Prime candidate for move to Freeview

Prime's line-up includes <i>True Blood</i>. Photo / Supplied

Rupert Murdoch-controlled Sky Television is negotiating a special deal to get its free channel Prime on to Freeview.

After long delays that have hampered Freeview, Sky says it is "looking at whether Kordia can cut some sort of entry-level deal".

Talks follow a Beehive meeting between industry leaders led by Broadcasting Minister Jonathan Coleman.

Sky Television chief executive John Fellet says that as it stands putting Prime, whose programmes include True Blood and Flight of the Conchords, on to Freeview does not make financial sense.

"The cost... is greater than the advertising revenue we would gain from the greater coverage," he said.

The cost is believed to be less than $400,000 a year.

"If Prime had 30 per cent of the audience we would already be on Freeview but with just four per cent there are issues," Fellet said.

"There is no advantage running Prime TV at a loss - trust me that is what it is doing right now," he said.

"We got Prime to break-even, but now the advertising sales market has collapsed."

TVNZ and MediaWorks are sceptical about Sky depicting Prime as a small, struggling independent channel.

They argue Sky is dominant, that Prime can be used to muscle them out of programming deals and that Sky has delayed to undermine Freeview.

They have their own access to Freeview and it is understood they are relaxed about Sky winning a sweetheart deal.

But the Sky-Kordia talks, brokered by Coleman, will put pressure on state-owned Kordia.

A Coleman supporter said that he had moved to break the deadlock between Sky and Freeview but had been surprised at the entrenched positions.

Kordia, which made a $4.4 million deficit in the year to December 31, will be wary of negotiating special deals for Fellet while trying to attract new broadcasters to pay the full price.

Sky has been on a roll with initiatives that strengthen its dominance of the TV industry,

Talks with Kordia follow the Government decision last month to scrap a regulatory review that could have hurt Sky.

Around the same time TVNZ gave up on plans to keep taxpayer-funded TVNZ 6 and TVNZ 7 off Sky.

The channels were handed to Sky on advantageous terms.

And independent producers for Prime shows are now allowed to access money formerly set aside for TVNZ.

Coleman called a Beehive meeting with Fellet, Freeview chief executive Rick Friesian, and Kordia's Geoff Hunt.

Coleman has made it clear he wants Prime on Freeview, saying talks were commercial and confidential.

Scrapping of the regulatory review was widely expected once National won the election.

Sky is the only television company trading on the NZX and after years of building infrastructure is making profits. Its status as a pay-TV monopoly with growing dominance and resources and the absence of regulation have made it popular with brokers.

Sky share prices have increased from $3.85 to $4.50 in the month since Coleman announced the regulatory review would be scrapped

A media analyst with First New Zealand Capital, Sarndra Urlich, said the carriage deal illustrated how Sky would thrive without the threat of regulation.

Rob Mercer of Forsyth Barr said that scrapping the regulatory review meant Sky could focus on challenges from new media developments.

"It removes the uncertainty for Sky," Mercer said.

Mercer dismissed free-to-air industry concerns about Prime TV and Sky's increasingly dominance controlling rights to content.

Around 70 per cent of television viewing was still with TV One, TV2 and TV3.

He said that consumers benefited from Sky's pay-TV monopoly.