TFM: The Financial Manager March/April 2019 by MediaFinance

TFM

INFORMATION AND INSIGHT FOR MEDIA FINANCE PROFESSIONALS

MARCH/APRIL 2019

THE FINANCIAL MANAGER

s e m i T HoItn the y s a E g i B media finance focus 2019 is loaded with sessions to help you excel— and you’ll have fun too. ALSO INSIDE:

CREDIT & COLLECTIONS

SPECIAL REPORT How Agency People Really Think Prepping for a Tougher Economy

The Cost and Promise Of NextGen TV

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TFM

INSIDE THIS ISSUE

The Financial Manager

FEATURES

The Official Publication of the Media Financial Management Association is published six times annually under the supervision of: MARY M. COLLINS, President & CEO Mary.Collins@MediaFinance.org JANET STILSON, Editor TFMeditor@MediaFinance.org

SPECIAL REPORT:

CREDIT & COLLECTIONS

10 Rocky Road Ahead? There are changes coming that may alter how you manage your customers. Make sure you’re as prepared as possible.

BILL KNIGHT, Art Director wknight5@nyc.rr.com

Limited commercial messages of interest to our membership and readers will be accepted. Rates and specifications on request to:

14 Fantasy or Reality? A clear-eyed understanding of ad agencies and their clients can impact how media companies are paid.

MEDIA FINANCIAL MANAGEMENT ASSOCIATION 550 W. Frontage Road, Ste. 3600 Northfield, IL 60093 telephone (847) 716-7000 facsimile (847) 716-7004 and at www.mediafinance.org.

18 The Costs and Benefits Of ATSC 3.0 NextGen technology will provide the TV broadcast business with a huge growth engine, more than making up for its costs.

What is MFM?

The Media Financial Management Association is a not-for-profit corporation organized in 1961. The MFM membership includes more than 1,200 of media’s top financial, IT and human resource personnel, station general managers and other media management personnel as well as associate members in the allied fields of auditing, tax, software, sales and the law. MFM sponsors telephone seminars and conferences, publishes special studies and surveys, files position papers with federal agencies on behalf of its members and its industry, cooperates with other media industry groups and helps its members grow and learn both personally and professionally. MFM also is involved in media industry credit matters through its wholly-owned subsidiary, BCCA, which provides members with a Credit Inquiry Service, an annual Conference, directory of Credit Personnel, credit reports accessed via bccacredit.com online credit search, Commercial Credit Reports and a credit and collections handbook. The information and recommendations contained in this publication have been compiled from sources believed reliable. However, no warranty, guarantee or representation is made by the Association as to the absolute correctness or sufficiency of any representation contained in this publication, and statements contained in advertising and articles submitted to the Association are the responsibility of the authors, not the Association or its officers, directors, staff or members. Moreover, this publication is provided with the understanding that the Association is not engaged in rendering professional services through its distribution. The views and opinions expressed are those of the author, and not necessarily the Association.

22 Let the Good Times (And Insights) Roll Over 80 educational sessions, roundtables and keynotes are on tap for Media Finance Focus 2019 in New Orleans.

DEPARTMENTS 4 From the President The Human Touch 6 Dear Expert Social Media Sleuthing 7 Human Factor Leading Through Change

8 Credit Where Due Clients in Distress 9 Association News Stronger Media Whys 26 Last Word Extending Payments The Financial Manager • March/April 2019 3

FROM THE PRESIDENT

The Human Touch

While new technology moves our businesses forward, the actions of individual people remain an invaluable component.

hen the MFM and BCCA Board recently considered the vision statements for the two associations, they focused on the human side of what we do. That’s something that struck me again as I read the articles for this issue of TFM. If you look at the statements, available on both organizations’ websites, you might wonder why we focused on people when artificial intelligence and automation are on everyone’s lips. And it’s certainly on our minds. Most recently we’ve used the APIs (application programming interfaces) built into the Media Whys credit program to integrate it with third-party credit-management systems. Yet as with the vision statements, the credit and collections special report in this issue doesn’t contain a single piece about automation. Despite technological advances, media and entertainment is, and continues to be, a business that needs and relies on people. The first article in our special report predicts “a mild recession” by 2020. The signs are there. The question becomes: what should media credit and collections departments be doing? Szabo Associates’ Robin Szabo says, “Be prepared!” His article focuses on three areas: revenue concentration, Michael Denson credit extension and collection procedures. All of them require a takes on the decidedly human touch. delicate issue of John Sloan, former executive director of credit services extended payment for Turner, also updates the knowledge base about advertising agencies, whose inner workings are often misunderstood. terms. Spoiler Again, his conclusion is that media credit decisions require a alert: there’s no personal touch. While the business can appear straightforward one-size-fits-all – 85% of U.S. advertising spending is controlled by a small solution. number of agencies – the devil is still in the details. First, there are the terms of liability: who is ultimately responsible for payment? Another consideration is the terms between advertiser and agency. Regardless of who is responsible, the issue becomes how media companies should enforce payment terms that will affect potential future business. Again, relationships between the media provider’s team and the others involved ensure best results. Three columns also explore the human side of order to cash. Lowenstein Sandler’s Mary Seymour addresses the use of social media for credit and collection in “Dear Expert.” Alex Rosen of American Financial Management looks at options for collecting from financially distressed companies in “Credit Where Due.” Our “Last Word” column, written by NMCP’s Michael Denson, takes on the delicate issue of extended payment terms. Spoiler alert: there’s no one-size-fits-all solution for any of these questions. We’ve also included two other compelling feature articles. John Hane of Spectrum Co examines the financial calculus of ATSC 3.0. He sees positive numbers. And Charlie Warner gives us a first look at the sessions (and networking opportunities) being planned for Media Finance Focus 2019 in New Orleans. There’s lots of value for attendees. Another column, “Human Factor,” by ACM Consulting’s Andrew Miller, explains how managers can lead through change. It’s a particularly apt topic and one Miller will be addressing at MFM’s 2019 CFO Summit. His focus is on the personalities involved and in turning the group he calls “dissenters” into powerful agents for change. As the media and entertainment industry moves forward, it will continue to evolve. At its heart, though, media is a decidedly human business. MFM and BCCA are committed to providMary Collins is president ing members the information and tools they need as they and CEO of MFM and BCCA; Mary.Collins@MediaFinance.org. travel their particular industry path.

4 The Financial Manager • March/April 2019

EDITORIAL ADVISORY BOARD MICHAEL DENSON Director, Credit Services NMCP Inc. JOHN SANDERS Principal Bond & Pecaro Inc. DAWN SCIARRINO Managing Member Sciarrino & Shubert PLLC MEREDITH SENTER Member Lerman Senter PLLC C. ROBIN SZABO President Szabo Associates Inc. THOMAS TWEDT Attorney-at-Law

CONTRIBUTORS MICHAEL DENSON National Media Credit Professionals JOHN HANE Spectrum Co ANDREW MILLER ACM Consulting ALEX ROSEN American Financial Management MARY E. SEYMOUR Lowenstein Sandler, LLP JOHN SLOAN C. ROBIN SZABO Szabo Associates Inc. W. CHARLES WARNER, JR. Broadcast Finance, MFM

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DEAR EXPERT

Social Media Sleuthing

Platforms like LinkedIn can be great credit and collections tools. But there are some pitfalls to avoid, as MARY E. SEYMOUR explains. Dear Expert, Social media sites like Twitter are sometimes immensely helpful when my team is doing credit investigations or involved in the collections process. But I’m concerned that there might be certain legal issues that could get us in trouble. Please give me some advice. —Twin Cities Tweeter Dear Twin Cities, The short answer to your question is: yes, there are potential problems you need to sidestep. But social media can also be very helpful when used the right way. As you may have already learned, social media sites can help you find details about customers’ financial status, corporate structure as well as their suppliers and customers. The status of a client’s research and development efforts, additional contact information, references, recommendations and complaints may also spring to light. You can also use social media to verify information contained on a customer’s credit application – or pinpoint when something they’ve written doesn’t quite “add up.” By researching social media sites, you may also learn about a customer’s business contacts and potential references that were not listed on a credit application. And information about a customer’s or a principal’s assets and liabilities could also emerge. There are other big benefits as well. You may find that gathering information about a customer, its principals and guarantors from social media is more cost-effective than running credit checks. It may lead to information regarding the financial condition of the customer and/or guarantor and may help to identify potential sources of recovery. What’s more, a principal’s or a guarantor’s personal social media presence might disclose valuable assets (or excessive spending). Do you have a professional puzzle that MFM and BCCA experts might be able to answer? We’ll mine the contact base and find the right person to answer your question. Just contact TFM editor Janet Stilson at TFMeditor@mediafinance.org.

