TVNZ’s new boss planning for day television will be online only
Sunday, 25 February 2024
TVNZ plans to become “digital first” in four or five years’ time and is preparing for the time when it will be online-only, its new chief executive Jodi O'Donnell says.
She also sets 2028 as the year in which she hopes to stem the broadcasters’ losses and return the state-owned broadcaster to profit.
O’Donnell has taken over the reins of TVNZ as television companies around the world start to look towards a future when the only option may be to watch television over a broadband connection.
BBC director general Tim Davie sent shock waves around the industry in 2022 when he suggested the BBC could be online-only by 2032.
O’Donnell says TVNZ is also “absolutely planning for a future beyond broadcast, today”.
“Like all local broadcasters, we've currently got the challenge of paying for three different distribution methods which clearly has a large impact on our operational costs,” she says.
“We believe the future will be all of our content delivered exclusively via Internet Protocol or via streaming.”
The Ministry of Culture and Heritage warned Media and Communications Minister Melissa Lee in November that the costs of maintaining traditional broadcasts were “increasingly unsustainable” and that she could expect TV companies to ask for help.
O’Donnell says when broadcast television would be switched off would be dependent on many factors, some of which would be outside of TVNZ’s control, such as the availability and uptake of broadband.
But contract expiry dates and, in the case of DTT, any major need for maintenance on the network appear likely to play a part.
There are four main ways for people to watch TVNZ’s channels.
About 1.9 million people watch TVNZ on FreeviewHD via “digital terrestrial television” (DTT) radio towers operated by state-owned enterprise Kordia and its privately-owned rival JDA and which cover 86% of the population.
About another 800,000 watch TVNZ channels through Freeview’s standard-definition service which is delivered to the whole of the country via satellite.
The other alternatives are to watch online through TVNZ+, or in HD via Sky Television’s satellite service.
O’Donnell says it is safe to assume TVNZ’s satellite broadcasts will continue until its contract with Australian satellite provider Optus expires in 2032, while Sky TV has secured the future of its satellite service until November 2031.
But O’Donnell says it is too soon to say if TVNZ’s satellite service will continue beyond 2032, which implies that could be the year in which it becomes internet-only.
Its DTT broadcast offering, though technically superior, may be an earlier casualty.
O’Donnell would not comment on the chances of TVNZ renewing its DTT transmission contracts with Kordia and JDA.
Nor would she reveal when its contracts are due to expire.
But industry sources suggest TVNZ may need to make a call on whether to keep or ditch that service in or around 2026 or 2027.
Freeview general manager Leon Mead would give nothing away about when DTT contracts run to, saying only that it had “no plans” to stop offering the service, which as of right now is clearly correct.
Any decision to terminate one, other or both of the broadcasting options would be about more than just TVNZ.
O’Donnell agrees it is reasonable to expect that whatever decisions TVNZ and other free-to-air broadcasters made individually on how long they supported traditional broadcasts, that would impact each other’s options.
Broadcasters are effectively all sharing the cost of the DTT and satellite infrastructure so, if any one dropped out, a larger financial burden would then fall on the remaining broadcasters.
TVNZ is talking to other broadcasters “as appropriately as we can” about the implications of that, O’Donnell says.
“Freeview is probably the best platform for us to have that conversation as an industry.”
But she says it may also be appropriate for the Government to be involved in some of the bigger decisions.
Calls for a wider conversation are growing from other quarters.
Sky Television spokesperson Chris Major says it would be keen to participate in an industry discussion.
“Our satellite delivers to all of New Zealand, so it’s an important part of the solution.”
Both TV3-owner Warner Bros Discovery and TVNZ are understood to be eyeing the chance of relief from Kordia’s DTT fees, although a TVNZ spokesperson says it’s “not something we have raised with the Government at this stage”.
A fee-break could keep DTT broadcasts on air longer than otherwise.
But one industry insider suggests that the Government might conclude it was better off funding more broadband instead of subsidising DTT.
Closing DTT would free-up radio spectrum that the Government could also sell off and apply to helping close the digital divide, they note.
Warner Bros Discovery’s Auckland-based vice president Glen Kyne says there is “definitely a need for a conversation around the future of free-to-air television”.
“What will it look like in five, 10 years? The broadcast sector is moving to online at some stage and so where does that leave free-to-air?
“Of course, Kordia is definitely a part of that conversation,” he says.
Lee appears reluctant to lead such a debate.
Rather, she says the “transition to new forms of broadcast technology” would be consumer-led and it would be “up to each broadcaster to decide how long to support their traditional broadcast television transmission”.
But she says she would continue to look at potential solutions for the sector and consumers as people look to use new transmission technology “and consider how, when and if Government should play a role in this”.
Before it becomes internet-only, TVNZ will reshape itself as “digital first”.
O’Donnell says that at the moment about a quarter of TVNZ’s advertising revenues come from its internet-delivered services, with the remainder coming from traditional broadcasts.
TVNZ is probably about four or five years’ away from labelling itself a digital-first organisation, she says.
The switch won’t necessarily involve TVNZ providing a different mix of programming, O’Donnell says.
She notes that many of its viewers are simply using the internet to browse and watch its live channels in the same way they might watch its broadcasts, rather than to select and view programmes on demand.
But it will involve TVNZ looking at new ways to monetise content, which could include it charging for pay-per-view events or movies and offering viewers the option of advertising-free programmes in return for payment.
“We are definitely exploring all of those options,” she says.
What would distinguish TVNZ from other internet-television services such as Netflix in the online-only era is that it would be offering local, news and sports, O’Donnell says.
Despite that, she supports a call by the screen producers guild, Spada, for the Government to impose a local content quota on overseas streaming services such as Netflix and Amazon Prime.
The goal of that policy would be to ensure a proportion of their programmes were locally-made, rather than necessarily “telling local stories”, which would still leave room for TVNZ to differentiate itself, she says.
Ahead of its switch to digital-first, O’Donnell faces the challenge of manoeuvring TVNZ through an economic soft patch that has seen advertising revenues fall at the same time as it is having to make big investments in its TVNZ+ online platform.
The Culture and Heritage Ministry advised Lee in November that TVNZ was investing $100 million on its digital transition and TVNZ is forecasting a loss of almost $16m in the year to June.
TVNZ appears to have the reserves to withstand a protracted period of losses, with its assets exceeding its liabilities by nearly $145m as of June 30.
But the advertising market has been “pretty challenged” in the last 12 months and probably will remain so for the rest of this calendar year, O’Donnell forecasts.
Her goal is to get TVNZ back into the black “probably by towards the end of 2028” and that will mean further cost-cutting, she makes clear.
“Reducing headcount is always a last resort for us, but it's what we'll need to look at to develop a more sustainable operating model.”
News content performs extremely well on TVNZ+ and there is more opportunity to tell news stories on the platform, she says.
But that doesn’t mean TVNZ’s journalism operation will be shielded from making economies.
“I think we’ll have to look at everything,” O’Donnell says.