Each time Richard Bennett reached across his desk for the ma.docx

E
ach time Richard Bennett reached across his desk for the mail
and other docu-
ments his assistant had placed in his in-box, he smiled because
he thought of the
friendly disagreement with his wife about the “proper” way to
handle this task.
His approach was “top-down.” Whatever was on top of the in-
box was dealt with first,
then down through the stack until it was all finished. His wife
preferred the “priority”
method, first sorting through everything to determine the
urgency of each item.
Bennett felt that was just a waste of time. “By the time you’ve
gotten your stuff sorted,
I’ve probably finished with at least one-third of the items in my
in-box,” he had kidded
her. Bennett was thinking of his wife again that morning as he
sat down at his desk.
Tomorrow, July 12, 2006, was their wedding anniversary. How
could forty-one years
have gone by so quickly? His reminiscing was abruptly
interrupted when Bennett saw
the item on top of his in-box.
A special courier had delivered a package from the corporate
office of Centurion
Media. Inside the package was a contract signed by Joseph
Fowler, the new president of
his division. (Refer to Exhibit 1 for corporate structure.) As
Bennett read through the

contract, he had a sick feeling. The contract required all of the
cable television systems
in the Centurion cable division to sell their advertising
inventory at severely discounted
rates to Northpark Media. Northpark was a national buying
service that bought and
resold commercial spots on cable television systems; Centurion
Media owned 25 percent
of Northpark’s outstanding common stock. From the wording
Bennett saw in the con-
tract, Centurion Cable would lose millions of dollars in revenue
both by selling com-
mercials so cheaply to Northpark and by alienating existing
customers, who would stop
buying from Centurion. Because Fowler had been CEO of
Northpark before coming to
Centurion, Bennett immediately wondered if that relationship
had played a role in the
negotiation of this contract.
Centurion Media: Doing the Right Thing 1
Centurion Media: Doing the
Right Thing
Carolyn Conn, St. Edward’s University
Aundrea Kay Guess, St. Edward’s University
Jonathan Hiatt, St. Edward’s University
Copyright © 2008 by the Case Research Journal and Carolyn
Conn, Aundrea Kay Guess, and Jonathan
Hiatt. All rights reserved to the authors and NACRA.
This case was presented to the North American Case Research
Association (NACRA) at its annual meet-
ing, October 18–20, 2007, Keystone, CO.

The authors wish to thank the individual portrayed as Richard
Bennett in this case. We want to thank
the editor and associate editor of the Case Research Journal and
the anonymous reviewers for their time
and valuable suggestions. This case was written to stimulate
class discussion rather than to illustrate the
effective or ineffective handling of a managerial situation.
This case did not occur in the cable television industry. The
industry, as well as the names of all firms,
their locations, and the people involved in this case have been
disguised.
NA0005
For the exclusive use of A. Caceres, 2020.
This document is authorized for use only by Ana Caceres in
Advanced Auditing Theory and Application-7-1-19-1 taught by
BUNNEY SCHMIDT, Keiser University from Jan 2020 to Jul
2020.
2 Case Research Journal • Volume 28 • Issue 1 • Winter
2008
Exhibit 1 Centurion’s Corporate Structure
As a vice president in Centurion’s cable division, Bennett
managed cable network
systems in the southeastern United States. Bennett had been a
regional vice president in
the cable division of Centurion Media for nearly ten years. Most

of his management
team had been with him from the time he began as regional vice
president. They had
worked hard to build relationships in the communities where
they operated, and finan-
cial growth provided proof of their success. Revenues for his
group’s cable systems had
almost doubled annually since his first year as regional vice
president. His group had
been recognized for their accomplishments as the “Outstanding
Team” nationwide at
the previous year’s Centurion Media annual banquet. In
Bennett’s opinion, the
Northpark contract would destroy everything Bennett’s group
had done in their region
during the past ten years.
Bennett wondered if the other vice presidents had received their
copies of the con-
tract. He had to get to the bottom of this and try to avert
financial calamity. He knew
he had to be careful. One of Bennett’s golfing buddies who was
in upper management
of Centurion’s newspaper division had had a run-in with Fowler
at a corporate meeting
the month after he became president of the cable division. His
buddy warned Bennett
not to trust Fowler. Bennett called his sales director, Vicki
Porter.
Vicki, you are never going to believe what I got by special
courier this morning. It’s a
contract signed by Joseph Fowler between Centurion Cable and
Northpark Media—and
we’ve got to sell them any of our advertising inventory they
want at rates way below what

we are charging this year and below many of the annual
contracts we already have with
advertisers for the coming year. Those customers are going to
be furious if they ever hear
about this—and, you know they will. Worse still is the impact
this contract will have on
our bottom line. We’ll lose millions!
Porter said she understood Bennett’s frustration, but reminded
him they needed to
talk to other Centurion Cable vice presidents about the
Northpark contract before they
did anything. Bennett said he would make a few calls, and they
agreed to meet later that
Centurion
Cable TV Division
Joseph Fowler, president
Five vice presidents for
other regions
Vicki Porter,
sales director for
SE region
Richard Bennett,
vice president for
SE region
Centurion Media, Inc.
Chuck Reilly, CEO

