The complexity of the TV industry is increasing and the competitive landscape changing rapidly. Models for traditional performance management in broadcasting are no longer suitable to fight the ongoing erosion of margins in an evolving multiplatform world. While businesses are shaping new strategies and customer value propositions to stay relevant, remain competitive, profitable and attractive to investors, CFOs are being asked to identify the new value levers. Their role has never been more challenging.

1. Pixels,
performance
and profits
Why CFOs in the broadcasting
industry need to build a new model
of performance management for a
multi-platform, digital world

2. Table of Contents
Executive Summary 3
The Broadcasting industry context: after 4
the crisis, a new crisis
Broadcasting moving forward: what is 7
changing and putting the future at risk?
The CFO role in Broadcasting 10
transformation: the hill climb to High
Performance
Rethinking the Broadcasting Performance 15
Management framework
Conclusion 26
2

3. Executive Summary
The complexity of the TV development of portfolio and
industry is increasing and profitability analysis over
the competitive landscape all the meaningful business
changing rapidly. Models dimensions, enabling CFOs to
for traditional performance evolve and assume a key role
management in broadcasting in the core Editorial Planning
are no longer suitable to and Execution process. While
fight the ongoing erosion rethinking the P&L dashboard,
of margins in an evolving CFOs should reshape their
multiplatform world. While skills and organizations
businesses are shaping new in order to build strong
strategies and customer value capabilities to understand
propositions to stay relevant, and create innovative
remain competitive, profitable KPIs that can explain the
and attractive to investors, dynamics underlying the
CFOs are being asked to full exploitation and ROI
identify the new value levers. enhancement of every single
Their role has never been one of the broadcaster’s
more challenging. commercial and industrial
assets and resources.
CFOs seeking to act as
business partners in The first step of the journey
transformation will have is to set up a brand new
to quickly understand performance management
and overcome the limits framework. This needs to
of traditional models and address all the complexities of
rethink their performance the broadcasting value chain
management capabilities. through three separate but
First of all they will have integrated models, and deliver
to start from scratch to the high visibility required to
define a new approach to drive effective business and
P&L, building a Profitability editorial decisions.
Model around the TV Product.
The centrality of product
should be the basis for the
3

4. The Broadcasting industry
context: after the crisis, a
new crisis
Partial recovery–but worse to The recovery of the • Analyzing 2007-2011 advertising
spend (see figure 2) shows the
come? Broadcasting industry
recovery to be cyclical rather
Broadcasters have not fully recovered from the 2008-2009 crisis than structural, ie the bounce in
from the impact of the financial crisis was only partial owing to advertising after the recession (TV
and ensuing recession. As shown investors’ growing concern Advertising increased 18 percent from
in figure 1 below, broadcasters’ 2009 to 2011), and the increase of
about future growth TV advertising share relative to other
enterprise values remain below their
2007 levels. The reason? Investors The January 2011 edition of the media like print (TV share on total
continue to have doubts about the Broadcasting industry Shareholder spending increased 2 percent from
sustainability of broadcast business Value Analysis, uses trends in 2009 to 2011).
models in the light of a volatile enterprise value (the sum of current
• The data suggests a progressive
and fast-changing market. While and future value) to investigate the
loss of confidence by analysts and
advertising revenues have recovered, factors underlying investors’ trust in
investors in the sustainability of
the projection of broadcasters’ future the broadcasting industry. It reveals
current broadcasting business models.
value is significantly lower today that some key issues:
This is further demonstrated by the
it was in 2007. The macroeconomic
• The broadcasting industry has current vs future value analysis (see
climate is set to deteriorate. If, as
experienced a strong but only partial figure 1): the bounce in the sector’s
many including the IMF predict, the
recovery. In fact at the beginning enterprise value in 2010 was entirely
global economy contracts in the next
of 2011, enterprise value was still due to the recovery in the value of
12 months, spending on advertising
around 15 percent below 2007 pre- current operations, while future value,
will be hit.
recession levels (see figure 1). measuring expectations of growth,
was at the beginning of 2011 down
by 44 percent compared to 2007.
Figure 1: Enterprise Value: FY 2007-2010
2007
$226bn
$140 $86
2008
$143bn
$131 $12
2009
$180bn
$117 $63
2010
$189bn
$141 $48
Current value Future value
Notes:
1. Enterprise value = Sum of Market Capitalization and Net Debt (Total debt less total cash)
2. Current value = Sum of Present value of current operations a based on NOPAT divided by the WACC, NOPAT taken from latest period
3. Future value = Sum of Enterprise value less current value. Sky Italia is a private company and hence not included in
Source: S&P Accenture analysis
4

5. Stepping into a new The macroeconomic forecast provided
by the World Economic Outlook (see
macroeconomic downturn:
figure 3) indicates that mature and
incomes from traditional TV advanced economies are expected
advertising are under to experience low rates of growth
attack, again. or recession, and this slowdown will
likely result in a collapse of spending
on advertising.
Figure 2: Net global advertising spend: FY 2007-2011
2007
258.8 153.1 (37%)
2008
255.5 155.1 (38%)
2009
222.0 143.3 (39%)
2010
231.1 159.5 (41%)
2011
242.6 169.1 (41%)
Rest of Media TV (value and %)
Source: 2011 Advertising forecast by MagnaGlobal
Figure 3: Global GDP growth (percent; quarter over quarter, annualized)
Emerging and 12
developing economies 10
8
World
6
4
2
0
-2
-4
-6
Advanced economies
-8
-10
2007 08 09 10 11 12 13
Source: IMF staff estimates (World Economic Outlook - update released in January, 2012)
5

