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INFORMATION AND INSIGHT FOR MEDIA FINANCE PROFESSIONALS JULY/AUGUST 2021 THE FINANCIAL MANAGER

ALSO INSIDE

Conference Pearls Of Wisdom Video Games: Winners & Losers Newspapers Gaining Luster? Avoiding Copyright Gotchas

MISSION CRITICAL Cyberattacks are on the rise, inflamed by remote-work environments. Hybrid home-office environments may extend the trend.

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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

10 A Thousand Avenues To the Future

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

Media Finance Focus 2021 is providing myriad ways for attendees to up their performance, and that of their companies. The first article in a two-part report.

JANET STILSON, Editor TFMeditor@MediaFinance.org BILL KNIGHT, Art Director wknight5@nyc.rr.com

BY JANET STILSON & KRISTA VAN LEWEN

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

SPECIAL REPORT: MEDIA VALUATIONS

MEDIA FINANCIAL MANAGEMENT ASSOCIATION

14 Turning a New Leaf?

Like a forest that germinates after wildfires strike, the newspaper industry just might enter a more vibrant state following a period of great turbulence.

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

BY JOHN SANDERS

Subscription $69.00 per year.

18 Copyright Myths & Pitfalls

It’s easy to repurpose creative material found online or elsewhere. It’s also easy to get in a lot of legal hot water when you do.

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.

BY LOUIS J. LEVY

24 Outsmarting the Competition

An excerpt from the book “One Up” explains how savvy marketing techniques have led to the explosive growth of some video games. BY JOOST VAN DREUNEN

28 Rising Crime, Rising Response?

Hackers had a field day when companies went into remote-worker mode. Missioncritical information must be better protected. BY MARY J. HILDEBRAND

DEPARTMENTS 4 From the President Age of Discovery 6 Dear Expert Travel Insurance 7 Human Factor Picking a Coach

8 Credit Where Due Slow-Payer Remedies 9 Board of Directors With Association News 34 Last Word Tips for Tax Leaders The Financial Manager • July/August 2021 3

FROM THE PRESIDENT

A New Age of Discovery

As we start to return to a new sense of normalcy, uncovering hidden opportunities and vulnerabilities is critical. “Become a free-range chicken.” – Joe Batista, Dell Technologies

across the media landscape. Mary Hildebrand, from law firm Lowenstein Sandler LLP, addresses one of his advice was offered by Dell’s chief the downsides of the technological advances creatologist as part of his opening keyforced by stay-at-home orders: the increase note for MFM and BCCA’s (virtual) in cyberattacks. As Hildebrand chillingly 2021 conference. His point was that you points out, “When employees are remote cannot scratch out new opportunities behind they are alone.” Fortunately, she recomyour desk; you need to get out where things mends best practices and includes a sidebar are happening. listing what she calls “stand out” risk factors To see the possibilities, we must expose for companies with remote workers. ourselves to new ideas. That’s also one of the When employees are working remotely, themes running through this issue of TFM. they may be a little more casual about what The conference had barely begun when could become copyright issues. Louis Levy we prepared the magazine’s content. Yet, from Lerman Senter PLLC lays out the “most common copyright myths” along with potential consequences John Sanders asks: “Did the COVID content owner rights. crisis mark the newspaper business’s for violating The transformation theme also final chapter, or should this period be runs through our four regular colseen as a new beginning?” umns. “Dear Expert” authors Maxime Lefebvre and Joseph Weiss from TFM editor, Janet Stilson, and MFM/ Chubb provide advice about issues to conBCCA public relations consultant, Krista Van sider before business travelers go back on the Lewen, were able to capture its invigorating road. In “Credit Where Due,” Szabo Associspirit in part one of their conference wrap-up. ates’ Robin Szabo offers a three-step plan to In addition to Batista’s call to stretch our untangle the increasingly troublesome knots imaginations, they look at the four technolin advertising agency payment processes. ogies KTRK TV’s Tim Hinson advises we Sarah Levitt, this issue’s “Human Facembrace and explain why LSU professor Tina tor” contributor, reports on an increased Harris recommends advocate-mentors to interest in executive coaching. She provides develop the next generation of leaders. They 12 criteria to consider before hiring somealso report on the business side of the enterone. Finally, in “Last Word,” KPMG’s Dan tainment phenomenon that is video games; McGuire shares some learnings about what the U.S. games industry went from $19.6 C-suite executives expect from tax departbillion to $41.5 billion in 10 years. ment leaders and why individuals should Much of games’ growth can be consider a career in tax. His reasons include attributed to savvy online marketing, being at the center of decision-making. explains New York University adjunct proThis really is an exciting time to be fessor and video games advisor/investor Joost working in media finance and accounting. van Dreunen in a separate article, which is MFM and BCCA an excerpt from his recently released book. members have a leg up He says videos showing players in action because, as the articles help demystify complex games and extend in this issue demongame lifecycles. strate, we are commitOur media valuations feature, provided ted to providing you by Bond & Pecaro’s John Sanders, asks: with the information “Did the COVID crisis mark the newspaper and connections you business’s final chapter, or should this period need to be successful. be seen as a new beginning?” He favors the Mary Collins is president and CEO of MFM later, again offering observations that apply and BCCA; Mary.Collins@MediaFinance.org.

4 The Financial Manager • July/August 2021

EDITORIAL ADVISORY BOARD SALLY BUCKMAN Member Lerman Senter PLLC DENISE DWYER Accounting Manager/Assistant Controller Morgan Murphy Media—West 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 MARY J. HILDEBRAND Lowenstein, Sandler LLP MAXIME LEFEBVRE Chubb SARAH LEVITT Magnificent Leadership Executive Forum Community LOUIS J. LEVY Lerman Senter PLLC DANIEL McGUIRE KPMG LLP JOHN SANDERS Bond & Pecaro Inc. JOOST VAN DREUNEN New York University KRISTA VAN LEWEN MFM & BCCA Public Relations JOSEPH WEISS Chubb

Thanks for 50 incredible years! We couldn’t have done it without you. It’s not often a company accomplishes 50 years of serving clients, especially in the media business. But here we are, the first and largest media debt collection service, MORE focused than ever on delivering MORE debt dollars to our awesome clients. We also would not be here today without our talented employees who combine the art of diplomacy with savvy negotiation skills.

“...Szabo Associates more than delivers. They work as an extension of our internal teams helping us collect past due accounts. They are easy to work with, provide excellent service and their results have been outstanding...” Christopher Sterling Director of Credit & Collections Local Media Group Meredith

We asked a few clients to share why they continue to partner with us. Here’s a sampling of what they tell us.

“We were looking for an affordable collection agency that would be courteous and non threatening to our clientele. Szabo has been that company! They took the time to understand who we are as a company and how we want our clients handled while also collecting over 90% of our debt. I would recommend Szabo to anyone who is searching for a collection agency.” Darlene Mixon Credit Manager Evening Post Publishing Group

“It is with much enthusiasm that I am writing this letter on behalf of Szabo Associates, Inc. AARP began our business relationship with Szabo in June 2001 and for the past 20+ years we have been serviced with the utmost care and professionalism by their entire staff but specifically by Charles L. Langgood…We recommend Szabo for any of your collection needs and look forward to continuing our relationship with them.” Linda Mitchell AARP Credit & Accounts Receivable Manager “I am so pleased with the incredible progress that has been made in the reduction of our DSO. Not only has the DSO for multiple PAGE members been reduced, Szabo has tackled some of the larger outstanding debts—all with great and continued success. I also want to compliment you on your customer service approach—always affable, but firm.” Gary Blakely CEO-PAGE Cooperative

Discover more reasons why we’ve thrived for 50 years and how we can help you recover MORE media debt dollars. Visit our new website Szabo.com to learn more.

1971–2021

MORE is better than less.

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

DEAR EXPERT

On the Road Again

As business travel resumes, insurance veterans MAXIME LEFEBVRE and JOSEPH WEISS lay out the risks that employers and employees face.

Dear Expert: As pandemic concerns ease, many of our employees are anxious to make long-overdue business trips. What should we be doing now to protect them and our own liability? Apprehensive in Anaheim, CA Dear Anaheim, We can certainly understand your staff members’ enthusiasm for renewed travel. And the time is certainly right to develop a robust plan that helps safeguard your employees’ health and income in case of a serious accident or illness, and to consider potential liabilities. Every employer is responsible to provide a safe environment for workers, no matter where they travel. Medical costs for an employee injured in an accident or who becomes ill on business-related travel assignments are usually covered by employer-paid workers’ compensation insurance. When this occurs during the “course and scope” of employment, the insurance would typically assume the cost of the medical services provided to the employee, releasing the employer of liability for the employee’s injury or illness. U.S. state laws require employers to buy workers’ compensation insurance. Companies with employees that travel abroad may want to consider purchasing foreign voluntary workers’ compensation insurance. The policy is designed to provide bodily injury and disease medical insurance benefits to employees working outside the home country for extended periods of time. Unlike traditional workers’ compensation insurance, the voluntary workers’ compensation policy generally covers a percentage of medical expenses to treat injuries and illnesses like a heart attack or stroke that are unrelated to the “course and scope” of Do you have a professional puzzle that MFM and BCCA experts might be able to answer? We’ll mine the contact base and find the right person to answer your question. Just contact TFM editor Janet Stilson at TFMeditor@mediafinance.org.

