4106

THE NEW ZEALAND GAZETTE

No. 173

On behalf of the Corporation, Mr Dunlop told the Tribunal:

“Upon receipt of a warrant for a commercial ZM-FM station
for the Manawatu the Corporation undertakes to uplift the
application for a warrant for an FM service to relay the
Concert Programme in the Manawatu.”

An argument was raised by counsel for Manawatu Radio Co. that
there was some significance in the fact that YC stations were
being commenced where commercial FM operations began.
That ignores the fact that the Tribunal recommended and the
Government accepted that the development of the Concert
Programme on FM should take place first in those areas which
have not been receiving a satisfactory YC-AM service.

It could have been expected therefore that the Corporation, with
its stated commitment to a specific budget for Concert
Programme FM development irrespective of any other revenue,
might have seen the Manawatu as one of those places it would
serve in any event without delay.

(d) The needs of New Zealand or the locality or localities proposed
to be served, in respect of broadcasting services—

We believe there is a need in this area of substantial population
for an FM service. Both applicants would provide one.

We also find that there is a need in the area for the Concert
Programme on FM.

The existing service of 2XS is popular and is fulfilling the needs
of the area. The station has made a commitment to FM and
has demonstrated the courage to carry it out by moving to FM
rather than sitting on its AM warrant and resisting any FM
intrusion.

We also find that there is a need for the 2ZA service and that
the introduction of the ZM-FM service would not in any way
substitute for the service provided by 2ZA and thus the needs
filled by that station. The ZM service is oriented for a different
audience and is not a substitute or alternative for 2ZA.

(e) The financial and commercial ability of the applicant to carry on
the proposed service—

Both applicants have the commercial ability to carry on their
proposed services. The Corporation is prepared to fund the
capital involvement and has produced its costings on a marginal
cost basis. On a true costing basis it is likely that the profit is
very much less and possibly non-existent.

However, it pleases the Corporation to consider these matters on
a marginal cost basis which produces an apparent surplus to
apply to other activities, namely the Concert Programme. If
the Corporation is happy to carry on its activities on such a
basis, the Tribunal, on behalf of the consumer, probably should
not look the gift horse in the mouth.

We regard this approach as a dangerous one, however. As we
have said before, we think it tends to justify every extension
of service, and to provide arguments against any contraction
of services. It would have been helpful if the Corporation could
have indicated what the actual costs would be.

The Manawatu Radio Co. after the swallowing of setting up costs
and the cost of establishing itself in the marketplace, has now
produced a profit according to the figures that were produced
to us of $161,859, which is a more than satisfactory return on
shareholders’ funds. The profit was an increase of about one-
third on the previous year. It was, however, arrived at without
payment of tax.

It is also to be noted that 2XS’s revenue had not increased in
the year and that the better profit situation arose from lower
costs.

With the experience the company now has however, we believe
it would be in a position to finance the changeover and
withstand any difficulties that might arise over the next year
or two in the establishment of the FM station. The financial
viability will be aided by there being two FM stations in the
area and only one AM commercial service after the 2XS-AM
operation closes down.

(f) The likelihood of the applicant carrying on the proposed service
satisfactorily—

Both operators would be likely to do so.

(g) The results of any survey available to the Tribunal—

It is appropriate to mention at this point that the selective use
of statistics did Manawatu Radio Co. no credit and the Tribunal
had to call for further details to get a true picture of the profiles
of each of the Palmerston North stations.

One might have expected that the industry was mature enough
to present figures which objectively showed the respective
strengths and weaknesses of the stations in the market, rather
than present them to the Tribunal in the selective form used
to secure sales.

Eventually it was clear from a table presented in relation to the
McNair survey from April 1985 which covered the 6 a.m. to
midnight, Monday to Saturday audiences that 2XS dominated
the 15–24 age group with more than 80 percent of the audience;
that it carried the 25–29 audience with 60 percent against 2ZA’s
33 percent, but the trend changed after that. In the 30–34 age
group 2XS had 40 percent of the audience compared with 2ZA’s
53 percent for the 35–39 age group only 21 percent compared
with the Corporation’s 67 percent.

The BCNZ introduced a business survey which was largely
accepted by 2XS although it was pointed out not all the
information gathered had been analysed for presentation to the
Tribunal.

There was also one question which was challenged by 2XS.
Basically however the surveys produced no information that was
substantial evidence to persuade us to refuse an application.

(h) The requirement that frequencies be best utilised in the public
interest—

The transfer of 2XS to FM will, in due course, make the AM
frequency available for other purposes.

(i) The desirability of avoiding monopolies in the ownership or control
of news media—

There were no issues relating to this.

It is a convenient point, however, to consider the news question.
We accept the evidence of 2XS that it may well be necessary
to maintain a higher news profile than one might expect in a
FM music station in a metropolitan area.

We also accept that the 2ZM service will provide a slightly
different emphasis of news from other Radio New Zealand
sources.

(j) The hours during which the applicant proposes to broadcast
programmes—

It is convenient here to consider the local origination aspects.
While 2XS-FM will provide a 24 hour local service, the Radio
New Zealand ZM proposition will mean that in terms of local
origination it is nothing like a full station.

2XS has the existing advantage over 2ZA which joins the network
for the Tonight Show in the evenings and for the midnight to
5 a.m. period. However, 2ZA does provide full services to the
community.

The ZM-FM proposal will not. That has both advantages and
disadvantages. While it provides a lesser service—despite the
ability to provide encapsulated news, advertisements and
information during the networking periods—that will also limit
the competitive element against the total commitment of 2XS
to the region.

We would therefore limit the period of local origination and not
allow it to be extended without the approval of the Tribunal.
It is also an argument for limiting the commercial content which
ZM may extract from the market.

We discuss this later.

(k) The extent of advertising matter which the applicant proposes to
broadcast—

2ZM expected an average of 6 minutes per hour and 2XS 8
minutes. Both stations opposed any limitation being imposed
by the Tribunal. We believe that 2XS will require the higher
commercial content to be profitable.

Normally in a two station market the Tribunal would not have
been inclined to impose any commercial limit on either station.
However, it is concerned that despite the Corporation’s stated
intention to draw quite modest revenue from the area, there
would be a possibility of it either extracting a higher revenue
or—despite its protestations—using the station to depress
advertising rates to the under 30 audience. One way to ensure
that the Corporation’s effect on revenue is limited would be to
impose a limit on the commercial content of that station on a
maximum minutes per hour basis.

The Tribunal has concluded that upon the grant of both warrants
it must require a limit of 6 minutes per hour of advertising for
the ZM-FM station. It would be prepared to review that
situation after 3 years and to consider short term variations in
the light of operating conditions.