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NZOA lowers floor on licence fees

TVNZ and TV3 have done a deal with NZOA which means NZOA paying more, the networks paying less, and the viewer seeing less local content on screen. Who’s the winner in this?

It’s old news that the networks’ advertising income has been taking a hit, with both TVNZ and TV3 seeking to reduce overheads and flagging cuts in local programming.

TV3’s New Zealand’s Next Top Model won’t run in the autumn schedules next year, leaving winner Christobelle Grierson-Ryrie as the only NTM for a while longer. Rumours abound that TVNZ’s Dancing With The Stars, a three-time winner at last weekend’s Qantas Film and TV Awards, won’t be back on screen next year.

TVNZ has already dropped its plans to produce Dream Home inhouse next year, after sponsor Mitre 10 withdrew, and has canned game show Wheel of Fortune.

Andrew Shaw said in May that although Wheel of Fortune was popular, “it was expensive to make and the impact of the recession meant it was not achieving an adequate return from advertising.”

He added that TVNZ had decided to divert its resources into protecting its peak-time programming. However, it now appears that the diversion of resources won’t extend to making some local programming without additional support from NZ On Air (NZOA).

Earlier this year, TVNZ shed staff and flagged a cut of 100 hours of local programming for this year, although producers Screen Hub spoke to believed the cut would end up being closer to 150 hours.

NZOA has agreed to accept a lower level of licence fee from the major networks for programming over the next twelve months. Maori Television and Prime are unaffected by the decision, as they already pay lower licence fees. According to Chief Exec, Jane Wrightson, the cost of this decision isn’t known yet, and probably won’t be apparent until early next year, probably after the February funding round.

All concerned are presenting the move as “a sensible interim solution” in the current climate, and are stressing the temporary nature of the deal; it’s in place until June 2010, with a possibility of a one-off extension to June 2011. Call us cynics, but we’d bet that both networks will find ways to argue that licence fees shouldn’t return to pre-2009 levels when the deal runs out.

TVNZ said that it spends “up to four times the cost of acquisition to produce local drama”, which means – with licence fees believed to be a maximum of $80,000 per commercial hour of drama – that it’s picking up overseas content for as little as $20,000 an hour.

Producers Screen Hub spoke to estimated that the drop in licence fee payments would likely be in the region of 20-25%, although these will be negotiated on a case by case basis, as NZOA rejected a suggestion of an across the board percentage cut.

However, all this really does is shift the financial pain from one organisation to another. NZOA doesn’t have a few million squirrelled away to draw on for these sorts of situations. It operates under a cap, so the money has to come from somewhere else. This means – as NZOA runs a very tight ship and puts over 97% of its budget into funding original content – that there’ll be less money for other things.

NZOA spends over 62% of its money on TV, and splits the rest between radio, music, community broadcasting, digital/archives, and administration. It’s unlikely significant savings could be made elsewhere to assist the funding of this new arrangement so the money will come from elsewhere in the TV budget, which boils down to less programmes being made or lower budget programmes being made.

Ms. Wrightson said yesterday that NZOA was now unlikely to achieve its intentions (as outlined in its Statement of Intent), re: the amount of local programming achieved, which is already down in many areas from last year.

Drama and comedy was estimated at 101 hours for last year, and is forecast to be 80.5 this year. Documentary drops from 112 hours to 89, and arts and culture takes a 50% cut, from 32 hours to 16.

TV3’s Kelly Martin said, “because we are having to reduce budgets and NZ On Air will therefore get fewer hours for their money, there will inevitably be some shows that don’t end up being renewed. At this stage there are no specific titles in mind.”

Looking forward, its unlikely that NZOA will achieve anything better than standstill funding for next year, as government seeks to make cuts in expenditure in all areas of its operations. Ms. Wrightson said that the agency would now have to work with producers to seek to maximise the value of NZOA funding to ensure that production budgets were used as effectively as possible to ensure that NZOA delivers as much programming as possible.

She confirmed that the decision to lower the floor for licence fees would not mean zero licence fees, and that projects previously regarded as “ineligible” for funding were unlikely to be affected by the change in levels of licence fees.

NZOA’s board is understood to have rejected the level of licence fees offered for some projects considered during the August round of funding. Ms. Wrightson stressed that this new agreement was in place going forwards not backwards, and that there would be no opportunity for projects previously awarded funding to renegotiate those agreements.

She added that no programmes were discussed by name in reaching the decision on licence fees, and that the discussions had centred on high-level genres, focused on the implications of offering or not offering to accept lower licence fees for such programming.

The losers from this agreement are quite clear. The viewers lose, as less programmes are made, and less NZ content is available. NZOA loses, unlikely to meet its targets for hours of programming. The producers lose and win, with greater scrutiny of budgets a likely consequence of this decision but the possibility of work as the networks commission local content.

The situation makes clear that production companies and viewers here are particularly vulnerable to market fluctuations. It’s difficult not to at least consider whether this situation would have come about if there was a local content quota in place, as in Australia.

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