TVNZ is facing some of the biggest challenges in its history - financially and operationally. As the state broadcaster prepares to embrace a bold new content and technology plan - and with more cost cuts to come - can a relatively new board and a rebuilding executive team deliver a
What’s eating TVNZ? The major financial, operational and leadership challenges facing state TV broadcaster and the bold and brutal plan to survive and thrive
TVNZ's Auckland HQ and some of its biggest names: Seven Sharp co-host Hilary Barry, 1 News at 6 presenter Simon Dallow, Breakfast host Jenny-May Clarkson and chief correspondent John Campbell. Photos / Chris Skelton, TVNZ
AdvertisementAdvertise with NZME.
In a decision which surprised few observers - except perhaps some of the most ardent members of the broadcaster’s leadership team - Inglis ruled that TVNZ had breached its own collective contract, in failing to properly consult and work with union members on cost-saving measures, including the axing of more than 60 roles and top-rating shows such as Sunday and Fair Go.
In the normal scheme of things, TVNZ had followed a tried and true process: present a proposal, consult staff on that proposal, tweak the proposal if necessary, and then confirm it.
But it hadn’t banked on a new protagonist, in the form of former MP and E tū negotiation specialist Michael Wood, uncovering a collective contract clause hidden in plain sight.
AdvertisementAdvertise with NZME.
Clause 10.1.1 of the agreement outlines how the company needs to work with union members on any changes before a proposal is even developed. Effectively, it means leaders and staff work through any issues early, with access to all relevant information, to try to develop change proposals together.
TVNZ was found - firstly by the Employment Relations Authority and then by the Employment Court - not to have taken this critical, additional early step.
Clause 10.1.1 had been sitting idle for some two decades - it was now the equivalent of a dormant volcano that had suddenly erupted.
Onlookers see the decision as an embarrassing backdown for TVNZ, and one that has thrown the broadcaster’s cost-saving measures into expensive disarray.
As well as that, it has also shone a spotlight on the board and leadership teams as they face unprecedented financial and operational challenges.
That was emphasised this month when TVNZ announced that it was expecting operational losses of between $28 million and $33m this financial year (the company’s financial year runs to tomorrow, June 30) - more than double what had been earlier expected.
What on earth is going on? And does TVNZ have the leadership and the strategic focus to pull itself out of this mess?
TVNZ is one of our most important and influential media companies and easily our most scrutinised. Everyone has an opinion about its shows, its talent, and its performance.
AdvertisementAdvertise with NZME.
Take, for example, the debate over John Campbell’s move into opinion writing and the 300-plus official complaints about the way political editor Maiki Sherman presented a recent political poll.
People feel a unique ownership of TVNZ, beyond the obvious fact that the public are, indeed, the shareholders.
When a major news event unfolds, TV viewers tend to gravitate back to TVNZ - it is difficult to break habits. Its talent still commands headlines - good, bad or indifferent - even as traditional linear audiences drop away.
In turn, TVNZ has long operated as king of the media jungle, according to some within the industry.
“The thing I noticed when I joined and I’ve noticed ever since is that there’s a culture there of believing that they’re the biggest fish in the pond,” says one former senior executive.
“That was absolutely the case in the 1990s when TV ruled the media in New Zealand and TVNZ was the biggest player. Even though TV3 had just started, the advertisers were lined up out the door to give money to TVNZ. For everyone who worked there, the culture was, ‘We’re the biggest in town and you need to dance to our tune’. I sometimes wonder whether that psyche has changed at all.”
TVNZ was officially established in 1980, but its roots go back to 1960, when New Zealand’s first television channel, AKTV2, started broadcasting out of Shortland St in central Auckland. AKTV2 channel eventually amalgamated with similar channels in Wellington, Christchurch and Dunedin to become the New Zealand Broadcasting Corporation (NZBC) in 1969.
When NZBC broke up in 1975, Television One was established and five years later it and South Pacific Television merged to form Television New Zealand.
From virtually day one, there have been arguments over TVNZ’s purpose - is it a public broadcaster, delivering content for the public good; or is it a commercial organisation delivering money? Purely based on legislation and for right now at least, it is the latter.
The problem for TVNZ, says one former executive, is that it has a variety of stakeholders, and they change from election cycle to election cycle.
One government introduced a public media charter, another government removed it. One government proposed a merger with RNZ, the same government ditched the idea.
“Some want it to be a commercial entity and others want it to be a public broadcaster, and those two things can flip,” says the former executive.
“It’s not like Radio New Zealand which is clearly a public broadcaster and it’s not like Newstalk ZB which is clearly a commercial broadcaster. It’s got to appeal to all stakeholders and that’s really difficult.”
