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INFORMATION AND INSIGHT FOR MEDIA FINANCE PROFESSIONALS MARCH/APRIL 2020 THE FINANCIAL MANAGER

HOORAYFOR HOLLYWOOD Media Finance Focus 2020 is loaded with sessions to deepen your knowledge, along with some fun social events. ALSO INSIDE

The Impact of Cloud Gaming New Political Ad Regulations

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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

SPECIAL REPORT:

CREDIT & COLLECTIONS

10 Our Mutual Headaches BY C. ROBIN SZABO

JANET STILSON, Editor TFMeditor@MediaFinance.org

Credit professionals express deep frustration on several fronts in our unofficial survey. But they also suggest ways to “cure” the problems.

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 Clearing the Picture BY CANDICE HERBST

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. Subscription $69.00 per year.

A series of best-practice steps that can help improve forecasts for accounts receivable and collections.

18 The Gaming Disruptor BY CHRIS ARKENBERG

Cloud delivery marks the newest chapter in video gaming’s evolution. It could shift the balance of power.

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 California Dreamin’ BY W. CHARLES WARNER

Media Finance Focus 2020 touches down in Los Angeles with a bountiful array of educational and entertainment options.

DEPARTMENTS 4 From the President Power of Invention 6 Dear Expert Political Ad Regulations 7 Human Factor Changing Your Behavior

9 Association News Upcoming Events 9 Board of Directors Leaders of the MFM Pack 26 Last Word Application Pushback The Financial Manager • March/April 2020 3

FROM THE PRESIDENT

The Power of Invention

A critical way of reaching new levels of success involves feeling the fear but embracing novel solutions anyway. setting them up to complement and compete with other entertainment options. Taking “ACTION” to invent the future hat maxim has been credited to is the theme for Media Finance Focus everyone from President Abraham 2020, our upcoming annual conference Lincoln to management consultant in May. In his article, Charlie Warner, Peter Drucker and computer scientist Alan our conference program director and Kay. I used to have it posted on the wall in CFO, gives you a sneak peek at the more my home office. Josef Martens’ “Human than 80 educational sessions and multiple Factor” column for this issue of TFM made networking events. To paraphrase Martens, me think of it again. we are being bold with our plans. Martens approaches the subject from the At first glance, the “Dear Expert” other side. He shows us what happens when response from Lerman Senter’s Sally we don’t embrace change. Buckman could be That’s a compelling idea for viewed as what Martens Josef Martens our time and an interesting calls “barking at the shows us what thought to keep in mind as unknown.” She’s answering you read the contributions for happens when a question about new this pre-conference issue. Federal Communications we don’t embrace Commission rules for Szabo Associates’ Robin Szabo tackles the need for political ad reporting. change. That’s a change head-on with his Instead, I see this as an compelling idea article for our special report example of what Martens on credit and collections. refers to as “responding with for our time. He interviewed several grace” when others fear professionals in that field to determine what the unknown. At challenge involves new frustrates them today. More importantly, documentation requirements for political he asked them for suggestions that might ads, including issue ads. Buckman make their jobs easier. I encourage you outlines these requirements and advises to read what he has to say with an eye companies to do their best to comply. to how you might make some of these Finally, in our “Last Word” column, suggestions a reality at your company. Michael Denson of NMCP summarizes the When Candice Herbst took on the current state of pushback on media credit question of improving cash forecasting applications. It fits into Martens’ advice to for Discovery, she began with the goal in “revisit our plans and focus on our power to mind. Then, she took steps to determine make them happen.” Perhaps, rather than what her team could do to create success. feeling frustrated, it is time to make bold One of the key takeaways is that the plans and “be ready to stand up for them.” process cannot happen in a vacuum. If you get a chance, I encourage you to The summary of what she learned is the view the YouTube video Martens references second offering in our special report. in his column. Then, Video games companies are envisioning plan to join MFM and the future, and it includes cloud gaming. BCCA as we continue Or, so Deloitte’s Chris Arkenberg explains to reinvent the assoin his revealing article. Of course, this ciations to make you challenges the status-quo, and there are more successful in this technical challenges inherent in delivering ever-changing world “the dynamic, fast-paced, interactive of media finance. experience of competitive video games.” Despite this, Arkenberg sees this move Mary Collins is president and CEO of MFM and BCCA; Mary.Collins@MediaFinance.org. expanding the reach of game titles and “The best way to predict the future is to create it.”

4 The Financial Manager • March/April 2020

EDITORIAL ADVISORY BOARD MICHAEL DENSON Director, Credit Services NMCP INC. GREG LECHOWSKI Market Controller, Phoenix Bonneville International CAL MOSTELLA Vice President, Treasurer WarnerMedia JOHN SANDERS Principal Bond & Pecaro MEREDITH SENTER Member Lerman Senter PLLC C. ROBIN SZABO President Szabo Associates JAMIE GRANDE MFM/BCCA Staff Liaison

CONTRIBUTORS CHRIS ARKENBERG Deloitte SALLY BUCKMAN Lerman Senter PLLC MICHAEL DENSON NMCP Inc CANDICE HERBST JOSEF MARTENS C. ROBIN SZABO Szabo Associates Inc. W. CHARLES WARNER MFM & Broadcast Finance Inc.

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The Financial Manager • March/April 2020 5

DEAR EXPERT

A Political Quagmire

The FCC has issued new requirements that pertain to companies’ online political files. SALLY BUCKMAN explains the complexities. Dear Expert, Is it true that broadcasters are now required to review every issue ad they receive and include a list of every candidate and issue mentioned in an ad in their political file? Does the FCC understand how many ads my station receives during a political season? Grumbling in Greensboro, NC Dear Greensboro, Unfortunately, what you’ve heard is true. Although the Federal Communications Commission (FCC) has been asked to reconsider certain recent decisions, for now companies are required to comply with new and complex political file requirements. They have heightened importance during the 2020 election cycle because political files are part of a licensee’s online public inspection files. That makes it easy for political consultants, public interest groups and the FCC to review them. Political files maintained by TV and radio stations, cable operators that originate programming and satellite television and radio providers must include the following information: rates charged; dates and times spots air; the type of time (e.g. non-preemptible or preemptible); and the name of the candidate, election or issue referenced. For issue ads, the name of the entity purchasing the ad is required, along with contact information and a list of executive officers or board members. Generally, licensees include in their files a PB-18 order form published by the National Association of Broadcasters (or another similar form created by a licensee) and an invoice. The FCC requires the information to be put in the file immediately, which is generally interpreted to mean within one day. However, invoices can be uploaded as soon as they are prepared. Three decisions released by the FCC in late 2019, which resolved complaints against 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 2020