6 The Financial Manager • July/August 2021

for the medical expenses. However, the policy may not apply to overseas travel and is unlikely to respond at the pointof-service. Furthermore, a major medical policy may have deductible or coinsurance the individual’s employment. amounts, which can leave employees with With both insurance products, there large out-of-pocket costs. are some nuances to consider. Let’s say The business travel insurance program an executive traveling on business dies can fill that gap by including a benefit suddenly during the “course and scope” limit to cover medical treatments for of employment. Workers’ compensation injury or illness while traveling on foreign benefits still apply in this circumstance. An assignment – on top of the insurance coverannual death benefit based on a percentage age limits already provided by workers’ of the employee’s salary is provided to the compensation, foreign voluntary workers’ employee’s designated beneficiaries, but the compensation and the employer’s major medical health insurance. A major medical policy may have deductible Business travel insurance programs send or coinsurance amounts, which can leave a message to employees employees with large out-of-pocket costs. that the company truly death benefit often falls short of a family’s cares about their health and well-being. But financial security needs. they also help to address another concern That’s one reason why many major that you raised: your company’s liability for U.S. media companies augment workers’ an employee’s illness or injury while on the compensation and foreign voluntary road. workers’ compensation insurance with Employers can potentially be sued for a business travel insurance program, negligence. A business travel insurance which includes an accidental death and program that assumes the cost of medical dismemberment (AD&D) benefit. In some treatments above the limits of protection cases, there’s an additional benefit covering provided by workers’ compensation and accidental disabilities. other forms of insurance may help reduce Business travel insurance benefits pay on the risk of being named in a high-proa lump-sum basis without the need to prove file lawsuit affecting the organization’s negligence. They are designed to pay a reputation. benefit based on a multiple of the insured’s salary to allow a beneficiary to transition their life in the event of a serious injury to an income-generating family member. In contrast, voluntary workers’ compensation insurance assumes a percentage of the cost of medical expenses to treat a heart attack or stroke. But the overall cost to treat such serious illnesses can surpass $100,000. Maxime Lefebvre is senior vice president, That may be more than the policy’s finanentertainment, and Joseph Weiss is vice president, cial limits of protection. accident & health, at the global insurer Chubb. The company’s major medical health They can be reached at mlefebvre@chubb.com and Joseph.Weiss@Chubb.com, respectively. insurance plan may reimburse the employee

HUMAN FACTOR

How to Pick a Coach

Twelve tips can help you discern which leadership consultant will up your game to its highest potential. BY SARAH LEVITT

ith business growth comes an imperative to improve your leadership skills. Not only will that help you meet new challenges and mitigate risks, but you’ll greet a new level of success with greater influence. It will help you focus more time on strategic priorities. And as you become increasingly more visible, inside and outside your organization, it will enhance your confidence and executive presence. That’s why, as we emerge with great velocity, I’m seeing an uptick in the demand for executive coaching. If you’re looking for an executive coach, consider the following 12 criteria:

you – your goals, what you want. To you as a human being and a whole person. Cramming their agenda down your throat, by the way, is a sign that they’re not seasoned.

That’s different from challenging you with skill and compassion. A good coach should do this so that you get what you want. You should feel like you’re getting better as a result, not diminished by it.

They should invite you to push back. I always tell clients that they know themselves best, and if I’ve got it wrong, if I’m

The most important thing is to find someone who resonates, who feels like they’re the person you want in your corner. Yes, you might discover them on the first attempt, and wonderful if you do. But if you don’t, keep looking. I can’t emphasize this enough.

They should also work in your space. I don’t mean your industry; I mean the executive world. There are real pressures and a rigor to senior executive leadership, and your coach should understand that.

This should go without saying, but say it, I will: your executive coach should pay attention. To you. To what’s important to

An executive coach should be knowledgeable about the business world. The significance of time, revenue and results – and the impact of your work in that context – is a big deal. It’s the ballgame, really. Ideally, your coach blends business acumen/ experience with the human performance side of coaching and can toggle comfortably between them. The higher one is in an organization, the more important this becomes.

A prospective coach should be more than happy to give you a few references, people you can speak with about the experience of partnering with them. I once had a CEO who asked to have these conversations the day before Christmas, and my clients couldn’t have been more willing to oblige.

Results, results, results. That’s number t wo. W homever you hire should have a track record. What track record? Whatever it is that you’re aspiring to achieve. You’re in a new, elevated role? They should know that terrain and its pitfalls like the back of their hand. Do you need to build a rock-star team that delivers so you can get out of the weeds? They’ve worked that. You want to enhance your executive brand and have far greater influence? They have the map. You get the idea.

looks like and how they (and their organization) will measure it.

barking up the wrong tree, push back. That’s what a partnership is. I count on them to speak up if something doesn’t fit. It’s helpful to us both.

In that spirit of partnership, it should feel like your coach is rooting for you, that they’re genuinely supportive of your aspirations, that they want your success, that they have your back.

One of the first questions I ask prospective clients is: “Can you get where you want to go by continuing to do things the way you have in the past?” If they can, they likely don’t need my services. If they can’t, we identify specific goals and objectives for the engagement. We determine what success

An executive coach should customize an engagement to you, rather than asking you to fit into a template. This means taking the time up front to understand who you are and what you want to achieve. It also means being able to quickly create a roadmap for your success.

While it’s not a requirement, it is a bonus when a coach makes relevant introductions to others in their network. Whenever I get the sense that two people should know one another, I connect them. And I love doing it. Although all these criteria should be considered, the first is the foundation. Start there. Sarah Levitt works with CEOs and senior executives and is the founder of the Magnificent Leadership Executive Forum Community. She can be reached at www.sarah-levitt.com.

The Financial Manager • July/August 2021 7

CREDIT WHERE DUE

Slow-Payer Remedies

A three-step process helps to dissolve troublesome knots when agencies fail to pay their bills in a timely manner. BY C. ROBIN SZABO

requently I hear frustrating comments from media companies about the difficulties they face in collecting timely payments from advertising agencies. It’s no wonder when you look closely at the landscape that exists. Their ecosystem might include a lack of organizational support. There may be few or no signed contracts and liability positions that differ from what the media companies prefer. Payment terms by advertisers to agencies may be undisclosed, and agencies may refuse to pay media companies until they are paid by clients. On top of that, there may be last-minute schedule changes; slow discrepancy resolution; difficulties in finding out what advertisers have paid agencies and when they did so; outdated misconceptions about when agencies are paid and when to begin collection; and policies or procedures that are not followed or ignored. Head spinning for sure. And it can be hopeless unless you have a plan and execute it well. A three-step approach can help untangle the “knots.”

EXAMINE YOUR PROCESS Review your written credit and collection policy, your payment terms, your liability position and your procedures. Make sure they are aligned with how you currently conduct business. The policy goals should be realistic and have some measure of flexibility to allow for changes in business models and economic events. Pay special attention to the areas of accountability, authority and responsibilities so everyone involved knows their role and what is expected of them. Enlist all the stakeholders in this process – senior management, finance and sales. It is critical and well worth the time to have these stakeholders involved in the review and any revisions that are necessary. Their support will be vital once everyone is in agreement. When there is a lack of agreement between media companies and advertising 8 The Financial Manager • July/August 2021

changed the policy or procedures significantly. Distribute hard copies of this information and post it on your intranet for easy reference. Make this information clear when new employees are on-boarded. If problems occur with personnel not following the policies and procedures, re-educate them. And if necessary, involve their manager.

agencies concerning payment liability, have the necessary “teeth” in your policies and procedures so you are able to take the appropriate action. For example, you may refuse to grant credit to an agency if it (or its client) is not creditworthy. You might need clear unconditional payment guarantees or cash-in-advance. Additionally, include the ability to place a blanket or advertiser-specific credit hold on an agency until pastdue payments are brought current or to an acceptable level. And when necessary, have a collection process that escalates to contacting an agency’s client when the agency delays payment without a bonafide reason. EDUCATE FOR COMPLIANCE Communicate your policy and procedures to everyone involved in the order-to-cash process. Be thorough and informative, presenting scenarios for a better understanding. In-person communication works best. When that is not feasible, a video meeting is your next best option. Encourage discussion and explain the whys of the policies and procedures so there is a clear understanding. Follow-up discussions may need to occur, especially if you have

EXECUTE YOUR PLAN Identify which agencies (and which of their advertisers) are your biggest problems. Gather the facts, including length of relationship, volume of business and past cooperation level. Set specific objectives with each of the agencies and re-cap previous efforts to improve the relationship and reduce payment time. Present the findings to the appropriate senior financial and sales management within your company with recommendations on the next communication steps to take with the agency. In the staff meeting, discuss who should lead the communication. Once that’s agreed upon, have them contact their counterpart at the agency to have a discussion. The tone of the conversation with the agency should not be adversarial, but with the goal of fostering a better working relationship benefiting all parties. Ultimately this should result in a written agreement stating how your company and the agency will do business together. Areas of discussion may include informational needs from a credit standpoint; faster discrepancy resolution; advertiser payment disclosure; quicker payments; and other pain points. The exchange should allow the agency to explain their needs and problems, too. This will hopefully result in a mutually beneficial relationship without frustrations. 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

MFM

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

2022 CONFERENCE CHAIR

Save the Date Media Outlook 2022 takes place Oct. 19 and 20. Each day includes one two-hour virtual session, beginning at 1 PM ET.

