Bad PR, good numbers: TVNZ announces big half-yearly profit increase, takes a bath on Igloo

TVNZ is having a fairly rough time of it at the moment in terms of PR, with the Shane Taurima saga, the fake abuse own goal, Brian Edwards’ attack on Fair Go and, adding salt into its wounds, even a bit of a slap from overseas with calls from an ex-head of TVNZ telling the BBC not to replicate New Zealand’s public broadcasting model. But, according to its half-year earnings report, the finances aren’t looking too bad at the state broadcaster, with a net profit after tax of $20.8 million for the six months to 31 December, up 47 percent on the same period last year.

Excluding gains on the sale of property (it sold a chunk of its land to Sky City Entertainment last year and has temporarily moved most of the staff into the Telecom building as it uses the cash from the sale to renovate its HQ and upgrade its technology), the company’s operating earnings at the half year mark were up 40 percent to $30.1 million. 

“The highlight of our half year result is the strong growth in operating earnings, fuelled by increased advertising revenue and a ten percent reduction in non-programming costs,” said chief executive Kevin Kenrick in a release. 

Lifts in both TV and digital ad income contributed to topline revenue growth of three percent to $202 million, up from $193 million at the same time last year. TV advertising revenue was up 2.4 percent to $171.5 million, up from $167.5 million the year before, and digital revenue was up 23.3 percent from $4.8 million to $5.9 million.

“TV continues to be the nation’s favourite pastime, with the average Kiwi watching three hours of TV per day,” Kenrick says. “TV One and TV2 bring in the biggest audiences, with TVNZ airing 18 of the top rating 20 programmes for the period.”

New Zealand’s Got Talent was the country’s most watched entertainment show during this time (although it’s been canned after two seasons), One News was New Zealand’s most watched news and Sunday was the most watched current affairs programme. And while there has been a lot of discussion about the state of broadcast TV after a big drop in PUTS last year, Nielsen stats show that the obituaries are premature, because overall PUTs have grown by eight percent since 2003. 

A growing proportion of the viewing is taking place through digital channels and often on the viewers’ own terms through ondemand and Kenrick says the company is reaping the rewards of its investment in digital media. TVNZ Ondemand set a record 4.7 million streams for the month of October, it regularly attracts a million streams per week and its mobile app has now topped half a million downloads (Jason Foden has also been brought onboard as the general manager of Ondemand, replacing Tom Cotter). 

“One of the real success stories for this period has been the performance of TVNZ Ondemand, which is a huge hit with both our viewers and advertisers. Total streams for the half year are up 88 percent.” 

Much like news media, however, the money isn’t really following that audience and $6 million of digital revenue is chump change in comparison to its main earner (strangely, no ads feature on TVNZ content watched through the Samsung Smart TV app). So is this a result of mass reach still being more important than targeted engagement? Or a symptom of broadcasters doing a good job of protecting their ad-funded legacy and lazy/uneducated/overworked media planner/buyers (and/or) marketing managers and creative agencies who still favour TVCs over everything else? 

Kenrick says TVNZ’s increasingly integrated approach to on-air and online content means it can follow viewers “from their TV screens to their desktops, their smartphones to their tablets”. And he says coverage of the 2013 America’s Cup in September was a great example of this kind of integration and, “at its height, TV viewing peaked at 1.2 million on TV One and live streaming topped a quarter of a million people on onenews.co.nz”. 

On the negative side of things, TVNZ’s minority stake in Igloo alongside Sky seems to be following a similar trajectory to its ill-fated investment in TiVo (Sky’s stake in Igloo went from 51 percent to 66 percent last year). And after TVNZ said last year that it may take six years before Igloo broke even, the company added a $6.1 million impairment and loss to its accounts. It also recognised an impairment of $3.2 million on property, plant and equipment.  

A source familiar with the Igloo deal says TVNZ, under previous management, were well and truly duped by Sky. 

“Pay-lite is a tough business model with a limited target market so it needs to be priced and communicated really well, not to mention offer some unique content/channels that the bottom tier of the premium pay platform doesn’t offer. So when the premium pay platform is the majority shareholder, is that ever going to happen? From day zero this was obvious, especially when the box had no PVR. So TVNZ continue to share the losses and slowly reduce their shareholding.” 

When that shreholding is down to zero, the source believes Sky will (quietly) shut Igloo down and start the managed process of converting their Sky satellite subscriber base to a DTT/Fibre system, or drop DTT altogether depending on the speed of fibre-t-the-home rollout.  

This just got more urgent with Telecom about to launch ShowMe TV.”

Igloo aside, Kenrick says TVNZ’s half year results are encouraging and he believes “its strong slate of new season content will ensure we achieve if not exceed our full year Statement of Intent forecast”. That​ Statement of Intent anticipates a net surplus of $16.8 million in the 12 months ending June 30, 2014, with estimated revenue of $357.3 million. 

As a point of comparison, the latest results from Sky TV, which has recently announced its retail bond offer, show it clocked in with a net profit of $137 million in 2013, up from 123.7 million in 2012. Its interim forecast predicts an $82.1 million net profit for the first half of 2014.         

Sky had total revenue of $885 million in 2013, with advertising revenue accounting for $68 million of that. 

MediaWorks was asked to provide some figures on its financial performance and we’ll update the story if they respond. 

TVNZ Financial Highlights Summary – Six months ended Dec 2013





Operating Revenue



Television revenue



Digital media revenue



Operating Expenses



Operating Earnings



Interest Expense



Financial Instruments/foreign currency gains



Impairment of property, plant and equipment



Share of Associates results/impairment



Income Tax expense



After Tax Profit



Operating Cash Flow



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