INFORMATION AND INSIGHT FOR MEDIA FINANCE PROFESSIONALS MAY/JUNE 2020 THE FINANCIAL MANAGER
Leaders of Our Pack A special report on MFM’s 2020 award winners, highlighting their contributions and the mindsets that have helped them succeed.
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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:
10 Survival of the Savvy BY GORDON BORRELL
MARY M. COLLINS, President & CEO Mary.Collins@MediaFinance.org
Media companies who rise higher after the COVID-19 crisis will understand important truths about their customers.
JANET STILSON, Editor TFMeditor@MediaFinance.org
14 Redesigning the Workforce
BILL KNIGHT, Art Director wknight5@nyc.rr.com
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18 A Hard Look at Software Solutions BY ASHLEY KINDSVATTER & KARIN BLEILER
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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 Heroes in Our Midst TFM has begun the selection process for its People to Watch in 2021 special report and is seeking your nominations.
PEOPLE
2021 TO WATCH
SPECIAL REPORT:
2020 award winners
23 Put Your (Virtual) Hands Together BY JANET STILSON
Let us now praise eight people who raised the bar, each in their own way, for MFM, BCCA and the media industry. Charles (Chuck) Sennet. .. 24 J. Dee Stevenson..................25 Robin Stephenson. .............. 26 George Berbari................... 26
Sean Hetzler........................ 26 Stephen Clare.......................27 Doug Lyons...........................27 Kent Nate. .............................27
DEPARTMENTS 4 From the President
Stronger Building Blocks 6 Dear Expert Planning for Disaster 7 Human Factor Defusing the Distress
8 Credit Where Due
Calling a Liability Truce 9 Association News New Conference Plan 30 Last Word The Newspaper Paradox The Financial Manager • May/June 2020 3
FROM THE PRESIDENT
Stronger Building Blocks This issue offers ways we can alter our strategies and attitudes so that we come out of the COVID-19 crisis with resilience.
I
n early 1990, French sparkling water company Perrier recalled product worldwide after a U.S. scientist found traces of benzene in some bottles. In addition to far-reaching implications, the scandal resulted in some creative marketing. One ad featured the presumably ice-cold green bottle with a single tear-shaped drip and the tag, “We miss you too.” As I write this column, COVID-19 and its repercussions are sweeping the globe. Things are changing – including the plans for our 2020 conference in Los Angeles. The results of the Perrier problem and other crises make one thing clear: we will come through this. Now is the time to learn everything you can and question every assumption or accepted practice. Let me draw your attention to this issue’s special report about some people we would normally honor at the conference. TFM editor Janet Stilson has done an excellent job teasing out the ways they’ve questioned the status quo. Their stories will inspire you. Take Chuck Sennet, who’s receiving the Jack Zwaska Career Achievement award. One of Chuck’s skills is being able to find commonalities between opposing sides and use them as a Now is the time to learn foundation for agreement. Dee Stevenson – the 2020 Peter F. Szabo everything you can and Career Achievement honoree – constantly gives question every assumption of herself to help her media credit peers. or accepted practice. MFM’s Rainmaker awards are for those who help us bring in the revenue needed to support all member programs. This year’s honorees, Stephen Clare of Entercom; Doug Lyons from The E.W. Scripps Co.; and Bonneville International’s Kent Nate each found a way to help MFM bring in new, and necessary, dollars. Working Capital awards recognize those whose proverbial elbow grease helps us get things done. All three honorees – Tribune Publishing’s Robin Stephenson; A+E Networks’ George Berbari; and Tegna’s Sean Hetzler – have (to paraphrase Hetzler) stepped up to seize opportunities. In his feature, Gordon Borrell of Borrell Associates suggests ways both media companies and their advertising customers can get past the pandemic with flying colors. Similarly, Symphony Media’s Ashley Kindsvatter and Karin Bleiler give pointers on how to make smarter decisions about software, which will help companies come out of this recession leaner and nimbler. They offer three questions to ask and explain the software development triangle. Lowenstein Sandler’s Amy Komoroski Wiwi and Lauren Hollander take on the legal questions around alternate staffing options. While companies may want to explore these to reduce compensation-related expenses, states are looking at rules for these arrangements that will add to their cash-strapped coffers. Our four regularly scheduled columns also provide good insights. In “Dear Expert,” Chubb’s Tim Ehrhart takes on the question of disaster planning. June, which is the start of hurricane season, could mean even more problems for unprepared media businesses. Szabo Associates’ Robin Szabo, author of “Credit Where Due,” suggests a new approach to the thorny question of liability, which could help media businesses and their agency clients. “Last Word,” written by Bond & Pecaro’s Matt Lochte, tackles the topic of ongoing newspaper consolidation, explaining why these companies remain attractive targets. Finally, Sarah Levitt’s “Human Factor” offers some wise counsel for all of us with “an ever-present hum of concern in our minds and hearts.” MFM has been serving media finance professionals for nearly 60 years. Together we can support each other through this crisis and come out stronger. For now, “we miss Mary Collins is president and CEO of MFM and BCCA; Mary.Collins@MediaFinance.org. you too.”
4 The Financial Manager • May/June 2020
EDITORIAL ADVISORY BOARD SALLY BUCKMAN Member Lerman Senter PLLC 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 KAREN BLEILER Symphony MediaAI GORDON BORRELL Borrell Associates TIM EHRHART Chubb LAUREN M. HOLLENDER Lowenstein Sandler LLP ASHLEY KINDSVATTER Symphony MediaAI AMY KOMOROSKI WIWI Lowenstein Sandler LLP SARAH LEVITT Magnificent Leadership MATT LOCHTE Bond & Pecaro ROBIN SZABO Szabo Associates
the big screen Is coming to you! MEDIA FINANCE FOCUS 2020 IS GOING VIRTUAL! WE’RE TURNING THE SPOTLIGHT ON VALUABLE CONTENT DELIVERED TO YOU! Save your spot at MFM & BCCA’s 60th Annual Conference. Registration for Media Finance Focus 2020 is STILL OPEN; we are delivering the hottest ticket in town to you!
This summer, you’ll have the chance to soak in expert speakers, engage in networking opportunities, and sharpen your knowledge with cutting-edge content – all from the comfort of your office.
EARLY BIRD Registration* extended through 5/31/20!
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*includes a 25% credit towards Media Finance Focus 2021 (May 24-26, 2021) in Tampa, FL AND guarantees 2020 rate for 2021
THANK YOU TO ALL OUR SPONSORS whose participation is making this event possible Registration, Agenda and virtual conference details available at
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DEAR EXPERT
Planning for Disaster
Preparing for severe weather events has become critical. Insurance specialist TIM EHRHART provides advice on how to minimize potential damage.
Dear Expert, June marks the start of hurricane season. And in general, severe weather events seem to be on the uptick. How can we better prepare for them? Gearing Up in Greensboro, NC Dear Greensboro, accuracy, and to make sure that key employYou’re right to be concerned. Weather ees are still on staff. patterns appear to be shifting, leading to even larger losses from hurricanes, rain, hail, PROTECTING PROPERTY snow and flood events. Extreme weather can During Super Storm Sandy, the power was disrupt news operations at a time when the out in the New York and New Jersey area for public may be most dependent on them. days, and flooding at transmitter sites forced When severe storms strike, they often several AM stations off the air. Here are some bring heavy rains, flash floods and hail – ways to help minimize the impact of similar and in colder climates, snow and ice. Water situations involving water damage: may leak through roofs or windows, or seep ■ Inspect the property to make sure water into basements and low-level floors, causing cannot accumulate in areas where it does not significant damage. Power loss may occur, belong. Consider bringing in a landscape or sometimes for extended periods. Snow can pile up on roofs, Plan for the needs of employees who causing them to collapse. Ice can could be stranded at the office. Make build up on communication and cable transmission lines, bringing sure food and water are available and them down and causing service bathrooms are working. interruptions. Media news outlets play a special role in engineering firm to improve drainage and the community and are expected to stay on re-grade the property to direct water flow the air to keep the public informed. Radio away from critical areas. becomes extremely important as many peo- ■ Avoid placing critical equipment in baseple turn to battery-powered radios for infor- ments or on ground-level floors where it would be more vulnerable. If that’s not possimation when the power is out. It’s important to be prepared for such ble, you might install a raised floor to protect emergencies with a business continuity plan equipment from possible water intrusion. that addresses the maintenance and testing ■ Consider installing a water-intrusion detecof equipment and other critical systems. It tion system. It is important to detect flooding should include strategies for keeping the immediately, contain the leak and clean it up power on and plans to accommodate em- quickly to minimize damage. ployees who will be needed to keep the news ■ Regular preventive maintenance should operation running. Business continuity include testing sprinkler systems, HVAC plans need to be tested on a regular basis. (heating, ventilation and air conditioning) Contact information should be verified for systems, drains and sump pumps. For sprinkler systems, conduct regularly required tests Do you have a professional puzzle that per the National Fire Protection Association’s MFM and BCCA experts might be able to NFPA 25 standard. answer? We’ll mine the contact base and find ■ Properly maintain HVAC systems. the right person to answer your question. Just contact TFM editor Janet Stilson at Broadcast equipment often runs hot, and TFMeditor@mediafinance.org.