6 The Financial Manager • March/April 2019

Be cognizant that social media platform providers and those people or entities that post content on social media sites owe no duty of care concerning the quality of content. So while you may use information obtained from Facebook, LinkedIn and Twitter for due diligence on a potential A “cousin” to social media, search engines, customer or existing customer, try to concan also be extremely helpful. By typing a firm the information you find with concustomer’s name in search engines, you can tacts at the companies you’re researching. Consider the importance of information quickly obtain current news, articles, press releases and other information that you may obtained and weight it accordingly. And be aware that social media not otherwise be able to obtain. research can be time consumReceiving Google alerts about If you wouldn’t ing and may not result in a potential customer or existing print something obtaining information that customer is a free tool for getting real-time data and up-to- on the front page will help you with a credit investigation. date information on a business of tomorrow’s One final point: you should applicant or troubled customer. newspaper, don’t never “friend” a delinquent Compare that info to tradi- post it publicly customer or its principals on tional sources of information, social media sites, such as such as financial statements, that on a customer’s credit professionals typically use Facebook or Yelp Facebook, as a way to gain access to information that has to conduct an investigation or pages. been posted in private mode, to assess the creditworthiness of a potential customer. Oftentimes, the for “friends” only. Likewise, you should never publicly post information on the financial statements is information on a customer’s social media out-of-date when you receive them. site about a delinquent account for colNOTES OF CAUTION lection purposes. Posting derogatory comRemember, however, that you must be aware ments on sites like Twitter or Facebook isn’t of a social media site’s terms and conditions. really different from making something Browsing publicly available information on public in another medium, from a defamasites like Facebook or LinkedIn – information standpoint. It raises the risk of slander tion that is public and can be seen by anyone or libel litigation. – appears to be permissible. One key rule of However, while this seems to be accept- thumb to rememable, credit and collections professionals ber: if you wouldn’t should be conservative when using social print something on media to gather such information. Care- the front page of tofully consider the accuracy of the infor- morrow’s newspaper, mation that you access. All social media don’t post it publicly platform providers disclaim any responsi- on a customer’s Facebility for verifying user-generated or user- book or Yelp pages. provided content and information. Such Mary E. Seymour is a partner in the law firm disclaimers will be reflected in the sites’ Lowenstein Sandler LLP. She can be reached at (973) 597-2376 or mseymour@lowenstein.com. terms of use and privacy policies.

HUMAN FACTOR

Turning the Ship

Leading change requires an understanding of the different types of people involved and how to handle their needs and concerns. BY ANDREW MILLER

eading a team of professionals to be at the forefront of the change and are still need to speak to them about the impact through major changes as a CFO or looking to drive it. You need to understand of the change, but this can be done through in another senior leadership role in- what motivates them and what will get them town halls and company-wide emails, rather volves improving one’s people skills. on board. than small or individual meetings. That may sound like a no-brainer. “Of Often leaders are looking for new roles Working with the fourth group, discourse, I need to improve my ability to deal or responsibilities that will allow them to senters, may be the most challenging and with people,” you might say. “But how do show what they can do. They need to be difficult, but it can also reap the greatest I do that?” acknowledged for their contribution during outcomes. Dissenters, although not repThe first step involves answering a key and after the transition takes place. resenting a majority, will typically be the question for everyone involved in the comIt’s likely that they will seek a top role in loudest of the four groups. They will try to pany’s new direction: “What’s in it for me?” their area or department, usually something influence others to join their cause. Many staff members are also likely Find out who the most influento fear alterations in the status quo tial dissenters are and meet with because they don’t know how it will them. Learn why they are so reimpact them or, in some cases, why sistant to the change and address the change is being made. it personally. Often people in this If you can articulate thoughtgroup will balk because the change ful responses, then people will be will impact their balance of power more likely to support your initiaor influence within the organizatives. The way you do so is likely to tion, or how they are perceived. depend on where a given employee Work with the dissenters to see fits into the bigger picture. There how they can continue moving forare generally four groups of emward as a source of inspiration for ployees involved: others, instead of being a roadblock. 1. The Leaders – Those who When you can turn a dissenter into want to be at the forefront of a leader, they will become the most any change and help lead and When you can turn a dissenter into a leader, powerful change agent on your team. manage it (about 10% of your they will become the most powerful change Getting the most out of your employees); people requires commitment from agent on your team. 2. The Followers – Those who you. If you are a senior leader of the always have the best interests of the that involves working directly with senior team, you have a lot of influence across the corporation in mind and will go along management, providing their bosses with organization. You need to learn how to harany change because they assume the some visibility into their abilities. ness that power. company is doing it for the right reasons The second group, followers, may be the Understanding the different ways that (about 20% of employees); easiest group to manage. They generally employees perceive change goes a long way 3. The Masses – Those who will go with believe that the company makes good deci- in doing that. If you the flow, regardless of what it is, neither sions and that the change is happening for remember that everysupporting nor disagreeing with the new the right reasons. As long as they feel like one will be concerned game plan (about 60% of your organiza- they are being acknowledged and treated about the new direction); with respect, they won’t rock the boat. tion and how it will 4. The Dissenters – Those who resist Leaders can be used to cultivate and man- impact them personchange, usually because it makes them age relationship with the followers, making ally, it will improve uncomfortable or will disrupt their daily them feel more involved in the organiza- your ability to drive routine or fiefdom (about 10% of your tion’s new direction. and manage change. organization). Dealing with the third group, the masses, Andrew Miller is a consultant who helps Each group requires different tactics. can be tricky, but as long as there is minimal accelerate operational and financial performance. Dealing with leaders can be challenging, disruption for them individually, they will go He can be reached at (416) 480-1336 but very rewarding. These team players want along with the leaders and the followers. You or at andrew@acmconsulting.ca. The Financial Manager • March/April 2019 7

CREDIT WHERE DUE

Fumble Recovery

When clients slip up due to financial distress or out-of-business status, take very specific actions to score the best results. BY ALEX ROSEN

hen an invoice becomes past due, the goal of credit and collections professionals is to liquidate the claim most expeditiously or, secondarily, to learn the reason for nonpayment. But the methods one uses to do so can have dramatically different results. In TFM’s September/October 2018 “Credit Where Due” column, I shared some advice on how to complete recovery efforts when dealing with two of the most common reasons for nonpayment: customer disputes and promise-breaking customers. But what are the best actions to take when a customer is financially distressed or out of business? Read on.

steps to maximize recovery. In addition, you can learn about the customer’s financial status by reviewing state and federal court records, credit reports and financial statements. If the customer is experiencing severe financial hardship, it is most economical to quickly settle by securing an immediate lump-sum payment, even if the amount is less than the full amount owed. Another option is to enter into a payment-plan agreement. However, you need

FINANCIAL DIFFICULTIES

to protect yourself. For example, if the customer is incorporated and goes out of business, there will no longer be a party from whom to collect. Any payment-plan agreement should include a personal guaranty, promissory note and/or agreed judgment upon default. You also should try to procure post-dated checks or credit card information to automate the payment process. If unable to settle, close the account as uncollectible.

