Despite strong result, TVNZ boss Kevin Kenrick still anticipates annual loss

TVNZ boss Kevin Kenrick. Photo / File

One figure that stood out in the strong TVNZ result today was zero under the income tax column.

This made for a stark comparison to the $4.2 million the organisation paid the same time last year.

Asked to explain the difference between the two figures, TVNZ chief executive Kevin Kenrick said it had to do with the state broadcaster's annual results forecast.

"We are forecasting that we are not going to be earning the profitability to be paying tax on," Kenrick said.

"We are going to continue to invest in the business at an accelerated rate to build our online scale and to migrate our content from international to local."

None of this is a surprise.

In July last year, Kenrick flagged to the government that the state-owned broadcaster was expecting to make a $17.1m loss this year.

This was anticipated as a result of the organisation putting an additional $20m from its own coffers towards local programming as it looks to future-proof the business.

"The only thing that's different now is that our revenue growth has been much stronger than what was forecasted," said Kenrick.

"So, in the first six months, we covered the increased cost with increased revenue."

TVNZ's interim report for the year ended December 31, 2019, showed operating expenses rose from $147m to $152m year on year, while advertising revenue lifted from $163m to $170m.

This contributed to an interim net profit of $15.8m for the six months ended December 31, 2019, up more than $5m on the figure posted the year before.

Much of TVNZ's investment is being put toward local and on-demand content - which in turn contributed to TVNZ introducing 71 new local shows last year. Kenrick has long suggested possibly introducing an on-demand paywall and refused to pour cold water on the idea today.

"Never say never," Kenrick told the Herald.

"But, at the same time, we think the area that is our core strength and capability is delivering for audiences and delivering for advertisers. And, we think it's pretty compelling for viewers to get great content for free."

TVNZ's strong start does, however, come at a time when growing concern across the advertising industry about the impact the coronavirus outbreak may have on the willingness of businesses to spend money on advertising.

"If businesses get to a situation where they've got cashflow challenges, they're going to need to cut the cloth accordingly and what we tend to find is both travel and advertising are cost lines that businesses tend to go to quite early," said Kenrick.

"At the same time, if business is seeing a bit of a slow down, you could argue the flip side is that they may want to advertise more to drive sales.

"At this stage, it's really uncertain."

Another issue TVNZ will face in the coming months is the fate of the Olympic Games, set to be held in Tokyo.

The broadcaster has secured the rights in partnership with Sky to bring this event to Kiwi viewers, but there are growing concerns about whether or not this spectacle will go ahead if the coronavirus isn't contained effectively enough.

The importance of live sports programming to TVNZ was demonstrated during the Rugby World Cup, which saw almost three million New Zealanders tune in to catch the action.

Cancellation of the Olympics would be a huge blow to TVNZ, particularly in light of the big bets the broadcaster is putting toward this type of programming.

"At this stage, the Olympics are still on," said Kenrick.

"The final confirmation, we understand, could only come as late as the end of May. But, for now, Plan A is still the Olympics."