TFM September/October 2022 Issue

INFORMATION AND INSIGHT FOR MEDIA FINANCE PROFESSIONALS SEPTEMBER/OCTOBER 2021 THE FINANCIAL MANAGER

ALSO INSIDE

Radio Revelations Conference Wrap-Up Biden and The Press Sweeter Bonus Deals

PACKING A BIGGER WALLOP

A special report on technology reveals how cryptocurrency and NextGen TV will propel some companies into much higher realms.

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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:

SPECIAL REPORT: ANNUAL CONFERENCE ROUNDUP

MARY M. COLLINS, President & CEO Mary.Collins@MediaFinance.org

10 Preparing for the Best

JANET STILSON, Editor TFMeditor@MediaFinance.org

Experts shared loads of predictions about possible speed bumps and bright promises during Media Finance Focus 2021. The second article in a two-part report.

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:

BY JANET STILSON & KRISTA VAN LEWEN

MEDIA FINANCIAL MANAGEMENT ASSOCIATION

16 The Velocity of Change

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

A new radio survey points to shifting consumer behaviors and opinions, revealing new ways that stations can transform and succeed. BY FRED JACOBS

Subscription $69.00 per year. Copyright, 2021. All rights reserved.

SPECIAL REPORT: TECHNOLOGY TRENDS

What is MFM?

20 The Crypto Revolution

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 webinars, 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.

Are media companies ready to accept cryptocurrencies? When they are, some key concepts and decisions become vital. BY CAL MOSTELLA

26 NextGen’s Towering Promise What does ATSC 3.0 really mean for the broadcast TV? The possibilities are vast and are likely to supercharge the business. BY JERALD FRITZ

DEPARTMENTS 4 From the President Race Into Tomorrow 6 Dear Expert New FCC Rules 7 Human Factor Signing Bonuses

8 Credit Where Due Revising Payments 9 Board of Directors With Association News 30 Last Word Respecting the Press

The Financial Manager • September/October 2021 3

FROM THE PRESIDENT

Racing Into Tomorrow

Yesterday’s pace of business looks almost slo-mo when compared with what gets done today — or will tomorrow.

O

ne comment really stood out for me that they “are especially noteworthy for during Discovery CFO Gunnar Wie- their impact on traditional and digital denfels’ keynote address for Media media use.” Finance Focus 2021 in July. He observed that With nearly 50 sessions along with 14 the pace of change is as fast as it’s ever been. roundtables, TFM editor Janet Stilson and And conversely, the pace of change will public relations consultant Krista Van Lewnever again be as slow as it is today. en surely struggled when deciding which I was reminded of his remark as I read the events to include in their second conferstories for this issue of TFM, which includes ence round-up story. Rather than covering part two of our conference recap and a speWiedenfels’ ideas for developing and maincial report on technology. Both tie in nicetaining corporate culture, they opted for a ly with our conference theme – Together sampling of other sessions, all with a look at Toward Tomorrow – and the idea of a more media’s future. When you check out their rapidly changing future. outstanding coverage beginTwo articles focus on new Lori Kahn considers ning on page 10, keep in technology for so-called mind that you really had to the emerging trend traditional media busiparticipate to appreciate the of extending hiring nesses. The analogy ONE depth and breadth of conMedia 3.0’s Jerald Fritz uses bonuses beyond the tent offered. ranks of top talent. to explain the value propOur four regularly schedosition for ATSC 3.0, the uled columns also have an Next Gen Broadcast standard, is perfect. He eye on the future. “Dear Expert,” by Lerman compares an ATSC 1.0 station to a modest Senter attorney Sally Buckman, begins to rental property in a thriving neighborhood. explain the Supreme Court’s decision about But the neighborhood now allows luxuriFederal Communications Commission ownous mixed-use developments. Maximizing ership rules. In “Human Factor,” Media return means replacing the bungalow with a Staffing Network’s Lori Kahn considers the modern high-rise structure. Or, in the case emerging trend of extending hiring bonuses of broadcast TV, swapping ATSC 3.0 for beyond the ranks of top talent. There are sevexisting technology. eral suggestions for non-cash incentives. WarnerMedia’s, Cal Mostella – who is an Gray Media Group’s credit guru and MFM board member – takes on the quesMFM board member Dee Stevenson advistion of cryptocurrency. He notes that stoes readers to rethink old ways of handling ries of “multi-million-dollar windfalls” have past-due clients in “Credit Where Due.” companies considering the sale of digital Finally, in “Last Word,” Dan Shelley of the collectibles – NFTs (non-fungible tokens) Radio Television Digital News Association – on the blockchain. This requires deployexplains that President Biden’s administraing cryptocurrencies. Adding such a digital tion is not as press friendly as one might payment system, which can also be used in have expected. other transactions, requires several manageLike the theme for our 2021 conference, ment decisions and can have wide-reaching the stories in this issue accounting and tax implications. Like that encapsulate the mission much-maligned Facebook relationship staand vision statements tus, it’s complicated. of MFM and BCCA. Fred Jacobs shares some of the takeaways We are all about memfrom a survey his firm, Jacobs Media, combers, and the media pleted using responses from more than industry, working 42,000 North American commercial radio Together Toward listeners. Conducted during the pandemic, Tomorrow. the survey resulted in a lot of timely data. Mary Collins is president and CEO of MFM Jacobs singles out 10 trends. He explained and BCCA; Mary.Collins@MediaFinance.org.

4 The Financial Manager • September/October 2021

EDITORIAL ADVISORY BOARD SALLY BUCKMAN Member Lerman Senter PLLC GREG LECHOWSKI Market Controller, Phoenix Bonneville International NAT McCALL Senior Manager, U.S. Credit & Collections Discovery, Inc. 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 SALLY BUCKMAN Lerman Senter PLLC JERALD FRITZ ONE Media 3.0 FRED JACOBS Jacobs Media LAURIE KAHN Media Staffing Network CAL MOSTELLA WarnerMedia DAN SHELLEY Radio Television Digital News Association J. DEE STEVENSON Gray Media Group Inc. KRISTA VAN LEWEN MFM & BCCA Public Relations

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DEAR EXPERT

Relaxing the Rules

The Supreme Court’s broadcast-ownership decision impacts stations in critical ways, as legal eagle SALLY BUCKMAN explains.

Dear Expert, I heard that a recent U.S. Supreme Court decision resulted in changes to the Federal Communications Commission (FCC) multiple ownership rules. Does that mean that I can buy more FM radio stations? (My company is at the limit for our market.) —Hopeful in Harrisburg Dear Hopeful, You are correct that the Supreme Court issued a decision that eliminated and changed some of the FCC’s multiple ownership rules. Unfortunately, the rule limiting how many radio stations a company can own was not changed. Here’s some background: in April, the Supreme Court issued a unanimous decision that upheld an order the FCC adopted in November 2017. That order eliminated both the newspaper-broadcast and newspaper-radio cross-ownership rules and relaxed the local television ownership rule so that one entity can own two television stations in any sized market if the stations are not both top-four network affiliates. In the 2017 order, the FCC concluded that dramatic technological advances have transformed how Americans obtain news and entertainment. It concluded that the three rules at issue no longer served the public-interest goals of promoting competition, localism and viewpoint diversity. The Third Circuit Court of Appeals vacated the FCC’s decision in November 2019. The Third Circuit did not dispute the FCC’s reasoning that the rules at issue no longer promoted competition, localism, and viewpoint diversity. However, the court found that the record did not support the FCC’s conclusion that the changes would have a minimal effect on minority and female ownership. As a result, the cross-ownership rules were reinstated, and 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.

other rule changes were eliminated. In overruling the Third Circuit, the Supreme Court decided that the FCC’s determinations were reasonable and that its decision was consistent with the require-

ments that expert agencies must follow. Given the Supreme Court’s decision, the following multiple ownership rules apply: ■ The local radio ownership rule limits the number of AM and FM stations an entity can own in a local market, depending on market size. For example, in markets where there are 45 radio stations, a company can own no more than eight stations, and only five of them can be in the same service (AM or FM). In markets with 14 or fewer stations, companies can own no more than five stations, with only three in the same frequency band. ■ The local television ownership rule allows companies to own two stations in the same market as long as the outlets are not among the top-four stations, ranked by audience size. ■ The national television ownership cap limits one company from owning TV stations that serve more than 39% of all television

6 The Financial Manager • September/October 2021

households. However, UHF stations receive a 50% discount on the total number of households in a given market. ■ The dual network rule, which essentially prohibits the merger of any two of the big four television networks – ABC, CBS, Fox and NBC. Don’t give up hope concerning a further relaxation of the local radio ownership limit. The FCC is required to review its multiple ownership rules every four years, and several parties asked the commission to relax the local radio ownership rule as part of its currently pending review—which was initiated in 2018. The same review is also examining a possible change to the local television rule. Because of the Supreme Court’s decision – and the amount of time that’s elapsed since the 2018 review began – the FCC has asked parties that already made comments to update them. It is most specifically interested in new information regarding the media marketplace. The FCC’s national television ownership rule is not part of the reviews the FCC is required to conduct every four years. However, possible relaxation of this rule, along with elimination of the UHF discount, is part of a separate proceeding that has been pending since late 2017. There’s another benefit to the Supreme Court decision: the Third Circuit will no longer automatically retain jurisdiction over challenges to FCC orders in the quadrennial reviews of the multiple ownership rules. That situation had existed for two decades. Now, it will be possible for such challenges to be decided by other courts of appeals. Sally Buckman is a manager at the law firm Lerman Senter PLLC. She can be reached at (202) 416-6762 or sbuckman@lermansenter.com.