When a customer with past-due and unpaid invoices claims it does not have the means to pay monies owed, immediately determine their proposal to satisfy their balance. You may not receive a concrete settlement offer, or you may not have the authority to accept what’s proposed, or you may decide that it is not in your company’s best interests to accept the customer’s plan. Regardless, attempt to obtain a complete understanding of the customer’s financial picture. Signs of distress may include decreased revenue or reduced personnel, payroll difficulties, numerous uniform commercial code (UCC) creditors, cautionary liens filed by UCC creditors, federal or state tax liens, legal proceedings, collection balances or other substantial liabilities. Much of this information can be learned during your call with the customer. To extract as much information as possible, ask open-ended questions. Before ending the conversation, ask for a recent tax return, balance sheet, profit-and-loss statement, and/or bank statements to help you evaluate their financial status and your next 8 The Financial Manager • March/April 2019

If the customer is experiencing severe financial hardship, it is most economical to quickly settle by securing an immediate lump-sum payment.

OUT OF BUSINESS

A different approach is necessary when you learn a customer is out of business. However, the type of approach depends on whether or not the customer’s owners are personally responsible for its liabilities. If incorporated, the customer is a separate legal entity and its owners are not responsible for the customer’s debts. As soon as you discover a customer is out of business, pinpoint the dissolution date and confirm that the unpaid obligations arose beforehand. Also, confirm the customer properly distributed all remaining assets by paying their creditors, according to creditor class, before paying shareholders.

Once a customer completes dissolution, it should file a Notice of Dissolution with the Secretary of State, declaring that they properly disbursed all remaining assets. If the customer is still in the process of dissolving their company, attempt to extract documentation that will show evidence of proper asset distribution. Lastly, locate the customer’s owners and their contact information. Sometimes, owners will pay even if they have no legal obligation to do so. A separate series of actions is needed if you determine that the out-of-business customer’s owners are personally liable. This occurs when the customer: ■■ Is not incorporated – for example, when it is a sole proprietorship or general partnership; ■■ Incurred obligations after dissolution; ■■ Has owners that breached their general fiduciary duty of loyalty and care by acting with gross negligence or in bad faith. Locate the customer’s owners and their contact information. If the customer does not make significant progress in voluntarily resolving the unpaid balance, you should consider escalating your recovery efforts to a third-party for collections or legal action. This should occur when: a) the amount owed exceeds a certain threshold set by your company, or b) there are not any apparent and substantial collectability or service issues. Regardless of whether a client is financially distressed or out of business, you’ll limit your company’s losses by thoroughly investigating the circumstances and making swift, educated decisions. Alex Rosen is the COO and general counsel of the collection agency American Financial Management. He can be reached at (847) 483-6220 or arosen@afm-usa.com.

ASSOCIATION NEWS

Media Whys Gets Even Stronger IT’S OFFICIAL: BCCA’s Media Whys credit analysis tool now includes data from 100% of the top 50 media markets in the U.S. and 97% of the top 100 markets. Media Whys includes application programming interfaces (APIs) that allow users to pull its media-specific and tradepayment information into their automated credit decisioning processes. BCCA also works with third-party providers to integrate Media Whys data into their credit products that are focused on media. Subscribers using the Media Whys credit reports can access custom online credit applications that mirror their companies’ own internal forms. They can also access automated decisioning tools that link them to appropriate credit reports. And they can change the weight of various inputs to ensure credit recommendations coincide with their company credit policies. BCCA also recently announced partnership with High Radius, a fintech enterprise specializing in automating the order-to-cash process. HighRadius focuses on efficiency and productivity using artificial intelligence and machine learning. When Media Whys subscribers use HighRadius’s so-called “credit cloud,” along with the online application and BCCA integration, they will no longer need to manually download reports for each credit application and credit review. Media Whys is the only creditworthiness evaluation tool to combine data from media companies along with collection filings, tax liens, judgments, corporate linkage, payment trends and trade data from D&B or Experian. In addition to media payment information, the customized reports contain credit logic scores, payment trends graphs, data depth scores, balance-to-high credit graphs and D&B or Experian trade payment data. “The wide range of services available to our members offers them a higher level of automation in their credit management process,” said Mary M. Collins, president and CEO of MFM and its BCCA subsidiary, in speaking of Media Whys.

Free BCCA Webinar A Day in the Life of a Credit Professional, With AI March 14, 3 PM ET In this live webinar, you won’t just hear about what artificial intelligence (AI) can do for the credit department. You’ll be able to experience it. Watch Bill Weiss, a vice president at HighRadius, perform a 60-second credit review with a digital assistant by his side. For more information and to register, visit bccacredit.com.

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The Financial Manager • March/April 2019 9

ROCKY ROAD AHEAD?

10 The Financial Manager • March/April 2019

SPECIAL REPORT: CREDIT & COLLECTIONS

THERE ARE CHANGES COMING THAT WILL IMPACT THE MANAGEMENT OF YOUR CUSTOMERS. MAKE SURE YOU’RE AS PREPARED FOR THEM AS POSSIBLE.

By C. ROBIN SZABO VER THE PAST 10 YEARS THE U.S. ECONOMY, AD MARKETS

and consumer confidence have grown despite ups and downs along the way. Last year was one of the U.S.’s strongest economic years with gross domestic product over 3%, unemployment at 3.7%, U.S. ad spending up close to 4% and consumer confidence positive. Will this growth and confidence continue or are changes coming? No one can predict with certainty what the economy will be like going forward. However, the consensus is that the U.S. economy will slow; interest rates will rise, and a mild recession may occur sometime during the next two years. What is certain is that sales will be aggressively seeking ways to meet budgets by growing the ad commitments of established clients and developing new ones. Political advertising will decline dramatically in 2019, particularly for TV stations, resulting in more commercial inventory sold on credit terms. Ad spend will continue to be fragmented as technologies evolve and clients shift their promotional messages across numerous media. And advertising category revenue will rise and fall based on how product and service demand is affected by the economy. What’s more, credit markets will be tighter due to rising interest rates, which could lead to increased business failures and a housing slowdown. What can we take away from all this with respect to the credit management of your customers? The constant watchword is: “be prepared!” ASSESSING THE RISKS

Preparation begins with an analysis of your current customers to determine revenue concentration risk, credit risk and days sales outstanding (DSO). Let’s look at each one in turn. The revenue concentration risk can be analyzed by looking at data on your customers and their respective advertising categories. Determine the revenue concentration expressed as a percentage of your accounts receivable portfolio. Diversification is key. A good rule of thumb is not to exceed 10% of your business with any one customer or advertising category or 25% with your five largest customers. There are exceptions to these rules, of course, if the concentration is with healthy, stable, timely paying customers with whom you have a longstanding relationship. Then the risk is not as great. Your customers’ credit risk should be evaluated initially and then annually based on the volume and frequency of their business and payment history. This is especially important because one of the pillars of your relationship with your customers is their credit worthiness. Assess both agencies as well as advertisers. Needless to say, the media industry has experienced failures of both types of companies. Additionally, The Financial Manager • March/April 2019 11

stay alert for any negative information about your larger advertising categories so you can quickly reduce exposure if need be. Another important measure is DSO, assessed by individual customer and advertising category with monthly comparisons. With it you are able to track your results from period to period, spot trends so you can fine tune your collection strategy and more accurately forecast cash collections. Once the analyses are completed, merge the data with the strategies formulated by your sales managers to achieve their revenue goals and recast the data. Share your recasts with the sales managers so everyone will understand the changes that may occur to the accounts receivable portfolio based on the sales strategies. You may determine, for example, that the sales team intends to generate a great deal of their revenue from one ad sector or client, creating a riskier portfolio. By working together, you will be able to make sure your customer management plan is in order and ready to meet the changes ahead. The following simple checklist will help determine just how prepared and effective your organization is in its application of the basic principles of credit extension and collection procedures:

KEEP CALM

AND MAKE THE CALL

CREDIT EXTENSION

Does your credit application clearly indicate with whom you will be doing business and what their qualifications are for credit extension? The credit application remains the single most important document to determine whether or not to do business with a particular client. It should include the year that the agency or company was established; its structure (proprietorship, partnership, corporation or other); number of full-time employees; annual sales; business license number, and the principals of the company (including their addresses and home phone numbers and bank references). It should also require at least three trade references, including media. Identify the parties to the agreement and the legal capacities in which they are signing. This information should be included on the signed application. Does your credit application clearly state the terms of the business agreement? Because a realistic view of our industry does not always include signed contracts, today’s credit application must fulfill more than its original purpose. It should clearly define the responsibilities of the parties involved and state your liability position. We recommend a “joint and several”

SHORT OF FACE-TO-FACE COMMUNICATION, TELEPHONE communication cannot be equaled in its combined power of immediacy and intimacy. Its limitation is its intrusiveness, which creates an immediate loss of control for the person receiving the call and may put them in a defensive mode. This can be overcome by employing discipline and diplomacy. Know everything possible about the account before you make the call. Ensure that your records are accurate and up-to-date. Check the past record of payment to determine whether a pattern of delinquency exists. Finally, have a follow-up system that works for you. When speaking, stay calm, even if verbally attacked. The tone and energy of your voice convey an attitude. Speak slowly and deliberately. Your message should be simple and direct. Use words that cannot be misinterpreted. “Will you mail a check for $15,000 today?” leaves little room for misinterpretation, while “Can you send the money immediately?” is vague. Tune in to customer responses. Their words and tone can convey subtle messages about what might motivate them to pay and what might be a reasonable solution. Use statements that leave the customer’s integrity unchallenged while conveying an unmistakable imperative. Try to pin down an exact date and amount of payment. And try to limit the promise of payment to a maximum of 10 days. Then seize the opportunity to end the phone call, emphasizing how important it is that the customer keep his end of the arrangement. Ask for a “recap” of the arrangement, including the name and address to which the check should be sent. Immediately send a follow-up letter to the customer, confirming the conversation (include the date of the call) and the specifics of its outcome.

12 The Financial Manager • March/April 2019

liability position, which holds both an agency and the advertiser responsible for payment until media gets paid. This means that you should have a credit application for both the agency and the advertiser. Having signed applications from both provides not only information you need to determine whether or not to extend credit but also written confirmation that the applicants understand and agree to your payment terms and joint and several liability position. Do you have procedures for dealing with borderline customers? You might deal with marginal customers by using one or more of the following: 1) request cash in advance; 2) extend credit on a weekly basis, with payment to be picked up by the salesperson; 3) request partial cash in advance with the balance due within 30 days; 4) get a personal guarantee; 5) obtain a guarantee of payment from the advertiser to you when the agency’s credit is doubtful. If you opt for a personal guarantee, remember that it is only as good as the guarantor’s ability to pay. The signature must show that the party is signing personally. The person’s title must not appear after the name, and the company name must not appear directly above the signature. Do you reinforce payment terms at the beginning of the relationship? A good relationship with sales can really pay off here. At the time of the initial sale, the salesperson should make it clear to the customer what the agreed-upon terms of payment are. Underscore the message by sending the new customer a “welcome” letter, expressing thanks for its business and restating the credit terms. Good communication with sales can also bring potential problems to light long before they affect your work. Sales reps are in the best position to become aware of their customers’ management or cash flow problems early on. Make an effort to build relationships with your sales reps and attend sales meetings in person or by teleconference periodically to expand and reinforce your understanding of the sales perspective. COLLECTIONS PROCEDURES

Do you maximize the effectiveness of your collection tools? The tried and true collections “tools of the trade” are still effective. The telephone is still your best friend, and a follow-up

SPECIAL REPORT: CREDIT & COLLECTIONS letter (via email, fax or the post office) is ing concern and should include a positively critical to your confirmation process. (See phrased benefit statement to motivate the sidebar, page 12, for more on phone calls.) debtor to pay. (“Payment of the invoice by While usually not as effective as a phone the 10th will ensure your continued favorable call, a carefully worded letter can be the credit standing.”) least offensive collection communication. However, particularly for larger acYour organization should develop its own counts, a phone call may be a better idea form letters, with two or three variations of each message to disguise its Begin the collection process appearance as a template and to add when the account falls 15 days flexibility. The letters’ style should be clear and past due and then follow-up at uncomplicated. The structure should least every week. be simple and easy to follow. And it should easily fit on one page. Present the than a third letter. Depending on the size situation clearly (amount due, number and and nature of the accounts, a combination date of invoice) and ask for action. Make of letters, phone calls and a personal visit sure your information is up-to-date before may be best. sending the letter. The “final demand” letter contains your The “first reminder” letter should be final request plus a statement of your next mild and non-accusatory, suggesting that action if you are not paid, such as referring the nonpayment is probably the result of an the account to a third-party collector. In all oversight. The “second reminder” should cases, collection letters should always comexpress puzzlement. (“We still believe the ply with federal and state legislation. items called to your attention have either Do we adhere to a strict schedule of collecbeen overlooked or delayed in payment for tion efforts? some other reason.”) Begin the collection process when the The “third reminder” must reflect grow- account falls 15 days past due and then

follow-up at least every week. You never want to let a customer think that an extra week or two makes little difference to you. Communicate only with the person in charge. Consider enlisting the help of the account’s sales rep, either for the first try or after your first try meets with resistance. Revoke credit privileges on overdue accounts as outlined in your company’s policies and procedures. Finally, enlist thirdparty help when the account is 90 to 120 days past due, as specified in your policies and procedures. As you work to perfect all of these procedures, preparing for a bumpier road ahead, bear in mind that the strength of an organization depends on the solidity of its foundation. A sound base supports growth and change and helps to weather inevitable economic ups and downs. By honoring the principles of credit and collections, you can help ensure that your organization will continue to survive and thrive. C. Robin Szabo is president of Szabo Associates, Inc., media collection professionals, in Atlanta. He can be contacted at robin@szabo.com or (404) 266-2464.

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The Financial Manager • March/April 2019 13

SPECIAL REPORT: CREDIT & COLLECTIONS

Fantasy or O

FTENTIMES THERE CAN BE A VAST DIF-

ference between the way media companies perceive their advertising clients and the actual reality. It’s something that TFM has addressed in past articles. But as the business is constantly changing, we decided to update readers about what media companies can reasonably expect from agencies and advertisers, and how to handle relationships with them. For people who aren’t familiar with advertising practices, the media customer base may seem relatively easy to handle. After all, it’s made up of

14 The Financial Manager • March/April 2019

A clear-eyed understanding of ad agencies and their clients can impact how media companies are paid. By JOHN SLOAN

Reality? advertising agencies that represent one or more advertisers, making the overall number of customers fairly small, when compared with similarly sized companies in other industries. That may have been true 40 years ago, but there is much more complexity to the business than agency numbers suggest. LIABILITY DEBATE

Look no further than the American Association of Advertising Agencies, commonly referred to as the 4A’s, to understand why. Founded in 1917, this trade organization now has more than 700

members, which control 85% of all U.S. ad spend, according to its website. The 4A’s has recommended to its members that they adopt a sequential liability position. Under these terms, the agency is only liable for payment of media invoices if the agency has been paid for those invoices by the advertiser. And the advertiser is solely liable for those prior payments. Because of the delays in payment that sequential liability terms can cause – and a lack of transparency on whether or not clients have paid the agencies – media companies have advocated for other terms, known as joint and several liability. That position The Financial Manager • March/April 2019 15

