Statement of Intent For 4 Years Ending 30 June 2018 - Television New Zealand Limited - TVNZ
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Television New Zealand Limited
and subsidiaries
Statement of Intent
For 4 Years Ending 30 June 2018Table of Contents 1. Introduction 2 2. Who we are and what we do 2 3. Challenges within the operating environment 3 4. What we plan to do: operations and activities 5 5. Statement of service performance 8 6. Capability 8 APPENDIX – Consultation, subsidiary and associated companies
30 April 2014
Hon Craig Foss
Minister of Broadcasting
Parliament Buildings
WELLINGTON
Hon Bill English
Minister of Finance
Parliament Buildings
WELLINGTON
Dear Ministers
TVNZ is on track to meet its financial goals for the year to June 2014 and produce a result that
confirms our position as New Zealand’s leading free to air national television and digital media
company.
This would represent a strong operating result, given the dynamic and extremely competitive
market in which we operate.
A review of TVNZ’s growth strategy was undertaken in late 2013, with refinements made to reflect
TVNZ’s place and aspirations within the changing media market in New Zealand. The company’s
core focus remains ‘to engage the hearts and minds of New Zealanders with the most watched
content’.
Despite market challenges, the Board believes TVNZ, through its growth strategy, is well
positioned to continue to consolidate its market-leading position, grow the commercial
performance of our established properties, and pursue sustainable financial performance
improvement through efficiency and improved productivity.
The Board has confidence in the Executive team and staff to adapt the business to changing market
conditions, increasingly diversified competition and changing behaviours across viewers and
advertisers.
Yours sincerely
Wayne Walden
Chair
1Introduction
This Statement of Intent outlines TVNZ’s strategy for the forthcoming four years. In should be read
in conjunction with the Statement of Performance Expectations, which has also been drafted in line
with legislative changes.
Who we are and what we do
TVNZ is a Crown Owned Entity and has a Board of Directors appointed by the Minister of
Broadcasting and the Minister of Finance.
The Chief Executive has day to day management of the company.
The Television New Zealand Act 2003 provides the company editorial independence of which
freedom from political influence is a fundamental principle. TVNZ’s operations are governed by:
Television New Zealand Act 2003.
Broadcasting Act 1989.
Companies Act 1993.
Crown Entities Act 2004.
Owner’s Expectations Manual as published by the Crown Ownership Monitoring Unit.
Business Planning ‘Outlook Letter’ sent to TVNZ in advance of the 1 July start to the
financial year.
Memorandum of Understanding between TVNZ and the Minister of Broadcasting (for the
Pacific Service).
Compliance with the current Free-to-Air Code of Broadcasting Practice regulated by the
Broadcasting Standards Authority.
Compliance with advertising codes promulgated through the Advertising Standards
Authority.
The policy objectives set out by shareholding Ministers is for TVNZ to continue its transition into a
successful national television and digital media company providing a range of content and services
on a choice of delivery platforms while maintaining a strong commercial performance.1
1 Section 12(1), Television New Zealand Act 2003
2In carrying out its functions, TVNZ must provide high quality content that:
(a) is relevant to, and enjoyed and valued by, New Zealand audiences; and
(b) encompasses both New Zealand and international content and reflects Māori perspectives.2
The scope of functions and intended operations of TVNZ are:
The commissioning, production, purchasing and archiving of video content, either
independently or with others.
The provision of television production facilities (field, studio and post production, outside
broadcast facilities, design and set construction services).
The programming and scheduling of television channels and related marketing services to
commercial and non-commercial partners.
The provision of advertising and sponsorship services and related marketing activities.
The broadcasting and narrowcasting of free to air and pay television channels, programmes
and signals on all available platforms and devices.
The provision of online services, development and delivery of content for the television,
internet and communications industry.
The provision of services to the broadcast industry, both domestically and internationally.
The provision of audio-visual footage, programming, video and DVD rights, programme
listing information, channel packaging and all other content related services and materials.
To undertake other media related activities, as determined by the Board.
Challenges within the operating environment in FY2015
FY2015 will see a number of long term challenges for the company intensify. They include:
Loss of viewers watching linear television
Our audience continues to extend and evolve television viewing behaviours (time-shifted viewing,
viewing of television content on smart phones and tablets, and online delivery platforms).