HUMAN FACTOR

Sweetening the Deals

While signing bonuses were once used as a type of “honey” for top talent, they’re becoming more critical as companies lure valuable worker bees. BY LAURIE KAHN

I

n the past, signing bonuses within media companies were only granted to senior managers or highly sought-after on-air talent. However, in this crazy, competitive hiring environment, they are becoming more commonplace. The pandemic has altered the balance of power between the workforce and employers. Companies are struggling to hire back staffers to maintain their needed workf low. And many media companies are understaffed, especially in the sales departments. When I went on a road trip recently, almost every truck I passed had a “drivers wanted” sign. Every fast-food location and hotel was looking for more employees. I saw billboards promoting open jobs and signs placed around town. And there were commercials on local television stations that promoted staffing opportunities. We can’t blame this all on unemployment. Many states are starting to crack down on applicants that are not actively looking for work. One of the dynamics at play relates to working moms who have decided not to return to the office; they finally have their home workflow set up. The good news is that this fall kids will be back in school, so we hope to see more women back in the workplace. How can we compete for the moms’ attention, along with so many other potential staffers? Certainly, bonuses aren’t the only carrot you can dangle. Improved compensation plans for sellers, longer guaranteed employment periods as well as training and growth opportunities are all possibilities. Conveying the idea that you have a fun environment in a fast-paced business may also go a long way. But those lures might not be enough. At this point, you might be groaning. When you think of signing bonuses, you may conjure up images of top athletes with lucrative deals to join struggling teams. Poor Aaron Rodgers of the Green Bay Packers recently signed a deal involving a $6.8 million

$10,000 sign-on bonus, with the written understanding that they need to stay for 24 months. If they depart before that two-year period ends, a pro-rated amount will be deducted from their last paycheck. T he g o o d ne w s i s that signing bonuses do not have to be cash. For example, they might i nvolve pro duc t s or The good news is services. One manager that signing bonuses do I know discovered that not have to be cash. For example, they a new hire needed an updated TV set. When might involve products or services. the hire signed on the dotted line, the manager got them one. roster bonus and a signing bonus of about Another popular sign-on bonus is offer$14.5 million on top of a $1.1 million base ing remote work. Think of the savings and salary this year. And there are more sweet- benefits to an employee if they aren’t comeners for him in 2022, according to the Na- muting every day to the office. They could tional Football League’s site. trim expenses for things like parking, eating Fear not. There are a lot of ways to en- out, gas, work clothing, dry cleaning, coffee tice a prospect. It might involve convincing and health clubs. someone to relocate, or to leave a competiWork from home also allows a staffer to tive company. The bonus can be a lump sum be more organized. Perhaps they can throw or paid out over a period. The longer you in a load of laundry between calls or run to spread out the payment, the longer you can the grocery on their lunch hour. And there’s entice a new hire to stay, if the package is a chance for less stress and more productivattractive. ity. Studies have shown that remote workers Research shows that in other industries, can be more loyal and do a better job if they managers can receive amounts ranging from have the right tools. $10,000 to $50,000, while hard-sought clerWith so many signical positions often receive sign-on bonuses ing-bonus options at of less than $5,000. It all depends on how your disposal, you may much the potential employee is worth to have what it takes to your organization. build the team you need Take note that sign-on bonuses are usu- to succeed. After all, it’s ally viewed as supplemental income and a new world out there. taxed at a different rate, usually a flat perLaurie Kahn is president of Media Staffing centage. Include contract verbiage that reNetwork, which helps media companies with all of quires repayment if the new hire decides to their talent acquisition needs, including diversity depart within a pre-stated amount of time. planning. She can be reached at (480) 306-8930 or laurie@mediastaffingnetwork.com. For example, let’s say a new hire is given a The Financial Manager • September/October 2021 7

CREDIT WHERE DUE

Finding Middle Ground

By revising payment plans for clients in difficult circumstances, it’s possible to create win-win scenarios for everyone involved. BY J. DEE STEVENSON

“W

e’ve always done it that diplomatically while insisting that a given way.” Those words are debt be settled. Before entering into special something that most of payment agreements, use a bit of predictive us are guilty of saying, analytics with the account data you have on or thinking, at least once, if not countless hand. It may help you to identify customers times in life. However, the coronavirus has that may be (or will be) encountering liquidseverely compromised the financial health ity problems. of many advertising clients, and insolvencies I’ve found that breaking accounts into are on the rise. Because we are navigating good, fair and poor categories helps assess our way through an economy unlike any the strength of a payment plan. Granted, we’ve experienced in the span of our career, most customers requesting special payment “that way” may require some updates. terms are doing so because they are in finanTo help balance cash f low and restore economic normalcy, credit managers will need to brush up on their skills of investigation as well as negotiation. Companies that range from small mom-and-pop shops to multinational corporations are struggling to recover and gain momentum these days. At the same time, some media companies have asked their collections departments to limit their I’ve found that breaking established practices, while accounts into good, fair and others have suspended them all poor categories helps assess the together. strength of a payment plan. Given the shifting sands, it’s essential for managers to optimize accounts receivable and limit bad debt cial distress. However, others see this period loss as much as possible. In that way they of instability as an opportunity for exploitacan help sustain their company’s cash flow tion. A careful review of account analytics and working capital. can be extremely helpful in understanding a Many businesses will need creditors to client’s true circumstances. give them some breathing room as they reSometimes offering small incentives is all store their financial health. One of the best it takes to receive a payment and avoid bad ways to do this is by restructuring payments debt. The incentive might involve suspending on the outstanding balance into affordable interest and late fees on a short-term payment installments. This will make the end goal, plan when payments are made promptly. Or payment in full, much more attainable. Col- you might offer small discounts to encourage lection may involve a longer time frame, but early payments. And if a revised payment by stretching out the payments, media com- schedule doesn’t stretch out for too long a panies will have a stronger chance of collect- period, it’s likely to be just as beneficial to a ing amounts owed. And that is much more creditor as it is to their debtor. desirable than the alternative: bad debt. No matter what incentives are offered, try This process involves a careful juggling to make the payment process as simple and act: you need to work with customers frictionless as possible. Keep in mind that

8 The Financial Manager • September/October 2021

many people working in accounts payable departments may be working from home. And some clients may have had to eliminate that dedicated staff altogether. Regardless of what new payment arrangements you make, be sure and document the changes. Your records should include information about any changes in your collection methods and efforts; exceptions or revisions to existing contract terms; disputes; and payment agreements. Store them in a central repository that’s easily accessible to all necessary parties that may be working with the account. Copies of all changes also need to be sent to the customer to avoid any future disputes. A client’s acknowledgment of the changes can be of great value in the future. This written document eliminates confusion and misunderstandings while keeping the debtor on track. And it helps maintain a healthy working relationship. This record also allows you to monitor and follow up on a debtor’s progress with little trouble or effort. When credit and collection professionals truly understand the financial difficulties of customers and develop new payment plans, they have an opportunity to forge stronger relationships with them. They can also prove that they are valuable members of a company team when they adapt new collection approaches, accelerate internal collection efforts and help minimize cash f low risk. A fter all, the biggest asset on a company’s balance sheet is often accounts receivable. J. Dee Stevenson is the corporate credit and collections manager at Gray Media Group Inc. She can be reached at (850) 766-4748 or dee.stevenson@Gray.TV.