6. Figure 4: Average video consumption in EU (minutes per viewer per day)
275 265 266
258
33 31 236 ~237 20
35 ~219 ~217
~211 ~206 24
+12 +23 +17 +6 +9
211 223 219 242 217 234 206 212 237 246
2005 2010 2005 2010 2005 2010 2005 2010 2005 2010
Germany UK Spain France Italy
2010 Online video 2010 linear TV 2005 linear TV
2005 Online video data estimated to be marginal so not included into figure
Source: Accenture analysis of e-Media Institute data, 2011
6

7. Broadcasting moving forward:
what is changing and putting
the future at risk?
Industry in transition: new 1. TV business’s economies of scale 2. Advertising budgets are moving
competitors, new consumers continue to come under attack online
More people are spending more Volume data from the e-Media No longer a distant threat, in some
time watching more video content. Institute highlights how video markets advertising budgets are now
However, encouraging as this consumption in the EU, in minutes larger for online than for traditional
might sound, a detailed review viewed daily per capita, is increasing media. In the UK for example, internet
of how consumers are watching on average by more than 19 percent advertising in 2011 exceeded all
reveals considerable fragmentation (see figure 4). other categories including linear TV
of habits across a wide variety of and print (see figure 6). Advertisers
Increasing audience fragmentation are also looking for greater insight
platforms. That fragmentation makes is progressively compromising
it increasingly hard for traditional about the returns on their spend, and
the ability of TV businesses to more targeted messages for specific
linear TV broadcasters to achieve the generate economies of scale and
economies of scale demanded by their audiences, further undermining
remain relevant. Despite increasing traditional broadcast mass
traditional business models. consumption of linear TV, the ratio market models.
The difficult macroeconomic context between TV advertising spending
is increasing pressure on traditional and GDP is falling in all advanced
broadcasting business models. economies (see figure 5). Growth is
not expected to recover to
There are two main reasons behind historical levels.
the perceived loss of growth potential
and value creation:
Figure 5: Traditional TV advertising spend as a percentage of GDP
1.40%
1.30%
1.20%
1.10%
1.00%
0.90%
0.80%
0.70%
0.60%
0.50%
0.40%
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010e 2012e 2014e
France Germany Italy Spain UK US
Source: Global Markets Research-European TV Sector, September 2010, Deutsche Bank AG/London
7

8. Figure 6: Spending on advertising in UK (Jan-Jun’08 vs Jan-Jun’11; £ bln)
1st Half 2008
Internet 1,67 Internet 2,23
Television 1,95 Television 2,15
Press 3,04 Press 2,07
Direct mail 1,00 Direct mail 0,83
Other 1,27 Other 0,99
Source: Internet Advertising Bureau H1-2011 Online Adspend Study
Users are driving the change: entrants are shifting the terms of the broadcasters to not only define a new
traditional debate between pay and free business strategy and value proposition
the new digital consumer
TV models and are instead developing to consumers, but also develop an
Changing consumer habits are new, more complex approaches that effective operating model grounded in
responsible for driving major shifts in exploit the possibilities of an online and an understanding of the value creation
the market. The new digital consumer on demand environment. And they are processes and built on insightful
is looking for personalized, on-demand enjoying considerable success. Netflix, performance management.
and interactive content. As they shift for example generated an increase in
total shareholder returns of 240 percent Accordingly, in this paper Accenture
how, where and when they consume
in the year to January 2011 (see figure 7). investigates how broadcasters should
content they are opening doors to
look to evolve their performance
digitally native players with the cash and
In the face of these challenges, management in the face of an
experience to make significant in-roads
remaining competitive, profitable increasingly complex and challenging
to broadcasters’ markets. These new
and attractive to investors requires business scenario.
Figure 7: Total return to shareholders (6/2008-1/2011)
6.0 Netflix, 5.92
5.0
4.0
TRS Monthly Values
CBS, 3.61
Sun TV, 3.07
3.0 ITV, 2.83
TWC, 2.75
RTL, 2.71
Antena 3, 2.22
DirecTV, 1.93
2.0 TIF1, 1.84
Dish TV, 1.80
BSkyB, 1.62
Comcast, 1.61
Televisa, 1.49
1.0 Nippon, 1.45
Mediaset, 1.41
Canal Plus, 1.33
Tokyo Br, 0.91
0.0
Jan ‘0 9
Mar ‘0 9
Apr ‘0 9
May ‘0 9
Jun ‘0 9
Aug ‘0 9
Sep ‘0 9
Oct ‘0 9
Nov ‘0 9
Dec ‘0 9
Jan ‘1 0
Apr ‘1 0
May ‘1 0
Jun ‘1 0
Aug ‘1 0
Sep ‘1 0
Oct ‘1 0
Nov ‘1 0
Dec ‘1 0
Jan ‘1 1
Jul ‘09
Jul ‘10
Feb ‘09
Feb ‘10
Mar ‘10
Pay TV Segment
Free-to-Air Segment
Source: S&P, Accenture analysis
8

