Global Entertainment/Media Company

Streaming Movie & TV Client Gains Competitive Edge with Robust Planning Solution

Overview

Ad-supported streaming television (FAST) apps have a uniquely complex business. They are a rapidly developing entertainment/media industry that must capture and keep millions of viewers in a competitive landscape. The ability to successfully scale live or streamed content can make or break a company’s success.

Situation

The FAST industry requires a constant influx of new content to remain competitive for viewers. With all their revenue coming from ads, pinpointing top content sources for increased ad revenue is a challenge as is determining whether those content investments are paying off.  Our client could not forecast costs, cash flow, or revenue from their new investments with their existing forecast tools. To be successful, a robust planning platform was needed. Workday’s integrated Adaptive Planning solution created accurate modeling and a structured way to evaluate and plan for new content ventures; these included new films to stream—originals or licensed, as well as made-for-television opportunities.

Why Macrospect

Macrospect provided deep industry expertise on the planning issue our client was solving. Planning “Greenlights” (new content ventures) and “Ultimates” (P&L by approved venture) are unique, but critical, topics for media companies. Macrospect was able to show exactly how Workday Adaptive Planning would solve both problems AND report the client’s actuals correctly. Beginning with the end in mind and deploying Adaptive Planning prior to Financial Management, our client could now accurately assess the impact of new content creation on their business and pinpoint the effect of the content on their ad revenue.

Action

• Create an integrated content planning module that included forecasting inbound revenue, costs, and cash flow from potential new content ventures—Greenlights.
• Create revenue and cost modeling for approved content ventures and title purchases—referred to as Ultimates.
• Have accurate breakdowns of title-based actuals.
• Create “what-if” scenarios on cash, revenue, and profit impacts.

Business Benefits

Content planning is very different from standard financial planning due to the revenue and cost behaviors. It requires research and development to produce a product, then, financial forecasts to gauge the value of the product over time. This “Greenlights” process evaluates all media options to produce/stream, selecting what will be a part of the offerings in the future. Films were categorized as single products or individual revenue streams.

Once product selection and the initial financial analysis are completed, long-term forecasting begins. “Ultimates” are the 10-year amortization and associated costs view by film title/product. The 10-year forecast includes revenue and calculated costs—marketing, distribution, production, amortization, etc. Being able to produce a long-term view by product allowed the client to see profitability and gross margin impacts over several years. Short and long-term visibility into the different revenue and cost driver impacts on the overall P&L of a specific product was achieved.

This more accurate P&L view allowed the client to monitor products and make ongoing changes to the forecast with cuts to underperforming products. This helped ensure a high-performing portfolio of products, eliminated lower gross margins, and expanded their resources into products with greater profitability. The individual product P&Ls fed into one Ultimate P&L for a macro view of the profitability of the whole product line. Being able to create several “what-if” scenarios for different products and seeing an overall content view allowed our client to position itself to be more profitable for the next 10 years.

Cash flow modeling was of the utmost importance in the scope of the content module planning. Amortization of certain production costs, like licensing and agreements, made modeling cash payment schedules for these costs a requirement. Within the Adaptive Planning solution, a dynamic model was created to better predict, calculate, and plan for cash payments on a month-to-month basis. As a result, not only did the production cost planning accuracy improve in the P&L, but the cash payments schedule and overall cash forecasting improved within their balance sheet.

Results

Our client now has a new ability to create entire “what-if” portfolios and scenarios. They can see certain products’ impacts on the company’s cash, revenue, and profitability. More accurate and timely projections of cash flow allow them to free up additional cash they had previously held, due to inaccurate cash forecasting. This excess cash can be used to invest in new original productions, additional products, or for entry into new markets allowing the client to grow more quickly. The deployment of the new solution has increased margin and revenue.

Seeing the cash and profitability impacts by product positioned the company for more profitable decision-making around their portfolio. Improved forecasting was the key. They can eliminate products from the portfolio that burn up cash or add products that provide sustainable cash flow increasing revenue and gross margin. Greater visibility and understanding of cash fluctuations and product positions in a 10-year window helps the client to manage their cash more efficiently. The business leaders have bolstered confidence in every investment decision because there is clarity into future impacts.