The FUTURE OF BROADCASTING

Star (Christchurch), Volume XLIV, Issue 194, 17 August 1931, Page 4

The FUTURE OF BROADCASTING

(Published by Arrangement.)

Proposed New Company with Listener Shareholders

Board of Eight Directors: Four Elected by

Listeners in Districts

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 an entirely new public company 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:— The present Radio Broadcasting

Company of New Zealand owes its origin to a desire on the part of Mr William Goodfellow to make conditions more attractive for the eight or nine thousand dairy farmer suppliers of the New Zealand Co-operative Dairy Company, Limited. In 1922 the directors of that company, on the suggestion of Mr Goodfellow, managing director, took steps to investigate the practicability of installing a broadcasting station for the benefit of dairy farmers in the South Auckland district. At that time the erection of dried milk factories, and the extension and erection of butter and cheese factories, was proceeding apace. Wherever practicable, these plants were being connected with the Government hydro-electric supply by the A. R. Harris Company. The idea of the broadcasting station in Mr Goodfellow’s mind was therefore naturally discussed with Mr Harris.

The upshot was that Mr Harris was instructed to report fully on the project. From 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 Right Hon J. G. Coates, Postmaster General, for a license to erect a station at Hamilton, and operate it on a cooperative basis and by levying a nominal license fee. This was agreed to, and an order placed with the A. R. Harris Company, Limited, for the supply and erection of a 500-watt station identical with those subsequently erected at Christchurch and Auckland. The proposal, however, was subsequently withdrawn, as Mr Coates considered it inadvisable to license a number of indi vftdtxal stations, but desired to proa Dominion-wide service under u*ri3ed control, taking in the South Auckland province. Mr Goodfellow expressed unconcern as to how the service w'aa conducted, provided the dairy farmers in his district were given satisfactory broadcasting facilities, and left the matter at that.

Time went on, and some eighteen months or two years later Mr Goodfellow again looked into the position, and found that, while considerable progress had been made in the legislative machine for providing a service, the service itself seemed as remote as ever.

Negotiations, however, had been carried on between the Government and a Wellington syndicate without success, because the syndicate desired a term of at least ten years, whereas the legislation provided for a term of five years only. Further endeavours were then made to obtain a license for the South 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. R. Harris and Company, Limited, undertaking the technical work, and Mr Harris personally accepting the responsibility of management. Government Requirements. 'J’HE Government originally required that Messrs Goodfellow and Harris should personally undertake to provide the service. This Mr Goodfellow would not agree to, but subsequently agreed to form a company within 31 days to inaugurate a national broadcast service in accordance with the Government’s ideas. At that juncture there was considerable public unrest and criticism of the apparent delay by the Government in providing a service, and to expedite matters the Government insisted that both trustees should accept personal responsibilities (pending the formation of the company) as follows: (1) Forthwith to order two 500watt radio telephone broadcasting transmitters. (2) To erect one in Auckland and one in Christchurch immediately on arrival. (3) To immediately form and register a radio broadcasting company. (4) That the trustees should be personally responsible for the erection of the plants. Term of the Agreement. IT was freely admitted that the term of five years was insufficient for the development of a national service. The legislation, however, provided for only that period, but the matter was discussed with the Postmaster General, Sir James Parr, who gave the trustees a letter stating that he had no doubt that, if the service was satisfactory, an application for a further term would

be favourably considered by the Department.

