BROADCASTING.

Auckland Star, Volume LXII, Issue 193, 17 August 1931, Page 10

BROADCASTING.

FUTURE IN DOMINION.

COMPANY'S PROPOSALS.

a CUSTOMER-OWNERSHIP."

LISTENERS' REPRESENTATION.

By request of the Government the Radio Broadcasting Company of New Zealand has submitted its views for a comprehensive scheme for the future management and control of radio broadcasting in New Zealand. This scheme, which is now under consideration by Cabinet, is based upon the principle of customer-ownership and provides for a new arid entirely better ccmpany to be formed,- in which the shareholding will be divided between listeners and the management, and equal representation be given to both interests upon the directorate of the company, thus ensuring capable and efficient administration with full and adequate protection of the interests of listeners. In a full and comprehensive statement of the whole situation leading up to the present, the Radio Broadcasting Company states:— Company's Origin. The present Radio Broadcasting; Cpnr r pany pi New Zealand owes its origin to a desire on the part of Mr. William Goodfellow to make conditions; more attractive for the eight j.or. nine, thousand dairy farmer suppliers of the New Zealand- Co-operative .-Daily : Company, Ltd. In 1922 the directors of, that t company, on the suggestion of Mr. Goodfellow, managing director, took steps to investigate. Jhe. practicability of installing a broadcasting station for the benefit of -dairy; -fairxaers in the South district, V At that time 1 / the" erection of dried milk factories aid the extension and erectioii of buirter. and. cfieese factories was proceeding -pace.' "Wherever practicable?, these plants were being connected ir with thV Government hydrosupply E- Harris Company. - r Th<i idea of the broadcasting station in Mn Goodfellow'e mind was, therefore, naturally discussed with Mr. Harris. ■-'.'";:: The upshot was that Mr* Hams was instructed to report fully;: on the project. VFrom various sources, and a visit to Australia, Mr.'. Harris gathered considerable data and: his report prompted Mr. Goodfellow, in May, 1923, to apply to the Rt. Hon; J/G. Coates, then Postmaster-General, for a license to erect a station at Hamilton and operate jf on a co-operative .basis and by levying a nominal license fee. Ims was agreed t*> and an order placed with the Ai R- Harris Company, r the supply and erection of a 500-watt station- identical with those quently; erected at Christchurch and Auckland. fibairy Farmers* Interests. The'proposal, however, was subse-quently-withdrawn, as Mr. Coates coninadvisable to license a number of'individual stations, but desired to provide a Dominion-wide service under -tmified control, taking in the southern part of the Auckland Province. Mr Goodfellow expressed unconcern as to service was conducted, provided Kie dairy farmers in his district were given satisfactory broadcasting facilities, and left the matter at that. Time went on and some 18 months or two yeW later M~. Goodfellow again looked into the position, and found that, while donsiderable progress had been made in, the legislative machinery lor providing a service, the service itsett seemed- as remote as ever. m Negotiations however had been ca«? ed on between the Government and a. Wellinoton'syndicate without success, became Jhe eyndicate desired a term of at least 10 year., whereas the legislation provided for a term 'of five years only. 'Further endeavours were then made to obtain a license for the southern part of the Auckland Province, but without success. The Government reiterated its preference for a Dominion scheme, and approached Mr. Goodfellow to undertake that work. He refused, but subsequently accepted the suggestion, subject to A. E, Harris Company, Ltd., undertaking the technical workf and My; Harris personally accepting -the. responsibility of management* ~.,,. h Criticism of Delay.

The originally required that Messrs. Goodfellow. and Harris undertake to provide the service. This Mr. Goodfellow would not agxee to, but subsequently agreed to form it company within 31 days,.vto

inaugurate a national broadcast service in accordance with th* Government's ideas. RiA.t that juncture there was considerable public unrest and criticism of the apparent delay by the Government in providing a service, and ta expedite matters the Government insisted that both trustees should accept personal responsibilities (pending the formation- of the follow: — (1) JForthwitbi'-fo. order*two, 500-watt radio telephone broadcasting transmitters. ■?. ' "-■" . '■' ; (2) T-o erect one in Auckland andone: in Chrietchurch immediately on arrival. (3) To immediately form and' register a Eadio Broadcasting Company. (4) That the trustees should be personally, responsible for the erection of the plants. It was freely admitted that thd term of five years was insufficient for the development .of .a national service,, . The. however, provided, for only that period, but the. matter, was .discussed with: •4heu i then Sir jjames Pjaajir,-"who. ;gs^ ; trustees a letter that he.hadVio: doubt thafc£>if was, satisfae-j tory, an application fpr & further, term: would be iy;/ ; the; Department);.•;;> >vy. ''■'■■■:'■-.'.' :•:'■■■:■'■;■ 'f'- , I

