Media

Going public last play for Three

There has been plenty of empathy for MediaWorks staff after the company announced its TV arm was for sale, but why did the company decide to embark on such a public process and risk badly undermining its brand? 

ANALYSIS: One of the first jobs senior executives at MediaWorks scrambled to do after Thursday’s bombshell was to call clients who advertise with the company and production houses that make programmes for it and assure them “it was business as usual”.

Of course, it is not business as usual and won’t be for a long time.

Back in 2013 when MediaWorks tipped itself into receivership as a way of exiting an onerous contract with the big Hollywood studio Fox, the same process took place.

Executives hit the phones to explain that the receivership was only “technical” and the company wasn’t really broke. 

While the explanations were plausible, it spooked many advertisers and suppliers.

Some demanded money up front for services, others like Australia’s Seven Network decided that TNVZ was a more stable option and sold Home and Away to the state broadcaster. At the time, the Aussie soap was TV3’s most profitable and strategically-important programme.

Some nervous TV3 staff took jobs elsewhere but most hung in. It was a setback but survivable. This time, if the market is not seriously spooked, it will be a miracle.

Advertising agencies will commit less money to campaigns on Three, the most talented employees will be weighing their options, and sources in the local production community say programme producers are “freaking out”. Confidence in the network is taking a dive.

The highly-rated comedy duo Jono and Ben has just announced it's abandoning the MediaWorks ship and heading to NZME.

There are unconfirmed reports that several advertising agencies have either moved their client’s money to TVNZ, or are trying to lock in deals for next year at today’s prices.

Given the experience of MediaWorks CEO Michael Anderson and Three’s sales and programming executives, these risks would have been analysed before the announcement was made. The board must have considered quietly trying to sell its TV arm and hoping nobody found out.

Newsroom spoke to four leading media industry executives who asked not to be named.

None of them could understand MediaWorks’ rationale for suddenly putting the 'for sale' sign up in public and making dramatic announcements to all its staff.

“I see it as reckless,” said one. 

A leading TV producer said he was dumbfounded. "It feels like they are destroying their brand. It is going to make it much harder to find a buyer with this damage.”

A former top executive at Three said the move only made sense if you were trying to pressure the Government to intervene, “but the Government can’t, won’t and had already said they are not going to”.

“They (Government) are already facing the prospect of TVNZ losing $17 million next year. They will have their hands full with that. They’re not going to help out a privately-owned TV station.”

Three of the four executives felt MediaWorks had given up on its campaign to convince the Government it should turn TVNZ into an advertising-free public broadcaster like the ABC in Australia, and this was not a last-ditch attempt to bluff the broadcasting Minister Kris Faafoi into action.

“The only thing I can think of is that they are hoping some very wealthy person out there wants to own a TV station. Otherwise, it just doesn’t make sense why they would disrupt themselves like this,” said a senior television executive.

NZ-on-Air’s reaction

MediaWorks’ situation will have prompted some interesting conversations at the Wellington headquarters of NZ-on-Air. Last year, NZOA awarded Three about $17 million in public funding. In past years, it has been as high as $24 million. 

This taxpayer assistance has been vital to MediaWorks, and two big drama series, Westside and Head High, currently in production, received $10 million dollars between them.

NZ-on-Air CEO Jane Wrightson told Newsroom that MediaWorks had given her a “heads up” on the announcement, but she would hold more detailed discussions with the company in the near future.

“It is a tragedy but not unexpected. We’ve known that they’ve been an organisation in trouble but the station is not closing down and I think everyone should keep calm and carry on. 

“We have certainly been concerned about the state of the New Zealand media and what happens to NZ content in this landscape. This is the first big upheaval and we will watch to see what happens. I hope they find a buyer ... a good buyer.”

Wrightson said that if MediaWorks did close down Three, she was confident that other networks would pick up the NZOA-funded programmes currently being produced.

“We will work with the producers to find another platform. Will the programmes make it to release? Yes, they will,” said Wrightson.

It’s likely that Three’s off-peak current affairs shows -The Nation and The Hui - are applying for funding in the current round of NZOA applications. Wrightson wouldn’t confirm this but said all applications from Three would be considered as per usual.

MediaWorks responds

When Australian Michael Anderson took over as chief executive of MediaWorks in August 2016, he was facing an uphill battle. A bigger battle than he surely thought.

Back in the early 2000s Mediaworks’ then-chief executive, Brent Impey, came to the conclusion that New Zealand was a two-and-a-half channel market. 

At least one of the players at the time (probably TV3) was odds-on to lose money in the long-run, and he pursued the strategy of buying profitable radio stations.

Since then, successive CEOs have had to cope with the complete disruption of the media landscape including an increase in the number of TV channels and the rise of Netflix, Facebook, You Tube and Google.

Anderson also walked into a network that was in turmoil after the departure of the highly-polarising CEO Mark Weldon.   

With a new executive team, Anderson cut costs and lifted ratings but it wasn’t enough.

He spoke to Newsroom earlier this week.

Why did you not quietly try to find a buyer? You made this a high profile event.

Yes, our view is that this market leaks more than any other market I’ve worked in. We could’ve approached all the individual parties that might be interested in buying but I had no faith that wouldn’t have leaked.

After the Mark Weldon era, I made a commitment to staff that we would tell them first about anything that might affect their future.

I think if we hadn’t have told them and they found out, it could’ve driven a rift between management and staff and that would’ve been very dangerous for the company.

Has there been an issue with television and radio being so tightly integrated? Instead of operating as separate arms?

Under Mark Weldon they were certainly smashed together. It is true that the majority of clients only buy one form of media ... most radio clients only buy radio. TV clients only buy TV, and most billboard clients just buy billboards (MediaWorks operates an outdoor media company). Some really big clients buy more than one media but there are only a few and I could probably name all of them.

Each platform appeals in a different way and management can only truly add value when they are really focused on those core products. Many of the synergies that appear to be there are not really there.

Who do you think is the most likely buyer of TV?

We have made no assumptions as to who the buyer might be. Businesses that we are not aware of might be interested ... everyone has an equal chance.

TV was part of our core business but I don’t think it will be the core business of a new owner.

It will be more of a strategic point of difference for them. Owning a free-to-air station or a news service could add value to their core business.

Are you suggesting it could be a telco or a big content producer, like an overseas studio?

I don’t want to speculate; I will leave that to you.

Why is there an urgency to sell now?

Seeing TVNZ heading into a loss had a significant impact on our thinking (TVNZ is forecasting its losses could be as high as $17 million next year).

When a market leader, actually a market dominant leader, goes into loss ... what does it tell you about the issues in the television industry? Not only that but they (TVNZ) have been given a licence to keep investing heavily. We can’t wait around to see what the Government might do so the board has had to decide what is the best of the difficult options.

Knowledge of the market is clear, and unfortunately, we are not the best company to own Three.

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