While the coalition government - including Act leader David Seymour, one of TVNZ’s shareholding ministers - are more clearly aligned to seeing TVNZ purely as a commercial broadcaster, the reality is they also expect it to “show content that’s valuable to us as New Zealanders”, says the former executive.
“It’s still caught up in that dilemma, even though legislatively it’s now purely a commercial broadcaster. It hasn’t helped that successive governments keep chopping and changing their views on what TVNZ should and shouldn’t be.”
There is also a common misconception that TVNZ is taxpayer-funded. It operates as a state-owned enterprise, generating all of its revenue through advertising.
And therein lies one of the biggest challenges facing the organisation today.
Jodi O’Donnell offers water and a sheet of paper as we sit in TVNZ’s boardroom on a Friday afternoon. We’ll come to the sheet of paper shortly.
After a week or two of the Herald wrangling with TVNZ’s communications team, O’Donnell has agreed to an interview. She is just six months into the role as chief executive, and facing the toughest challenge of any TVNZ boss.
“There has been no honeymoon, you’re absolutely right,” says O’Donnell.
Aside from the economic conditions, she is fighting fires on a number of fronts - both short and long-term.
Short-term, she needs to get TVNZ’s balance sheet back into order - revenue is falling at a rate of knots, down about $40 million this year, as advertisers pull back their spending in tough times and spread what’s left more broadly, to the likes of Facebook and Google.
Television is now facing what the digital media publishing companies - such as Herald owner NZME, and Stuff - have experienced over a longer period of time.
The advantage for the likes of NZME and Stuff is that they’ve had longer to build sustainable digital models - that’s evidenced not just in the commanding position that their news websites hold over rivals, but also their diversified revenue streams, with the likes of digital subscriptions.
TVNZ’s own strategic work is happening in far less time, with a shorter runway, a fragile economy and a more polarised public and political backdrop.
Between 2016 and 2023, TVNZ’s revenue has remained incredibly consistent - between $310 million and $342 million a year. Similarly, costs have been consistently anywhere between $286 million and $320 million (apart from in the 2020/2021 financial year, when they fell away considerably during Covid).
This year, however, the revenue number would likely begin with a 2, one source said - as in the 200 millions. O’Donnell confirms this.
After positive earnings and net after-tax profits for seven of the past eight years, TVNZ has forecast it will deliver an operating loss of between $28 million and $33 million, its worst result ever.
What’s more, O’Donnell reveals, the broadcaster expects a similar result next year and it will need to take “a significant amount” of more cost out of the business to reflect continuing, declining advertising revenue.
“We need to work really hard as an organisation to focus on reducing our costs to match what we believe the revenue will be,” she says.
“We’re not hearing that revenue will probably come back [until] closer to calendar year 2025. We have built our business plan this year with the strategy in mind but also a realistic view of revenue.”
The broadcaster is aiming to deliver sustainable profits again “ahead of 2030″.
So, where is the hope?
It comes in the form of the sheet of paper that O’Donnell has laid on the boardroom table. There’s another copy affixed to the whiteboard.
It is TVNZ’s ‘digital plus’ strategy - an all-of-business transformation taking the broadcaster to 2030.
By then, it aims to have doubled digital audiences, trebled digital revenue and built a sustainable and profitable future business.
About 2.4 million New Zealanders are watching TVNZ each week, says O’Donnell, and about 800,000 people are logging into TVNZ+. She says the organisation knows from CMI research that “it’s actually about 1.4 million who are watching digital” although more measurement work needs to be done.
Digital revenue last year was just over $50 million, meaning a target of at least $150 million by 2030.
A major part of the massive transformation plan is technology-driven but another critical component is a cultural shift - moving staff into a digital-first mindset.
“It’s critical we embark on this, otherwise we’ll have a Kodak or Nokia moment,” then-TVNZ chairman Andy Coupe told the Herald earlier last year.
TVNZ has about $100 million set aside in cash reserves for its transformation but several sources question whether the broadcaster needs to spend anywhere near that amount of money. O’Donnell says she hopes it will be less.
TVNZ has appointed consultancy firm Accenture to help guide it through the technology implementation, and right now the parties are about halfway through a 20-week initial ‘sprint’ to draw up a shopping list of technology needs.
A TVNZ spokeswoman said: “We will need to make a significant investment to ensure we can compete with global streamers in this market.”
It is clear the broadcaster is looking at technology which allows for much deeper personalisation of content served up to individual viewers; better access and use of customer data; the ability to set up specialist channels far more swiftly; and even being able to implement pay-per-view or a subscriber paywall, although O’Donnell is adamant that TVNZ’s priority will always be on an advertising revenue model.
