Peter Thompson: The Demise of the TVNZ Charter

The Prime Minister recently announced his government’s intention to abolish the TVNZ Charter, claiming that it ‘wasn’t working’, that there had been ‘a number of inquiries’ into it and that there was ‘no discernible difference in the amount of local content that’s been played because of the Charter’. It is fair to assert that the TVNZ Charter set-up has not delivered the full range of public service outcomes envisaged in the Charter document and that there were significant flaws in Labour’s public broadcasting policies. However, National’s ostensible rationale for scrapping the Charter and diverting its funding to NZ On Air is not only disingenuous, but severely deficient in its consideration of the evidence.

For a start, John Key has got his facts wrong on at least three accounts: Firstly, there has been only one ‘inquiry’ into the TVNZ Charter. That was the statutorily required 5-yearly Charter Review which included a revision of the Charter document. The Commerce Select Committee (which was chaired by National’s own Gerry Brownlee) endorsed the new version and the development of new Charter performance measures, and recommended it to Parliament last year. The Ministry for Culture and Heritage’s briefing to the incoming Minister of Broadcasting, Jonathan Coleman, also recommended that the Charter revisions be implemented.

Secondly, the TVNZ Charter’s level of local content increased after the introduction of the Charter, although this level has fluctuated. There has certainly been more local content screened on TVNZ’s channels than any of its commercial rivals. However, this misconception overlooks a even more fundamental point: Local content provision is only one component of public service provision and the Charter function extends well beyond the role of NZ On Air’s contestable fund. Indeed, the $15m of Charter funding that the government intends to redirect to NZ On Air was originally earmarked specifically towards extending the range of programming beyond what would otherwise be commercially viable, and beyond the range of content typically funded by the NZ On Air contestable fund. Essentially then, the Charter was introduced to address the market failures of the commercial television ecology that the NZ On Air fund was unequipped to address. Local content provision alone is just one component of public service broadcasting- it is not an adequate substitute for it.

Thirdly, the claim that the Charter has not worked is a convenient rhetorical myth for opponents of public broadcasting to propagate because coupled with a dichotomous argument (X is wrong so Y is right), it can be deployed to justify any number of policy responses. Even assuming that there is a problem with the Charter, abolishing it altogether is only one of the options, and it is far from clear that diverting the funding to NZ On Air is going to deliver superior public broadcasting outcomes. If your car breaks down, you don’t just tow it to the scrap-yard and buy the first one you can afford in the second-hand yard. You’d open the bonnet, see what the problem is, and try and fix it, and that wasn’t possible you’d then make sure the replacement you bought was at least as good as the one you scrapped.

If one agrees that TVNZ Charter arrangements are flawed, and the Charter outcomes have not been adequately delivered, it is nevertheless incumbent upon any responsible minister to discern the reasons for this failure, if only to ensure that the same errors are avoided and not compounded in any alternative policy development. So to properly understand what went wrong with the Charter, one has to differentiate between the Charter document itself, the financial arrangements, the regulatory/policy arrangements and TVNZ’s own performance.

Although Jonathan Coleman has dismissed the Charter document as some sort of woolly academic exercise, the new version was an improvement on the original and is more explicit in its expectations than the equivalent documents of most other public broadcasters (including the BBC Royal Charter & Agreement and also the Radio New Zealand Charter- to which the Minister curiously seems to have no similar objections). Given TVNZ’s commitment to developing new performance measures, there can be no rational objection to the Charter itself, unless one thinks that goals such as ‘promoting democratic participation by examining the activities of public and private institutions’ or ‘providing programmes that support awareness of business, commercial and financial matters’ are intrinsically undesirable during a period of global economic instability. The various Charter objectives are not an exercise in ivory tower idealism; they took account of 286 public submissions as part of the Charter review and were endorsed by Parliament’s Commerce Committee. One might quibble about the phrasing, but any sensible government in a democratic society should embrace, not eschew the broad cultural and civic aims of the Charter.