The FCC’s decisions also make clear that political files must disclose the list of chief executive officers or board members of a sponsoring organization. If a form given to a licensee only lists one official associated with a sponsoring entity, the licensee must ask the advertiser whether there are several television stations, made additional persons who should the process more difficult. be disclosed. Licensees are now reBroadcasters and cable quired to identify for each operators have asked the ad all political matters FCC to reconsider severof national importance al aspects of the commisreferenced, including the sion’s recent decisions. names of all federal candiThey urge the FCC to dates (and offices they are rely on their reasonable, running for), as well as all good faith efforts to identielections for federal office and fy and disclose the elections, all national issues discussed. races and issues that political Broadcasters Also, an ad that references a ads reference. Given the frefederal candidate but not a netic pace of ad sales during and cable specific election would still political seasons, the media operators have trigger disclosure obligations. companies point out the funasked the FCC In one decision the FCC damental unfairness of reto reconsider concluded that a Georgia quiring stations to guess how TV station whose form refer- several aspects of FCC staff will interpret the enced the number of a Conthe commission’s requirement to adequately gressional district race – GA identify and describe various CD-6 – should have included recent decisions. elections, races and issues. the name of the candidate They also asked the FCC to and specific race. In another decision, the confirm that the clarifications apply only commission stated that a Democratic Con- to issue ads not candidate ads. gressional Committee ad that referenced a The 2020 election season will likely be congressional candidate and criticized his well underway by the time the FCC issues lobbying for a special interest group that additional guidance rereceived taxpayer funds at a time when the garding these concerns. country faced record debt should have refer- In the meantime, comenced the candidate and identified national panies must do their debt as an issue even though the substance best to comply with the of the ad did not discuss it. new requirements by Another station was admonished for iden- carefully reviewing the tifying the sponsor of an ad with an abbrevi- information included ation – DSCC-IE – rather than Democratic in their political files. Senatorial Campaign Committee. The FCC Sally Buckman is a member of the law firm admonished the stations subject to comLerman Senter PLLC, which represents media plaints but said that in the future stations that companies. She can be reached at (202) 429-8970 or sbuckman@lermansenter.com. failed to comply would be subject to fines.

HUMAN FACTOR

Stop Acting Like a Dog

Rather than barking at the unknown, test out new patterns of behavior that will help you attain your highest goals. BY JOSEF MARTENS

e’re kidding ourselves. We say that we’re open to new things; that we welcome constructive feedback that helps us grow; and that we embrace change. It’s mostly a lie. The reality is that we keep doing the same things again and again; we seek validation more than we seek challenges; and we’re comfortable with the way things are. (And if you want to push back by telling me that you travel to new places to see different things, I’m willing to bet that the way you travel has been the same for quite some time.) When something new and unknown comes along, very often we are not curious about it, and it scares us. The consequence: we act like our dogs. We “bark” at the unknown. Since we’re smarter than dogs, our “barking” comes in another form: we declare that the unknown is wrong or ridicule it. Want an example? Go to youtube.com and search out “what is internet explained by Bill Gates”. It will take you to a two-minute excerpt from Bill Gates’s appearance on the Late Show With David Letterman in 1995. There are several things you will see in the video. You will notice that it’s so easy to criticize and ridicule something that we don’t know about. You will also see that showing grace in the face of ignorance – as Bill Gates does – is immensely powerful. And finally, with 25 years of hindsight, we realize that the future belongs not to those who bark at the unknown but to those who create and embrace it. How should we deal with the unknown, and how do we get to be like Bill Gates in the video? The first step is self-awareness: we need to realize that we mostly go about life in recurring patterns that we’ve developed over a period of time. There seems to be a benefit to what we’re doing. We experience it as successful and rewarding. We follow our predictable patterns, and we get what we want (i.e., a reward for our behavior). This reinforces our pattern.

What we don’t realize – because we don’t experience it – is the cost that we pay when we follow the same patterns. We’re missing out on new avenues of exploration. We lose the ability to experience ourselves as successful in a completely new way. Consider the example of a leader who runs team meetings in an authoritative style. Meetings are streamlined; the agenda is followed; action items seem clear; and no one complains. It looks like excellent benefits. Yet this leader does not experience the power of the team’s creativity, doesn’t see the benefit of dealing with conflict in open discourse, doesn’t notice what they can gain from letting go of their need for control and allowing someone else to shape the action. The second step in dealing with the unknown is to focus less on the context. Whatever happens in our environment – what we encounter as either known or unknown – is the context in which we operate. The more we focus on the context, the less we’re able to focus on our actions and our power to create. Let go of the considerations of what happens around you. Instead, focus on what you want to create. You probably have a performance plan for your role or a plan for your business. Or

maybe there are some goals related to your new year’s resolutions. Any of these are great because they are all a step toward envisioning and creating the future. Revisit your plans and focus on your own power to make them happen. (Let go of preconceptions about whether the results of your intended actions are known or unknown, or if they will be difficult to accomplish.) Give these plans an extra push. If you want to be successful in breaking through the unknown (and be more like Gates than Letterman), here’s my advice: ■ Be bold with your plans; ■ Be ready to stand up for them; ■ Be graceful when you see fear of the unknown in others. The more you see others bark at the unknown, and the more you develop empathy and grace for their situation, the less you will feel the need to bark as well. And the future will be yours. Josef Martens helps organizations dramatically improve their performance. You can reach him at JM@JosefMartens.com or (240) 938 1274.

The Financial Manager • March/April 2020 7

WE’RE ROLLING OUT THE RED CARPET! LOS ANGELES, CA | MAY 18-20, 2020 Secure your spot at MFM & BCCA’s 60th Annual Conference. Registration for Media Finance Focus 2020 in LA is now OPEN and it’s sure to be the hottest ticket in town! From the moment you arrive in LA, it will be Lights, Camera, ACTION. You’ll have the chance to soak in expert speakers, engage in networking opportunities and sharpen your knowledge with cutting-edge content.

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HOST A GROUP MEETING:

ASSOCIATION NEWS

MFM

[ AFFAIRS TO REMEMBER ]

As of July 2019

Atlanta-area members will have a chance to network and get fresh educational insights at the spring Localism event on March 18, 5-7:30 PM. It takes place at Nine Mile Station on top of Ponce City Market. A New York Localism gathering is planned for March 19, 8:30–10:30 AM, at the Hearst corporate office in Midtown.

BOARD OF DIRECTORS CHAIRPERSON RALPH BENDER Manship Media VICE CHAIR/CONFERENCE CHAIR MELISSA MITCHELL Bonneville International SECRETARY/CONFERENCE CO-CHAIR DAVID BOCHENEK Sinclair Broadcast Group

Local Connections

Very First Tax Summit

With an eye on providing deeper insights

for tax professionals, MFM is debuting the Media Tax Summit on Aug. 11 at Tribune Publishing’s offices in Chicago.

Our Annual Outlook

Examine some of the critical issues media companies will face in the coming year by attending MFM’s annual Media Outlook seminar. It takes place Lowenstein Sandler in Midtown New York on Tuesday, Sept. 15. Look for more information about these events at mediafinance.org. MFM will fill in the details as the event dates draw near.