If financial statements were not prepared following GAAP rules by an independent party, then the information in them is suspect at best.

holds all parties liable – including the advertiser, agency and buying service (if applicable) – until a given media company receives payment. Since there are many advertising agencies who do not belong to the 4A’s, some of them have accepted joint and several terms when placing advertising. But even when they have, enforcement sometimes presents problems. Because the media advertising business is extremely competitive, it can be tricky for media companies to try and enforce payment from an advertiser subject to joint and several terms. The ad client may have paid their agency already, but the agency has failed to pass along monies owed to their media partners. So persistent payment requests can severely injure client relationships and impede the potential for future business. Similarly, relationships with agencies can become tense if a given agency is forced to pay for schedules when it has not been paid by the advertiser involved. Regardless of which liability terms are agreed to, it’s imperative that media credit managers analyze the creditworthiness of both the agency and the advertiser. Obtaining credit and financial information on the primary customer, the ad agency, should be a routine function. Obtaining the same information for advertisers is more problematic as many agencies are reluctant to share advertiser financial information, even though they demand sequential liability when they place their orders. Agencies may also object to the media contacting their advertiser clients directly for the information, particularly if they are placing schedules on a large number of media outlets. There’s an upside for advertisers when they allow media providers to become acquainted with their business and agency agreements. It reduces the likelihood that media credit teams will pursue the ad client for payment if they have already paid the agency. What’s more, advertisers often require detailed billing and police their agencies to make sure media is paid on a timely basis. Agencies can also benefit from cooperating with media on the financial information about their clients. If the media provider approves the advertiser, who then fails to pay the agency, that agency is more likely to get help from media to resolve the problem. OTHER RESEARCH OPTIONS

If it is not possible to obtain the necessary information from the agency or directly from the advertiser, it can be obtained in other ways, particularly if the advertiser is a publicly traded company. Quarterly and annual financial reports on all publicly traded companies are available through the 16 The Financial Manager • March/April 2019

SEC Edgar database (SEC.gov), which is searchable by company name or ticker symbol. The financial information can be read online, printed or downloaded into an Excel spreadsheet. Information on privately held entities is available from Dun & Bradstreet (D&B) or other commercial credit-reporting companies. Another resource is BCCA. It offers reports that combine information from D&B or Experian with media industry credit history. They’ve also been able to integrate their reports with automated order to cash systems. In reviewing financial statements, the primary focus should be on the liquidity ratios from the balance sheet that are indicative of the customer’s ability to meet its current obligations. Pay particular attention to the current ratio (current assets/current liabilities), quick ratio (cash + marketable securities + accounts receivable/current liabilities) and the cash ratio (cash + marketable securities/current liabilities). Of course, the company’s profitability from the income statement and its sources and uses of cash contained in the cash flow statement should also be reviewed. In the event that the financial statements are obtained directly from the customer, then they should show some information that is just as important as the public-company data available from third-party services. Look for info about who prepared the statements; if an audit was conducted (and by whom), and whether the statements follow generally accepted accounting principles (GAAP). If the statements were not prepared following GAAP rules by an independent party, then the information in them is suspect at best and misleading or fraudulent at worst. One can also obtain a substantial amount of information on companies by a basic Internet search. One helpful tool is Google Alerts. Simply type in google. com/alerts and a page will appear that enables you to receive alerts on specific companies or topics. One can choose how often the alerts are received, the region (worldwide or just the United States), the sources (such as news, finance or the web), whether the alerts are sent in multiple emails or in a digest form, and the time of day the alert is sent. The initial focus in building credit files on advertisers should be on obtaining information on clients with the largest amounts due. One can do the necessary research on a few at a time and gradually reach a point where credit files on a large portion of the accounts receivable portfolio has been completed. In order to keep the workload manageable, it may not make sense to create credit files on all advertisers, but only those whose average balance outstanding is above a certain level.

SPECIAL REPORT: CREDIT & COLLECTIONS HANDLING HIGH RISK

In the process of creating the files on advertisers, it is probable that there will be one or more that are showing signs of insolvency or may otherwise qualify as a high credit risk. If the advertiser’s schedules are being placed by an agency, then it is imperative that the credit person involved fully understands the financial arrangements the agency has with the advertiser. Very few agencies are compensated using the traditional 15% commission. Most agencies are paid based on set fees. Some also receive additional compensation, based on performance reviews and sales goals. A frank conversation with the agency’s financial management about the advertiser involved is absolutely necessary and may allay the media’s concern. For example, the agency may be receiving advance payment for media, or they may have taken other steps to ensure payment. If the agency is unaware of the financial problems with the advertiser or is not prepared to guarantee payment of the schedules being placed, then a decision must be made whether to continue to accept placements for that advertiser or if other financial arrangements need to be made directly with them. In spite of media credit professional’s best efforts, it is inevitable that some customers will file for bankruptcy or otherwise go out of business without paying

the media. If it is an advertiser, and the media has a joint and several agreement with the agency, then a decision must be made on whether to enforce those terms. As noted earlier, this could create problems in the relationship that may impact future business from the agency. If the agreement is sequential, or if the media elects not to enforce the joint and several payment terms,

Very few agencies are compensated using the traditional 15% commission. Most agencies are paid based on set fees. then the agency and media should cooperate in efforts to recover any amounts due. In summary, the media’s relationship with advertising agencies and advertisers continues to evolve. That makes it imperative for media companies to protect their interests by properly researching their clients and obtaining the most advantageous liability terms. John Sloan is a former executive director of credit services for Turner Broadcasting System. He can be reached at john_sloan23@yahoo.com. This article benefited from an earlier TFM story by C. Robin Szabo, published in the March/April 2011 edition.

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18 The Financial Manager • March/April 2019

TECTONIC TECHNOLOGY

DOING THE

ATSC 3.0 Math

NextGen technology will provide TV broadcasters with a huge growth engine, more than making up for its costs.

By JOHN HANE HILE THE ATSC 3.0 TECHNOLOGY STAN-

dard has long been heralded as a big step forward for broadcast TV stations, there were important signs late last year that it’s finally coming to fruition. During the TV2020 conference in October, top executives from several companies jointly announced plans to deploy ATSC 3.0 by the end of 2020. There to proclaim the transition to ATSC 3.0, sometimes referred to as NextGen TV, were representatives of NBC, Fox, Univision, Telemundo and the Pearl group of broadcasters. (Founding members of Pearl, focused on forward-looking TV opportunities, include Cox Media Group, the E.W. Scripps Company, Graham Media Group, Hearst Television, Meredith Local Media Group, Nexstar Media Group, Raycom Media, and TEGNA). Also joining in the announcement were top officials at Spectrum Co LLC – a consortium formed last year by Nexstar and Sinclair Broadcast Group to build new lines of revenue for TV stations using the ATSC 3.0 standard. What’s more, TV set makers are geared up to have NextGen-ready sets on retail shelves in 2020 as well. Now that the dust has settled on that announcement, broadcast TV station groups are about to experience the new standard’s financial impact – both its great revenue potential as well as the associated costs required to build out NexGen TV and maintain it. To appreciate ATSC 3.0’s financial implications, consider that it permits stations to transition from their legacy, single-service broadcast platform (referred to as ATSC 1.0) to a much more flexible service-agile network. It’s a one-time upgrade that will bring both resilience and growth to the business of broadcasting. Specifically, ATSC 3.0: ■ Equips broadcasters to continually improve and elaborate their core video services without the constraints of

embedded technology choices made decades earlier; Permits stations to enter high-growth lines of business that rely on wireless data; ■ Enables broadcasters to expand their geographic markets by making productive use of spectrum – the “white space” – that is unusable with existing technology; ■ Is capable of providing robust service to ATSC 3.0-enabled mobile devices. The new standard isn’t backward compatible with existing receivers, so broadcasters will have to transmit with both standards for a period of years until compatible receivers are widely deployed. That means broadcasters in each market will have to cooperate to host each other’s programming during the transition. For example, one station in Kansas City might convert to ATSC 3.0 while another in the same market continues to operate with the older standard (ATSC 1.0). Each station will simulcast the other’s programming until penetration of NextGen receivers allows all stations to convert. Broadcasters have developed models and best practices of how to implement this transition and are working together aggressively to develop hosting plans in dozens of markets already. ■

