TVNZ has reported a steep drop in profit as tougher economic conditions bite into advertising revenue.

The state-owned broadcaster's profit for the year ended June was $1.7 million, compared to $7.9m last year - a 78 percent drop.

Overall revenue fell by just over $14m to $327.6m, with advertising revenue decreasing $12.1m to $309m.

However, the company said digital revenue continued to grow.

TVNZ said it cut costs in response to the declining revenue, with total operating expenses reduced by $2m to $313.6m.

Interim chief executive Brent McAnulty said it was a tough media environment but called it a "solid result".

"Strong audience numbers helped TVNZ outperform the market this past year. Local content including Te Matatini, new seasons of Celebrity Treasure Island and T20 Cricket Internationals resonated with viewers," he said.

However, McAnulty said challenging conditions were expected to remain.

"We expect inflationary pressures and slower economic conditions to continue into FY24. While TVNZ will need to navigate this carefully, particularly in the first half of the new financial year, we remain committed to advancing our ambitious digital strategy to secure a sustainable future for the business."

TVNZ said its digital transformation involved a "significant investment in technology" and it would start to draw down on its cash reserves. The investment would be reflected in future results.