Viewership of television has declined to pre-GFC levels, as the improving economy has presented
viewers with more entertainment options outside the home.
2 Section 12(2), Television New Zealand Act 2003
3The video content experience is no longer limited to traditional linear television. We therefore
must consider the strategic threat, that a growing portion of our audiences shift to “over the top” or
OTT services before we achieve scale in our on-demand services.
To mitigate these risks we need to deliver the strongest linear television schedule in the market,
drive deeper engagement with our content through social media and integrating on-air and online
viewing, further develop TVNZ Ondemand and expand its content beyond catch up TV.
Increasing costs of premium international content
The cost of television content continues to rise, disproportionately to the return that broadcasters
can expect from that content. Local content (including news and current affairs content) is the
most expensive to produce, yet remains an integral and differentiating part of the schedules across
our channels.
Content sourced from overseas returns the greatest yield, yet the price paid for it by New Zealand
broadcasters is proportionally higher than broadcasters in other markets pay for the same content.
Competing interest for overseas content by local broadcasters increases this further.
To mitigate this risk, we are placing greater focus on securing the most compelling content across
longer terms and continue to balance our investment across international content investments for
optimal yield.
Downward pricing pressure on TV advertising
NZ has more mass market FTA advertising inventory available than there is demand in the market,
and there’s increasing global over-supply of static online advertising inventory. Media agencies are
keen to use new technologies to standardise online and on-air audience metrics and how they buy
that audience.
To mitigate this risk we need to maintain our share of TV audiences to deliver reach advantages,
invest in content that appeals to higher value audiences, tightly manage our price relative to other
media alternatives, and preserve the premium value of online advertising.
The risk of an adverse economic event
An adverse economic event, whether originating within or outside New Zealand, could negatively
impact on the level of advertising spend in this country.
To mitigate this risk, TVNZ is accelerating efforts to distinguish its value propositions from those of
competitors, both in substance (i.e. content and the accessibility of content) and form (i.e.
enhanced advertising propositions driven from differentiating opportunities and integrated media
solutions).
4Significant shift in broadcasting policy expectations
A significant shift in broadcasting policy or change in shareholder expectations could prove
disruptive to TVNZ business momentum and result in weaker operational and/or financial
outcomes.
What we plan to do: operations and activities
TVNZ’s focus in the next four years will be on building and maintaining sustainable business
growth and delivering a continuous and improved rate of Return on Equity.
The TVNZ 5 year growth strategy is our plan for the future of the business, based on our best
thinking at the time it was developed. Given the dynamic nature of the media industry we need to
regularly review local and international market developments, and adjust our strategic thinking
when necessary. Following a strategy refresh in 2013, TVNZ’s six strategic priorities are:
These are explained in more detail below.
Generate the most compelling content
Content is what drives our business, and offering the best content is core to our strategy.
Includes actions to:
5 Develop a deeper understanding of viewers’ behaviours and preferences to direct our
content decisions.
Fully leverage significant local content programmes to drive viewer engagement and
advertiser integration.
Reduce piracy by eliminating the time lag between international and TVNZ transmission of
foreign content.
Drive flagship TVNZ news and current affairs programmes to increase audience share and
advertising revenues.
Expand online viewing
We recognise that “digital” has come of age and, therefore, will expand access to video content
online. We will expand the reach of TVNZ by extending our portfolio of on-demand video content
to more devices and platforms.
Includes actions to:
Successfully develop and implement a future proofed content management system.
Enhance personalisation features and expand content to drive growth in Ondemand.
Rebuild and relaunch ONE News online.
Extend the reach of TVNZ Ondemand.
Deliver Superior Value for Advertisers
We will leverage superior reach across TV and online to offer advertisers more opportunities to
communicate through the power of video. We will simplify our trading model to more effectively
match inventory to client demand and to better demonstrate the value of our products and services,
while remaining more cost effective than other media. We will keep pace with industry
developments and improve performance measurement as consumer behaviours evolve.
Includes actions to:
Actively manage TVNZ’s relative price to maximise TV advertising revenue growth.
Outpace the market growth for online advertising revenue.
Accelerate Media Solutions growth.
Shape our sales capability to deliver differentiated value to consolidated media trading
hubs vs. direct buying clients.
6 Champion the value and advantages of TV and online video to media buyers and
advertisers.
Embrace User-Paid Opportunities
We will evaluate options to deliver video content to pay platforms.
