There are reasons that stations and groups rely upon direct response (DR) rep firms to sell some of their inventory. Rather than exploring alternative sales solutions, the better near-term remedy might be to explore ways to shorten the day sales outstanding for this portion of their ad sales revenue.
Get Faster, Better Revenue Results From DR
One of the ongoing challenges facing TV stations and other ad-supported media businesses is getting paid in a timely matter. As mentioned in earlier discussions, major brands have been delaying payment for advertising services. And when these media buys are placed by an ad agency, TV stations often wait until the agency has been paid and any discrepancies are cleared before they see the money.
Stations can also experience payment delays when they work with a rep firm to handle their direct response (DR) ads and infomercials. In fact a member of BCCA, the media industry’s credit association, recently wondered if, in light of payment delays, using a rep firm was even worth the time and trouble.
There are reasons that stations and groups rely upon DRTV rep firms to sell some of their inventory. Rather than exploring alternative sales solutions, the better near-term remedy might be to explore ways to shorten the DSO — day sales outstanding — for this portion of their ad sales revenue.
For insights on addressing this challenge, we turned to Aldo Vasari, manager of credit, collections and client services for WorldLink Ventures Inc., which sells more than 200,000 half-hours and in excess of 3.6 million DR spots a year.
“The amount of time it takes rep firms to pay their clients is probably the most frequently asked question I receive,” Vasari replied.
He went on to explain that the TV networks, stations and syndicated shows represented by his firm are sold in aggregate, “as a one order, one invoice, one-check, ‘unwired’ buy.”
In this sense, the rep firm would seem to operate like an agency, placing an order across several stations and other media outlets and then billing its client for the full campaign.
However, treating a rep firm in the same way an agency is treated may be one of the reasons payments are delayed.
Remember that the rep firm aggregates the sale across a number of stations and cable networks and then submits one bill to the agency or advertiser. Vasari points out that the advantage of this approach is that “it opens up national agency budgets for local markets that are too small to be considered individually by an agency, allowing them to compete for larger agency orders. The larger the footprint and distribution becomes, the greater the rate.”
The rep firm consolidates the buy into one invoice for delivery. This means that a delay in receiving an invoice from just one of the participating media outlets can postpone issuing the “unwired” invoice.
With this in mind, Vasari says: “It is of utmost importance that the billing be set up correctly from the start so as to not create further drag on the already complicated billing process. Directing all invoices to the rep and reflecting the correct ‘bill to’ is key.”
He goes on to recommend that one way to streamline this process is to designate the rep firm “as a sales office or sales person, while separating it from the station’s ‘in-house’ business.” Doing so can eliminate the additional back-office support and time required for creating invoices for agencies that are reflective of the relationship.
As Vasari notes: “We all know that the longer the lag is in billing, the longer the agency will take to pay as they start their term upon receipt of invoice, not date of invoice.”
Structuring rep firm relationships as an extension of in-house ad sales can have additional benefits. Much in the same way that credit and collections managers rely on help from the in-house sales tem in collecting from past due accounts, Vasari believes rep firms “can upset the agency’s entire schedule, on all represented properties, giving it more leverage to affect change” on behalf of its station clients.
This type of leverage with an agency results in “a lower overall bad-debt ratio for receivables, better communication about receivables and faster payments.” Similar to the situation for accounts managed by an in-house sales team, rep firms not only have agency paperwork but also all trafficking information.
As a result, they are better able to negotiate more quickly and provide a more satisfactory discrepancy resolution. “The overall strength of the various media clients represented by the rep firm is more valuable to the agency than the dollar amount of a given discrepancy.”
Vasari also addressed the broader benefits for working with rep firms. For example, larger clients can find it valuable to allow someone else “to worry about their DR and infomercial inventory so they can focus more on the general market or other avenues of revenue.”
And as noted earlier, local markets can tap into national dollars by participating in a consolidated media buy. In addition, he suggests: “You can utilize your rep as you would an employee without the headache of managing or monitoring the day-to-day.”
Another area Vasari discussed was the role that rep firms can play in meeting a station’s requirements for credit-worthiness. These companies maintain data on the DR segment of the market. This data can complement the station’s experience and credit information available from BCCA’s database of credit reports on more than 40,000 national, regional and local advertisers.
Vasari’s recommendations appear as part of a series of articles addressing credit and collections management in the current issue of MFM’s The Financial Manager magazine.
The March-April edition also provides a preview of the full track of credit and collections topics that will be discussed at Media Finance Focus 2014, the 54th annual MFM-BCCA conference. The conference is being held in Miami May 19-21 and will feature keynote remarks by Borrell Associates’ Gordon Borrell; Carl Salas, VP-senior credit officer with the Telecommunications/Media Group at Moody’s Investors Service, among others, and presentations from more than 175 industry experts.
The current edition of The Financial Manager and more information about Media Finance Focus 2014 may be found on MFM’s website.
I hope you’ll explore both the magazine and the agenda for this year’s conference. These educational programs are examples of how we fulfill our mission to be the premiere resource for financial professionals for media industry education, networking, and information sharing throughout the U.S. and Canada.
Whether you’re looking for insights on optimizing traditional revenue sources like DRTV and infomercials or by expanding your digital ad sales operation, our goal is to provide the tools and tips that can help you to achieve your objectives.
For this reason, I hope you’ll join us by sharing your thoughts on this topic and, as always, by letting us know the issues that you would like us to address. You can add a comment here, post to our discussion forum on LinkedIn, or by sending an email to me at the address below.
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.