Faafoi's conundrum: The toughest political call left in 2019

There are no easy answers for broadcasting minister Kris Faafoi. Photo / File

Broadcasting Minister Kris Faafoi has left New Zealand media in a prolonged limbo, promising a big announcement before the year's end but not specifying a date.

While we wait, we've seen the impact a continued lack of action can have on the industry.

MediaWorks is desperately looking for a buyer, the "for sale" sign outside Stuff has dried up and shrivelled away, and magazine company Pacific Magazines was bought out by Bauer. It was also reported by Australian media this week that Private Equity firm Mercury Capital was interesting in taking the full magazine portfolio -- which includes Woman's Day and The Listener, off Bauer's hands.

The only positive to take from this is that Bauer doesn't look set to join the old dogs languishing in the pound. It, at least, has found a taker.

The point here is that while the Government mulls its options, New Zealand media are being pummelled with increasing ferocity in every month of inaction.

Leaked information published by RNZ today revealed that the Government is weighing up three options: merge the RNZ and TVNZ newsrooms; increase public funding for New Zealand on Air; or disestablish RNZ and TVNZ to create a new public broadcaster.

All those options have merit, but they will also have repercussions that leave Faafoi facing one of the trickiest political conundrums left for the year.

First, the idea of merging the RNZ and TVNZ newsrooms would seem to detract from the overall objective of retaining media plurality in New Zealand. There would be a tinge of hypocrisy to this, given that the importance of media plurality contributed to the Commerce Commission's decision to block the merger between Stuff and Herald publisher NZME. Beyond the obvious advantage of cost-cutting by removing duplication, it's difficult to see how this would help to secure the long-term future of independent journalism.

Pouring more money into NZ on Air would help to give the media companies a top-up, but it won't address the revenue leaks that are the cause of their problems in the first place. Also, if the Labour Government does commit to a certain amount of funding for public media, what guarantees can be put in place to ensure that future governments don't cut those contributions? Also, given that revenue leakage is only set to continue in the coming years, how much more would a government and taxpayers be willing to hand out?

The third option of creating a new broadcaster, underpinned by a mixed commercial and public funding model, has attracted the most interest so far.

"A hybrid public-commercial model has proven sustainable at SBS in Australia, RTE in Ireland and the original Channel 4 set-up in the UK," says Peter Thompson, a senior lecturer in media at Victoria University and the chair of the Better Public Media Trust.

"However, all of these have a high ratio of public to commercial funding."

Thompson says it's never simple to glue public service and commercial priorities together in the same institution, as they're driven by different motivations.

"The problem with trying to use commercial revenue to underpin public media services is that commissioning and scheduling decisions will always be shaped by the imperative to maximise ratings," Thompson says.

If there is too much emphasis on commercial targets, this could lead to broadcasters focusing on producing shows that are popular, rather than those that give voice to a diverse array of New Zealanders. These things aren't mutually exclusive, but we've all seen the way commercial imperatives can quickly lead to a reality TV-driven race to the bottom.

There has been further speculation that TVNZ 1 could be made ad-free as part of the revamp of local media, but that could be costly.

Running a TV channel with the production values of TVNZ 1 costs well over $100 million a year (TVNZ's overall operating revenue for the last financial year was $310m).

A TV industry source told the Herald that level of operating revenue sees TVNZ run around 42 minutes of content every hour - a figure that could rise to the BBC's 56 minutes if TVNZ 1 did go non-commercial. That would essentially require around 20 per cent more content to a fill a channel if it was ad-free.

Add the extra cost of producing high-quality local shows and it's questionable whether taxpayers would be willing to fork out anywhere near the required amount.

However, Thompson points out that fully funded services don't need to be unduly expensive.

"New Zealand's first commercial-free digital TV channels, TVNZ 6 & 7, cost only around $17m per year but offered a range of programmes which none of its commercial rivals would have considered," says Thompson.

"None of the programmes on the arts, politics, the law courts, literature, local communities and the media, not to mention an hour of ad-free news and current affairs every evening, survived the National Government's decision to discontinue the funding after 2012."

The problem with many of those programmes is that they simply do not attract large audiences. And while the ratings should never be the only measure of success, the public has a history of calling out publicly funded shows that perform poorly (The Spinoff TV show was a good case in point).

Time is running out

Nothing is yet set in stone, but the growing rumours involving some part of TVNZ going ad-free gathered enough steam to prompt TVNZ chief executive Kevin Kenrick to send out an email to commercial partners on Thursday afternoon to calm the uncertainty.

"The Government's intention is to strengthen public media – not weaken commercial media," Kenrick said in the note.

TVNZ boss Kevin Kenrick. Photo / File

"You can be assured that TVNZ and the Commercial Communications Council have reinforced the need and value of television advertising platforms and opportunities for New Zealand business to build brands and promote products and services.

"Should any decision be taken to change TVNZ's future obligations, the legislative process would likely take years to implement."

That last point touches on a problem with any government attempts to offer a regulatory hand to organisations severely disrupted by the digital duopoly of Google and Facebook. And this applies well beyond public broadcasting.

This week, when the New York Times asked business owner Richard Stables whether he felt vindicated at seeing Google fined billions of dollars in Europe, his response had a defeated tone.

"It took basically eight years to get something done," Stables said. And in that time his business had been decimated.

This is ultimately the potential fate of New Zealand's media companies, if regulators don't come up with a solution that can be acted on quickly.

This is certainly why, for the better part of this year, MediaWorks has been making such an impassioned call for the Government to finally do something.

It isn't only MediaWorks staff who that should be worried about the media company's fate. Lindsay Mouat, chief executive at the Association of New Zealand Advertisers, says losing local media channels would have a major impact on the businesses who rely on them to advertise their goods.

"The loss of competition in linear TV, whether through Government policy removing TVNZ 1 as a commercial channel, or a worst-case outcome for Three, would be very disappointing for advertisers and would almost certainly lead to increased pricing," he says.

"Advertisers do not want to see a near-monopoly in the linear TV market."

Justin Mowday, chief executive at advertising firm DDB, mirrors those concerns, suggesting that the cost of advertising on television could increase by as much as 20 per cent.

He says this could become prohibitive for smaller advertisers, who may then be forced to take their spend elsewhere.

Mowday says that while some of this might trickle into radio, magazines or newspapers, most of it will probably go to social media – which in turn creates the irony of a scenario in which advertisers are given an incentive to spend even more money online.

This will also have a knock-on effect for video production companies in that advertisers are far less willing to spend big on making social videos than they are on television ads.

TVNZ and RNZ may have got the headlines this week, but what happens with them will reverberate throughout New Zealand media.

Within the next six weeks, Faafoi has promised to announce a plan that could set a new course for New Zealand media. But will it be enough - not only for today, but for future governments who might not be so enthusiastic about a healthy media landscape?