At that time it was considered - ; a" com-, pany of £20,000 capital, would: m,ees the situation. ~The Crown Law ; Offic§k collaborated tvith.the company's solicitors in drawing up v a t meau>randuin . and articles of association for ihk company, the terms and Conditions being 1 approved by the s lt' was provided that, if ■fe&e/company's license was not renewed, wduld purchase the company's plant and chattels at a price, if not agreed v-<oh," to be determined by arbitration. . Company's Undertaking. In general, the company undertook as follows:— ''■'■'■ ; • (1) To ptta&ase the fonr email «tations then established at ,• Wellington, Auckland, Christchurch:-v-juid' bunedin. -and subsidised by the Pist^fcnid''Telegraph : Departiqent^ '- . Y f < -~ ■■.■ .■ (2) To kilowatt at Auckland an< one at Chrietcfiurch; r (3) Tc provide-i/W additional stations one at. Wellingtomarid, one at. Dunedin. (4) And to carry out the Broadcastinj Regulations, 1925, and gire from eacl

station a minimum service of 12 hours .eekly, Sundays not included. The" Minister undertook to pay the Broadcasting Company 25/ out of every receiving, transmitting and experimental station license fee, and 90 per cent out of every dealer's license fee (first grade £10, second grade £5, third grade £2) paid and received by the Post and Telegraph Department, provided that in case of fees paid for less than one year, the amounts paid the company should be proportionately reduced. Subsequently, the amounts for dealers' licenses were increased, and the company's percentage reduced from 90 per cent to 45 per cent.

It was provided that the capital oi the company should be (a) £20,000 in 10,000 ordinary shares of £1 each, and (b) £10,000 in 10,000 preference shares of £1 each. In consideration of expenses incurred by the trustees prior to the formation of the company, the Post-master-General authorised the issue of 2000 fully-paid shares.

It was provided that the dividend and interest on capital should be limited to 7J per cent cumulative, free of tax. The company had the right to provide sinking funds for the repayment of capital, and necessary depreciation, or to create a reserve fund to meet contingencies. The trustees automatically became directors, Mr. Goodfellow being chairman and Mr. Harris general gerPlant, Studios and Stations. The supply and erection of plant, the fitting pi studios and the maintenance of technical equipment were undertaken initially by A. R. Harris Company, Limited. . .. ■In view of Mr. Harris' dual connection a.special clause in the company's articles of association was authorised by the Government to provide for this. The company was-thus able to immediately take adyantage of the experience and expert 'organisation of the A.'R. Harris Company- for * handling work of this nature. . ■

The practice was adopted that every transaction between the Radio- Broadcasting Company and A. R. Harris Company should -J)e submitted to the directors, of the • first-nam6d company, and every voucher duly approved/by the chairman. Scrupulous care has been observed throughout. Article 19 (e) of the company's articles of < association (duly approved.by'the Crovra).specifically provides for these I transactions, and outlines the exact procedure:; .'.;"••, ■'"'■ Having undertaken to provide a Dominion broadest 'service.'oilier directors sought consistently to ■ advance the Government's scheme. Aid. hi this direction was given by the? personal guarantees undertaken by the directors and the assistance given by Ai R. Harris Company, Limited. Without this co-operation much greater difficulty and considerable further delay wjpuld have been experienced, in view ofHhe general apathy shown toward the service in the pioneering period. Possibilities of Radio.

When the establishment of a radio service was first mooted radio was in its infancy and the possibility of its growing into a permanent universal utility was seriously questioned by the general public. Attempts to interest business men in the financial side met with no response. The proposal was subject to a good deal of criticism and the attitude of scepticism generally adopted made finance extremely difficult. In consequence, the directors were compelled to pledge their personal securities. The nominal capital of the company was set at £20,000; of this £17,000 was subscribed and £13,896 was paid up. In addition, the directors gave their joint arid several guarantees to the bank for £15,000. Subsequently debentures, to the amount of £5000 were sold and £15.000 secured from the Government on first mortgage debenture at 6 per cent on the Wellington plant. For their personal guarantees to the bank the directors received neither remuneration nor monetary consideration. In addition to the foregoing, the A. R. Harris Company, Limited, who supplied the initial equipment on a 10 per cent basis,, with the exception of the Wellington plant, which was on 5 per cent, financed the company's expenditure over and above the moneys in hand, and extended credit without any charge whatsoever other than bank interest on the amount outstanding and funded in connection with the Wellington plant. The directors thue raised a total sum of £47,000, apart from accommodation provided by the A. R. Harris Company.