The broadcaster is also looking closely at self-serve advertising, using AI to help create ads for existing and new customers.
The digital-first strategy also means that as well as a return to profitability, the broadcaster will be in a position - if it chooses - to be able to turn off linear/terrestrial television in five years. That means all viewers accessing its content digitally, through TVNZ+ and via smart TVs and other streaming devices.
That doesn’t mean the end of channels, emphasises O’Donnell. Plenty of people can, do, and will watch live television - such as TVNZ1 and TVNZ2 - on TVNZ+, she says.
TVNZ won’t say what they’re paying Accenture. “What we spend with our vendors is commercially sensitive.”
What’s clear is that the strategy is bold; necessarily brutal in addressing the need for massive transformational change; and is critical for survival.
At the same time, the broadcaster has to take more cost out of the business. Earlier this year, TVNZ had about 700 fulltime equivalent staff. It lost more than 60 roles in the recent round of redundancies and more job losses are likely over the next 12 months.
Amongst all the strategic moves, O’Donnell has also found herself at the centre of some problematic operational issues.
The controversial axing of top-ratings shows has played out very publicly from the outset - details of proposed job cuts were leaked to rival media including the NZ Herald, Stuff and Newsroom before staff had even been fully consulted.
The legal setbacks at the Employment Relations Authority and in the Employment Court have been expensive and time-consuming.
Seventeen union staff continue to be employed by TVNZ, even though they have no shows to work on.
They’re likely to be on the books for a few more weeks yet, as TVNZ resets itself, engaging with E tū under Clause 10.1.1.
At the same time as TVNZ and the E tū were preparing to meet in the Employment Court in May, O’Donnell made a business trip to Los Angeles for the annual LA Screenings.
We know this because another of her executives, chief content officer Nevak Rogers, posted selfies to social media showing the pair of them and another TVNZ leader enjoying social gatherings and drinks at the likes of the world-famous Chateau Marmont hotel.
While most people understand that business trips are important, the timing of this one and the social media images infuriated many staff and left other senior media industry figures flabbergasted.
“What does that tell you about their EQ - as their newsroom is burning?” one said.
In a statement, TVNZ defended the trip - it cost almost $30,000 - but now concedes the social media posts were inappropriate.
“The business rationale for that trip is clear, and the trip was executed modestly from a cost perspective,” says a spokeswoman. “While we do need to continue to buy content for our platforms, the social media posts were inappropriate and we’ve discussed that with our teams.”
Regardless, O’Donnell - who has been at TVNZ for two decades, most recently as its chief commercial officer - is highly respected in the media industry, especially in advertising and marketing circles.
One well-placed source said she came close to becoming TVNZ’s new chief executive after Kevin Kenrick’s departure in February 2022, but that former National MP Simon Power was a standout candidate at that time - not because of his political background but for his financial industry experience and human relations skills.
Former TVNZ deputy chair Kevin Malloy did not wish to comment for this piece, other than to say he was hugely supportive of O’Donnell. “I genuinely think she has got the credentials of being an outstanding leader. I wish her well as a first-time chief executive.”
O’Donnell is also rebuilding her executive.
She has just lost her highly regarded chief digital officer Kym Niblock to Sky TV, less than a year after the departure of chief transformation officer and former head of content Cate Calver to Great Southern Television.
One industry source said Niblock and Calver had been instrumental in the success of TVNZ+, and left a huge hole, especially around digital transformation.
O’Donnell says: “I am really confident around the executive leadership. When we’re working at such pace, we’re having lots of conversations on an ongoing basis and challenging each other. The challenge is there around the executive table, which I think is good.”
The question then arises: Does O’Donnell have the right mix of people above her?
Five directors retired last June - chairman Andy Coupe, deputy chair Kevin Malloy, Trish Carter, Keiran Horne and Tokorangi Kapea - and with their departures, a huge amount of collective knowledge walked out of the boardroom, leaving a set of newcomers to take on TVNZ’s financial challenges and future strategy.
Four new board members came on board on July 1, joining existing members Megan Matthews and Aliesha Staples.
The newcomers - chair Alastair Carruthers, deputy chair Ripeka Evans, Linda Clark and John Quirk - were all appointed by then Labour Broadcasting Minister Willie Jackson, with just four months until election day.
Herald inquiries have revealed that Malloy was earlier considered a frontrunner to be the new chair of TVNZ, once Coupe had retired.
Malloy is a highly regarded, commercially-minded director with an extensive background in the advertising industry. He is the chair of Super Rugby Pacific, the deputy chair of NZ Cricket, and a board member of Kiwibank.