TREASURER JEANA STANLEY Hearst Corp. IMMEDIATE PAST CHAIR CINDY PEKRUL WarnerMedia PRESIDENT & CEO MARY COLLINS MFM/BCCA

MFM/BCCA DIRECTORS MARCUS ANJEWIERDEN Deseret Management Corp. DAVE BESTLER Hubbard Radio LORI BROCK Meredith Local Media Group

PAUL NESTEROVSKY Sinclair Broadcast Group CHRISTINE OLIVER Deloitte KIM PARKER Graham Media Group

TRACY CLARK Hearst Television

PAUL RAHMLOW Midwest Communications

LAURA GRAVES ABC-Owned Stations Group/WLS-TV

ANTONELLA RICCIARDI NBCUniversal

STEPHEN HALL Las Vegas Review-Journal

JOHN SANDERS Bond & Pecaro

JENNA HARDY Gearbox Software MIKE LAVEY Tribune Publications LORI LOCKE Discovery CAL MOSTELLA WarnerMedia

DEE STEVENSON Gray Television MARIE TEDESCO Beasley Media Group BCCA Board Member Rep ED IENNER Meredith Corp.

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The Financial Manager • March/April 2020 9

SPECIAL REPORT: CREDIT & COLLECTIONS

10 The Financial Manager • March/April 2020

Our Mutual Headaches Credit professionals express deep frustration on several fronts in our unofficial survey. But they also suggest ways to “cure” the problems. BY C. ROBIN SZABO

HILE THERE’S BEEN SOME

wondrous changes in the media marketplace in the last 10 years, credit professionals are still plagued with some problems that were around long before we knew about clicks, bots and hashtags. Recently, I checked in with some managers who enthusiastically “dumped their buckets” as they explained what really drives them crazy. In sharing their frustrations and experiences, they also recommended a long list of possible solutions, included in the sidebar on page 12. Their comments can be broadly categorized as liability; payment terms; agency inefficiencies; credit information; payments; and inter-organizational issues. What follows is a summary of the major challenges.

LIABILITY BREAKDOWN “I think our biggest issue of all stems from the dreaded sequential liability,” stated one respondent.

How many years (decades) have we been talking about this? Joint and several terms, which hold both agencies and advertisers liable for payment until media is paid, have always been preferred and recommended position of media companies. Unfortunately (but predictably), agencies have largely embraced the sequential position, which holds them liable only if and when the advertiser pays them. One industry source, whose buys and agreements are mostly with agencies, has been dealing with the consequences of a lack of signed paperwork outlining liability. An inability to provide evidence of the agreement handicaps her case when litigating against small and midsize agencies that deny liability because they have not been paid by the advertiser. “The problem happens mostly because the agency has not responded or informed us that it has not been paid by the client,” she explained. “Once we move to collections or litigation, the agency then invokes sequential liability as the reason for nonpayment.” When managers receive what should be

The Financial Manager • March/April 2020 11

considered proper paperwork, the issue is far from settled, according to others contacted for this story. Even when a given media organization’s terms and conditions – which include the joint and several clause – are signed by the agency, the agency will often refuse to pay the delinquent account because it has not yet been paid by the advertiser. “Agencies are citing sequential liability as the industry standard,” said one respondent. “On the other hand, they do not follow the media vendor’s terms for payment and offer terms to the advertiser on our behalf without our knowledge in order to get the business, passing on the risk to media. Agencies can’t have it both ways.” Adding insult to injury, collections may then contact the advertiser directly, only to learn that the agency has not yet billed the advertiser! Agencies will sometimes embed their own comments regarding their liability

position in small print within sales comments on insertion orders. These never make it to the credit and collections department for review before orders are accepted. One manager found it interesting that some small and medium agencies provide

“Some clients threaten to move business if we don’t accept their credit card payments, so it’s a constant struggle.” — Anonymous Credit Manager

insertion orders that actually claim financial responsibility for advertising for their client. But when the account becomes

BUT WAIT: THERE ARE SOLUTIONS

HILE A CLEAR-CUT CREDIT POLICY AND AGREED-UPON TERMS AND conditions are ideal, that’s not usually possible in the real world of credit and collections. While the respondents to our unscientific survey identified plenty of rough terrain that credit and collections departments must navigate, they also offered up some possible solutions to make the “road” smoother moving forward: 1. Create more rules and regulations with regard to liability. Define the “industry standard” more clearly. 2. Litigators and third-party collectors should immediately push back on agencies that refuse to pay on the basis of sequential liability and demand to see their written client agreements and client contact information. Credit and collections managers usually do not have that information. 3. If getting a signed credit application from the advertiser is not possible, get an agency-of-record letter. That will help resolve problems when an agency will only sign an insertion order. 4. Make sure you get the buyer to sign an insertion order that clearly includes your joint and several liability clause. 5. Offer to help the agency in its collection efforts by calling the advertiser about the delinquent payment. 6. Work to develop relationships whenever possible with agencies. 7. Work harder on smaller accounts; you may have more influence with them. That could help keep your days sales outstanding in line. 8. Push back on customers who attempt to dictate payment terms. Consider suspending services to those who believe they deserve extended terms. 9. Use any opportunity to reach out and emphasize your payment terms with customers. 10. Limit credit card payments to cash-in-advance accounts. 11. Regularly communicate with agencies and account executives on the status of accounts. 12. Impress on upper management the need to have a credit policy as well as terms and conditions that all entities and departments understand and agree to enforce.

12 The Financial Manager • March/April 2020

delinquent and collections begins its process, the agency suddenly claims that it has not been paid by the advertiser and that it is covered by sequential liability. DEBATES ABOUT TERMS Who gets to dictate payment terms? The organization extending credit should have the right to determine its terms and conditions. However, many customers refuse to see it that way. “Large agencies are paying later and later,” said one manager. “Payments within 90 days used to be considered the industry standard, but many have pushed that out to 120 days.” The primary challenge facing one respondent, whose company recently acquired another, is changing the mindset of the purchased company’s established customers. “They were accustomed to paying net 90; however, our policy is net 30,” he said. “As we know, this is one of the hardest behaviors to change with customers in any industry.” As with liability clauses, agencies will sometimes supplant media payment terms with their own terms in insertion orders, which do not make it to credit and collections prior to acceptance. There’s also a separate issue related to terms: customers continue to request that media accept credit card payments. “Our policy is to limit credit card payments to cash-in-advance accounts,” said one manager. “From a financial standpoint this is what we want to do, because the fees associated with credit card payments are huge.” Refusal can lead to friction, both internally and externally. “Sales folks don’t necessarily agree with us because they want to please the clients,” she said. “Some clients threaten to move business if we don’t accept their credit card payments, so it’s a constant struggle.” COMMUNICATIONS CONFUSION “We are at the mercy of the efficiency of the agency’s billing and collections departments,” said one senior manager. “The large agencies continue to downsize and are unable to keep up with clearing our invoices in a timely manner.” She noted that when checking up on unpaid invoices, agencies will sometimes report that they are discrepant for a couple of

SPECIAL REPORT: CREDIT & COLLECTIONS months “just because the buyer has not cleared it in their own system.” Communication is clearly an issue. “Sometimes orders are entered with a smaller commission amount than the agency takes, and sometimes it’s vice versa,” said one respondent. “It’s a lot of work to stay on top of.” What’s more, some large agencies receive additional commissions related to certain buys based on share, which impacts the amount media is paid. “It varies

against walls,” said one source. There’s a related problem: many sales representatives consider the agencies that they work with to be creditworthy, regardless of the advertiser. That’s fine, until the agency has not been paid, and there is no signed credit application on anyone to prove payment liability. “Often we are unaware of the nonpayment until the process has moved to third-party collection or litigation,” stated one manager.