Includes actions to:
Embrace VOD opportunities
Optimise the profitability of linear pay channels
Focus licencing on sustainable high value opportunities
Reduce Operating Costs
We will deliver year-on-year reductions in non-programme costs. We will refocus our cost savings
achieved on strategic priorities. We will ensure all future investment is aligned to these objectives
and, in addition, continue to exit non-core activities.
Includes actions to:
Complete exit of targeted non-core activities.
Exploit building redevelopment opportunities to enable a lower cost future.
Reduce non-programming costs.
Shape a Sustainable Industry
We will assess options to ensure the industry moves at pace, and works with disruptive
technologies and trends.
Includes actions to:
Ensure Freeview’s relevance and growth by assessing future technology standards.
Preserve and enhance TVNZ Ondemand as a premium advertising environment.
Expand TV commercial demographics.
Proactively contribute to relevant legislative changes.
Engage NZOA to broaden funding for commercial programming.
7Statement of Service Performance
TVNZ is granted an exemption under Section 143 of the Crown Entities Act 2004 from including in
its Statement of Service Performance outputs which are not directly funded (in whole or part) by
the Crown.
TVNZ is funded directly to provide one service, namely the Pacific Service, which would otherwise
not be provided for on a commercial basis.
Due to changes in legislation, further details of this are now included within the separate Statement
of Performance Expectations.
Capability
As part of TVNZ’s strategy to “engage the hearts and minds of New Zealanders with the most
watched content” the company continues to strive to ensure it has the right people to deliver on
this. This means having an adaptable workforce that isn’t afraid of the constantly changing nature
of modern broadcasting and digital media companies.
As at 31 March 2014 TVNZ employed 822 FTEs in its Auckland, Hamilton, Wellington,
Christchurch and Dunedin offices, and its Sydney and London bureaux.
In FY2015 TVNZ will continue to:
Provide a healthy and safe work environment, and develop its policies in this area in line
with new legislation and expectations.
Manage change with transparency, respect and support for individuals in order to meet the
changing needs of the company.
Ensure its recruitment process enables the impartial selection of suitable candidates.
Remunerate fairly and consistently in relation to performance, position in salary bands and
to the external market.
In collective bargaining with the EPMU and PSA, achieve satisfactory outcomes through
good faith negotiation.
Provide appropriate learning and development opportunities.
Demonstrate equal opportunity practices which firmly discourage discrimination.
8 Operate a fair, transparent and regular performance management appraisal system that
allows employees full participation in their own performance reviews.
TVNZ takes seriously its commitment to treating people fairly and with respect, ensuring equality
of access to opportunities and understanding, appreciating and realising the benefits of individual
differences.
9APPENDIX – Consultation, subsidiary and associated companies
TVNZ will in relation to any single or connected series of transactions, consult with Shareholding
Ministers of TVNZ on substantial matters not contemplated in the business plan including:
Any substantial capital investment where the value of the investment exceeds 5% of the
book value of equity.
Any substantial expansion of activities outside the scope of its core business into new
business areas.
The subscription for, or sale of, shares in any company or equity interests in any other
organisation which are material, involve a significant overseas equity investment, or are
outside the scope of its core business.
The sale or other disposal of the whole or any substantial part of the business or
undertaking of TVNZ.
Where TVNZ holds 20 percent or more of the shares in any company or other body
corporate (not being a subsidiary of TVNZ), the sale or disposal of any shares in that
company.
TVNZ will ensure at all times that:
Control of the affairs of every subsidiary of TVNZ is exercised by a majority of Directors
appointed by TVNZ.
A majority of the Directors of every subsidiary of TVNZ are persons who are also Directors
or employees of TVNZ, or who have been approved by the Board of TVNZ for appointment
as Directors of the subsidiary.
In accordance with Section 100 of the Crown Entities Act 2004, TVNZ will ensure that it does not:
1. Acquire shares in a company that gives TVNZ substantial influence in or over that company or
2. Acquire an interest in any partnership, joint venture, or other association of persons, or an
interest in a company other than its shares or
3. Settle, or be or appoint a trustee of, a trust, -
other than –
4. After written notice to its shareholding Ministers and
5. In accordance with the consultation principles stated in the first paragraph above and
6. For the purpose of TVNZ carrying out its functions, and acting consistently with its objectives
under any Act and its constitution.
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