9. The role of OTT-TV in
broadcasting transformation
According to the Accenture The availability of OTT-TV traditional TV through the
Video-over-Internet platforms is lowering the adoption of successful
Consumer Survey 2012, barriers to entry in the multiplatform strategies.
overall time spent on video is broadcasting market and, Interactivity and ease of
progressively spreading across fueled by the worldwide communication - through
internet connected devices: expected increase of internet for example social media
92 percent of consumers connected devices (see figure platforms - can drive word-
of all ages and across all 8), is making the audiovisual of-mouth recommendations
geographies around the world market extremely attractive that can foster the popularity
now watch video over for new players like content of broadcasters’ linear TV
the internet. producers, cloud based and content as never before.
streaming video providers,
One of the most relevant Achieving this transformation
telcos, content producers
enabling technologies requires a deep review of the
and device manufacturers, all
fostering this trend is the performance model (in terms
challenging to increase their
spread of Over-The-Top TV of its dimensions, KPI, logical
share of revenues along the
services, providing a number cost allocation) in order to be
value chain.
of additional attractive able to monitor performance
features such as catch-up TV However, despite the scale of generated by new strategies
and video on demand. this threat, it also represents and business models.
a major opportunity for
Figure 8: Evolution of connectable devices installed bases in the world (2011 - 2015) - Mln Units
2011
2012 Smartphones
PC
2013 Home Console
Digital STB
DVR
2014
TV set
Media tablets
2015
0 1000 2000 3000 4000 5000
Source: Digital Home Market Database, IDATE, Sept 2011
9

10. The CFO role in Broadcasting
transformation: the hill climb
to High Performance
CFOs will play a key role in A quick look at the past: in line with, revenue trends (ie a top-
transforming broadcasters’ strategies down approach).
supporting audience
and value propositions. They will be
in charge of supporting and driving maximization Traditional Performance
the business to develop a detailed In the past, the broadcasting Management facing the
understanding of new value creation
dynamics. The main challenge they
industry’s sustained revenues and Margin collapse: the risk of a
strong profitability arose from high Catch-22
are expected to face is to strengthen barriers to entry and the absence
their performance management of open content delivery platforms. The outlook today is very different. In
capabilities, focusing on the relevant Enhancing audience and market share the context of falling revenues and
success factors, value levers and was the most important performance high operating costs, broadcasters are
strategic assets in both current and driver. Performance management looking to prevent margin erosion.
future broadcasting environments. was consistent with this goal, Performance management should
As the industry becomes more and accordingly focused on broad therefore be enabling business
complex, so, too, do the parameters measurement of the broadcaster’s decisions to enhance profitability.
of performance management. Put performance, such as market share, However, the persistence of
simply, the traditional models of the brand awareness and audience. traditional approaches means many
past founded in the relative simplicity broadcasters lack the capabilities
At the same time the limited they need to do that. There are three
of the mass audience are no longer pressure on margins led to relatively
able to support effective performance main areas in which the nature of
unsophisticated operational and performance management needs
management in the emerging and capital expenditure control, with
increasingly complex multiplatform to change:
budgets predominantly driven by, and
world (see figure 9).
Figure 9: Broadcasting imperatives and performance management focus
Industry
Achieve High
context
Performance in
complexity
a multi-platform
High environment
Prevent the
margin
erosion
Medium
Maximise
audience
Low and market share
Past Present Future t
Performance • Audience • P&L by nature • Products performance
management • Market share • Dynamics of the main • Multiplatform strategy
• Brand awareness business effectiveness
focus
• Content costs • Efficiency/ROI of assets
10

11. Figure 10: The Broadcasting Value Chain
Main Actors • Authors • Rights managers • Channel managers • Technology officers • Commercial Directors
Involved • Executive Producers • Content Managers • Emission responsibles • Network operators • Area Managers
• Content Buyers • ..... • Quality controllers • IT responsibles • Dealers/Agents
• ..... • ..... • ..... • .....
Production & Library Packaging
Acquisition & Setup Delivery Sales
Management
Staff & Support Processes
• Self produced, acquired or commissioned program • Channel/Schedule • TIme Slot (e.g. prime
Product time, day time....)
• TV genre (e.g. drama, news, sport, documentaries,..) • Service (linear vs not linear)
• ..... • ..... • Subscription
• .....
1. Traditional performance The lack of a common product cost/revenue line item in the P&L)
management does not breakdown definition has arisen from the for controlling profitability. This
profitability using a commonly different objectives of departments clearly prevents a detailed analysis of
understood product dimension involved in the value chain. For profitability by product.
example, channels and editorial
Broadcasters are not culturally teams are normally measured 2. Economies of scale mask the
familiar with a product profitability against a program’s audience (not need for attention to content’s
approach, and organizations lack necessarily a measure of revenues), and assets’ ROI
a common understanding of the while production teams are typically
meaning of TV product. A typical measured against cost of production Traditional broadcast business models
broadcaster’s value chain (see figure per unit and advertising departments dictate that larger audiences led
10) will variously define product as on overall revenue streams. to greater revenues that in turn
a program (self produced, acquired delivered higher profits. Naturally
or commissioned), a TV genre (eg This situation, (aside from resulting enough, focusing on the largest
drama, news, sport, documentaries), a in suboptimal decisions across each market share meant little attention
channel/schedule, service (linear and area), has led traditional performance was paid to the profitability of
not linear) or a time slot (eg prime- management to rely on mono- individual items of content. Today,
time, day-time…). dimensional models (typically the
11