REVVING UP REVENUE

The NextGen standard will give broadcasters muchneeded tools to grow revenue and defend against revenue erosion in their core over-the-air (OTA) video business. It also allows stations to develop entirely new services. According to BIA Advisory Services, traditional TV broadcasters currently earn about 50% to 70% of their revenue from advertising and 30% to 50% from subscriber fees – the latter in the form of retransmission rights payments. ATSC 3.0 can drive growth and resilience in both revenue lines. Advertising revenue is a function of measured viewership and the addressable ad market. Making broadcast The Financial Manager • March/April 2019 19

programming accessible to mobile users (including those in connected vehicles) and far easier to receive indoors will grow viewership. To date, broadcast TV has been reliant on research firms to monitor their audience levels, often resulting in questions about validity. The direct measurement of OTA viewership via 3.0 will patch a gaping hole, bolstering ad revenue. What’s more, advanced audience targeting through digital ad insertion (DAI), delivering ads focused on specific demos and consumer behaviors, will allow stations to tap into new ad markets. Because ATSC 3.0 is native Internet protocol (IP), it will enable stations to take part in sophisticated cross-platform ad campaigns as well as high-yielding direct response campaigns. Equally important, these capabilities will limit encroachment by new platforms on existing broadcast advertising revenue. The NextGen standard also provides new subscription revenue opportunities for broadcasters. Today broadcasters largely rely on multichannel video program distributors, like cable and satellite platforms, for subscription revenue. If they choose to do so, broadcasters will be able to supplement their free-to-air offerings with a range of subscription services, potentially including enhancements (such as 4K/ultra-high definition and high dynamic range options) or “skinny” bundles of pay services.

Broadcasters launching NextGen also hope to build national lines of business. Spectrum Co was founded for exactly this reason. Because of legacy Federal Communications Commission (FCC) ownership rules, no broadcaster has the scale or depth to be a national service provider. Yet the market for data services today is national. Broadcasters understand that they must build new systems and work collectively to enter new markets. With that in mind, Spectrum Co is linking hundreds of stations into a seamless nationwide network and developing the resources needed to monetize the broadcasters’ extraordinary spectrum assets. To grasp the scope of what is at stake, consider how the old FCC-mandated technology affects how broadcast service is used and monetized. About 14% of television households do not subscribe to traditional multichannel television service and receive broadcast television only over the air. Many of these OTA households watch more broadcast television than the average, so for illustrative purposes we can roughly attribute 20% of station advertising revenue to the value of the spectrum. (Over the air viewers do not generate retransmission fees.) BIA estimates that the TV station business garnered $18.6 billion in advertising revenue in 2019. That indicates that the television station industry earns less than $18 million in ad revenue for each

WHY THE HOOPLA?

VER-THE-AIR TV BROADCASTING HAS HAD A REMARKABLE RUN ACROSS THE

last 50 years. But questions about broadcasters’ ability to compete on equal footing with newer platforms have lurked in the background. For some time now broadcasters have been saddled with outdated technology. Today’s broadcast TV technology, dubbed ATSC 1.0, lacks features that give competing providers additional tools to monetize their services. Among them are content security, data reporting and the ability to use modern codecs that are not currently available. Television stations also rely on third parties to retransmit their signals into many homes. And while that has resulted in retransmission consent revenue, TV outlets have yielded some of the value of their service to those resellers. Like other communications infrastructure platforms (landline voice, cable television, mobile voice), broadcast stations were originally built to provide a single high-value service. But all of the non-broadcast platforms have long since been upgraded to support multiple services and applications. In most cases those platforms deliver more profit from new services than from the legacy services that justified the original build. Broadcasters are the only communications sector that has been stuck operating with single-service infrastructure using technology the FCC chose 23 years ago.

20 The Financial Manager • March/April 2019

TECTONIC TECHNOLOGY megahertz of allocated spectrum. ($18.6 billion X 20% assumed OTA usage = $3.72 billion / 210 MHz allocated). This calculation attributes all of the advertising revenue derived from OTA households to the value of the spectrum itself and none to the programming. By comparison, T-Mobile generates roughly $250 million in service revenue annually per megahertz (MHz) of deployed spectrum – almost all of it by directly monetizing that spectrum. The point is not to compare broadcast and wireless services directly: two-way point-to-point wireless and wide-area broadcasting will remain fundamentally different platforms even with ATSC 3.0. However, the per-MHz revenue analysis illustrates the untapped economic potential of the spectrum, which can be realized when the shackles of an outdated technology are removed. Unleashed from an inflexible technology previously mandated by the government, broadcasters can finally create business lines based on wireless data, one of the most robust sectors of the economy. Broadcasters won’t earn anything close to what wireless carriers earn per unit of allocated spectrum – at least not anytime soon. But the upside is considerable. Stations are already leasing unused capacity, but legacy technology has limited it to one opportunity: leasing capacity to niche broadcast networks – called diginets, in trade parlance. While most of that diginet revenue drops straight to the bottom line, it’s a pittance compared to the 3.0 potential. In the best cases, diginets yield a penny or two per gigabyte (GB) used by consumers. In comparison, wholesale wireless data rates for two-way point-to-point service are measured in dollars per GB. Again, ATSC 3.0 is a different technology and can’t be directly compared to wireless service. But it gives broadcasters the tools they need to narrow the revenue/MHz gap considerably. PAYING THE PRICE

The investment for a typical station to get into the ATSC 3.0 game is modest compared to the flexibility and new revenue opportunities gained. The cost will differ depending on such factors as: ■ The condition and capabilities of the equipment a station currently uses; ■ Whether the station will convert to ATSC 3.0 or serve as an ATSC 1.0 host;

How much of the work the station outsources. A station serving as a 1.0 host – that is, simulcasting programming for other stations that convert to 3.0 – in some cases could face only the costs of connectivity, adding new program streams to its multiplex as well as legal and engineering costs. At the low end, the costs for these 1.0 hosts could total a few thousand dollars for additional encoding licenses and some light construction for up-to-date stations. At the top end, costs could reach $125,000 for stations that require new or redundant encoders, or need to outsource most of the work, or have other special requirements.. The 3.0 conversions are somewhat more expensive, requiring upgraded transmitters for stations that have not already added 3.0 capability. Many stations involved in the repack process are installing ATSC 3.0ready transmitters reimbursed by the FCC, so their costs will be lower. In most cases, stations will also need to invest in new encoders and other equipment. Assuming a transmitter upgrade, a basic ATSC 3.0 conversion equipment package to replicate an ATSC 1.0 station with four services can range from $300,000 to $500,000 at the high end, although the equipment costs for a basic conversion done in house might cost as little as $130,000. There are other upfront costs, although generally less significant. Much of the engineering can often be completed in house. Legal/regulatory fees may fall to just a few thousand dollars, or even less, as agreements are standardized. Most stations will incur expenses to transport programming to their respective 1.0 or 3.0 hosts. These costs may be trivial when the stations are co-located. In more typical cases costs could range from a onetime $5,000 to $150,000 expense for microwave transmissions. Monthly fiber costs may be in the $100 to $2,500 range per service. Most stations have rejected the idea of paying each other for hosting. These are the basic costs to get programming launched in ATSC 3.0, which will drive the penetration of compatible receiving devices. However, one of the biggest advantages of ATSC 3.0 is that it provides enormous headroom for stations to extend and elaborate their services by making additional investments when justified by the opportunity. ■

Assuming a transmitter upgrade, a basic ATSC 3.0 conversion equipment package … can range from $300,000 to $500,000 at the high end.

