Television channel three 'a good business' struggling in a skewed market, says MediaWorks boss

Friday, 18 October 2019

Media company MediaWorks is selling its TV business - including Three. (Video first published in June 2020)

Television channel three and the rest of MediaWorks' television business has been put up for sale, casting a further pall over the private media industry.

But chief executive Michael Anderson left the door open to a change of heart if the Government's media policy changes.

MediaWorks said it intended to sell its television arm and had engaged UBS as an adviser to help identify a list of potential purchasers.

TVNZ, Spark and Sky TV wouldn't comment on whether they might be potential buyers.

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Sam Hayes and Mike McRoberts have been among the most familiar faces for TV3.

A sale would leave MediaWorks owning about half the country's commercial radio stations and the outdoor advertising business that it acquired through its merger in August with QMS New Zealand.

MediaWorks, which is owned by United States private equity firm Oaktree, trimmed its overall loss to $5.5 million last year, but again failed to bring its television business into the black.

Anderson said this year had been 'by far the worst year' since he arrived at the business in 2016 in terms of the decline in television revenues.

'I think Three is not a 'distressed' business. Newshub is a really solid asset.

'What it is, is a good business struggling in a market that is skewed against all of free-to-air, but particularly skewed against Three.'

MediaWorks was aware the Government was due to make an announcement prior to Christmas on broadcasting policy, Anderson said.

But he said it had started the sale process now as it wanted to start its next financial year in 'a clean state'.

There was 'no defined time frame' for the sale, but he did not expect it to drag on for years.

MediaWorks has lobbied the Government to turn TVNZ's TV One channel commercial-free, which could assist Three by allowing it to grab a greater proportion of television advertising.

More recently, it has blasted a decision by the Government to allow its state-owned rival to suspend paying dividends and to post a loss of up to $17 million this financial year while it beefs-up its digital operation.

Anderson said the TV sale plan was not 'set and forget' and it would review any information it received from the Government about its media policies.

'But at the same time, right now, this is we believe the best approach.'

MediaWorks' had not made the announcement to try to force a change in Government policy, he indicated, while not ruling out a change of tack should that occur.

'We are putting the business up for sale. We'd be silly to ignore changes that might occur, but we are not expecting anything to change at this point in time – but we are open,' he said.

The Government has signalled it wants to invest further in public media.

In August, Prime Minister Jacinda Ardern said she was of the view there should be an organisation dedicated to making sure New Zealand's stories are told.

Broadcasting Minister Kris Faafoi said his thoughts were with the staff of Mediaworks TV operations.

But he said the decision to put the division up for sale was a commercial one and he did not want to intrude on the process.

A spokesman for Faafoi said the minister was acutely aware of the landscape and saw there were 'total challenges across the board' both in the private media and public media which was his primary responsibility.

'He is aware of the wider difficulties the media landscape is facing and which is indicated by what has happened today.'

MediaWorks journalists were told of the sale plan just minutes before a public statement on Friday morning.

Anderson said staff were 'rattled, a little bit' and uncertain, but there was a level of acceptance and in some quarters they were looking at it as an opportunity.

It was unsettling for them but the company had committed to be as transparent as possible in keeping them updated on the sale process, he said.

Media commentator Bill Ralston speculated that 'hundreds' of journalism jobs would be lost if MediaWorks could not find a buyer for Three.

'Three has been staggering along for a while, the big question is who will buy it and will anyone buy it? There's still the option that Three may just close down.'

Three presenter Jesse Mulligan said on Wednesday that Three may have no choice but to shut down if the Government didn't change its current broadcasting policy.

The Project host made the comment after MediaWorks confirmed it was cancelling Guy Williams' show New Zealand Today and cutting back popular comedy show 7 Days.

But MediaWorks spokeswoman Charlotte McLauchlan said reports the television business could be closed down by Christmas were 'categorically not true'.

MediaWorks first warned in April last year that it might pull out of television, if Government policies didn't change.

It told a ministerial advisory group then that if 'structural anomalies' in the media market were not addressed 'there is a genuine risk that the Government, through its owned media channels, may become the only broadcaster in New Zealand'.

There has been speculation Oaktree has been open to offers for MediaWorks since then.

It is the second major media business to be put up for sale this year.

Australian e-commerce and media company Nine announced a plan to sell Stuff Ltd earlier this year, but put that on the backburner after it did not get an adequate bid.

Anderson indicated MediaWorks could be prepared to go through a sale process with a competitor that had existing assets in the industry, even if that meant going through a Commerce Commission process to approve a sale.

'We will look at every opportunity in its own right. We can make those decisions as it unfolds.'

MediaWorks' Flower Street property in Auckland will be put up for sale with a lease back option for a buyer to continue to operate television from that location.

Anderson said his intention was to stay with the MediaWorks radio and outdoor advertising business, once the television business was sold off.

Jesse Mulligan comes out swinging on The Project after news that some of Three's biggest shows have been cancelled and scaled back.

Infometrics economist Brad Olsen said finding a private buyer for the television business looked increasingly difficult.

'Nine wasn't able to find a buyer for Stuff earlier this year, and so there looks like there's slim pickings out there for someone to pickup the TV arm of MediaWorks,' he said.

'Some have started to mention Sky as a potential buyer of the TV arm, but given concerns about the long-term viability of Sky, with declining subscriptions, it's unlikely Sky would want to take on another TV arm that might not have the ability to support itself,' he added.

Public funding was an idea that MediaWorks might be hoping for, he believed.

'There's been a lot of discussion recently about increasing government funding to the media sector to boost the capabilities of news media, as both advertising spending habits change and overseas and social media change the playing field.'

Figures from the Advertising Standards Authority show that advertising spending on TV had declined by 0.7 per cent annually on average since 2012, he said.

Over the same period, radio spend had risen 2 per cent, on average, and overall advertising spending had increased 3.2 per cent a year, he said.

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