Around this time every year, the television industry erupts in excitement as the shows for the upcoming season are introduced to viewers and—perhaps more importantly—advertisers. TVNZ was the first out the gates this year, putting on another extravagant show on Wednesday night that left media types with very sore heads on Thursday morning.
But before the chaos hit, TVNZ commercial director Jeremy O’Brien took a few minutes to reflect on what has been a good year for the state-funded broadcaster while also looking forward to what the business aims to achieve over the next 12 months.
At the end of August, TVNZ’s financial results showed a profit of $28.1 million, up $10 million on the amount posted a year earlier. This result came at time when the company’s main competitor MediaWorks has weathered PR storm after PR storm, struggled in the ratings department, seen an outflow of executive staff, provoked the ire of viewers with the John Campbell debacle, and now faces claims that the TV department is dragging down the group’s revenue.
So given the struggles of its competitor, how has TVNZ managed to strengthen its business in the market?
“We just wanted to get the basics right and I think we’ve been able to do that in a number of areas,” says O’Brien. “That started out by getting really strong performance out of the tent pole part of the schedule.”
He says that strengthening core programming slots, particularly in current affairs, within the schedule has served as an important driver of growth for TVNZ's share of the overall TV market.
“Getting those fundamentals right has been really integral … [and now] One News is regularly two and half to three times its competitor in terms of audience delivery, and Seven Sharp has twice as much. Breakfast in the morning is also twice as high as its competitor.”
These primetime slots serve as a jumping board for the shows that follow because audiences are likely to stick with the channel they’re already on.
However, TVNZ is no longer only fighting on the free-to-air front. As audiences shift their consumption online, its on-demand service is becoming an increasingly important tool.
And while TVNZ already had a strong on-demand platform, the broadcaster took a risk earlier this year by introducing a subscriber model.
“In February, we held our breath,” says O’Brien.
“All our research said that viewers were absolutely comfortable sharing some simple details with us in return for having access to great content, but you always hold your breath you launch something new. The fact that we’ve now got over 750,000 verified users over a six-month period from launch is a really big success for us. We were initially targeting 450,000 in that first year, so these results just show that the drive for the convenience of getting your shows when and where you want them is really big.”
O’Brien also touched on the launch of a short-form play called OnDemand Shorts, which TVNZ aims to have up and running before the Christmas break to capitalise on the free time viewers will have. And he adds that the first brand-funded short-form projects will be introduced on the service early next year (read more on this OD Shorts here).
Arrival of the disruptors
In a recent interview, Lightbox chief executive Kym Niblock told StopPress that the weekly video consumption levels for viewers had over the last 20 years remained relatively consistent at about 20 hours—meaning that an increasing number of digital players are grappling for a bigger slice of a finite pie.
O’Brien admits that the launch of the SVOD players in the local market did cut into TVNZ’s share of overall time spent watching video content.
“There was some impact on the total hours spent viewing TV, but it was minimal—you’re talking the difference of half an hour or an hour,” he says.
“I think there was a Bell Curve of activity when all those players hit the market within a reasonably compressed period of time. When those services came in … quite a lot of them were bundled up for six or 12 months. So, essentially, you have anomaly where very quickly, within a space of six weeks, New Zealanders had the ability to take a whole video store of content into their homes for free. And I think that had an initial impact.”
O’Brien says that as deals start to expire, it will be interesting to see whether or not the services will be able to convert their users into paying subscribers.
“Within a lot of those SVOD services, there are one or two key shows that people are really into, but then there’s a lot of stuff that’s of less appeal. People will binge and go hard, but then long-term you need to have enough content in there that justifies you paying ongoing subscription … and I think the jury’s still out with some of those services as to whether there’s enough variety and breadth of content to justify that fee. I think that test is still to come.”
Niblock previously responded to such criticisms pointing out that SVOD services generally don’t expect users to break the bank:
“It’s $12.99. It’s the price of a couple of coffees. It’s the price of a movie ticket. There’s not a huge number of people in New Zealand who would look at it and say, ‘I desperately want it, but I can’t find $12.99.’ I’m not assuming for a second that the entirety of New Zealand is willing to fork that out, but at the end of the day we’re not asking you fork out $120 a month.”
Even if SVOD players do manage to convert all their current users into paying subscribers, online streaming is still relatively small—albeit growing—when viewed against the total time Kiwis spend watching video.
As O’Brien explains: “By our estimates, there are 186 billion minutes of video content viewed on a per annum basis in this market and about 11 billion minutes of that is online video. So it’s less than eight percent. And the other 92 percent is broadcast video.”
The other thing that shouldn’t be under-estimated is the fact that viewers have over the decades become accustomed to the lean-back experience offered by linear TV.
“We’re all lazy and we have so much stuff to get through during the day that it’s sometimes just nice to be given [the content],” says O’Brien. “That’s part of what has sustained the TV industry to this time.”
The faux Netflix slogan ‘spend more time searching than actually watching’ has recently been making the rounds online. And like all examples of good satire, it’s funny because it’s true.
And until SVOD players find a way to create the Pandora of online video, linear TV will remain appealing because it doesn’t require the viewer to continuously scroll through countless options to find something worth watching.