ASSOCIATION NEWS

MFM

BOARD OF DIRECTORS As of July 1, 2021 CHAIRMAN DAVID BOCHENEK Sinclair Broadcast Group PRESIDENT & CEO MARY M. COLLINS MFM/BCCA VICE CHAIRMAN/

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Get Ready for Next Year Media Outlook 2022

Oct. 19-20, 2021 1-3 p.m. Both Days CHANGING OPPORTUNITIES for media companies are in the spotlight at this annual seminar, which will be held virtually and is free to MFM and BCCA members. This is a must-attend event if you want a deeper understanding of new revenue streams or how audience bases can be expanded. A keynote address will feature Jay Bryson, managing director and chief economist, Wells

Fargo Corporate & Investment Bank. Another session will look at pending Biden administration changes that will impact businesses, with a particular focus on taxation. The power of data analytics for customer targeting and the reinvention of media revenue streams will also be examined. Non-members pay $250, which includes a one-year trial membership. Up to four CPE credits are available. Registration is required. Visit the Programs & Events dropdown tab on mediafinance.org.

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SECRETARY/ CONFERENCE CO-CHAIR LORI LOCKE Discovery Inc. TREASURER MARIE TEDESCO Beasley Broadcast Group IMMEDIATE PAST CHAIRMAN MELISSA MITCHELL Bonneville International

MFM/BCCA DIRECTORS JENNA HARDY Gearbox Entertainment Software CAL MOSTELLA WarnerMedia CHRISTINE OLIVER Deloitte & Touche KIM PARKER Graham Media Group PAUL RAHMLOW Midwest Communications DEE STEVENSON Gray Media Group ELIZABETH BRAMOWSKI Audacy

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The Financial Manager • September/October 2021 9

PREPARING FOR THE BEST EXPERTS SHARED LOADS OF PREDICTIONS ABOUT POSSIBLE SPEED BUMPS AND BRIGHT PROMISES DURING

media finance focus 2021.

THE SECOND ARTICLE IN A TWO-PART REPORT. BY JANET STILSON & KRISTA VAN LEWEN

10 The Financial Manager • September/October 2021

ANNUAL CONFERENCE ROUNDUP

Forging a PostCOVID Strategy

D

OES YOUR company have a COVID-19

As finance departments position themselves for a comeback after the COVID-19 crisis, enormous changes are afoot that could make labor laws much more pro-union. At the same time, some streaming TV services are expected to refine their business models, and esports businesses could show stronger results as the next year progresses. Those are just a few tidbits from the smorgasbord of knowledge shared during Media Finance Focus 2021. Here are some insights that we put on our “plate” during the event’s second half.

exit strategy? That question was front and center during a session that featured two McKinsey officials. On the upside, companies responded 20-40 times faster than they thought they could during the crisis, delivering working solutions in days instead of weeks or years, said senior knowledge expert Laura LaBerge. On the downside, organizations still must

room when big decisions were being made,” said Prakash. That’s changing, and in parallel, McKinsey sees a large increase in CFOs looking to make the finance function more agile, streamlined and digital. CFOs have a prime opportunity to enable their companies to meet new challenges, LaBerge and Prakash advised. Finance can work in cross-functional, agile teams; use analytics to generate performance insights; and develop in-house talent. “Finance can become the single source of trust, helping to shape decision-making. It’s really an advisor to the entire business,” said LaBerge.

I

Biden’s Swing for The Fences

dreams come true, the U.S. will see far-reaching changes in its labor laws. The Protecting the Right to Organize (PRO) Act, which passed the House and now faces a Senate debate, is key to that goal. So said Dave Masud, managing partner of Masud Labor Law Group, and Dana Neves, senior vice president, WFSB, F PRESIDENT JOE BIDEN’S

“FIVE YEARS AGO, A SLIM NUMBER OF ORGANIZATIONS IN THE TECH SPACE HAD THE CTO IN THE ROOM WHEN BIG DECISIONS WERE BEING MADE.” — PRIYANKA PRAKASH, McKINSEY

navigate uncharted territory. With some course corrections, companies – particularly media companies – stand to leverage their technology innovations and flourish in the years ahead. LaBerge and Priyanka Prakash, an engagement manager at McKinsey, cited a study showing that 64% of respondents plan to build new digital businesses as part of their COVID exit strategy. “The rate of change in the media industry has been pretty acute,” said Prakash. “Companies are using this moment in time to innovate, diversify, maybe completely reinvent aspects of their business. And CFOs are rising up to take part in this innovation.” In fact, in this increasingly digital world, both the CFO and chief technology officer (CTO) roles are becoming more significant. “Five years ago, a slim number of organizations in the tech space had the CTO in the

“[THE PRO ACT] WOULD GIVE UNIONS MORE POWER THAN THEY’VE EVER HAD, OR MAYBE NOT SINCE THE 1930S.” — DANA NEVES, WFSB-TV

and labor relations for Meredith Local Media Group, during their presentation. “It would be the single biggest change to labor laws ever,” said Neves. “For an employer, it could be enormous. It would give unions more power than they’ve ever had, or maybe not since the 1930s.” The PRO Act would eliminate state right-

The Financial Manager • September/October 2021 11

ANNUAL CONFERENCE ROUNDUP to-work laws, which prohibit union security agreements between employers and labor unions. It would also block employers from hiring permanent replacements for striking employees. “If we were not allowed to bring in permanent replacements, we would lose some bargaining power,” said Neves. If the PRO Act passes, it would also be possible for employees to strike for secondary activity. Under current rules, “if Dana’s home station in Hartford, WFSB, had a labor dispute with their union, the union cannot set up a picket line in front of one of [the station’s] big advertisers,” explained Masud. That roadblock would be eliminated if the PRO Act passes. The act contains several other provisions that raise concerns, but its fate is far from assured. While it passed the House vote earlier this year, the act is likely to spark a filibuster in the Senate. As a result, 60 votes would be required to pass it. So the current debate over

Board is changing from its Donald Trumpera composition. Biden is already shifting the balance of power to his own party.

T DAVE MASUD

whether or not filibuster rules should change is critical. Regardless of whether the act passes in its current state or in a watered-down version, Biden and his Democratic colleagues are invoking their power to make the U.S. more pro-labor in other ways. Perhaps most notably, the makeup of the National Labor Relations

Video Games’ Epic Year Ahead

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ILL THE VIDEO GAME INDUSTRY CAPTURE MORE INVESTMENT ATTENTION

from SPACs, more formally known as special purpose acquisition companies? Will the esports business come out of its COVID-19 funk during the next year? Will the court showdown between Epic Games and Apple result in better economic conditions for video game apps? Those are some of the questions raised by Mark Mondello during his annual valuation presentation. There’s an attractive business model for most sectors of the video-games industry, with the exception of hardware, said Mondello, who is Duff & Phelps’ managing director, global leader of entertainment media valuation advisory services. “The big powerful companies are getting stronger, because they’ve been able to generate more and more out of their franchises through digital distribution and just elongating the franchises,” he said. However, the esports business had a bit of a rocky “THE CAPITAL MARKETS year, because it wasn’t able to hold live events during ARE STRONG RIGHT the COVID crisis. Mondello noted that the $1 billion NOW; THE IPO MARKET’S in sales that esports generated last year was a drop from GOOD; AND THERE’S A the year before, but it’s likely to ramp up as the economy LOT OF SPACs WITH A LOT OF CASH.” continues to improve. — MARK MONDELLO, So are the investment opportunities. “The capital DUFF & PHELPS markets are strong right now; the IPO market’s good; and there’s a lot of SPACs with a lot of cash,” he said. Mondello also noted that Epic Games, the force behind Fortnite, is among the other companies that might go public. This possibility comes when Epic and Apple are awaiting the outcome of their high-profile legal battle, which largely stems from Epic’s resistance to the 30% app store fees that Apple demands. Mondello questioned whether the final outcome would emerge before year’s end.