6 The Financial Manager • May/June 2020
HVAC systems are needed to keep equipment within the optimal temperature range. They can also pull humidity out of the air, so condensate drain lines need to be clear and properly plumbed to avoid water accumulation around equipment. OTHER CONSIDERATIONS During a severe storm, employees will be needed to keep operations running and to respond to the crisis. Employees who are already at the office may not be able to leave, and employees who are scheduled to work over the following days may not be able to get in. Plan for the needs of employees who could be stranded at the office. Make sure food and water are available and bathrooms are working. Companies may want to identify an area for cots where staff can sleep. It’s also important to develop clean-up plans. After a destructive storm, it may be days before a professional disaster recovery team can get to your facility. Keeping wet/ dry vacuums on hand can help troubleshoot that. Spill containment tools and sandbags may be useful for keeping water out of critical areas and equipment safe. Working with an insurer that understands the risks is also key. By troubleshooting severe weather events, media companies can help reduce the risk of a loss and be better prepared to serve the community in a time of crisis. This document is advisory in nature and is offered as a resource to be used together with your professional insurance advisors in maintaining a loss prevention program. It is an overview only and is not intended as a substitute for consultation with your insurance broker, or for legal, engineering or other professional advice. Tim Ehrhart is senior vice president, industry practices at the global insurer Chubb. He can be reached at tehrhart@chubb.com.
HUMAN FACTOR
Defusing the Distress
While it’s easy to lash out or retreat during office flareups, there’s a more productive response: when triggered, do nothing. BY SARAH LEVITT
W
hen I began writing this column, it was before the COVID-19 crisis. I’d wanted to discuss the oft-occurring friction in media finance departments between sales and credit/collections teams, when sales wants to generate ad revenue and collections, well, wants to collect. Finding ways for teams of any sort to navigate those waters is crucially important. But perhaps this national crisis is providing us with a particularly good opportunity to resist the urge to act quickly when we’re triggered. After all, right now there is an ever-present hum of concern in our minds and hearts. In the greater context, it is all about finding our way through moments (or days) when we are on high alert rather than centered. It reminds me of a sales and R&D battle, which provides larger lessons for all sorts of intra-departmental battles. Some time ago, I led a strategic off-site for members of the senior leadership team of a mid-size manufacturing company. They had a strong product line, a great CEO and robust senior leadership. However, the sales VP and the engineering VP were at war. It was a common problem: sales thought research and development should be faster, and R&D was furious that sales kept selling things that weren’t fully developed. It was a big issue for the CEO, because they weren’t able to be client- and prospect-facing often enough. Instead, they had to keep playing referee in the sandbox between the two VPs. The clash wasn’t just about the wear-and-tear of friction and lost time; this was about lost opportunity and lost revenue. At the first off-site, I worked with the team to create a strategic, team-designed plan with specific actions and mile markers. Everyone had responsibilities related to it. When we reconvened three months later, we discussed where we were getting traction and where we needed to tweak things. The
team worked in earnest. I coached the CEO, and in six months they were a different team entirely. The CEO was able to turn over some responsibilities to both leaders rather than being in the middle between them. A tremendous success all around. But. That’s not the whole story.
Most of us can tell by tuning in to what’s happening in our bodies. Our respiration might speed up; our hearts typically beat faster and sound louder within us; we might feel heat in our faces; our muscles might tense. The good news is that with some time away (which might be a walk outside, for example), we can help ourselves return to center. And center is where it’s at. That’s where we’re calm and grounded, where we’re more likely to seek and see a solution rather than defend or attack. When you’re centered you won’t feel any urgency to fight, flight, or freeze. Your body will feel relaxed, not amped up. For clients who exercise, I ask them to describe what it feels like after a run or bike ride. Or taking their dog for a long walk. System relaxed. That’s baseline. If you question whether this is applicable to executives, conWith some time away (which might sider that Steve Jobs meditated; Oprah retreated to her office be a walk outside, for example), we can closet for 10 minutes when she help ourselves return to center. needed a break; and several Fortune 500 organizations Augmenting their efforts was something from Nike to Google have all implemented in the background, something I delivered to mindfulness programs. them on the first day we met. I told them When you’re triggered by a colleague about the concept of fight, flight or freeze or boss, simply ask if you can get back to and suggested that if anyone were to experi- the other person at a ence it, to do nothing. mutually agreed upon We all get triggered. (My clients love the time. And during this story of how, when I was in the middle of time of national unan argument with a man that I was dating, ease, take extra care to I hung up and then called him back simply maintain centeredness. to hang up again.) When that happens, we’re If you’re triggered, not equipped to make good decisions about do nothing. how to relate to whomever or whatever is trigSarah Levitt works with CEOs and senior gering us. Instead, the emotion that’s churned executives to elevate leadership performance and up – and the thinking that’s entangled with drive business outcomes. She is the author it – is guiding our decision-making. of Magnificent Leadership. She can be reached at www.sarah-levitt.com How do you know if you’re triggered? The Financial Manager • May/June 2020 7
CREDIT WHERE DUE
Calling a Truce
It’s time to consider a new hybrid approach to the payment liability debate. After all, it has dragged on for almost 30 years. BY C. ROBIN SZABO
T
wenty-nine years ago, the American Association of Advertising Agencies recommended their members adopt a “sequential” liability position, designed to protect agencies from payment responsibility to media in the event that advertisers failed to pay them. This recommendation prompted media to adopt a “joint and several” position, which holds both agencies and advertisers liable for payment until media is paid. Since that time, neither the agencies nor media have budged from their stated positions. Although most media have a joint and several liability position, they are reluctant to go after agencies that have not been paid by advertisers, or to go after advertisers who have paid agencies that subsequently fail to pay media. Additionally, enforcement problems continue to plague the industry accentuated by the absence of industry custom and practice when it comes to payment liability. When advertisers and agencies remain solvent, sequential liability works well and fairly. The problems arise when one or more parties fail to pay, and media are left with the difficult decision of whether or not to pursue one or all parties involved in order to get paid. So, what can be done to reduce the chances of having to make that decision? Perhaps it is time to consider a new approach, a “hybrid” of both positions that embraces the concept of sequential liability but retains the joint-and-several clause as the fallback if the situation goes awry. The essential elements of the approach are as follows: Cooperation – The major pitfalls of sequential liability exist because the advertiser and media do not engage each other in the media-buying process. For the system to work well, all three parties – advertisers, agencies,
8 The Financial Manager • May/June 2020
and media – must cooperate with each other. Simply put, everyone needs to know what is going on. Advertisers should understand that it is in their best interests for media to know their agreements with agencies. After all, advertisers who are willing to provide this information and who pay their agencies in accordance with their agreements reduce
the likelihood that they will be pursued by media for payment should the agency fail to pay. If the agency doesn't pay media on time, the media will know that the problem lies with the agency and will know to pursue the agency for payment. Additionally, advertisers need to insist on written verification from the agency that it has paid the media for their purchases. Agencies also should understand that it is in their best interests to share information with media about themselves and their advertisers. If the media company knows and approves the advertiser and the advertiser then fails to pay, the agency and media can be allies working together to help resolve the problem. Disclosure – The advertiser has a contract with the agency. Therefore, the agency should be the primary source of information on the advertiser and willing to answer media’s
questions regarding its agreement with the advertiser and its procedures for dealing with delinquent accounts. What are the terms of payment? Some agencies have agreed to longer payment terms with advertisers, and media are unaware of these terms until their own invoices have become delinquent. When do internal collection efforts begin? Is the agency willing to require payment in advance from advertisers with questionable creditworthiness? By k now ing t he a genc y’s timetable as well as its terms with the advertiser, media can establish their own expectations for payment receipt. The agency should also agree to inform media of payment delinquency and factors that might be affecting the advertiser’s ability to pay. Dispute Resolution – All parties should agree on a policy for resolving liability disputes. If the agency refuses to pay, will media inform the agency that they intend to notify the advertiser of the nonpayment? If the agency claims it has not been paid by the advertiser, will media contact the advertiser to investigate the problem? And if so, when will they do it? It’s clear that agencies, rather than accepting media’s joint and several liability position, are continuing to insist on their sequential liability position. This impasse is costly to all parties, not only in terms of revenues delayed or lost because of liability disputes, but also in terms of the industry’s inability to act together as partners in a transparent manner. 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.