Outgoing Board Members

MFM would like to recognize the Board members who stepped down when their terms expired on June 30. We appreciate all their service to the association and look forward to their continued involvement. They include: MARCUS ANJEWIERDEN, chief internal audit executive, Deseret Management Corp.; TRACY CLARK, senior

director of finance, Hearst Television; MIKE LAVEY, interim CFO, Tribune Publishing; and ANTONELLA RICCIARDI, senior vice president and group controller, entertainment and lifestyle, NBCUniversal/Telemundo. A special thank you to RALPH BENDER, our immediate past chair, who has provided both strong support and wise counsel during this unusual time. All the outgoing Board members have been active and valued contributors. MFM looks forward to their continued, non-voting participation, as they begin their two-year term on the Advisory Board.

DAVE BESTLER Hubbard Radio

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 CLIFFORD EJIKEME A+E Networks SEAN HETZLER TEGNA

JENNIFER HURLEY The Washington Post PAUL KELLY KTRK-TV/ABC/Disney DAN McGUIRE KPMG LORI BROCK Meredith Local Media Group

BOND & PECARO

The Basis for Your Decisions PURCHASE PRICE ALLOCATIONS FAIR MARKET VALUATIONS IMPAIRMENT ANALYSES EXPERT TESTIMONY AND RELATED FINANCIAL SERVICES FOR THE COMMUNICATIONS INDUSTRY

MATT DEPREY C-SPAN JOE HANRATTY WarnerMedia DOUG LYONS The E.W. Scripps Co. KEVIN SCHMITZ Meredith Corp. BCCA Board Member Rep ED IENNER Meredith Corp.

WE’VE MOVED! OUR NEW ADDRESS IS: 2000 PENNSYLVANIA AVENUE NW SUITE 7000 WASHINGTON, DC 20006 202.775.8870 WWW.BONDPECARO.COM

The Financial Manager • July/August 2021 9

MEDIA FINANCE FOCUS 2021 IS PROVIDING MYRIAD WAYS FOR ATTENDEES TO UP THEIR PERFORMANCE, AND THAT OF THEIR COMPANIES. THIS IS THE FIRST ARTICLE IN A TWO-PART REPORT.

A THOUSAND AVENUES TO THE FUTURE

BY JANET STILSON & KRISTA VAN LEWEN What’s the best way to lend a hand to younger staff members from diverse backgrounds? How do you build a sound business model for a new video game? Where do you find hidden areas of growth within a giant corporation? Those are just a few of the myriad questions that were answered during the first portion of Media Finance Focus 2021, which is being held virtually from May through July. In this first of a two-part series, TFM looks at just a few of the many ways that conference speakers advised attendees on how to move into the future in the best possible ways. Look for the second roundup article in the next issue.

10 The Financial Manager • July/August 2021

ANNUAL CONFERENCE ROUNDUP

Maximizing the Assets

ELL TECHNOLOGIES IS BEST KNOWN

for products like computers, but the assets in its portfolio actually extend to mushrooms – mushroom packing material, that is. In his keynote address, Joe Batista, Dell’s chief creatologist, used the specially designed mushroom material as an example of how his company has expanded the definition of its assets and business opportunities. Batista explained that mushroom packaging is 30% less expensive and 25% more protective than Styrofoam. It not only helped the company internally, but Dell has sold the packaging material to other companies as well. In order to come up with that kind of outof-the-box thinking about the ways a company can expand its products and services, its leaders need to “go on safaris,” Batista advised. In other words, get closer to their customers’ experiences by visiting call centers, or going on sales calls or even watching a movie with a member of Gen Z. Becoming a “free range chicken,” as he put it, is another means of exploration: traveling between a company’s silos to see what various departments are doing. It might help uncover how a company can expand its lines of business. “When you’re a free-range chicken, try to catalog and define what the assets might be,” Batista said. There’s a critical question that should be asked: what is your capacity to fail? Batista noted that the handyman’s product WD-40 failed 39 times before it was successful (thus the name). “Obviously many of us can’t fail 39 times; our organizations won’t allow it. But if your capacity to fail is low, you’re not going to be able to stretch the imagination on how to re-think or re-image the business,” he said.

“

Know Thy Technology

F WE DON’T EMBRACE TECHNOLOGY,

we will become obsolete.” These words, coming from someone who spent 16 years at the National Aeronautics and Space Administration, served as a reminder that

“IF YOUR CAPACITY TO FAIL IS LOW, YOU’RE NOT GOING TO BE ABLE TO STRETCH THE IMAGINATION ON HOW TO RE-THINK OR RE-IMAGE THE BUSINESS.” —JOE BATISTA, DELL TECHNOLOGIES

every part of the media industry is affected by technological changes, which seem to move at the speed of light. Tim Hinson, who is now executive director of technology at KTRK-TV Houston, focused his presentation on “four technologies you should know.” He began with the cloud, which he described as “a colony of computers, which typically take the form of a data center containing 80,000 servers, and which we can’t build quickly enough.” The beauty of the cloud, he explained, is that it’s a way for anyone who uses Google Drive, Dropbox, Pandora or most databases to access data, but not pay for the infrastructure that houses it. He also touted the cloud’s ability to link data to other data – something highly valuable in targeted advertising, for example. The second technology he focused on, virtualization, is essentially “the replacement of possession with accessing.” Services that fall into this category include Google Maps, Airbnb and Uber – the world’s largest taxi company that owns no cars. Artificial intelligence (AI), the third technology, is what Hinson described as “machine learning that learns algorithms over time.” He said Google is the most advanced AI engine in the world, but that “Amazon’s is not far behind.” Machine learning can rapidly analyze data from connected devices, helping decision makers become more effective. Hinson’s fourth technology, augmented

reality, combines the real world with computer-generated elements. Think of Google’s smart glasses or other advanced projection devices. This technology will allow us to try on clothes at home, enhance traditional education methods and reduce our reliance on physical equipment in manufacturing. Hinson wrapped with some advice: “You need to look at new technologies as a way to make your business better.”

Video Games’ Growing Complexities

OU’D HAVE TO LIVE UNDER A ROCK

not to realize that video games business is huge. But exactly how large – and the unique ways of developing business models – became clear in two conference sessions. Gena Vetere, the Electronic Software Association’s general counsel, provided a bounty of statistics about the industry. Among them: ■ There are 226.6 million gamers in the U.S. today. ■ The U.S. business doubled in size over 10 years, from $19.6 billion in 2009 to $41.5 billion in 2019. ■ Global game revenue reached $180 billion in 2020, a 20% jump over the year before, according to IDC research. The Financial Manager • July/August 2021 11

ANNUAL CONFERENCE ROUNDUP Revenue from mobile games has been projected to reach $90.7 billion worldwide in 2021, representing 52% of the market. ■ The economic impact of games in the U.S. is $90 billion, and it supports over 428,000 high-paying jobs. ■ There are over 450 collegiate programs related to games. While the numbers are impressive, so are challenges related to game creation and modeling the potential business. “Companies spend five to 10 years developing a game, to make really high-end graphics and state-ofthe-art storytelling, using technology that’s very sophisticated,” Vetere said. Live games have their own distinct challenges. In a separate panel session, David Saunders, a product manager at Gearbox Publishing, defined live services as “any type of entertainment product that gets updated ■

APPLE’S IDFA RESTRICTIONS “WILL RESHUFFLE THE WINNERS AND THE LOSERS, IN A WAY. BUT I DON’T THINK IT WILL BE THE APOCALYPSE THAT SOME PEOPLE ARE THINKING ABOUT.” — KEN GO, DECA GAMES

with new features or content on a regular basis with the goal of continued engagement.” The live-game sales results are massively

Best Mentoring Practices

HE NEED FOR MENTORSHIP, particularly for people of color (POC) on the financial side of the media industry, has never been greater. Work-from-home situations; mergers and acquisitions; and other corporate disruption all play a part. Many employees feel isolated. Sometimes they wonder if they are on the right track, or even in the right job. Mentorship can go far in bolstering employee confidence, adjusting their attitudes and encouraging excellence. So explained Tina Harris, endowed chair of race, media and cultural literacy at Louisiana State University, who gave a keynote presentation. Her desire to promote mentorship stems from deep personal experience, learning from those who guided her. “If it were not for people in critical positions in my field, I wouldn’t be where I am today,” Harris said. She’s coined the term “advocate-mentor” to convey the importance of what she calls “an investment in individuals in our community who deserve advocacy and support.” Effective advocate-mentors have some common, and innate, characteristics. They tend to be people of societal “IF IT WERE NOT FOR privilege; they verbally and nonverbally express deep PEOPLE IN CRITICAL commitment to seeking social justice for POC; they POSITIONS IN MY FIELD, understand the impact of privilege and oppression on I WOULDN’T BE WHERE POC; they avoid using mistakes as an excuse for inacI AM TODAY.” tion; and they understand the importance of emotional — TINA HARRIS, safety. “If a person isn’t well emotionally, they won’t LOUISIANA STATE UNIVERSITY succeed professionally,” she explained. Harris laid out guidelines for a successful mentor-protégé relationship. First and foremost, she said, a mentor “chooses to represent their protégé’s interests and act on their behalf; they’re the priority.” Second, they must agree to defend their mentee’s intellectual abilities and champion their career advancement. Also, an advocate-mentor should show compassion and respect for the person they’re guiding. Finally, they must exercise racial, professional and/or intellectual privilege to engage in activism. “It’s important to think of diversity as not just something to strive for,” Harris noted. “We must invest in [POC] and create an environment that’s affirming and accepting.”