“It never ceases to amaze me how stations are totally surprised, month after month, when accounts end up on the collections list.” — Anonymous Credit Manager

from market to market, and keeping up with these is frustrating at best,” said another manager. His main challenge involves customers that send a payment without providing remittance information. “This usually leads to payment either being misapplied or unapplied, both of which are nuisances,” he said. Sometimes payments that have nothing to do with accounts receivable show up in AR lockboxes, another time-consuming problem. “This causes my cash team to perform internal reconciliations to ensure that we only account for AR payments received in our monthly cash received reports,” he said. Disputed invoices, particularly digital invoices, continue to plague managers. “Maybe because it’s still a relatively new field, but advertisers often demand more substantiation for payment,” stated one respondent. “They claim that an order was canceled or that they didn’t get promised results. This is our most difficult type of revenue to collect.” MISSING APPLICATIONS It’s a given that a signed agency credit application and signed terms and conditions will minimize exposure. But getting that done is a challenge. “Most [agencies] refuse to sign and commonly respond that the competition is not asking them to provide this. So credit and collection professionals in this industry are left banging their heads

Another respondent cited problems associated with the digital market. “Many of these companies are startups,” he said, “or they have limited working capital, which makes quality credit decisions a challenge.” DEPARTMENT DISPUTES A continuing challenge among credit and collection managers is getting other departments in their media organizations “on the same page” with regard to policy and procedures. Each unit has its own agenda, which of course relates to their paychecks, and everyone has an opinion about the role credit and collections should play. Some organizations simply do not have a clear credit policy or, even when they do, enforcement is erratic. “It never ceases to amaze me how stations are totally surprised, month after month, when accounts end up on the collections list,” said a manager, who spoke from a shared services perspective. “It has been our company policy for all local accounts to be sent to collections when outstanding invoices are permitted to age to 120 days.” Notifications to management are not always successful solutions. “In an effort to make it easier for station management, finance created a report to be saved on the desktops of the general manager and general sales manager,” the manager said. “All that they need to do is click on it and enter the date to produce a report

showing all 90-day and older accounts and the account executive’s name for each,” the manager added. “This gives them the time to meet with the account executive at least 30 days before the account ages to 120 days. The report also includes a notes field, so they can make notes before returning it to me by the 10th of the month.” The credit manager’s attempts to forestall advanced aging does not stop there. She sends two emails to each station before sending the accounts for collection. Unfortunately, these actions often cause additional problems. “I receive countless email replies asking for more time because they are going to contact the customer for payment, or they want to set up a payment plan,” she said. To make matters worse, she often does not receive these requests before the account has already been turned over to the third-party collector. “Then the stations refuse to pay collection fees because they didn’t want the account turned over in the first place,” she said. “It’s more than a fulltime job to keep track of all the requests.” Another respondent concurs. “Account executives [AEs] are concerned that collectors will harm a relationship,” she stated. “We have calls with AEs and sales managers to discuss and come up with a plan of action. Sometimes we fail, and by the time the account is sent for collection, it’s too late to collect.” Short pays for no given reason are another inter-organizational problem. Said one respondent: “We’ve developed a system where we upload short payments to a dashboard. The AE is notified and asked to give a reason. Then the adjustment goes through an approval process before we credit the balance.” All of these challenges are made even more significant because of limited collectors on staff. With shared services, there may one collector assigned to four or five markets. “Typically, they work the largest and oldest amounts first,” a respondent said. “That means that smaller balances can fall through the cracks.” C. Robin Szabo is president of Szabo Associates Inc., media collection professionals, in Atlanta, GA. He can be contacted at robin@szabo.com or (404) 266-2464.

The Financial Manager • March/April 2020 13

ADVERTISING REVENUE IS NOT VERY EASY TO MAP OUT, PARTICULARLY IN THE UNITED STATES. ROUTINELY ANALYZE THE PAYMENT TRENDS AND ADJUST YOUR FORECAST FREQUENTLY.

SPECIAL REPORT: CREDIT & COLLECTIONS

Clearing The Picture A series of best-practice steps that can help improve forecasts for accounts receivable and collections.

HERE’S A SITUATION that many of us in finance are only too familiar with. Near the end of the quarter, the CFO is hot on our heels. How are collections pacing against our target? Are you confident you will meet your numbers? Which customers have not paid yet? A chill can run down your spine. You know that certain customers typically hold cash going into the end of quarter, and although you know you have done as much outreach as you can, the customers are just not responding with a definitive confirmation that you will have their payment before the quarter’s end. In this day and age, everyone has cash on their minds. In order to remain relevant, media companies need cash to diversify their businesses by acquiring or investing in digital platforms or buying competitors. The recent mergers of CBS and Viacom as well as Walt Disney Co.’s acquisition of 21st Century Fox have also consolidated the market. That has left smaller media companies with an even greater cash need. However, forecasting cash from customers is a bit like predicting who might

BY CANDICE HERBST win the World Series when you have a wildcard team in the final. It is often the team you thought you could depend on least that comes through in the end, and the solid performers can leave you unexpectedly in the lurch. During my years working at Discovery Inc., my team developed and validated a consolidated accounts receivable (AR) and collections forecast – an effort that escalated after the company acquired Scripps Networks in 2018. We needed a new methodology that would meet the expectations of senior management but also be reasonable and reliable. The development and implementation of an enhanced model became an extensive initiative that lasted over six months. Here are some of the best practices we put in place that allowed us to more accurately forecast cash collections and receivables: UNDERSTAND THE REVENUE FORECAST —

This was the most critical improvement we made to our process. The financial planning and analysis (FP&A) group compiles a revenue forecast working closely with sales. Often the billing team is not part of that pregame planning. This can result in a lot of disconnect between

where sales think they are driving the business and how the billing team is translating that into collections. It’s about getting the right hand to talk to the left, and the earlier the better. To use another analogy, it can be like getting the pitcher to throw a ball the way a batter on the opposing team expects. Translating sales into cash means getting to the heart of what sales is doing as they are planning new business, so that you can begin to anticipate the potential revenue and what impact it will have on your billings available to collect. Salespeople don’t always consider the cash impact of the deals they enter into, largely because their compensation is not frequently or solely dependent on the collection terms. It’s mostly based on closing the deal and ensuring that revenue will increase. After understanding the revenue forecast with the sales inputs, we mapped out the timing differences between the forecasted revenue and the billing and collection of the customers. Oftentimes a sales team gets creative with larger customers by bundling certain products together; extending payment terms in certain cases; and in some surprise circumstances even requiring a certain amount of cash upfront. The Financial Manager • March/April 2020 15