At that time it was considered a company of £20,000 capital would meet the situation. The Crown Law Office collaborated with the company’s solicitors in drayving up a memorandum and articles of association for the company, the terms and conditions being approved by the Postmaster-General. It was provided that, if the company’s license was not renewed, the Crown would purchase the company’s plant and chattels at a price, if not agreed upon, to be determined by arbitration. The Company’s Undertaking. JN general, the company undertook:— (1) To purchase the four small stations then established at Wellington, Auckland, Christchurch and Dunedin, and sub-divided by the Post and Telegraph Department. « (2) To establish and operate two halfkilowatt stations—one at Auckland and one at Christchurch. (3) To provide two additional stations, one at. Wellington and one at Dunedin. (4) And to carry out the Broadcasting Regulations, 1925, and give from each station a minimum service of twelve hours weekly, Sundays not included.' Source of Revenue. 'J'HE Minister undertook to pay the Broadcasting Company 25s out of every receiving transmitting and experimental station license fee, and 90 per cent out of every dealer’s license fee (first grade £lO, 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. Subsquently 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 of the company should be (a) £IO,OOO in 10,000 ordinary shares of £1 each, and (b) £IO,OOO in 10,000 preference shares of £1 each. In consideration of expenses incurred by the trustees prior to the founding of the company, the Postmaster-General authorised the issue of 2000 fully-paid shares. It was provided that the dividend and interest on capital should be limited to 7i 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 j manager. Erection of Stations. supply and erection of plant, the. fitting of studios, and the maintenance of technical equipment were undertaken initially by A. R. Harris Company, Limited. In view of Mr Harris’s 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 advantage 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 Co. and A. R. Harris Co. should be submitted to the directors of the first-named 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 Crown) specifically provides for these transactions, and outlines the exact procedure. Financial Arrangements.

JJAVING undertaken to provide a Dominion broadcast service, the directors sought consistently to advance the Government’s scheme. Aid in this direction was given by the personal guarantees undertaken by the directors, and the assistance given by A. R. Harris Company, Limited. Without this co-operation much greater difficulty and considerable further delay would have been experienced, in view of the general apathy shown toward the service in the pioneering period. 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 and several guarantees to the bank for £15,000. Subsequently debentures to the amount of £SOOO 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 thus raised a total sum of £47,000, apart from accommodation provided by the A. R. Harris Company. Debentures. X° provide for the erection of 2YA as a super station, 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 the average, throughout the period of the contract, the Post and Telegraph Department has held £IB,OOO each month of listeners’ fees due to the company, but for this no offset in interest has been allowed. Debentures to the amount of £SOOO were sold to the public at an interest rate of 7i per cent, as allowed by the agreement. In regard to these debentures, and also in regard to the overdraft accommodation provided for the company, the directors considered the question of setting up a redemption fund for repayment, 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. Audit. Xhe books, accounts, and vouchers of the company are subject to a continuous audit by the auditors of the company, and the correctness of the balance-sheet and revenue account verified as> required by the provisions of the. Companies Act. Aftev 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 I i o 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. Overseas Investigation. QWING 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 £4OO. Much valuable information was gathered, and connections made for the contincous supply of special recordings of outstanding programme features, a series of which is at the present tinie 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. The Company’s Attainments. |JNDER its contract to provide a radio broadcast service for the Dominion, the company has exceeded all the requirements of the Govern-

ment, 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. (2) The company has provided programmes of the widest diversity and acceptability by:— (a) Organising, classifying and utilising all talent available in the Dominion; 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, thereby affording New Zealand listeners a diversity of entertainment not obtainable by any 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. (3) It 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 tha propagation of anything in the public welfare. (4) A strong bond has been forged by the appointment of 32 official listeners and 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. 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 scrupulouslysafeguarded the political, sectarian, moral and social aspirations and susceptibilities of the listening public. PROPOSALS FOR THE FUTURE. Entirely New Company Suggested. JTOR 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 7& per cent per annum, cumulative on the paid-up 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 Broadcasting Company, but will rank equally with “ B ” ordinary shares as to dividend and voting power. The “B ” ordinary shares will be issued only to the holders of radio licenses, subject to the following conditions : (1) No licensee to hold more than 100 shares. (2) Such shares not to be transferable, except to other licensees in multiples of 5 shares.

(3) The company to have the right to resume any shares held by licensees who do not continue 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: (1) That these be reserved for issue if and when the capita! 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. 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:— £ (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 5,000 Total £IOO,OOO License System Approved. 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 of systems in other coxintries, 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 be 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. Provincial Relay Stations. XHE 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 dirtricts 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 of 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 serviced 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 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 and 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 rebroadcasting 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 on 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. 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. The Centres Affected. pONVINCED 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 companv is already co-operating with these stations at Hamilton, Palmerston North, Masterton, 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 as Whangarei and Masterton to be brought in as circumstances warrant. Approximately three-quarters of a million people would then be located within a high-grade service range, and practically the whole population within fair service range of a first-class radio station. Management. TN 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