In contrast, TVNZ’s performance in delivering the Charter can certainly be questioned. There have undeniably been problems with transparency and accountability in the deployment of the Charter funding. Some of the money was combined with NZ On Air funding to fund programme production, conflating their discrete, complementary functions. Furthermore, some Charter funds went towards the subsidy of programmes which pre-existed the Charter, which could hardly be construed as extending the range of content. These problems led the previous Minister of Broadcasting, Trevor Mallard, to propose that NZ On Air would be given the responsibility of disbursing the Charter money and approving TVNZ’s use of the funding before it could be released. All this might suggest that responsibility for the Charter’s under-performance lies with the broadcaster itself. But that’s too simple an explanation, because it overlooks the fact that TVNZ did at times make an effort to produce content consistent with the Charter that it would never have attempted to do as a commercial state-owned enterprise. Programmes like Face to Face, Agenda, Eye to Eye (and the new Q&A) clearly addressed Charter goals, even if they were tucked away in peripheral slots where they would pose no risk to the commercial schedule. The coverage of the memorial proceedings for Sir Edmund Hillary, the Maori Queen, and the Unknown Warrior would never have been so extensive without the motivation of TVNZ’s Charter.

Meanwhile, the efforts to harden up the focus of news and current affairs and include more regional and international reporting saw the departures of star presenters and shake-ups in the format, that also led to slippage in the ratings. That loss of market share was met with vehement criticism from the political right and media commentators whose only yardstick of performance was audience share and advertising revenue. In the end, even the government joined in the criticism, and TVNZ quickly realised that failing to deliver the Charter attracted far less political flak than failing to maintain ratings and revenue.

So a more fundamental problem with the Charter has always been the financial and regulatory arrangements, notably the dual remit, by which TVNZ had to deliver the Charter outcomes at the same time as maintaining commercial performance and paying a dividend to the Crown. In practice, this resulted in the Ministry for Culture and Heritage giving it money with one hand only for the Treasury to take it back with the other. Between 2003 and 2008, TVNZ received $95 million in Charter funding but returned $142 million in dividends. (Do the math and ask yourself how much Charter content you’d expect from that.) Even with the availability of NZ On Air funds, TVNZ remained 90% dependent on commercial revenue streams for its operations. Although there are other public service broadcaster arrangements which combine public and commercial revenue (e.g. RTE in Ireland), none have such a low ratio of public funding. Consequently, the $15m was never sufficient to offset the opportunity costs and insulate programming and scheduling decisions from commercial pressure and market failure.

On top of this was an unstated third imperative; the implicit expectation of the government that TVNZ, as the centrepiece of Labour’s public broadcasting strategy, would help maintain the public credibility of those policies. Apart from the ‘no surprises’ requirement (which led to tensions between TVNZ’s board and management after the messy scandals over its star presenters’ salary negotiations) this also meant that TVNZ was obliged to play its part in a ridiculous political charade whereby the government pretended to fund the Charter and TVNZ pretended to deliver it. So on top of the dual commercial and public service remit, TVNZ was also juggling a capricious set of political expectations. By the end of 2005, CEO Ian Fraser had resigned with the memorable lamentation that continuing commercial pressures had resulted in a schedule ‘profoundly incompatible with any recognisable model of public broadcasting’. Since then, TVNZ has introduced the two commercial-free digital channels TVNZ 6 and 7, but TV One and TV2 have focused increasingly on recapturing their lost audience share rather than pursuing the Charter.

John Key and Jonathan Coleman are therefore right to point to the dual remit as a key factor in the Charter’s system’s under-performance. But if National wants to deliver public service television outcomes, then surely it would try to correct Labour’s policy errors and address the principal impediments to Charter implementation i.e. the imperative to maintain commercial performance/ pay dividends and the disproportionate dependence on commercial revenue. Getting rid of the Charter doesn’t solve these problems, it compounds them. Unfortunately National’s drive to dismantle the centrepiece of Labour’s public broadcasting initiatives appears to be motivated by ideology, not empirical evidence, and it is currently proceeding with indecent haste in the hope that the Charter will be dead and buried before anyone gets round to generating a rational debate on the issues.