In another example, you could have customers billed with significant delay that have prompt collection terms once the invoices are issued. Planning for prompt invoicing of these deals can improve collections in unfavorable sales circumstances. UNDERSTAND PRODUCTS & PAYMENT TERMS — This involves knowing more

than just your company’s product catalog. You want to understand how you bundle the products, how the deals are priced and what is important to the customer. Many media companies have three types of revenue: affiliate fees, advertising and the sale of other products. Affiliate revenue is typically contractual, and as long as you are not renegotiating your contracts, timely invoicing usually results in timely collection within your contractual timeframe. Advertising revenue, on the other hand, is a bit trickier, particularly in the U.S. Advertisers are affiliated with agencies who may also be affiliated with holding company agencies. Although you are ultimately selling to advertisers, the payment is coming from the holding company agency after they have been paid, if the agency requires sequential liability terms. Payment terms are negotiated between

the advertiser and the holding company agency, and they may not align with the previous terms that we may have with the holding company agency that is paying us. Oftentimes the holding company agency will allow longer payment terms to the advertisers. Collecting digital revenue has its own peculiarities. Sometimes digital advertising deals are combined with transactions for other media within a large agency; sometimes they may be standalone arrangements. The collection of standalone deals is more like a consumer-to-consumer (C2C) transaction from a collection perspective. If the advertising on a digital platform is connected to large advertising agency, it will likely follow the payment attributes of the agency or the holding company agency. C2C digital customers may pay in advance through the app they are using. Although you have revenue from the customers, you may never see an increase in receivables for this revenue. DISAGGREGATE YOUR REGIONS — We

found that it was imperative to disaggregate our forecast by region: U.S., Europe, Latin America and Asia. Within those regions, we also had many sub-regions, which often aligned with a particular country.

PULLING IT ALL TOGETHER A “to do” list of actions will make your forecasting much easier: ■ Start early with your forecast for the next year – preferably during the fourth quarter of the previous year or sooner, if data is available. ■ Approach the forecast from a high-level analytical perspective first, understanding the overall company’s data and cash needs, including days sales outstanding and actual cash expected. ■ At the same time, compile a more detailed calculation using revenue as a starting point. Start early with your collections forecast, working with financial planning and analysis (FP&A) and sales to understand exactly what revenue will look like. ■ Derive forecasted revenue by region and by product. Make adjustments for billing terms, delivery of products and other known issues to determine forecasted billings. ■ To determine the forecasted collections, apply to the disaggregated revenue the payment history using data from your sub-ledger at this disaggregated level. ■ Validate, validate, validate! Share your forecast with sales, FP&A as well as your billing and collections team. Let them give you feedback and bake that feedback into your forecast. Along the way, remember that your forecast is a fluid calculation. It should be updated with a regular cadence to reflect most recent trends and new payment data. Also bear in mind that a great forecast is only successful if we carry it through to the end game with timely billing and collections activity.

16 The Financial Manager • March/April 2020

In the international arena, payment trends differ substantially. You might be dealing with public broadcasters that follow the payment trends similar to a government entity. Companies in the Nordic countries typically pay in 14 days to two weeks, but those in countries like Italy typically take at least 90-120 days to pay. Latin American countries may have payment trends more like Italy. However, if you have collectors on the ground in those countries who speak the language and understand the cultural nuances, it can make a real difference in the time it takes to receive cash. In my case, the Latin American region was one of our better performing regions for collections in spite of the challenges in Brazil and Argentina. Our billing and collections team lead had a great relationship with the sales team and the customers and could leverage that advantage. In Asia, the recent challenges with repatriating money from China requires some creativity on the forecasting front. Payment is often delayed as regulatory hurdles are cleared. Lastly, if you have international operations, withholding taxes may reduce the amount of cash available to you. These rates are not insignificant. U N D E R STAN D H I STO R I CAL AC TUAL RECEIVABLES — This is about more than

just knowing your payment history. We found it beneficial to disaggregate the total receivables in the general ledger between the billed and unbilled balances and understand what is driving the balances. It is important to establish a cadence for reviewing the unbilled accounts so that items with delayed billing are promptly invoiced. Unbilled AR can be a stealth contributor to a higher days sales outstanding without this regular review of unbilled. To further improve our understanding of the fluctuations in our AR balance, we referred back to the accounts receivable roll forward that is required for financial statements. Because we were a listed company, the preparation of a quarterly roll forward provides a unique opportunity to leverage data about what is contributing to the activity in AR each quarter by region and by product. Who knew a U.S. Securities and Exchange Commission

SPECIAL REPORT: CREDIT & COLLECTIONS disclosure requirement could be so operationally useful! VALIDATE THE FORECAST — This

is the single biggest lesson that I learned in developing forecasts. The process, which must include customer-specific information, also was the most complex part of our new process, and the one that gets a lot of pushback. However, it provides some guaranty to your forecast, and it allows you to explain which customers are not providing timely payments. There are various ways to implement this. For most of us, any affiliate customers should have contractual payment terms that they adhere to. Mapping out these payments over the months in the year provides a pretty decent customer-specific forecast. Advertising revenue, on the other hand, is not very easy to map out, particularly in the U.S. Routinely analyze the payment trends and adjust your forecast frequently. One of my teams examined the cash collected for every single customer by month in the prior year. Then it applied an annual revenue increase to every

customer and used that as the basis of their collections forecast for the following year. That team met their forecast every time, and in the rare months they missed, they were able to track precisely which customer was the culprit, and management could be directed to help resolve

Have a little cushion in your forecast to address the volatility in payments and continue to work on your relationships with customers. the issues with the customer in a timely manner. This was a smaller region with less diversity in their sales arrangements, which made this is a practical approach. For most of us though, the annual increases are not uniform between customers, making that approach invalid.

Another option we used was to focus on the top 20 or 30 customers by product; review their payment history and revenue forecast; and map out expected payments. The billing team can then focus on these customers, ensuring that there is prompt invoicing and consequently a good base of regular-paying customers. One media company I talked to has determined that a significant portion of their cash from advertising revenue comes in during the same few days each month. The company plans out receipts from those customers on that assumption. So far, it is working out well for them. Here are some final thoughts: I have not identified a miracle cure for forecasting advertising customers. My advice is to have a little cushion in your forecast to address the volatility in payments and continue to work on your relationships with customers. Resolving discrepancies as quickly as possible is essential. Candice Herbst is an experienced leader in order-to-cash and forecasting for media and other companies. She can be contacted on LinkedIn or at Candice.v.herbst@gmail.com.

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18 The Financial Manager • March/April 2020

MEDIA TREND ANALYSIS

Cloud delivery marks the newest chapter in video gaming’s evolution. There are big questions about how it could shift the balance of power.