As with most innovations there will be a ramp-up period between product introduction and getting to scale. I expect the revenue profile for a typical television station to look considerably different – and better – four to eight years after launching ATSC 3.0. But the benefits to broadcasters will come sooner. Today, broadcast equities are valued by cash flow which, if anything, is discounted because of questions about long-term growth. But the intrinsic – if yet unrealized – value of the spectrum broadcasters use is widely recognized among investors more focused on growth than cash flow. Delivering on ATSC 3.0 conversions, and development of even modest spectrumrelated revenue, opens the possibility of attracting new spectrum-savvy investors who seek long-term growth (and who appreciate the hedge of substantial cash flow in the meantime). This sort of buy-side diversification might help smooth the cyclical bumps for broadcast stocks. A significant amount of the wireless service each of us uses every day rides on spectrum that was formerly allocated to TV stations. ATSC 3.0 allows broadcasters to finally exploit some of the untapped value of their spectrum assets. John Hane is president of Spectrum Co, LLC. The opinions expressed in this article are those of the author. He can be reached at (703) 236-9240 or JH@thespectrumco.com. Rick Ducey, managing director of BIA Advisory Services, contributed to this article.

The Financial Manager • March/April 2019 21

Jazz, blues, zydeco and Cajun music seems to emanate from every corner in many New Orleans neighborhoods.

22 The Financial Manager • March/April 2019

CONFERENCE SNEAK PEAK

Let the

s e m i T Good Roll (and Insights)

Over 80 educational sessions, roundtables and keynotes are on tap for Media Finance Focus 2019 in New Orleans. BY W. CHARLES WARNER

New Orleans is a magical place. Some say it should come with a warning label: if you go there, you might not want to leave. A larger-than-life statue of Louis Armstrong greets you at the airport bearing his name. And if a car lets you off in the French Quarter or the Warehouse District, you might think that the party has begun. Jazz, blues, zydeco and Cajun music seems to emanate from every corner, as do the delightful smells coming from gumbo stewing in many a restaurant.

New Kids On T he Block

MFM’s Games Committee is organizing its second year of sessions. In fact, Media Finance Focus is now the only conference where games finance people can obtain state-of-the-art information for their industry. What’s more, a brand-new track focused on blockchain is on offer as well. Some see blockchain as a savior. Others see it as an energy and computer-memory hog that is rife with potential problems. Regardless, there is a hope that blockchain will improve the efficiencies of existing process flows, as detailed in a Jan./Feb. 2019 feature article in this magazine. One thing’s for sure: blockchain is drawing a lot of attention from a number of bigname players. Discussions in this track will

There is a lot to see and do. The museums, parks, streetcars, cemeteries, historical buildings as well as the restaurants and bars have so much to offer. This May, there is an added attraction: Media Finance Focus 2019, which is MFM and BCCA’s 59th annual conference. It will be held at the Hilton New Orleans Riverside May 20 to 22, and it’s jam-packed with around 80 different informative sessions. There are plenty of opportunities to increase your knowledge about some of media’s most intriguing (and sometimes frustrating) developments.

define what blockchain is, how the technology works, what the problems are, what the future holds and, more importantly, what opportunities exist for media companies. Separately, the games track will survey the digital revenue landscape – opportunities as well as traps. It will delve into monetization strategies for all companies in the sector as well as game financing and publishing strategies for independents. Game development insights will also be a focus. And, back by popular demand, there also will be a session on games valuation.

Video’s New Frontiers

Much is going on in the world of television, from the standpoints of both broadcasters and services related to multichannel video

programming distributors (MVPDs). Two groups – the Television Committee and the Networks, Programming, and Streaming Committee – are on the case, developing two separate tracks. Within the Television Committee track, there will be a session on the next generation technology standard, ATSC 3.0, which is already up and running in test markets. This exciting new technology will present a host of new opportunities to station groups. (For a taste what of what they are, read John Hane’s feature article in this issue, starting on page 18.) Also look for a session on automated sales platforms, which are spurring some excitement among station groups. Although they also face some challenging issues. “Challenging” also is an apt description The Financial Manager • March/April 2019 23

CONFERENCE SNEAK PEAK of TV ratings these days. There will be a discussion about what to measure and how to measure it, as well as information about how competition between the big providers is driving technology. Another TV session will center on worrisome regulatory changes – what the Federal Communications Commission is up to and how to unpack those repack rules. Streaming services will also get some exposure in the television track. Meanwhile, the Networks, Programming, and Streaming Committee (formerly known as the Cable Committee) has developed a wide-ranging track to address the needs and concerns of content providers. It’s featuring an examination of direct-toconsumer (DTC) and subscription video on demand (SVOD) opportunities and how people involved with finance, accounting and forecasting should deal with them. This track will also focus on how social media is being used to lure viewers to different platforms and to promote specific content or channels. Another session will focus on measurement issues related to streaming services and cross-platform usage. Also in the committee’s crosshairs will be

a discussion about how mergers and acquisitions are affecting content providers.

Radio & Newspaper Advances

Growing the top line is on just about every manager’s mind within the radio sector, and digital sales are a key area for potential growth. The Radio Committee will present some success stories on both those fronts. The radio track also will look at how robotics and office automation will impact the industry, and more importantly, the finance department. Another session will uncover insights about podcasts and how radio is in a wonderful position to capitalize on them. And it wouldn’t be a MFM conference without an examination of music licensing issues, a complicated area for radio broadcasters. The Newspaper Committee is planning a deep dive into the world of programmatic sales and digital advertising. Other newspaper sessions will answer some big questions. For example, how can a newspaper deal with an advertiser

IN THE BIG TENT

HE CONFERENCE MORNINGS WILL

kick off with some dynamite general session speakers. Among them is Louisiana native James Carville, a political commentator and media personality who is a prominent figure in the Democratic Party. Carville was a lead strategist for the presidential campaign of then-Arkansas Governor Bill Clinton. He was also a cohost of CNN’s Crossfire and has appeared on CNN’s news program The Situation Room. His accomplishments also include a weekly James Carville program on XM Radio and he’s been a Fox News contributor. In 2007, Carville returned to his home state, where he served as an advocate for the City of New Orleans. He recently wrapped an almost decade-long professorship at Tulane University. Now he’s teaching at Louisiana State University’s

Manship School of Mass Communication. MFM has also invited a convicted felon to speak. That’s right; you read that correctly. He is none other than Aaron Beam, cofounder of Healthsouth and the company’s first CFO. From 1984 to 1996 he helped grow Healthsouth into a Fortune 500 company. However, in 1996 Beam took part in an Aaron Beam accounting scheme at the company that resulted in one of the largest corporate frauds in the history of the United States. In 2003 he pleaded guilty to the crime and was sent to federal prison. In the last 10 years, Beam has spoken to over 500 different groups, at universities, associations, companies, churches – and now MFM. He’ll discuss how frauds occur, who is actually responsible and what can be done to prevent them.

24 The Financial Manager • March/April 2019

in trouble? Should it take the beleaguered client’s ad, and what is the recourse in the event of a Chapter 11 filing? Some newspapers have cut the number of days they print, in favor of digital distribution. What does that do to the bottom line? Tougher times and cuts put stress on employees. So the newspaper track will also look at managerial skills that can motivate and help retain staff in that environment. Another discussion will focus on the cost savings that automation and robotics can provide, along with the possibility of greater efficiencies and accuracy. Subscriber packages and promotions will be discussed. A session on newspaper valuations, looking at the latest numbers and trends, is also on tap. And newspaperfocused attendees can also hear from the Alliance for Audited Media on opportunities generated by the wealth of data that it offers.

