THE FUTURE OF BROADCASTING

Radio Record, Volume V, Issue 6, 21 August 1931, Page 1

THE FUTURE OF BROADCASTING

Proposed New Company with Listener Shareholders Board of Eight Directors: Four Elected by Listeners in Districts.

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 Cab inet, 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.

N a full and comprehensive statement of the whole situ_ation leading up to the present, the Radio Broadcasting Co. states ;- The present Radio Broadcasting Co. of N.Z. 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 that company, on the suggestion of "ir. Goodfellow, managing director, tbok 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 hydroelectric supply by the A. R. Harris Company. The idea of the broadcasting stition 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!® \#'rom various sources, and a Visit to Atstralia, 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 co-operative basis and by levying a nominal license fee. This was agreed to, and an order placed with the A. R. Harris Company, tee for the supply and erection of. a §00-watt station identical with those subsequently erected at Christehurch and Auckland. The proposal, however was subsequently withdrawn, as Mr. Coates considered it inadvis‘able to license a number of individual stations, but- desired to provide a

Dominion-wide service under unified eontrol, taking in the South Auckland province. Mr. Goodfellow expressed unconcern as to how the service was conducted, provided the 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 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 & Company, Limited, undertaking the technical work, and Mr. Harris personally accepting the responsibility of management.

Government Requirements. 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 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. FT 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 diseussed 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 drawing 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. gN general, the company undertook: (1) To purchase the four small stations then established at Wellington, Auckland, Christchurch, and Dunedin, and subsidised by the Post and Telegraph Department. (2) To establish and operate two half-kilowatt 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 12 hours weekly, Sundays not included. Source of Revenue. 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 £65, 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 of the company should be (a) £10,000 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 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 7 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 manager. ; Erection of Stations. ‘THE supply and erection of plant, the ;, Witting 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. FAVIN G undertaken to provide a Do- ; minion 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 cooperation 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 £5000 were sold, and £15,000 secured from the Government on first mortage 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 fhus 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 the five years ending July 31, 1930, appears on this page. The foregoing shows that, after making provision for a 7} per cent. dividend, losses were sustained for the first four years, and it was only in the fifth. year that the company was able to 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, Debentures. TO 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. Qn the average, throughout the period of the contract, the Post and Telegraph Department has held £18,000 each month of listeners’ fees due to the company, but for this no offset in interest has been allowed. Debentures to the amount of £5000 were sold to the publie at an interest rate.of 74 per cent., as allowed by the agreement. In regard to these debentures, and also in regard to the ovedraft. aecommodation 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 proyision has been made for general reserves of any kind.

Audit. 2 a HH 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. After the certification of the annual accounts hy 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. ‘Hivery 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 Jijm to investigate the fintincial and operations’ ‘of the company hese officers, at the conclusion of their work each year, have expressed the:r appreciation of the courtesy and ready attention afforded them, and their entire satisfaction with the full and clear system of accounting adopted. Overseas : ‘Investigation. WING 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 tech-" nical possibility of recording broadcast matter, and. reproducing it without los of quality, and whether such ings could be made. available for N 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 outstancing programme features, a series of which is at the presént: 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- Re as high-class leading American’ tions of similar power which areéregarded as the world’s best.

The Radio Broadcasting Company of New Zealand, Limited.-Tabulated revenue account for the five years eni(led July 31, 19380:-

> baal es Se — oe Ei Elle =-_-onrrovrr=i(----eas'/Tr-aFa-h-(r Veer YO; 4V0 #4 AL OuU,d00 te VU Qd,Ud0 iv oO wenerai expenses inciude and wages, talent, rent and rates, light, heat and power, printing and stationery, travelling, telephones, telcgrains and postages, advertising, copyright, insurance, royalties and taxes, repairs and maintenance, discount, interest and exchange, legal and audit, . Miscellancous trade expenses, , : ‘ . : bee . @Signed) W. R. McCALLUM, A.RAN.Z, ALAN.Z, Auditor,