12 The Financial Manager • July/August 2021

asymmetric. Budgets range from a few $100,000 to $100 million, and it’s hard to model them, Saunders explained. Investments are doled out in small increments, based on milestone outcomes. With traditonal media, a company might project high, medium and low results. With live games “you probably need to do 10 or 20 different scenarios based on what the game could potentially do,” Saunders said. Another area of complexity relates to consumer spending preferences, based on what kind of games platform they’re using. For example, gamers using consoles will spend $60 on a game, but balk at paying an extra $10 for an avatar skin. In such cases, “we’re asking them to pay one-sixth of what they’ve already paid for far less value,” explained Taylor Miller, a design director at IUGO Games. Conversely, “you can take a $60 console game and put it on mobile, and you can’t sell it. People won’t buy it [at that price point],” Miller said. With free-to-play games, there’s a heavy emphasis on user acquisition: figuring how much a single player will spend, noted Ken Go, founder of Deca Games. A lot of data is collected that relates to user spending. “Instead of only thinking about the engagement metrics – number of levels played or the length of a session – you have to look at KPIs [key performance indicators],” Go said. “So, you’re looking at funnel conversion metrics going from the viewing of an advertisement to the install of the game and all the various levels, to payment and how [a consumer is] retained, month over month, from when they first started playing.” That is changing with new restrictions on the Apple platform regarding so-called ID for advertisers (IDFA). The tech giant’s latest operating system allows players to block companies from accessing granular data. In the games world that data helps identify which customers are bringing them in the most money, Go said. Google is expected to take the same step. “This will reshuffle the winners and the losers, in a way. But I don’t think it will be the apocalypse that some people are thinking about,” Go said. 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.

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SPECIAL REPORT: MEDIA VALUATIONS

TURNING

A NEW

LEAF? BY JOHN SA NDERS

LIKE A FOREST THAT GERMINATES AFTER WILDFIRES STRIKE, THE NEWSPAPER INDUSTRY JUST MIGHT ENTER A MORE VIBRANT STATE FOLLOWING A PERIOD OF GREAT TURBULENCE. THIS IS THE SIXTH IN A SERIES OF STORIES ON THE FINANCIAL PERFORMANCE OF MEDIA. 14 The Financial Manager • July/August 2021

HE U.S. NEWSPAPER INDUS-

try faced an unprecedented amount of change and disruption over the last year. Three primary forces altered the landscape. First, newspapers were hit harder by the COVID pandemic than almost any other media sector. Second, Alden Capital’s $630 million bid for Tribune Publishing initiated a battle with other investors that ignited a competition not only for the highest price, but also for which business model would prevail – one based upon corporate group ownership leveraging economies of

million, from first quarter 2020 to the same period this year. But Tribune grew its recurring earnings before interest, taxes, depreciation and amortization (EBITDA), from $9.5 million to $25.4 million. Its profit margin expanded from 5% to 15%. Other entities have restructured by divesting legacy printing facilities. Then they’ve used the proceeds to buy out unfavorable contracts, invest in content and shift to a more economical out-sourced printing model. PUBLIC COMPANY PERFORMANCE The results of the Tampa Bay Times and Tribune were generally mirrored by the con-

PERFORMANCE OF PUBLICLY TRADED NEWSPAPER COMPANIES

120 Price Change %

pass decades ago as the issue worked its way through excruciatingly protracted regulatory and judicial proceedings? There is reason to believe the answer to the first question is: “a new beginning.” Most newspaper companies managed their way through the pandemic admirably, despite intense technological, competitive and financial pressures. Profits were strengthened by carefully balancing promotion of digital content with a reduction in print days. In other words, expenses were reduced more aggressively than the pace of declining revenues. For example, the Tampa Bay Times reduced it print offering to two days per week

60 0 -60 -120

JAN ’20 FEB ’20 MAR ’20 APR ’20 MAY ’20 JUN ’20 JUL ’20 AUG ’20 SEP ’20 OCT ’20 NOV ’20 DEC ’20 JAN ’21 FEB ’21 MAR ’21 APR ’21 MAY ’21

Tribune Publishing Co. TPCO-Share Price 30.62%

Gannett Co., Inc. GCI-Share Price -20.53%

The New York Times Company NYT-Share Price 29.78%

A.H. Belo Corporation AHC-Share Price -31.91%

News Corporation NWSA-Share Price 87.34%

S&P 500 S&P 500-Index Value 28.63%

Lee Enterprises, Incorporated LEE-Share Price 98.59%

SOURCE: S&P Global Market Intelligence

scale, or one based on local ownership with (Wednesday and Sunday) and simplified its stellation of the five other publicly traded a foundational community focus. offerings to two choices: all digital or digital newspaper companies: A.H. Belo, Gannet And third, the Supreme Court ruled on plus print on Wednesday and Sunday. This Co., Lee Enterprises, The New York Times Corp. The stocks of most of the April 1, 2021, in National Association of model facilitates significant operating cost and News PUBLICLY TRADED NEWSPAPER COMPANY ENTERPRISE VALUES Broadcasters v. Prometheus Radio Project, that savings and, therefore, greater profitability. group appreciated strongly between January 30,000 the decades-old ban on newspaper-television At the same time, the newspaper maintained of 2020 and mid-May 2021 (when this article A.H. Belo Corporation station cross ownership could be repealed. subscriber engagement. Lowering the frequen- was completed). As most of us vividly recall, 25,000 These events prompt some questions. Did cy of print editions can also increase advertiser the COVID crisis was just beginning to erupt Tribune Publishing Com in January of 2020. It was not until March the COVID crisis mark the newspaper busi- interest in those that remain. ness’s final chapter, or should this period be Tribune Publishing improved performance 2020 that the World Health Organization de20,000 Corporation a couple seen as37 a new beginning? Is there a viable with a similar strategy of driving digital clared the outbreak a pandemic, andNews 27 10 business5 model for local ownership of news- growth while, according to its first quarter of weeks later stock markets hit their lows. 9 15,000 Between January 2020 and May 2021, two papers in large markets? Does the relaxation 2021 press release, “transforming the expensThe New York Times C 19 15 of the ownership limits portend new opportu- es side of our business.” There was a 16% stocks, Gannett and A.H Belo, declined ap16 13 nities for newspapers, or did that opportunity revenue decline, from $206 million to $174 proximately 20% and 30%, respectively. But 11 14 14 29 25 27 28 29

Lee Enterprises, Incorp

10,000

Gannett Co., Inc.

