Lure of web stark problem for media companies

TVNZ is confident that its mix of news and video will be a money-spinner.

The advertising slump has complicated life for media companies as they are obliged to invest in new media that have not yet proved to be profitable.

Like other media TVNZ and its core businesses TV One and TV2 have suffered a rapid fall in revenue after the downturn.

Private sector companies have pressure from their shareholders.

But state owned TVNZ is under intense pressure from government owners to deliver bigger dividends.

The squeeze has meant shows being scrapped and 88 staff being laid off.

But while other firms like Sky Television and MediaWorks are slowing the shift into new media TVNZ is excluding online developments from its cost-cutting.

It says its growing online arm is already a success.

Last week TVNZ revamped its entertainment website with a new format that is replete with "rich media" video content and offers more opportunities for catch-up TV.

In December last year TVNZ unveiled a new-look news website and promised 24-hour news coverage.

It has already invested heavily in its "catch-up" site tvnzondemand. co.nz.

The state-owned broadcaster is confident it is on to a winner with its full-steam-ahead digital strategy.

Head of marketing and emerging markets Jason Paris said TVNZ is "well ahead of the pack" with its online offering.

"No other media comes close to TVNZ and as a result we have a competitive advantage," he said.

"A lot of people struggle to make money online and we have a profitable model," he said.

"It is not making us millions. And there is still a long way before we generate the sort of money we get out of our core business" he said.

Why has it worked?

"We launched a product that consumers love and charged a premium for the rich video content," Paris said.

All traditional media - television radio and print - have been investing online.

More people - especially those young demographics favoured by many advertisers - are turning to the web for information and entertainment. But TVNZ rivals MediaWorks (which owns TV3 and C4) and Sky Television (which has a pay TV monopoly and owns Prime) have been more circumspect.

MediaWorks also owns half the country's radio stations and has invested online only recently and much later than TVNZ.

The uncertain state advertising demand in the economic downturn had changed dynamics for its investment, he said.

"Everybody is feeling their way at the moment," said TV3 marketing director Roger Beaumont.

"We are just keeping online in perspective and not spending extraordinary amounts of money and resources.

It was focused on its core businesses.

"There is an argument that in this sort of environment advertisers stick to the tried and true media," said Beaumont.

Sky TV chief executive John Fellet says the company is "dabbling" with its online arm.

Sky has developed a catch-up TV site that has the potential to grow into a full internet Protocol Television - IPTV.

"But before we start pouring in money we want to know someone is making money from it - and we have not seen that yet," Fellet said.

He did not know the details of TVNZ's business model but thought the commercial dynamics for the changeover were similar to those at newspapers, which were more deeply entrenched in a reader shift online.

"The way I see it people like me who read the Herald back to front are worth much more [in revenue] than my kids who read one or two articles in the Herald online - I think television is the same as that.

Jason Paris insists online and emerging markets is running profitably, though online has not yet been broken out of TVNZ financial returns.

So far it appears TVNZ has not borrowed additional funds for its emerging markets.

Paris says the strategy has been to provide content across different sites such as a recent deal to provide video content for the msn.co.nz site.

On May 14 MSN dropped video content on TV3 in favour of a syndication deal with TVNZ.

internet Advertising Bureau chief executive Greig Buckley said that TVNZ online developments fitted with a rapidly increasing demand for "rich media" content such as videos.

"TVNZ are taking an enlightened, new world approach," he said.

"The problem is that TVNZ is getting squeezed on the traditional side but have still not got the benefits of the new media," said Buckley, summing up a dilemma hanging over all media.