; Revenue and Expenditure. A'summary of the; revenue and expenditure for years ending July 31, 1930, is appended. It shows that, after 0 niaking'provisi&n for a 1\ per cent dividend, losses were sustained for the first four years, and it was only in the*fifth year that the company was able tq' pay the accumulated dividend on all shares. This accumulated loss amounted to £1082 for the first year, £485 for the second year, £3051 for the third . year, and £1155 for the fourth year. In the fifth year, after paying accumulated dividends, the profit remaining was £.188, In the first year no directors' fees Were !paid..; In the'second and third years part fees only were paid. In the fourth year all directors received an honorarium, the total of all three directors' fees not exceeding £750 per annum.

i To provide for the erection of 2YA on a super station basis, the Government agreed to advance £15,000 on first mortgage debenture- at 6 per cent- per annum. This liability still exists, and interest has been duly,paid.. On $he average, throughout the period of the contract, the Post and Telegraph Department har held £18,000 each month of listeners' fees due to the company, but for this no offset in interest has been allowed.

• Debentures to ih& amount' of ■ £5000 were sold to the public at an interest rate :of 7J per eent, , as allowed by the agretblent.- In regard "fo these debentures, and also in fegatrd to the overi

draft accommodation provided for the company, the directors considered the question of setting up a redemption fund for Tepayment, but the revenue did not permit of this being done.

Depreciation has been provided for on machinery and plant, office and studio equipment and buildings, but no provision has been made for general reserves of any kind. Continuous Audit. The books, accounts and vouchers of the company are subject to a continuous audit by the auditors of the company, and the correctness of the balancesheet and revenue account verified as required by the provisions of the Companies Act.

After the certification of the annual accounts by the company's auditor, the Post and Telegraph Department each year, since the formation of the company, has sent an experienced officer to audit and investigate the books and accounts. Every inquiry made by the officer has been answered to his satisfaction, and the fullest information placed before him. He has had access to all papers and documents, and every facility has been given to enable him to investigate the financial dealings and operations of the company. These officers, at the conclusion of their work each year, have expressed their appreciation of the courtesy and ready attention afforded them, and their entire satisfaction with the full and clear system of accounting adopted. Visit to United States. Owing to the increasing demand for diversity of entertainment, and the difficulty of achieving finality in overseas negotiations for specially recorded programmes, the directors decided that the general manager should visit the United States and Canada. The particular object was to ascertain the technical possibility of recording broadcast matter and reproducing it without loss of quality, and whether such recordings could be made available for New Zealand.

This journey was made from May to August last year, at a cost to the company of £400. Much valuable information was gathered, and connections made for the continuous supply of special recordings of outstanding programme features, a series of which is at the present time being broadcast weekly from the company's stations.'

Many aspects of broadcasting were investigated, one of the most important being radio interference, and as an outcome the company has included proposals for a co-operative scheme for effectively dealing with this difficulty., As a result of- this visit and report of the.general manager, and of an earlier visit by the company's chief engineer, the directors hold the view that the company's plant, equipment and service is as complete and up-to-date as high-class leading American stations of similar power, which •are regarded as the world's best. Sound Broadcast Scheme. Under its contract to provide a radio broadcast service for the Dominion, the company has exceeded all the requirements of the Government, and has built up in a comparatively short period a national broadcast scheme on sound financial lines, all without cost or liability to the State. (1) The company has:— (a) Established and maintained broadcasting stations, including studios, plant and equipment, embodying the latest improvements, at the four main centres; that at Wellington being 10 times the power called for in the original license from the Government. (b) Created a nation-wide service designed to cater for and serve the best- interests of all sections of the community, and provided average daily hours of service more than four times that required under its •license.