GAMING DISRUPTOR THE

BY CHRIS ARKENBERG

A S T YEAR VIDEO GAMING

moved into the mainstream. At the convergence of social streaming, smartphone media behaviors, massively multiplayer gaming networks and spectator esports, the modern video game industry is becoming a 21st century form of media and entertainment. Now, cloud gaming is emerging as a new wave of potential disruption for the industry. In 2019, two of the world’s largest digital platform companies announced their entrance into cloud gaming. This is a long-sought capability that moves game engines away from devices and into the cloud, transmitting games over networks. This could remove the need for consoles and lower the barriers of entry for would-be gamers. Games could become much larger and more immersive, running on the unlimited resources of the cloud, potentially hosting vastly more people. Although cloud gaming services have been around for some time, none have really been able to successfully compete with existing solutions. Cloud gaming is more complicated than streaming video and faces significant technical and market challenges.

The Financial Manager • March/April 2020 19

Unlike video – which is linear and essentially the same for every viewer – video gaming is highly interactive, and the view is different for every player. Latency – the time between a player’s action and the resulting response in the game – becomes very important. High latency can introduce unacceptable lag making gameplay impossible. Successful cloud gaming may require content delivery networks (CDNs) that are customized for the dynamic, fast-paced, interactive experience of competitive video games. With considerable bandwidth demands, telecoms may see opportunities in upselling subscriptions to cloud gamers, while finding a strong use case for the adoption of the 5G mobile technology standard. As 5G wireless reaches greater deployment, it can allow for faster connections. Conversely, some cloud gamers may bear the costs of higher bandwidth needs. Likewise, gamers may not yet see the value in cloud gaming, or how it could be better than their existing experiences. The video game industry is mature, and its success has

only grown. It is unclear whether the prospect of cloud gaming offers sufficient incentive for game companies and players to change how they create, distribute and consume video games. If cloud gaming is successful, it could shift

the balance of power towards top delivery networks. While the two biggest players involved in cloud gaming today are enormous high-tech corporations, a growing number of game companies are likely to pick up on the opportunity. Some have already announced

BEYOND THE CLOUDS

As a result of this shift, game companies may be starting to think HE ADVENT OF CLOUD DELIVERY IS NOT THE ONLY like broadcasters. Top titles are increasingly tracked not only by trend that is contributing to the gaming industry’s enormous counting players, but also viewers on social streaming platforms. success. Game companies are investing heavily in multi-year Traditional media companies are buying rights to bring league development of AAA franchise titles that deliver hyper-realistic matches to their broadcast and cable audiences, hoping to reach narrative experiences. They can now monetize past the point of younger generations less inclined to watch TV. purchase by selling additional storylines, capabilities and gear as Likewise, traditional sports teams, players and their financial downloadable content (DLC). More of these game worlds are being backers are investing in esports to reach people in the same deployed as durable, persistent online subscription services with demographic, who are less likely to engage virtual economies and social affordances. One of the biggest free-to-play Game companies may be starting with traditional sports. While video games have primarily drawn revenues from game multiplayer games reported earnings to think like broadcasters. Top purchases, subscriptions, and downloadable over $2 billion in 2019 from players buying titles are increasingly tracked access to exclusive experiences and virtual not only by counting players, but digital content, 2018 esports revenues saw $353 million in sponsorships; $164 million goods that personalize their play and also viewers. from advertising; and $176 million for media appearance. They have hosted celebrity rights, according to the research firm Newzoo. events and brand crossovers, showing how such games can now However, it’s unclear if esports can work with traditional act like sets that can continuously feature new experiences. broadcast formats and audiences. The esports experience is Social streaming platforms enable game companies, players, inherently social and interactive, and gameplay can be harder to teams, leagues and influencers to widely share the gaming follow with only one camera. Esports viewers are scattered across experience. In North America, social streaming has helped social streaming channels run by leagues, teams, game companies expand esports, which increasingly show up on game company and influencers. earnings. More game companies are investing in esports as an This poses challenges for broadcasters and brands trying area of growth, and more game franchises now include multiplayer to reach and activate consumers who are less aggregated on features tailored to esports competition and viewing. Indeed, the top broadcast channels. The esports industry itself may face a rise of esports has shown not only the growth of the multiplayer reckoning as investors that understand TV and sports better than gaming experience, but also the draw of video games as a competitive video gaming look for returns on their investments. spectator sport.

20 The Financial Manager • March/April 2020

MEDIA TREND ANALYSIS plans to develop their own cloud gaming services. Likewise, if cloud gaming succeeds in its promise to remove the need for consoles, allowing games to be streamed to any device, the console market could be strongly impacted. As we’ve seen with video, changing the distribution model can be disruptive, but once the dust settles, content is usually still king. Changing the economics of delivery could possibly ignite a wave of merger and acquisitions for content while minting new studios and IP. This would likely amplify competition – and innovation – suggesting that the changes animating the video game industry may not subside anytime soon. Today, video gaming is a growing share of the media and entertainment pie, especially among younger generations. And it’s more than just people playing games: it is a confluence of innovative and engaging gameplay, immersive storytelling, social media, high-octane competition, democratized broadcast and spectator sports, all wrapped in virtual and real economies that are stretching around the world. If cloud gaming is successful – and transformative – the future could include vast hyper-realistic and highly social worlds living in the cloud. Riding technology and generational behaviors, video gaming may be evolving into a significant form of 21st century entertainment. Chris Arkenberg is a research manager at Deloitte’s Center for Technology, Media and Telecommunications, Deloitte Services LP. He can be reached at carkenberg@deloitte.com. Material Copyright © 2020 Deloitte Development LLC

This publication contains general information only. And Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication. ABOUT DELOITTE Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a U.K. private company limited by guarantee (DTTL), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the U.S. member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting. Please see www.deloitte.com/about to learn more about our global network of member firms.