The alternative funding system proposed by Jonathan Coleman, involves NZ On Air distributing the redirected $15m diverted from the Charter on a contestable basis. The intention is that this money will be earmarked to fulfil the public service functions the Charter was intended to address and distributed according to more stringent criteria than the regular contestable fund. This is important because it does recognise that local content provision alone does not constitute a full range of public service functions. But the new funding mechanism will not, as the Minister supposes, be capable of delivering the outcomes he envisages. Rather like Trevor Mallard’s decision last year to make NZ On Air oversee the use of Charter money, Jonathan Coleman’s proposal precedes any informed deliberation about whether the system he is proposing is workable and lumbers the Ministry for Culture and Heritage and NZ On Air with the invidious task of making a half-baked policy deliver.

Although the additional funding will be welcomed by NZ On Air (which had historically regarded the direct Charter funding as a threat to its own institutional function) the removal of the TVNZ Charter will ironically make it more difficult to achieve the public service outcomes desired. It will not be sufficient for NZ On Air to merely develop some additional criteria for funding applications; the broadcasters' programming decisions and scheduling priorities also need to be addressed. The institutional limitation of the contestable fund mechanism is that it cannot oblige broadcasters to accept particular types of programmes or screen them at particular times. Crucially, this means that the contestable funding mechanism fails to offset opportunity costs and incentivise broadcasters to disregard commercial priorities. Just like the Charter funding, it remains vulnerable to the very market failures for which it is intended to compensate.

When NZ On Air has previously tried earmarking funding for particular genres of content that are not commercially attractive (e.g. children’s' drama), it has often found that broadcasters are not interested in the programmes even if a producer is willing to make them and supply them cost-free. The margin costs compared with scheduling imported/ populist commercial are often too high. Although the NZ On Air contestable funding has made possible a range of good quality local programmes, there is a propensity for these to be concentrated on genres/ formats that can be most easily accommodated in a commercial schedule geared to optimising ratings and revenue. Innovative, risky, or minority-appeal programming gets relegated to peripheral slots in the schedule or else rejected by the schedulers. Apart from the fact that the new funding mechanism will not address news and current affairs (one of the key areas of Charter performance most in need of improvement), many other programme types oriented toward the Charter’s civic and cultural objectives are also the most difficult to persuade commercial schedulers to accept (e.g. programmes addressing minority interests). Even if the funding is earmarked for specific types of content, producers can still subvert the programmes within an ostensible public service-type genre so as to serve a commercial function. Thus for example, a documentary all too easily becomes reality TV or infotainment, compromising its public value. Quality and diversity therefore cannot be guaranteed by genre-specific incentives alone.

The Minister of broadcasting has suggested that in an increasingly competitive and commercial digital multimedia environment, the availability of the $15 million in additional contestable funding will incentivise producers and broadcasters to make and screen the sorts of programmes the Charter set up failed to deliver. Of course, the Minister is right that broadcasters will want the money- the issue though is how far they will be motivated to provide a range of public service local content in order to get their hands on it. On that point, the minister is seriously mistaken if he thinks the funding will incentivise public service-type content provision in an increasingly tight commercial environment. The problem is that most local content productions- even those funded by NZ On Air- result in broadcasters losing money. Broadcasters complain that, outside of the most commercial genres, providing any sort of local content is increasingly becoming an civic act of charity. On a purely commercial basis, the margins of profitability simply do not justify the investment in local content relative to the alternative of screening populist commercial content from overseas. The public funding is insufficient to offset all the opportunity costs for high-public value content in prime time. So even with public subsidy, the provision of non-commercial local content will NOT be attractive in an increasingly competitive and uncertain market.

