TV station groups are centralizing operations and administration, scrutinizing costs and outsourcing administrative tasks in an effort to cut costs and create a more efficient way of doing business, according to financial managers at Belo Corp., Meredith Broadcasting and Gray Television.
With TV station revenues down in double digits so far this year, group financial managers are faced with a near unending cycle of having to cut costs, scrutinize their operations for further ways to save, and then whittle down budgets some more.
At an MFM 2009 session characterized as “group therapy,” finance managers from Belo, Meredith Broadcasting and Gray Television compared notes on everything from centralizing technical operations to paring back the costs of telecommunications, travel and even office supplies.
“One of our biggest challenges is syndicated programming expenses,” said Dalton Lee, vice president of finance at Meredith Broadcasting. Meredith walked away from Wheel of Fortune and Jeopardy! in some markets, Dalton said. “We were making a 12 percent margin on those shows.” By switching to running Access Hollywood, the company has increased its margin.
“You may lose some stature in the market,” Lee said, “but at the end of it we are all here to improve the financial viability of our companies.”
Meredith is also saving money by centralizing master control, traffic and billing, business administration, graphics production and research.
“You can significantly reduce your staffing if you centralize master control,” Lee said. “The person you have sitting in master control looking at one stream can be looking at two or three, and it doesn’t cost you any more money.”
Similarly, a new, more user-friendly traffic and billing system has enabled Meredith to reduce the head count in its traffic department from five, six or seven people at a single station to three or four, “depending on whether [we] have two stations being trafficked from one location.”
Belo and Gray have both centralized their business offices. Gray Television broadcasts 74 programming streams out of 30 markets, and runs financials for all of that out of a single hub in Tallahassee, Fla., said Trisha Allen, director of broadcast accounting.
Allen cautioned her colleagues to look at their companies’ needs before moving to a centralized or “shared services” operation. “There are so many different ways to consolidate,” she added.
Executives must also change the way they think about things when moving to a shared-services system, Allen said. “You have to go to a customer service model.” In Tallahassee, the mission is “to provide best-in-class financial services,” she said. “Our customers are our TV stations.”
As did Meredith, Gray began consolidating its business operations when it switched to a new traffic and billing system. “With one traffic system we could create one master client list that everybody uses,” she said, “and we can pull a consolidated aging report.”
In order to centralize accounts receivable, Gray outsourced billing, Allen said. “We worked extensively with traffic to generate a file and upload our invoices to a vendor. They create and mail our invoices for less than we would spend just mailing them.”
One big benefit of centralizing business operations is the savings incurred on audits, Allen said. “Auditors come to Tallahassee and do compliance and internal and external audits. We only go to stations for operational audits.”
Meredith has looked at both regionalization and centralization for its business operations and is considering the latter, Lee said. “What we hope to attain is an operation where we’d create three to four teams of five to six people each, and each team would be responsible for clusters of four or five TV stations,” he said. “We are also putting in a national credit manager who oversees local credit managers who are each in charge of three or four stations.”
Meredith’s business operation will include one person, with an accounting background, at each station to do things like track down expense reports from employees and induct new staffers. “They must be senior enough to manage all that and to get on the phone and answer questions” from senior financial management at the group level, he said. “This isn’t a clerical position.”
National sales at Meredith has been regionalized, Lee said. “Evaluate where your business comes from. Most of our business comes out of New York, Chicago and Los Angeles, so that’s where we’ve put our regional national sales managers.”
When regionalizing national sales management, station groups must “work closely with their reps,” Lee said, “as they will feel threatened by this.”
Centralizing graphics “requires significant change management,” Lee said. “People who are staying need to know they still have a job, and the news staff needs to plan ahead. They can’t call at 4:30 and ask for a new graphic to be ready at 5.”
Meredith is also creating clusters for research, with four coordinators for 12 stations, Lee said. “They are responsible for working with sales managers to create the big picture, and we have a sales or research assistant who creates one-sheets.”
Strategic sourcing can help a station group step outside the box and figure out ways to save money, Lee said. “This means creating a group of people to look at what you spend money on. They can’t be at a TV or radio station. They can’t have bonds with existing vendors or stations. They need to be removed from that type of pressure and they need to be at the division or parent company level.”
A strategic sourcing unit can help a station group achieve significant savings by leveraging a company’s size, Lee said. “Think about how many ENG trucks you buy in three years. Imagine the dollars you pay and what you could save if you went to a vendor and said I’m going to give you this much business over the next year or two.”
The same approach can help companies save on things like office supplies, said Carey Hendrickson, senior vice president and chief accounting officer at Belo Corp. “Talk to your vendors and ask them how you can save money,” he suggested. “We require people to only select best value items that we’ve negotiated rates for, and they have to use the vendor we’ve chosen, so we get a rebate.” Belo receives an extra 1 percent discount by increasing its average order size to $200. “This got us an additional $50,000 to $60,000 a year for us.”
Belo is one of several companies represented in the MFM session to have instituted a cell phone policy. Instead of buying cell phones and Blackberries for staff, the company reimburses for 300 to 400 incremental minutes per month per employee who requires a cell phone for work, Hendrickson said. For Blackberry data plans, it pays $45 per month.
“We analyzed who really needed to be on call 24 hours a day and who really needed a cell phone or Blackberry,” he said. The company saves more than $200,000 as a result of having overhauled its cell phone policy.
Telecommunications is an area in which companies can save millions of dollars a year, said Michael Solan, president and founder of Telemax Communications Inc.
Telemax reviews companies’ telecommunications invoices, scouring for over-charges and evaluating how many lines a company really needs. Even if it finds a company has been over-charged for years, it can recover retroactive fees for the station group, Solan said.
“A C-level commitment is crucial” to this process, Solan said. “Employees need to understand that they aren’t going to be fired if over-charges are discovered. No one expects them to understand tariffs and other charges.”
Solan also said the chief engineer at a station needs to be comfortable working with the vendor, who may recommend eliminating remote lines that are rarely if ever used.
Lee and Allen both said that cost cutting alone will not solve the financial issues faced by TV stations.
Local TV needs a “complete restructuring,” Lee said. “If you were to step back and think about what it is we do at a TV station, we produce news and we sell and market that product. To the extent that you are able to streamline your business into those two distinct functions, you will get a lot more efficiencies out of the stations,” he said.
In Lee’s vision of the future TV station, there would be two or three department heads: a news and production czar who would be responsible for the gathering, production and promotion of news, and a sales and marketing chief. Engineering would reside in the news department. A potential third unit at each station would handle administration.
“This is where we will be ultimately,” he said. “Gone are the days when we have year-over-year revenue growth. We have to think of the business in a completely different way.”