Introduction to the Second Edition

Although it may sound like hyperbole, the world of broadcast and cable finance has changed dramatically since BCFM Press published the first edition of this book in 1994. Then the Internet was a curiosity, and very few people had email—if they did, it was via a slow dial-up connection (2400 baud was considered fast!). Fax machines were considered cutting-edge technology; cell phones were very expensive, and their weight was measured in pounds, not ounces. A cable system with 100 analog channels was state of the art. Radio, TV, and cable ownership was disbursed among many, many smaller companies. Satellite television was just being launched, as were digital cable tiers. There was no such thing as high-definition broadcast television in the United States; nor was there satellite radio, HD radio, or podcasts. And, on the financial side, scandals such as those at Enron, WorldCom, and others, and the subsequent laws intended to restore investor confidence—primarily the Sarbanes-Oxley Act of 2002—had not been contemplated.

The original book was also noticeably short of cable content because the majority of the contributors came from the broadcasting side of the media business. What cable issues it did address focused primarily on cable programming (applicable to channels such as ESPN or CNN), and overlooked the unique financial considerations of cable operating companies—the companies that provide the packages of programming (and now data and telephony services) to consumers.

Despite these shortcomings, the Broadcast Cable Financial Management Association (BCFM) continues to get requests for the original book because there is no other source that explains the basics of broadcast and cable financial management for both the industries’ nonfinancial managers and to financial personnel new to the industries. Despite its obviously dated contents, the original is required reading in several broadcast companies (followed, of course by, “Here’s what’s changed since that book was written …”). It has been used as a secondary college text as recently as 2004.

Working with Focal Press has allowed BCFM to produce a second edition that is a significant upgrade from its predecessor. Not only does this edition include information that is more complete and more current, with Focal’s help, we have improved both the editing and the graphics. In addition, we have added an index and a glossary—very valuable additions because language in the media industry is riddled with acronyms, jargon, and familiar words that have unique meanings when used in the context of media and/or media finance.

This edition is organized in two parts. Part I covers the fundamentals: an introduction to the industry; the role of the financial manager; an overview of financial statements; key sources of revenue, followed by important information about industry expenses; an overview of the financial systems used in broadcasting and cable (including several that are unique to the industry or industries); a discussion of capital assets; a look at key performance metrics for the industries; and an overview of the extremely important issue of cash flow. Part II gives an overview of specialized areas that are nevertheless important to nonfinancial managers and those interested in understanding the electronic media business. These include Sarbanes-Oxley and internal controls; planning and budgeting; administration of credit and collection—an interesting topic because the industry sells a perishable product (advertising time and/or media transmissions to consumers), and generally tries to collect for that product after it has been consumed; trade and barter transactions; music license and syndication fees; taxation; and the financial and accounting considerations when media ownership changes hands.

The rewrite of this book is one of the tangible results of the work done by the BCFM Strategic Planning Committee to position the Association to meet members’ needs both now and in the future. A not-for-profit educational association, BCFM’s mission is:

To be the premier source of education, networking, information, and signature products to meet the diverse needs of financial and business professionals in the broadcast, cable, and electronic media industries.

This book would not be possible without the leadership of the project’s Co-chairs—Leslie Hartmann and Timothy Pecaro. As 2006 BCFM Chair, Leslie Hartmann had the vision and the drive to make this rewrite a priority, and she committed to heading up the project when her Board term ended. Working with Timothy Pecaro, she developed the outline for the new book, drafted volunteers to write each chapter, and reviewed each submission to ensure that it covered the subject thoroughly and at a level easily understood by our target audience: nonfinancial media professionals; financial professionals new to electronic media; and academics—both professors and students concentrating in media management.

The volunteers who contributed their time and knowledge to this volume are all experts in their field. They are among the most senior financial persons in broadcasting and cable. This book simply would not have been possible without their contributions.

We were also fortunate to have Walter McDowell, Ph.D., and Alan Batten as our editors. They are experienced writers and editors, and, most importantly, they understand the business of electronic media. Before entering academia, Professor McDowell spent more than two decades in commercial television, including station management positions in promotion, programming, and creative services. After earning his doctorate in Mass Communications from the University of Florida, and teaching for several years at Southern Illinois University, he joined the faculty of the School of Communication at the University of Miami in 2001. In addition to teaching various media management courses, Professor McDowell has published media branding studies in several academic publications, including the Journal of Media Economics, and the International Journal on Media Management. A nationally known consultant, he has also coauthored two books published by the National Association of Broadcasters (NAB) and Focal Press: Branding TV: Principles and Practices (with Alan Batten) and Troubleshooting Audience Research.

Alan Batten graduated from the University of Maryland (College Park) and undertook postgraduate work at Boston University’s College of Communications. He has been active in the broadcast industry since 1971, when he had the opportunity to lead the marketing efforts of several stations affiliated with NBC, ABC, CBS, FOX, and PBS. Along the way, he served as President of the Broadcast Promotion and Marketing Executives (now known as PROMAX). Batten has received countless industry awards and has presented numerous international lectures on various aspects of broadcast marketing. In 1991, he founded ABCommunications to provide consulting services for marketing challenges. ABCommunications counts as clients such industry giants as Sinclair Broadcast Group, Universal Pictures, The United States Postal Service, and Raycom Sports.

Finally, we owe a debt of gratitude to those who went before us. Without the first edition of this book, there simply would be no second edition. Although there have been significant changes in the world of broadcast and cable finance, other areas—such as financial statements, trade and barter, and taxation, among others—have changed very little over the years. Wherever possible, our authors used what was written in the first edition as the starting point for their contributions to this edition.

Any mistakes in this book are solely the responsibility of BCFM. In addition, because the world of media and media finance is changing so quickly, we encourage you to address questions about topics not covered in this book to us at BCFM. Contact information is available on the Association’s web site—www.bcfm.com.