What would become of TVNZ and RNZ if their merger is shelved?

Friday, 27 January 2023

$16.1m spent on merger to date, with some costs yet to be tallied.

Tom Pullar-Strecker is a senior business journalist at Stuff.

ANALYSIS: The Government is widely expected to shelve the proposed merger of TVNZ and RNZ into a new public media entity currently dubbed Aotearoa New Zealand Public Media.

Stuff reader polling last year suggested about twice as many people opposed the merger as supported it.

The assumption is that sacrificing the project could aid the Government’s narrative that it is focusing on priorities such as the cost of living, during an election year that is likely to be scarred by a recession.

Auckland academic Sir Peter Gluckman, the Government’s former chief science advisor twisted the knife last week, when he said legislation paving the way for the merger was unfit for purpose and “unsafe”.

* Select committee seeks more independence for proposed new public media entity

* TVNZ, RNZ merger a 'watershed' moment for NZ media

Would the merger be scrapped or just postponed?

This would be one of the key decisions facing ministers.

The National Party's broadcasting spokesperson, MP Melissa Lee, blasts the merger of RNZ and TVNZ. (Broadcast October 2022).

Putting the merger on the back-burner would have some political advantages and might be more palatable to the merger’s supporters.

The Government would not need to create a whole new media policy and could claim that the millions spent on paving the way for the merger, including on consultants, had not been entirely wasted.

But there would be a downside to leaving the two broadcasters hanging in a state of uncertainty.

An industry insider fears the proposed merger has slowed down TVNZ’s digital transition, as it waits to find out whether it will be investing in new technology alongside or independent of RNZ and what new expectations may be placed upon it.

Simply postponing the merger to rosier times could leave both organisations sitting in limbo, so there would also be a case for ripping off the plaster fast.

How big would the savings be?

Former broadcasting minister Kris Faafoi announced at last year’s Budget that the Government would provide new funding of $327 million over three years for the proposed new public media entity during its first three years of operation through to 2026.

That appeared to come on top of $40m in capital funding for its set-up costs.

But, in reality, the Government appeared to be proposing to provide the new entity with about an extra $58m a year from the public purse in the near term, over and above its total current funding for public media.

If the merger didn’t proceed, it could either reallocate that spending to other initiatives given it has already been budgeted for, or simply not spend the money.

Myles Thomas suggests “intelligent” advert-free programming on TVNZ on Sundays, if the public media merger does not go ahead.

Reallocate the spending?

Maybe. At least some of it, perhaps.

The bill paving the way for the merger of TVNZ and RNZ received its first reading in Parliament on July 26.

There is speculation that in the absence of the merger, the Government might want to show it was moving TVNZ and RNZ’s services forward in some other way.

Better Public Media chairperson Myles Thomas suggests the Government could use at least a portion of the money that was allocated to the new public media entity in the last Budget to instead make TVNZ’s programming on Sunday advertisement-free.

The state-owned broadcaster doesn’t run adverts on Sunday mornings.

But Thomas suggests that TVNZ could broadcast a mix of longer-form current affairs and locally-produced entertainment programmes and sport through the day on Sundays, all without ad breaks and perhaps funded through NZ On Air.

The idea would be to fill the day with “more intelligent” programming, but that needn’t just be “boring documentaries”, Thomas says.

“It definitely needs to entertain. I think that would be a good outcome.”

Another industry source expects Broadcasting Minister Willie Jackson would be seeking more funding for Maori programming if the merger was shelved or scrapped, arguing that has been his main focus anyway during the proposed merger process.

Otherwise, RNZ and TVNZ carry on as normal?

TVNZ’s advertising revenues have held up better than many expected in recent years, but big capital outlays on technology may be on the horizon.

Probably, at least for a while.

The proposed merger of TVNZ and RNZ was predicated on the assumption that the two organisations could not carry on along their current tracks forever.

The fear has been that RNZ would gradually lose its predominantly older audience and that TVNZ would need more government support in future as competition from international streaming services increased, audiences fragmented, and its commercial revenues from advertising on TV1 and TV2 declined.

But so far, TVNZ’s finances have held up surprisingly well since the merger was first conceived, with no evidence of an imminent crisis.

The forecast recession this year could test the resilience of the state-owned broadcaster along with all other media, but National Party broadcasting spokesperson Melissa Lee says she hopes there would not come a point when TVNZ became more reliant on government subsidies for its normal operations.

If it did, that would also raise the question of why it was not also subsidising TV3, she says.

Future governments always have the option of indirectly increasing their funding to the media by upping their funding to NZ On Air, to offset any decline in commercial advertising revenues.

RNZ is almost entirely state-funded, so it continues as long as governments are prepared to pay for it.

Lee says National is prepared to put more money into RNZ, if that proves to be justified, so its future seems assured for the foreseeable future in any scenario.

‘For a while’?

A senior industry insider notes that the crunch point for media firms tends to come when they need to invest large amounts of capital in new technology or, worse, reinvest in their old technology.

It was the need to invest substantial sums in a new streaming platform currently provided by a US technology partner that appears to have prompted Spark to decide to nix its Spark Sport service late last year, for example.

The crunch point for TVNZ may come in about five to 10 years’ time, when it may need to decide whether to recommit funding and investment for the country’s digital terrestrial television (DTT) network, he says.

The DTT network comprises a network of radio towers, many of which are operated by Kordia, that allows TV viewers to receive free-to-air television through an aerial on their roof.

One option for TVNZ would be to try to largely complete the jump to streaming programmes online by the end of that period, and perhaps to rely on the satellite service provided by Freeview to keep its linear TV1 and TV2 channels on air for other viewers who didn’t want to make that transition.

The alternative might be having to tap on the Government’s door for some new form of subsidy.