Like it or not, the Government must step up and help Television New Zealand compete in the fight for its life.
The state-owned broadcaster is in what military strategists would call a perilous situation: With weakened supply lines, it is facing enemies on both flanks and a pincer movement that could squeeze the life out of it.
On one flank it has Sky TV, which last week pulled off a brilliant tactical move in which it was effectively gifted the valuable brand equity that continues to reside in Three despite its financial woes.
On the other flank are streaming services which – in spite of fighting their own battle royal – take increasing numbers of viewers from traditional providers.
The pincer movement could place TVNZ in an existential crisis within an alarmingly short period of time
Sky is in the strongest position in its history. The deal in which it acquires Three and ThreeNow debt-free for $1 gives it the free-to-air outlet that will be the dealmaker in negotiations for sports rights, and the streaming video on demand (SVOD) outlet that it has lacked. Both give Sky useful advertising inventory to bolster its subscription revenue.
On the other flank, Netflix and YouTube are fighting for premier position and (in the US at least) YouTube is winning that fight. Irrespective of who emerges as top dog, they collectively represent a juggernaut bid for New Zealand audience share.
TVNZ simply cannot afford to be outflanked.
Its total revenue for the first half of 2025 was down 1.9 per cent on same period last year and its forecast for the full year is either a small profit or a small loss. Television broadcasters globally are facing an ongoing 3-4 per cent annual decline in their broadcast audiences and linear tv now reaches less than half the New Zealand population.
Of course, TVOne has easily outstripped Three in the quest for broadcast audience and is unlikely to relinquish that relative position. However, Sky will be merging its new acquisition into a broader strategy and product line-up and will be looking to boost Three’s ratings. That can only be at the expense of TVNZ and its advertising revenue.
And Sky is now in a stronger position to bid for the sports rights that are a vital drawcard for broadcasters. I hesitate to say an invincible position because there are a multitude of factors in play in rights negotiations. However, there is absolutely no doubt that it is in a significantly stronger negotiating position with Three than it was with Sky Open (formerly Prime). We all know where to find Three on the TV remote. I’m damned if I can remember the channel number for Sky Open. More pressure on TVNZ.
The state-owned broadcaster has made commendable progress in the digital environment with TVNZ+. It has seen its digital audience grow from 405,000 in 2023 to a projected 482,000 this year and its digital revenue has grown from $55.6 million to a projected $67.7 million this year. However, it has a long way to go before its streaming service is in a financial position for TVNZ to let its sunset broadcast service sink quietly below the horizon.
TVNZ has a strategic target of becoming a digital first media organisation “and on its way to being fully digital” by 2030. Put bluntly, it doesn’t have the luxury of that much time to sort itself out. The regiments of outflanking stormtroopers are bearing down on it.
YouTube is serious challenging Netflix for the top streaming service slot. Last week Dow Jones boldly stated:
“The headquarters of the world’s leading television network has none of the trappings of a traditional studio. There are no posters of popular shows, no writers, no soundstages and no audiences. Because after decades pioneering viral videos that people watched on their laptops and phones, YouTube is now the king when it comes to the household small screen as well. YouTube became the most-watched video provider on televisions in. the US this year, and its lead has only continued to grow, according to Nielsen data.”
That translates to more than one billion hours each day.
It’s a real challenge for Netflix, whose basic fee in New Zealand ($17.99) is matched by YouTube’s premium fee. And the Google-owned company is hoovering up content from here, there and everywhere. Unlike Netflix, its isn’t dependent on in-house drama production. It has huge reach and potential for higher usage rates, while Netflix may have plateaued (New Zealand Marketing Magazine reported that its audience had dropped from 42 per cent to 38 per cent in 2024).
I use YouTube to watch Herald Now over my bran flakes and it draws me to other programmes like Australia’s ABC News. Ironically, TVNZ aids the migration by inviting us to “go to the menu on the left side of your smart tv” during the six o-clock news. Sure, it takes you to additional TVNZ content, but it also opens a wider world to what was traditional a linear tv audience.
YouTube, or rather its owner, plays hardball. For example, it convinced the Albanese Government in Australia to exempt it from the under-16 social media ban. The eSafety Commissioner, Julie Inman Grant, has called for the carve-out to be reversed but for now it remains in place. We can expect Google/YouTube will fight hard for audience share here.
For its part, Sky has every right to maximise its opportunities with the new acquisition and should be applauded for doing so. Its CEO, Sophie Moloney is a very good operator and will have already mapped out how the broadcast and SVOD assets will be deployed. Expect to see rapid moves on sports rights and the closure or redeployment of Sky Open. The integration of teams – and the inevitable job losses – is also likely to be achieved in short order, accompanied by re-invigorated advertising sales initiatives. It would be nice, though, if they upgraded their awful ‘new’ Sky box which ironically is Google powered.
All of this means TVNZ needs to urgency revisit what it has set out in the Statement of Intent its board approved in 2023. The four-year window it contained needs to be compressed. Its digital planning needs to be brought forward by a year. The 2030 target for ‘digital first’ needs to be thrown out and replaced by the same three-year timeframe.
That is easier said than done. Technically it could ramp up TVNZ+ and launch a subscription service to more than offset declining advertising revenue. It could explore partnerships – perhaps even with Netflix – to add to its programming muscle.
However, it lacks two things: Money and people.
The present Government has adopted hands-off market-driven media policies that look more like reflecting the thinking of the neo-liberal junior partner than that of a majority centrist party. So let’s look through that lens at what is facing TVNZ.
The Government is TVNZ’s owner. It holds all the shares. It has an investment in the enterprise, which has assets worth more than $200 million. However, the enterprise has run at a loss and has not paid a dividend since 2021. Staff numbers have been slashed and it has been on a continuing efficiency drive.
Last week’s Sky announcement means its asset faces even stiffer challenges in the marketplace.
Most owners in such a situation would do one of three things – shut it down, sell it or reinvest in it to make it more competitive. The first two options are electorally unacceptable so that leaves only reinvestment if the Government is to avoid a legitimate charge that it left TVNZ to die on the battlefield.
The subsuming of Three into Sky means we now have a broadcast duopoly where we previously had three operators. It is vital that we do not end up with a private monopoly. Sky has been a distributor rather than a producer of content. Three’s production dwindled under the Warner Bros Discovery ownership. In the case of news, it would have disappeared entirely had not Stuff provided a replacement for Three News. Sky now needs to step up to meet the obligations we might expect of a local broadcaster. It has already indicated the Stuff news contract will continue
However, TVNZ will continue to be expected to carry more of the weight in that regard. For that reason – and to ensure we continue to have competing local television news services – the Government needs to reinvest. It must provide TVNZ with the wherewithal to fund and implement an accelerated digital strategy that allows it to compete with Sky on the sports field and with whatever digital opposition is waged against it.
To do so will not put Sky at a disadvantage. It has amply demonstrated its ability to operate successfully in changing environments. Rather, government capital investment in TVNZ will ensure we continue to have competition. And that is good for everyone.
UPDATE: On July 30, the Australian Government announced it is reversing the exemption for YouTube in its under-16 social media ban. There were widespread predictions that Google will challenge the decision in federal court.