NZ on Air loses almost $250,000 in NZ Idol deal

NZ on Air was left almost $250,000 out of pocket by the popular TV series NZ Idol, the Auditor-General says.

However, the funder has escaped significant criticism over its initial $450,000 funding deal with TVNZ - designed to help the state broadcaster make a local version of the international show.

Earlier this year, details of the deal caused an outcry among opposition MPs, who said imported popular commercial franchise shows such as Idol should not get state funding.

They also questioned whether the $450,000 had been changed from a loan to a grant and whether TVNZ planned to avoid paying back any money, despite the show's success.

However, a letter from the Office of the Auditor-General to Act MP Deborah Coddington, issued to reporters yesterday, shows NZ on Air did not break the rules by putting money into the show.

NZ on Air promised funding on the basis that it would receive back 100 per cent of revenue from text voting, sponsorship and website activity, once the cost of producing the show had been met.

However, the deal excluded lucrative advertising revenue, due to TVNZ underwriting the show's overall costs and paying a "substantial licence fee" to its producer.

The letter says the cost of producing the 28-episode series was extremely high and TVNZ never fully recovered those costs through the revenue streams set out in the deal. However, $206,000 was returned to NZ on Air because TVNZ under-spent that amount on its budget, and under the agreement had to return it.

The final cost of the programme to NZ on Air was about $244,000.

The letter says NZ on Air's chief executive changed the form of the assistance from a "loan" to a "funding agreement", because of TVNZ's reluctance to take on the extra red tape associated with a loan, but the repayment provisions of the deal remained unchanged. It lightly rebukes NZ on Air for failing to make sure TVNZ made fortnightly reports on the show's revenue.

The letter also says NZ on Air's board meeting minutes wrongly labelled the agreement a loan, which was technically incorrect because TVNZ only had to pay back the money when certain conditions were met. There was a lack of a detailed written record of the board's discussions of the agreement.

Ms Coddington yesterday said it appeared TVNZ had "shafted" NZ on Air, because it was left $250,000 out of pocket despite the show being an enormous rating success. She said the state of NZ on Air's minutes also showed its "lax processes".

- NZPA