ANALYZING THE NUMBERS

HE ENTERTAINMENT SOFTWARE ASSOCIATION (ESA) ESTIMATES that there are 2.5 billion gamers supporting the $150 billion global video game industry, with 18% growth in the last year. According to Newzoo, a market research firm focusing on video gaming, China and the United States are the two largest markets, roughly equivalent in size at around $36 billion each. The U.S. market has shown greater expansion in 2019, underwritten by the launch of three new North American franchise esports leagues and launches of top video game titles. According to the ESA, 65% of American adults play video games, and the average age of gamers is 33 years old, with roughly 46% female. U.S. gamers are spread across mobile, PC and console roughly evenly, with smartphones a bit higher. In Deloitte’s 2019 Digital Media Trends survey, 30% of streaming media subscriptions are for game services. As you might expect, younger generations report higher numbers, with 54% of Generation Z playing video games weekly. However, Deloitte’s survey found that mobile gaming has the broadest distribution across generations, bringing more Generation X and Boomers Mobile expansion hasn’t cannibalized into the market. According to Newzoo, the largest expansion of the much of the global video game industry has been in mobile gaming, console and PC which accounts for about $68.5 billion and showed market. Rather, 10% year-over-year (YoY) growth from 2018 to 2019. it has expanded Smartphones now host the largest cohort; according to the overall number investment advisers Banyan Hill, over 2 billion people of gamers. play mobile games. The company anticipates that mobile gaming will be a $100 billion market by 2021. Newzoo estimates that gaming consoles are a fast second in the revenue ranking, at $47 billion in 2019, with considerable YoY growth at 13%. That’s a testament to both the success of consoles and top gaming titles. Finally, personal computers (PCs) claimed an estimated$35 billion in the global market with around 4% YoY. But there are some important nuances in these numbers. Mobile expansion hasn’t cannibalized much of the console and PC market. Rather, it has expanded the overall number of gamers, reaching more smartphone users that are increasingly turning to mobile games to fill their idle time. Although PCs have slowed globally, many top esports are still dominant on PC, leveraging their customization and capabilities for high-performance gaming. Consoles are also optimized for high-performance gaming, and their growth may continue as the next generation of consoles hit the market over the next year. Beyond just the hardware, video gaming has become an ecosystem of technology, media and entertainment. In particular, social streaming services enable gamers to broadcast live video of their play, while helping audiences find and engage with content. Social streaming helped expand esports from a mainly Asian phenomenon to a global one, leveraging top players and social influencers who built their own large and lucrative audiences. The stats for a week of engagement in October 2019 reported by the top social streaming platform: 216 million hours watched; 1.3 million average number of viewers with a peak of 2.9 million simultaneous viewers, across 3 million streams from 45,000 channels. These numbers represent a very different media and entertainment landscape than traditional broadcast and streaming. It is both highly social and very fragmented.

The Financial Manager • March/April 2020 21

California

Dreamin’ 22 The Financial Manager • March/April 2020

ANNUAL CONFERENCE PREVIEW

Media Finance Focus 2020 touches down in Los Angeles with a bountiful array of educational and entertainment options.

BY W. CHARLES WARNER

very September, the MFM and BCCA annual conference advance team makes a pilgrimage to the city hosting the upcoming annual conference. There’s lots to do: meeting logistics, scheduling, planning, people flow in the hotel. They all demand attention. Arranging for A+ evening and social events is crucial; a review of restaurants and attractions in the neighborhood is also on the list. A major point of focus is to visit potential locations for the Monday-night party. This is a fun assignment but can get tedious. In preparation for the conference that takes place in Los Angeles May 18–20, even the most seasoned member of the scout team started to fade after looking at the 12th establishment in one day. There were some “okays,” but no homeruns. That is, until the intrepid group marched into Madam Tussauds Wax Museum on Hollywood Boulevard. Despite prior skepticism, this place felt right. The flow is there. The catwalk overlooking the Hollywood Walk of Fame hit home. The wax figures were amazing. “I think this could work,” said Melissa Mitchell with a twinkle in her eye. She’s chair

of the conference this year, as well as corporate controller of Bonneville International. Working alongside her throughout the production process is conference co-chair Dave Bochenek, who is also senior vice president and chief accounting officer at Sinclair Broadcast Group. While planning out the fun events like that are key, MFM’s many committees have been pulling out the stops to organize over 80 educational sessions that will help attendees understand the business and do their jobs even better than before. There’s no place that seems to embody all of the industries served by MFM than Los Angeles. Needless to say, companies focused on television, radio, digital, streaming, newspapers and games are all located there. The conference’s venue, Loew’s Hollywood Hotel, is centrally located for the media scene. It is an easy distance from Santa Monica, Glendale, Burbank and Century City, allowing for plenty of extracurricular activities. Not that there’s a need to stray very far from the center of our conference “universe.” Here’s a sneak peek at some of the sessions that will take place:

Future of Media

Games

David Offenberg was such a smash hit last year that we’re featuring him again. The associate professor of finance at Loyola Marymount University will share his interpretation of media consumption behavior and how it might change. He’ll also analyze how industry consolidation, bundling and capital constraints could impact the next generation of media platforms.

The Video Games Committee is back in a big way. Its track will kick off with a look at the most notable trends – what has happened in the past year and where the industry is going. One session will investigate company valuations, and another centers on legal issues. There’s also a session about blockchain tools and what they can offer in-game digital economies. The Financial Manager • March/April 2020 23

An examination of opportunities related to esports is in the works as well, and there will a special event for young professionals in the games business.

Radio

The automation of workflow and accounts payable processes are among the hot issues that the Radio Committee addresses in this track. Best practices related to the issue of employee classification – exempt vs. non-exempt – is front-and-center in another session. There’s also a special panel on tax considerations for finance professionals who are not tax experts but must make sure returns are handled correctly and in a timely manner.

Accounting

There will be a series of sessions that look into the latest accounting standards pronouncements from the Financial Accounting and Standards Board, as well as pending changes and updates. The Accounting Standards Committee is also organizing a session on cloud computing agreements. In addition, there's an examination of how mergers and acquisitions can affect the integration of systems. Another panel takes a close look at finance effectiveness and how to make things more efficient without operational pain.

Television

A deep dive into questions related to new technologies is at the heart of many sessions organized by the Television Committee. For example, how can drones drive newsgathering innovation? What kinds of opportunities will surface for television companies when the 5G mobile technology standard is more fully implemented? What do the Federal Communications Commission and other Washington institutions have in store for TV broadcasters? What is impression-based audience measurement, and why is it important? And how might the process of licensing music change, for better or worse?

Internal Audit

If you want to get a better grip on how robotics and artificial intelligence can impact the finance function, then the Internal Audit Committee has a great panel for you. The group is also putting a spotlight on how advanced technologies can present new opportunities for error, and new complexities. The audit track will also look at risk management, focusing on fraud and cybersecurity. And it will explain some nuances related public and private companies. There are also two roundtables for internal auditors on Wednesday afternoon and Thursday morning after the regular conference sessions conclude.

THE MAIN ATTRACTIONS

24 The Financial Manager • March/April 2020

Newspapers

Robotics process automation is the topic of a session that kicks off the newspaper track. Most specifically, it will look at project identification and prioritization. The Newspaper Committee is also organizing a panel on alternative revenue streams, including digital revenue, subscriber packages and promotions. New cost management opportunities will also be discussed. And another session will look at the National Labor Relations Board’s latest decisions, independent contractor issues and relationships between management and unions. The track will also feature a look at newspaper valuations.

Digital

Needless to say, members of the Interactive & Digital Media Committee are working in a rapidly changing world. The proliferation of streaming services is just one aspect of that. The committee’s track seeks to answer some crucial questions. For example, what new strategies for monetization are cropping up? Are there new operational issues to consider? What skills do employees need and what should managers look for when hiring? How can a company grow its footprint with streaming and esports opportunities? And what are the latest digital ad strategies?

