TVNZ holds fire on online news push as its forks out $20m to win audience share

Thursday, 7 November 2019

TVNZ says it is investing to build audience but can't see a sustainable business model for online news.

TVNZ has no plans to take on NZME and Stuff by significantly stepping up its ambitions in online news, despite hiking its spending on local content, chief executive Kevin Kenrick says.

Kenrick said TVNZ could see a sustainable business model for streaming online entertainment, but thought the business model for digital news was 'still really challenged', and it would be investing accordingly.

He said that much of the extra $20 million that the state-owned broadcaster expected to invest annually over the next three years would be in local programming to boost its audience, rather than in new capital investment to expand the business.

Kevin Kenrick says MediaWorks' bid to exit television was not unexpected and 'consolidation' is inevitable.

* TVNZ searching for solution to boost its digital news, no comment on a Stuff purchase

* Television channel three 'a good business' struggling in a skewed market**

Kenrick said in February – when there was speculation that it might bid to buy some or all of Stuff Ltd from Australian owner Nine – that TVNZ needed to improve its position in online news.

He said then that TVNZ had not translated its leadership in television news into a leadership position in digital news and it needed to 'find some solutions around that', adding also that online local news reporting 'had to be key' to its future plans.

'News is so critical to us that we have to accept that what we have done so far has not been enough,' he said.

A TV adaption of The Luminaries is one of the investments that TVNZ hopes will provide a point of difference with international streaming services.

But an annual update of its content strategy released on Thursday evening made no specific reference to new initiatives in online news, instead emphasising the strength and reach of TVNZ's existing news and current affairs line-up.

Kenrick said he did not believe TVNZ's position had changed.

It was committed to the sustainability of its news offering and knew that needed to involve 'more than just what we are doing in TV', he told Stuff.

'Our commitment to long-term sustainable success in news is unchanged.

'I just think the way you go about doing it is you invest in a way that is appropriate to the risk and also to the potential solutions that are available.'

That might mean small experiments, he said.

'We are absolutely developing the capability to trial and develop new things in the digital news space.

'But we are not going to bet the farm on it because we can't see a business model globally that would give us the confidence that is the right thing to do.'

Kenrick said Stuff and NZME had done a good job in achieving scale in online news and 'I am not sure there is enough space for three big players to have a sustainable business'.

'My concern is that has plateaued and is potentially starting to decline, so we have got to be looking at the next wave.

'I do think the future of news is mobile, it is video, and I think it is going to have a big dose of 'subscription'.'

TVNZ said in July that it would suspend paying dividends to the Crown for the foreseeable future, which is believed to mean for at least three years.

It also said it was budgeting for a loss of $17m in the current financial year, as it invested about an additional $20m annually in the business.

The Government's decision to allow TVNZ to run at a loss is understood to have influenced MediaWorks' decision to attempt to exit its television business.

However, sources have speculated that the impending private equity buy-out of its minority owner QMS may also have been a factor.

Kenrick said developments at MediaWorks were not a surprise.

'If you look globally, the 'status quo' business model for local media is unsustainable and I think some form of market consolidation is inevitable.'

The big three areas for TVNZ's investment were local content, 'making a big push back into sport', and in online streaming, Kenrick said.

'We think that there is a strategic race for audience scale that is happening right here and right now and we think that is intensifying.'

Streaming services Disney Plus, Apple Plus and NBC's Peacock were either about to launch or around the corner, he said.

'In that environment, we can't afford to be half-hearted.

'We have built up cash reserves over the last five years preparing ourselves to fund our future, so now is the time to take advantage of that.

'A big part of that is reducing our reliance on international content and significantly increasing local content, because that is our sustainable point of difference.'

New local entertainment content will include TVNZ's and the BBC's adaption of Eleanor Catton's novel The Luminaries, and The Bachelorette NZ.

TVNZ would also continue to rely on advertising for revenues, emphasising its value as 'brand-safe environment for Kiwi businesses' rather than charging for entertainment content, Kenrick said.

'It is sticking to your knitting. We know which lanes we should swim in.'

He forecast trouble ahead for the subscription model as more companies piled in.

'We think it is going to be a bloodbath with billion-dollar players and we can't afford to be caught in the crossfire of that.'

Broadcasting Minister Kris Faafoi refused on Thursday to release five documents updating him on discussions between NZME and officials, following an Official Information Act request, citing the confidentiality of officials' advice and commercial sensitivity.