12. with margins to protect, broadcasters industry, generating a further lack 1. Provide a clear and detailed view
are very limited in the levers they of coordination between scheduling, of product profitability. Broadcasters
can pull to influence the efficiency operational planning, procurement should adopt a portfolio approach to
of a specific production or an and content production processes. profitability. They will need to target
acquired right. This lack of focus in tactical and strategic business and
performance management is now 3. Models are predominantly editorial decisions at the level of
critical. And there are two main areas focused only on dimensions that single products and items of content.
that need to be addressed: are relevant for the traditional From a performance management
main business perspective, this means that
Rights procurement and broadcasters’ models and processes
management: the need to increase Most broadcasters have maintained will be required to fully explain the
ROI from acquired rights is frustrated unchanging business models (ie costs, revenues and investments
by the absence of strategic advertising-based linear TV or of each item in the portfolio of
planning models that are capable subscription-based pay TV) and with products/contents and clearly
of driving procurement activities linear TV as the only way to deliver highlight its ROI and contribution to
toward the need to compose content to their customers. overall profitability.
schedule effectiveness (ie coherence
between contract values and Performance management practices in 2. Support maximization of
expected revenues) and a forward- this context are now being challenged broadcasters’ assets and efficiency
looking approach (ie availability by a rapidly changing and increasingly of investments. Broadcasters will
of the appropriate content on the multiplatform broadcasting environment. be required to define targeted and
corresponding platforms). The absence of the performance appropriate cost enhancement
management capabilities needed programs, without compromising their
Rights management processes are ability to attract audience and remain
also likely to be poorly supported, to make detailed business decisions
about specific products may lead relevant in the market. In order to
particularly where performance effectively support this, performance
management is not structured to to a catch-22 whereby cutting
investment generally in content management will be required to be
monitor key metrics such as the more focused on the identification
correct exploitation of available production and rights acquisition
leads to a decline in quality output of all the areas of inefficiency that
rights, in terms of frequency and can be recovered, rather than on the
placement within the schedule, and and a further contraction of audience
and revenues. The lack of granular extent of each cost and investment
the appropriate sizing/turn-rate of the line item within the P&L.
rights inventory. analysis to support decision making
leads to traditional P&L approaches, The CFO’s role in the future should
Content production: where whereas the focus needs to be on the be to fully understand and monitor
broadcasters have adopted an performance of specific content. all the dynamics of the broadcaster’s
operating model with internal content operating leverage, spreading a new
production facilities, performance The future of Performance culture of resources optimization
management faces an additional issue. Management: supporting to all levels of the organization,
In these cases CFOs are now required the achievement of High encouraging the full exploitation of
assets and efficient capital allocation.
to address the endemic misalignment Performance Business in a
between production capacity needs multiplatform environment 3. Understand the future
and available internal capacity multiplatform broadcasting business.
caused by seasonal swings in Performance management is going to Performance management should
demand. This results in huge costs to have to do more than prevent margin provide an accurate and near-real
acquire additional external capacity erosion. It will also be required time control of the effectiveness of
in peaks during high season, and to support broadcasters to shape platforms used by broadcasters to
underutilization of in-house assets their business strategies and value deliver content (eg linear and non-
during the low. propositions to remain relevant and linear) and the revenue streams
help achieve high performance in the they generate.
The effects of this endemic future multiplatform environment.
inefficiency can also be made worse
by the limited diffusion of structured In Accenture’s view, performance
product lifecycle management models management needs to be shaped by
and processes within the broadcasting three main objectives:
12

13. The lack of a ROI focused
approach: the case of TV
Production
A deep dive into the TV procurement of external capacity the total cost of the content, with
Content Production highlights in high season and underutilization no rewards for the use of internal
in low season. Only advanced capacity. Both these conditions
just how hard the challenge
production planning capabilities often result in an uncontrolled
of Performance Management could help to demolish this belief acquisition of external services,
is to keep Broadcasters costs by the timely quantification of even in the presence of internal
under control potential savings achievable, for spare capacity.
example, through:
In order to support ROI, C. The appropriate level of
manage the costs of - The increase of production resources required for content
techniques’ flexibility (eg moving production is not easy to define,
production assets and
facilities addressing simultaneity as during budgeting processes all
improve the use of resources of production in peak periods) the characteristics of TV products
(eg studios, editing/cutting are not clearly identified. The
facilities, executive producers, - The identification of alternative exclusive attention of traditional
operational planning scenarios (eg
ENG/EFP crews, etc), performance management on
Made To Stock production the difference between actual
performance management of contents). and budgeted costs may result in
will be required to manage
B. Where there is not a strong planned needs that are structurally
several complexities (see higher than actual. In fact,
focus on costs, it is highly
figure 11): producers are required to budget
probable that the transfer price for
A. Broadcasters tend to view internal resources and assets will costs by project, consequently
the inefficiency arising from exceed the market price. On the during the budgeting phase they
seasonality of audiences as other hand, incentives to executive tend to overestimate costs in order
inevitable, and this results in producers are typically linked to to create unstated contingency.
Figure 11: Potential issues in production assets and resources exploitation
Capacity A
Cost(£)
B
Acquired Capacity
Capacity not required
in budgeting phase
Capacity required in
Internal budgeting phase but
available not used
Inefficiency
capacity C
Capacity used for TV
programs realization
t
13