If there were a television broadcaster that had operational imperatives other than maximising commercial returns, then there would be a more reasonable expectation that they would accept the opportunity costs of public service local content provision. However, no private commercial television broadcaster will do that, and on that basis, the Minister seems to be cutting off his nose to spite his face by stripping the Charter obligation from TVNZ. There are indications that TVNZ 6 and TVNZ 7 (which will soon be extending their reach on the Sky platform) will remain ineligible for NZ On Air funds, so that leaves MTS (which has a far more specific remit than the TVNZ Charter) and arguably Triangle/ Stratos (which are not-for-profit but operate more on a community-driven ‘access’ basis that complements mainstream television services).

Even if the new contestable funding mechanism can ensure the production of local content with high public value, it is likely to be distributed across a range of providers and platforms. The government assumes that public broadcasting funding can be ‘platform neutral’ and still deliver public service outcomes. The problem is that this may fragment the public value to be gained and render much of the content invisible. There will be no recognised ‘home’ or portal that audiences will be able to access, knowing that quality local content can be sourced there. Without a dedicated public service provider there is also no guarantee that there will be any coherence or balance in the direction of funding towards a full scope of Charter-type functions. Moreover, if the various providers and platforms are all geared to commercial operation, then despite the apparent plurality of services, the broadcasting ecology as a whole will remain collectively prone to market failure and constrain the diversity and quality of programming available.

In that regard, the Charter remains significant because it specifies a set of broadcasting principles and goals in an otherwise normatively rudderless commercial environment in which transitory ratings and revenue are the only operational goals. Even placing a half-hearted public service operator within the ecology can have an ‘anchoring’ influence by making other broadcasters reflect on their own performance and motivating them to uphold some semblance of social responsibility beyond their own commercial self-interest. The other free-to-air television operators seemed to show more interest in local content after the Charter was introduced if only because they were concerned that TVNZ might persuade the government to divert all the public television funds to it unless they demonstrated they could contribute to cultural and democratic functions too. That ‘anchoring’ effect may not have been strong, but it will disappear completely if the Charter is abolished, pushing the television sector back towards the commercial excesses of the 1990s- the very problem that the Charter was intended to redress.

Jonathan Coleman has suggested that concerns about public broadcasting are limited to the ivory tower debates of academia. The minister suggests that the failure of an angry mob to descend upon his electorate office brandishing torches and pitchforks indicates that the public is quite happy with broadcasting as it is and does not want public service television. Such arguments are spurious. The Ministry for Culture and Heritage’s own research found that, as citizens, most New Zealanders value the provision of public broadcasting content (such as high quality news and current affairs and educational programmes) irrespectively of whether they themselves enjoy that content as consumers. But left to a commercial broadcasting market, our individual media choices will, on aggregate, fail to provide sufficient incentive to producers and broadcasters to supply that content. Public broadcasting is therefore a classic instance of market failure, and given the cultural and civic importance of broadcasting, it is incumbent upon any responsible government to ensure it is adequately provided. In regard to radio, Radio NZ and the Iwi and access stations provide a decent overall service despite coping with increasingly restrictive budgets. But in regard to television, the more specialist services (MTS and Triangle/Stratos) operate peripherally without a dedicated mainstream public service broadcaster at the centre of the television ecology.

TVNZ 6 & 7 are for now the only commercial-free public service television channels, but Jonathan Coleman has suggested that they will have to become self-sustaining once their current public funding expires ($79 spread over 2006-2012; which is, in effect, a gradual repayment of a special $70m dividend TVNZ paid to the government in 2006). Recognising that dependency on advertising would largely negate their ability to deliver anything of public value, the Minister has suggested that in the future, they might be subsidised from TVNZ’s mainstream channels, TV One and TV2. This proposal is not entirely without merit, especially considering the recent announcement that TVNZ 6 & 7 are to be carried on Sky’s digital platform as well as Freeview, significantly extending their reach. Unfortunately, the Minister has not recognised that TVNZ already subsidises TVNZ 6 and 7 from its commercial revenue and that without the Charter, it will have no incentive to do so. Moreover, his assumption that a broadcaster could operate public service and commercial channels side-by-side actually contradicts his rationale for dispensing with the Charter; indeed, for a channel-specific version of the dual remit to have any chance of working, then the government would have to forego some of TVNZ’s commercial dividend and the specification of the intended outcomes of the commercial-free channels would become even more important. Consequently, if the Minister is serious about this option, then he should be looking to amend the Charter legislation accordingly, not to dispense with it altogether.