Centurion
Broadcast TV Division
Centurion
Newspaper Division
2020.
day to work out a strategy for dealing with the contract. Bennett
had hired Vicki dur-
ing his first year as vice president at Centurion Cable and had
never regretted it. He
respected Vicki’s judgment and knew she was trustworthy and
knowledgeable about the
political workings of the corporate offices and boardroom of
Centurion Media. He had
told her numerous times she was the logical choice to be
promoted into his position after
he retired.
THE CABLE TELEVISION INDUSTRY
The cable television industry originated in the mountains of
Pennsylvania in the late
1940s. John Walson, owner of an appliance store in rural
Mahanoy City, wanted to

increase sales of televisions. To improve reception and better
demonstrate the televi-
sions, he erected an antenna on top of a nearby hill and ran a
cable to his store.
Customers soon began asking for their houses to be connected
to his antenna.
Walson charged two dollars a month for this service and by the
middle of 1948 had 727
customers. He and other entrepreneurs soon began setting up
similar “Community
Antenna Television” (CATV) systems in rural areas where
television reception was poor.
By 1955, there were about 400 such systems with a total of
150,000 subscribers.1
Initially, CATV systems throughout the United States provided
their customers with
the three channels from the national broadcast networks: ABC,
CBS, and NBC.
Expansion of the systems and demand from customers resulted
in the growth of pro-
gramming to include hundreds of national cable networks (such
as A&E, HBO,
Showtime, ESPN, and CNN) as well as the offerings of local
standard broadcast stations.
Cable television systems were established under franchise
agreements within specific
geographic regions. Under FCC regulations, some cable
operators had been granted
franchises in multiple areas of the United States. Cable
operators that had multiple fran-
chises were referred to as Multiple-System Operators (MSOs).
As of 2006, the twenty-
five largest MSOs served more than 61 million subscribers

nationwide.2
Cable Television Revenues
Operators of cable television systems obtained revenue from
several sources: subscriber
fees for basic service, additional subscriber fees for premium
programming, fees for spe-
cialty services (such as movies on-demand), and local
advertising. Sales of subscriptions
for basic cable service had stalled; thus, advertising revenues
had become more signifi-
cant to the operators of cable systems. The dramatic increase in
the number of available
digital cable channels resulted in ever-increasing amounts of
advertising space.
Nationwide, total cable revenue for 2007 was estimated at $74.7
billion, with $26.9 bil-
lion of that coming from advertising.3
Cable television operators sold local advertising on their
systems based on a pre-
determined number of commercial breaks within each network
program. On average
there was two minutes per hour of commercial breaks. These
commercials were in addi-
tion to those purchased directly by advertisers through the
national cable networks.
Depending upon the city and surrounding area served by a
specific cable system and the
demand for a given program, the local advertising rate in
various markets across the
United States for 2006 averaged from less than $20 per thirty-
second spot to approxi-
mately $200.

2020.
2008
TELEVISION ADVERTISING
Television advertising spots had been available for purchase
from multiple sources:
national broadcast (ABC, CBS, NBC); national cable networks
(e.g., ESPN, MTV,
CNN); local broadcast affiliates (e.g., KABC in Los Angeles,
WFOR4 in Miami, and
WXIA in Atlanta); and local cable (e.g., Comcast, Time-
Warner, Cox). Small advertis-
ers did not need national placement of their commercials.
Instead, they targeted a local
market and bought lower-priced commercials from local
broadcast stations (frequently
in locally-produced programs such as evening and late news)
and/or from local cable
operators.
Industry data for 2005 showed that audiences watched cable as
much as they were
watching broadcast networks, causing an increase in the demand
for advertising on
cable systems. For 2005, gross cable advertising revenue was

