Late last week, TVNZ sent out a release on its financials for the year ended 30 June 2014, showing an overall profit after tax of $18.1 million, up 25 percent on the figures posted the previous year.
This growth in profit was posted despite the fact that the broadcaster’s total revenue declined year-on-year by 0.4 percent from $362 million last year to $360 million this year.
As advertisers diversify their spend across the various channels, this means that TV doesn’t have quite as big a share of overall annual ad spend as it previously did.
The latest figures from the ASA showed that TV’s overall share of ad spend had dropped from 28.4 percent in 2012 to 27.9 percent in 2013 (the dollar value went up from $614 million to $634 million). In contrast, the interactive category’s share had increased from 16.9 percent to 20.7 percent.
This trend has also been evident in TVNZ’s figures in the sense that the company’s television revenue dropped from $312 million last year to 306 million dollars this year, while digital media revenue rose from $9.9 million to $12.9 million.
TVNZ’s chief executive Kevin Kenrick says that these figures indicate the growing importance of the digital sphere to the broadcaster.
“Growth in digital media was the standout performance for the year – TVNZ Ondemand streams were up 78 percent for the year and now average more than one million per week, and an increased focus on publishing more, and faster, news online boosted onenews.co.nz video streams by 63 percent,” he said in a release.
Despite the strong growth in the online sphere, Kenrick says that ad spend in this category is still not a major contributor to the company’s overall revenue.
“Online revenue is currently a modest component of total revenue, but it’s a major driver of future growth and the company is investing to significantly enhance both its TVNZ Ondemand and One News online service offerings,” he says.
According to TVNZ spokesperson Georgie Hills, the revenue currently generated by online advertising is not sufficient to offset the drop in TV’s overall share of ad spend, but she remains optimistic.
She says that the state-backed broadcaster currently takes nearly “two out of every three dollars spent on TV in the market” and, given that TVNZ continues to dominate TV ratings, Hills expects this to continue.
“We’re in a solid position on the TV front,” she says. “[And] we’d expect the outstanding viewership share we’re now getting to translate into future revenue.”
The release of TVNZ’s results also came with the announcement that the company has sold its remaining stake in Igloo to Sky TV.
Hills explains that this decision has been made in response to the fact that TVNZ is investing more into its on-demand and online services.
“There was uncertainty on when Igloo might develop as a sustainable stand-alone business,” she says. “TVNZ fully wrote down the value of our investment back in December and we felt we were not adding any additional value by continuing to be a shareholder. Instead, we’re making a significant investment in fast-tracking online growth through TVNZ Ondemand and onenews.co.nz, which is already paying dividends. Given TVNZ Ondemand’s huge popularity with viewers and ongoing potential for growth, we see this is the service to launch new services from in the future.”
In 2012, TVNZ invested $12.25 million to obtain a 49 percent share in Igloo. Last year, the company reduced this stake to 34 percent, and this latest announcement brings an end to the company’s joint venture with Sky.
TVNZ has also pulled out of Hybrid Television Services, and Kenrick says that the “recent exit of these non-core assets has freed up capital to invest in technology infrastructure to fast track online growth and to refurbish its Auckland building to meet future accommodation needs in one central location”.
This move now gives Sky TV full control of Igloo, but as things stand this doesn’t look to be all that profitable.
Last year, TVNZ told StopPress that it would take Igloo, which launched in December 2012, up to six years to break even.
Sky initially forecasted that the aim for Igloo was to acquire approximately 50,000 subscribers, but this was later reduced to 30,000 by chief executive John Fellet.
Interestingly, Sky had never before revealed how many subscribers had signed up for Igloo, but this silence was broken with the release of the company’s full-year results to the New Zealand Stock Exchange.
According to the report, Igloo currently has 8,760 paying subscribers, a number well below the 30,974 Igloo decoders that have thus far been sold.
Sky’s head of corporate comms Kirsty Way said Sky has decided to release this information at this stage, because the number is of interest to the company’s shareholders.
Way says that Sky has just added two new channels to Igloo, and it will be “business as usual” despite having now acquired complete control of the company.
Another point of interest from Sky’s report was that the percentage of Sky Sports subscribers increased, even though the company lost the rights to broadcast the English Premier League (EPL) last year.
According to the statistics, 71 percent of the company’s 865,055 subscribers were signed up for the package that includes Sky Sports. The percentage of subscribers to SKY’s premium package of 'Basic + Sport + Movies' has dropped by two percent this year, while penetration of the 'Basic + Sports' package has increased by one percent. A total of 560,567 subscribers were subscribed to the Sky Sports tier at 30 June, compared to 560,303 last year.
“Some thought the loss of the EPL would be the demise of SKY, but this didn’t’ happen,” says Way.
Despite this optimism, Way did add that the increase in the number of Sky Sport subscriptions was quite small.
“Sky Sport subscriptions have only increased slightly, and there could be several reasons for this including the obvious one of alternative viewing options. We also believe the most passionate sports fans are already Sky customers.”
Despite these suggestions that company’s subscriber base might be reaching its plateau, Way says that the company isn’t going to become complacent.
“Sky will have to continue to deliver world class sports channels (including our local production, almost 13,000 hours of our locally produced sport was screened last year) and keep an open mind to new business models that are much more viable with the quality of internet delivery now.”
Overall Sky posted a revenue total of $909 million, up 2.7 percent from the previous year. The company’s profite was posted at $166 million, up by 20.9 percent from the previous year.
Way explained the seemingly huge jump in profit by pointing out that the figures shouldn’t be looked at in isolation.
“It’s a good result, although we’d always prefer a higher net gain,” she says. “Costs can’t be looked at for the year in isolation, there are often exceptions (this year appears lower with no Olympic or Commonwealth cost), the following years we expect content as a percentage of revenue to increase.”