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Public Disservice Broadcasting: The shameful demise of TVNZ7

Public Disservice Broadcasting:
The shameful demise of TVNZ7 and how it could have been saved

Peter A. Thompson

28th June 2012

At midnight on Saturday 30th June, the plug will be pulled on TVNZ7, bringing to an ignominious end one of the most promising initiatives in New Zealand’s convoluted broadcasting history.

The paltry $16m that TVNZ7’s demise will save the Treasury is insignificant. For the sake of one cent per person per day, the government is destroying New Zealand’s only commercial-free public service television channel.

Unlike any of its commercial rivals, its insulation from the commercial pressure to maximise ratings and revenue allowed TVNZ7 to schedule a range of high quality educational and informative content in prime time. The result was a significant increase in the diversity of programme choice for the audience- including programmes on politics, law, media, arts, and science, many of which have no equivalent on other commercial channels.

Apart from the fact that the government’s dismissal of TVNZ7’s significance was premised on a flawed interpretation of the 4-week cumulative ratings, the latest figures show that 1.6 million people- over a third of the population- find something on 7 at least once a month that they prefer over the content available on other channels.

Even if the ratings per programme on 7 do not compare with the mainstream channels, they do compare with those of Maori Television and many of the channels on Sky. But nobody is suggesting these have no purpose or value.

Since Jonathan Coleman announced the government’s decision to discontinue TVNZ7’s funding last year, there have been increasingly vocal protests from the general public, the academic community, and the TV production industry.

The new Minister of Broadcasting, Craig Foss has been left trying to defend policy decisions he neither made nor, apparently, comprehends. His recent attempt to blame the previous Labour administration for not funding TVNZ6 & 7 beyond 2012, made in Parliament earlier this week, is either disingenuous or very poorly informed.

It is clear that Labour must accept some responsibility for its failure to develop adequate funding alternatives for public broadcasting during its three terms from 1999-2008. Intra-cabinet disagreements over funding led to a series of awkward compromises (including the dual remit that undermined the TVNZ Charter and the finite funding period for 6 & 7). The Review of Regulation for digital broadcasting Labour initiated was partly intended to identify solutions, including options for re-regulating the relationship between the free-to-air and pay-tv sector.

But when National returned to office, they moved- prematurely- to terminate the review, even though it would have provided them with important advice on the policies needed to manage a complex digital environment, irrespective of political ideology. Since then, it seems the government has based its approach to media policy more on the myth that the digital media economy will usher in a cornucopia of unlimited choice than judicious consideration of the evidence of how media markets actually work.

National’s insistence that funding content on a contestable basis, rather than institutions will secure public broadcasting outcomes is based on a false premise. NZ On Air is not vertically integrated- it will only fund programmes if there is a national broadcaster willing to schedule them. This effectively gives the commercial schedulers gatekeeping power over the local content NZ On Air can realistically support, and exposes its contestable funds to precisely the market failures for which they are supposed to compensate.

If all the mainstream television channels are chasing the same mainstream audience demographics and advertising dollars, then the opportunity costs of taking on risky, innovative or niche-appeal content increase. This has been underlined by TVNZ’s public declaration that it wants more of the contestable fund to be diverted to commercial genres.

Despite the welcome news that, with NZ on Air’s support, TV3 has agreed to pick up Media 7 and the rumours that Prime may be willing to acquire Back Benches, there is still no sign that broadcasters are queuing up to rescue the Court Report, the Good Word, or an hour-long commercial-free news programme, let alone screen them in prime time. Maintaining the diversity of content therefore requires not just a plurality of digital platforms, but a range of different media institutions willing to screen different forms of content.

Indeed, one wonders whether Media 7 and Back Benches would have been rescued had it not been for the erstwhile lobbying of the Save TVNZ7 campaigners. TVNZ did virtually nothing to promote TVNZ7 and appears to have been more embarrassed than gratified at the audience protests over 7’s imminent closure.

It is no credit to the state broadcaster that its commercial rivals have recognised the market as well as the public value of 7’s programmes while TVNZ’s board and senior managers have responded to the government’s discontinuation of the funding with forelock-tugging obsequiousness. Indignant protests and resignations might have been more appropriate.

Meanwhile, the team behind TVNZ7 have evidently been warned to keep quiet on the issue (at a recent Back Benches programme, one TVNZ staff member even expressed concern about their proximity to the resident Save TVNZ7 group and their adopted Goodnight Kiwi). If that is how the state broadcaster rewards the public service achievements of its employees over the over the last 5 years, then TVNZ’s journey to the commercial dark side is surely complete.

But National cannot blame TVNZ any more than it can blame Labour for the closure of TVNZ7. The government had ample opportunity to consider options for continuing the funding. Indeed, Jonathan Coleman came round to supporting the continuation of 7. Subsequently, Cabinet did examine several funding options.

