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Inspiring New Zealanders on Every Screen

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Inspiring New Zealanders on Every Screen Inspiring New Zealanders on Every Screen TVNZ ANNUAL REPORT FY2007 Environmentally responsible paper manufactured using Elemental Chlorine Free (ECF) pulp sourced from sustainable, well managed forests contents 4 Chairman’s Review 23 Charter Performance Measurements 5 Chief Executive’s Overview 26 TVNZ in Society 7 Financial Performance 27 ‘Hands-on’ careers visits a hit with kids 8 Summary of Statistical Information 31 Financial Statements 9 Two shows total 50 years on air 66 Corporate Governance 11 Local Content 68 Directors’ Profiles 14 Achievements against Statement of Intent 70 Management Structure 17 TVNZ’s Digital transformation 71 Main Locations 21 Funeral of Te Arikinui CHAIRMAN’S REVIEW Television New Zealand has experienced a journey of Whilst the Company did not achieve its budget, an operating significant change during the past 12 months, which now profit of $9.3 million was satisfactory in the circumstances. positions the Company to take an important leadership position as New Zealand’s largest public broadcaster in Transformation costs incurred in repositioning the Company for the digital and broadband environment of the future. a return to profitable growth resulted in a net bottom-line loss of $4.5 million. The Company’s strategy for building sustainable public value in this environment was concluded late last year and titled I give my own, and the Board’s, thanks to all staff for their ’Inspiring New Zealanders on Every Screen’. effort and loyalty in what has been a very challenging year of change. Essentially the focus has been on investing in the infrastructure and partnering with our many key stakeholders, to build upon our leadership in local content and increase its accessibility to New Zealanders through screen devices connected to platforms other than just traditional television. Sir John Anderson The Government approved the Freeview digital free-to-air Chairman television platforms for satellite and digital terrestrial in June 2006, and subsequently demonstrated material support for our new strategy by approving funding for two new digital channels to be launched in September 2007 and March 2008. These new digital channels will dramatically enhance our public broadcasting delivery of local programmes in an advertising-free environment. The launch of the TVNZ ondemand service in March 2007 was an industry first, and has already gained tens of thousands of new programme viewers ‘on-line’. The Board has approved the infrastructure investments required to support the digital transformation at TVNZ, and the executive leads a comprehensive organisation redesign to ensure we are properly resourced and organised for the digital future. Contemporary to the organisational design, TVNZ has a new leadership team in place with the skills and experience to give confidence for the future in delivering our current goals and strategies. Against a backdrop of a soft advertising market resulting in advertising revenue declines year-on-year, the Company began to see pleasing improvements in the performance of TV ONE towards the end of the financial year. CHIEF EXECUTIVE’S OVERVIEW Tena koutou katoa. The first of these, TVNZ 6, to be launched on 30 September 2007, delivers unique local content through its three services, The foundation for all Company activity this year was the TVNZ Kidzone, TVNZ Family and TVNZ Showcase. A second development of TVNZ’s five-year strategy ‘Inspiring New information-based digital channel, TVNZ 7, is to be launched Zealanders on Every Screen’. During the second quarter on 30 March 2008. Through these two channels, TVNZ aims we began the process of organisational design required to to deliver an advertising-free service that will permit shared reposition the Company to deliver against that strategy in the family viewing and meet a clearly-expressed demand for high- years ahead. quality news, factual, arts and children’s programmes. The key elements of the strategy focus on TVNZ delivering During the year, we concluded news and current affairs significant and enduring public value through local content distribution partnerships with Yahoo!Xtra and stuff.co.nz, leadership, and broadening the accessibility of that content to expanding our accessibility of news and current affairs content all New Zealanders through whatever screen device attached to New Zealanders. And, in a first for Australasia, we signed a to whatever platform they choose – on a PC, on a mobile deal with Google to make our local content available globally device, or via the TVNZ website or partner websites. through YouTube. In November 2006, the Company announced that it would Following the Board’s approval of the digital technology launch TVNZ ondemand, and this was done in March 2007. required to dramatically improve our agility as an organisation The Government confirmed investment in the Freeview platform in the future media and broadcasting landscape, the Company