While Johnnie was sitting across from the “big desk,” Pops, through his company, cosponsored a series of lectures on communications at Cornell. Bill Ward, my earlier professor and by then head of the Department of Communication Arts at Cornell University, introduced the address my father gave to his students on December 10, 1971, and it should be noted that Johnnie said he wrote 95 percent of my father’s speeches.
In his introduction, Professor Ward said: “No one in America is more qualified to discuss communication media as a business— and more than a business—than Roy H. Park, president of Park Broadcasting, Inc. A man with his long and broad experience in all forms of mass media wouldn’t be himself if he didn’t stress the vital importance of black rather than red ink on a ledger and what must be done to make a profit and stay in business. ‘There’s very little glamour in working for a bankrupt company.’ “At the same time, Mr. Park ‘humanizes’ the media, especially radio and television, where his main interests are now centered. He shares with us an inside view of management and the criteria he used to build his group of eighteen television and radio stations,” Ward said, expressing his appreciation to Mr. Park and his company for being a cosponsor of our Cornell communication seminars during the 1971−72 academic year. One of these addresses given by my father was entitled CoMMuniCAtions MediA: More thAn A Business.
Although he said it was more than a business, it was all business, and a profitable one, to him. Just how much it was “all business” I would soon learn—the hard way. As Johnnie tells it now, he learned the lesson the same way—quick and hard.
MANAGING BROADCAST AS PROFIT CENTERS by John B. Babcock While young Roy was busy attending the Johnson Graduate School of Management, and recently married, living in his own apartment in Ithaca, his father was snapping up broadcasting stations. By 1971, when he joined his father’s company, Park had already accumulated eighteen stations, and I was into the throes of managing all of them. Park saw gold in owning broadcast stations. They are reason
ably invulnerable to competition, not overburdened with depre
ciable assets, high profile in their community, and while regulated by the government, the franchise for the assigned frequency on the airwaves is protected by Uncle Sam. The end product is what goes out over the air each day. At the end of day, there is no inventory remaining. Direct costs are for energy and equipment to send the signal out over the airwaves, programming, and payroll for sales and operating people. The difference each day between those costs and advertising time sold is operating profit.
Other than acquiring detailed knowledge of the dynamics of the industry—how TV and radio work—Roy cared about the details of station operation about as much as he sought to understand how his mechanic kept his cars running. He didn’t care to look in the toolbox. He focused on the operating profit that a broadcast station produced every day. Park regarded all of his businesses as money machines. A TV station stood out like a foolproof slot machine. You pulled the handle to start the broadcast day, and by sign-off each night, the station returned in cash in the tray as much as two times what you paid to play that day.
My job was to produce those operating margins. I targeted 45 percent for our broadcast group, and looked to our most suc
cessful CBS station to throw off well over 50 percent in operating profit. Radio was expected to produce in the high 30s, outdoor billboards in the low 30s, newspapers in the mid to high 20s. A big grocery retailer does well to turn a profit of 2–3 percent; industrial concerns score success if they exceed 10 percent operating profit.
Broadcasting was pretty fat cat.
The term operating profit, as it is calculated in broadcasting, does not account for all the costs. Referred to as “above the line” charges, it contains all those elements needed to air the programs, and the cost of selling them. Profit is sales income less out-of
pocket costs (direct expense), before interest, depreciation, and taxes. Below-the-line items include the cost and repayment of loans, federal income tax provisions, interest charges, depreciation of equipment and long-term amortization. That’s where Park’s trusted financial advisor, Kenneth B. Skinner, came in. A retired financial officer with the Ithaca facility of National Cash Register, Ken agreed to help Park and me develop a business plan for each of the stations considered acquisition candidates. Ken oversaw other accounting people, but he was most comfortable hunched over a big, green accounting form, plying his Cross pencil and pink eraser.
After studying operating statements of the target company, I would suggest budget goals for sales by months from the principal sources: local, regional, national, political, and production. I worked with Ken toward totals about 10 percent higher than most recent results, taking into account variances such as anticipated political campaigns, special events, and sports coverage rights.
After we had massaged income figures, I went entry by entry into expense categories with the goal of a 5 to 10 percent overall reduction. Salaries were reviewed and adjusted to numbers I thought we could achieve, usually less than the present owner had paid. Of course we eliminated top management and owner salaries, substituting what we felt would attract competent hired management. I always included liberal amounts to promote higher viewing levels, confident that Park might reduce these numbers when he reviewed our work, but hoping he might give less scrutiny to items that I felt more important to the station’s growth and welfare.
We extended the month-by-month financial plan for the station to three years, by adjusting annual totals by a modest 5 percent increase in expenses, a 10 to 15 percent increase in revenues.
That produced attractive annual growth in profitability including resources to pay off the loan.
Skinner worked directly with Park to schedule the below-theline entries. Depreciation was applied to the assets provided by the seller, and Ken made monthly entries on his green analysis tablet that rounded out the business projection for the foreseeable future. By the time he had provided for the new depreciation for assets to be acquired and interest payments, taxable income had been shrunk considerably. Now Park had the hard information to finalize the price he would offer in cash, and how much he would need to borrow.
I was left with one remaining assignment: to fulfill the business plan and provide Roy Park with the promised profits.