14. 14

15. Rethinking the Broadcasting
Performance Management
framework
A performance management 1. A profitability model: to strategic assets used to conceive,
framework represents the conceptual explain the dynamics underlying the procure/produce and deliver content
design of controlling objectives, broadcaster’s profitability, showing over multiple channels and platforms.
dimensions of analysis, KPIs and the correlation between revenues and
management reporting that CFOs costs over an unambiguously defined TV The profitability model represents the
should adopt in order to provide product and other dimensions relevant link between the revenue streams,
the most effective representation to business and editorial decisions; the commercial assets model and the
of business performance and to industrial assets model, linking both
understand the key levers to 2. A revenue and commercial assets revenues and costs and pinpointing
generate value. model: enabling rapid and effective cost allocation rules that are able
control of each revenue stream’s to provide different sets of margin
In Accenture’s view, a single commercial margin and of the main indicators for the company P&L.
performance management model KPIs underlying sales and customer
cannot address all the complexities of management processes; The following sections explain how
the entire broadcasters’ value chain. in Accenture’s view broadcasters
Instead, Accenture believes three 3. An industrial assets model: a set of should address e the two most critical
specific models should co-exist within ad hoc models, each built to focus on areas: the profitability model and the
an integrated framework (see figure 12) the metrics measuring the efficiency industrial assets model.
and effectiveness of each of the
Broadcasting
Figure 12: the Broadcasting Performance Management Framework
value chain
Sales
2. Revenue streams and Revenue Marketing
“Commercial Assets’ recognition
cRM
1. Profitability model ...
model
Delivery Transmission
Start and
support Scheduling
Packaging processes Channel Channel Channel
and setup 1 2 3
3. “Industrial
Assets” model
Library Warehouse
management (library)
Production Rights
Production and
acquisition News Film
Sports Fiction
Entertainment
15

16. 1. The profitability model dimensions (eg channel, genre, time to different choices (eg channel,
slot). This in turn will allow CFOs to genre, time slot, pay TV bundles,
Business and editorial decisions in run product portfolio analysis that linear and non-linear services).
broadcasting traditionally follow a can drive decisions grounded in
budget driven approach. Estimated considerations of profitability and the The Profitability Model itself is
revenues/audience drive the top-down centrality of individual TV products not exhaustive of all the business
definition of the total target amount (see figure 14). dynamics, but receives inputs from
of costs and investments to be the Commercial Assets Model and the
allocated to the industrial dimensions With this approach the CFO will be Industrial Assets Model, respectively
(eg library, production facility). able to play a central role, providing focused on the effectiveness of
Subsequently, this target total the inputs required to perform commercial processes and levers to
amount of costs and investments is editorial planning and execution improve operational efficiency.
the main element driving editorial processes effectively.
Obtaining a reliable and significant
planning activities, with little visibility
The design of an effective profitability valorization of product portfolio
of the levers controlling underlying
model requires the unambiguous analysis and of the profitability model
performance (see figure 13).
definition of both the TV product management reporting views will
Traditional performance management and the set of additional controls require the definition of a detailed
models do not allow CFOs to drive this and entities that together provide an Allocation Model.
process, but typically only to coordinate integrated and consistent breakdown
top-down planning activities and build of overall performance. Definition of the Allocation Model:
company P&L budget as an output of shared and clear rules
This paper does not intend to provide
editorial decisions. The allocation model represents the
a unique understanding of TV
In order to support the editorial Product or define a representation set of rules that should be defined
planning process effectively, CFOs of profitability that applies to all to allocate revenues and operational
should define a profitability model broadcasters. In fact, even if in many and capital expenditures on the
build around TV Product profitability ways the program can be considered TV product and on other identified
and enabling performance analysis the true TV product, the business dimensions of analysis, enabling
over all the relevant business models of each broadcaster can lead control of profitability and ROI.
Figure 13: Traditional high-level process for editorial planning and execution
Strategic Planning
Audience/ Top-down costs Editorial Company P&L
Company P&L
Revenue and investments Execution monitoring and
planning planning planning budgeting
forecasting
The CFO role:
Process Owner Involved Not Involved
16