12 The Financial Manager • September/October 2021

The Streaming Tsunami

HE DELUGE of streaming services that compete for consumer attention has created a “flixopalypse,” joked Alan Wolk during a session on subscription video on demand (SVOD) services. Wolk, co-founder and lead analyst at media industry consultancy TV[R]EV, noted that SVOD began slowly with Netf lix, Hulu and Amazon. “Suddenly it’s everywhere, as Paramount+, Apple TV, Disney+, Peacock+ and others joined the fray,” he said. “And the pricing is so competitive, you can subscribe to all nine major services for less than $100 per month.” Wolk’s advice to SVODs? It’s complicated. They must grapple with churn, as customers toggle between ad-free and ad-supported services. Network groups with more than one service need to determine how to best bundle and discount them. The brand “A Team” (as

“[LINEAR TV] IS SHRINKING, BUT IT’S FAR FROM OVER. MASSIVE CORD-CUTTING IS FICTION. THERE ARE STILL 80 MILLION SUBSCRIBERS.” — ALAN WOLK, TV[R]EV

he calls it) – Discovery, Hulu, Netflix and Amazon – is in a good position, since top talent wants to work with them. The “B Team” – where Wolk places Paramount+, Peacock and Apple TV – “needs to figure out what they’re doing. News and regional sports will be key.” Don’t count linear TV out yet, he said. “It’s shrinking, but it’s far from over. Massive

The Financial Manager • September/October 2021 13

ANNUAL CONFERENCE ROUNDUP cord-cutting is fiction. There are still 80 million subscribers.” Meanwhile, the recently launched Peacock service is on a mission to join the A team. It offers consumers three options: free, ad-supported “premium” and ad-free “premium plus.” Kristin Newkirk, senior vice president and group controller at NBCUniversal, is leading the charge to manage the complexities around its unique subscription model that must recognize and harmonize data from numerous systems. To do this, Peacock introduced an automated BRIM (billing and revenue innovation management) platform to handle its order-tocash components. Newkirk admitted BRIM has been a long, but worthwhile endeavor. “You’re never done,” she said. “At least for the

T

first year. It’s probably an 18-month process.”

Speaking to Cultural Passions

T

HE CULTURAL relevance of media com-

panies has become increasingly important to advertisers as they consider where to place their dollars. And it’s no coincidence that 62% of the media buyers and influencers working today have been in the business fewer than eight years. “That translates into Gen Z and young Millennials,” said Jack Myers, founder and chairman of MediaVillage and AdvancingDiversity.org. “Social values, impact and relevance are important to their own

well-being and the careers they choose.” Myers believes that media companies need to consider both the social and financial implications of budgeting decisions. CFOs and their teams should be more focused on the rewards of a diverse workforce and initiatives that will speak to the social-conscious passions of consumers, in his view. Seconding that opinion were both Sarah Harris, vice president of social impact, and

As the Cookies Crumble HIRD-PARTY COOKIES MAY HAVE BEEN DEALT A CRUSHING BLOW, BUT A NUMBER

of options for resolving the data-privacy dilemma are in the works. That’s according to three experts from The Washington Post, who emphasized that there are no simple remedies. At issue are aggressive moves by governments, first initiated by European Parliament’s General Data Protection Regulation (GDPR), which was enforced in May 2018 to protect consumers’ health and banking data. Even before that, in 2017, Apple introduced the so-called intelligent tracking prevention technology into its operating system. Firefox and Safari were the first web browsers to remove third-party tracking, with Google on board to begin a phase-out in mid-2023. Google is focused on its “federated learning of cohorts” or FLoC. The test groups are made up of demographically similar users in a decentralized system JOEY WEED that advertisers could use to target ads. FLoC has already generated privacy concerns. Publishers, which stand to benefit from more direct purchasing in a post-cookie world, are nonetheless grappling with putting up more paywalls in order to obtain data “THERE’S NOT ONE when third-party tracking departs. SOLUTION, AND IT’S FAIRLY FRAGMENTED WaPo senior data analyst Joey Weed said that there are AND CONTROVERSIAL. several alternatives to third-party cookies under considerNOTHING IS VERY GOOD ation. Among them is first-party data, in which users offer OR VERY BAD.” information themselves; contextual targeting, a less exact —JENNIFER HURLEY, way to advertise; Unified ID 2.0, an encrypted identifiWASHINGTON POST cation system that follows users on the web; and Google’s other “privacy sandbox” offering, FLEDGE, which has been shelved until late 2021. Todd Nicolini, WaPo’s manager of ad sales research, advised media companies to explore research tools and prepare for all possibilities. Jennifer Hurley, director of finance, added: “There’s not one solution, and it’s fairly fragmented and controversial. Nothing is very good or very bad; it’s just going to be very interesting.”

14 The Financial Manager • September/October 2021

JACK MYERS BELIEVES THAT MEDIA COMPANIES NEED TO CONSIDER BOTH THE SOCIAL AND FINANCIAL IMPLICATIONS OF BUDGETING DECISIONS.

Paul Suchman, chief marketing officer, at Audacy. The radio and podcast company was formerly known as Entercom Communications. Harris explained that the new brand “is about building belonging and bringing people together around content that moves them. That translates into our culture and how we build a community of inclusivity [to help support] high-performing folks on our team. And then we set them up to excel.” It’s possible to directly connect a company’s purpose to its return on investment, said Suchman. Audacy has zeroed in on three live events, rebranding them to generate awareness of, and dollars to, specific causes: the environment, mental health and veterans. “My CFO understands the value of making that kind of investment,” Suchman said. “Because there aren’t a lot of dollars, it can’t be buckshot. You have to be very precise in the bets that you’re making.” Janet Stilson is editor of TFM. She can be reached at TFMEditor@mediafinance.org or (212) 694-0126. Krista Van Lewen provides public relations services to MFM and BCCA. She can be contacted at kvanlewen@gmail.com or (415) 608-0263.

®

The Financial Manager • September/October 2021 15

THE

VELOCITY OF CHANGE BY FRED JACOBS

16 The Financial Manager • September/October 2021

SPOTLIGHT ON RADIO

A new radio survey points to shifting consumer behaviors and opinions, revealing new ways that stations can transform and succeed.

W

HEN YOU’RE LIVING

through a true cultural shift, it is often hard to pinpoint how it began and how your life has changed as a result. For many of us, that’s been the case with the Digital Revolution – a period as significant as the Industrial Revolution was to those who experienced it more than a century ago. Let me jog your memory. Do you remember when you got your first smartphone? Or how you found your long-lost BFF on Facebook after years of drifting apart? Or when you used Google Maps for directions instead of printing out a MapQuest route or waiting for a radio traffic report? All of these technologies and services have been around for just a couple decades or so, but they’ve changed our lives forever. Everyone who works in traditional media – radio, TV, print – has had their worlds rocked by the tech tsunami. Like fixing an airplane flying at 35,000 feet, the best and the brightest working in “old school” media have been forced to adapt, often using muscle groups long dormant. CEOs need solutions and answers last week. And that’s why back in late 2004, Jacobs Media launched its first Techsurvey (originally known as Tech Poll) to help radio broadcasters understand the velocity of change among their core listeners. How quickly are consumers moving to the “subscription economy” to access their preferred content? How are they using digital media to enjoy terrestrial radio stations? How has podcasting rocked audio consumption and on-demand content? Our latest study among core radio users, TS21, is especially important because the pandemic was in full swing when we conducted our survey during the first two months of this year. There are hundreds of thousands of data points and crosstabs produced by our analysts, but here are 10 key trends that are especially

noteworthy for their impact on traditional and digital media use. 1. The Digital Train Has Left the Station – This year, about 61% of broadcast radio consumption is considered “traditional.” That means listening occurred on “regular radios” in homes, cars, workplaces and schools. Conversely, 35% of station listening took place via “digital” outlets – computer, smartphone, tablet and smart speaker streaming. Station podcasts figured in there, too. We’ve been asking this same question for nearly a decade. A look back at the tracking reveals that “traditional” radio listening has decreased, while “digital” consumption of AM/FM stations has grown steadily. This trendline is a clarion call for broadcasters to provide digital delivery. It is essential that radio brands deliver a competitive, seamless streaming experience. 2. Local Matters – One of the consistent findings we see year after year is overwhelming agreement with the notion that “one of radio’s primary advantages is its local feel.” In this year’s survey, a near majority (49%) of these radio fans strongly agree with that statement – a five-year high. It’s possible that as many mainstream entertainment and information sources are national or even global, there’s an increased appreciation of radio’s connection to its communities. That creates a challenge and an opportunity for broadcasters to step up to the plate and provide quality hometown features, personalities and service. Yet, so often, broadcasters may be becoming over-reliant on syndicated or “hub” programming at the expense of live and local content. 3. Damn, That Traffic Jam – As mentioned, COVID-19 was still very much with us when this survey was fielded early in 2021. As a result, most respondents said that they were spending less time in cars than usual. And because the car has historically been the No.1 radio listening location, the pandemic wreaked havoc with drive time listening.