NDER 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, ail without cost or liability to the State. th The Company’s Attainments. (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 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. (ad) Submitted a scheme early in 1929 for additional relay stations, planned to increase the efficiency of the broadcast coverage, thus en‘abling 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 "A utilising all talent available in the «. Dominion. Over 40,000 indi- .. Vidual 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. (ad) Regular broadcasts of interesting and educational lectures by highly qualified speakers; daily news, market reports, and. deseriptions of sporting events. . (e) Assembling a musical library, comprising 16,000 items, many of which are unprocurable in: New Zealand. wane It has broadcast. events of local, mal and {Imperial significance by me ns of relays and broadcasts, and has.@%eely co-operated with local organisations in aiding the propagation of anything in the public welfare, (4) A strong bond has been forged ‘by the appointment of 82 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. (ec) Children’s work. (d) Service to primary producers. (5) The Company has scrupulously gafeguarded. the political, sectarian,

moral and social aspirations and susceptibilities of the listening public. Entirely New Company Suggested. | Fok the future managemént 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 repre- ~-: sentation 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 "OC" preference shares (to be used if and only as re-. quired). All ordinary shares to rank equally as to dividend (to be limited to 74 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 transfer: able, except to other licensees in multiples of 5 shares, | (3) The Company to 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 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. 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 stationspurchase of plant, improvements, and additions ..... . 50,000 (2) Relay stations ......... » 45,000 (3) General outlay, interference plant, and sundry items ee re eee oOeeeaeteeesene 5,000 Total ee eaceeserovresoe £100,000

License System Approved. i "THE present system of deriving ‘revenue exclusively from the fees collected from licensed listeners and Tadio dealers would be continued. This system safeguards the interests of: the listener, -The fact that listeners would be interested in the success of the un» dertaking, and would have adequate control, would go a long way toward ensuring success. Other known methods of obtainin 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 experiencé and from investigations of systems iti 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 spon sored programmes. Under that system; too, listeners’ interests would no longer be the sole consideration. » The adoption of subsidies for duplicate stations would jeopardise the eco» nomic 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. a HE most urgent need of the national broadcast service at present ig 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 jaid 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 inter-ference-atmospheric or electricalwhich spoils the enjoyment of a programme. It is highly desirable, there, fore, that those towns and cities out side 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, ig 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 times goes on listenerg more and wore rely on broadcasting for regular

information and entertainment, and, sewing to ever-changing atmospheric éonditions and liability to Interference, Stich 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. QONVINCED of the urgent import- ‘ ance 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 ‘eompany 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. "2: 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 locat-

ed within a high-grade service range, and practically the whole. population within fair service range of & first-class radio station. Management. IN every undertaking of size, the question of sound management is, perhaps, the most important factor in suceess 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. Co-operation to Eliminate Interference. ROGRAMMES of the highest standard and transmission of the best quality are continually marred by manmade interference. This problem, in the company’s opinion, is 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. 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-ordinat-ing 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 towards 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. Extended Hours. At the four centres there would be no silent day, and the service would commence at 10 a.m. ‘Public Relations Commitiees. 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 close collaboration with listeners, the..company constituted fourteen 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 unnecessary, as the four directors, representing the listener shareholders, will be in close contact with the large body of listeners-in and the public relations committees refer. red to. HIE scheme here formulated aims to provide for a broadcast service without cost to the State and ensure efficient administration. It safeguards the interests of the listener and removes all possibility of liability to the taxpayer.

1926. 1927. 1928. . ‘1930. Expenditure. Income. Expenditure. Income. Uxpenditure. . Ineome. Expenditure. Income. Hxpenditure, Income. , £ sd, £ sd, £& da. & s. d. d. £ ss a d. £ 5s. d. .. S Se Balance from the previous year : 1,082 19 4 485 Fy 4 $d 051 re it) 1, 155 i 7 ; : 5,262 0 0 22,616 11 0 48,794 14 8 56,978 1 4 65,995 19 9 General expenses ...........02- 6,015 7 0 18,047 4 7 , 45,485. 3 10 48,194 14 11 56,214 4 4 Interest on paid-up capital at -* ' ost soe 7h per cent. pia. .....cacee 6712 4 599 3 7 907° 1 & 1,042 2 6 1,042 -3 5 irectors’ fees ...... eo cccccccse . 250 0 0 444.10 5 750 0 0 --:750° 0 0. opzecia on-~ ; : and plant .... 262 6 2,818 11 4 3,450 11 10 3,873 18 3 4,853 15 6 Office a studio equip. .. . 3803 17 6 TTF AQ 10 920 7 8 1,450.12 0 ----cen ees . 26 1 0 300 8 0 34119 6 x alance- : 7 f TOSS sgeccccesecaveencnce 1,082 19 4 485 5 4 8,051 12 0 1,155 1 7 Pro eeten'evecnaresesuser . : oo iss 3 [a ee 344.19 4 6,344 19 4 23,101 16 4 2310116 4 51, 846 6 8 ‘ _ 51, 846 8 8. 58,138 211 58,188 2 11 65,995.19 9 65,995 19 9 General expenses inetd salariag and wacek talontét vant and untan Ware Le ~~ weve &# fk VS : Oy ,