TVNZ on track to hit target

When we spoke with TVNZ’s head of sales Jeremy O’Brien last year about its new branded content initiative, he said he made no apologies for TVNZ being a commercial broadcaster. And, unlike many other commercial broadcasters in this part of the world, it’s actually making a profit and is on target to meet its full year Statement of Intent forecast. 

Most of TVNZ’s numbers are down on the same time last year (operating earnings for the half year were $22 million, $7 million below the prior year, and unaudited net profit after tax was $14 million, $5 million below the prior year) and, according to a release, the primary driver of the year on year change in operating earnings was increased investment in both local and international programming content (it re-signed a deal with Disney just before the new season launch last year). 

Chief executive Kevin Kenrick said the first six months of the financial year had featured “some exceptionally positive programming and consumer developments within a continuing challenging economic environment” and “the net result is that we are where we expected to be at this time,” he says. 

Operating revenues, excluding Government funding, were $600,000 ahead of the same period last year, despite television advertising revenues decreasing by $2.7 million (two percent) to $165 million and other operating revenue was up by $3.4 million (20 percent).

The total New Zealand television advertising market contracted for the six months ended December 2012 and the absence of advertising revenue generated from the Rugby World Cup in the prior year had a significant impact. But, on the plus side, TVNZ grew its market share of television advertising revenue from 61 percent to 62 percent year on year.

Other operating revenue growth has primarily been driven by the performance of TVNZ Ondemand, which achieved a substantial increase in advertising revenue off the back of growth in online stream views of 30 percent and average monthly unique viewer growth of 23 percent in the half year.

TVNZ continues to grow online revenue ahead of the market in New Zealand, cornering 58 percent of the total online video market. And its impressive new iOS and upcoming Android Ondemand apps (the iOS app went straight to the top of the iTunes charts) look set to continue that trend. 

“Online is currently a small part of our revenue, but it’s a big part of our future,” Kenrick says.

Government funding reduced by $6.5 million reflecting the closure of TVNZ 7, with a consequent drop in programme amortisation costs for TVNZ 7 of $5.4 million. 

Investment in content for the remaining channels increased by $10.5 million year on year. And Kenrick says a significant contributor to this was New Zealand’s Got Talent, which exceeded all ratings expectations and became the most popular local entertainment series in the last ten years. 

Whilst investment in programming has increased, non-programme costs were reduced by $3.8 million (five percent) year on year.

Other highlights for the six month period include:

  • A comprehensive review of the media market and potential business opportunities culminating in the development of a refreshed TVNZ strategy for future growth.
  • The December launch of Igloo—a prepaid pay TV service owned 51 percent by Sky and 49 percent by TVNZ offering a combination of free-to-air channels, 11 premium pay TV channels, and access to pay-per-view movies and selected sports events (no sales figures have been made available yet). 
  • An Ondemand app for Samsung Smart TVs, which was launched in early December and has exceeded all projections of viewer usage within the first month of launch.
  • The introduction of new controls to moderate the sound levels of television advertisements.

Kenrick says “while TVNZ expects the current economic environment to result in continuing competition for advertising revenue, and the ongoing need to tightly control expenditure, there are exciting future market opportunities with the rapid growth in online video consumption and ongoing high levels of time spent watching television”. 

When we spoke with O’Brien last year, he said TVNZ’s Media Solutions team, which he headed up before being promoted to head of sales, had grown over the past three or four years in terms of revenue (staff numbers will stay the same even with a new branded content initiative) and while selling ads still made up the bulk of TVNZ’s revenue, he was very keen for this kind of activity to increase.

As an example, he pointed to SMG Red from Seven Media Group, which made up around seven to nine percent of total revenues. And while TVNZ isn’t at that level quite yet, he’s confident it will make up seven to eight percent of TVNZ’s total revenue in the next couple of years. 

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