estimated at $24 billion
with local cable advertising at $5.6 billion. Experts predicted 10
percent annual growth
for local cable advertising, 9 percent for national cable, 4
percent for national broadcast,
and 1.5 percent for local broadcast.4
Unsold inventory of advertising in their local commercial
breaks had presented chal-
lenges for the operators of cable systems. Nationally, unsold
inventory on cable was
equal to roughly 70 percent of the total available spots (called
“avails”).5 Much of the
unsold inventory was in “late night” (after “prime time”)
through the following “early
morning” (approximately 5 A.M.).
Some internet-based companies had begun exploring ways to
sell the unsold “rem-
nant” advertising inventory in various media, including
newspapers, radio, and cable
television. Google had been extremely aggressive in this area.
In fall 2006, Google
debuted an on-line bidding system for selling advertising in all
media. Google began
this service in the newspaper and radio markets, with plans to
expand into broadcast
and cable television. Most major newspaper chains and major
papers, such as The
Chicago Tribune and The New York Times, subscribed to
Google’s new bidding service.
Google reported their initial ad volume sold through the system
was double their pro-
jections.6 Their public statements about the system described
their plans to add spot
sales on broadcast television and cable networks.7 Some

industry experts postulated that
availability of online advertising order systems would force
cable television program-
mers to partner with firms such as Google and eBay to help sell
advertising on the pro-
grammers’ cable and satellite networks.8
Some members of the radio industry had tried to keep Google at
a distance, prima-
rily because of concern their advertising would become a
commodity and prices would
be driven down. However, Google’s position had been just the
opposite, as described by
Douglass Merrill, their vice president of engineering, “If you
use some of the things that
we understand about finding appropriate value and targeting, we
might get folks who
haven’t advertised on radio before to advertise now. . . . With
those advertisers comes
new money; with those, rates rise.”9
CENTURION MEDIA
Centurion Media began as a newspaper publishing business
called Centurion News in
the late-1940s. The corporate founder, Charles Reilly Sr., had
the foresight in the 1950s
to expand into broadcast and cable television. In order to obtain
sufficient capital for
his new ventures, Reilly took the company public and named the
new company

2020.
Centurion Media. In 2006, Centurion Media was a diversified
public corporation head-
quartered in Chicago, Illinois with operating divisions in
several major media segments,
including Centurion Broadcast Television, Centurion Cable
Television, and Centurion
Newspaper. A president managed each division. (Refer to
Exhibit 1 for Centurion’s
organization chart.)
Charles Reilly Sr. served as chief executive officer (CEO) until
1975 when he
became chairman of the board. Even though it was a public
corporation, Centurion
Media maintained the feel of a family business. When Reilly Sr.
stepped down as CEO,
Charles Reilly Jr. replaced him and served in that capacity until
2001. At that time,
Charles Reilly III (Chuck) was named CEO. Chuck Reilly had
worked in various
departments at Centurion, starting first as an errand boy during
summers in high
school. After graduating from college with a degree in radio,
television and film, he
began working full-time for one of the broadcast television
stations owned by
Centurion. He was well liked by his colleagues and regarded as
a hard worker. They also
respected him because he had started at the bottom and never
used his father’s and

grandfather’s positions as influence to get ahead in the
company.
CENTURION CABLE DIVISION
As a division of Centurion Media, Centurion Cable had a
president supported by six
vice presidents, with operational responsibility for multiple
cable television systems
within specific regions of the United States. Each vice president
was autonomous with
primary responsibility for franchise negotiations in the cities
and towns where their sys-
tems operated. Every region had its own sales department that
sold advertising at the
rates established by the regional vice president. The rates were
based on demand for
commercial placement and availability in various programming,
as well as competitive
market forces. The president was primarily responsible for the
execution of their divi-
sion’s portion of the corporate strategic plan and for
representing their division’s inter-
ests to the upper management of Centurion Media.
In January 2006, Terrence Moore, the fourth president of
Centurion in eight years,
was transferred to Centurion’s broadcast television division and
replaced by Joseph
Fowler. Moore, president for two years, had been a hands-off
manager, letting the
regional vice presidents run their own operations with little
input or guidance from
him. The management style of the new president, Fowler, was at
the other end of the
spectrum. A few current Centurion Cable employees had worked

for Fowler at
Northpark, and they described him as being dictatorial, with
little patience for people
who disagreed with him.
Chuck Reilly personally recruited Fowler from his position as
CEO of Northpark.
When Reilly introduced Fowler around Centurion’s offices,
Reilly noted they had been
friends in college and began their media careers together at
Centurion. Reilly let every-
one know Fowler was a tough negotiator and had led Northpark
to impressive growth
in revenues and profits. Reilly said he was expecting Fowler to
have a significant impact
on the cable division’s bottom line in a short period of time.
NORTHPARK MEDIA
A simple concept had been the basis for Northpark Media’s
business. Most cable televi-
sion operators could not sell all their available advertising
inventory and most small
2020.