The Financial Manager • September/October 2021 17

Home Station Listening Platform Trend: Tradional vs. Digital 100%

Four in 10 (41%) of these regular radio users told us that compared to the prior year, they are spending “a lot less time in car.” Recent Nielsen data, however, indicate radio listening is rapidly returned to its pre-pandemic levels, a welcome sign for radio broadcasters. 4. See You on Zoom – Virtual meetings became a key part of the way we connected during the pandemic. Our Techsurvey results showed that 38% of core radio listeners found themselves on one of these platforms at least weekly. We also learned that many consumers experienced events such as concerts via streaming video platforms, a reminder to broadcasters that entertainment and information provided to screens is a welcome option for many listeners, even when COVID fears dissipate. There is no reason to believe the “Zoom meeting” won’t become a fixture as common as conference calls were before. 5. The Rise of the Personality – Radio became a mass medium in no small part due to its high-profile on-air talent. Throughout its history, personalities like Orson Welles, Ronald Reagan, Paul Harvey and Howard Stern have kept America coming back to radio for more. Each year, Techsurvey measures the degree to which music on the radio compares to the power of personality as a main driver for generating appeal. And as we’ve tracked these two trendlines over the years, the shift to the power of “sticky” air talent continues to grow – apparently at the expense of music, which has been greatly commoditized by streaming services such as Spotify, Pandora and YouTube. For broadcasters, the impetus to invest in the discovery, development and training of appealing personalities has never been more important, whether stations are licensed in Pensacola, Portland or Philly. 6. Radio and “The Feels” – Given all the options on the competitive media landscape, why do consumers still choose broadcast radio? From a veritable “laundry list” of potential drivers, we learned that emotion plays a great role in choosing to listen to broadcast radio, especially in the year of COVID-19. Of course, bread and butter offerings like music and personalities are table stakes. But a growing number of respondents point to companionship, mood elevation and connection as key motivators for regular tune-in. As playlist streaming services have risen in popularity, radio broadcasters may find that giving audiences “the feels” may, in fact, become the greatest motivator

80% 100% 60%

Traditional

Digital

Home Station Listening Platform Trend: Tradional vs. Digital 85% 81% 80% 77%

80% 40%

85%

80%

81%

60% 20% 40% 0%

14%

17%

17%

2013

2014

2015

20%

14%

0%

2013

74% Traditional

77%

70%

74%

20%

22%

2016

2017

Digital

65%

65%

70% 27%

65% 31%

32% 65%

35% 61%

2018

2019

2020

2021 35%

31%

61%

32%

27% Percentage of time spent with Preset 22% 1 station in a typical week via 20% radio traditional at home/school/work or in a vehicle) 17% platforms 17% (an AM/FM vs. digital platforms (computer, mobile, smart speaker, podcast) 2014 2015 2016 2017 2018 2019 2020

2021

Percentage of time spent with Preset 1 station in a typical week via traditional platforms (an AM/FM radio at home/school/work or in a vehicle) vs. digital platforms (computer, mobile, smart speaker, podcast)

Over Time, the Appeal of Music on the Radio Is Becomming Secondary to the Appeal of Personalities 80%

Time,DJs/shows/hosts. the Appeal of IMusic onmythe Radio Is want to hear favorite songs/artist. IOver like particular Becomming Secondary to the Appeal of Personalities 66%

70%

80%

64%

67%

I like particular DJs/shows/hosts.

60%

57% 70%

55% 67%

58% 64%

66% 56%

60%

59% 59% I want to hear my favorite songs/artist. 58%

57%

60%

59%

60%

57%

40%

2014

55% 2015

58%

2016

56%

2017

58%

2018

57%

2019

61%

55% 59%

55% 61%

55% 2020

55% 2021

Among those who listen to AM/FM radio, percentage who say this is a main reason they listen 40%

SOURCE: Jacobs Media Techsurvey

2014

2015

2016

2017

2018

2019

2020

2021

time as a result. Audio consumption, for for keeping them tuned-in and engaged. Among those who listen to AM/FM radio, percentage who say this is a main reason they listen 7. Podcasting Giveth and Taketh Away – Among many, is a zero-sum game. And that means SOURCE: Jacobs Media Techsurvey our core commercial radio respondents, there are only so many hours in a day to listen nearly three in 10 (29%) listen to podcasts to content, whether it is on-demand or on-air. at least weekly – the highest level ever. Podcasts represent key digital content that is And many broadcasters have responded erosive to real-time broadcast listening. with the creation of their own podcast 8. The Subscription Economy Is Booming – Acdivisions or even standalone companies centuated perhaps by the pandemic and charged with creating and producing the stay-at-home work environment, the successful on-demand programming. willingness to pay for content on a subBut Techsurvey also reveals an inconve- scription basis has never been greater. All told, 85% of respondents now pay for a nient truth about podcasting. That is, 30% of consumers who listen to podcasts on a weekly video streaming service like Netflix or Amabasis say they’re reduced their radio listening zon Prime Video, and 60% shell out money

THE SURVEY’S METHODOLOGY The Techsurvey research studies focus on core listeners of commercial radio stations. (There are companion studies among those who favor public and Christian music radio.) The sample is provided by hundreds of radio stations across the U.S. and Canada that allow us to tap into their email bases or social media pages to access audiences willing to take the survey. This year’s Techsurvey included 42,224 respondents delivered by 470 commercial radio stations across North America: big markets, small markets, stations owned by big companies, stations owned by mom and pops. The survey is cross-tabbed by 14 different radio formats, providing insight of how fans of Adult Contemporary behave differently than partisans of News/Talk, Country, Rock along with 10 other format genres.

18 The Financial Manager • September/October 2021

SPOTLIGHT ON RADIO monthly for a music service like Spotify or Pandora. What’s more, 22% subscribe to satellite radio for news, music and talk content. On the other side of the spectrum, a frequently mentioned reason for tuning in broadcast radio is that “it’s free” – an often-overlooked advantage AM/FM has over a growing number of subscription outlets. As credit card statements are increasingly crammed with monthly subscription fees, radio’s “free” value proposition may grow in importance. 9. Online Shopping Is Ex ploding – Many of the trends already taking shape preCOVID have only intensified as a result of the pandemic. And a great example is e-commerce. A strong majority (59%) say they did “all” or “most” of their 2020 holiday shopping in front of a screen, rather than visiting a brick-and-mortar store. For advertising media of all stripes, this key trend has strong implications. Which product categories will continue to market via broadcast outlets? Which will shift to online for sales and marketing? And can radio and TV sellers assist unknowledgeable local retail businesses in the setup and development of e-commerce engines

PRIVACY AND BIG TECH CONCERNS

T

ECHSURVEY ALSO EXPLORED

how core radio listeners feel about their privacy, their data and the big companies managing this information. More than eight in 10 (81%) agree or agree strongly with the statement: “I’m concerned about the ways in which tech companies are using my personal data.” Increasingly older consumers express the highest level of concern. And not surprisingly, a majority (52%) now concur that “some technology companies are too big and should be broken up” — a significant increase from the previous year. Men, Baby Boomers and members of the Great Generation are most likely to agree with this sentiment.

and web landing pages? The 2021 holidays will be here before we know it. 10. Connection to Radio Remains Strong – While COVID instigated new media usage hab-

its, loyalty to broadcast radio among its existing audience strengthened in some ways. For example, Techsurvey measures how users are recommending radio stations via word-of-mouth. In this year’s data, those scores achieved a 16-year high. Additionally, more than a third (37%) of respondents revealed that since the outbreak, they feel a strong sense of connection to their favorite radio station – higher than we’ve seen before. This year’s Techsurvey is of particular importance, due in no small part to shifts influenced by COVID-19. The data suggest that familiar, warm, personal and community are all attributes smart broadcasters can mine in order to nurture strong audience relationships. But it requires a commitment to providing a quality service to local listeners. A deck of key findings is available on the Jacobs Media website, jacobsmedia.com, within the “Research” drop-down menu. Fred Jacobs is president of the research and consultancy firm Jacobs Media. He can be reached at fredjacobs@jacobsmedia.com or (248) 353-9030.

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The Financial Manager • September/October 2021 19

TECHNOLOGY TRENDS

The Cryp to

SPECIAL REPORT

20 The Financial Manager • September/October 2021

o i n t u l o v e R

HEADER

L Are media companies ready to accept cryptocurrencies? When they are, some key concepts and decisions become vital. BY CAL MOSTELLA

URED BY MULTI-MILLION-DOLLAR WIND-

falls, more and more media companies are dipping their toes into the non-fungible tokens (NFTs) market. It involves a conversion of treasured content images into token­ ized digital assets for auctioning on the blockchain. Treasurers and CFOs are frantically evaluating how accepting, paying and holding cryptocurrencies can (or should) be managed for not only NFT transactions, but other forms of revenue generation as well. The accounting, controls and risks surrounding cryptos are vastly different from the familiar fiat currencies. And there are very specific decisions that need to be made when cryptocurrency is incorporated into a company’s operations. THE OVERALL LANDSCAPE Before delving into those decisions and related issues, let’s step back for a big-picture perspective on cryptocurrencies. As you are probably aware, debates over the impact of crypto on the economy and society are passionate, to say the least. Governments, banks, billionaire entrepreneurs and Main Street investors have espoused a variety of opinions. Some of them are completely opposed to crypto transactions, while others hold ever-evolving views. As of July 2021, the total market cap for all cryptocurrencies was $1.43 trillion, up 59% compared to January but down 58% compared to its peak in May 2021. The dramatic volatility was driven by coinciding regulatory announcements: China banned banks from offering crypto services and cracked down on crypto mining operations. (Crypto mining is the process of gathering cryptocurrency as a reward for work that’s been completed.) Unfortunately, this followed news that Tesla would no longer accept crypto due to sustainability concerns over mining processes. No wonder finance leaders are approaching crypto with such consternation and hand wringing. One of the biggest concerns relates to compliance with anti-money laundering (AML) and know-your-customer (KYC) requirements. Cryptocurrencies have a propensity for anonymity and lack of regulation, which make them attractive for money launderers. Fortunately, governments are cracking down on crypto exchanges to curb cybercrime, and top exchanges are proactively taking various measures to ensure AML and KYC compliance.

