KEY POINTS:
TVNZ chief executive Rick Ellis is resorting to a classic burning-decks strategy to ensure the state television broadcaster survives as a commercial entity.
Ellis' decision to highlight TVNZ's failure to meet budgets as a rationale for this jobs purge makes a good deal of sense.
By exacerbating the
extent of advertising revenue falls last year - a mere $9 million off the $344 million advertising revenues scooped up in 2005 - he was able to persuade the board of the need to cut jobs to get expenses further under control.
He was also able to persuade Broadcasting Minister Steve Maharey, who fronts up with cash for TVNZ to fulfil its charter obligations, that the state broadcaster is running a lean machine and not simply continuing to pump up its results by using charter payments in a Government-funded money-go-round.
More than 90 per cent of TVNZ's revenue comes from commercial activity. Advertising is the key revenue driver but there are also licensing and merchandising streams and fees from hiring out production resources. Slightly less than 10 per cent comes from Government sources, but it's arguable that even that should be cut, given that many of the so-called charter shows that TVNZ has produced - like the vastly popular Dancing with the Stars - have also proved to be great money-spinners.
Ellis has been disarmingly direct on this score noting that the company does not erect rigid boundaries between the charter programmes, which have to meet its commitment as a public broadcaster to reflect New Zealand's national identity and diversity, and its commercial programmes.
He says TVNZ operates a mixed funding model, with commercial success playing a significant part in funding charter delivery.
Arguably, the company could drive much greater efficiencies if it stripped out the charade that programmes such as Dancing with the Stars are any different from the types of commercial shows TVNZ used to make before the charter nonsense was imposed.
Once the projected 160 jobs are slashed, Ellis will be well-positioned for the upside that will occur as a result of stronger bookings this year and some aggressive work his team is beginning to do to gain higher yields from the existing advertising inventory.
If Ellis can organise an industry-wide position - he has been talking behind the scenes about reducing advertising agencies' 20 per cent commission on bookings - there will be considerable upside, not just for TVNZ, but across the media board.
But it's not a move that would be greeted with open arms by advertising agencies, no matter that charging a middleman's fee for making bookings in such a small media environment is hardly taxing stuff.
There will be considerable discussion over what that would do to the economics of the advertising industry. Whether agencies would charge clients more for creative and strategic work to make up for the lost fees, or whether they would have to become more efficient is open to debate.
Ellis and TVNZ's new chairman Sir John Anderson would have seen the bottom-line boost that Air New Zealand gained when it formed more direct relationships with customers by cracking down on travel agents' fees.
The two situations are not identical but there are sufficient similarities to make discussion worthwhile.
That's the theory.
Ellis is a much tougher commercial customer than his predecessor Ian Fraser, the highly creative broadcaster who was brought on board by TVNZ's former chairman Dr Ross Armstrong to manage the shift to the charter environment in which the company has to marry public and private objectives.
This would have been no mean feat for an experienced CEO, but as it proved, it was a bit of a stretch for Fraser and his team. They succeeded on the charter end of the equation but let the commercial imperatives drop away by failing to ensure One News remained top of the perch.
Bill Ralston, who Fraser brought on board to inject some mongrel into the news operation, has paid the price. But the turnaround will not be easy.
There's a lot of dead wood at the state broadcaster, even if the loss of some 50 or so journalists' jobs as part of the overall 150-160 cutback will be greeted with dismay by the industry.
But TV One's news programmes are not compelling. There's not a lot of news breaking and precious little investigative current affairs.
Like many deeply entrenched news-led organisations, TVNZ has become bureaucratic and process-oriented, with the ratio of middle-management to journalists way out of sync.
Which is why the more aggressive and hungry TV3 has done the impossible and leaped ahead of the dominant television news player.
In the words of its news boss: No time for back-stabbing and the endemic internal politics that characterises journalistic operations. Just enough journalists to do the job.
If TVNZ is to succeed with its digital platforms and proposed free-to-air 24-hour news channel against the Murdoch-backed Sky TV operation it will need to stay nimble.