5,000 0

1/1/20

2/1/20

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4/1/20

5/1/20

6/1/20

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The Financial Manager • July/August 2021 15

9/1/20 10/1/20 11/1/20 12/1/20 1/1/21

2/1/21

3/1/21

4/1/21

Billions of Dollars

the other publicly traded newspaper compaPUBLICLY TRADED NEWSPAPER COMPANY 30 nies appreciated considerably. The New York ENTERPRISE VALUES Times and Tribune were both up about 30%. News Corp and Lee rose almost 90% and 25 100%, respectively. As a benchmark, the S&P 500 increased approximately 30% over the 20 same period. (See chart, page 15.) Each company has its own story. The New York Times has become a digital force 15 around the world, and News Corp. enjoyed strong operating results driven by its regional 10 diversity and its global flagship, The Wall Street Journal. Lee successfully integrated its acquisition of the B.H. Media newspapers and 5 gained additional scale. Tribune’s stock price jumped in January 2021 because of the Alden 0 Capital offer. A. H. Belo, the smallest of the 1/1/20 2/1/20 3/1/20 4/1/20 5/1/20 6/1/20 7/1/20 8/1/20 9/1/20 10/1/20 11/1/20 12/1/20 1/1/21 2/1/21 3/1/21 4/1/21 group, struggled financially, and Gannett was The New York Times Company Gannett Co., Inc. Lee Enterprises, Incorporated challenged by its integration with New Media Investment Group/Gatehouse. News Corporation Tribune Publishing Company A.H. Belo Corporation To a degree, the appreciation was driven by SOURCE: S&P Global Market Intelligence operating results. The average 12-month trailing EBITDA margin for newspaper groups increased from approximately 10% in first This demonstrates the power and scale of to be low by some observers. And the offer quarter 2020 to 12% in the first quarter of combining digital and print platforms with itself became a case study of fair market value, as other investors began to formulate offers 2021. Overall operating cash flow increased the global reach of a dominant masthead. to compete against Alden. by 25% from approximately $1.5 billion to THE ALDEN DEAL Under the definition of willing buyer, will$1.9 billion. The chart above shows the overall enter- Although the improved performance gave ing seller (both fully informed and neither prise value (equity value plus debt minus new life to newspaper stocks, strong head- under compulsion), if a higher offer did not cash) for the public newspaper stocks. Several winds are still threatening. As revenues materialize, then $17.25 per share is theoretaspects are noteworthy. After a COVID-re- continue to decline, there will at some point ically fair market value. The share price is lated decline of approximately 20% in early be a limit on how much more costs can be equivalent to 8.0 times the seller’s trailing 12 2020, from about $19 billion to $15 billion, reduced. Alden’s offer for Tribune of $17.25 months cash flow. This is a high multiple relthe enterprise values of the publicly traded per share (indicating an enterprise value of ative to other recent newspaper transactions, newspaper companies have been on a steady approximately $630 million) was considered and reflects, to a degree, an expected recovery from the depressed earnings march upward, increasing to during the pandemic. approximately $27 billion in the The first five months of 2021 spring of 2021, or by over 42% were rife with stories of efforts since January of 2020. to vanquish Alden with a highThis appears to validate the HERE WAS MUTED RESPONSE TO THE U.S. SUPREME er bid. Maryland entrepreneur newspaper owners’ difficult choicCourt’s decision that the newspaper-television crossStuart Bainum, Jr., first offered es, which included cost-cutting, ownership rule could be repealed. That was not surprising as the to acquire The Baltimore Sun for simplifying subscriber choices and media industry continued to grapple with the effects of COVID. $60 million and then the entire the digital migration. They’ve all Quincy Media’s newspapers were not included in Gray company for $680 million – $50 started to pay off. Some comTelevision’s acquisition of its other assets. And there are some million more than Alden had ofpanies have also strengthened good reasons for that. Observers report that the cultural and fered. Tribune employees lobbied finances and content through operational differences between a television newsroom and a Patrick Soon-Shiong, owner of grants that fund local coverage newspaper newsroom limit synergies. the Los Angeles Times as well as of specific subjects or help train Still, some television operators have indicated that a approximately 25% of Tribune future journalists. prudently structured newspaper acquisition will allow them itself, to no avail. However, the newspaper industo offer more of a total-market solution to advertisers. It can Other efforts were made to find try is in a “Tale of Two Cities” incorporate an established brand, another digital outlet and a “local hero” in the Tribune marscenario. Over 80% of the total additional means of distribution, such as direct mail and inserts. kets who could fund and support public-market value is comprised a community-focused structure to of just two companies: News revitalize the publications, much Corp. and The New York Times.

CROSSING THE LINE

16 The Financial Manager • July/August 2021

SPECIAL REPORT: MEDIA VALUATIONS as John Henry did with The Boston Globe, Gerry Lenfest did with The Philadelphia Inquirer, and Jeff Bezos did with The Washington Post. The drama came to a close on May 21 when Tribune shareholders approved the Alden offer. This worked out to a multiple of about 8.0 times trailing EBITDA and a “buyers multiple” of closer to 4.0 times, assuming Alden is able to share corporate resources to significantly increase the profitability of the Tribune newspapers. Alden’s fiercest critics viewed the Tribune transaction as catastrophic due to Alden’s reputation for deeply slashing newsroom operations. But industry participants need not descend into pessimism. Other gears have continued to churn in the background. The basket of newspaper stocks fell about 2% coincident with the news of Alden’s success on what was generally a down day for the market anyway. It was somewhat disappointing perhaps, but hardly an indication that the future of the newspaper industry hangs on the outcome of the Alden-Tribune transaction. As discussed earlier, inventive management has injected financial viability into the

performance of newspaper companies despite the headwinds. The approximately eight times seller’s EBITDA multiple for Tribune is quite respectable in the context of recent transactions in other media sectors. So, is there a viable model for local newspaper ownership in large markets? The answer is mixed. On one hand, locally owned publications in markets like Philadelphia, Tampa and Washington, D.C., have been great sources of innovation and appear to have moved in the right direction financially. However, as the Alden-Tribune Publishing transaction indicates, assembling the managerial and financial assets to create the local structure is challenging. PRIVATE COMPANY TRANSACTIONS In the private market for newspapers, consolidation and rational acquisitions continue, although at lower multiples – reportedly in the three-to-four-times seller’s EBITDA range. This was the case in Nordstar Capital’s purchase of the Toronto Star and other publications in Canada in August 2020. Other smaller groups, such as Paxton Media Group and Ogden Newspapers, continued to make geographically rational add-ons in proximity

to their existing operations. The newspaper industry enters the second half of 2021 in the wake of substantial changes: the nascent recovery from the COVID pandemic, the spectacle of the Alden-Tribune transaction, demonstrably improved operating efficiencies and a potentially more hospitable regulatory environment that could widen the pool of buyers. But there are less favorable elements. No other media sector is subject to such intense technological and competitive pressure. Newspaper revenues are forecast to contract over the next decade, even when increased subscriber fees and digital revenues are added to advertising sales. The debate will continue between two camps (those who see the salvation of the industry in cost-cutting and those who see it in improved content and innovative ownership structures). But the newspaper industry appears poised to live on with a vibrancy and vitality that may surprise its critics. John Sanders is a principal of the valuation consultancy Bond & Pecaro Inc. He can be reached at johnsanders@bondpecaro.com.

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A court will find that a particular work is a parody only when it criticizes or ridicules the original work that it’s based on, in some way.

18 The Financial Manager • July/August 2021

LEGAL MATTERS

IT’S EASY TO REPURPOSE CREATIVE MATERIAL FOUND ONLINE OR ELSEWHERE. IT’S ALSO EASY TO GET IN A LOT OF LEGAL HOT WATER WHEN YOU DO.

OVER THE YEARS, I HAVE HEARD A LOT

of people confidently claim that their use of copyrighted material for a variety of uses is “fine” when it most decidedly is not. Some clients have asked: “It’s okay if we use 20 seconds of a popular song in an ad we’re producing, right?” Another common question is: “I see a lot of people putting photos of scenes from famous movies on t-shirts. That’s okay, right?” And most damningly, “I found this photo of a rock concert on the web and put it on our site. We just got a demand letter from the photographer. He doesn’t have a case, right?” Not right, of course. But the questions reveal the types of myths that are out there. The misconceptions can lead you into the thicket of a copyright-infringement claim, which usually requires payment of a substantial amount of money to avoid the untidy costs of a full-fledged court battle and potential damages. Let me give you a “tour” of the most common copyright myths to consider.

Myths & Pitfalls BY LOUIS J. LEVY

FAIR USE FACTORS Perhaps the great level of confusion concerns the issue of fair use. Fair use is a copyright law concept that allows third parties to use portions of copyrighted material The Financial Manager • July/August 2021 19

LEGAL MATTERS

in limited circumstances without incurring liability. Companies frequently assume that use of a brief clip from a video or song is fair merely because it’s short. They may also reason that it’s only an insignificant part of a larger work or not used for a commercial purpose. This, however, is not the case. The U.S. Copyright Act requires consideration of four factors when determining fair use: ■ The purpose and character of the use (commercial, non-profit or educational); ■ The nature of the copyrighted work; ■ The amount and substantiality of the portion used in relation to the copyrighted work as a whole; ■ The effect of the use upon potential market. No single factor is dispositive, and one factor may dominate. Take, for example, the 1997 Reginald Denny video case, Los Angeles News Service v. KCAL-TV. The court held that use of just 20 seconds of the four-minute video that captured Reginald Denny’s beating by the Los Angeles Police was enough to constitute copyright infringement because it was the most significant portion of the video. In another 1997 case, Ringgold v. Black Entm’t TV, Inc., a court rejected a media company’s argument concerning the incidental, background use of a copyrighted poster as part of a set decoration in a sitcom series. The poster was visible to viewers for between 1.86 and 4.16 seconds per segment, and the defendants argued the

brief exposure entitled it to fair use rights. Instead, the court focused on the defendant’s decorative purpose in using the work, and the plaintiff’s lost license fees. These cases demonstrate a straightforward point: don’t assume that a fair use defense will protect you. When in doubt, consult with an attorney. The costs of doing so will be far less than the costs of a lawsuit. HAZARDS OF PARODY Parodies, which are covered under fair use copyright law, are often misunderstood. Over the years, I have had many clients who believe that using a song or song lyrics for humorous effect is a permissible fair use because it can be generally classified as a parody. This is incorrect. To qualify as a fair use, the parody must say something about the work being parodied. Merely changing lyrics of a song to refer to something unrelated to the original song is not a parody. For example, in a case that made it all the way to the Supreme Court, the rap group 2 Live Crew was deemed to have created a defensible parody when it recorded its rap version of Roy Orbison’s famous tune “Pretty Woman.” In that 1994 case, Campbell v. AcuffRose Music, the court referred to two definitions of parody: a “literary or artistic work that imitates the characteristic style of an author or a work for comic effect or ridicule,” and a “composition in prose or

