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    Television New Zealand Limited

    Statement of Intent For 3 Years Ending 30 June 2016

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    Table of Contents

    1. Introduction 5 2. Who we are and what we do 5 3. The operating environment 6 4. What we plan to do: operations and activities 7 5. Statement of Forecast Service Performance 10 6. Capability 13 7. Performance Measures 14 8. Dividends and capital expenditure 15 9. Reporting and consultation 16 APPENDIX I – Board of Directors – Governance and Committees APPENDIX II – Forecast financial statements APPENDIX III – Reporting requirements APPENDIX IV – Consultation, subsidiary and associated companies

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    31 May 2013 Hon Craig Foss Minister of Broadcasting Hon Bill English Minister of Finance Parliament Buildings WELLINGTON Dear Ministers TVNZ is on track to meet its financial goals for the year to June 2013 and produce a result that confirms our position as New Zealand’s leading free to air national television and digital media company, in what continues to be a dynamic and extremely competitive market. This would represent a sound operating result, given the tightening of the overall market in which we operate, and is one which the company is proud of. In a declining advertising market TVNZ has held its share of free-to-air television revenue, and started to see the real benefit of its investment in online assets and expertise. In addition, throughout FY2013 TVNZ has continued its disciplined approach to cost management. TVNZ is not content with the status quo, however. A wide-ranging strategic review was undertaken in late 2012, with the second half of the current financial year (in effect “Year 0”) readying the business for the concentrated effort required to grow the commercial performance and profitability of TVNZ in subsequent years. As a result of this review a new strategy for growth was formed. Central to this strategy is a new core focus: ‘to engage the hearts and minds of New Zealanders with the most watched content’. Despite an expectation that the advertising market in FY2014 will remain soft the Board believes TVNZ, through its growth strategy, is well positioned to continue to consolidate its position as New Zealand’s leading television and digital media company, grow the commercial performance of our established properties, pursue sustainable financial performance improvement through efficiency and improved productivity. Success will not be achieved easily, and current market conditions do not make the challenge any simpler. However the challenges that TVNZ faces as a digital media

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    company in a fast-changing media landscape also present great opportunities for TVNZ as a commercial organisation.

    The Board has confidence in the Executive team and staff to adapt the business to changing market conditions, increasingly diversified competition and changing behaviours across viewers and advertisers. Yours sincerely Wayne Walden Chair

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    Introduction

    This Statement of Intent (SOI) provides a range of performance measures, for those services that are directly funded by the government. Due to the unique nature of TVNZ and that the majority (in excess of 95 per cent) of TVNZ’s funding comes from advertising revenue and other commercial sources, as opposed to either from Crown funding or from grants, levies, fees or charges prescribed by or under any Act, TVNZ has been provided an exemption from the requirement to report on non-Crown funded outputs in this SOI. Who we are and what we do

    TVNZ is a Crown Owned Entity and has a Board of Directors appointed by the Minister of Broadcasting and the Minister of Finance. The Chief Executive has day to day management of the company. The Television New Zealand Act 2003 provides the company editorial independence of which freedom from political influence is a fundamental principle. TVNZ’s operations are governed by:  Television New Zealand Act 2003.  Broadcasting Act 1989.  Companies Act 1993.  Crown Entities Act 2004.  Owner’s Expectations Manual as published by the Crown Ownership Monitoring

    Unit.  Business Planning ‘Outlook Letter’ sent to TVNZ in advance of the 1 July start to the

    financial year.  Memoranda of Understanding between TVNZ and the Minister of Broadcasting (for

    the Pacific Service and Remote Services).  Compliance with the current Free-to-Air Code of Broadcasting Practice regulated by

    the Broadcasting Standards Authority.  Compliance with advertising codes promulgated through the Advertising Standards

    Authority. The policy objectives set out by shareholding Ministers is for TVNZ to continue its transition into a successful national television and digital media company providing a

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    range of content and services on a choice of delivery platforms while maintaining a strong commercial performance.1 In carrying out its functions, TVNZ must provide high quality content that: (a) is relevant to, and enjoyed and valued by, New Zealand audiences; and (b) encompasses both New Zealand and international content and reflects Māori

    perspectives.2 The scope of functions and intended operations of TVNZ are:  The commissioning, production, purchasing and archiving of video content, either

    independently or with others.  The provision of television production facilities (field, studio and post production),

    outside broadcast facilities, design and set construction services.  The programming and scheduling of television channels and related marketing

    services to commercial and non-commercial partners.  The provision of advertising and sponsorship services and related marketing

    activities.  The broadcasting and narrowcasting of free to air and pay television channels,

    programmes and signals on all available platforms and devices.  The provision of online services, development and delivery of content for the

    television, internet and communications industry.  The provision of services to the broadcast industry, both domestically and

    internationally.  The provision of audiovisual footage, programming, video and DVD rights,

    programme listing information, channel packaging and all other content related services and materials.

     To undertake other media related activities, as determined by the Board. The operating environment

    FY2014 has a number of long term challenges for the company. They include:

    The continuously increasing cost of television content

    The cost of television content continues to rise, disproportionately to the return that broadcasters can expect from that content. Local content (including news and current

    1 Section 12(1), Television New Zealand Act 2003 2 Section 12(2), Television New Zealand Act 2003

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    affairs content) is the most expensive to produce, yet remains an important part of the schedules across our channels.

    Content sourced from overseas returns the greatest yield, yet the price paid for it by New Zealand broadcasters is proportionally higher than broadcasters in other markets pay for the same content. Over-bidding for content may significantly worsen this trend across the medium to long term increasing pressure on content budgets.

    To mitigate this risk, we are placing greater focus on securing the most compelling content across longer terms and continue to balance our investment across international content investments for optimal yield.

    The risk of an adverse economic event

    An adverse economic event, even one originating outside New Zealand, could negatively impact economic recovery and our ability to trade (either export or import) with other regions. This will have a consequential impact on the level of advertising spend in this country.

    To mitigate this risk, TVNZ is accelerating efforts to distinguish its value propositions from those of competitors, both in substance (i.e. content and the accessibility of content) and form (i.e. enhanced advertising propositions driven from differentiating opportunities and integrated media solutions).

    Audiences materially shift to “over the top” or OTT services

    We operate in a competitive environment in which the video content experience is no longer limited to traditional linear television. We therefore must consider the strategic threat, albeit low within this planning horizon, that a growing portion of our audiences shift to “over the top” or OTT services (content supplied direct to consumers from the content owner) before we achieve scale in our on-demand services.

    To mitigate this risk we are accelerating our efforts to grow TVNZ Ondemand and the provision of news video online. In addition, we will continue to work in partnership with platform providers to explore new capabilities (e.g. synchronising content/viewing across devices, content recommendations based on viewing habits) and investigate new business models (e.g. TVOD, targeted advertising, platform-enabled services).

    What we plan to do: operations and activities

    In FY2014 TVNZ’s focus will be on building and maintaining sustainable business growth and delivering a continuous and improved Return on Equity. In order to achieve these commercial objectives TVNZ’s fi

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