MediaWorks will be weighing up ratings for outrageous TV against advertiser concerns about the Joe Irvine humiliation.
Some advertisers are getting nervous that they have become the arbiters of what is acceptable on New Zealand television.
Advertisers contacted by the Herald said sponsor anger was a factor in MediaWorks firing X Factor judges Natalia Kills and Willy Moon, and were concerned that advertisers should not become the moral compass for what should air on television.
The idea that the two judges' comments were an overblown publicity stunt gone bad fits the tone of the show, but X Factor New Zealand producer Andrew Szusterman has insisted the bizarre comments were not scripted. Interviewed at LA Airport, Kills offered a mixed message, saying it was not a manufactured conspiracy but she would "not get an entire industry in trouble" with any comments.
One senior ad industry source familiar with the situation believed MediaWorks would not have sacked Moon and Kills if sponsors had not demanded action.
"Media have a right to say that we advertisers should not be imposing our will on the content, but our concerns do seem to have convinced them," said the ad executive.
MediaWorks - and X Factor distributor Fremantle - have refused to discuss their actions, but after a string of cock-ups in its reality TV shows, MediaWorks has said it is reviewing its processes for checking contestants' backgrounds.
In my opinion MediaWorks is at a turning point in deciding how to deal with tabloid TV, manufactured outrage and the positioning of its brand.
Significantly, Monday's X Factor - after the sackings - enjoyed a big increase in ratings, so that must make it tempting to manufacture outrage on the new Paul Henry show. After all, Henry has plenty of experience with that tactic.
At the moment the brand appears to be drifting, with the main brake being sponsors who are aware of the risks for their brands in being associated with negative events like the Irvine humiliation.
TV3's tabloid turn
The question over manipulated outrage is a major issue in New Zealand, given the size of the media market, with increasingly converged media operations and tabloid news values.
Social media expert Michael Carney said social media reaction was just an exaggeration of the reaction among the wider public.
But social media feedback is heavily promoted in this country. A television industry source said the New Zealand and Australian markets had a unique response, with long shows running on multiple nights and providing strong engagement. Not everybody liked this type of show, but those who did were passionate and watched for a long time, and that boosted ratings.
The phenomenon applied less in the United States and Britain.
Traditional media such as radio and newspapers had a symbiotic relationship, and promoted reality shows because it plugged them into this enthusiastic audience.
But when there was a controversy - as there was on Sunday - traditional media attached themselves to the online outrage, and that heightened profile meant trouble for sponsors.
The high ratings for the Monday night follow-up X Factor might be seen as encouraging MediaWorks, but it was also slightly sad, said my TV source.
MediaWorks is not talking. It is a complicated issue for the company as it heads towards the new Paul Henry show.
Adding to the issue of TV3's direction is the fact that Campbell Live - which provides traditional current affairs and worthy content - has had a battle with ratings.
It is up to MediaWorks if it wants to take a risk with its own revenue, but it is questionable why taxpayer money was was used to put X Factor on air. Contestant Joe Irvine's humiliation occurred during the week that NZ On Air marked its 25th anniversary, and it is timely to ask whether it is following the demands of TV networks, rather than filling its role as a cultural body.
It has given $4.8 million of taxpayer funds to reality talent shows, including $2.4 million for X Factor over two years - $800,000 for the 2015 series.
The funder says there is no money for another X Factor, and it is steering clear of other international talent shows, but is not ruling out cash for new franchises.
X Factor and other franchise talent shows follow formats that have been developed around the world, and allow TV networks to avoid the chance of making a dud.
They require heavy sponsorship and product placement. They are manipulative and use New Zealand performers for a gladiatorial contest. So why are taxpayers involved?
Bro'Town and IRD
The drift for NZ On Air to work closely with the industry appears to have been exacerbated over the past decade, and that has come back to bite NZOA, leading to the taxpayer funding agency making a special tax-based investment in the animated show
At the heart of the issue is the agency's unorthodox decision to give money to the show's producers as a loan rather than a subsidy, a decision that had its denouement this week in the High Court at Auckland.
New Zealand On Air, which is a witness for the IRD in the case, is restricted in what it can say, but issued a statement.
"The producers and a private investor have been in dispute with the IRD about a production investment structure for series 1 and 2 of bro'Town funded in 2002 and 2004. A High Court hearing has started and NZ On Air's CFO will give evidence next week as a witness for the IRD."
Diplomat and former NZ On Air chief executive Jo Tyndall is also giving evidence. "NZ On Air can confirm that we have not entered into a loan arrangement with any other production," said a spokeswoman.
High-profile company director Joan Withers has continued a long-time interest in media, taking over from Wayne Walden as chairwoman of Television New Zealand.
Withers was appointed a board member and deputy chairwoman in 2009, and has long seemed to be an heir apparent - initially for Sir John Anderson, and latterly for Walden.
Her extensive media experience includes being chief executive of Fairfax Media's New Zealand operation.
During the past five years TVNZ has ended a long run of PR disasters, while maintaining its numbers.
The downside of this new respectability is that TVNZ news is less likely to be breaking news stories, and its profile - though not its ratings - has diminished.
With the appointment of a media-focused chairwoman, there will be questions about the potential relationship between TVNZ and NZME., publisher of the Herald.
The two have already developed closer ties. Notably, Sir John Anderson is chairman-designate of NZME.
New Zealand media are forming partnerships and alliances, and both TVNZ and NZME. are making the transition into digital media. TVNZ also has a significant store of video content that would be useful to NZME.