OTHER TRUTHS, OTHER CONSEQUENCES COPYRIGHT NOTICE — Companies often assume that if a photograph or other work lacks a copyright notice (the © symbol or its equivalent), the work is unprotected. This is not true. The formal notice requirement was eliminated when U.S. copyright law was revised in 1976. Use of a copyright notice is not required by law. PRE-EXISTING WORK — We are frequently asked whether modification of a pre-existing work is permissible. For example, several years ago a station wanted to produce a spot for an advertiser using artwork that mimicked the logo and graphics used on the hit television program “Mad Men.” We advised the station against doing so. Copyright law protects the copyright owner’s right to control creation of copies of their work. And it also allows them to control the creation of works derived from their original work, known as derivate works. Assuming “fair use” is not an issue,

20 The Financial Manager • July/August 2021

modifying graphics, music or other material that is protected under copyright law can easily put you in the defendant’s side of a copyright dispute. CREDIT IS NOT ENOUGH — You cannot avoid a copyright-infringement claim by crediting the author or creator of a work when you use it, unless a fair use defense is appropriate. Your company needs to obtain permission either directly from the copyright owner or from a service that represents their work – for example Getty Images or ShutterStock in the case of photographers. It’s possible that a copyright owner may readily agree to give permission without compensation, if they receive a credit. The important thing to remember, of course, is to ask beforehand. PRO LICENSE LIMITATIONS — Performing rights organization (PRO) licenses only

cover public performances of musical works (compositions and lyrics). They do not cover use of the music works incorporated into a promotion produced for an advertiser. Nor do such licenses cover incorporation of music into a documentary, film or video program. To use music in this manner, one has to obtain a “synchronization” (synch) license from the owner of the musical composition and a “master recording” license from the record label or producer that originally recorded the music. If you don’t obtain these licenses, you’ll be guilty of copyright infringement. THERE IS NO 30-SECOND RULE — The myth of the so-called 30-Second Rule has not died. Use of even a short clip of music or a video can lead to a copyrightinfringement claim. It is therefore important to assess the proposed use of such a clip before airing it.

Sharing our experience experience Deloitte’s Deloitte’s Audit Audit&&Assurance AssuranceTechnology, Technology,Media Media&& Telecommunications Telecommunications(TMT) (TMT)industry industrypractice practiceisisfocused focused on onquality qualityand andinnovation, innovation,delivered deliveredby byAudit Audit&&Assurance Assurance professionals professionalswho whocan canprovide providedeep deepindustry industryknowledge knowledge and andinsightful insightfulaudits. audits.We’re We’reservice serviceproviders providersto tomany manyofofthe the world’s world’s most most recognizable recognizableTMT TMTbrands brandsininthe themarket markettoday. today. deloitte.com/us/tmtauditservices deloitte.com/us/tmtauditservices Copyright © 2020 LLC. AllAll rights reserved. Copyright 2021Deloitte DeloitteDevelopment Development LLC. rights reserved.

LEGAL MATTERS

Articles about a particular posting or trend can include embedded content found on other sites as examples. This would be considered a fair use.

verse in which the characteristic turns of thought and phrase are imitated in such a way as to make them appear ridiculous.” Notwithstanding the amount of the original work used by 2 Live Crew, the court nonetheless held that the group’s overall purpose was to mock and in its own way criticize the original, thus entitling it to the benefits of a fair use defense. The 1969 Harvard Lampoon book “Bored of the Rings” is another example of a permissible parody. The title refers to J.R.R. Tolkien’s “Lord of the Rings.” The Lampoon book was a true parody of the original because it used contemporary irreverent humor to poke fun at Tolkien’s epic work. (In a famous scene from the original novel, the character Bilbo has an opportunity to kill evil Gollum but does not because “pity stayed his hand.” In the parallel scene in “Bored of the Rings,” pity similarly stays Bilbo’s hand, but Bilbo adds “What a pity I’ve run out of bullets.”) Contrast this with the 1997 Ninth Circuit Court of Appeals finding in Dr. Seuss Enters., L.P. v. Penguin Books USA, Inc. It determined that a book about the O.J. Simpson trial entitled “The Cat NOT in the Hat! A Parody of Dr. Juice” was not a parody of the original Dr Seuss work because it did not in any way criticize or poke fun at the original. Rather, it was a humorous, satirical take on the Simpson trial that copied elements of the original “Cat in the Hat” children’s story. The parody included the image of the iconic cat’s hat, which appeared multiple times throughout the book, as well as the graphic design of the text style, and the poetic meter of the text, among other things. The take-away here is straight-forward: a parody is not simply using a copyright owner’s material for comic effect. A court will find that a particular work is a parody only when it criticizes or ridicules the original work that it’s based on, in some way. SOCIAL MEDIA TRAPS It is also very important to understand the restrictions related to copying material that you find on the web and then adding it to your website. Most social media platforms post terms of use stating that the material posted remains the property of the owner. Such material can be used, of course, if it is newsworthy and/or used for criticism or commentary. But every effort must be made to avoid creating an impression that your station or platform originated or otherwise owns the image or clip. Companies also should exercise caution when downloading material, in particular photographs,

22 The Financial Manager • July/August 2021

from websites that claim to offer them for free. Such photos should be vetted. Confirm that they are available without charge. Photographers frequently watermark their images and use bots to detect unauthorized uses. And Google provides a tool that allows you to search the web for other uses of an image. You just need to right-click on the image. It’s a tool I frequently employ to detect unauthorized uses of my clients’ works. With that in mind, the following guidelines may be helpful: ■ Always make sure embedded content clearly links to, and bears the logo of, the source platform website (such as Twitter or Facebook). ■ Avoid hosting images or videos lifted from other sites directly on your servers. ■ Articles about a particular posting or trend can include embedded content found on other sites as examples. This would be considered a fair use. ■ If someone’s online account is marked “private,” do not repost their content. ■ Whenever possible, use photographs or other images from reliable stock photo sources such as Getty Images or Shutterstock. OTHER DANGERS Keep in mind that the unlawful use of copyrighted material extends beyond whatever might happen in court. For example, a Tucson radio station copied and broadcast video footage from a local bicycle enthusiast’s blog featuring original content in a news story about cycling without the blogger’s consent. Because the TV station was not using the footage for commentary or criticism, the fair use defense was not available. The parties settled the dispute for a very nominal amount (just $300), but the public relations fallout in the local community was blistering. The station was very embarrassed and had a real blemish on its reputation. The station would have saved itself a lot of trouble and aggravation by either asking permission from the blogger, who most likely would have granted permission in exchange for the free publicity. Or the broadcaster could have shot footage of a cycling event itself. To avoid potentially costly and always distracting copyright-infringement disputes, train employees to recognize these issues and myths. Contact your company’s legal department whenever there is a chance that you might violate a content owner’s rights. Louis J. Levy is an attorney of counsel at Lerman Senter PLLC. He can be reached at LLevy@lermansenter.com or (202) 416-6748.

This excerpt from the book “One Up” explains how savvy marketing techniques have led to the explosive growth of some video games.

By leveraging gaming video content as an effective marketing tool, the underdog Anthem outwitted the favorite, Apex Legends.

