Waiting lists used to be common in media. Advertisers would queue up well in advance for the opportunity to have their brands displayed in the best magazines and alongside the most popular TV shows. Those were good days to be a media executive. And it’s perhaps a reason why feet propped up on a rich mahogany desk persists as a stereotype in the business world today. Nothing’s quite as good as taking sweet a siesta after telling a mass of advertisers they will not pass.
It goes without saying that things aren’t as cruisey any longer. And as TVNZ chief executive Kevin Kenrick sits down for a chat, it’s clear he’s juggling quite a few challenges as he strives to build a sustainable business. (Note: interview was recorded on the afternoon of TVNZ's new season launch).
On financial pressure after a tough annual result
"I’m not feeling any more pressure than I have in any other year. Last year, we tidied up a whole bunch of things, so our financial results reflected a number of one-offs. We wrote off an onerous contract, we exited some lease agreements, and we had some significant restructuring costs throughout the business. The good thing for us is with that behind us we’ve now baselined the operating costs throughout the business. So we’ve got a sustainable cost base, so that gives us the confidence to grow the business because we know that we have the financial capacity to be able to do that and to do it confidently."
On how agreements become onerous
"When you look at the history of those agreements, they were struck many many years ago. And in that time, we paid a fee to have exclusive rights to content in this local geography. What’s happened since that time is that the exclusivity has been eroded. So you’ve got subscription video on demand, you’ve had a growth in piracy and so what you end up with is deals that lock you into an exclusive price with what are effectively non-exclusive benefits. So, there’s just a need to realign that. The value of them is no longer what they were."
On modern content deals
"You’d like to think that the most recent deals are the ones most suited to the market environment of the day. And the more historical they are, the greater the risk that they’re based on former constructs… I think the challenge is that the pace of change tends to be far greater than the refresh rates of the contracts. So, a natural reaction to that is that the contract terms become shorter, so that you can mitigate that risk. We had an opportunity last year to go through and look at every aspect of the business and set it up for a sustainable future and we’re pretty confident about what the outlook looks like from here."
On new hires
"The thing with this industry is that you’re as good as the talent you’ve got. And quite often when we talk about talent, everyone thinks about on-screen talent, which is important, but so too is the talent throughout the business and the thought leadership talent. For us, the smarter the people we’ve got in the business, the better decisions we’re going to make and the more successful we’re going to be. We’ve had an opportunity through a number of changes to bring in some fresh enthusiasm, energy and new ideas. And that’s pretty invigorating for any business."
On learning from the international market
"We’re constantly looking at what else is happening around the world. In fact, we’re currently doing a piece of work right now that says ‘Look at places around the world that are not dissimilar to us. Who’s doing what? Which of those things have been successful? And, just as importantly, which ones haven’t?’ The really important thing for us is to look at markets that are similar to ours. The scale of our market means that not everything employed internationally can be applied here… Ireland is a good scale comparison. Scandinavian countries are also. Then, within some of the larger markets, it’s about looking at sub-groups within those."
On interesting things happening abroad
"The first thing is that everyone is confronting the same challenges. The challenges to the media market are global in nature. And from that point of view, it’s kind of reassuring to say we’re all in the same boat here. My theory on it, though, is that the smaller markets have to confront those things faster because you’ve got less buffer and less scale to protect yourself from that impact, so you have to respond more urgently. Even if you compare New Zealand to Australia, the challenges are the same but advertising spend is four or five times what it is in New Zealand and the number of viewers is also much larger, which gives you more time in which to respond. So, it does mean that you can’t necessarily look around the world and say ‘here are a whole bunch of others who have gone before and addressed it’. But, at the same time, we’ve got the flexibility and we should be able to move faster."
On talking about failure
"You’ve always got to be open to learning from others. It’s about the mistakes as well as the victories. Everyone wants to turn up at the conference and promote ‘here are all the great things we’ve done, look how clever we are’. But I think a lot of insight comes from 'here are the things we tried that didn’t quite work out, or here are the things you should never do'. Those are invaluable lessons. You’d rather learn from somebody else’s mistakes than make them all yourself."