At present then, even with the additional local content provided by NZ On Air, there remain crucial gaps and deficits in the diversity and quality of television programming in New Zealand, and the new funding and institutional arrangements proposed by the government will not be sufficient to address them. But there are no solutions to be found by reshuffling the current problems in the hope that people will temporarily ignore them. The Minister of Broadcasting even points admiringly to the increasing public take-up of Sky’s service (now in roughly 46% of households) as if this means anyone interested in a broader and better range of television content can just subscribe, obviating the need for state provision. Unfortunately “Let them watch Sky” is not a solution to the deficits in public television broadcasting. For a start, many New Zealanders cannot afford Sky, and even those who can will not find much in the way of high quality local content, particularly in-depth news and current affairs.

Consequently, despite its range of channels, Sky does not adequately address the deficits in public service television. Indeed, the fact that its subscriptions are increasing indicates that people are not generally satisfied with free-to-air television provisions and that many are willing to pay for something better (even allowing for the fact that many Sky subscriptions are motivated by the demand for live rugby or less advertising). This is important because it suggests that the government’s assumption that New Zealand cannot afford a dedicated public television broadcaster is flawed. So how much would it really cost to provide a service comparable with Sky to every household in New Zealand?

Of course, with a population of only 4 million people, New Zealand cannot afford to set up a Kiwi version of the BBC and fund it to the tune of $8 billion per year. However, while $15m was never enough to transform a commercial TV schedule into a public service schedule, the amount required to make a substantial and positive difference is not huge. Consider the following figures: If you look at Sky’s annual reports, last year, Sky made around $144m profit ($98m after tax) on $659m operating income. That’s 22% profit (before tax) going to shareholders like Rupert Murdoch, not into programmes (which one reason why public-value-per-dollar is lower when taxpayer funds are distributed to private broadcasters). Sky’s total operating expenses were $470m with $210m of that going into programming. Meanwhile, 88% of Sky’s overall income came from subscriptions which represent roughly 46% of the 1.585 million households in New Zealand. The average subscription is about $66 per month, which over a year is $792 per household. But suppose for a moment that the operating costs of $470m were spread across all those households: That would work out at $297 per year, or roughly $25 per month- just over $6 per week per household. And that’s for a commercial-free service comparable with a full range of Sky’s channels. In fact it works out cheaper than the BBC licence fee in the UK which costs around $350 per household.

Of course, this is not to suggest for a moment that a fully-funded public service broadcaster ought to have all the same channels and content as Sky. In particular, the cost of local production and high quality news and current affairs would be higher than many imported services. But to put that in context, with $470m of revenue per year, one could easily cover TVNZ’s operating costs of around $365m (for 2008), get rid of all the commercials and give it an additional $100m to put into Charter content. This is all for around $6 a week per household, remember. Too much? Okay, if you retain the $339m in annual commercial revenue from TV One and TV2, that leaves around $131m to raise to help fund public service Charter- type programming (whether on TVNZ 6 & 7 or an additional commercial-free public service channel). That works out at $83 per household per year; just $7 per month or less than $2 per week. One can go through other possible models, but the point would be the same: New Zealand could afford public service television.

Now one can debate at length how exactly that revenue might be collected and distributed and there are a dozen funding mechanisms that might be considered (e.g. TVNZ might retain some advertising to lower the net taxpayer contribution but redirect any commercial revenue streams to the Treasury to offset costs and ensure that programming decisions remain insulated from commercial pressure). It would take a much longer discussion to explain all the possibilities, but the point here is that the New Zealand public want and deserve better television broadcasting, and if the quality were to be provided at an affordable cost, the majority of people would probably be willing to pay for it.