But he is understood to have been the victim of a political kneecapping when he voiced concerns about the proposed TVNZ-RNZ merger.
That immediately put him offside with the then Labour Government and Jackson, in particular, several sources said.
Jackson told the Herald last week that he was now disappointed in the TVNZ board he had appointed, in light of the cuts to the likes of Sunday.
“The ones that we put up, we thought, were very much public media people. They would give a perspective ... they either had experience, they had insight, they had history in terms of New Zealand identity,” he said. “And we didn’t think their commercial skills were too shabby either.”
He said he had considered the board members well-rounded and well-balanced, with strong governance skills. Some had broadcasting history, and he thought they’d all focus on the “New Zealand story” as an “absolute priority.
“So I’ve got to confess, obviously as the former minister, there’s a bit of disappointment from myself and others that we haven’t really seen much evidence of that at all.”
When asked specifically about Malloy, he refused to comment.
The upshot is that TVNZ faces one of its most critical periods ever with a relatively new board and an executive that is rebuilding.
One former TVNZ leader says the collective board could not be considered to have the strongest commercial expertise.
“That was Willie Jackson’s reaction to the failure of the merger of TVNZ and RNZ and his attempt to make TVNZ more public broadcasting in nature. My personal view is that TVNZ now needs a highly commercial board and that board is not there at the moment if it’s to survive.
“I’m quite pragmatic about it. Given the current environment, TVNZ has to pull out all the stops to survive. It’s got to have a highly commercial board and management.”
That viewpoint is backed up by experienced television and film producer John Barnett. Over a coffee with the Herald in an Auckland cafe, he runs his finger over an iPad screen, working his way through the TVNZ board members.
He poses a question: would any other commercial media company strive to poach some of the members of the existing TVNZ board? In his opinion, he says, the answer would be no.
He believes a once $300 million company has lost a sizeable chunk of value.
“A company that will lose up to $33 million this year isn’t worth $300 million anymore.
“It’s not their fault that it’s happened, but it’s happened. And you have a board with maybe one who has run a company with 700 employees, and maybe one who has run a business with such a large consumer and customer base of this type, or this level of turnover. There is an absence of experience or knowledge in buying or scheduling programmes or having any understanding of what competitive programme supply lines are like in the current environment.
“None of them have faced competitive technological change of this speed, and at this level. And the public owns this company.”
Media and Communications Minister Paul Goldsmith says he has confidence in Carruthers and the board.
“We are concerned about the financial performance of the company, and we expect it to work towards a plan to rectify that,” said Goldsmith, in an emailed response to questions.
“The Government is actively considering a range of options to deal with some of the issues facing the media in New Zealand.”
Act leader and TVNZ shareholding minister David Seymour told the Herald it was “fair to say” the state broadcaster’s board was facing more rigour from shareholding ministers than what they had been used to in the past: “What’s your purpose, what does technology enable?”
TVNZ and O’Donnell back the likes of the Fair Digital News Bargaining Bill - which would force Google and Facebook to the table to pay for the journalism they use to help their business models - and a levy on streamers.
Operationally, a relaxation of broadcasting transmission fees and the allowance for Sunday morning TV advertising all help but the company realises it holds the key with its transformation plan.
There are also more cuts to come in the short term - across the board.
We still don’t know what’s happening with shows such as Shortland Street - but if the Government, as expected, allows the 40% screen production rebate to apply, that should save the long-running soap in some form. TVNZ pays for it all at the moment - it’s broadly estimated to cost in the region of $20 million a year.
“When I have something to say, I [will],” says O’Donnell.
“We’re working with Shortland Street around what [it] might look like in a digital plus environment as well.”
Asked if she was confident the show could be saved, she says: “I really hope so. It’s an important part of the TVNZ2 and TVNZ+ schedule.”
Over the past three weeks, I’ve spoken to more than a dozen TVNZ insiders, former staff, customers, and other industry observers about the plight of the state broadcaster.
One staff member told the Herald that morale at the broadcaster was at rock bottom, especially among some newsroom staff. “It’s very glum, it’s very grim.”
Others I speak to are more upbeat but staff know another wave of cuts is coming.
Leaders were peppered with questions at a recent all-newsroom staff meeting, one staff member said. “Who’s going to be scrutinised first? How much time have we got? How are you going to tell us? The expectations are very grim.”
The staff member says there has been a chasm between the newsroom and the rest of the company, especially the content team.
That divide can often be caused by simple things, such as a lack of prominence for news and current affairs journalism and shows on TVNZ+.
This week, TVNZ has started making amends in this area, creating a more prominent news category on the digital platform.