(c) Increased the number of licensed listeners from approximately 3000 to over 60,000. (d) Submitted a scheme early in 1929 for additional relay stations, planned to increase the efficiency of the broadcast coverage, thus enabling listeners in the country districts to obtain a service equal to that already enjoyed by listeners adjacent to the main stations. Attractive Programmes. (2) The company has provided programmes of the widest diversity and acceptability by:— (a) Organising, classifying and utilising all talent available in the Do- , minion. Over 40,000 individual contracts with artists have been completed without a single case of misunderstanding. (b) Presenting the leading artists of . the world by means of recordings. (c) Presentation of special recorded features selected .from programmes broadcast in other. countries, r ; thereby affording ' New, i Zealand listenere a. diversity of entertain- •; ment not obtainable :hy airy-other means. ■ '.. ; ■. ;. ■-■ , ~ '(d) Regular broadcasts of- interesting and educational lectures by highly qualified speakers: daily news, market reports, and descriptions of sporting events. (e) Assembling a musical library, comprising 16,000 items, many of •which are unprocurable in New ' Zealand.

Interests of Listeners,

(3) ;The company has broadcast events of local, national and imperial significance by means of relays and broadcasts, and' has freely co-operated with local organisations in aiding the propagation of anything in the public welfare.

(4) A strong bond has been formed by the appointment of 32 official listeners and 14 public . committees, wlich bring to' the service of broadcasting the specialised knowledge of 146 leading citizens representative of a wide range

of listeners' interests. These committees make recommendations to the company with regard to:— (a) Entertainment, music, drama and sport. (b) Church services and broadcasts of a religious nature. (c) Children's work. (d) Service to primary producers. (5) The company has scrupulously safeguarded the political, sectarian, moral and social aspirations and susceptibilities of the listening public. For the future management and control of broadcasting, it is proposed that there shall be formed an entirely new public company, embodying the principles of customer-ownership. In this it is proposed that listeners shall be financially interested, and have adequate representation on the board of directors. It is proposed that the capital shall be £150,000 divided into 50,000 "A" ordinary shares; 50,000 "B" ordinary shares, and 50,000 "C" preference shares (to be used if and only as required). All ordinary shares to rank equally as to dividend (to be limited to 7J per cent per annum cumulative on the paidup capital—free of income tax), and on a winding up. In* regard to the allocation of capital the '*A" ordinary shares will be subscribed for by the management of the Radio Broadcasing Company, but will rank equally with "B" ordinary shares as to dividend and voting, power. Ordinary and Preference Shares. The "B" ordinary shares will be issued only to the holders of radio licenses, subject to the following conditions:— (lj No licensee to hold more than 100 shares^ (2) Such shares riot to be transferable, except to other licensees in multiples of five shares. (3) The company to have the right to resume any shares held by licensees who do not conti"-"> their licenses, with power to issue such shares to other licensees. (This power is at present possessed by co-operative dairy companies, but would here require special legislation.)

In regard to "C" preference shares it is proposed:—(l) That these be reserved for issue if and when the capital requirements of the company render it necessary; (2) that such shares may be sold to any person, firm or company without limit; (3) that they carry no greater dividend than that payable on both classes of ordinary shares; and (4) that they confer no voting power on holders. Proposed Directorate. It is proposed that the directorate should • consist of eight members —the "A" ordinary shareholders to elect four, one to be chairman; the "B" ordinary shareholders to elect four—of which number one should be elected by the "B" shareholders in each of the districts of Auckland, Wellington, Christchurch and Dunedin respectively. The estimated capital expenditure is set down as follows: — (1) The four main stations. —purchase of plant, improvements and additions, £50,000. (2) Relay stations,' 45,000. (3) General outlay, interference plant, and sundry items, £5000. Total, £100,000. Raising of Revenue. The present system of deriving revenue exclusively from the fees collected from licensed listeners and radio dealers would be continued. This system safeguards the interests of the listener. The fact that listeners would be interested in the success of the undertaking, and would have adequate control, would go a long way toward ensuring success. Other known methods of obtaining revenue for a radio service are from (a) advertising, or (b) Government subsidy. Six years' experience by the company has proved it possible to provide a good, service without assistance from either of these sources, and the company believes, from that experience, and from investigations ox systems in other countries, that it would be a retrograde step for the service to have to depend on revenue from advertising, .whether direct or in the form of sponsored programmes. Under that system, too, listeners' interests would no longer bo the sole consideration.