ASSOCIATION NEWS
media finance focus 2020 [ ]
The Annual Conference Goes Virtual
PHOTO BY LUCY KENNEDY
G
et ready for an MFM and BCCA conference like you’ve never experienced before. Media Finance Focus 2020 has been transformed into a virtual event beginning the week of June 15th. The move was made to adhere to current health advisories associated with COVID-19, and the likely cautions that will be required once shelter-in-place restrictions are lifted. “The Board, the MFM/BCCA staff and our committee members are committed to making the virtual conference as accessible, inclusive and participatory as possible,” said Mary Collins, president and CEO of MFM and its BCCA subsidiary. “Our goal is to make this new format engaging and interactive by taking advantage of exciting technology that will enable attendees to experience these virtual sessions as if they are in the same room with speakers.” The conference will include 40 one-hour virtual sessions offered over the course of 10 weeks, beginning June 15th and continuing into August. Two sessions will be scheduled each Tuesday and Thursday afternoon until August. In addition, MFM is planning to add some topic-specific roundtables along with other bonus events. The sessions will provide media-specific information not offered anywhere else. They’ll allow for maximum interaction with the presenters in real time. Attendees with full conference registrations may join up to 20 of the one-hour sessions. Participants will have an option to earn CPE credit for each session attended. And sponsors — whose businesses are critical to media companies’ success — will be spotlighted during the conference. Their support is crucial to the conference and the association.
BOND & PECARO The Basis for Your Decisions
ApprAisAls FeAsibility studies expert testimony And relAted FinAnciAl services For the communicAtions industry
1990 M STREET, NW SUITE 400 WASHINGTON, DC 20036 (202) 775-8870 E-mail: BP@BondPecaro.com www.BondPecaro.com
For more information, please visit mediafinancefocus.org. The Financial Manager • May/June 2020 9
T
he spring of 2020 will be remem-
bered as the perfect storm for local businesses and for the media companies that serve them. As the skies clear and things return to normal, a different business landscape is likely to emerge. It’s been a long time coming. Marketplace disruptions take place slowly before they occur all at once. In initial stages, change incubates. Old habits are hard to break, and competition acts as a regulator so that too much change doesn’t occur too soon. It takes an economic trigger to accelerate everything. To understand how today’s perfect storm formed in the media and advertising world, look back a decade ago to another economic trigger – the Great Recession. Until that point, digital media was viewed as an
10 The Financial Manager • May/June 2020
optional, snap-on marketing tool. Facebook, Twitter and LinkedIn were barely known and hadn’t turned their first dime of advertising revenue. Traditional forms of print, broadcast, cable and outdoor media controlled 75% of advertising expenditures. The world was still beautiful because it didn’t look all that different than it had in the 1990s. With the Great Recession came a quick reversal of fortunes. In the decade prior, digital’s share of advertising had grown an average of two percentage points annually. After the recession of 2008-2009, it grew at a rate of 3.5 points. Traditional media’s share shrank to 40%. The coronavirus pandemic cued up the next trigger. But this one won’t further accelerate digital market share. In fact, the growth rate of digital advertising has already begun
ADVERTISING ADVANCES
Survival Savvy of the
Media companies who rise to new heights of success after the COVID-19 crisis will understand important truths about their customers. BY GORDON BORRELL
to decelerate, dropping into single digits in 2019 for the first time ever. But it will instigate a shakeout of local media companies that haven’t completely evolved to meet their customers’ needs: a marketing partnership with multimedia offerings. To understand the reason for this disruption, we need to understand the mindset of media’s most important customers: local businesses that provide 60% to 100% of a media company’s revenue. The coronavirus crisis exposed a deep marketing flaw had been building up for the past decade. Local businesses had been slowly slipping away from classic forms of advertising, assuming many marketing tasks on their own. They managed their own Google pages and Google search; they created Facebook, Instagram and Twitter pages; and they shot
videos to post on YouTube. In so doing, they created their own headwinds: ■ They unwittingly spent more and more money on marketing by taking on tasks internally. In 2019 we found that the average small business in one of our surveys spent $120,000 on marketing, most of it via internal costs – and had no idea they were spending that much. ■ They put marketing in the hands of novices. In some cases, these were administrative assistants, tech staff or sales reps who were being tasked with posting on social media or crafting their own ads. A 2019 survey by Borrell Associates found that 70% of those making marketing decisions within local businesses were considered novices, with little marketing experience. ■ Their ad budgets went awry. Coming into 2020, 58% of advertisers surveyed felt
that they were either underspending or overspending on advertising. Remarkably, nearly all of them had no formula – whether it was percentage of gross revenue or percentage of sales – to set their ad budgets. ■ Overreliance on their “owned media” channels created an echo chamber for their marketing efforts. That is, their emails, web page updates and social media posts reached the exact same audience. Conversely, they lost a significant audience of potential customers by retrenching from traditional forms of local media. Does this mean a spring-back for traditional media? To the contrary, these marketing mistakes have weakened a lot of small businesses who, as a result, may not be able to survive the downturn. With fewer small businesses to rely on for ad revenue, media companies will suffer The Financial Manager • May/June 2020 11
ADVERTISING ADVANCES as well. Especially the smaller, less capitalized ones. Before this year’s second quarter began, we saw some radio stations and weekly newspapers quietly shut down. What do the media survivors of this new, condensed marketplace look like? For a glimpse, let’s look first at their likely advertising base: local businesses that will probably survive. These are the healthy companies that will continue to support media. We can perhaps identify them by how they handled their advertising budgets as the coronavirus crisis took root. While most businesses reduced or stopped their advertising, 44% of them maintained their spending or spent more, according to a Borrell survey conducted March 15-29. These are likely to be the survivors, and the ones who will continue to support local media companies in the future. But they’re not likely to blithely buy ad availabilities from newspaper, TV, cable or radio companies. They are marketing experts, and as such look for a strong mix of mass media and targeted media, especially digital. The businesses that increased their ad budgets during the depth of the coronavirus epidemic weren’t characterized by any type of
12 The Financial Manager • May/June 2020
DURING CORONAVIRUS CRISIS, MANY CONTINUE TO ADVERTISE Asked in late March: “Over the next six months, my business will spend … on advertising/marketing than it did in the past six months.”
44%
Planned to maintain or increase spending
More
16%
Less
52%
Same
28%
Don't Know
6%
SOURCE: Borrell’s SMB Business Panel, March 15–29, 2020.
business, like food delivery or grocery or health care. Those businesses certainly remained open because they provided essential services. There was something else at play, underscored by the fact that we also saw a lot of unusual business activity from categories you wouldn’t expect to see advertising in a pandemic, when everyone remained in their houses. We saw increased activity from
clothing stores, dog kennels, food trucks, real estate agents and even jewelry stores. They all held one key characteristic. Our data showed that they were savvy marketers. They had far more years of experience in marketing than those who were cutting ad budgets. These savvy marketers shine during a crisis. They are the ones who helped propel radio Continued on page 28
HUMAN RESOURCE LEGALITIES
REDESIGNING THE WORKFORCE BY AMY KOMOROSKI WIWI & LAUREN M. HOLLENDER
14 The Financial Manager • May/June 2020
HEADER
As companies take advantage of alternative staffing options, they need to be aware of legal implications on both state and national levels.
T
HERE ARE SOME VERY ATTRACTIVE REA-
sons why companies hire workers who aren’t on the payroll or who work in locations beyond the companies’ offices. Chief among them are opportunities to reduce costs and increase the retention and satisfaction of staff members. Yet at the same time, there are legal implications related to three different outside-the-general-workforce options: independent contractors, remote workers and temporary workers that are contracted through staffing agencies. Let’s look at the issues, and attractive aspects, of each one in turn.
