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Why CFOs in the broadcasting industry need to build a new model of performance management for a multi platform, digital world.
The TV industry is increasing in complexity and the competitive landscape is 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.
This PoV sets out how broadcasters’ finance functions need to create a new model of performance management and what it will need to capture in order to fully reflect the fast changing reality of operating as a broadcaster in a multiplatform, digital ecosystem. The foremost requirement is to build a model that defines a new approach to P&L, moving away from traditional models and focusing on the profitability of specific TV products. This will allow CFOs to evolve and assume a key role in the core editorial planning and execution process. While rethinking the P&L dashboard, CFOs should reshape their skills and organizations to build strong capabilities to understand and create innovative KPIs that can explain the dynamics underlying the full exploitation and ROI maximization of each of the broadcaster’s commercial and industrial assets and resources.
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Broadcasters’ business models have been hit by significant changes in the industry landscape and the wider economy. Recovery from the financial crisis has been only partial. Advertising revenues are under continuous pressure and a fragmenting industry landscape is creating additional pressures, raising questions about future values.
The new digital consumer is driving considerable change in the market. As they shift how, where and when they consume content they are opening doors to digitally native players with the cash and expertise to make significant in-roads to broadcasters’ markets. These new entrants are shifting the terms of the traditional debate between pay and free TV models and are instead developing new, more complex approaches that exploit the possibilities of an online and on-demand environment.
In the face of these challenges, remaining competitive, profitable and attractive to investors requires broadcasters to not only define a new business strategy and value proposition to consumers, but also develop an effective operating model grounded in an understanding of the value creation processes and built on insightful performance management.
The traditional emphasis on driving the highest audience across channels has led to performance measures that are no longer suitable for a world in which individual items of content are now the focus. The lack of a common definition of what constitutes a product has led to various roles along the value chain being measured against different criteria.
The inability to manage the detailed performance of any specific item of content may lead broadcasters to cut costs in such a way that cutting investment generally in content production and rights acquisition leads to a decline in quality output and a further contraction of audience and revenues.
Performance management therefore needs to achieve three main aims:
Building a brand new performance management framework, will let CFOs achieve three key success factors. CFOs should:
April 17, 2012