It may seem like there’s a simple process of determining receivables from multichannel providers. But funny things can happen on the way to revenue recognition. Here are tips on dealing with some common challenges.
While news reports often focus on the contentiousness surrounding retransmission consent, it’s in TV stations’ best interest to develop a good working relationship with their MVPDs — multichannel video programming distributors. This will go a long way in improving retrans revenue management.
As Richard Taub, SVP of broadcast and digital service at Media Audits International (MAI) and a past president of MFM’s board of directors recently observed, “It may seem like there’s a simple process of determining receivables from multichannel providers. But funny things can happen on the way to revenue recognition.”
To give you an idea of the types of situations that can make the revenue management process more difficult, take a look at just a few from Taub’s and MAI’s experiences:
- Addressing billing and payment changes that result from restructures, such as consolidating a local operation into a regional structure.
- Understanding variances in the remittance data provided by an MVPD from one month to the next.
- Adapting to changes in payment management, such as a shift from making payments to the station to sending them to that station’s corporate or regional office.
- Receiving payments in a variety of ways, such as lockboxes, automated clearing house processing or checks.
- Not having access to the contract data that is needed for payment verification;
- Reconciling variances in payment amounts to determine if there have been underpayments or overpayments.
- Addressing payment changes that can arise from the impact of natural disasters.
- Experiencing data storage and search problems or the impact of human error on data management.
In addition to sharing some tips on how to address these particular challenges, Taub’s article provides examples of industry best practices for handling a large volume of MVPD license fees. He divides these into three categories:
- Contract compliance measurement
- Payment and accounts receivable processing
- Management reporting
Taub’s article is aptly titled Taming the License Fee Wilderness, reflecting the newness of this requirement for broadcasters. Fortunately, this is familiar territory for MAI, which has been assisting cable and satellite programming networks in managing their license fee revenues for more than 20 years. I’d like to share a few tips honed by MAI’s years of experience to help you improve your management of this increasingly important stream:
As Taub points out in his piece, “trust but verify” involves figuring out how to verify so many payments coming in, from so many sources and subject to different sets of contract terms. This requires ensuring that records of both rates and subscribers (or transactions) are being applied correctly by MVPDs.
Additionally, there may be various rates governed by geography (in-market, out-of-market), splits and tiering, as well as contingent terms such as ancillary content provisions or marketing. Taub says this will usually require “automated and/or human management of an expertly crafted and exquisitely managed, multi-component Excel pivot table, or another similar type of document.”
Ensuring all subscribers are accounted for is another matter of contract compliance. This means that the station or station group must have a tracking mechanism to ensure payments are made by each system every month. Subscriber tracking needs to be done not at the “top-line” MVPD corporate level or even at a market level, but rather at individual subscriber systems. Taub says, “Full compliance measurement simply cannot be done any other way.”
Merger and acquisition activity must also be addressed as part of the contract compliance program. For example, accounting departments need to understand which payment rates survived the acquisition, for exactly how long, and under what conditions. The post-deal ownership of the accounts receivable balances will also need to be addressed. In Taub’s opinion, “Best practices dictate that attorneys and contract-compliance teams work together and with MVPDs to ensure absolute agreement and clarity regarding the surviving terms.”
Payment And A/R Processing
Workflow for payment processing begins with proper receipt of monies owed and related data. This requires:
- Ensuring that both are received in a consolidated lockbox or other method managed by as few people as possible.
- Inputting both payment and subscriber data per period into a standardized data storage facility and processing system.
- Equipping the data management solution with an automated error-detection capability which is also integrated into the station’s or station group’s accounting system.
Coverage areas for MVPDs don’t correspond with Nielsen’s 210 designated market areas (DMAs) and that can add to labor costs and create delays if a stations use non-automated solutions. As Taub explains, “It is a very time- and skill-intensive process that requires multiple quality control checkpoints. This work can become even more difficult for broadcasters with a large number of local stations, network affiliations and MVPD clients.”
An organization’s best practices for managing payments must also address what Taub believes can be “the stickiest of tasks: problem resolution.” When developments such as rate variances, non-payment by a local MVPD operation, or a sudden change in reporting structure occur, it is essential to resolve the matter “quickly, thoroughly and tactfully in order to ensure proper payment and financial statement integrity.” Those involved must have a comprehensive database of accounts payable contacts at all MVPDs, both for the headquarters and at all local operating units, and keep it updated.
Of course, data can only go so far in managing payments and resolving discrepancies. Managing personnel risk and fostering relationships with MVPDs depends upon best practices like proper training and maintaining adequate staffing levels. “Such employees should also be properly equipped, motivated and compensated,” recommends Taub.
Data Management And Reports
As Taub notes in his article, staff members involved with retransmission fee management must also ensure they have all billed subscriber and financial data at their fingertips. These statistics, which address his earlier point about the importance of accurate data for revenue forecasting and strategic planning, should include trending analysis, revenue, profitability and payment practices and they should be measured on MVPD, regional, DMA, station and network-affiliation bases.
And with reverse compensation payments now a reality for many network affiliates, access to this data will make it easier for stations to address the payment verification requirements their network groups are also likely to implement.
“Management should determine which reports they regularly need on a monthly basis, and all such reporting should be automated, consolidated and easily understood by all parties. Software development must be agile enough to incorporate new standardized reports and data requests easily,” he advises.
A copy of Taub’s article, which appeared in the March-April edition of TFM, will be available in the electronic version on our website for another week or so. MFM members will have continued access via the “TFM archives” section. While I have tried to do it justice with this summary, I encourage you to give it a read. It is sure to provide you with additional ideas on how to improve your revenue management practices.
Best practices for managing retrans revenue also number among the presentations from more than 150 industry experts, including Taub, at our upcoming annual conference, Media Finance Focus 2015, which will be held in Phoenix May 18-20.
Taub’s observation that an effective revenue management program relies upon having a good working relationship with MVPDs bears repeating as the last word. TV stations and their MVPDs have a lot more to gain from closer collaboration, and a lot to lose from failing to do so.
Live local programming continues to provide the competitive edge for retaining and growing the digital video revenues that benefit local stations and MVPDs alike.
Mary M. Collins is president and CEO of the Media Financial Management Association and its BCCA subsidiary. She can be reached at [email protected]. Her column appears in TVNewsCheck every other week. You can read her earlier columns here.