INDEPENDENT PROS & CONS There are some compelling reasons why companies hire independent contractors. In doing so, they can avoid significant wage, tax and benefit obligations associated with full-time staff members. They also don’t need to worry about payroll taxes, overtime, workers’ compensation and unemployment insurance, or paid sick leave. However, misclassification of workers as independent contractors deprives workers of important benefits, as well as the protection of anti-discrimination and workplace safety laws that often only protect “employees.” In addition, misclassification adversely impacts state and local governments, which claim to lose millions of dollars in foregone tax and benefit contributions. As a result, independent contractor audits and lawsuits have become increasingly common, resulting in significant costs and penalties. Unfortunately, proper classification of workers as independent contractors is not as simple as a written agreement between the parties. An all-purpose test to determine independent contractor status does not exist. And compliance is often complicated by the fact that different federal and state tests apply. Recently, California and New Jersey have taken
The Financial Manager • May/June 2020 15
the lead in what is likely to become a national trend, passing legislation that makes it more difficult to classify workers as independent contractors. This has dealt a harsh blow to the media industry, which has come to rely heavily upon independent contractors. Re-classification can increase job costs up to 30%. California’s Legal Moves – In 2018, the California Supreme Court adopted the threepart “ABC test” for determining whether a person may be classified as an independent contractor (Dynamex Operation West, Inc. v. Superior Court). The test was recently codified by California statute, Assembly Bill 5 (AB 5). As of Jan. 1, 2020, it applies to most California workers. Under the ABC test, a worker is presumed an employee, unless the hiring entity satisfies all three of the following conditions: A) The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact; B) The worker performs work that is outside the usual course of the hiring entity’s business; C) The worker is customarily engaged in an independently established trade, occupation or business of the same nature as that involved in the work performed. In meeting the first criteria, a business need not control the precise manner or details of the work that an employer ordinarily possesses over its employees. Further, contracted workers who provide services in a role comparable to that of an existing employee will likely be viewed as working in the usual course of the hiring entity’s business. Part C requires that the independent business operation actually be in existence at the time the work is performed. This criteria is not met if an individual’s work relies on a single employer. Companies based outside of California are subject to AB 5 for any worker performing services in the state. Both California residents and out-of-state residents who are hired to perform significant services in California are also likely covered by the law. Specific occupations are exempt from AB 5, including certain freelance newspaper distributors and newspaper carriers until Jan. 1, 2021. Limited industry exemptions under AB 5 exist for professional services provided by a freelance writer, editor, photographer, photojournalist or newspaper cartoonist who 16 The Financial Manager • May/June 2020
does not provide content submission to their employer more than 35 times per year. “Fine artists” are included in the list of exemptions, but the term is not defined. It is unclear whether actors, singers, dancers or musicians are covered by the exemption. The media industry has yet to find a clear solution to this change in California law. Some have shut down, moved out of state or turned to out-of-state workers. Others have searched to cut expenses in order to offset the costs associated with
Companies based outside of California are subject to AB 5 for any worker performing services in the state. reclassification. Lobbyists have also been hired to pursue statutory amendments providing additional exemptions, and legal challenges have been filed. New Jersey’s Approach – The Garden State has relied upon an ABC test that’s slightly broader than the one adopted in California. It was initiated in 2015, an outcome of Hargrove v. Sleepy’s LLC. However, the New Jersey state Senate recently introduced Bill 4204, which proposes a stricter version of the test more aligned with California’s. The bill has stalled, but efforts to modify the ABC test are not dead. This past January, New Jersey Gov. Phil
Murphy signed six bills into law related to the test. One requires businesses to post notices regarding misclassification.The state is also imposing higher penalties for misclassification. And it has authorized stop-work orders by the New Jersey Department of Labor and Workforce Development for violations of wage, benefit or tax laws. In addition, there are new rules related to joint liability of a client employer and labor contractor for violations of state wage and hour laws as well as tax laws. Significantly, New Jersey law now provides that “any individual acting on behalf of an employer” may be held liable as the employer for such violations, including “an owner, director, officer or manager.” This should give employers significant pause. REMOTE WORKER OPTION It has become common for employers to offer remote-work arrangements to employees who conduct business from home. These arrangements can be mutually beneficial: employees get additional flexibility and save the time and money associated with commuting, while employers expand their available talent pool and save money on office space and supplies. Yet there are many issues to consider in advance of this type of hire. One involves privacy and security. Employees may have access to a wide range of confidential business information that is being exchanged over wireless networks. Employers must ensure that remote employees’ home files and equipment are secure.
THE AGENCY AGREEMENT
W
HEN USING THE SERVICES OF AN AGENCY TO OBTAIN THE SERVICES of temporary workers, it’s wise to have a temporary staffing agreement that
identifies the agency’s obligations. This will help avoid joint-employment . liability issues. The agreement should require that an agency: ■ Recruit, screen, interview and hire the worker; ■ Ensure the worker is legally authorized to work in the U.S.; ■ Pay the worker’s wages and provide other required benefits; ■ Pay, withhold and transmit payroll taxes; ■ Provide unemployment, workers’ compensation, and paid family leave insurance and paid sick leave as required by law; ■ Handle workers’ compensation and unemployment claims; ■ Have the workers acknowledge in writing that they are employees of the staffing agency alone and that they are not employees of the client company; ■ Have the worker sign a confidentiality agreement and an intellectual property rights agreement (if applicable).
HUMAN RESOURCE LEGALITIES Also be aware that there are state-specific regulations related to non-compete covenants that restrict staff members from working for a competitor upon the conclusion of employment. For example, with very limited exceptions, California prohibits the enforcement of non-competes upon employees altogether. Other states, like New York, allow them when the covenant is deemed reasonable. Frequently, employers wish to classify remote workers as independent contractors to reduce payroll taxes and other labor costs. However, as discussed above, an employer’s lack of control over a remote worker’s daily activities generally does not determine a worker’s status. Wage and hour issues also need to be addressed. When remote workers are performing duties from multiple states, they need to be paid in accordance with both federal and applicable state laws. The federal Fair Labor Standards Act (FLSA) requires employers to pay employees for all hours worked and to keep accurate records of time spent on the job. It is often difficult to know how many hours remote employees are on the job, but the act requires employers to count hours worked if
“the employer knows or has reason to believe that the work is being performed.” State laws related to remote workers vary in a number of other ways, ranging from minimum wage requirements to payroll deductions. Income taxes vary by state. As a general rule, employers must withhold income tax according to the law of the location where the work was performed. However, in some states, the law differs. The analysis can become further complicated in the case of remote workers who split their work time between home and office in two different states. Determining whether deductions are required for disability and paid family-leave insurance benefits can also prove tricky. Employers should not forget remote employees when it comes to legally mandated training or required job notices. Several states require that employees receive annual or bi-annual sexual harassment training. Remote employees who perform the same work as on-site employees are arguably entitled to be treated the same when it comes to the terms and conditions of employment. Companies should ensure that remote workers are being exposed to the same opportunities
for training, mentoring and advancement as others to avoid claims of discrimination. THE AGENCY ALTERNATIVE A staffing agency may reduce a company’s costs and provide the solution to its short-term needs. However, don’t assume this solution will avoid liability for workplace issues. Temporary workers are employees of the staffing agency, not the client company. However, a company may be deemed a “joint employer” of a temporary worker if the company exercises sufficient control over the terms and conditions of the temporary worker’s employment. This can result in the company assuming many legal obligations the company assumed were the responsibility of the staffing agency under wage-and-hour, harassment and discrimination laws. Unfortunately, tests for determining joint-employer liability vary by statute and jurisdiction, creating confusion especially for multi-state employers. For example, the test for determining a joint-employer relationship under the federal FLSA was just revised this year. It applies a four-factor balancing test that focuses on Continued on page 28
The Financial Manager • May/June 2020 17
TECHNOLOGY IMPROVEMENTS
DETERMINING THE BEST FINANCIAL PROGRAM UPGRADE CAN BE AN ARDUOUS PROCESS, UNLESS YOU ANSWER SOME STRATEGIC QUESTIONS ONE AT A TIME.
18 The Financial Manager • May/June 2020
A HARD LOOK AT
SOFTWARE SOLUTIONS
M
BY ASHLEY KINDSVATTER & KARIN BLEILER
ANY MEDIA FINANCE
professionals face a big conundrum these days: how should they go about successfully managing revenue in a rapidly changing industry when their own software tools remain somewhat unchanged? Microsoft Office software is often used to do the heavy lifting simply because of its dynamism and easy adaptability. However, what’s lacking is the built-in business logic that addresses many of the industry’s intricacies. There’s an enormous amount of data that must be handled, and a lack sophisticated tools that can help detect abnormal reporting and paying behaviors. As a result, it is easy for issues to go undetected. Serious revenue implications are associated with non-compliant reporting and paying, and frequently organizations are unable to recoup revenue lost from prior periods. Solving the problem is often a complex and protracted process. Organizations must identify, procure or build software solutions that can help them meet their fiduciary requirements and financial controls, creating efficiencies in an otherwise laborious regimen. Yet there are some key steps that can make that wilderness of possibilities much easier to navigate.