The adoption of subsidies for duplicate stations would jeopardise the economic stability of the entire service, probably resulting in the Government having to find further sources of revenue to preserve financial soundness in the service. Need For Relay Stations. The most urgent need of the national broadcast service at present is greater radio coverage—i.e., to make available to listeners in provincial and country districts a service equal to that already enjoyed by the main centres. The present system, under the scheme laid down by the Government —stations in the four main centres only—is incapable o£ providing a technically efficient service for the whole Dominion, owing to distortion and fading, phenomena inherent in radio. The main factor governing the utility of a station is its service range, which may be defined as the area within which satisfactory reception is ensured at all times. * Receivers located outside the service range of a station are liable to interference—atmospheric or electrical—which spoils the enjoyment, of a programme. It is highly desirable, therefore, that those towns and cities outside the service areas of the main stations should have some local facilities for broadcasting on relay from the. main stations, if an efficient service is to be provided. An- examination of the census figures of the population in New Zealand which would come within the high-grade service area of provincial towns and cities, indicates that a separate broadcast station, having its own studio arid being

responsible for the preparation and supply of its own programme, is not economically sound. Under existing circumstances it would not produce sufficient revenue from licenses to support itself with a reasonably efficient service; and while technically practicable, it is commercially impracticable. The provision of stations dependent for their satisfactory operation on the picking up and re-broadcasting of transmissions from main stations, would, under certain circumstances, be commercially practicable, but, on the other hand, would not be reliable from the technical standard. As time goes 6n listeners more and more rely on broadcasting for regular information and entertainment, and, owing to ever-changing atmospheric conditions and liability to interference, such an arrangement could not be recommended. "Only One Way." After thorough investigation, the company has concluded that there is only one economically practicable way in which the difficulty can be dealt with effectively, and that is by providing a system of relay stations at the larger provincial towns. Convinced of the urgent importance of this matter, the company has felt impelled to act in some areas, although not called upon or licensed by its .contract to provide broadcast facilities outside the four main centres. The company is already co-operating with these stations at Hamilton, Palmerston North, Maeterton, Invercargill and New Plymouth. It is suggested that the new company should complete the relay system recommended by fuller co-operation with existing "B" stations, and by the provision of additional stations, the complete scheme including:— Hamilton. New Plymouth. Palmerston North. Wanganui. Napier-Hastings. Gisborne. Invercargill. Timaru. Greymouth. Nelson. Rotorua. Such towns ae Whangarei and Masterton would be brought in as circumstances warrant. Approximately three-quarters of a million people would then be located with a high-grade service range,- and practically the whole population within fair service range of a first-class radio station. Management Problem.

In every undertaking of size, the question of sound management is perhaps the most important factor in success or failure. The present company has now had six years' experience of the problems to be faced in conducting a national broadcasting service; it has a. highly efficient staff, both on the technical and operating sides of the service. It is suggested that it would be unwise to. disturb the existing organisation, and that any change in policy under which the service is operated would be experimental, the result and ultimate cost being largely matters of conjecture.

Dealing with co-operation to eliminate interference, the statement Says programmes of the highest standard and transmission of the best quality are continually marred by man-made interference. This problem, in the company's opinion, Jβ of such magnitude as to preclude its satisfactory treatment at the hands of any individual section, whether it be the Department, the company, listeners, or dealers; so that some form of co-operative effort is required. The company has already exhaustively examined methods of dealing with this trouble, and is satisfied that it is capable of being remedied. Dealers and Listeners.

It is therefore suggested that a special Department should be created, with a view to co-operating with dealers and listeners for the investigation and solution of the problem. The company proposes to engage an expert overseas radio engineer, to come to New Zealand for the purpose of co-ordinating and directing the operations of an efficient staff and apparatus at each of the four centres.

This Department would be available, not only for servicing major faults, but by means of demonstration and instruction would make a definite move toward eradicating, or, at least, minimising this source of trouble. It would be at the disposal at all times of those it was designed to assist, a nominal charge per day being made to cover travelling and incidental expenses.

At the fcur cen'res there would be no silent day, the service would commence at 10 a.m.

Public Relations Committees,

An extension of the system of Public Relations Committees, for the purpose of providing full understanding between the Broadcasting Company and listeners, would be proposed. Fully seized with the importance of establishing cloee collaboration with listeners, the company constituted 14 public committees, which bring to the service of broadcasting the specialised knowledge of 146 leading citizens, representative of a wide range of listeners' interests.

In order to achieve this collaboration with listeners in even greater measure, and having regard to the extensive and increasing activities of these advisory committees, the company has already announced its intention of bringing the scheme to its logical issue by setting up a Central Board, to meet at regular intervals, for the purpose of reviewing the deliberations of all the committees, and co-ordinating them prior to making comprehensive recommendations to the company. Under the present proposals this board will be necessary, as the four directors, representing the shareholder listeners, will be in close contact with the large body of and the Public Relations Committees referred to.