in June 2006, and subsequently approved funding for TVNZ to began a significant infrastructure transformation to facilitate the launch two new digital channels on the Freeview platform. delivery of the five-year strategy. In addition, the Company embarked on an extensive organisation redesign to ensure our organisation is fit for purpose and affordable. The redesign was led by up to 50 staff and involved wide consultation with employees, unions and some external stakeholders. Regrettably, an outcome of this project was the disestablishment of over 100 positions. Transformation costs are recognised in FY2007. The core of our business remains TV ONE and TV2. TV ONE improved its performance during the last six months of FY2007 following the re-branding of the channel, along with programme and schedule changes. While creating consistency in time slots and programme offerings was an important factor in the re-branding, local content was key. Event programming such as This Is Your Life, Dancing with the Stars and Intrepid Journeys captured outstanding audiences and re-established their belief that TV ONE is ‘the heart of New Zealand’. CHIEF EXECUTIVE’S OVERVIEW (continued) All TVNZ current affairs programmes performed strongly in the The performance and behaviour of the TVNZ leadership over second half of the fiscal year, in particular Sunday, Fair Go and the months and years ahead will be an important factor in Close Up on TV ONE and 20/20 on TV2. driving the cultural change needed for TVNZ to thrive in the future and to deliver the public and commercial value that we On TV2, some of the overseas hit shows like Desperate aspire to. Housewives, Lost and Grey’s Anatomy did not achieve their record ratings of FY2006, but nevertheless continued to be the Whilst the necessary restructuring of the past few months top performing international programmes in New Zealand, has been difficult and painful for some staff, the Company while Shortland Street was once again the country’s favourite is now repositioned for profitable growth and has in place a local drama. leadership team committed to striving for the outcomes that New Zealanders expect of us as their public broadcaster. During the year we celebrated some significant milestones: the 30th year of Fair Go, the 20th year of Tagata Pasifika, the 15th I know that TVNZ staff and leadership face the future with year of Shortland Street, the 10th year of Breakfast and the confidence and are committed to ‘Inspiring New Zealanders 100th episode of Eye to Eye with Willie Jackson, demonstrating on Every Screen’. again New Zealanders’ appreciation of New Zealand programmes on New Zealand’s largest public broadcaster. Ma to tatou whakaiwituna i a tatou e kore te taura here i a tatou e motu. TVNZ’s local content leadership would not be possible without the creative ideas and talents of the independent production sector, on whom we depend for a wide range of quality programmes of all genres. Additionally, continued Government funding for local content both directly and indirectly through the Ministry for Culture and Heritage, NZ On Air and Te Mangai Paho is critical to maintaining local content hours Rick Ellis on TV. Excluding independent productions funded through Chief Executive Officer NZ On Air and Te Mangai Paho, nearly 80% of our investment in local content comes from our commercial revenues; consequently, as our revenues have declined the importance of continued public funding has increased. FINANCIAL PERFORMANCE TVNZ has reported an operating surplus (before non-recurring As a consequence of the declining revenues, rapidly changing items, interest, expenses and income tax) of $9.3 million. This audience and advertising needs, and the acceptance of a represents a decrease of $10.7 million on the prior year result five-year strategy for TVNZ by the Shareholding Ministers, of $20.0 million. the Company embarked on a comprehensive reorganisation programme. The objective of the reorganisation was to align The decline in this operating surplus was due to a reduction the Company with its five-year strategic plan and to reduce the in operating revenue of $34.6 million to $375.2 million. This operating cost structure. decline in revenue was predominantly due to lower advertising revenue ($21.9 million), lower satellite sub-lease revenue A one-off charge of $11.1 million has been recognised this ($9.3 million) and lower trading revenues ($5.8 million). year for costs associated with this reorganisation, including redundancy, outplacement, consultancy and other costs The television advertising market declined 3.0% in the associated with the reorganisation. year ended 30 June 2007, while TVNZ’s decline in advertising revenues was 6.5%. The decline in revenue resulted from The result of this one-off non-recurring charge is that TVNZ has reduction in audience share for TV ONE and TV2 and reported a net loss for the year of $ 4.5 million. No dividend reduction in people watching television due to the fragmenting will be paid to the Shareholder from this year’s trading results.
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