Anthem’s Ranger Javelin

24 The Financial Manager • July/August 2021

GAMING VIDEO DYNAMICS

OUTSMARTING THE

COMPETITION BY JOOST VAN DREUNEN

N IMPORTANT CATALYST BE-

hind the growth in gaming video content is the popularization of free-to-play games. In the absence of buyer’s remorse, titles that rely on a slow drip toward monetization found that an abundance of available videos with epic moments and hilarious commentary had a seemingly positive effect on the acquisition and retention of users. Live streams broaden the experience and allow consumers to become more deeply involved and familiar with the intricacies of strategy for titles like DOTA 2 or League of Legends. Many of these games can be quite complex. Consistent with a microtransaction monetization strategy, many different heroes are available, each with their own unique skill set and characteristics. Seeing how others play with them demystifies the game; improves overall awareness; and extends the average player’s life cycle. Tencent subsidiary Riot Games, for instance, recognized this fact early on. Almost since its inception, the firm has emphasized hands-on support to the development of user-generated video coverage and has promoted content creation by hosting and supporting tournaments and channels. It learned that viewers flock to online video both to spectate and learn new tactics. In an interview with ESPN.com in August 2012, CEO Brandon Beck stated that such viewership has become an “integral part of the experience.” A second driver behind the popularity of gaming video content is the change it facilitates in the dynamic between large multinational game companies and the journalists

who review the games they bring to market. Consumers negotiate a significant risk when deciding to pay $60 for a game. Before their purchase, they know little about it and largely hope it will be worth their money and time. To mitigate this tension, consumers have long relied on magazines and reviewers to decide what to buy. At the center of this dynamic, we find conventional games journalists. These professional reviewers carefully balance the tension between their reliance on the industry for access, on the one hand, and the need to remain objective, on the other. They depend heavily on receiving copies of upcoming releases and consoles before they are available to the broader consumer market. This early access builds up their social capital and allows reviewers to become a trusted source of information. In exchange for providing access, publishers and platform holders hope to garner positive feedback and critiques, boosting their overall marketing efforts. Journalists are flown around the world, put up in fancy hotels; meet famous game designers and hardware engineers; and are privy to embargoed product announcements. This is key to a games journalist’s credibility. But to keep this access, they ultimately are limited in their ability to be overly critical of an upcoming release. Large, publicly traded firms whose stock price can depend on the positive outcome of a big launch naturally seek to influence tastemakers and gatekeepers. As an example of how this tension can manifest, we can look to the case of Jeff Gerst- mann. As the editorial director of GameSpot, a gaming website, Gerstmann refused to adjust his review of an upcoming title, Kane &

Lynch. After its publisher, EIDOS, had spent significant amounts of money on advertising on the GameSpot site, it complained about Gerstmann’s review and rating of the game. Unwilling to compromise his integrity, his employers prioritized EIDOS’ interests and fired Gerstmann. In response, several other high-profile resignations followed from the GameSpot staff. One of my colleagues, David Nieborg at the University of Toronto, refers to this dynamic as the political economy of games journalism. Succinctly, the financial pressures on reviewers force them to rely heavily on ad revenue to keep up their traffic and circulation numbers. This inevitably creates a murky circumstance in which it is increasingly unclear whether they truly serve the players in their need to know about what games to buy or whether they are on the side of the corporations that fund their efforts. Live-streamers bypass this pressure of large corporations trying to influence an individual reviewer to a degree. And, more importantly, they allow consumers to see a game in detail before committing to it. This neutrality has resulted in viewers growing loyal to a particular personality or player and wanting to watch them play online. It is not unlike radio personalities: listeners tune in a specific disk jockey they like, but who have access to much of the same music as every other radio professional. Live-streamers occupy a distinct position in the industry: they are both celebrities with their own following, and tastemakers who meaningfully affect consumer demand for a new title. Gaming video content has quickly evolved into a key component to the value chain and The Financial Manager • July/August 2021 25

GAMING VIDEO DYNAMICS plays an important role in marketing new releases. Today, online videos influence what 46% of PC and console gamers under the age of 25 play in a major market like the United States, according to SuperData Research. The impact of a well-thought-out campaign involving live-streamers compared with a more traditional approach is tangible, as Electronic Arts discovered in 2019. It put most of its weight behind building momentum for the release of its new sci-fi shooter, Anthem. But another one of its own titles, free-to-play battle royale shooter Apex Legends, stole the spotlight.

amount of revenue during their launch month, consumer attention for the blockbuster release dropped quickly in the second month. Meanwhile, Apex Legends managed to outperform Anthem in terms of total hours viewed on Twitch and monthly revenue. Predictably, unit sales for Anthem dropped off post release, but Apex Legends continued to drive viewership, player usage and revenue. Nine months following both releases, Anthem had earned Electronic Arts about $200 million in revenue compared with the $362 million generated by Apex Legends. By

120M

groups or inviting a select group of people to “play test” a title before its release. This practice had been reserved for those firms that could afford it, because asking consumers for their feedback in person is costly and time-consuming. Monitoring video content and livestreaming, in contrast, enables creative firms to gather consumer feedback and add or remove aspects of a game to maximize its chances of success at launch. Unlike magazines, gaming video content presents a real-time feed of what audiences are playing and watching.

$120M

TOTAL HOURS VIEWED

80M

MONTHLY REVENUE

$80M

Apex Legends Anthem

40M

Anthem

Apex Legends

$40M

SOURCE: SuperData Research

Electronic Arts positioned Anthem as a leveraging gaming video content as an effecSmaller outfits similarly benefit. Indeblockbuster release and leveraged mostly tra- tive marketing tool, the underdog, Anthem, pendent developers leverage livestreaming ditional marketing channels. Simultaneously, had outwitted the favorite. to outmaneuver larger publishers and their it permitted Apex Legends studio producer Beyond promotional activity, large well- considerable marketing budgets. Because Drew McCoy to independently determine its known studios have started to rely on gam- overhead usually takes up the bulk of their own marketing strategy and content financial resources, small developers rollout schedule. generally have no money left for proToday, online videos influence The studio allegedly paid celebrity motion. Instead, they send free copies what 46% of PC and console streamer Ninja millions of dollars to to popular streamers in the hopes that play the game for one day on Twitch, gamers under the age of 25 play they will dedicate play-through video to which resulted in many other streamers it or give it a glowing review. According in a major market like the also switching over to the new release. to designer Davey Wreden, it was his United States, according to From there, the game went viral: severencouragement of players to post playal of the most-viewed streamers played throughs on YouTube that helped him SuperData Research. Apex for another two weeks. Apex sell 100,000 copies of his title Stanley Legends quickly dominated the viewership ing video content as part of their creative Parable, as reported in an October 2013 Wired rankings and managed to even push past the process. According to a senior producer article. In its current state, gaming-video contop title at the time: Fortnite, as reported in a behind Horizon Zero Dawn at Guerrilla tent acts as a powerful equalizer. March 2019 Reuters story. Games, YouTube videos acted as “an exThis feature was adapted from “One Up: Creativity, After playing Fortnite for months on end, tremely qualified feedback loop, that we Competition, and the Global Business of Video Games” by Ninja and others were eager for something new can use to improve the game and check if it Joost van Dreunen ©2020 Columbia University Press. Used and continued to play Apex Legends without appeals to the community,” according to an by arrangement with the publisher. All rights reserved. receiving compensation. This signaled the article in Gamasutra.com published in June game’s value to audiences and resulted in 2014. Handled well, design takes place with Joost van Dreunen is an investor and advisor to startups and financial funds active in video games. roughly twice as many people playing the un- an unprecedented degree of insight into what He also is an adjunct assistant professor at New derdog than the anticipated favorite, Anthem. resonates with audiences. York University’s Stern School of Business. He can Despite generating roughly the same Historically, developers have relied on focus be reached at joostvandreunen@gmail.com. 26 The Financial Manager • July/August 2021

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CYBERSECURITY ISSUES

28 The Financial Manager • July/August 2021

HEADER

RISING CRIME,

RISING RESPONSE? Hackers had a field day when companies went into remote-worker mode. Mission-critical information must be better protected. BY MARY J. HILDEBRAND COVID-19 has changed the way we interact with technology and focused renewed attention on data privacy and security. U.S. companies are grappling with the enhanced business and legal risks associated with remote working, especially their vulnerability to cyberattacks. Currently, cyberattacks rank as the fastest growing crime in the U.S., according to the Information Systems Audit and Control Association (ISACA). Globally, cybercrime damages were estimated by ISACA to reach $6 trillion by 2021. That alarming vulnerability of mission-critical information could continue. Rather than disappear as a relic of pandemic, the remote-work trend may become permanent, or at least morph into a hybrid model. It’s imperative that businesses intending to retain (or introduce) remote-work infrastructures take steps to minimize exposure from these increasing cybersecurity risks. HOW DID WE GET HERE? Before delving into best practices to mitigate the risks, let’s backtrack slightly to understand the extent of the current quandary. When COVID-19 rampaged through America, the disruption stressed not only the millions of individuals

involved, but also the complex technology infrastructures that were suddenly required to accommodate massive traffic volumes. While this stimulated innovation to meet rapidly changing needs, well-organized hackers and other bad actors moved to exploit security weaknesses in the technology infrastructure supporting the newly decentralized workforce. Their goal: obtain control of data assets for future monetization or extort payments from companies desperate to access their highly sensitive data after a ransomware attack. When a business sustains a cyberattack, direct financial losses are only part of the story. Businesses must comply with the applicable

data-breach laws of every state and country where the affected individuals reside. U.S. companies may have obligations to notify individuals, law enforcement and governmental authorities around the world. For businesses in highly respected industries that process valuable personal information (often financial or medical data) the reputational impact may be the most challenging. Once shaken, the confidence of consumers and business partners is hard to regain. Ironically, companies that moved most rapidly to ensure business continuity during COVID-19 may be among the most vulnerable to cyberattacks. For every well-known company hit by cyber criminals that make national headlines such as Twitter, Marriott, Zoom, Magellan Health, Colony Pipeline and Cox Media Group, there are many others managing the fallout of cyberattacks within their own industries. The top cyber fraud incidents are social engineering, phishing, data security lapses, ransomware and patch management, according to analysts at the ISACA. Preventing

The Financial Manager • July/August 2021 29

CYBERSECURITY ISSUES such intrusions by increasingly organized and tech-savvy criminals is a massive challenge. BEST PRACTICES While the risks to mission-critical data associated with remote work environments involve many complex factors, successful risk mitigation is often a matter of common

Alert staff members regarding the enhanced cybersecurity risk and conduct appropriate training in connection with the remote-work environment. sense and strict monitoring of compliance. Our team recommends: Involve Strategic Leaders – Ensure that key stakeholders are involved and accountable from the outset of the planning and risk-mitigation process. They should include top executives from IT (operations,

security, data analytics); legal and compliance; marketing and business operations; human resources; finance; and representatives from the C-suite and the company board. Vet the Vendors – Revisit and evaluate third-party vendor dependencies that support remote working, including an appropriately scaled security diligence process. Companies are responsible under applicable data breach laws (and frequently in commercial contracts) for the consequences of security incidents sustained by third-party vendors engaged in processing their data. Employee Engagement – Alert staff members regarding the enhanced cybersecurity risk and conduct appropriate training in connection with the remote-work environment. Then do it again. There is no substitute for a welltrained workforce, but humans will continue to fall for social engineering, phishing and similar incidents.