The Financial Manager • September/October 2021 21

SPECIAL REPORT TECHNOLOGY TRENDS The U.S. made cryptocurrency exchanges subject to AML and KYC requirements back in 2019, when regulators defined them as money-services businesses. Popular exchanges Gemini and Coinbase require complete KYC procedure, submitting official documents and personally identifiable

The indirect POS approach avoids the complex accounting and tax entanglements of holding and managing cryptocurrencies. information (PII). Coinbase goes further by incorporating biometric facial recognition and liveness detection to authenticate users. Because of that, companies that transact with crypto currencies have wisely designed onboarding processes or engaged trusted third

parties to determine the source of any crypto they receive or disburse. This helps to ensure they aren’t sanctioned or restricted. There are many crypto service providers that help ensure sales channels comply with AML and KYC requirements. Today, there are more than 11,000 different cryptocurrencies and growing. Each crypto serves a unique purpose or functionality for its underlying blockchain. Some digital currencies, like stablecoins, are tied to fiat currencies to reduce volatility and facilitate quick and cheap value transfer, while others offer incremental innovations from the original crypto currency, Bitcoin. The top Bitcoin alternative is Ether (used on the blockchain Ethereum), which is essentially a programmable cryptocurrency that enables decentralized applications and smart contracts. (See sidebar more info on smart contracts.) Still, many more cryptos are speculative

THE GROWING CRYPTO RATIONALE

T

HE BLOCKCHAIN, WHICH CRYPTOCURRENCIES ARE BUILT UPON, HAS TREMENDOUS

value. It increases trust, security, transparency and the traceability of data shared across a business network. The cost savings and efficiencies that it delivers are transforming how companies conduct business today and in the future. For example, blockchain smart contracts are revolutionizing financial products because they run when predetermined conditions are met, automating the execution of agreements without an intermediary’s costly involvement in facilitating, verifying and enforcing the contract. Speaking of intermediaries, J.P. Morgan estimates that over $10 billion in costs can be avoided by simplifying the correspondent banking structure with blockchain technology. As the use cases for blockchain expand, the value and efficacy of cryptocurrencies will evolve and stabilize. In a recent speech to Congress, Federal Reserve chairman Jerome Powell said, “You wouldn’t need stablecoins, you wouldn’t need cryptocurrencies if you had a digital U.S. currency. I think that’s one of the stronger arguments in its favor.” As one can imagine, a digital currency backed by the U.S. government would be a gamechanger for the blockchain. Ready or not, like it or not, blockchain and cryptocurrencies are reshaping the future of money. When you consider the transformative power of the blockchain, the amount of cryptocurrency in circulation and the highly desired, tech-savvy customer represented, it would be unwise to dismiss a business opportunity simply because it involves accepting and managing cryptocurrencies. A recently released whitepaper by Deloitte, “Corporates Using Crypto,” claims many clients and vendors want to engage by using crypto, which means companies need to position themselves to meet that demand. Although this is new territory for most corporate treasuries, large corporations are stepping into it successfully. Microsoft, Whole Foods, Starbucks, Home Depot, Rakuten and Twitch have all been accepting crypto as a form of payment for some time now, according to a Yahoo! Finance article by Andrew Lisa.

22 The Financial Manager • September/October 2021

or even PR stunts, chasing those massive returns. In the end, they’re all vying to achieve mainstream adoption. It’s challenging to know which cryptocurrencies will survive long term – even Bitcoin isn’t a sure winner. In its whitepaper, ”Blockchain and the Decentralized Revolution,” J.P. Morgan predicts that the underlying blockchain technology is likely here to stay whether Bitcoin survives or not. J.P. Morgan goes further to offer this snarky assessment, “Bitcoin is to the blockchain as America Online was to the internet.” Generally, companies accepting crypto use it in three different ways: for indirect point of sale (POS), direct acceptance or a hybrid of both. USING INDIRECT POS The most accessible and straightforward use case is indirect POS. Many companies use service providers like BitPay, Bakkt, Flexa, Coinbase, PayPal and Bitnet to accept crypto at the point of sale. These solutions usually offer hosted checkout, payment buttons, invoicing and other e-commerce integrations. For example, BitPay displays the invoice via QR code to the customer, who then uses a wallet app to pay the invoice at a locked-in exchange rate. Next, BitPay converts the customer’s payment into the company’s local currency, then initiates a bank settlement for the next business day. In this scenario, crypto is just another payment rail like Visa/Mastercard or American Express. It allows customers more payment options and helps the businesses cater to the much-desired, digital-savvy customer. Another bonus is that processing fees for crypto are 1-2.5% lower than traditional credit card processing. The indirect POS approach also avoids the complex accounting and tax entanglements of holding and managing cryptocurrencies. When choosing a third party, it’s essential to perform careful due diligence to ensure a vendor’s resilience and a positive customer experience. It is also vital to understand the

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The Financial Manager • September/October 2021 23

SPECIAL REPORT TECHNOLOGY TRENDS transparency and accuracy of conversions and to provide adequate data for the substantial recordkeeping requirements. Unfortunately, the indirect approach doesn’t work for every use case. Many smart contracts provide for commissions on the secondary sales of digital assets. Most POS solutions don’t accommodate these transactions, which require companies to accept cryptocurrencies directly.

Most institutional users adopt a multi-signature structure where hot wallets are used as operational accounts.

DIRECT ACCEPTANCE There are several concepts to understand before diving into the many considerations surrounding the direct acceptance of cryptocurrencies. First and foremost, direct acceptance requires a digital wallet structure. Digital wallets store the public and private keys that allow a company to send, receive and spend cryptocurrencies. When a company collects cryptocurrency revenue directly, they store its location in their digital wallet and use it to make transactions or exchange for other cryptos or fiat currencies. These digital wallets can be a physical device, similar to a USB drive, that runs a wallet app, often referred to as a “cold wallet.” The wallet can also take the form of a program, app or online website, known as a “hot wallet.” Cold wallets are not connected to the internet and are therefore considered more secure. On the other hand, hot wallets are accessible online, making them more convenient but also more vulnerable to hacking. These wallets don’t store the currency but act as an interface with the blockchain. The information stored on the wallet only points to your cash’s location on the blockchain. It is necessary to have a digital wallet to protect your company’s digital assets, but choosing the proper wallet structure is fundamental to successful cryptocurrency management. Digital asset transfers are authorized using a private key, and