Taxes

media finance focus 2020 will have no shortage of top talent in keynote speaking slots. The conference kicks off Monday morning with a deep dive into esports. This billion-dollar video game sector is exploding, with the formation of leagues and stadiums and a rising viewership base. The presentation will look at how traditional media companies can benefit from this growing industry. Tuesday morning’s “A View From the Top” will feature a dynamite panel of executives who will discuss the latest issues and opportunities facing the media industry. Kasey Montoya, a reporter at KTLA will moderate a panel that includes Jeff Krolik, president of Sinclair Broadcast Group’s regional sports networks; Caroline Beasley, CEO of radio-focused Beasley Media Group; and Randy Pitchford, president and CEO of the video game development company Gearbox Software. Wednesday morning’s general session puts the spotlight on Brian Bark, vice president and chief information officer of Sinclair. He has been instrumental in developing the company’s digital strategy and next generation traffic system. And he’s also been heavily involved in identifying opportunities related to the ATSC 3.0 technology standard. Bark’s session will be followed by a presentation from Deloitte, providing an outlook on the media and entertainment industry.

They’re a great way to compare notes and insights with like-minded colleagues.

KROLIK

BEASLEY

PITCHFORD

Professionals focused on taxes have three roundtables to choose from specific to federal, state and local issues. What’s more, the Tax Advisory Committee is featuring a panel that addresses how digital companies (or divisions) are struggling with taxes levied at multiple levels. Another session focuses on income tax accounting best practices. And there will be an examination of the Wayfair decision on sales and use taxes. The track will also look at how companies need to be on guard regarding the ways in which mergers and acquisitions affect their tax departments. Another session will spotlight new tax technologies and discuss how (or if) they make the process of reporting and tracking tasks easier and more accurate.

Networks, Programming and Streaming BARK

The committee that covers these three aspects of the business has had plenty to work with in

ANNUAL CONFERENCE PREVIEW services, as well as program cost accounting, round out the track’s offerings.

Credit’s Cornucopia

The Media Credit Committee is bent on continuing the success it experienced last fall with its two-day Media Credit Workshop and has put together a large track of conference offerings. It begins with a speed-networking event to get credit problems out in the open and give attendees a chance to meet each other.

Roundtables

It wouldn’t be an MFM and BCCA conference without a full selection of roundtables for a no-holds-barred discussion of perplexing or downright thorny issues. Look for gatherings specific to radio, television, credit, internal audit, newspaper, chief financial officers, young professionals, digital, networks, programming and streaming.

PLANNED CREDIT SESSIONS WILL FOCUS ON: Cash forecasting — the most efficient way to go about it and produce the best

results;

Controversial advertising — a look at types of customers that involve particular risks and their potential impact on receivables; Risk analysis — the best way to calculate the end result of an advertiser’s payment trend; Lockboxes — how this method of collecting funds stacks up against other types of payment; Portals and apps — the impact of these new revenue streams; Legal issues — the latest developments; Digital — the smartest ways to handle this type of revenue; Best practices — optimal ways of doing business and protecting company assets.

developing a track for the conference. It’s featuring a session on new media deals. Another panel focuses on how robotics and artificial intelligence may further impact the industry.

Fun Stuff

In addition to the Monday-night event at Madam Tussauds, there will be a host of other social and music events at the conference. Come early, or stay late, and enjoy the many attractions that the City of Angels has on offer. We look forward to seeing you in sunny California. Online registration is open at mediafinancefocus.org. W. Charles Warner, Jr. is the president of Broadcast Finance Inc., a media management consulting firm. He is also MFM’s conference program director and chief finanial advisor. He can be reached at charlie.warner@mediafinance.org.

There will also be a look at how social media affects these areas of the business – as well as missed opportunities. Residual payments related to streaming and digital

Corporate Licenses

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The Financial Manager • March/April 2020 25

LAST WORD

A Pushback Dilemma

When are credit applications absolutely necessary? And why do some ad clients balk when asked to complete them? BY MICHAEL DENSON

hen advertisers and agencies basically the same, the implications of not refuse to fill out credit appli- having one can be quite different. For local cations it’s a source of con- companies, they are extremely important. If cern for credit professionals. the applicant is a smaller business or local We all know that you can’t go to banks, franchise you want to get as much inforretailers or car dealers and request credit mation as possible to protect your company without completing a credit application. So from potential losses. why is it that in the media industry we get Local advertisers that are part of a big nasome pushback? tional chain may be hesitant to complete the Let’s delve into the detail of what should application. Like anything else, it’s always be on a good credit application for local and a case-by-case business decision, whether or national businesses and then try to answer that question and a few others. The basic application should contain the legal name of the applicant and all trade (dba) names used. Business addresses are also needed, but don’t accept post office boxes as a substitute for street information because of potential legal and collection issues. It’s important to get a phone number, accounts payable contact name, telephone number and email address. The applicant should be required to supply information about the type While local and national credit of their business entity (such as sole applications are basically the same, proprietorship or a limited liability company); their type of company the implications of not having one (advertiser, agency or something else); can be quite different. the date the business was established; state and date of incorporation; federal tax not to push for a credit application prior to I.D. number; the company’s principals and running the advertising. their titles; credit references (preferably three National businesses can be a different media companies); and bank information. story. How many times have we heard, “We Make sure you get the signature of an au- don’t need to give you a credit application. thorized person, who is usually an officer of We are so-and-so, and we’re too big to fail.” the company. When you hear that familiar excuse, rememSome credit applications are multiple ber that 2020 is predicted to be a banner year pages while other are just one page. Some for bankruptcies according to several sources contain verbiage for a personal guarantee, that I’ve read about. It’s also a point of discusand some contain no terms and conditions sion between industry professionals. (T&Cs). You don’t need to list T&Cs on the Rather than signing applications, large application provided that they are clearly national agencies will oftentimes provide a visible on your company website and there credit information sheet with general inforis a clear notation on your credit application mation. However, most are public compaabove the signature line stating that the nies and you can find financial information T&Cs are located on the website. about them on the internet. While local and national applications are Agencies and advertisers may also push

26 The Financial Manager • March/April 2020

back against completing applications because they know that you have run advertising from other customers without obtaining credit applications. Or they don’t want to agree or acknowledge some of your T&Cs. Payment liability can become a particular sticking point. Some balk at accepting joint and several liability, which holds all parties liable – including the advertiser, agency or buying service – until a given media company receives payment. Some clients strictly adhere to sequential liability, which means they only pay media when they have been paid and the funds have cleared. Bear in mind that even when your T&Cs are on the credit application, or spelled out clearly on your website, it does not mean that you will get paid in the way you have required. We all know that for the most part, payments come in later. And we also know that clients sometimes ask for or demand extended payment terms, or they just simply take longer to pay. When that happens, try to settle on a mutually acceptable plan. But remember that extended payment terms cause your days sales outstanding and bad debt reserves to rise. And they might cause an adverse effect on your company’s borrowing capabilities. If you extend payment terms and put it in writing, consider adding a clause stating t hat if t he new payment terms are not strictly ad hered to, the original payment terms will once again become effective. Of course, once again, this is a business decision. Michael Denson is director of credit services for NMCP Inc., which is managed in partnership with ABC-Amega. He can be reached at (716) 878-2860 or michael.denson@abc-amega.com.

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