TVNZ needs to treble in size to compete with global giants - CEO
By Paul McBeth
Aug. 29 (BusinessDesk) - Television New Zealand will need to be three times the size it is now if it's to fend off the likes of global online media giants Disney and Netflix, says chief executive Kevin Kenrick.
The state-owned broadcaster has built up a war-chest in recent years - it had $50.3 million in the bank as at Dec. 31 - and will ramp up spending on local content and its online capabilities. The board agreed with the shareholder to stop paying modest dividends and will instead direct its steady earnings to fund that investment.
TVNZ will be spending more on local content than international rights for the first time in many years, Kenrick said. He no longer sees the likes of TV3 owner MediaWorks as a rival and views streaming video giants such as Netflix, Disney and Amazon as his new competition.
"We have a lot of work to do. Ultimately, we need to be three times the size," he told BusinessDesk.
His three-year plan is a "big step" towards that goal, but won't be the final say.
TVNZ today reported flat operating earnings and a smaller decline in annual profit than expected as the state-owned broadcaster grappled with a declining TV advertising market.
Earnings before interest, tax, depreciation, amortisation and changes in financial instruments were largely unchanged at $25.6 million for the 12 months ended June 30. That was ahead of the $22.4 million forecast in its 2020 statement of intent. A 44 percent slide in net profit to $2.9 million was due to a $2.9 million hit from unrealised foreign exchange movements and well ahead of the $1 million projected profit.
Revenue fell 2.5 percent to $310.7 million, on a 2.6 percent decline in advertising revenue to $293.2 million. The broadcaster said a single-digit decline in TV advertising was partly offset by double-digit growth in online advertising.
TVNZ's ad revenue edged up 0.7 percent in the final six months of 2018, but the wider market soured this year. Newspaper publisher and radio station owner NZME this week noted weaker advertising spending in its print and digital display businesses, with radio advertising its only unit to show increased advertising revenue in the six months through June.
Kenrick said it was a reasonable result in a weaker advertising market but he's optimistic about the coming year due to TVNZ's partnership with Spark New Zealand for the Rugby World Cup.
TVNZ looked at subscription video-on-demand models but will stick with an ad-funded business model.
Kenrick said he's learned a lot about the different business models in the past 12 months, and while some things are achievable at a technology level, they need to be financially viable. He pointed to the likes of Disney, Netflix and Amazon which are willing to keep losing billions of dollars as they chase direct-to-consumer online subscriptions.