There was little surprise in March when broadcaster TVNZ announced a round of 90 layoffs, the cutting of program budgets and an executive wage freeze in an attempt to cut millions in costs. The web, which commands a leading share of the Kiwi TV market, has been hit hard by falling ad revenues as well as the loss of auds to online content.

But net topper Rick Ellis says that cost cutting alone is not enough to rescue the broadcaster and that it will need to fundamentally change the way it operates.

“That’s why TVNZ will be accelerating its strategy to transform the business from a traditional advertising-reliant broadcaster to that of a multiplatform digital media company with diverse income streams,” Ellis says.

To this end, the web recently explored other delivery systems by purchasing a stake in Hybrid Television Services from Oz’s Seven Network — the company is the exclusive licensee for TiVo in Oz and New Zealand and is scheduled to roll out the device in New Zealand later this year.

Ellis can clearly see the writing on the wall for free-to-air TV, particularly in the overwhelmingly enthusiastic takeup of online viewing by local auds.

Recently, TVNZ’s online on-demand service, which streams previous series episodes for free, reached well over 1 million viewers in March and saw a 43% jump in users of the service.

Hit local sudser “Shortland Street” and the local version of “Dancing With the Stars” proved the most popular, closely followed by Stateside fare “Desperate Housewives” and “Grey’s Anatomy.” Network honchos hope the service will soon provide a strong additional revenue stream.

One rising revenue source is format sales to its Aussie neighbor. Down Under webs have been keeping an eye on the Kiwi market more closely than ever and buying local skeins, such as “Beyond the Darklands,” and inserting stories from Oz. Traditionally the flow of formats has been in the other direction, with shows such as “Border Security” and “Dancing With the Stars” littering TVNZ skeds.

Another local hit is political satire “The Pretender,” while Peter Jackson’s digital workshop Weta recently has made its first foray into children’s television for TVNZ.

Preschooler skein “The WotWots” bowed last month in New Zealand and has already been purchased by Australian Broadcasting Corp. for the Aussie market.

Skein follows the brother-and-sister team of DottyWot and SpottyWot, two aliens who have fallen to Earth and landed in a zoo. Each week they explore the different animals trying to work out what they will be when they grow up. Show was created by Martin Baynton and Academy Award winner Richard Taylor (“The Lord of the Rings”).

Its tagline is “What will they be?” — a question that TVNZ may well be asking itself as it strives to transform itself from 20th century broadcaster into a 21st century digital creature.