The media ecosystem is fundamentally changing due to shifting consumer habits. The average American adult consumes 12 hours of media and technology each day, with digital media representing the largest share of consumption—far exceeding traditional outlets like television, print and radio.
With its increased command of audience share, digital media is leading growth in advertising revenue. Cable subscriptions are expected to decline in the coming years as more TV watchers adopt over-the-top (OTT) video services. Cord cutters now have more options for streaming live TV broadcasts, as well as high-quality original video content. Plus, live video is no longer restricted to TV—social media users broadcast their lives to their followers on various platforms.
Despite changes in technology, consumer spending continues to increase—and media and entertainment companies are well-positioned for near-term growth. To best adapt to industry trends, companies may want to consider updating their cash management processes to capture efficiencies and optimize working capital. Here are three crucial challenges media and entertainment companies face today, and treasury solutions to manage them.
Brands have more options than ever when it comes to reaching consumers. The rise of digital media companies has led many publishers to form dedicated studios for branded content, capitalizing on their ability to reach large audiences and optimize content based on performance. Add to that landscape in-house services and nontraditional competitors like consulting firms, and traditional agencies are no longer the only option for brand marketing.
With increased competition, brands are able to negotiate longer payment terms. Today, bill collection routinely can take 60 to 90 days, as compared to 45 days in the past—and the upfront content creation costs are significant. At the same time, vendors want to get paid faster. Agencies and content producers caught in this dynamic face a cash-flow crunch.
A commercial card program is one option for alleviating stress on working capital because it can allow companies to pay vendors sooner, extend days payable outstanding and may even carry the added bonus of cash-back rebates.
For companies with a high volume of recurring expenses—such as 500 ad charges with the same vendor each month—single-use accounts are an attractive option. These 16-digit virtual cards can be set with a credit limit, payment date range and recipient type, and can simplify reconciliation by making it easy to match transaction data to pre-payment information. Single-use accounts also can help maximize float and reduce fraud on vendor payments.
Many media and entertainment businesses remain stubbornly cash-intensive. With live entertainment, for instance, attendees often purchase tickets, merchandise and concessions with cash, and it’s still a common way for venues to pay the talent’s fee. Content producers—often on the sets of film and TV productions—frequently pay their vendors in cash, too.
However, with cash comes risk. Handling a large amount of dollars not only raises safety concerns for employees on site, cash is notoriously difficult to track and especially vulnerable to fraud. It also slows account reconciliation, with a higher potential for error and loss than electronic alternatives.
By modernizing to electronic payment and collection methods, media and entertainment companies can help improve reporting, efficiency and security. On the receivables end, merchant services can be used to increase credit card payments from customers and mobile deposit solutions can expedite processing. For payables, commercial card or email-based payment solutions can be used to pay vendors and talent.
As consumers change their media habits and quality entertainment options proliferate, companies across all media and entertainment sectors are competing for audience share by moving into new international markets and, in some cases, pursuing mergers. As with any expansion or merger activity, this can lead to inefficiencies and redundancies in financial operations.
Similarly, as companies—particularly digital media startups—look to grow by raising funds from venture capitalists and strategic investors, it’s imperative to show efficiency in operations as a way to demonstrate the potential value of the organization.
In any of these scenarios, consolidation of financial reporting is key to a company’s success because it allows for greater control of operations. Consolidation can take the form of using a single international bank across all global locations to centralize management of accounts while also centralizing mitigation of cybersecurity and fraud risks. Technology solutions—such as automated liquidity sweeps—can streamline inefficient processes across complex corporate structures. Utilizing a single online portal gives a real-time view of all accounts for greater transparency, easier reconciliation and more comprehensive reporting.
No matter which sector of the media and entertainment industry you’re in, J.P. Morgan can customize financial solutions for your unique needs. Increase working capital efficiencies with award-winning cash management solutions that make it easier to accelerate receivables, streamline payables, mitigate fraud and manage short-term liquidity.
We’ll work with you to help your organization optimize efficiency, streamline processes and reduce the cost of critical cash management functions, with solutions that include payables, receivables, liquidity and investments, information management, online banking, foreign exchange, trade and card. Get in touch with a media and entertainment banker today to learn more.
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