“There needs to be a lot of concessions,” says the staff member.
“Nevak [Rogers] from content and Phil [O’Sullivan] from news and current affairs need to find an alignment that works for both parts of the business. They need to see themselves as more than the sum of their parts. That means if the newsroom can access NZ on Air funding rounds, for example, it’s not seen as being at the cost of content.”
On the issue of morale, a TVNZ spokeswoman says: “Going through any change process is hard on people. It’s been a really challenging period for TVNZ, but we’re focused on moving forward. We are not unique in this position, and as we’ve seen, many organisations have had to make these difficult decisions.”
For all of its issues, TVNZ is enjoying some operational highs right now.
Its digital streaming service, TVNZ+, has been considered by many as world-class, especially in terms of content, even though it needs a technology overhaul to help drive the broadcaster’s digital strategy.
The broadcaster has also brought live sports such as cricket and - right now - Euro championship football back to free-to-air audiences.
That cricket deal is courtesy of the collapse of Spark Sport and still has two years to run. NZ Cricket, by all accounts, have loved having their game back in front of hundreds of thousands of people with free TV access.
Whether TVNZ has the funds to sustain big sporting deals remains to be seen, but it clearly sees sport as playing a critical role in its future as a digital streamer - and another point of difference from the likes of Netflix.
With its audiences and mass reach, TVNZ holds a trump card as it seeks to collaborate with the likes of sporting bodies and other operators - here and internationally - in being a free-to-air partner.
Meanwhile, O’Donnell bristles at suggestions that TVNZ does not collaborate as strongly as it perhaps could in the New Zealand media landscape - citing various deals in recent months over grassroots rugby (with NZ Rugby and Sky) and ANZ Netball (with Netball NZ and Sky).
Nevertheless, TVNZ is still at loggerheads with Sky about its channels appearing on Sky’s Pod streaming menu - “we see a value” in those channels, says O’Donnell.
She’s still hopeful of a resolution, even though the standoff has been going for more than a year.
TVNZ and NZME may also be natural bedfellows, especially as Stuff launches its new 6pm bulletin to replace Newshub on Three next week, and also teams up with MediaWorks commercially.
I ask O’Donnell if there’s a natural marriage between her company and the one that owns the Herald. “I think that’s a great question,” she smiles.
As TVNZ unveils its five-year strategy, O’Donnell is certainly not shying away from the challenges.
“When I took on this job, I knew that it would be challenging, not just financially but also as an organisation.
“Change is hard and so I’m really leaning into that conversation with people. I always said I’d be really open and transparent with our people first and more broadly with the external media as I can.”
For all the protests from some quarters of TVNZ about it being the focus of negative media coverage or too much coverage generally, there is a worse scenario: people not caring at all.
Analysis: A final word
TVNZ’s 6pm bulletin has been the centrepiece of its news endeavour - and newsroom focus - for decades. In Simon Dallow, they have a world-class newsreader; their newsroom is chocka with talent.
TVNZ is serious about transformational change but one of its biggest tests will be how it addresses its news strategy over the next five years.
In reality and as harsh as it sounds, the cuts to Fair Go and Sunday still look like convenient cost reductions on the side.
TVNZ will also need to deliver an in-depth strategic plan for the future shape of its news delivery, taking into account how audiences are consuming news. Generally, these days, it’s through the small screens in people’s pockets.
Take Tuesday night’s 6pm bulletin, for example. The breaking news story of the lost fishermen off the East Coast was superbly covered but viewers were then directed to the next morning’s Breakfast show for latest coverage, with no mention at all of onenews.co.nz.
Onenews.co.nz should be front and centre of TVNZ’s future news strategy, just as TVNZ+ is front and centre of the broader content strategy.
What’s to stop broadcasters such as Dallow from fronting special digital news updates on onenews.co.nz?
O’Donnell has said in the past that there are “no sacred cows”.
Earlier, I asked TVNZ if there was still too much focus on the 6pm bulletin - it’s a refrain we sometimes hear in the media industry and was confirmed by several sources in the preparation of this piece.
“More than a million New Zealanders watch 1News at 6pm live every night across TVNZ 1 and TVNZ+,” said a spokeswoman.
“There is an incredibly loyal commitment to this programme, from both audiences and advertisers. We will follow audiences as their behaviours change, but 1News at 6 is a cross-platform success for us and we’ll continue to focus attention here.”
Editor-at-Large Shayne Currie is one of New Zealand’s most experienced senior journalists and media leaders. He has held executive and senior editorial roles at NZME including Managing Editor, NZ Herald Editor and Herald on Sunday Editor and has a small shareholding in NZME.