17. In Accenture’s view, CFOs that have understood and shared at all levels of
already adopted multi-dimensional the organization.
profitability models should now
consider a revision of allocation models • The costing model should rely on
according to the following guidelines: quantitative and measurable drivers,
thus allocation procedures should
• In order to provide a product as much as possible use timely
profitability KPI that clearly reflects information from corporate and
value levers under the control of operational systems (eg time-sheets,
content/channel managers, the resource scheduling systems, etc).
allocation of internal assets and
resources should rely on standard/ The representation on the next page
target unit transfer prices, rather outlines for illustrative purposes
than actual average unit costs. In the main elements of a Free to Air
fact, the allocation on the basis of broadcaster. (see Figure 15).
average unit costs could result in
overestimating or underestimating the
total cost of the product
• TV product cost evaluation is not
typically associated with a fixed bill
of materials but allocation rules,
unitary costs and business logic
should be based on assumptions.
In order to verify that everyone
involved takes decisions based on
the consideration of profitability, the
business logic should be defined, and
revised as needed, in order to be fully
Figure14: Innovative high-level process for editorial planning and execution
Strategic Planning
New New
Products/
Product Editorial Products company P&L
portfolio profitability Company P&L Execution
planning budgeting monitoring &
analysis budgeting forecasting
The CFO role:
Process Owner Involved Not Involved
17

18. Revenues and sales costs: the model Rights investments: while the cost of and delivery network
should rule the allocation of revenues rights are typically associated with a management processes.
and selling costs from commercial single item of content, investment in
dimensions (ie the bundle of advertising rights usually refers to the licensing A similar criteria to that defined for
windows) to the specific advertising of multiple runs of the same content editorial and production structures
windows that are placed in over specific platforms. The impact can be followed to allocate the costs
each program. on the P&L typically does not refer to of content playout activities and
the run’s actual utilization but rather technologies. That means using the
Costs of editorial and production to depreciation according to local and program’s duration, multiplied by the
structures: management reporting international accounting standards. standard/target hourly price of assets
views of the costs of editorial and Since performance and revenues are and resources required for playout.
production are typically structured generated by each run within the
by organizational department. That is The costs of network management
schedule, Accenture’s recommendation processes can be similarly allocated,
largely owing to the need to assign is to define a rule that can associate
organizational responsibilities for using the hourly standard/target price
every single run with a standard cost, of the bandwidth required for signal
budgets. Enabling a product-driven view weighted on the basis of the ability of
of profitability and ROI requires a new broadcasting (eg cost per Mbit/h).
the run to generate revenues through
approach. Costs should be allocated to advertising (ie the first run could Channel, content management and
each editorial and production structure represent 50 percent of the right’s staff costs: once product profitability
in line with the consumption of specific value, the second 20 percent, third 15 has been calculated using content-
assets and resources and these should percent and so on). Using this approach specific costs, it should then be possible
be priced at the standard hourly rate for to evaluate the cost of both used to calculate the total, high-level
each asset and resource. and unused runs, beyond providing a profitability of each channel and family
Allocating cost with a target/standard meaningful managerial representation of content by calculating the sum of all
hourly cost enables both the timely of the breakdown of a right’s entire potential channel/content management
allocation of costs for each item of profitability (ie its ROI), can also reveal costs (eg including salary of channel
content and the identification of the the cost of library underutilization. managers/content area managers).
costs of unallocated structures, due to the Technology costs: Technology costs General and administrative overheads
variance between quantities (eg difference and investments for a FTA TV business and staff costs are not meaningful for
between needs and availability) and price primarily covers playout (eg the the control of profitability for specific
(eg difference between the standard/ technology operating centers’ schedule channels or content. They should only
target and average actual price of each assembly and quality control activities) be taken into account when monitoring
asset and resource). the broadcaster’s entire P&L.
Figure 15: Example of Allocation model for Free-to-air business
Commercial Advertising Detailed profitability Broadcasters profitability
P&L offering window Program Time Slot Channel Genre Broadcaster
Revenue
Commercial Adv. Window Program
offering 1st 1st margin Commercial
Selling costs margin margin
Program direct
costs Program Time slot Channel Genre Bradcaster
costs margin margin margin margin
Editorial and Utlilization x STD cost
production
costs
Weighted single Run STD cost
Rights
Utlilization x STD cost
Technology
Costs
Channel Driver based allocation
management costs
Driver based allocation
Content area
management costs
Staff costs
Legend Direct Attribution Cost Allocation
18

19. 19

20. 2. Industrial Assets Model exploitation of all the industrial Structural quantity variances: the
assets, from editorial factors to cost of under/overcapacity that can
The design of high-level management delivery networks. be identified during the planning
reporting views and allocation phase, defined as the difference
models enables deeper control of To achieve this second main objective between the cost of total available
the broadcaster’s performance and Accenture recommends defining capacity (eg hours/days of production
better support for high performance a set of specific performance facilities, available bandwidth, library
business and editorial decisions. But management models. Each of them rights runs available) and the cost
it only partially addresses the need to should be tailored to the quantitative of saturation expected according to
maximize the overall profitability and economic dynamics underlying budget capacity needs (eg production
and ROI. operational and capital expenditure planning, schedule planning,).
on each asset, thereby overcoming
In fact, as shown in figure 16, the the traditional attitude to controlling Operational quantity variance: the
Profitability Model is focused on the internal processes according to cost of under/overcapacity that can
“portfolio analysis view” of industrial organizational responsibilities. be monitored within content and
assets costs and investments, ie the services production processes, defined
representation of the contribution of CFOs should focus on understanding as the difference between the cost
each asset and resource to TV product the cost of under/over-utilization of of saturation expected according to
performance, obtained through PxQ- each asset and resource, that cannot budgeted capacity needs and the cost
based allocation models. be effectively and fully explained of actual utilization of internal assets
simply through traditional price/ and resources.
Beyond supporting the definition quantity variance analysis models. In
of the appropriate products mix, Accenture’s view, the breakdown of Price variance: defined as the total
broadcast performance management the budget vs actual variance of PxQ cost of the difference between budget
will be required to achieve another values should therefore be analyzed unit costs and actual unit costs of
main objective: supporting efficient across the following dimensions (see internal assets and resources.
capital allocation and the full figure 17):
Figure 16: Industrial assets model framework
Profitability model
Editorial Factors
Product 1
Artists
Product 2
Production plants Allocation
model
Product 3
Rights management
....
Delivery network and
technologies
Price variance “Structural” quantity
Under/over utilization variance
(efficiency/inefficiency)
Quantity variance “Operational” quantity
variance
20