Before embarking upon a solution transformation we need to ask and answer three key questions: ■ What are the costs? ■ What are the business requirements and pain points to be resolved? ■ How will the software solution be implemented? Of course, the question that typically receives the most amount of attention throughout an organization is, “How much will this cost?” That’s only natural. But in order to get to the answer, the other two questions must be addressed. First, build a thorough understanding of the business requirements and pain points. Then determine if a given software solution can and will address those requirements when it’s fully implemented. Acknowledging the relevance of these components will help you to determine the correct software solution for today and also for the future. And it will probably end up costing your organization less over time. BUILDING YOUR OWN There is a plethora of software solutions to choose from. No matter what industry someone happens to be in, there is a tool to do almost anything, or so it seems. However, the media industry is unique due to its dynamic and complex reporting structures.
There simply aren’t hundreds of software solutions to choose from that can resolve the complicated business problems. So why not just build one? How hard can it be? The impulse to build a software solution, or hire someone to do it, is the answer that most other industries and corporate functions used over the last two decades for custom enterprise resource planning (ERP) implementations, database applications and customer-facing solutions. We’ve seen this transformation happen in many corporate departments – such as human resources, sales and marketing – across many industries. Oddly, media and entertainment finance has lagged in its embrace of productivity-enhancing software. Software development is driven by three things: time, cost and requirements. This socalled software triangle determines the overall quality of a software solution. Typically, we can successfully capture two of these three components, but not all three. So, which one takes the hit, and what can you afford to let go of, or pay more for? To determine the answers to those questions, focus on the imperative action mentioned earlier: successfully capture your business requirements. Identify and communicate these requirements to decision-makers and developers. Simply stating that the solution must account for financial transactions while The Financial Manager • May/June 2020 19
adhering to financial controls is insufficient. Translating those requirements into a successful software application that works within a finance function’s workf low is the real challenge. ENSURING SUCCESS Creating a company-specific solution takes time and painstaking attention to details as you determine the resources needed and then communicate process flows, expectations and coding guidelines to developers, solution architects and technical experts. From experience, we can tell you that the business side needs to spend as much time and effort as the technical side. This commitment is challenging because, let’s face it, financial managers already have a full plate. A software solution will not magically appear through conversation and working sessions. The biggest mistake an organization can make is to have developers and the tech team write code without having clear, documented requirements. Even the simplest item (like an implied “save” button) can cause major issues if not explicitly stated in the requirements documentation. For those brave enough (and resource/time
rich enough) to take on building software, how you build the application matters. It’s useful to employ the so-called Modern Agile software development methodology, which has four guiding principles: make people in a company’s ecosystem feel happy; deliver value; prioritize safety; and experiment and learn quickly. Modern Agile shortens development time and cost, but it forces a more robust require-
The biggest mistake an organization can make is to have developers and the tech team write code without having clear, documented requirements. ments process. It demands that the “right” people be focused on the project. This includes business analysts, project managers and project sponsors who must be willing to devote substantial time and efforts and have the authority to make key decisions about overall scope. It also requires that business analysts use their robust domain expertise to
think about the software in a manner that allows for future growth. None of this is easy. Developing a software solution for today without strategically identifying how the industry will change in the future is not for the faint of heart. As we know, the media industry is ever-growing and ever-changing. Then there’s the issue of maintenance. A software solution is always going to require upkeep. With so much investment in time and money, your development team must be dedicated to not only supporting and maintaining the newly built application, but it must also pledge to enhance and envision future changes. This should remain top of mind from the very early stages. Ensuring that the team can and will always be able to quickly respond to new requirements, bugs and industry changes is critical. There’s another key factor to consider: you need to engage end users in the development process. If they are excluded or overlooked, your new software application may meet the outlined business requirements but fail to capture the support of all key stakeholders. In other words, the very problem that you may have been trying to solve could still exist
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20 The Financial Manager • May/June 2020
TECHNOLOGY IMPROVEMENTS
ASKING THE RIGHT QUESTIONS
A
S ALBERT EINSTEIN FAMOUSLY SAID, “WE CANNOT SOLVE OUR PROBLEMS
with the same thinking we used when we created them.” It can be overwhelming to think about the many potential questions you should be asking when choosing which software solution is right for your organization. By taking some of the big questions, one at a time, the decision-making process will be more comfortable. Many are raised within the main part of this story. But here are some of the biggies: ■ Is data easily accessible and can all staffers — from those involved with finance to sales to operations — use and benefit from the solution? ■ Are all applicable data points available for the entire business team? ■ What is the “real cost”? ■ How efficiently can the solution be implemented? ■ Is it intuitive and easy to navigate? ■ How much time will it take to train new users? Onboarding costs are substantial, and aggravated users are not easy to manage. Keeping all people affected in mind will reduce the chance that you could choose a solution that doesn’t work over the long term.
once you roll out a new solution. Recognizing how users experience the application is foundational to success. You can build rapport with end users and gain their support if you involve them in usability testing and solicit unfiltered user feedback.
PRE-BUILT SOFTWARE Constructing your own in-house software solution requires heavy personnel and financial commitment. This may be a worthwhile approach if your organization has the deep domain expertise, in addition to the financial
and time resources required to do so. However, if equipped with the right questions, business needs and domain knowledge, perhaps finding a pre-built solution may be a more viable option. There are many factors that determine which software solution is the right one for your organization. Should you just go with the cheapest one that checks the necessary boxes? Or the one that looks the best? What about the one that’s been around the longest? You might come up with three separate answers to those three questions, so which option is best? Once again, it all comes back to your business requirements. Understanding those at the very beginning of the decision-making process will help you to identify the best choice for your organization. When compiling the list of requirements, consider all aspects of the business – not just the buttons or features on the screen. Make sure that the software solution you choose is from an established service provider and is scalable to your business. What’s more, your team must commit to enhancements and maintenance. Simply assuming that an out-of-the-box software solution will be able Continued on page 29
The Financial Manager • May/June 2020 21
people to watch 2021
HEROES In Our Midst TFM has begun the selection process for its People to Watch in 2021 special report and is seeking your nominations.
WHO ARE THE PEOPLE THAT ARE REALLY
shouldering important changes at your company, or more broadly in the industry? They might be someone who’s in a junior position but full of fresh ideas. Maybe they’re your boss, or a top executive at another company, someone who’s mandate is worth keeping an eye on. The Financial Manager’s Editorial Advisory Board wants to know about all of them. Every year we showcase a handful of outstanding individuals in the annual People to Watch special report.
The deadline for nominations is fast approaching: July 24. We welcome all suggestions. Those who are nominated don’t need to be members of MFM or BCCA. Likewise, the nominees do not need to be members. There are just two main requirements. They must: n Be part of the media financial community; n Have a goal or responsibility that is likely to lead to improvements, either at the company where they work or within the media industry in general.
Stories about the next People to Watch will run in the January/February 2021 issue. Download an application at mediafinance.org under TFM (People to Watch). Again, the deadline is July 24th. You are welcome to nominate more than one person.
22 The Financial Manager • May/June 2020
2020 award winners Let us now praise eight people who raised the bar, each in their own way, for MFM, BCCA and the media industry.
Put Your (Virtual) Hands Together BY JANET STILSON Among the many unfortunate aspects of the COVID-19 crisis is the likelihood that many planned graduation ceremonies — honoring students who have worked so diligently to reach those seminal moments — have been cancelled or postponed. On a similar front, the inability to personally bestow awards on this year’s honorees is a big disappointment for MFM and BCCA. The eight people who are featured in this special report have dedicated much time and effort to give back to the media financial community, either directly to our associations, or (in the case of Charles Sennet) through an organization that serves our members’ interests. In a poem, Theodore Roethke wrote: “In a dark time the eye begins to see.” May the following stories illuminate the outstanding people for whom we are most grateful, during a period when so many have faced difficulties and loss. Janet Stilson is editor of The Financial Manager. She can be reached at (212) 694-0126 or TFMeditor@mediafinance.org.
The Financial Manager • May/June 2020 23
Jack Zwaska Career Achievement Award
This honor is named after a former MFM Board member and executive director of the Television Music License Committee.
