Why by title financial reporting is a game changer for Media companies
Have you ever started following a new series only to find that it gets pulled after one or two runs? A recent example is a compelling series broadcast by the BBC, “The Hour” starring Dominic West (“The Wire”) and Romola Garai set in the late 1950’s about a new format news program (for the period) with analysis and live interviews which was axed after just 2 series despite critical acclaim and protests from fans. The BBC made a tough decision. With production costs rising and the emergence of disruptive original content providers such as Netflix, Amazon, Facebook with huge financial resources at their disposal, there is a greater than ever focus on by title financial reporting for content. The ability to analyze and compare the profitability, balance sheet figures, and cash flow of individual titles has proven to be essential for successful operation of an entertainment studio.
Other media companies with a content production business are starting to understand the benefits of a 360° view of title performance. Not all media companies will need all features of a full-blown by title accounting and reporting solution (e.g. cash by title). But the ability to analyze the lifecycle contribution margin of individual titles at your fingertips is needed to make the right investment decisions.
Financial reporting typically focuses on an organization or entity-based analysis. This analysis is provided using standard accounting and controlling functions in an ERP system. In addition to traditional financial reporting and analyses, media companies also plan, report and analyze the profitability, balance sheet, and cash flow of individual titles. Providing comprehensive by title data reconciled with the general ledger is a major challenge. Visibility of accurate and timely by title data through the title’s entire life cycle is crucial to planning, reporting and title analysis.
The term “title” is used in a variety of ways by members of the media & entertainment community and has many synonyms (such as release, product, catalog, MPM and intellectual property). Generally, a title can be defined as a representation of a piece of content for which financial transactions can be identified and against which they can be recorded. Through its lifecycle, from development to production to exploitation, a title takes on various characteristics unique to the phases in the lifecycle. Titles can be assigned attributes, which are additional pieces of information about the title needed for financial accounting or reporting, for example: Made for Market, Producer, and Rights Holder. By title accounting and reporting requirements include the need to combine title information with transactional information, such as market or territory.
In addition, titles are typically hierarchical. Let’s take the example of a TV series. Series are typically divided in seasons, which consist of a set of episodes. Series, seasons and episodes are titles and financial transactions can be assigned to each of them. The title hierarchy enables us to aggregate the financials at higher levels of the title hierarchy. For example, if the production costs are tracked on episode level, in by title reporting the cost are summed up on season and series level.
Next Level of By Title Accounting and Reporting
Traditionally, entertainment studios have used SAP ERP for by title accounting and reporting for over a decade. This solution was implemented leveraging core functionality of SAP ERP, such as Special Ledger, Document Splitter and SAP Business Warehouse. The Media Product Master was used as the representation of the titles. With the media product hierarchy, it provides the required hierarchy of titles and in addition the Media Product Master in SAP Business Suite comes with a set of media specific attributes.
With the capabilities of SAP S/4HANA, by title accounting and reporting can be reinvented. With SAP S/4HANA Finance there is no need for a separate title ledger. The assignment to a specific title can now happen directly in the universal journal ledger posting. The same is true for the additional transactional attributes such as market or territory. This means you will have one single source of truth for organization- / entity-based accounting and by title accounting. Can you imagine how this reduces reconciliation efforts?
You may have heard that SAP S/4HANA resolves the conflict between transactional and analytical data, bringing OLTP and OLAP together on one system. But what does that mean in practice? After posting a financial transaction in SAP S/4HANA (including org data as well as title information) you can directly execute a financial query in embedded analytics and see the impact on title performance. This dynamic reporting capability was not previously possible.
Since embedded analytics does not rely on any aggregates and uses the data from universal journal directly, you will gain a lot of flexibility. Any option for filtering or drill-down in a Business Warehouse query has to be specified and implemented by a developer. The need to analyze by an additional attribute typically ends up in a request to IT. In SAP S/4HANA you as the end user get the power to pick from the large set of attributes available in the universal journal and easily define or adjust your by title queries.
Media Product Master in SAP S/4 HANA
While most of the other components required for by title accounting and reporting were already available with earlier releases of SAP S/4HANA, the Media Product Master will only be supported with SAP S/4HANA 1709. The architecture of the Media Product Master was changed to support a modern by title accounting and reporting.
When deployed within the SAP ERP architecture, Media Product Master acts as an industry-specific extension of the material master and is a relatively rigid piece of software. To reflect the fact that each and every media company requires a different set of title attributes and even the required number of hierarchy levels might be different in the future, the concept of the Media Product Master in SAP S/4HANA was kept quite flexible.
The product master in SAP S/4HANA 1709 was extended by a capability to define hierarchies of products. This enables the creation and maintenance of Media Product Masters and their hierarchical relationships within a modern Fiori app. With the move to digital media even sequences of original content are monetized which requires more flexibility regarding the number of hierarchical levels. To reflect this, the number of hierarchy levels can now be configured during the implementation phase.
In SAP S/4HANA, title attributes are defined as custom fields of the product master according to the company’s specific needs during the implementation project and might be extended at a later point in time as needed. Defining custom fields and positioning them on the Fiori UI is an easy and intuitive task and does not require development skills. The creation of title attributes in the implementation project will improve usability compared to the ERP system, where a fixed set of fields is available which does not fit the specific needs of an individual company.
Benefits for Business
Flexibility to support new media businesses
The by title solution built on SAP ERP architecture is powerful but it does not reflect the ever- changing nature of the media market. As your business moves forwards, it diversifies and gives up old media channels in search of the new and more lucrative.
Media Product Master in S/4 HANA provides the kind of customizable options that give your business the agility required to move and grow in a natural and organic fashion. While these movements are possible within SAP ERP, up to a point, they require the sort of developmental know-how that will put them out of reach for many users.
SAP S/4 HANA makes it possible for you and your team to handle changes to the business and their impact on the IT infrastructure in a straightforward manner. At the same time, it provides an intuitive user experience which makes onboarding new team members a much more straightforward process.
Better Understanding of your Title Performance
As a business owner, you need to know precisely which of your titles are setting the media market ablaze and which ones are crashing and burning. This is difficult to achieve without a way to directly analyze and assess performance.
By title accounting and reporting in SAP S/4 HANA, provides you with the possibility to perform ad hoc queries and drill downs by any attribute. This provides you a much clearer picture of title performance, which in turn gives you a vantage point from which to make the next move.