21. Each one of these metrics could serve • Set the operational quantity economic/operational measures but
as objectives for those involved in the variance, together with process with respect to potential impacts on
supply chain and their ability to drive productivity, as a target for executive finance and capital demands.
performance, since they should allow producers and channel/service
CFOs to: managers (ie those responsible for Accordingly, each industrial asset
product realization), in order to drive control model will have to provide
• Correctly identify, through the appropriate use of both internal and an integrated view of investment,
structural quantity variance, the cost external assets and resources. cash payouts and profitability for
of under/overutilization that should each economic dimension. These
be used to set targets for C-suite • Identify in the price variance the will have to be integrated by their
and Content Area Heads’ that will most effective target for rights consumption of working capital and
drive strategic planning towards managers, heads of production cash requirements.
enhancing the use of internal assets facilities and CTOs (ie those
and resources and reducing the need responsible for each industrial asset),
for external capacity. in order to drive asset management
towards process excellence regardless
• Avoid distortions and inefficiencies of the level of utilization (ie
(eg lower productivity, higher fulfillment of capacity needs at the
quantities of resources charged to lowest price).
contents/products) that, in the case of
internal overcapacity, could be caused The increasing difficulty of accessing
by setting the overall saturation finance and the relative increase
as the same unique target for all in the cost of capital means it is
those involved in content/services important to evaluate performance of
realization. industrial assets not only in terms of
Figure 17: Price/Quantity variance
Budget Actual
Price
variance
“Structural” “Structural”
quantity quantity
variance variance
“Operational”
quantity
variance
Asset budget Cost of Cost of Asset actual
cost capacity utilization cost
needs
(I.E cost
allocated on
contents/
products)
21

22. In addition to this common objective, Rights management model
the performance management models
of other industrial assets consist of: A rights management model should
be setup to control procurement,
Editorial and artists costs model library management and exploitation
activities for movies, series,
The objective of the editorial and documentaries and other content
artists model is to monitor editorial licensed from third parties. The
departments’ costs and investments model should be focused on both
(eg content area managers, executive library right-sizing/working capital
producers, etc), with particular focus and metrics explaining the proper
on the definition and implementation utilization within the schedule (eg
of contractual agreements and full ROI, procurement prices aligned with
exploitation of both internal and industry benchmarks, etc)
external artists and professionals within
the content production processes. Delivery network and technologies
model
Production studios model
The objective of the delivery network
The main objective of the production and technologies model is to control
facilities model is to monitor the the costs, investments and level of
costs and investment associated with utilization of all technical facilities,
both internal and external production assets and resources involved in the
assets (eg stages, studios, cutting/ processes required to deliver content
editing facilities, etc) and resources to the final consumer (eg. schedule
(eg directors, ENG/EFP crews, grips, assembly, payout quality control, live
etc) and explain the dynamics connections, delivery network and
underlying under/over-utilization. technical infrastructures management).
22

23. Assets and resources efficiency:
performance management key
questions
Editorial department and • Is the purchasing of external Delivery network and
artists model services and capacity consistent technologies model
with the level of productivity of
• Are the values of contractual internal resources and assets and • What’s the utilization level
agreements with artists aligned with target prices? and the eventual spare capacity
consistent with the performance cost of the contents delivery
requirements planned for self- • What’s the ratio between the infrastructure?
produced contents? average purchasing price of
external capacity and the average • Is the balance between the cost
• What’s the level of effective hourly cost of the internal assets of technologies and the workload
usage of the artistic resources? and resources? capacity involved in assembling,
releasing, quality control,
• What’s the relationship between • What is the ROI of investments warehouse management and
unit cost and total average in the production process in terms broadcasting processes coherent
cost of the available/delivered of increased efficiency? with the available technology
performance of artistic resources? equipment?
Rights management model
• Are the artistic resources
• Is the return on investments,
efficiently employed within the • Is the purchasing price of each in terms of efficiency of the
schedule (eg single performance right consistent with industry technologic processes, of the
cost vs standard cost of a certain benchmarks for the corresponding infrastructure evolution in line
channel/time slot)? content rating? with expectations?
Production studios model • Is the rights library, and the • Is the effort required for delivery
corresponding impacts on the consistent with to economic/
• What’s the average hourly cost working capital, correctly sized? strategic relevance of the contents?
of self-produced content?
• What’s the cost of library • What’s the ROI of innovation/
• Is the available internal capacity underutilization, in terms both automation initiatives in terms of
correctly sized in comparison to of unused runs at the end of the
process efficiency?
demand for self-produced content licensed period and the difference
(eg HC/workload analysis of between actual utilization
production personnel, etc)? (ie estimated on the basis of
managerial criteria) and income
• Does the operational planning of
statement depreciation?
the production correctly address
the demand seasonal periodicity? • Are the rights correctly used
within the schedule, in terms of
• Is the actual level of utilization
runs by channel/time slot?
of internal capacity in line with
forecasted needs? • Is the expected ROI of the
rights coherent with the effective
profitability and the ability to
attract audience/contacts?
23