However, O’Brien believes that the onus is on TV broadcasters to facilitate content capable of keeping users interested.
“There will always be other options to view video content. We’ve got an aspiration to reach 2.5 million on a daily basis. We currently reach about 2.3 million. We’re less concerned about where they show up—whether it be on air or online. But if we can get them coming back on a daily basis, the average duration that spend with us tends to be a couple of hours. And we will be able to sustain that degree of viewership as long as we have the content offering to back that up. If we lose the content offering, then absolutely you may see that they may fragment to different forms of viewership, be it SVOD or AVOD. But the free-to-air players still have a breadth of content available that's going to be pretty hard for the other players to [match].”
TVNZ has again added to its portfolio with a range of local and international shows that will no doubt pique the interest of viewers. But given that the titles are well covered across the media, O’Brien wasn’t asked to comment extensively on the key shows for the upcoming season.
He did however single out local drama Filthy Rich as one that he was excited about.
“One of the interesting shows is the local drama Filthy Rich and I think the unique thing about it is that we’re going to follow a multi-night model with it,” he says.
This approach is common with reality shows and miniseries, but O’Brien says it’s the first time TVNZ will be playing a locally produced drama on two nights a week.
“It will leave us with great little cliff-hangers that keep audiences on the edge of their seats and brings them back to get resolution really quickly. If that format works for us, it could open up a whole new way that we take drama to market.”
This does seem more in touch with modern consumption habits of viewers, who now become frustrated by the lag between episodes.
Another lag that has until now annoyed viewers involves the wait for US shows to reach local shores, but TVNZ plans to reduce this by increasing its premiering efforts.
However, this hasn’t been driven by viewer demand, but rather because traditional broadcasters are increasingly facing competition from SVOD providers.
“Our rights with the likes Disney, Warner etc. of that content are protected through our output deals, but where it becomes pretty interesting is in those pieces of content that sit outside the broader output deals,” O’Brien says.
“Some of those windows that we have in terms of the pay rights versus free-to-air rights are changing and that’s driving us to do more premiering.”
What this means is that SVOD providers might be able to buy rights for content and upload it before TVNZ screens it. So, to stop this from happening, TVNZ is tweaking its strategy.
“For instance, a lot of the American shows that we would have normally held until January or February will actually go on the same day or the next day out of the Australian or American transmission. So you’ll see a lot more of that across TV One and TV2. In the past we’ve experimented by premiering some of our shows online, so what you might see in the coming year is faster turnaround of those shows across linear TV … It won’t be everything, but we’ll be doing more and more of that.”
Time for change?
As the clock ticks over and TVNZ enters another year of working with advertisers to keep its business profitable, O’Brien says that he is looking for ways to improve the process of buying and selling ads.
“We still trade on a TV trading model and it’s the same as it was 20 years ago, which is cost per target audience reached. And depending on what you’re buying, you kind of buy a spot in the schedule rather than a target audience. And that audience may turn up or it may not. And that’s a pretty crappy advertiser experience.”
He recommends an alternative approach similar to that used in the online space.
“I think we should move toward cost per 1000 impressions. I think that’s the right thing to do. I think most markets around the world operate like that in TV. Most other media in this market trade on cost per 1000 impressions. It seems like a bit of a no-brainer that you’d go toward something like that.”
So does he see television going programmatic within the next 12 months?
“I don’t know if TV itself will go programmatic, but I think the way we trade TV should look a whole lot more like online is currently,” O’Brien says.
“Cost per thousand impressions is a big opportunity for us, because what it means is that we can have a really transparent conversation around the relative cost effectiveness of television when compared to other media. At the moment, that gets diluted, because people have to work out how compare their cost per target audience to cost per thousand impressions. And it just makes it murky and hard to make comparisons.”
This can only happen, O’Brien argues, if the whole industry becomes involved in the process.
“It’s definitely an industry move. It’s not something you want to do on your own, because the point of it is making the trade easier rather than more complicated by adding another model.”
Another pain point O’Brien identifies lies in the fact that TV rate cards are limited to three-month periods, which preclude advertisers from booking in advance.
“The fact that open up these rate cards every three months and you can only book three months in advance seems a very antiquated way to do it. An advertiser should be able to look at the market and see what’s available. And if they want to be able to book something in March next year, then why shouldn’t they be able to?”
He believes that this will bring the process more in line with the supply-and-demand dynamic that typifies most marketplaces.
Throughout the discussion with O’Brien, it’s clear that his entire strategy is based on video. And this could well be one of the reasons why TVNZ has had such a strong year.
While the likes of MediaWorks and NZME are multi-layered media companies, selling advertising across myriad platforms isn’t easy.
“We made a deliberate strategic decision three years ago that we were going to focus on video,” says O’Brien.
“The reason we did that was because we had a look at what was happening around the world in terms of consumption trends, and video was far and away the fastest growing medium. And the reason for that is because it’s the most engaging medium through which to tell stories and deliver content.”
Over the years, TVNZ could easily have expanded into other areas through acquisitions or by launching its own platforms, but it instead stayed single-minded in its commitment to video—whether on air or online.
“We had every opportunity to think about setting up adjacent business opportunities within media, but based on what we thought the long-term future of viewer consumption was, we felt that video was where we should concentrate.”