MediaWorks seeks contracts relief

17:00, Jul 20 2013
DIPLOMACY: MediaWorks leans heavily on The Simpsons, and shows such as American Dad and Futurama,and is in delicate talks with the studios supplying them.

MediaWorks is understood to be trying to renegotiate or quit onerous programming contracts with United States-based studios Fox and NBC Universal following the loss of its high-rating Home & Away show and recent receivership.

MediaWorks, which owns TV3 and C4, went into receivership last month with $700 million in debt and also announced the loss of Home & Away, its flagship show of more than 10 years, earlier this month.

The long-running soap, which drew an average of 310,500 viewers on weekdays in June according to Nielsen Television Audience Measurement, currently airs on TV3 at 5.30pm five nights a week right before the news.

However, TVNZ has snapped up the broadcast rights to the programme, which is a Seven Network production distributed in New Zealand by Endemol, and plans to put it in a 5.30pm slot on TV2.

An industry source said that although it was only one show, it was one of the highest-rating ones on TV3 and was likely deliver a further hit to the channel's news audience numbers. These averaged 374,000 for June compared to TV One's 721,300 weeknightly news viewers.

Industry sources say MediaWorks is also renegotiating its "output" programming contracts with Fox TV and NBC Universal, which require the company to take everything the studios produced.


"The good, the bad and the ugly," said Omnicom Media Group (OMD) chief executive Kath Watson.

The contracts still have many years to run but MediaWorks' receivership may be used as leverage to get around, or quit altogether, what are now argued to be onerous conditions.

The source said the contracts were expensive, making up the bulk of MediaWorks' content costs, and the studios had not produced high-rating fresh content in the past few years.

But if Fox and NBC allowed MediaWorks to walk away from the pricey contracts, the Kiwi channel would then have to find sufficient content to provide programming consistency to stop other shows like Home & Away from walking, the source said.

While getting out of the two output contracts could save MediaWorks money, local programming was even more expensive, the source said.

At the end of the day, MediaWorks had to fill the television time slots, they said.

And MediaWorks' Four relied heavily on Fox programmes like The Simpsons, Glee, Futurama, and American Dad.

Although TVNZ was the obvious new home for any shows or programming contracts lost by MediaWorks, Sky-owned Prime TV was also a contender.

TVNZ would not comment on any programming contracts it had its sights on.

Prime took on the CBS output contract about six months ago after MediaWorks decided not to renew it.

However, Sky TV boss John Fellet said Prime was not prepared to pay big money for output contracts where bad content had to be taken along with the good. It preferred the open market instead, he said.

Prime TV had not entered conversations to put in bids for the Fox or NBC contracts, or other programmes MediaWorks currently holds the rights to, he said.

MediaWorks receiver Korda Mentha said it was working with the new management team on programming and advertising operations. The board under the new ownership structure includes Julie Christie and media executive Martin Dalgleish.

"It is regrettable that TVNZ has convinced the distributor to cancel our agreement. However, this business is much bigger than one show," MediaWorks receiver Brendon Gibson said.

OMD's Watson said most companies advertised across different channels and media, so the loss of Home & Away alone was unlikely to push advertisers away from MediaWorks.

But the loss of another significant show would change things, she said.

The kind of contracts that could be in jeopardy are ones reputedly held exclusively with MediaWorks, a source said, such as with car manufacturer Fiat-Chrysler and confectionary and pet food company Mars.

Earlier this year Fiat-Chrysler indicated it had a television and online advertising budget of $8 million with industry sources estimating MediaWorks getting around $1.5m to $2m of that. The Mars deal is understood to be worth up to $5m a year.

Sunday Star Times