On the importance of scale
"It comes back to that thing about market size and market scale. I think to be a viable player in this market, it’s all about critical mass. A niche within sub-scale market becomes something that’s not commercially viable quite quickly. At the same time, if I’m an advertiser I need to reach a critical mass of New Zealanders to have a viable business myself. And, so I think for us, it’s about ensuring that we reliably and consistently deliver a scale audience that’s of value to clients."
On making money from content
"My view is that there is an audience for every piece of content you could choose to make. The question is: how scalable is that? And what does it cost to make it? If you can make it really cost effective, then you don’t need as big an audience to make it commercially viable. But you kind of get what you pay for. If you’re investing in high quality, then you need big audiences to pay for it. Otherwise, you go broke. It’s that simple."
On Amazon (and others) potentially entering the local market
"I think the first time you confront a global competitor rather than a local one, that’s pretty daunting, but once you’ve done it a couple of times, you’re not so daunted by it. You expect it. I think you’ve got to be match fit to take on the competition that shows up on the day. It used to be a battle between local media players, but that battle has been completely displaced by the battle between global players moving into local patches, whether it’s New Zealand, Australia or some other market."
On competing with international content budgets
"If you’re up against a global giant, you don’t want to play on their home turf, with their home crowd and with their local referee. You need to ask, ‘Well, where’s our home turf, and how do we play to our strengths and advantages?’ And that points us to local content. That is our sustainable point of difference. Yes, we can do some things with international content, but the global players will always be able to spend more and therefore we should play to our strengths. There’s definitely a market demand for both. I don’t think anyone will become the exclusive provider of content. I think households already have multiple services and I think that will continue to grow. It will probably get to the point where people want to rationalise down to a manageable number and we need to make sure we earn the right to be one of those players."
On TVNZ’s digital evolution
"The three areas for in on-demand are firstly user-experience. And there’s a lot we can learn from other great digital experiences, both in media and in other industries. We need to enhance search and discovery to make it easier for people to find what they want [by looking] at content recommendations and auto-play to go to the next episode. There’s a lot of that functionality that will make it easier for people to find the content that they want. We will continue to extend the number of devices and platforms that we’re available on. And the most vital part for us is the content. We are massively increasing the resource we’re putting into on-demand content. We have live-streaming, which we do pretty well; we have catch-up, which we also do pretty well; and the big growth area for us is exclusive on-demand content. We’ve just in the last week, done a deal with Warner Brothers to get over 1,000 episodes of their TV titles. So that includes some of the favourite shows, going back to the first series right through to the current season. We’ll be doing a lot more of that."
On online subscribers
"Right now, we are registering in excess of a 1,000 new viewers per day. We think that bringing together TVNZ OnDemand and TVNZ.co.nz is making it easier for viewers. Having made that shift, and with the growth in registrations that we’ve got, we’re really confident that there’s a viable business here, so we’re going after it really hard."
On where the business will be in five years
"I read a quote attributed to Jeff Bezos at Amazon recently, which really resonates. All these people were asking him the question of what is going to change over the next five or ten years and his response was that you really have to ask the question: what’s not going to change? Because it’s those things that you can build a business around. He was very clear that Amazon is about great value for money pricing and timely, speedy delivery. And those two things won’t change. When I look at the media sector, there’s this obsession with change and yet we need to look at the things that are true and enduring. And there are a couple of things. Firstly, people still need to be informed about the world. If you take Maslow’s Hierarchy of Needs, security and safety is knowing what’s happening in my world. I also think people want to be entertained, and the busier we are as we squeeze things into our lives, the more that release through entertainment becomes important. And the keys to success are compelling content, making it available where people want to see it and finding a way to turn eyeballs into dollars. We think those three things will be true for us long-term. And our goal is expressed around those very things. We want to engage two million viewers a day. We don’t care what platform they turn up on. We’re really open in terms of how we turn those eyeballs into dollars. But what we do know is that if we keep reaching two million New Zealanders a day, we earn the right to a viable business."