BCCA, Taxes & Accounting

Artificial intelligence and workplace automation are affecting the world of credit as well. This year’s BCCA track will examine how companies can automate part of the credit approval process, so that once a credit application is submitted, it will automatically generate a credit report. And credit scores can be tailored to specific elements that a company wants to include. The BCCA track will also look at the world of mergers and acquisitions – how changes to a company’s portfolio will affect operations in the credit department. Another session will take a hard look at Chapter 11, especially in light of significant retail bankruptcies that have occurred or are pending. Meanwhile, the Tax Committee has put together a robust lineup. This track has relevant material in it for the tax professional as well as those with ancillary tax responsibilities. In addition to federal and state roundtables and updates that have been so wellreceived in the past, the tax track will look at international issues and how they impact American companies. One session will examine and analyze tax research and tax preparation software. Among the topics covered will be the implications of the new lease accounting standards and an evaluation of credits and incentives – what they might mean to your company.

Executive compensation rules, in light of recent tax law changes, will be covered in a separate gathering. The Accounting Committee has been busy developing sessions related to new accounting rules. Revenue recognition has been a big area of concern in the public sector, and now private companies need to change their procedures. This track will look at lessons learned on those fronts. You’ll also have an opportunity to hear about changes in lease accounting rules – what is new and how new rules are implemented. Office automation and robotics will also be in the limelight, as will cybersecurity, including details about the latest scams and protections.

Roundtables & Round-Ups

One of the signature elements of Media Finance Focus is its series of roundtables sprinkled throughout the conference agenda. These informal gatherings help like-minded people share information and solutions. The peer-to-peer discussions will focus on TV, radio, cable, newspapers,

IN THE DIGITAL GROOVE No matter what discipline or media sector you hail from, matters related to digital have probably grabbed your attention. The Interactive and Digital Committee has you covered. Here are some questions that will be answered in its conference track: ■■

What is the business strategy of some of the big digital players? What is in the works for Netflix, Hulu, Roku and other streaming platforms?

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What is the effect of digital on traditional media? How can websites attract new people in key demographics? How are digital ad sales tracked and evaluated?

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How does data create targeted ad opportunities and create higher value for advertisers? How can this data be collected, aggregated and used?

taxes, credit, games, small companies and the special interests of young professionals. When the workday has ended, round up your buddies and new friends for some fun. The Hilton New Orleans Riverside is attached to the Riverwalk – a shopping center with many ways to get in trouble. Plus, it’s only a beignet’s throw from the Mississippi River, the Audubon Aquarium and the shops at Canal Place. Then put on your dancing shoes and bring your appetite to B.B. King’s Blues Club in the heart of the quarter for the Monday night

offsite event. Other musical events, including artists from BMI, are planned as well. MFM and BCCA are looking forward to seeing you and your colleagues in New Orleans. Register online and find out even more information at mediafinancefocus.org. W. Charles Warner, Jr. is the president of Broadcast Finance Inc., a media management consulting firm. He serves as MFM’s conference program director and chief financial advisor. He can be reached at charlie.warner@mediafinance.org.

The Financial Manager • March/April 2019 25

LAST WORD

Cutting Some Slack

When clients ask for more time to pay their debts, ask critical questions and consider the impact it would have on your company. BY MICHAEL DENSON

mong the more frustrating challenges that credit and collections professionals face are repeated requests, and sometimes demands, from customers for extended payment terms. Making the right decision for your company involves a careful investigation into the reasons for the request, and how to respond. First you must understand the “why.” Seek to determine if your client is going through a temporary cash flow problem, or if it’s permanent. You may learn that there is a change in the industry that is causing a general concern. Or perhaps the customer is making the request because everyone else is asking (and getting) extended payment terms. Maybe the customer has adopted a new corporate policy that extends to all vendors. Or it could be that the request emanates from your sales department. Ask questions to get at the root causes.

FUTURE SCENARIOS

It’s vital to know how a given extendedpayment agreement will impact your company. Consider the size of the client company, and if there’s a chance that you might lose its business if you don’t agree to its request. Maybe you won’t lose its business entirely, but a sizable chunk. Conversely, maybe you might get more business from the company if your terms were more lenient. As you contemplate those dynamics, take a look at the customer’s payment history over the past year or so. Has their payment history changed? Scrutinize the last document that you received from the customer that specifically mentions your payment terms. This might be a signed credit application, agency of record (AOR) document, insertion order or a side letter. The last document received usually supersedes all previous documents. Its 26 The Financial Manager • March/April 2019

Your customer has already agreed to your payment terms when they first became your client, and similar language should already be in your credit application. However, how many times have we seen that fail to work or we just didn’t enforce it? An alternative comment to add to the communication could be something like: “If the revised payment terms are not strictly adhered to, the extended payment terms will be cancelled with a 30-day written If you agree to notice and the original payment extended payment terms will once again be in terms, try to avoid effect.” Your legal counsel can firm this up if you decide to use putting it in writing a clause like this. ... A written stateAdding a comment in a side ment may only agreement about extending the cause further delays payment terms is just giving you more protection. The agreein payment. ment, whether sent by email or in the form of a letter, should be addressed to an officer or handled it. Belonging to an association a financial person at the advertising like the BCCA or a credit group like the agency and/or the advertiser. Their National Media Credit Professionals response should also come from that (NMCP) may prove very beneficial in person with their full name and title on getting information from your peers. the communication. Bottom line, it’s always a business deciTO WRITE, OR NOT TO? sion that you and the management of your If you agree to extended payment terms, company must make together. try to avoid putting it in writing. Some of The more challenging part will be the our customers pay late as it is. A written follow up for payment when the new statement may only cause further delays payment terms kick in payment. Push back and just say “no” in. If you stay on top whenever possible. of your customer, If that’s not possible consider adding a they will see that you comment to your written communication mean business, and saying that “in consideration for (your hopefully they won’t company’s name here) extending payment take advantage of terms from ___ days to ___ days to be your generosity. effective as of (date), (your customer) Michael Denson is director of credit agrees to pay all late fees, collection services for NMCP, which is managed in and related fees as well as interest at the partnership with ABC-Amega. He can be maximum monthly amount allowed reached at (716) 878-2860 or michael.denson@abc-amega.com. by law.” content may indicate that the terms on you credit application are no longer valid. Verify this with your legal counsel, if necessary. Also, determine if there are any contracts in place that may have to be amended if you agree to extend the payment terms. Ask others in your industry if they have been approached with the same request/ demand. If so, try to learn how they’ve

As a BCCA member, you’ll connect with knowledgeable credit professionals from 600+ media organizations. You’ll learn through our industry publications, networking events, conferences and seminars. Join our Industry Committees and be part of the group that influences and educates media credit professionals across the U.S. and Canada!

Join BCCA now.

Contact Arcelia Pimentel for information and to become a BCCA member: 847.999.2104 or 847.881.8757 | apimentel@bccacredit.com

MORE technique. MORE tact. MORE client retention.

When you know exactly what to do and exactly how to do it, you can be MORE successful. At Szabo Associates, we’ve spent decades learning and refining the tricks of our trade. So when clients come to us for help collecting media receivables, no one can do MORE than we can. There is considerable technique and technology involved in collections. We have the largest media accounts database in the world containing information on over 600,000 media advertising companies. We can immediately access this data, check payment histories and patterns, analyze them and plot the exact strategy needed to maximize collection. No one else has MORE information and MORE knowledge on how to use it.

Tact is equally important. This doesn’t come from a computer or a manual. It only comes from experience. Knowing when to be firm and when to be gently persuasive can make all the difference. Not only can MORE of the debt be recovered, but valuable client relationships can be preserved. At Szabo, our job is to recover your money without losing your clients. We have the technique, the tact and the experience to do both. It’s why Szabo can do MORE.

Szabo Associates, Inc. 404-266-2464 www.szabo.com info@szabo.com

MORE is better than less.