24. 24

25. 25

26. Conclusion
In light of the emerging business context
outlined in the first chapters of this paper, CFOs
are now being asked to support and drive the
ongoing transformation of business strategy and
value proposition to consumers, by deploying
a deep and accurate understanding of the new
dynamics of value creation. Unfortunately,
the limited complexity, sustained growth and
strong profitability that were hallmarks of
the broadcasting industry in the past, did not
drive the need for sophisticated performance
management models. Their limitations are now
being exposed.
So, how should CFOs reshape their performance
management capabilities in order to enable
the evolution of their role within the ongoing
broadcasting industry transformation?
26

27. Accenture’s view is and depth of control, but broadcast value chain can use
will be able to enhance their to manage their performance
that CFOs should
role, making consideration of and set individually
build a brand profitability a core element appropriate targets, each one
new performance of editorial planning and aligned to overall company
management execution process. objectives. This model should
provide clear definitions
framework, enabling 2. Reveal all the levers
and parameters that can
the achievement of underlying the efficiency and
be fully understood and
ROI of assets and resources
three key success shared at all levels of the
At the same time as organization in order to drive
factors.
delivering an accurate adoption and engagement.
1. Develop and leverage on understanding of It should provide target-
product portfolio analysis broadcasters’ profitability, oriented KPIs and be based on
to effectively drive editorial CFOs will also have to focus quantitative and measurable
decisions on improving their ability to drivers within allocation
identify all the opportunities rules, enabling all relevant
The absence of detailed
to enhance the efficiency personnel to achieve a clear
visibility of profitability
and ROI of internal assets and distinct understanding
dynamics is no longer
and resources. CFOs will of their contribution to both
acceptable. Sub-optimal
therefore be required to build revenues, the full cost of the
understanding of these
a set of controlling models, product and the effectiveness
dynamics can result in poor
each one focused on the of asset procurement and
and costly decisions about
business dimensions and KPIs management processes.
content and rights cost-
measuring the cost of under/
cutting, further eroding
over-utilization of every
already pressured margins. In
specific asset and revealing
order to prevent this catch-
the underlying dynamics that
22, CFOs should now:
drive its performance.
- unambiguously define
3. Foster the establishment of
the meaning of TV product
a new organizational mindset
according to their business
with reliable, fully understood
model and peculiarities of
and widely adopted models
their market context.
Establishing a new mindset
- build a profitability model
for all those involved in
around this TV product and
making profitability oriented
all the meaningful business
decisions will require CFOs
dimensions, enabling the
to design from scratch
development of detailed
new models that actors
product portfolio analysis.
responsible for the broad
By doing so, CFOs will not range of products and
only increase the accuracy processes involved in the
27

28. About Accenture About Accenture Media & Authors:
Accenture is a global management Entertainment Industry Group Francesco Venturini
consulting, technology services and Accenture’s Media & Entertainment Global Broadcast Lead
outsourcing company, with more than industry practice works with the world’s francesco.venturini@accenture.com
246,000 people serving clients in largest and most innovative media
more than 120 countries. Combining content enterprises in an increasingly Francesco Venturini is the global
unparalleled experience, comprehensive complex digital environment. broadcast lead within the Media and
capabilities across all industries and Entertainment (M&E) business practice
We help clients in one of the world’s
business functions, and extensive research of Accenture’s Communications, Media &
most dynamic industries find new
on the world’s most successful companies, Technology (CMT) industry group.
ways to engage the digital consumer,
Accenture collaborates with clients to A broadcasting trendsetter with more
seamlessly distribute digital assets via
help them become high-performance than 15 years industry experience,
a multi-platform digital supply chain,
businesses and governments. The company Francesco is known for shaping
optimize global operations and generate
generated net revenues of US$25.5 billion transformational strategies enabling
new revenues. Our deep industry
for the fiscal year ended Aug. 31, 2011. Its major broadcasters to compete more
knowledge, dedicated innovation
home page is www.accenture.com. effectively in the fast changing landscape
centers and Global Delivery Network
enable us to invest in forward-looking in the multiplatform digital era. From
assets, solutions and services that help content creation to distribution, he helps
our clients drive profitable growth and clients develop strategies for digitally
deliver high performance. convergent products and services. A
Communications, Media & Technology
industry stalwart with strong financial
acumen, he has been instrumental in
shaping cutting-edge financial deals
within the media industry.
Significant contributions from:
Matteo Pagliardi
matteo.pagliardi@accenture.com
Andrea Cimini
andrea.cimini@accenture.com
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