24 The Financial Manager • September/October 2021

managing these keys is a new and critical responsibility in blockchain environments. Most digital wallets and wallet providers are single-signature login. For corporations, these configurations put too much control in the hands of a single user and would undoubtedly cause a treasurer concern and lead to many restless nights. Most institutional users adopt a multi-signature structure where hot wallets are used as operational accounts. Much like bank transactions that require multiple written signatures, multiple keys can help alleviate some of the control risk surrounding digital wallets. This configuration is called “multisig,” and you can choose how many keys are required to open the vault as well as the minimum number of keys needed to unlock it. For example, you could require that two out of a possible three signatures is required, or three out of five, and so on. Although this configuration distributes the risk and decision-making for a digital vault, it also has a few drawbacks. If you lose most wallets in a multisig account and the seed phrases for these wallets, you lose access to the whole vault. Therefore, it is essential to design some redundancy into the configuration. Some popular multisig service providers with key management services include Blockstream, Casa and Unchained Capital. CURRENCY CONUNDRUMS When considering the type of wallet and configuration that is best for their purposes, treasurers and CFOs must decide how they plan to manage their cryptocurrency. Does the company hold crypto on its balance sheet or trade immediately for fiat currencies? Do they use crypto for expenditures or only as a means of collection? There are a multitude of accounting and tax considerations to weigh before making those decisions. In general, crypto is considered an intangible asset that is adjusted for

value impairment, not appreciation. Essentially, that means writing down the value to its lowest point each reporting period. Due to crypto volatility, it will probably require additional disclosures when the current market value of crypto significantly exceeds the intangible asset value on the balance sheet. To further complicate matters, for tax purposes, the use of crypto for receiving or making payments may be treated as a barter transaction triggering a gain or loss on the underlying asset used in the transaction. Your wallet structure must allow for segregating tranches of crypto to make these calculations possible. Consult with your accounting policy team to fully understand and identify all the accounting and tax nuances so that you can design processes to support the detailed tracking required. Due to these complexities, regularly exchanging crypto for stable coins or fiat currencies is a commonly recommended strategy. Digital currencies and the blockchain are changing the future of money and how we conduct business. As with any transformative technology and marketplace, there are significant opportunities but also many risks and challenges. Incorporating cryptocurrenies into your operation is a complex undertaking. But, with thoughtful planning and careful due diligence, it can be done. Start with creating an implementation plan that defines your objectives and addresses the considerations for the approach (indirect, direct or a hybrid) that works best for your company. Keep in mind, you can always start with a small pilot program to test the new processes and solution providers, then expand your offerings as your operation stabilizes and gains more confidence. Cal Mostella is vice president and treasurer at WarnerMedia. He can be reached at cal.mostella@warnermedia.com.

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TECHNOLOGY TRENDS

26 The Financial Manager • September/October 2021

NextGen’s

TOWERING PROMISE BY JERALD FRITZ

What does ATSC 3.0 really mean for the broadcast TV? The possibilities are vast and are likely to supercharge the business.

I

MAGINE YOU OWN A NICE LITTLE RENTAL HOME. YOU HAVE SOME GOOD TEN-

ants, and the house brings in a tidy profit each year. The local government changed the zoning laws a few years ago, and now you can rent out separate rooms in the house. Good! More money. Now imagine that little house is surrounded by high-rise condos where the luxurious penthouse units command top dollar and the rest of the floors are leased as retail and commercial office space. They bring in lots more money than your property, and for many potential renters, they’re extremely attractive. Would you be content to continue leasing your little single-family house to a dwindling number of potential tenants? Or, to fully capitalize on your investment, would you tear down that home and build your own high rise? That’s an asset-value maximization question. And it applies to TV channels too. Why limit the use of a 6 MHz chunk of spectrum you’ve been leasing out as a single-purpose, linear entertainment and information channel – especially when viewership is fractionalizing in the face of on-demand streaming platforms? Sure, you could continue to do that on a slice of the existing channel’s bandwidth. But wouldn’t it make sense to re-purpose the rest for other money-making data uses? This is a rhetorical no-brainer that underscores the importance of the NextGen Broadcast standard, otherwise known as ATSC 3.0. Within 15 years of deploying NextGen services, broadcasters could make more money renting their data bits than from the advertising revenue they earn today. The Financial Manager • September/October 2021 27

HEADER REPORT SPECIAL

TECHNOLOGY TRENDS

Think about that. A broadcaster’s future is not tied to the sole purpose of video distribution, as it is today. Instead, it will involve a myriad of new data businesses that are enabled by this new way of transmitting data. NextGen Broadcasting is our present and future way out of a limited, mature, linear TV world.

be identified (the more populous a market, the better). Then a series of difficult questions needs to be resolved. For example, which existing facility best meets coverage needs? (For example, which has the best VHF or UHF signal coverage?) Are there technical restrictions related to network program carriage? Is there space on the 1.0 hosting stations for all the current diginets? Will the programming on the 1.0 host stations meet FCC requirements for viewability by the current audience? And do the stations have available capital to pay for the deployment?

much work is ongoing simultaneously. And that’s just for the primary-station deployment. Enabling the embedded features of NextGen Broadcasting that permits integration with the internet (converging broadcast and broadband services) requires a broadcast app. Designing, provisioning and installing this middleware is crucial to realizing many of the NextGen Broadcast benefits. Those DEPLOYMENT HURDLES include critical advanced emergency alerting The challenge is getting ATSC 3.0 deand informing features. ployed quickly. The U.S. government has On demand services also require a broadnot made this easy. Unlike the mandatory cast app that enables menu features similar to analog-to-digital transition that what most viewers experience when began in 1998 and was completed accessing streaming services on their TV broadcasters can team up with in 2009 – when every TV broadsmart TVs. In other words, viewers radio brethren in their markets to caster received a second temporary need to see the viewing choices as simulcast channel – deployment of they change channels and access carry multiple audio streams using NextGen Broadcasting is a volundata from the internet. Constructing a fraction of the available capacity in tary, market-by-market, slow-rolling the means to do that on fixed and the data pipe. affair. mobile devices takes vision and exBroadcasters can’t even access tempert software development support. porary vacant channels to ease the process. Once this channel mapping process is That work is ongoing in the bowels of several Instead of having two channels, broadcasters complete, program rights need to be se- tech-centric broadcast groups. that were fierce competitors in the past must cured for 3.0 programming and legal hosting For more complex, targeted programming work cooperatively to share facilities. In com- agreements must be negotiated. Then there’s and data service offerings and a better video pliance with Federal Communications Com- the “easy” part of configuring, ordering, pro- experience on mobile devices, single frequency mission (FCC) requirements, TV broadcasters visioning and installing needed equipment networks (SFNs) – essentially in-market signal must give viewers access to programming via and connectivity to link all the stations. boosters – will also need to be designed, prothe current digital transmission standard, Topping off the process is more regu- visioned and built. They’ll provide the signal ATSC 1.0, for a period of time. That means latory approvals and notices to pay-TV coverage that mobile users are accustomed to. broadcasters will be sharing channels as they providers and the public. Assuming no SFNs may have multiple, small transmitting launch the transition. new transmitters are required, it is at least nodes throughout a market. That is an addiThis process is cumbersome. Markets best a five-month process per market. There are tional design, implementation and financial able to handle a ATSC 3.0 transition need to 210 markets in America. Needless to say, challenge for broadcasters. This process gets repeated over and over on a market-specific basis. And as more stations are launched in a market (tied to the increase in deployed receive devices), the station deployment process will itself repeat all over ROADCASTER IMAGINATIONS RUN WILD WHEN CONSIDERING THE MANY POTENTIAL again in each market. uses of NextGen Broadcasting. A bit is a bit is a bit. If it can be transmitted, broadcasters can Phew. Is it worth all the logistical headoffer associated services. Here are some possibilities: aches? You bet! ■ Entire lectures downloaded to home devices in locations where broadband may never Why? Because without transitioning to be deployed (which could give a dramatic boost to closing the Educational Digital Divide); NextGen, broadcasters will be permanently ■ Telehealth information on targeted pandemic locations; anchored to a single-use world for linear pro■ Digital signage support, updates and real time information; gramming that isn’t mobile and has limited ■ E-book and news distribution targeted to geographic locations and specific competitive opportunities in a streaming demographics; over-the-top ecosystem. ■ An internet of things backbone; Long, long gone are the days of a broadcast ■ Skinny programming bundles behind paywalls; video monopoly on American eyeballs. Yes, ■ Virtual reality game backdrops; ■ Agriculture support for simple tasks, such as watering or tractor directions for plowing; enhancing the attributes of television video ■ Building maintenance, heating and cooling adjustments; and audio quality is a good thing. And tar■ Water-usage metering; geting video programming and advertising ■ Automobile telematic upgrades – from system monitoring to navigation system map geographically and demographically has sigupdates. nificant upsides. But if broadcast TV is to thrive moving forward, it needs a platform

