TVNZ restructures to turn small profit

TVNZ restructures to turn a small profit in a tough year

By Peter Kerr

Sept. 30(BusinessWire) – Televisions New Zealand Ltd., the state broadcaster, said its annual profit tumbled 89% and it only avoided dipping into the red by slashing spending and abandoning plans to attend next year’s Commonwealth Games.

Net profit shrank to $2.1 million in the year ended June 30, from $19.4 million a year earlier. TVNZ will pay the government a dividend of $1.47 million, down from $10.3 million in 2008.

TVNZ chief executive Rick Ellis said the year was the most challenging in history for advertising-reliant media, forcing the broadcaster to eliminate 90 staff and cut chunks of regional broadcasting.

"Without the cost reduction measures of the last six months the company would have been unable to remain profitable," he said.

Revenue was tracking well before Christmas, but as the recession’s impact on advertising started to take hold, it was "only because of this prompt response that we have maintained a relatively strong position," Ellis said.

Advertising declined in the second calendar quarter and didn’t recover in the third, though there has been a good uplift for October, November and December which at least shows a leveling out, he said.

"Very few media companies that have reported back have reported black numbers," Ellis told BusinessWire. "We’re very pleased that at least we’re in the black, our debt levels are under control and we’re well positioned to capitalize on that."

Bright notes among the gloom for TVNZ included a doubling of online display revenue from its Digital Media division, increased international programme sales, and the generation of new revenue through mobile interactivity.

In a part demonstration that TV can sit alongside its internet rival, the broadcaster’s TV on demand is an increasing hit.

Research shows that viewers who catch up with a favourite programme online are 13% more likely to return to that programme on TV. Ellis said the success of one of the first TV on demand sites outside the U.S. is part of the reason behind Digital Media’s increasing contribution to the bottom line. The company doesn’t separately disclose figures for the unit.

TVNZ’s traditional advertising revenue fell to $298 million from $315 million and was the main factor in the company’s reduction in operating profit.

However the broadcaster claims it increased its television advertising revenue share from 58.9% to 60.9%.

Earlier in the week, TVNZ earned the ire of advertising agencies and advertisers by announcing that media commissions will drop to 10% from 20% starting in 2011. The Communication Agencies Association of New Zealand president David Walden said "agencies and advertisers will need an assurance from TVNZ that this reduction will also result in a reduction in airtime prices so that it is cost-neutral for advertisers."

"There is a feeling from members that over time TVNZ will increase prices to advertisers as rate cards are adjusted upwards," he said.

(BusinessWire)

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