Newshub closure: Govt to scrutinise TVNZ ‘return on equity’
Thursday, 29 February 2024
The Government will scrutinise state-owned TVNZ’s performance compared with other public broadcasters after its major competitor, Three, announced plans to shut down its news division.
Associate Finance Minister David Seymour, who has responsibility for crown entities including TVNZ, said on Thursday that advice he had sought about TVNZ was not about it paying a dividend to the Government, but whether it was making “a good return on equity”.
'When you've just seen a major competitor leave the market because they don't think they can get enough return, I think it'd be pretty irresponsible not to ask the basic question. How's our one going?“ he said.
Warner Bros Discovery announced on Wednesday that it was consulting on closing its Newshub news and current affairs arm, eliminating one of the New Zealand’s handful of major mainstream media outlets.
Seymour had on Wednesday questioned whether TVNZ’s “poor returns“ to its shareholder, the Government, had contributed to an uncompetitive market. But on Thursday he said it was ”premature to speculate“ about how TVNZ’s position might affect the media market.
TVNZ, which is commercially run but state-owned, saw a bumper profit of $59m in the year to June 2021 – thanks to a Covid-enforced drop in its spending on programmes – sink to a wafer-thin $1.7m profit in 2023.
Seymour said there would always be a role for Government in media, for example maintaining public broadcasters for emergency situations.
“Right around the world, the media landscape is something that is a) changing very fast due to technology, and b) up for debate in the interest of democracy.”
Alongside this, Media and Communications Minister Melissa Lee has said officials advised her against providing relief to Three’s owner, Warner Bros Discovery, in the form of breaks from broadcasting transmission fees.
It is understood Lee asked the Treasury for advice in January on the implications of the Government footing the bill for transmission fees currently paid by Warner Bros Discovery and other free-to-air broadcasters.
Lee said she was very cognisant that Three’s owner’s proposals would have “flow-on effects for other sectors, including the production sector”.
“I will be having continuous conversations with more stakeholders to see if there is any relief available, but I do not see that it is the Government's job to actually provide the relief,” she said.
TV broadcasters currently pay millions of dollars to state-owned enterprise Kordia and privately owned rival JDA for a service that lets people receive free-to-air broadcasts in high-definition via a network of radio towers covering 86% of the population.
Prior to Lee’s comments, both Warner Bros Discovery and TVNZ are understood to have been hopeful that the Government would provide relief from the fees for the service, known as Digital Terrestrial Television (DTT).
Warner Bros Discovery is understood to have also approached the former government for the same assistance but to have been brushed off.
Its Auckland-based vice president Glen Kyne told The Post last week — days ahead of the company’s shock announcement — that there was “definitely a need for a conversation around the future of free-to-air television”.
“Of course, Kordia is definitely a part of that conversation,” he said then.
A TVNZ spokesperson said last week that relief from DTT transmission fees was “not something we have raised with the Government at this stage”.
Lee confirmed that the issue of transmission fees was raised with her by Warner Bros “as well as other media companies”.
“I have sought advice, and the advice I have actually got was that providing one-off relief to Warner Bros Discovery, which is an overseas company, was not something we should be doing.
Kyne made clear on Wednesday that relief from DTT fees — and any promise from the Government to support the Fair Digital News Bargaining Bill which could help it negotiate licensing income from Google and Meta — was unlikely to sway its decision on whether to close Newshub, as that had mainly been driven by a slump in advertising.
Lee said the Government would take into account the “latest developments” in the media sector when deciding its position on the Fair Digital News Bargaining Bill.
Ministers are understood to be mulling whether the possible closure of Newshub — in the absence of relief from DTT fees — could accelerate a wider switch-off of free-to-air broadcasts and a move by broadcasters to instead stream all of their content online.
TVNZ is understood to need to make a decision in or around 2026 or 2027 on whether to continue with DTT broadcasts and, by 2032, on whether to renew a separate contract that lets households watch its channels in standard definition via satellite.
Chief executive Jodi O'Donnell said last week that it planned to become “digital first” in four or five years’ time and was preparing for the time when it would be online-only.
Warner Bros said in its statement on Wednesday announcing the consultations on Newshub’s closure that it wanted to transition its operations to a digitally-led business, with its streaming service ThreeNow “at the core of the model”.
The comments appears to suggest a limited appetite for footing a share of the bill for DTT and satellite broadcasting infrastructure once its current contracts expire, which would mean a larger share of those fixed costs falling on any remaining broadcasters.
Lee would not say whether she believed the closure of Newshub could accelerate the closure of broadcast television, but said she was considering a review of the Broadcasting Act.