THE SKY’S THE LIMIT

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28 The Financial Manager • September/October 2021

that allows it to grow and enter new businesses – to rebuild that single family home in the high-rise condo canyon. NEW UNIVERSE OF USES Think of a broadcast channel as a great big data pipe filled with lots of different-sized and interchangeable straws. Different types of data flows through each straw. If there’s a need for more capacity for 4K-ultra high-definition video, for example, you use a bigger straw. If you need tiny amounts of data to activate a remote water meter, you use a tiny straw. All of those straws can dynamically change size and accommodate multiple other data-bit use cases. In the TV broadcast industry, data has been synonymous with video. But video is just one form of data. Text, audio, software and instruction algorithms are other types of data capable of being broadcast. They are just ones and zeros. And the sooner broadcasters understand that distinction, the sooner they will understand the remarkable flexibility and inherent opportunity to maximize the value of their data pipes. HERE ARE A FEW EXAMPLES: Driverless Cars – What do autonomous driving vehicles need more than anything else? Huge amounts of data for 3-D mapping so they don’t bump into things. You can’t do that with wi-fi. You can’t do that at scale with an incomplete, fragile and overloaded cell phone system. You can do that with NextGen Broadcasting. Data Offload – If, for example, you are Microsoft and want to update your operating system to 100 million people overnight using the internet, what would happen? You’d melt the cell phone network. The unicast (one-toone) architecture of the streaming services is the least efficient way to accomplish that task. The “one-to-infinite” NextGen platform – renting bits from broadcasters – is a cheaper, more robust and infinitely more efficient way to reach devices. Audio Services – TV broadcasters can team up with radio brethren in their markets to carry multiple audio streams using a fraction of the available capacity in the data pipe. This will increase a radio outlet’s reach while targeting listeners and potentially even offering paid packages using conditional access capabilities built into the NextGen standard. eGPS – There is a burgeoning concern in and out of government circles regarding

so efficiently on a multicast basis. Aggregating bits from local broadcasters in local markets and combining them on a national basis places the broadcast platform in the enviable position of providing CONUS (Continental U.S.) coverage for national data network services. This data delivery as a service puts broadcasters at the forefront of using the cloud to deliver data storage, integration, processing and analytics via a very efficient delivery platform. Broadcasters are hard at work developing the core network capabilities to orchestrate the needs and capabilities of all users and providers in a market. Use of artificial intelligence is key to that. Think about the aggregation of all the straws in the data pipes from all the stations in a market and determining the most efficient marriage of bits to meet the Data services can greatly needs of selected users. Each broadexpand broadcasters’ public caster would then be compensated on interest service obligations the bits flowing through its data pipe. It bears emphasizing that these data without affecting their services can greatly expand broadcasttraditional over-the-air ers’ public interest service obligations video business. without affecting their traditional over-the-air video business. In fact, It highlights live Doppler radar, evacuation NextGen Broadcast can greatly improve the routes and emergency shelter locations in broadcasters’ video service – and the public multiple languages from a transmission sys- interest value – while also adding new services tem that doesn’t get overloaded or crumple that have great value to the public. Just ask in heavy winds. This advanced emergency the student who can now receive exceptional system can take AMBER alerts far beyond classroom lectures without a need to link to today’s vastly inferior system by showing the internet; or the family seeking a way out a missing child’s face and other critical in- of a fire evacuation zone; or the firefighter formation including map locations, vehicle who can now have mobile access to a builddescriptions and automobile photos. The same ing’s blueprints. These are services that can enhancements would be available for hazmat be provided as complements to the existing spills, school lockdowns and law enforcement video offerings of over-the-air television broadcasters. incidents. Looking backwards, broadcasting is a maIn fact, as the sidebar on page 28 demonstrates, imagination is the only limitation on ture distribution platform. Looking forward, use cases for broadcasters. And by “broadcast- though, it has reinvented itself technologically ers” we are not in any way limited to those to meet new challenges and the ever-changing with commercial licenses. Non-commercial, needs of consumers and businesses alike. It’s a public broadcasters can also dedicate portions dynamic future full of promise and opportuof their channels for these new data services. nity. And frankly, it’s the only future for that It will enhance their public missions and, im- little house surrounded by the tall condos. portantly, allow them to cover parts of the country that even commercial broadcasters Jerald Fritz is the executive vice president for do not serve. The broadcast data platform will likely be- strategic and legal affairs for ONE Media 3.0, a come an integrated piece of high-speed data wholly owned subsidiary of Sinclair Broadcast Group. ONE Media 3.0 develops, authorizes and distribution. It will relieve stress on unicast deploys NextGen Broadcast services domestically broadband systems that are overloaded as they and internationally. He can be reached at try to do what NextGen Broadcasting can do jnfritz@ONEMediaLLC.com.

the fragile nature of our space-based global positioning system (GPS). It is vulnerable to jamming and spoofing and is quite difficult to protect against natural and man-made disasters, given the extremely weak signals bouncing off satellites orbiting thousands of miles above the earth. Well, it just so happens that, using terrestrial broadcast signals that have power many orders of magnitude higher than satellites, GPS can be augmented in a significant way. Renting NextGen Broadcast bits is a demonstrably effective use case for some of that data pipe capacity. Advanced Emergency Alerting – Targeted advanced emergency alerting and informing services use NextGen capabilities to display rich media instead of simple warning crawls.

The Financial Manager • September/October 2021 29

LASTWORD

Respecting the Press

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everal years ago, after I boarded the That said, many journalists salivated Acela for one of my many trips be- about the change in administrations, not – tween Washington, D.C., and New as the rightwing punditocracy would have York City, police dogs began sniffing us believe – because they’re Democrats, but through the car. A few moments later, a stream because during the previous four years there of Secret Service agents boarded. And then, had been so many leaks they sometimes felt there he was: Joe Biden, the Vice President of as though they were being waterboarded. the United States. “Amtrak Joe” was headed They were yearning to catch their breath. home to Delaware for the weekend. I wanted to shake his hand, but I was intercepted by a woman sprinting ahead of me, who I would later learn was a congresswoman. She plopped down next to the veep and talked to him during the entire ride to Wilmington. The only thing I could make out from their conversation was when the vice president raised his voice and said, “Listen. I know my job!” When now-President Biden took office in January, he promised to be a kinder, gentler commander in chief. Joe Biden with NBCUniversal’s Jose Diaz-Balart He told White House staffers, “I will fire you on the spot … if I hear you Biden’s actions have sometimes been treating [anyone] with disrespect.” counter to his pledge to run a much That admonition was tested three more press-friendly administration. weeks later when deputy press secretary, T.J. Ducklo, had to resign after beratWhat they got from Team Biden was a ing a reporter for asking about his roman- watertight, highly disciplined communitic history with a journalist on the White cations team. Leaks are rare. Direct access House beat. to the President is less frequent. Once in a Six months later, the president himself lost while, somebody “forgets” to include the his temper when asked a question by a re- press pool at events. Administration officials porter after a summit with Vladimir Putin. who speak to reporters on background – to “What the hell? … You’re in the wrong busi- be quoted but without attribution – must ness!” he snapped. A few minutes later, he have their comments cleared in advance. apologized. But a clip of the exchange would It seems a lot like, well, the Obama admingo viral and become the set-up for a Stephen istration. Or the Bush 43 administration. In Colbert joke: “Wow. That was some strong other words, any 21st Century administragrandpa’s-had-it-with-your-lip energy.” tion that didn’t include Donald Trump. White House/journalist relations during That’s not to say that nirvana now resides the Trump administration were almost at 1600 Pennsylvania Ave. To be honest, it constantly love-hate, with reporters getting was probably never really there. nearly unprecedented access to a president The Bush and Obama administrations who craved attention more than Big Macs. had nasty records of persecuting and even Yet his press secretaries acted as though they prosecuting journalists who reported on were wartime consiglieres. leaked classified information. Both presidents

30 The Financial Manager • September/October 2021

loathed certain news organizations. Obama’s early comms team tried to ban Fox News from the White House briefing room, until virtually every other network protested. Since the dawn of his presidency, Biden’s actions have sometimes been counter to his pledge to run a much more press-friendly administration. He decided not to hold Saudi Crown Prince Mohammed bin Salman accountable for the murder of Washington Post columnist Jamal Khashoggi. He looked the other way when the Departments of Homeland Security and Health and Human Services (HHS) prohibited Border Patrol officers and HHS employees from speaking with journalists as a new wave of immigrants flooded the southern border. Press freedom groups had to beg the Department of Justice (DOJ) to include the treatment of journalists as part of its reviews of police responses in Minneapolis and Louisville following the killings of George Floyd and Breonna Taylor. In a “Casablanca”-type epiphany (“I’m shocked to find that gambling’s going on in here!”), the Justice Department “discovered” that DOJ attorneys had subpoenaed journalists’ phone and email records and obtained gag orders keeping it secret. Attorney General Merrick Garland pledged to stop it, and the House is considering a law to make sure it’s stopped for good. “Amtrak Joe” now takes Air Force One. But I think occasionally about his words: “Listen. I know my job!” Respectf u lly, Mr. President, when it comes to press access and transparency, please do it. Dan Shelley is executive director of the Radio Television Digital News Association, an association devoted to broadcast and digital journalism. He can be reached at dans@rtdna.org.

PHOTO BY ADAM SCHULTZ / BIDEN FOR PRESIDENT

President Biden’s relationship with journalists is markedly different than Trump’s. And it’s not all positive, to say the least. BY DAN SHELLEY

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