existing media operations, particularly newspapers which were then New Zealand’s most profitable medium. Each applicant group had two separate component parts: the mainstream channel activity offering entertainment, sports, fiction and reality programmes, and an independent news service operation.
This crazy structural approach was devised to deliver “independent news” while living under the corporate umbrella of the main operation.
At the time I was chair of directors of one of the news company applicants with a terrific lineup of journos and commentators on our team. After all those months of preparation,presentation and cross examination of our catering budgets, and planned premises, and technology, we were one of the three applicants who lost out.
The winning consortium, known as TV3, wasn’t winning for long. It was already in financial trouble shortly after getting its licence; then within months of commencing transmission, broadcasting minister Richard Prebble changed the rules under which it operated. Not long after, TV3 was in receivership.
Through various incarnations and with subsequent bank support, TV3 continued on – until recently when, once again finding itself in straitened circumstances, it hived off its radio operations and, under the ownership of international player Discovery, began a cost cutting exercise.
While all this was going on, broadcasting minister Kris Faafoi announced plans to merge TVNZ and RNZ. Yet another panel was put together to find a way to make that work.
But wait! Ahead of any merger direction, TVNZ has announced it will set up a local ‘subscription video on demand’ (SVoD) channel – a paid-for, ad-free service – to protect its market share.
TVNZ was seeing falling viewing figures, reduced revenue, and aging demographics. These are factors which are now impacting all free-to-air broadcasters everywhere. The licences to print money which once were held by print media, and then by free-to -air broadcasters, are looking very crumpled indeed. Across town at Sky TV, a severely reduced management team is working out what to do about a possible sale of NZ Rugby to US investment firm Silver Lake, which is very likely to take the rugby rights away from Sky.
Meanwhile AT&T, the US telco giant and owner of movie studio Warner Bros, announced it would spin off Warners into a new entity with Discovery who are broadcasters, channel owners, producers, and distributors. That will create a US $43 billion behemoth combining Warner’s entertainment arm, including HBO, sports and news, and Discovery’s non-fiction and entertainment.
This puts a huge amount of content into an operation which is competing with Netflix, Amazon, Hulu and also with a merged Fox/Disney.
And a day later Amazon announced it was in talks to buy the movie studio MGM, potentially taking another fabulous library of content – including all the James Bond films – off the market.
The changes and the consequences were all dictated from outside New Zealand, and neither the local operators nor the government anticipated them, or can do anything to modify them. But they have changed the landscape in ways which leaves two of the three NZ players in a very weak position.
What does this mean for NZ?
Look at Sky’s programme guide. You will see Discovery channels, you will see significant Warner HBO content on SOHO, movies from Warners, Fox, Disney and MGM on Sky Movies, and shows from their TV arms across the schedule.
All those agreements are currently contracted. But Discovery Warners has clearly stated its global aspirations, and supplying content to other providers is not their aim. So expect to see disruption here.
At TVNZ, the lineups in primetime also feature fiction and reality formats from companies owned by Fox/Disney, MGM, Warners and Discovery.
And if TVNZ is contemplating an SVoD service – particularly one which aims to compete with the SVoD giants, Netflix,and Amazon – it needs to have content which is attractive to younger demographics and households willing to pay, say, $10 a month every month for content which isn’t from a major studio, or from Netflix, Amazon and Disney, or from the fast emerging international competition.
In the year to March 2020, TVNZ spent NZ$202 million on purchasing programming content for transmission.
This year Netflix will spend NZ$21 billion on programme content. In 3.5 days, Netflix spends as much as TVNZ spends in a year.
Amazon will spend around NZ$10 billion this year. TVNZ’s annual spend equals one week of Amazon’s.
And unlike in 1985, Amazon and Netflix don’t need a licence to transmit in New Zealand. Government doesn’t control that lever any more because technology has bypassed it.
And while all that is going on, Kris Faafoi’s committee is planning a joint future for TVNZ and RNZ. But the landscape has undergone a seismic shift, and MBIE and MCH, like the local operators, will have no influence in its outcome.
I understand that the committee, under Tracey Martin’s leadership, is restricted in its deliberations to only addressing RNZ and TVNZ, and is under instructions not to include NZ On Air, the NZ Film Commission or Te Mangai Paho, the three funding agencies that keep the NZ production community alive and that provide content specifically for free-to-air players.
Given the shifts of the past two weeks, plus the blindingly obvious dominance of Netflix, Amazon and Disney, it would seem critical that any contemplation of a future for free-to-air content must include discussion and planning with the funding agencies, particularly NZOA, the best and most reliable of the operators.
And while TVNZ has argued that its viewers don’t like advertising in its programmes, someone has to ask how it will compete against the international subscription services that, combined, will outspend them by a factor of 250.
Then there’s funding. Since NZOA is restricted to financing content which is freely available, with no pay walls, TVNZ will have to forego access to that pot of funding if it creates an subscription service with new content.
However, there is a potential way for TVNZ to thrive, and for RNZ and TVNZ to jointly operate to offer all New Zealanders the very best of local content, plus the offshore content available after Netflix, Amazon, Hulu,Disney/Fox, Discovery/Warners, MGM, Paramount and Universal have taken their shows off the table.
The fastest growing platform in the US is ROKU which is an AVoD platform – that’s advertising-based video on demand, the very same model that TVNZ currently operates as TVNZ OnDemand.
In the last quarter, ROKU added 10 million US viewers, taking it to over 65 million people who are signed up and who have watched a combined 118 billion pieces of content. That content included a lot of material which debuted on pay platforms a month or so earlier, and then became available on ROKU.
Many, many New Zealand households don’t want, or can’t afford, a subscription-based video service..
With a predominately local content lineup plus “second run” premium content, TVNZ could create, at no real extra cost, an attractive AVoD offering, generating real income. Think the current TVNZ OnDemand, but on steroids: a more comprehensive back catalogue – why not all 30 years of Shortland Street, instead of just the past 20 weeks? – a bigger search engine, and a more aggressive acquisition approach, taking advantage of the fact that rights holders are allowing more windows, with shorter exclusivity periods for content licensed to subscription services.
What works in this space is an active curation approach – as demonstrated by ROKU’s phenomenal success in the US. With a better use of algorithms and machine learning, TVNZ OnDemand is in a position to exponentially increase its viewership. It’s not enough any more to just display content: you need to bring to the surface the content people actually want, before they even know they want it.
And there is a bonus which doesn’t appear to be on anyone’s radar yet. If you added RNZ’s enormous catalogue, and equipped it with a powerful search engine, you could offer all New Zealanders both visual and audio content on a single platform. Its unique selling point would be the local content both organisations produce so well, and which appeals so widely to New Zealand audiences.
Meanwhile, the significant resource of RNZ and TVNZ’s news libraries could be harnessed to create a cloud-based content pool, making it the predominant source of NZ news and NZ perspectives on world news. With a world-class search engine, a news service like this could present a challenge to those services to which search engines currently direct requests.
I’m sure TVNZ has done the numbers, but with only 1.7 million households in this country it’s hard to see how a New Zealand- based subscription service can generate even as much as 20% the income of TVNZ’s current ad revenue.
An advertising-supported service like the one I describe above would deliver a considerable part of what Kris Faafoi is seeking. It offers viewers and listeners content they wont get elsewhere, it builds local capability, and the economics suit our small population.
Thirty-five years ago a NZ government could dictate how we watched and listened, what we saw and when. But those days are gone forever. Now TVNZ has a chance to be the streaming platform of choice for all New Zealanders – no subscription required.