Just like the previous Labour administrations, the current government appears to be unwilling to explore the evidence and consider alternative broadcasting models. The ‘too hard basket’ seems to be the default policy response to any new idea, even when the current set of institutional, financial and regulatory arrangements are manifestly inadequate. Indeed, the Minister of Broadcasting’s response to last year’s substantial Review of Regulation on Digital Broadcasting and the Future of Content Regulation initiative appears to assume that the entire process was merely a navel-gazing exercise by Labour. Consequently, he seems to assume there are no pressing matters of import needing government intervention and that industry can be left to sort out any issues on its own. This is a dangerous abrogation of political responsibility.

Many of the broadcasting regulation issues raised in the Ministry for Culture & Heritage’s 2008 review process have arisen because of technical and legislative complexities related to media convergence and the development of digital multimedia services. These involve conflicting/ vested interests and matters concerning legal definitions and regulatory jurisdiction which industry cannot possibly resolve for itself (and even if it could, there is no guarantee that regulatory arrangements amenable to industry would also accommodate the public interest). There are therefore regulatory nettles which would need to be grasped by any government, regardless of ideological disposition. Indeed, making major decisions on the TVNZ Charter and funding mechanisms before resolving the broader regulatory questions seems like putting the cart before the horse. It may be politically expedient for the government to pretend that there is nothing to be debated here, but “move along now, folks- nothing to see here” is not an acceptable approach to media policy.

Jonathan Coleman has suggested there is no need for a review of market competition in the TVNZ sector and indicated that the Ministry of Economic Development’s proposed study will be canned. This completely overlooks the majority of industry submissions to the Review of Regulation. Furthermore, it overlooks the Minister’s own briefing from CCMAU which advised the shareholding ministers that TVNZ’s market position and ability to compete in the market for programming rights was becoming less stable because of media convergence and intensified competition, notably from Sky (which coincidentally will be the principal beneficiary of the cancellation of the inquiry because its own market growth and buying power in the content rights market would have been at the centre of the investigation). It is not possible to discern whether there is or isn’t a risk of market distortion based on the representations of either Sky or its free-to-air rivals. That’s why a review is needed. Given the shareholding minister’s responsibility is to protect the economic and public value of state assets like TVNZ, one can only speculate on the reasons for the peculiar alignment of his policies to the interests of Sky.

The government claims its broadcasting policies are ‘fit for the future’ but so far, it appears reluctant to take on board the evidence generated by Review of Regulation regarding the institutional, regulatory and financial arrangements required to ensure the future provision of quality public television services. The fact that audiences may be able to access content through a variety of new media forms has no bearing whatsoever on the continuing need to ensure that the content includes a diverse and accessible range of quality programming capable of fulfilling key civic and cultural outcomes. Public service television is therefore not an anachronism rendered obsolete in the digital multimedia environment; on the contrary, in an increasingly commercialised and uncertain market environment where margins are being squeezed, its provision becomes even more vital.

Ultimately, then, the shortcomings of the TVNZ Charter arrangements do not constitute an excuse to reject the desirability of the values and outcomes it aspired to. That’s throwing the baby out with the bathwater. The government may claim a mandate for change, but its mandate is to fix the mistakes of the Labour government’s broadcasting policies, not to abandon public service ideals and revert to the commercial excesses on the 1990s. The cheap and cheerful rhetoric about an exciting hi-tech media environment and policies for the future and the casual dismissal of academic objections as unworldly idealism is intended to stifle open public debate- Because National knows (as did Labour before it) that empirical evidence and reason will demonstrate that its broadcasting policies cannot deliver the public outcomes it claims, and that the real impediment to establishing public service television in New Zealand is the chronic deficit in political vision and will.

Peter Thompson is a Senior Lecturer in the Department of Communication Studies at Unitec in Auckland. He has written extensively on the government’s broadcasting policies since 1999, and chaired the working party which reviewed public submissions on the redrafted version of the TVNZ Charter. He has also undertaken policy research projects for the Ministry for Culture and Heritage (on broadcasting funding-setting mechanisms in OECD countries) and NZ On Air (on approaches to measuring broadcasting quality).

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