This post tries to make sense of all that. It looks at the state of broadcasting in New Zealand and reviews the prospects for greater competition. Part 1 sets out how things look at present, and explains some of the basic issues. Part 2 looks at where the market might be headed, and whether the government needs to get more directly involved.
Part 1 – How are we going
Given what the internet enables, i.e., near instantaneous distribution of any digital content anywhere in the world for next to nothing, the problem for users with the NZ broadcasting environment is straightforward to state: we have anaemic online content. Users are forced to jump through strange hoops to legally buy movies and new release TV shows online from overseas. Unusually, even though users are willing to part with their cash to buy video content, they can struggle to find someone in New Zealand to sell them what they seek.
This is a particularly galling state of affairs given the excitement about the so-called “long tail” (http://www.wired.com/wired/archive/12.10/tail.html). The internet was supposed to give us unlimited content to choose from whenever we liked. So just what is going on? To answer that question, we need to start with television broadcasting, and then add in the internet part a bit later.
State of play
The three key players in New Zealand broadcasting are TVNZ, Sky and Mediaworks (which runs TV3 and C4) – with television viewing shares around 50%, just under 30% and 18% respectively. All together there are around 110 channels on television with a wide diversity of options. Broadcasters also offer services that allow you to watch their content over the internet either streaming live, or for catch-up shortly after it has screened. And they compete for customers with other distribution mechanisms like iTunes or newcomer to New Zealand Quickflix, and other video options like YouTube or Facebook.
Television is extremely popular. Practically every household has at least one television capable of receiving free-to-air broadcasts, where content is effectively paid for by advertisers in return for showing ads to viewers. Just under half of New Zealand households buy a subscription from Sky. More than 60% of households have broadband that would enable them to watch online broadcasts: this proportion continues to grow, internet services are getting faster, and data-caps that limit how much online video people can consume are growing quickly.
To put together their channels, broadcasters bid for the content rights that they think will get them the best audience, or they commission their own content, perhaps with the assistance of New Zealand on Air. Around a third of what is shown on New Zealand free-to-air television is local content (see para 66 of this useful Commission report), and about a third of that is news or current affairs shows. The standout for local content is Maori Television, which broadcasts in the realm of 90% local content.
Different broadcasters have different strategies. Free-to-air broadcaster TVNZ tends to have the highest rating shows: news, current affairs, drama and popular international series. The most popular television last year (see page 21 of this document), was the Rugby World Cup opening ceremony, followed by the Royal Wedding, both free-to-air on TVOne. The most popular international television series tend to end up free-to-air television because free-to-air broadcasters can summon greater audiences for particularly popular shows. This can get them the nod in negotiating “output deals” with the studios, where the broadcasters get access to a range of content from a particular studio over a multi-year period.
Sky offers a wider line-up of shows across a larger number of channels and attracts less of an audience to any individual broadcast. It also uses its ownership of Prime – a free-to-air channel – to supplement viewing on its subscription service. It has the best and widest coverage of sports, and the most comprehensive broadcast movie selection available outside of the video store. Its financial backing and broadcast expertise has also been instrumental in creating professional sports leagues for several sports, including rugby, basketball, soccer and netball.
Newcomer Maori Television focuses on local content and was the lead free-to-air broadcaster for the Rugby World Cup, but interestingly has also recently bought rights to the NBA, and the UK’s Superleague.
Rights and wrongs
The competition for available rights plus broadcasters’ views on what they think will attract an audience help determine what ends up on New Zealand televisions and when. Some overseas movies and television shows come to New Zealand quickly. Some shows may never get here at all, or only after long delays.
Even once content is available, restrictions on its use are a standard part of the deal. Restrictions can reflect limits on rights inherited from rights holders, who divide up rights by geography and type in a way that makes most commercial sense for them. Rights restrictions can also reflect commercial strategy from broadcasters as to what rights to buy and whether or how to make content available to competitors.
For example, you can watch TVNZ’s onDemand service for free on your computer (with ads at the beginning), but you can not copy the content, resell it or retransmit it, availability of shows is restricted, it is not available outside of TVNZ’s site, and it doesn’t work at all on the iPad or iPhone as yet, or from overseas. There are similar sorts of rights restrictions for all online and offline services (think of the copyright notices that begin every DVD you have even hired from the store, for example).
The rights system is complex and suffers from its own competitive bottlenecks. We will look at copyright rules that support the rights system in a subsequent post. There is an obvious and substantial conflict between the near-free distribution options offered by the internet, and the historic rights system. It is hard to feel a lot of sympathy for content owners who complain about online piracy if they do not manage to make their content legitimately available at all. But the picture is more complex than that. Even those who own the content can struggle to make it available online, and all parts of the content industry are trying to figure out how to best deliver content to customers in the light of substantial change driven by the internet. See, as just one example, the demise of video stores in the US and Canada.
The change for rights holders is that these days users consume video in a widening variety of ways on an increasingly broad set of devices. Yes, a main television in the home, but also a smartphone, or a tablet, and perhaps all three of these at different times by different people. Users are rebelling against linear broadcasting, and the legal arrangements that mean they have to wait to see something that has been released in some other format or some other country already.