TV exec channels hope into Four

Jason Paris. Photo / Sarah Ivey

MediaWorks bosses say they have a multimillion-dollar budget for the relaunch of niche channel C4 into the new-look Four.

The revamped channel aimed at a slightly older mainstream audience will be on screens tomorrow night.

It's an ambitious move by a company that has seen tough times. But will a revitalised Four be the glue to pull together the debt-laden media group?

TV chief executive Jason Paris says the company is now trading well with strong operating profits.

But its problems hark back to 2007. The company was bought for $790 million at the height of the market boom.

Alongside Yellow Pages it was a high-profile local example of the private equity-leveraged buyout binge, fuelled by easy credit.

The aftermath was that its otherwise solid profit was swallowed by the requirement to service oppressive debt. It faced an interest bill of $91 million in the year to August 31, 2009, according to financial results issued last year.

MediaWorks was stabilised with big capital restructuring - a $70 million injection of capital and a $258 million write-off of goodwill. It has managed its way through all this without large-scale layoffs, so far at least.

The relaunch of Four may be a sign that MediaWorks is emerging from the troubles of the past three years.

It will be the third incarnation of a network that was created out of diverse radio frequencies by transmission engineers in 1997.

Initially TV4 was used to play programming that was gathering dust in the TV3 vaults.

But it was a messy B grade line-up and never built an audience.

TV4 haemorrhaged losses for several years.

In 2003, MediaWorks rejected an option to turn TV4 into a shopping channel.

Instead it opted for C4 - a youth-oriented music station filled with low-cost content like free music videos and filmed from a closet-sized studio in an adjacent building.

But over the years it has drifted away from music, while still aiming at a younger audience.

From tomorrow it will be morphed back into a mainstream channel - aimed at 18 to 49-year-olds.

Some programmes like America's Next Top Model and The Simpsons will be moved from TV3.

But MediaWorks says it is providing strong new programming and, as part of tweaking TV3 for an older crowd, will be running children's programmes on Four.

Paris says the shift is logical. Rather than one mainstream channel and a niche channel, both channels are aiming at the big demographics favoured by advertisers - 25-54 at TV3 and 18-49 at Four.

Paris says that is the new media environment. Advertisers and agencies are focused on targeted one-to-one relationships with consumers online and in social media.

Elsewhere they are looking at big hits with large audiences, and niche media have suffered.

So how will Four grow its brand?

At least a little of that "multimillion-dollar" budget can be accounted for by the oversized rubber duck - a promotional installation that is parked in Auckland's Viaduct Harbour.

The duck is an amusing stunt that will turn up again in on-screen channel identifications for Four.

But more important will be whether dedicated programming cuts through the crowd in a medium flooded with options.

Advertising consultant Martin Gillman agrees with Paris' appraisal of the new world order for TV advertising and says there is a particular problem pinning down younger viewers.

He likes the duck. But he wonders about the imagery for the station and whether early promotions for Four are "too cool for school" - discouraging the mass audience.

Investors will be hoping that the giant duck and Four boost revenue and ensure that they do not take a bath on MediaWorks.

Paris is confident that Four will build a bigger audience and profits than TV4 - which targeted a similar demographic.

"Back then the content and brand positioning was not right," he said.

But one television industry source familiar with MediaWorks was sceptical. Building a new brand is tough at any time - but with the upheavals in the media market right now it will be fraught.

Kerry McIntosh, New Zealand operations partner for the network's private equity owner Ironbridge, says his company "continues to believe there is significant upside in MediaWorks' earnings and value from a recovery in the NZ economy and ad spend".

However his optimism is guarded: "We do not anticipate a liquidity event for this investment in the near term."

In other words he doesn't think it will run out of money any time soon. But just having to make that point is a reminder of how tight things must have been in the past couple of years.

Much of the cashflow for MediaWorks comes from its radio interests.

But despite the utilitarian surrounds of TV3, television is the most glamorous side of the business, and potentially more capital intensive.

