How much of a funding boost can TVNZ and RNZ really expect after merger?

Friday, 20 May 2022

The new public media entity is set to receive $200m a year in operational funding from the Government in total, but may have to hand back about $51m of that each year.

The Government’s Budget statement on public media funding was opaque
The upshot may be a merged TVNZ and RNZ get an extra $58m a year from the public purse
TVNZ boss Simon Power says certainty has been provided over one aspect of its funding

ANALYSIS: Thursday’s Budget weighed in at about 10 kilograms once all the media releases, financial forecasts, departmental estimates and supplementary estimates are included.

But if anyone thought the many thousands of pages of text and tables would answer any question anyone would have about the Government’s finances, or even its new initiatives, then think again.

One area of confusion since Thursday has been just how much of a boost TVNZ and RNZ can expect to receive from the Budget, assuming they are merged into a ‘new public media entity’ as planned next year.

Broadcasting Minister Kris Faafoi announced that Budget 2022 would provide “new funding of $327 million over three years for the entity” during its first three years of operation through to 2026.

* Merging commercial TVNZ and non-commercial RNZ won’t be easy

Broadcasting Minister Kris Faafoi’s Budget statement did not set out what if any extra services or programming the public could expect for their increased contribution.

* Finally an answer on an RNZ-TVNZ merger, but questions linger

Faafoi said that would mean a “significant funding increase” for public media.

So how much more money does the Government plan to spend on public media, and what will the public see for that money?

Faafoi’s funding statement appeared to leave employees of more than one organisation affected by the changes scratching their heads to figure out exactly what the plan is.

But with help of his office and a few officials, this is what appears to be the situation.

Currently, RNZ receives about $47m a year in government funding through NZ On Air, and TVNZ receives about another $44m a year from NZ On Air at least mainly in the form of support for specific programmes.

The latter figure is a little over half of the pot of money that NZ On Air has to support projects and TVNZ competes for its share against programming ideas put forward by other broadcasters and media organisations.

From 2023, the new public media agency will receive $200m a year in annual government funding for its operations, plus $40m in capital funding for its set-up costs, a spokesperson for Faafoi says.

The operational funding is about $109m more than the current total TVNZ and RNZ receive through contestable and non-contestable NZ On Air funding.

So the $327m figure quoted by Faafoi is the increase in funding the Government will provide for the services the new public media entity will deliver in its first three years, not the total.

But TVNZ currently earns about another $300m a year from television advertising and other commercial activities, and the Government doesn’t believe the new media entity will actually need $500m a year to operate.

So the Government is forecasting that the new media entity will hand back $306m to the Crown over the first six years of its operation, in what might be called a dividend if the new entity wasn’t actually being structured as a non-profit entity.

TVNZ chief executive Simon Power says the Government’s Budget statement provides certainty over one aspect of the new public media agency’s funding arrangements.

It also appears that the new media entity will not qualify for contestable NZ On Air funding in future, but a sum of $40m a year which approximates to the total that TVNZ usually receives from that source will be routed to TVNZ from the Ministry of Culture and Heritage in some other form.

That is necessary to make the numbers provided by Faafoi add up.

This means that the actual increase in annual government funding for the services currently provided by TVNZ and RNZ should net out at about $58m a year, taking into account the $306m cash-back.

That still definitely qualifies, as Faafoi says, as a “substantial increase” over and above the current support of about $91m a year.

It is understood though that the Government is forecasting TVNZ’s commercial revenues will decline over the coming years.

So it may be that the new media entity might only have an extra few tens of millions a year to spend on top of TVNZ and RNZ’s current total annual budget of about $390m, and perhaps less than that.

To figure out its expected budget, we’d need to know what the Government’s assumption has been about the rate of that decline in TVNZ’s commercial revenues, and how it might alter the size of the ‘cash back’ if reality differs.

Faafoi’s spokesperson says “details of any operating surplus to be returned are dependent on future earnings and funding arrangements to be determined through the detailed establishment design phase of the new entity, currently underway”.

Better Public Media chair Myles Thomas cautions also that there is no guarantee that Budget commitments up to 2026 will survive the next election.

“If a new government disapproves of public media … the promised funding could be compromised,” he says.

“Without sustainable, long-term funding, such as through a ring-fenced levy, the future remains uncertain. If public funding were to go the same way as the TVNZ charter, it could drag RNZ down with it.”

Putting that concern aside, what the public will get – if anything – in return for the extra operational funding that the new public media entity will get from the Government remains perhaps the biggest mystery.

The Budget documents provided no information on that, and Faafoi’s spokesperson says merely that “the new entity will be expected to deliver services in line with its public media charter obligations”.

The legislation paving the way for the merger of TVNZ and RNZ will be going in front of a select committee some time in the second half of this year, and that will presumably be a question high on the minds of MPs.

TVNZ chief executive Simon Power said the Budget figures were “useful signposting that provides certainty over one aspect of the new entity’s funding”.

“In the meantime, work goes on producing local content to meet the needs, aspirations and expectations of New Zealanders across all demographics and audiences, and ensuring TVNZ provides an essential platform for businesses to reach their customers through advertising on TVNZ’s platforms,” he said.