By Peter A. Thompson
Is the government to blame if Mediaworks’ TV3 shuts down? Peter Thompson looks into the crisis at the struggling network.
MediaWorks’ television business has been attracting a great deal of attention recently, but unfortunately not entirely in the form of audience eyeballs. In October 2019 MediaWorks announced its decision to offload its television business (comprising Three, Bravo, ThreeLife and Newshub)  as well as canning New Zealand Today and Married at First Sight NZ while reducing the run of 7 Days)
MediaWorks’ TV channels have been competing relatively well against their main rivals, TV One and TV2, especially in the lucrative 25-54 demographic. Unfortunately, despite a variety of cuts and rescheduling efforts, they have remained unprofitable. Senior executives have identified an “uneven playing field” in the free-to-air television market as the source of the problem, and have become increasingly vocal since TVNZ announced that it expected to make a loss in the next financial year and cease paying dividends.
In 2018, CEO, Michael Anderson warned that the government’s proposal for a new public TV channel operated by RNZ risked wiping Mediaworks ‘into oblivion’ while a Mediaworks submission to the Ministerial Advisory Group on Public Media issued the stark prophecy that “If the structural anomalies unique to the New Zealand market are not addressed, there is a genuine risk that the Government, through its owned media channels may become the only broadcaster in New Zealand.“ 
MediaWorks’ outgoing head of news, Hal Crawford, meanwhile, published an indignant rant denouncing the government for excusing TVNZ from paying dividends: “I’m angry that the market for television advertising in New Zealand is distorted by this bizarre, anti-competitive set up. I’m angry that my newsroom, Newshub, is part of a business struggling to keep its head above such polluted waters “ 
Even TV3’s celebrity presenters have been part of the PR offensive. Duncan Garner made a live personal appeal to Broadcasting Minister, Kris Faafoi on The AM Show reinforcing the company line about unfair competition from TVNZ; “The level playing field has disappeared- gone- […] We can’t compete when the other guy’s rules are different.” In October, Jesse Mulligan followed suit, live on The Project, complaining that, “At the moment, it’s not a level playing field […] We are out of costs to cut- it’s not unrealistic or an exaggeration to say that the next move could be for MediaWorks to close down our entire station “
The concerns of Garner and Mulligan may be genuine, but it must be noted that, earlier in 2018, CEO Michael Anderson had circulated an email encouraging MediaWorks staff to promulgate the message about an uneven playing field with TVNZ. There is certainly some validity to the claim that the NZ media ecology is distorted- but not in the way MediaWorks would like us to believe. There are several factors which need to be considered in order to better contextualise the current scenario:
- The deregulated media ecology: Since the late 1980s, the free market paradigm prevailed in public media thinking. In 1991 New Zealand removed the restrictions on overseas (or cross-media) ownership- ironically to enable CanWest to rescue TV3 which had been driven into receivership by a newly-commercialised TVNZ. Apart from basic broadcasting standards, television operators have no requirements to provide local content quotas or restrictions on advertising (except for Sunday mornings). The prevailing free market philosophy has allowed private media operators to enter the domestic market with no public interest obligations. Sky was allowed to operate as a virtual Pay-TV monopoly for two decades (until the arrival of online subscription video-on-demand services like Netflix which provide little local content and no news and current affairs). Meanwhile, digital intermediaries like Google and Facebook have been permitted free rein to co-opt and monetise online traffic while paying minimal taxes. If MediaWorks is concerned about a distorted market, this would be a good place to begin the analysis.
- Declining levels of television advertising: One can sympathise with MediaWorks when its ostensible success in targeting the most valuable prime-time demographics still does not generate enough revenue to cover its costs. But this is not because of TVNZ- the advertising spend in the television sector in New Zealand has been declining for two decades, from 34% of the total in 1999 to 21% in 2018. This is largely due to the massive increase in the digital/interactive media sector’s share of the advertising revenue (dominated by Google and Facebook). If the TV sector’s share of the advertising market had been sustained at 1999 levels, MediaWorks’ channels would have remained comfortably profitable.
- Fragmenting Audiences: Part (but not all) of the reason for the decline in television advertising revenues has been the changes in the way audiences discover and consume content. Despite the increases in online/mobile media consumption, the popular assumption that no one watches TV any longer is incorrect. More people are accessing content on non-linear on-demand/on-line/mobile platforms, but this has not completely superseded traditional TV viewing. A NZ On Air report  actually found a recent increase in the proportion of people watching free-to-air TV every week (although Sky was in decline). However, daily reach was slowly declining: Between 2014-18, TV One had dropped from 48% to 43%, while TV2 had dropped from 27% to 20%. But TV Three dropped the most, from 35% to 25%. So despite the gains in its 25-54 audience, Three’s overall audience decline seems to have been sharper than that of its rivals.
- Access to premium content rights: The earlier dominance of Sky, followed by the arrival of Netflix has intensified the competition for content rights, especially for new movies, high-end drama, and live sports. None of the free-to-air channels can compete with the major subscription operators here (TVNZ won the rights to the 2019 Rugby World Cup because it partnered with Spark). Interestingly in 2013, when MediaWorks lapsed into receivership, it cancelled content contracts with Fox and others worth over $170m. However, given the gradual decline in daily viewing, this also suggests trying to make savings by reducing spending on content may simply drive a further decline in ratings and revenue.