But the requirement for fiscal neutrality was evidently non-negotiable, and so the government expediently tossed the hot potato back to TVNZ, no doubt well aware that their own demands for increased dividends made it politically as well as economically impossible for the broadcaster to pick it up.

The tragedy here is that there were fiscally neutral funding options available. In fact I made a point of articulating these both in discussion articles and recent public forums, and I have written to the Minister of Broadcasting explaining them- so far without any response. There are at least a dozen viable funding options and variations/combinations, but two basic forms deserve further discussion:

The first would entail rebalancing the asymmetrical relationship between the pay-tv sector and the free-to-air sector by the introduction of ‘must-carry-must-pay’ rules. This would require pay-tv providers to carry free-to-air channels and pay a modest retransmission licence fee. This would redress the current set-up whereby Sky pays nothing for carrying FTA channels, even though their absence would detract significantly from the appeal of its own platforms.

Must-carry-must-pay requirements would also redress the absurd situation whereby Heartland and Kidzone 24, both of which provide programmes paid for by the public, are not on Freeview, but behind a paywall. TVNZ receives fees for these channels because they are exclusive to Sky and extend the range and appeal of its own services.

Historically, Sky might have argued that it was doing the FTAs a favour by extending their audience reach on a digital platform, but after digital switchover this argument will be rendered redundant. The pay-tv operator would doubtless protest, but a review of its increasingly dominant position in the television ecology (including its ownership of Prime and expanding online presence) is surely overdue.

The other key funding option is the introduction of a marginal levy on all subscription service media, including pay television, telecommunications, telephone and internet services. A 1% levy on all these services could raise, at a conservative estimate, around $50-60m per year.

That would be sufficient to save TVNZ7 twice over and still put additional funding into Radio RZ, NZ on Air’s platinum fund, Maori Television, or community radio. It could also be used to support regulatory services such as the Broadcasting Standards Authority, Office of Film & Literature Classification, and the Telecommunication Commissioner. Alternatively, such a levy could support a new stand-alone public service television channel to take up TVNZ7’s place in the media ecology.

The levy system has several virtues:

Firstly, it would operate on a principle of natural justice: The media industries whose commercial operations generate their substantial revenue (hundreds of millions in the case of Sky; billions in the case of the telecom industry) are also collectively responsible for market failures. The levy therefore works on a ‘polluter pays’ principle to support important public services that the commercial market under-provides.

Secondly, even if industry initially objects to the mechanism, in practice it will cost them virtually nothing- because the levy will simply be passed onto the consumer. A $100 phone/internet bill or Sky subscription would instead cost $101. This increase would be less than the rate of inflation, and would go largely unnoticed by the vast majority of consumers.

Thirdly, it would provide a ringfenced and fiscally neutral revenue source from outside the consolidated fund which would be more than sufficient to provide a public television service like TVNZ7. After all, this is what the government claimed that it wanted.

The levy is a win-win solution all round. It is therefore very disappointing that Craig Foss recently dismissed calls for such a model out of hand. It is equally worrying that he offered no coherent rationale for refusing to contemplate such a system. Similar models have been implemented in France and Spain, and indeed, there are precedents in New Zealand: The BSA and the Telecommunications Commissioner both receive funding from a marginal levy on industry. This is not an unworkable system- its basic form already exists.

Perhaps the Minister is less worried about the functionality of the model than the prospect that it might actually work. The system would require modest re-regulation, but the government (both past and present) has too often hesitated to contemplate this and deferred to the vested interests of industry with their soothsaying auguries about damaged investor confidence if the dreaded R-word is mentioned.

But regulation is neither intrinsically good nor bad. Indeed, outside of neoliberal theology, there is no natural market form which would function in the public interest if only the government left it alone. On the contrary, one can believe in competitive market mechanisms but still recognise that judicious state intervention is required both to ensure that competition produces outcomes in the wider public interest (optimum quality/minimum prices) and does not lapse into market failure and oligopolistic over-pricing.

New Zealand can afford a public service television channel. TVNZ7 has already demonstrated that the media ecology and schedule diversity benefit from such an arrangement. So when the Save TVNZ7 campaigners deliver their petition to Parliament at lunchtime today, the ball will be back in the government’s court. It will be interesting to see whether Craig Foss can offer them anything beyond platitudes and excuses.

On Saturday night, 1.6 million viewers will lose something valuable that the market cannot adequately replace. When Jonathan Coleman handed over responsibility for broadcasting at the start of National’s second term, perhaps he neglected to tell his successor that the portfolio was ticking….


Dr. Peter Thompson is a senior lecturer in Victoria University of Wellington’s Media Studies Programme. He has published extensively on broadcasting policy in New Zealand and was one of the organisers of the media academics’ open letter to the government on the TVNZ7 funding decision last year and the subsequent forum on the future of public television hosted by Victoria University. He has been invited to speak at several public forums organised by the Save TVNZ7 campaign, but is not affiliated with any political party.

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