The scrapped TVNZ7 channel will be replaced with a "plus one" channel that will be a duplicate of TV One run an hour later.

The new channel will start broadcasting on July 1 and will mirror the equivalent TV3 Plus 1 channel.

TVNZ spokeswoman Megan Richards said the decision not to retain TVNZ7, or replace it with a new channel, was driven by economics and the Government's expectation of a 9 per cent return on investment.

"The rationale for this boiled down to some fairly basic facts of life for us. As a commercial broadcaster we need to make a profit, or at least not make a loss," she said.

"The Government expects us to make a 9 per cent return on investment and that's got to be the primary driver, so investing $15 million in a channel that provides no return is not an option that was available to us."

It is understood TVNZ costed a new start-up channel at $20m to $30m. Ms Richards said TVNZ had studied options for profitable new channels.

"Those few options that we've felt were commercially viable we have in fact largely launched already – U, and pay channels Heartland and Kidzone 24, all of which involved sizeable investment."

The new channel was not expected to be "a big earner". But TVNZ acting chief executive Rodney Parker said it aligned with the strategy of reaching more New Zealanders on more screens.

"TV One has been selected as the time-shifted channel to maximise exposure for the great local content, news and current affairs that it features."

It will be broadcast on Freeview and it may also be run on Sky TV once negotiations are complete.

Labour spokeswoman Clare Curran said TVNZ7's closure would be seen as the death of public broadcasting television. "I'm fiercely trying to keep it going."

But if it did go, a minimal advertising channel with content not available elsewhere might be palatable, she said.

TVNZ is not likely to charge advertisers extra, but expects the repeat showing will help protect its market share.

Ms Richards said people who could "time shift" viewing, such as through MySky or using a recorder, would not see the value in a plus one channel.

"But there is a large segment of our population who are free-to-air consumers and who don't have gadgets. We've had complaints for many years that working people with busy lifestyles just don't get home in time to see the news for instance, and the experience internationally is that the opportunity to time-shift is appreciated."

TVNZ was fully aware that fans of TVNZ7 would be disappointed

"But TVNZ simply cannot subsidise a public broadcasting channel and meet its financial performance targets."

The plus one channel was not a replacement or substitute for TVNZ7, she said.

"It's an entirely separate venture that just happens to occupy the same broadcasting frequency."

The issue is expected to be a hot political potato. A vocal lobby group is backing the channel, which AGB Nielsen surveys show attracts more than 1.4 million viewers a month.

The Government is expected to argue TVNZ7's demise was an operational decision for TVNZ, but the state broadcaster believes it had little alternative given the decision to end its separate funding and the requirement for a 9 per cent return.

- © Fairfax NZ News

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