- Local content challenges: If the free-to-air channels cannot afford to bid for premium international content, then local content is an obvious way to differentiate themselves in a small but highly competitive market. However, even high-rating local programmes typically incur an opportunity cost- put simply it’s cheaper to license overseas content than to make it here. But even with NZ On Air funds available, it often makes little commercial sense to invest in local productions. For example, in October 2018 TV3 dropped Jono and Ben because of declining ratings. The recent decision to cut programmes like 7 Days, New Zealand Today and Married at First Sight underlines the harsh commercial logic at work.
- Financialisation and debt: All the factors outlined above have affected the entire free-to-air sector, which suggests that many of the problems facing MediaWorks are far from unique. Where Mediaworks is arguably at a disadvantage compared with its rivals is in its capacity to respond to these pressures. In 2007 CanWest sold MediaWorks to Ironbridge, an Australian private investment firm in a deal which saw it loaded with more than $700m in debt. Unsurprisingly, this put an intolerable strain on the business and saw it lapse into receivership in 2013. It was subsequently bought out by Oaktree in 2015, another private investment firm which has been trying to turn the business around and sell it ever since (although digital advertising firm QMS recently took a 40% stake). One of the key strategies was to cut back on news and current affairs (starting with canning Campbell Live and the restructuring of the news operations into Newshub) while developing a focus on reality TV (e.g. replacing Four with Bravo). Despite a relative improvement in its performance in the key prime time demographics, these measures have not been sufficient to drive the television business back into the black.
There is no question that MediaWorks has been subject to a range of challenges, some historic, some contemporary- which have threatened its survival. Although MediaWorks has made a concerted PR effort to frame TVNZ and the government as the source of its current difficulties, there are far more significant factors, common to the entire television sector, to consider. Speculation about prospective suitors for the television business is rife, but there are no obvious domestic media companies likely to want to invest in a business MediaWorks has publicly admitted is struggling to survive, while international media groups like the Australian Nine (which bought Fairfax and Stuff) are trying to sell off their NZ holdings.
There is also no question that New Zealand needs to overhaul its frameworks for media regulation- but it seems highly unlikely that the government would move to make TVNZ non-commercial as MediaWorks has suggested. Insofar as the government bears some responsibility, it is in its historic laissez-faire approach to allowing a deregulated media sector to become dominated by speculators and vulture capitalists. Oaktree’s presence here was intended to take advantage of precisely this scenario. It seems disingenuous to now demand the state intervene to rescue the television business just so Oaktree can realise a higher sale price. If TV3 does not survive, ultimately it will be nobody’s fault but their own.
 MediaWorks Media Release, 18 October 2019 https://cdn.MediaWorks.nz/aem/corporate/MEDIA_RELEASE_MEDIAWORKS_TO_PURSUE_A_SALES_PROCESS_FOR_ITS_TELEVISION_BUSINESS.pdf
 C. Keall (2019) TVNZ profit halves, cans dividend. NZ Herald, 29 August. https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12262975
 M. Jennings (2018) Hit pause on RNZ+, urges MediaWorks CEO. Newsroom, 23 January. https://www.newsroom.co.nz/2018/01/22/76973/hit-pause-on-rnz-urges-MediaWorks-ceo
 M. Anderson & J. Matthews (2018). MediaWorks submission to the Ministerial Advisory Group on Public Media, 6 April: https://mch.govt.nz/sites/default/files/projects/Media%20Works%20submission%20Michael%20Stiassny%20Public%20Media%20Ministerial%20Advisory%20Group%2006042018.pdf
 H. Crawford (2018) The problem with news in New Zealand 15 August. https://www.newshub.co.nz/home/new-zealand/2019/08/opinion-the-problem-with-news-in-new-zealand.html
 Duncan Garner (2018) AM show appeal to Kris Faafoi. Newshub, 15 August. https://www.newshub.co.nz/home/new-zealand/2019/08/opinion-the-problem-with-news-in-new-zealand.html
 Stuff (2019) Jesse Mulligan says Three ‘could close down entire station’. Entertainment/TV and Radio, 17 October, https://www.stuff.co.nz/entertainment/tv-radio/116651709/jesse-mulligan-says-MediaWorks-could-close-down-entire-station
 T. Coughlan (2018) MediaWorks CEO’s Murdoch-style email. Newsroom, 26 July. https://www.newsroom.co.nz/2018/07/25/166648/MediaWorks-ceos-murdochean-email
 NZ On Air/ Glasshouse (2018) Where are the Audiences? Report 2018. https://www.nzonair.govt.nz/research/where-are-audiences-2018/
 P McBeth (2018) Oaktree Capital ups MediaWorks stake as Rabo exits. NBR, 11 July. https://www.nbr.co.nz/article/oaktree-capital-ups-MediaWorks-stake-rabo-exits-bd-148801
 Newstalk ZB (2018) ‘We’re gutted’: Jono and Ben axed from TV. 11 October. https://www.newstalkzb.co.nz/news/entertainment/jono-and-ben-cancelled-by-tv3/
 B. Gaynor (2016) Weldon wrong choice for MediaWorks. NZ Herald, op-ed, 7 May. https://www.nzherald.co.nz/brian-gaynor/news/article.cfm?a_id=14&objectid=11634836
 Stuff (2018) The Project wins important battle in 7pm ratings war. 2 October. https://www.stuff.co.nz/entertainment/tv-radio/107539412/the-project-wins-important-battle-in-7pm-ratings-war
Peter A. Thompson is a Senior Lecturer in Media Studies at Victoria University. He is an expert in the political economy and cultural economy of media.
Disclaimer: The views expressed in this article reflect the author’s opinion and not necessarily the views of The Big Q.