T
he ability to survey a whole field License Committee. There’s no one of legal issues and then zero more deserving than Chuck, and what a in on an individual “weed” is nice way to close the circle,” says Mary a real gift. And that’s one of Collins, MFM’s president and CEO. Chuck Sennet’s most strikZwaska, the TVMLC’s one-time exing talents, says Ralph Bender, who is ecutive director, “was wonderful. And CFO of Manship Media and chairman that’s one of the main reasons I was of MFM. so touched in hearing the news about For about four years, Bender worked the award,” says Sennet. The whole with Sennet at the TV Music License approach of getting to know people Committee, where Sennet had been that sit across the negotiation table active since the 1980s. Sennet stepped was something that Sennet learned down from his position as the chairman from Zwaska. of the TVMLC last fall, shortly before “He had his own way of doing leaving Tribune Media following its things — backdoor phone calls and acquisition by Nexstar Media Group. unofficial meetings,” Sennet recalls, “Chuck sees the big picture, but in in speaking of how Zwaska was able negotiating with the PROs, he sees the to build rapport with potential (or real) little bitty problems that I don’t even adversaries. “He had very good workthink about,” says Bender, referring to ing relationships with all of us on the performance rights organizations like SESAC and BMI. committee. He wouldn’t do anything on his own that “While Chuck was chairman of the committee over the he didn’t know he could get approved and wasn’t last number of years, it very successfully negotiated within the scope of what we wanted.” with the PROs. Sennet says that one of the organization’s biggest “For the most part we’ve been able to avoid litigaaccomplishments while he was there involved successtion, which translates to the benefit of fully negotiating digital-rights licenses. the industry. Because if you get into He acquired a taste for the media litigation on one of these licensing [disbusiness during his undergraduate putes] it can be millions and millions years at Cornell University. “My major Judges work really of dollars,” Bender says. in college was sociology, but my real Sennet spent almost his entire career major was The Cornell Daily Sun,” he hard at what they do. at Tribune, joining in1984 and serving says, referring to the independent But there’s no substitute most recently as assistant general newspaper in Ithaca, NY. for the two sides sitting counsel. Over the years he handled “Journalism was something I had a legal matters for properties that ranged lot of fun doing. I was a newspaper down and compromising, from TV stations to newspapers to the reporter for a few years after I got out if that’s possible. Chicago Cubs. of college,” he says. That was followed He’s clearly proud of what the by law school at George Washington —Chuck Sennet TVMLC accomplished while he was University. involved. “We were able to develop Along the way he’s learned that “litisome good working relationships with gation is fun when you win and it’s not the PROs, rather than treating them as adversaries. when you lose. Even when you win, you don’t always We got to know one another better and got to know win on every issue. Even if you win 90%, the other one another’s businesses better. That definitely helped 10% can come back to bite you. us reach better deals. And with some exception, it “Judges work really hard at what they do. But there’s helped us to avoid litigation,” Sennet says. no substitute for the two sides sitting down and com“The Jack Zwaska award is named for someone with promising, if that’s possible, to make their own deal whom Chuck worked very closely at the TV Music and live with it,” Sennet adds.
Charles (Chuck) Sennet
“
”
24 The Financial Manager • May/June 2020
2020 award winners
Peter F. Szabo Recognition
Named in honor of a great supporter of MFM and BCCA, this career achievement award pays tribute to BCCA members.
P
eter Szabo made a big ima culmination of a lot of things she’s pression on Dee Stevenson done over 30 years that’s helped the when she first met him back whole media credit industry in addition in 1993. She was attending to BCCA.” an annual conference held by Stevenson was born and raised in the Advertising Media Credit ExecHagerstown, MD, and spent most of utives Association [AMCEA]. At that her career there as well, first working time, the media collections firm that in the banking industry. After taking Szabo headed, Szabo Associates, some time off to be a full-time mom, sponsored a party for the group, Stevenson got a job at the Hagerstown much like it does at MFM’s annual newspaper property The Herald-Mail conferences. Co., which was owned at the time by “He was just so much fun. He had Schurz Communications. While workthis unbelievable laugh, and a great ing there as a credit and collections sense of humor,” recalls Stevenson, manager, she earned a degree in law who is corporate credit and collecand became a paralegal. tions manager at Gray Television. “He It took a pretty sweet offer from Gray Television Inc. had this bigger-than-life personality. Gray Television about two years ago I don’t think he had an enemy in the to pry Stevenson away from her job world. He couldn’t do enough for you.” with Schurz. Gray’s deal involved a That’s why Stevenson says she is so honored to remove to Tallahassee, FL — fairly close to her son and ceive an award named after Szabo, who passed away his family, including five-year-old triplets. “Had I not several years ago. moved down here, they would have seen me maybe Stevenson has some big admirers within MFM and once or twice a year. And they wouldn’t really know BCCA. Mary Collins, president and CEO of MFM, notes me,” Stevenson says. that Stevenson was part of the group That change led Stevenson to exthat helped to fold the AMCEA orgaperience one of the highlights of her nization into BCCA and MFM a few career, implementing changes at Gray years back. “Dee has given tirelessly of that relate to its acquisition of another You have to take on herself to her credit peers in media, and large TV station group, Raycom Media. that’s really the reason she’s getting The combination created a mammoth the attitude, ‘This needs the award,” Collins explains. business with TV stations and digital to happen, and it will Since becoming active in BCCA properties in 91 markets. come. It will happen. about 10 years ago, Stevenson has “The growth alone is astronomihelped organize and participated in cal,” Stevenson says of the Raycom Just have faith and have sessions at MFM’s annual conference integration. “Watching these two very patience.’ and the BCCA Media Credit Seminar. large companies becoming one has And she’s also been updating the been not only interesting, but it’s been —Dee Stevenson BCCA Credit and Collection Handbook rewarding.” of late. Among the insights Stevenson has “We don’t have a lot of people these learned over the years is not to take days that will step forward and say, ‘I’ll do this. I’ll take things personally. “You’re dealing with a lot of other this on.’ A lot of people are on the sidelines. Dee’s not personalities throughout the stations. And they, of a sidelines player. She’s active daily,” says C. Robin course, have their own thoughts and ideas,” she says. Szabo, who is Peter Szabo’s brother and president of With the Raycom integration, patience has been Szabo Associates. key. “You have to take on the attitude, ‘This needs In speaking of why Stevenson was selected to receive to happen, and it will come. It will happen. Just have the award, Szabo says: “It’s not just one thing, but faith, and have patience.’”
J. Dee Stevenson
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”
The Financial Manager • May/June 2020 25
Working Capital Recipients
This award honors members who help MFM achieve its goals.
Robin Stephenson
W George Berbari
G
A+E Networks
eorge Berbari really stepped up to the plate about 18 months ago when MFM's president and CEO, Mary Collins, asked him to become a co-chair of Media Outlook 2020, the conference held last fall to give members expert advice about transformative changes on the horizon. “He was up for the challenge, and he did a great job,” Collins says, in speaking of Berbari, who is director of international revenue, planning and analysis at A+E Networks. Collins noted that Berbari and the event’s other co-chair, Antonella Ricciardi, worked very well together. Ricciardi is a senior vice president and group controller at NBCUniversal and a member of MFM’s board of directors. Berbari hasn’t limited himself to the Media Outlook initiative. “He’s also gotten involved with the Interactive and Digital Media Committee and the ad hoc Blockchain Committee,” says Collins. There’s certainly plenty to keep Berbari busy at A+E. He says the most appealing part of his job involves interacting “with financial and non-financial personnel all over the globe in different time zones and from various cultural backgrounds.” Berbari’s best advice for financial managers hoping to advance is: “Always keep learning and ask questions.”
26 The Financial Manager • May/June 2020
Tribune Publishing
hen Robin Stephenson joined Tribune Publishing in 2016 as vice president of internal audit, she didn’t know much about the media industry. So at her first MFM annual conference, “I was like a sponge. I learned so much,” says Stephenson, who left a job at a chemical manufacturing company to take the Tribune position. Since that first MFM conference, she’s been active in helping other members widen their knowledge base too. “She’s been incredibly involved in the Newspaper Committee and the Internal Audit Committee,” says MFM’s Collins. “She’s helped produce multiple sessions for the
annual conference and participated in some of them herself.” When Stephenson joined Tribune “we had some material weaknesses from a control perspective,” she explains. “Working with management, we implemented stronger controls and obtained a clean opinion from the external auditors that year.” When asked about her accomplishments, Stephenson says: “I’ve been able to build a strong team and keep them engaged and excited through all of the challenges.” One of the lessons she’s learned is: “Don’t let what you’re not familiar with stop you from stepping up and taking on the challenges.”