THE WEAKEST CONDITIONS

HERE ARE DOZENS OF FACTORS THAT

contributed to enhanced cyber risk at companies operating a remote work environment, but some stand out: IT Resources Stretched — IT staff members may have been deployed for extended periods to address system-bandwidth issues and server capacity for the remote workforce at the expense of cybersecurity. Acquisition Issues — Shelter-in-place orders left many businesses scrambling to purchase (and provide workers with access to) company-issued laptops and/or security software at a time when there was soaring demand and supply disruptions. Lack of Proper Vetting — Organizations were frequently compelled to quickly expand or even establish new relationships with third-party vendors and platforms to support the remote workforce. They often had insufficient time to conduct privacy and security diligence or provide current training suitable for the new model. Inadequate screening of third-party vendors is a perennial issue for many companies, but the sheer volume of new and expanded relationships undertaken during COVID-19 escalated the risk substantially. These deficiencies remain in

30 The Financial Manager • July/August 2021

place as companies contemplate making remote work a permanent feature of their workplace environments. Personal Devices — As businesses struggled to adapt, employees often resorted to using their personal devices and accounts to communicate (internally and externally) by email, especially in the context of communicating about COVID-19. These personal devices and accounts frequently do not have security measures in place that are comparable to those in many companies’ primary IT system. Additionally, many employees had little or no experience with remote work and communications. Because they had always worked within a secure system at their place of employment, they were not sensitized to the potential repercussions of sharing personal, confidential or business information through unsecure networks. Thus, the incredibly rapid implementation of remote working, while socially responsible, has made individual employees — and therefore the organizations that employ them — more susceptible to targeted phishing, fraud and malware attacks.

The best programs keep these issues constantly in front of employees by providing frequent training, and reminders in the form of emails, updates and internal tests using “fake” intrusions. Update Company Policies – Internal security practices and polices – including provisions for remote-work environments – should be monitored and updated as new threats arise. They should address the use of personal devices remotely, including, as applicable, devices that were previously approved. The security measures should include information regarding the installation of applications to either protect or wipe business data from a device. Revise Emergency Strategies – Update plans for incident response, disaster recovery and other data security issues. Be sure to include your remote workforce and conduct remote-work tabletop exercises with your cybersecurity teams. When employees are remote they are alone, and it is critical that they know exactly what to do – and what not to do – in the event of a security incident. Revisit Insurance Coverage – Analyze current cyber insurance policies to ensure coverage extends to your remote workforce and the third-party vendors that enable and support remote work environments. In conclusion, I probably don’t need to remind you that during the worst months of the pandemic, the immediate goal was to ensure continuity of business while maintaining the health and well-being of employees. As we move toward, releasing restrictions on business and other activities, the vulnerabilities associated with remote work infrastructures still remain. In 2021, it’s more important than ever for companies to prioritize protection of their data assets. Mary J. Hildebrand is a partner, founder and chair of the privacy and cybersecurity practice at Lowenstein Sandler LLP. She can be reached at mhildebrand@lowenstein.com.

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LASTWORD

Catering to the C-Suite

Tax leaders earn respect and a great reputation when they understand the expectations of their company’s top executives. BY DANIEL McGUIRE

edia company tax departments face quite the juggling act these days. Staff members need to keep pace with rapidly changing tax legislation and heightened compliance burdens. They must ensure accuracy within the financial statements and decipher the tax impact of disruptive technology that’s transforming the media landscape. All the while, they’re keeping a lookout for opportunities that could further integrate and add value throughout the organization. Teaming on transactions; analyzing the taxability of new services and products; and evaluating acquisitions and divestitures are equally important. They often occur with little advance notice. How do financial leaders manage all that? One session that took place during the inaugural MFM Media Tax Summit delved into the question. The executives who took part discussed the visibility of tax leaders and how they can provide exceptional value to their stakeholders. Here are some of the highlights.

C-SUITE EXPECTATIONS To be considered high-performing, a tax leader must first understand the expectations of the tax function from the C-suite. “First and foremost, it’s about ensuring accurate books and records, timely filings, compliance and defending the audits, as well as providing support, recommendations and value-add in regards to transactions and deal structures,” explained Lucy Rutishauser, executive vice president and CFO of Sinclair Broadcast Group. “Speed, accuracy, quality of work and value-add throughout the organization” are all key qualities for a tax leader to instill in their team, Rutishauser added. At the same time, leaders must look outside the traditional tax role and understand the overall direction of their company and the entire media industry. 34 The Financial Manager • July/August 2021

throughout other parts of the organization. This can enhance the reputation of the tax leader and the entire team. And it may result in invitations to consult on matters throughout the organization. Steve Gibson, vice president, CFO of The Washington Post, noted that “truly understanding the business activities and the goals of the business owners puts the tax team in the position of being a trusted advisor. Being able to clearly distill often-complex and intimidating rules and regulations into understandable action steps “Truly undercan allow business owners to obstanding the tain internal support and approvbusiness activial to move forward.” ties and the goals An understanding of tax conof the business siderations should be “integrated owners puts in every aspect of the company,” the tax team in added Rutishauser. The implithe position of cations range from day-to-day being a trusted operations to more complex transadvisor.” actions, structures or business — Steve Gibson, The Washington Post opportunities. “[Tax leaders need to] apply the tax code and translate that A deep tax-technical understanding is into forward expectations, which can impact only the starting point when addressing earnings and therefore a company’s valuatax changes. Tax professionals gain respect tion,” Rutishauser added. when they can interpret the potential impact on the media enterprise to stakeholders out- FRONT-AND-CENTER ROLE With so many exciting opportunities in the side of the tax group. developing media financial environment, why MAKING IT EASIER should individuals consider a career in tax? In addition to a thorough understanding of “As the complexity and globalization tax matters, it’s critical to have a communi- of business continues to escalate, tax procation style “that can really walk through a vides you with the opportunity to become transaction in a way that others can under- a subject-matter expert in a field that is stand,” explained Elizabeth Bramowski, chief increasingly at the center of planning and accounting officer and controller at Entercom decision-making,” explained Gibson. Communications. “The ideas that can come from a highly “Not only does it demonstrate [a tax effective tax organization that can benefit a leader’s] mastery of the topic, but it builds company’s bottom line and fuel their straconfidence across the organization to gain tegic growth are endless,” said Bramowski. broader support of the tax strategies and plans,” Bramowski added. Daniel McGuire is a partner at By exercising these skills tax and finance KPMG LLP. He can be reached at (703) 286-8275 group leaders can build a strong relationship or dmcguire@KPMG.com. One area of concern relates to tax authorities, both domestic and abroad, who have attempted to broaden the tax base in response to the expanding reach of media companies. There are ways to confront new or expanded taxes on digital services, products and even advertising. It requires an intricate knowledge of media offerings, the potential application of these taxes and the ability to pivot quickly to determine the impact on the organization and its customers.

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Cheers to a half century of collecting MORE media client debts MORE often!

1971–2021

In 1971, Pete Szabo recognized an opportunity to fill a gaping hole in the media finance business. The industry needed expertise in collecting media and entertainment accounts receivable. Szabo Associates met that need and founded the media collection industry. Today, 50 years later, we’re still exceeding our clients’ expectations by delivering MORE. Through the decades, the Szabo brothers guided the company through thoughtful growth, collected MORE debt than all other competitors combined, and committed to earning long-

term relationships. All along, we realized that the key ingredient to Szabo’s success was you, our amazing clients. We are grateful. No other media collection company has MORE experience or deeper understanding of the intricacies of collecting media and entertainment debt. No other media collection company delivers MORE service from long-tenured employees—it’s our promise and our passion. We work on contingency collecting media and entertainment debts

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