The new era of TV has dawned this autumn. Satellite broadcaster BSkyB was first out of the traps in October with its Sky Digital service.
But it was followed closely by broadcast digital services from the BBC and On Digital, a consortium formed by cable operators.
The media blitz may have just broken out on-screen and in the rivals’ advertising campaigns, but, behind the scenes, finance executives as well as television engineers have played their part in building new infrastructures to support the new business model.
Digitisation chops TV signals up into more precise packages – meaning a transition or a cable wave can now carry more separate channels. On-screen, this means that the consumer is presented with a broader variety of discrete programming – typically special-interest channels for children, wildlife enthusiasts or any other socio-demographic group.
Back at base, accounting procedures and supporting systems will have to be constructed if they are to cope with a much wider menu of delivery, customer billing and supplier transactions.
The whole matter of digital broadcasting has been preoccupying the finance department at BSkyB for more than three years, explains head of commercial finance Andrew Carney. The broadcaster’s previous chief financial officer, Nick Harrington, recognised the challenge three years ago and, since his death, current CFO Martin Stewart has picked up the baton.
The problem for BSkyB was it had to introduce the new service without disrupting its broadcast – and financial – operations.
‘The sheer volume of our digital services introduced a new level of complexity,’ said Carney. ‘When we looked at how Sky was going to change, we recognised the need for good-quality financial systems.’
Even before the Sky Digital launch, the revenue streams and expenditures, which the finance department took responsibility for, were remarkably complex.
BSkyB runs, and must account for, its own broadcast channels, but the company also provides a complete accounting service for third-party channels where it acts as a distributor.
The money collected from subscribers, meanwhile, is gathered up and counted in Livingston, Scotland; occasional pay-per-view events, such as boxing matches, complicate the picture. Then there are advertising revenues to collect, as well as income gathered from cable operators which take BSkyB feeds.
The broadcaster also operates a commitment accounting regime at its technical and management base near London so that the engineering project managers that are creating the new digital studios can build them without being held back by the accounts department.
Many of the processing and reporting requirements of BSkyB’s financial regime are handled by bespoke software systems, but these requirements were putting a strain on the previous accounts software supplied by Ross Systems. However, from the beginning of the 1998 financial year, starting 5 January, the broadcaster went live on a One World installation, supplied by JD Edwards selection, with specification and implementation help from KPMG Management Consulting.
It is the first such installation in the UK and, with its starring role in the Sky Digital launch, it’s something of a showcase for the Denver-based supplier’s enterprise financials system.
Carney says that being a pioneer is built into the BSkyB culture. ‘We rarely go for the middle ground, but like to make big strides.
“Be first” could be the company motto.’
KPMG has built up its expertise with JD Edwards software on the back of the BSkyB installation.
However, when it became clear that compared to rival offerings from Lawson, Ross, PeopleSoft and Coda, One World had the closest match to the requirements, the company had no hesitation in recommending it, explained Richard Rogerson, director of the JD Edwards practice at KPMG.
Purchasing was a particular challenge for the accountants, explained BSkyB’s Carney. ‘We’re such a diverse business. Whether Livingstone wants to buy some bananas for the staff or we acquire the next series of Friends, it’s still a purchase.’
The new accounts system sits at the centre of the accounts Web and pulls in feeds from 40 different systems. These include advertising sales, the Livingston mainframe, broadcasting administration, field management and payroll.
Changing the underlying technology gave BSkyB the chance to create new charts of accounts. ‘Reviewing and reorganisation after nine years gave us the opportunity to re-engineer,’ continued Carney. In particular, the project team spent a lot of time getting the management accounts right, to ensure they could extract the correct reports.
The One World software also allowed BSkyB to decentralise the purchasing budgets out into the business functions, Carney continued. ‘With a well-understood authorisation process, we can set budget allocations, and they can spend it when they need.’
The test of the new purchasing regime came during the construction of the technical ‘head-end’ of the digital distribution network, which involved thousands of purchase orders. Once order details are entered into the JD Edwards system, an electronic Bulldog clip is activated and will pick up the supplier invoice when it reaches the accounts payable department and is scanned in. If the order is within a pre-set tolerance, it will be authorised automatically, although clerks can refer any oddities they spot to the reviewing department.
Far from upsetting the internal audit department, the new regime met the approval of internal audit director Keith Belcher. ‘It has improved the paper flow trail by reducing it. The review and approval process is all electronic.’
In the run up to the Sky Digital launch, ‘we had every box out with our socket sets’ says Douglas, the systems chief. The first phase of the new accounts structure – incorporating general ledger, accounts payable and receivable, purchase order and sales order processing – was in place for October. Now that hurdle has been negotiated, Sky, with help from KPMG and JD Edwards, is pressing ahead with phase two, which will automate fixed-asset management.
The parties will not divulge how much was invested in the re-engineering exercise, but the early and public demonstration of confidence suggests that BSkyB’s finance department is confident that the new accounts regime will be a success. Whether the same can be said for the digital services themselves is another question all together.
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