Sean Hetzler
M
Tegna Inc.
FM is planning to debut its very first Media Tax Summit this coming August — an event that is benefiting greatly from the work of Sean Hetzler, senior director of tax at Tegna. “He’s been very active in identifying topics and speakers, as well as helping co-chair the Tax Advisory Committee with Paul,” says MFM’s Mary Collins, referring to Paul Nesterovsky, an MFM Board member and the vice president of tax at Sinclair Broadcast Group. Originally the summit was scheduled for last December but is now rolling out this coming August. Hetzler considers the present time to be pivotal not only for his career but for tax professionals as a whole. “Federal and state tax reform has gone a long way to increase uncertainty, and the aggressiveness of tax authorities is on the rise,” he notes. “It’s more important than ever for tax professionals to clearly and effectively communicate issues and risks to the C-suite, but due to increasing complexity, it’s never been more difficult to do so,” he adds. Hetzler has some words for the wise: “You should never assume someone else will step up to the challenge or seize the opportunity. The person who’s going to do it is you.”
2020 award winners
Rainmaker Award Honorees
These accolades pay tribute to those whose actions support MFM’s financial well-being.
Doug Lyons
O Stephen Clare
S
Entercom Communications
ome of the largest mergers and acquisitions in the radio and television business have benefited from the work of Stephen Clare, who’s currently vice president of finance at Entercom Communications. Remember when Media General and LIN Media merged, or when Nexstar Media Group acquired Media General? How about when Entercom and CBS Radio folded into one company? Those are but three of eight deals Clare was involved with. But despite the heavy load that requires — let alone other daily preoccupations — Clare has been a key asset for MFM. “Steve has been a huge supporter of MFM, going back to the days when he was at LIN,” says Mary Collins, MFM’s president and CEO. “We give out Rainmaker Awards to people who have helped increase revenue for the association. [Most recently] he’s been the Rainmaker for the Entercom corporate membership," Collins adds. Clare says that the biggest lesson he’s learned is that hard work pays off. “I show up every day wanting to make a difference to make our jobs easier so we can go home at a decent time and spend time with our family and friends. Because that is the most important thing to me.”
The E.W. Scripps Co.
ne of the key drivers behind MFM’s CFO Summit during March was Doug Lyons. The senior vice president, controller and treasurer of The E.W. Scripps Co. served as a summit co-chair. “He worked tirelessly to make sure we had new and different content that attracted new attendees. And he helped us bring in new sponsors,” explains MFM’s Mary Collins. “Doug was personally responsible for three of the speakers.” Lyons joined Scripps back in 1985 as assistant controller. He rose up through the ranks in a variety of other roles. Among his past positions was director of financial reporting and vice president
of finance and administration for the interactive media division (a cable-network unit that was spun off from E.W. Scripps and later acquired by Discovery Communications). Presently, Lyons helps watch over Scripps’ 60 broadcast stations and an assortment of diginet, streaming and podcast-focused properties. He also sits on the University of Dayton’s School of Business Advisory Council. (He graduated from the University of Dayton with a bachelor of science degree.) In the past, he was president of the Big Brother/Big Sisters of Greater Cincinnati’s board of trustees.
Kent Nate
Bonneville International Corp.
K
ent Nate was the “wind beneath our wings,” says MFM’s Mary Collins in describing Nate’s role as a cochair of the CFO Summit. “Because of the strength of the program, and the strength of the attendees – part of which is due to Kent’s involvement — we had a great CFO Summit.” Nate, who is executive vice president and CFO of Bonneville International, was one of three co-chairs of the conference, along with Doug Lyons and Marie Tedesco, CFO of Beasley Broadcast Corp. Tedesco is also an MFM board member. For over 20 years, Nate has held various positions at Bonneville, which operates 22 radio stations in San Francisco, Seattle, Sacramento, Phoenix, Denver and Salt Lake City. Previously he was CFO of the book publisher Covenant Communications, which like Bonneville is owned by Deseret Management. He is also a former director of finance and operations for the U.S. Ski Team and began his career at Arthur Andersen & Co. as an accountant. Nate has served on The Utah Association of Certified Public Accountants’ Members in Industry and Government group. He received his undergraduate degree from Utah State University and his MBA from the University of Phoenix.
The Financial Manager • May/June 2020 27
ADVERTISING—Continued from page 12
advertising during the Great Depression in the 1930s. Kellogg cereal famously stole market share by increasing its ad budget when its larger competitor, Post, reined in advertising. Post had been advertising solely in magazines and outdoor. Kellogg used those media but also realized that, during the Depression, people were turning to radio for entertainment.
The same things are happening during the coronavirus epidemic: media audiences have ballooned; advertising clutter have shrunk; and savvy marketers are seizing the opportunity. According to Nielsen, a crisis sparks a 60% jump in media usage. Borrell’s data shows that 52% of advertisers planned to cut or reduce spending, precipitating a 30% to 40% decline in local ad
100
HOW A CRISIS CREATES MARKETING ADVANTAGE
80
60% Grouth In Media Usage (Nielsen)
60 40 20
Larger Audience, Less Ad Clutter
Audience
0 -20
Advertising
-40
Up to 40% Reduction In Ad Buying (Borrell)
-60 -80 -100
Businesses that continue marketing during a crisis possess greater marketing savvy and use a broader media mix. These survivors will be media companies’ chief customer base moving forward.
2020
JAN
FEB
MAR
APRIL
MAY
JUNE
JULY
AUG
SOURCES: Nielsen, 60% growth in consumer media usage during crises; Borrell, 52% of businesses surveyed plan to cut advertising due to the crisis, March 2020.
WORKFORCE —Continued from page 17 more full-time employees to offer employa potential joint employer’s actual control ees health coverage. Whether this mandate over an employee and considers whether applies to the staffing agency or the client the potential joint employer: 1) hires or fires company depends on which entity is deemed the employee; 2) supervises and controls the the employee’s “common law employer,” a deemployee’s work schedule or conditions of Require staffing employment to DURING a substantial degree; 3) deCORONAVIRUS CRISIS, termines the employee’s rate and method of agencies to provide MANY CONTINUE TO ADVERTISE payment; and 4) maintains the employee’s proof of insurance employment Asked inrecords. late March: “Over the next six months, my business will spend … on advertising/marketing than it did in the past six months.” In New York, courts analyzing whether coverage. Ideally, a joint-employer relationship exists under the client company the New York Human Rights Law focus on More whether the employer has “immediate conshould be named as an trol” over the worker. additionalLess insured. Once the worker begins work, the comSame that involves a complex factual pany should ensureto that the temporary termination Planned maintain or worker is not treated as a regular employee. analysis as prescribed by Internal Revenue increase spending Temporary workers should be trained sep- Service guidance. arately from regular employees and should If a temporary staffing firm is not deemed not be included in regular employee meet- to be the common-law employer, it may still ings or be offered professional development make an offerDon't to cover the temporary worker’s Know opportunities. health care coverage as an added benefit to SOURCE: Borrell’s SMB Business Panel, March 15–29, 2020. Companies that retain workers through a the client company. staffing agency may be subject to the employWhen a staffing agency’s services are er mandate of the Affordable Care Act (ACA) used, make sure it has provided any legally that generally requires employers with 50 or required training, including anti-harassment,
44%
16%
28%
52%
6%
28 The Financial Manager • May/June 2020
spending in the March-April period. It’s important to note that these savvy marketers also tend to have a greater mix of advertising in their campaigns. They don’t put their eggs in one basket. They are more apt to include mass-media advertising, everything from broadcast TV, cable, outdoor, print, radio and direct mail. As they emerge from the pandemic, they’re likely to have already grown their customer base much as Kellogg did when Post remained silent. And they’re likely to be looking for equally savvy media companies who can help with a full array of marketing that includes not only their core media product, but also broader exposure for marketing messages via things like over-the-top, podcasting, geofencing, branded content and retargeted banners. It may be simple to identify the media companies that will survive. They’ll be the ones who not only know what all those things are, but also are savvy in making them work for their customers. Gordon Borrell is CEO of the research firm Borrell Associates. He can be reached at (757) 221-6641 or gborrell@borrellassociates.com.
anti-discrimination and workplace safety. And ensure that temporary workers are aware of any applicable company policies that may apply to them. There are also insurance issues to consider. A company’s insurance policies related to workers’ compensation, general liability and employment practices may not protect it from the accidents, acts or omissions of temporary workers. It is wise to require staffing agencies to provide proof of insurance coverage. Ideally, the client company should be named as an additional insured on these policies. Companies have three attractive choices when it comes to the nature of their employment relationship with nontraditional workers. But it’s important to be aware of the practical and legal implications related to each choice. In the end, it may save costly legal battles and ensure healthy working relationships. Amy Komoroski Wiwi is a partner and Lauren M. Hollender is of counsel at Lowenstein Sandler LLP in the employment litigation and counseling group. They may be reached at awiwi@lowenstein.com and lhollender@lowenstein.com, respectively.
