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Shared Service Advantages
Leading edge systems like this don’t just happen. They
reflect deep domain-specific expertise, decades of experience,
and millions of dollars of capital investment. Studios are
outsourcing these resources, and thereby realizing two key
advantages: lower capital cost structures and best-of-breed
competencies.
The bigger advantage is best-of-breed competency. Creditek
knows how to tailor systems to match business rules that reflect
retailer policies — policies that tend to be highly
customized. It can offer retailers very individualized treatment,
which results in more targeted attention and better relationships
with suppliers. More consistent feedback in turn leads to
continuous process improvement, which means fewer returns,
faster payments, fewer deductions, and faster turns on inventory.
Better communication also reduces the likelihood of erroneous
or malicious deductions. Proprietary software can also speed
collections even more. One example is algorithms that quickly
match titles, shipments, invoices, and claims. Systemic mistakes
are corrected, which also makes deductions less likely to
occur in the future.
Payoffs from both economies and competencies can be very
rapid. Studios should look for significant P&L improvements
in home entertainment retail within the first two quarters
of an outsourcing engagement. Significant balance sheet improvements
will occur in about the same timeframe as studios divest assets
and forego investments they no longer need.
Frequent
and consistent customer contact allow for resolution
to outstanding invoices and data on systemic problems
Through deduction resolution, process
and policy decisions,
and other reviews, the dollar value of the portfolio did little
to change;
yet the collectable value has increased dramatically.
:Looking Ahead
Outsourcing receivables management illustrates how doing
lots of small things well can quickly add up to big money.
That is Hollywood’s long-term opportunity in the information
economy. The greatest threats Hollywood faces today are the
escalating cost of movie production, negative future growth
in the number of theater screens, an ever expanding set of
channels, and a price ceiling above which people simply stop
buying tickets. The only way out is market aggregation —
a game that requires studios to engage in millions of highly
individual “micro deals” with channel members
and ultimately perhaps even with consumers. Each of these
transactions requires a very specific set of competencies
— not the least of which is figuring out how to get
paid.
One thing is certain, the marketplace and competition are
not standing idly by.
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