Paris, 36, is also a glamorous chief executive for the television operations.

He left a secure job as the head of marketing at TVNZ to take over last July - joining at a tough time for the company.

But that can be a good thing, he says.

"You get six months of grace - you meet, listen and talk to the market. Now people are saying put your money where your mouth is," he says.

Young and ambitious, Paris had senior marketing roles at McDonald's, DDB Advertising Europe and was head of consumer marketing for Nokia in Britain.

He joined TVNZ and was an acolyte of technology-focused chief executive Rick Ellis.

Paris seemed better suited to the role of building new media at TVNZ than he does digging MediaWorks out of its very muddy hole.

Ironically, some believe his work developing new media at TVNZ has created one of the impediments to success at MediaWorks.

During the depths of the advertising slump in 2009, while TV3 was overburdened with debt, the owners had to squeeze as much from the company as possible, says one well-placed source.

Meanwhile the board of state-owned TVNZ allowed investment in new media developed by Paris, accepting lower profits.

As television advertising has recovered, TVNZ has been able to package its ad deals with new media, boosting its share of the market.

The upshot is that TVNZ and Sky TV have taken a bigger share of the recovery while TV3 is playing catch-up on new media.

Figures released this week show television advertising revenue increased 6.6 per cent last year, up $37.5 million to $606.7 million.

But Paris said: "I don't think market has picked up as much as anybody anticipated. We are seeing positive signs leading up to the Rugby World Cup that we hope will be sustainable into 2012."

The fluid nature of life at MediaWorks was apparent on Thursday when the head of marketing at MediaWorks TV, Roger Beaumont, announced he would be ending 10 years with the company to work as a consultant with clients including MediaWorks.

Paris said it had not been decided yet how the position would be filled.



MediaWorks' key players

MediaWorks owns TV3, Four and is building its online arm. It also owns radio networks that make up half of the commercial radio industry. These include More FM, The Rock, The Edge, RadioLive, Mai FM, George FM, The Breeze, LiveSport and Kiwi FM.

Kerry McIntosh

New Zealand operational partner for Ironbridge Capital, the private equity company which manages three funds owning 67 per cent of GR Media, the holding company for MediaWorks. In 2009 Ironbridge announced MediaWorks had been recapitalised reducing interest payments that amounted to $91 million and wiping $258 million of goodwill - about 30 per cent of its 2007 purchase price. Details of its current debt loading are not available.

Jason Paris

The ambitious and high-flying former TVNZ marketing executive is MediaWorks TV chief executive. He is dealing with the aftermath of the huge advertising slump in 2009 and will have it tough in an astonishingly volatile media market. Paris says his focus is to improve the sales team, but Channel Four will be his highest profile calling-card.

Brent Harman

The veteran broadcasting executive played a key role starting Newstalk ZB and was a former chief executive of Television New Zealand before taking senior roles at Flextech and Prime TV in Australia. Harman chairs the board of MediaWorks which runs the group and provides Ironbridge with his insights on the media world.

Sussan Turner

The group managing director of MediaWorks oversees radio and television assets and was appointed during a management revamp. Turner rose through radio sales and has limited knowledge of the more complex but less lucrative world of television. The new structure initially led to confusion over the relationship between the radio and TV arms.

Belinda Mulgrew

The former chief financial officer from MediaWorks early pre-merger days took a key role in mergers and acquisitions. She was appointed as chief executive for radio in March last year.

Roger Beaumont

The former marketing director and a key lieutenant to former chief executive Brent Impey in his era. He resigned this week in the run-up to the Four revamp. No decision has been made on a replacement.

Mark Jennings

Longtime head of TV3 news and current affairs, which is a big factor in the stability of early evening ratings on TV3. Like Beaumont he was a lieutenant to Impey but has formed a good rapport with TV boss Jason Paris.

John Campbell

TV3's biggest star was rattled amid talk last year of cuts to news and current affairs, but the face of TV3 has been given a commitment that his job is safe. Jason Paris has also praised other senior players in TV3's news output.