SOFTWARE—Continued from page 21
to address all of your business needs for an extended period could be naïve. Equally important is customer service and support. You expect this software will manage, report on and process a significant amount of your business revenue and provide a foundation for overall operations. But bugs, enhancements and software issues will arise; this is inevitable. The vendor you select and the employees addressing your issues must act as natural extensions of your organization. Working with a service and support team that understands the software and the industry and your business is invaluable. Doing so reduces cumbersome back-and-forth and provides confidence that your issues will be addressed expeditiously and completely. Finally, ensure the support team is readily available and able to respond when you need them. Also consider the impact of this software on your team as well as how it affects IT and hardware. Not all mainstream software solutions run over the internet or operate as a cloud-based solution (software as a service, or SaaS). Many of them require that you have
mapping and the overall industry. This can save your team hundreds of hours, limit data errors and enable enhanced analytics for data decisioning. It will also reduce the overall migration time and safeguard against missed deadlines. Finally, make sure that this software solution will work for you, in both the short term and over the long run. It should positively impact your Simply assuming that an out-of-the- workload and provide effibox software solution will be able to ciencies to your team. This can seem arduous address all of your business needs for process and painful, and sometimes an extended period could be naïve. it is, which leads some organizations to decide to leave IT infrastructure to complete this process, or well enough alone. However, if we approach does it happen automatically? How often are software-procurement cycles prepared and you eligible for an upgrade, and do upgrades aware, the outcome can result in substantial efficiencies, increased business insights and come at an incremental expense? Consider the implementation process. revenue opportunities. Work with a partner who can assist with transferring data from one software applica- Ashley Kindsvatter is director, product tion to another, even from Microsoft Excel. management, and Karen Bleiler is senior vice president, revenue management services, at This can be a tedious process. Work with a Symphony MediaAI. They can be reached team that understands the key data points, at akindsvatter@symphonymedia.com and relevance of maintaining historical data, kbleiler@symphonymedia.com, respectively. physical servers and that the software exists on your network and behind your firewalls. Properly calculating and evaluating the costs associated with maintenance and IT overhead must be accurately factored into your overall cost assumptions. Think about how upgrades and bug fixes will be pushed to your software installation. Do you need your
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The Financial Manager • May/June 2020 29
LAST WORD
The Newspaper Paradox
Ironically, the financial difficulties facing the newspaper industry may be the key driver in the record number of transactions taking place. BY MATT LOCHTE
T
he merger and acquisition market for newspapers has been breaking records in recent times. Indeed, 2019 was the best year for that activity since 2007, with transaction volume of over $1.3 billion, according to the M&A firm Dirks, Van Essen, Murray & April. The landmark $1.2 billion acquisition of Gannett Publishing by New Media/Gatehouse was responsible for most of that. But the train continued rolling in 2020 with Lee Enterprises’ purchase of BH Media’s newspapers for $140 million. That may seem paradoxical. When people contemplate the newspaper industry, they most likely think of an industry in decline. In this digital economy classified advertisements have migrated to Craigslist, Angie’s List, Autotrader and the like; advertising revenues have moved to Google and Facebook; and subscribers have become accustomed to free news available from multiple websites. Press releases from several newspaper companies describe year-over-year declines in print advertising and circulation revenue; voluntary restructurings under Chapter 11 of the U.S. Bankruptcy Code; and declines in EBITDA (earnings before interest, taxes, depreciation and amortization) of over 10%. This news came before the advent of the Covid-19 crisis. The coronavirus pandemic and economic slow-down will likely accelerate the decline of ad dollars flowing to newspapers, and it is uncertain if those dollars will return once the pandemic has receded. In 2019, Warren Buffett referred to the newspaper industry as “toast.” McClatchy’s February 2020 bankruptcy filing and the March 2020 U.S. outbreak of Covid-19 might seem like the final nails in the coffin. Given all this, it may not seem logical that buyers are motivated to acquire newspapers. But there are three main factors at play. 1. Despite declines in most key performance indicators, newspapers are still remarkably profitable. According to recent Securties and Exchange Commission filings, the operating cash flow margins for Lee
30 The Financial Manager • May/June 2020
Enterprises, The New York Times, Gannett and Tribune were 23%, 13%, 10% and 9%, respectively. Financial distress has been more related to debt load than operations. 2. Newspapers are cheap; Lee’s purchase of BH Media was at an adjusted EBITDA multiple of less than three times, a small fraction of prior years. 3. The existing subscriber bases and editorial infrastructure of newspapers
represent an excellent resource for digital operations. Three different pools of buyers have emerged. There are the traditional strategic buyers. This is evidenced in the Gannett-New Media Enterprises (Gatehouse) transaction. A merger allows for synergies and cost efficiencies. As financial difficulties in the newspaper industry have intensified, consolidation allows stronger competitors to acquire their struggling peers, buying additional time for the industry. A subset of the traditional buyer is the local strategic buyer where one operator strategically acquires a newspaper in close geographic proximity to one of their existing publications. This type of deal is evidenced in Tribune Publishing’s acquisition of the Virginia-Pilot serving Norfolk, which is near their existing Newport News Daily Press. A second type of acquirer is the busi-
nessperson who believes in the importance of maintaining viable local and national newspaper reporting. There are fewer of these types of transactions, but they tend to represent flagship publications. Jeff Bezos and The Washington Post, the late Gerry Lenfest and The Philadelphia Inquirer and Patrick Soon-Shiong’s acquisition of the Los Angeles Times and San Diego Union Tribune exemplify this trend. Financial companies make up the third pool of buyers. Private equity firms have incentives to make acquisitions that are heavy in plant and equipment, such as newspapers. Provisions in the Tax Cuts and Jobs Act of 2017 allow for bonus depreciation of business assets with a recovery period of 20 years or less. If a newspaper is purchased in an asset transaction, the bulk of its fixed assets are currently eligible for 100% depreciation in the year of acquisition. Some hedge funds and private equity firms seeking to shield income are attracted to not only that “plus” but two others: newspapers’ ability to generate cash flow as well as possible net operating losses. These three types of potential acquirers, combined with economics that are still viable, prove that even a very mature industry can provide attractive returns if it is managed carefully. Consolidation allows for efficiencies and synergies. It is likely, though not guaranteed, that the additional financial strains brought on by the COVID-19 crisis may hasten the merger trend given that large publications have brand value that can preserve them as local and national news sources, assuming that adequate funding and skillful management is available. Matt Lochte is a principal with Bond & Pecaro, Inc. in Washington, DC. He can be reached at mattlochte@bondpecaro.com or (202) 243-7416.
CONGRATULATIONS! Jack Zwaska Award
Peter F. Szabo Award
Chuck Sennet Tribune Media Company
Dee Stevenson Corp. Credit & Collections Mgr. Gray Media Group
Rainmaker Awards
Working Capital Awards
Stephen Clare VP, Finance Entercom
George Berbari Director, Int. Revenue Planning A+E Networks
Doug Lyons Senior VP/Controller & Treasurer The E.W. Scripps Company
Sean Hetzler Senior Director, Tax TEGNA
Kent Nate EVP/CFO Bonneville International
Robin Stephenson VP, Internal Audit Tribune Publishing
BOND & PECARO
Collecting MORE for you requires a blend of strength and delicacy.
There is an art to collecting media receivables. Not everyone can do it or do it well. Some accounts need a firm approach during the collection process. A show of strength. Other accounts react better to gentle persuasion. A softer MORE delicate touch. The trick is not to be so firm or so strong to lose future business opportunities or too soft as you may never collect the debt. The true art of debt collection lies in knowing when and how much of each technique to use, blending the approach to the account. At Szabo Associates, we’re masters at being hard as steel or soft as a feather. We know what to say and when and how to say it.
It’s because we have MORE experience and MORE training than anyone in the industry. Not to mention a proprietary database that has chapter and verse on thousands of media clients and their payment histories. Szabo has been successfully collecting media receivables longer and better than anyone else. Is it any wonder we collect MORE for our clients?
Szabo Associates, Inc. 404-266-2464 www.szabo.com info@szabo.com
MORE is better than less.