businesses did not have employees dedicated to buying local
airtime. Northpark nego-
tiated with cable television operators to buy large quantities of
commercial advertising
at deeply discounted rates. In turn, they resold those
commercial spots to small local
businesses for higher prices—but at rates that were lower than
what the firms could
negotiate for themselves. Northpark became the intermediary
between the small busi-
nesses and the local cable operators.
The company was established in 1974 and went public in 1984.
Their stock traded
on the New York Stock Exchange and was included as part of
the Standard & Poor’s
400 Mid-Cap. During fiscal year 2005 they employed nearly 13
hundred people.
Northpark Media had experienced exponential growth in sales,
along with steady
growth in their stock price under the leadership of CEO Joseph
Fowler. In the two fis-
cal years ending December 2004 and 2005, revenue had grown
from $358 to $553 mil-
lion, with operating income rising from $61 to $104 million,
and net income increased
from $24 to $42 million. Northpark had minimized capital
expenditures while gener-
ating increases in earnings and cash flow. At a time when many
companies in the media
industry were having difficulty, Northpark was regarded as a
solid investment. Bennett
knew that most investment analysts who covered the publicly
traded company rated it
as a buy or a strong buy. Northpark had bought some

commercial airtime from
Centurion Media in recent years, but the amount was an
insignificant portion of their
total purchases. The company had formed no close trading
partnerships or alliances
with any particular media companies.
In late spring 2006, Centurion Media completed several
purchases of Northpark
stock which gave them control of approximately 25 percent of
Northpark’s outstanding
common stock. After Centurion completed these purchases, they
held two positions on
Northpark’s ten-member board of directors. Chuck Reilly had
been persuaded by
Joseph Fowler to buy the stock because Northpark was the
“wave of the future” for the
next few years in the media business. As Fowler reportedly
described it in a meeting with
Centurion Media’s upper management:
At least until Google and other Internet firms get the beta
testing done for their technol-
ogy and their internal processes ironed out, buying services
such as Northpark will
replace traditional sales departments. Then, in a few years
Google and others will have
made so many inroads into media buying that companies like
Northpark won’t be need-
ed either. Centurion can get in on the action in the short-run by
buying significant own-
ership of Northpark.
JOSEPH FOWLER
In the spring of 1999, Joseph Fowler was promoted from chief

operating officer to CEO
of Northpark Media. Fowler’s career in media began with an
internship during college
in the sales department of one of Centurion Cable’s systems.
After graduation, he was
hired as an account executive for a broadcast television station
in Atlanta, Georgia. He
later returned to his hometown of Boston where he worked his
way up from sales to
higher-level management positions at several cable systems in
the area.
Fowler’s reputation was that he did not take “no” for an answer.
A sales assistant at
Centurion Cable who had worked in a similar position at
Northpark described his pres-
idency there as “frightening,” marked by indiscriminate firings
of long-time employees.
When he was hired as CEO of Northpark, financial news articles
described Fowler’s high
six-figure salary, stock options, his bonuses which were based
on revenue growth, and
2008
2020.

his seat on the Northpark board of directors. Only a short time
after being hired as pres-
ident of Centurion Cable, rumors circulated within the division
that Fowler had played
hard-to-get and ended up with an even higher compensation
package from Centurion
than what he had at Northpark. The corporate gossip was that
Fowler had been allowed
to keep his position on Northpark’s board of directors and to
retain ownership of his
Northpark stock and options, although Bennett had no way of
confirming this.
Chuck Reilly’s memo in January 2006 announcing Fowler’s
hiring described his
wide range of experience working in various media across the
country, as well as the sig-
nificant growth in Northpark’s revenues and profits while he
was their CEO. The
memo ended with a statement about Chuck Reilly’s professional
respect for Fowler as
a visionary in the media business and it mentioned their long-
standing friendship. It
also quoted Fowler as saying his personal business motto was:
“Profits equal success.”
THE CONTRACT REVIEW MEETING
Vicki Porter was alarmed at what Richard Bennett described
over the phone. From what
Bennett had read to her from the Northpark contract, their cable
systems and all of
those within Centurion Cable would, indeed, lose millions in
advertising revenues. She
could not imagine what had caused Joseph Fowler to sign a
contract like that with

Northpark. Was the guy that unfamiliar with Centurion’s side of
the industry? Or, did
he just have a screw loose? She cleared her appointments for the
entire afternoon in
order to meet with Bennett.
When Porter arrived at Bennett’s office, he was calmer than he
had been on the
phone that morning. But, he was dejected when he greeted her:
It’s worse than I thought. I’ve been reading and re-reading this
contract. In addition to
every Centurion Cable system being required to sell all the
advertising Northpark wants
at extremely discounted rates, we have to guarantee that we’ll
run at least 90 percent of
the commercials they buy. If we don’t, we’ll have to pay a
penalty of five times the dis-
counted ad rate. Oh yeah, and the contract wording says it
cannot be cancelled and is
automatically renewable!
Porter was stunned.
What do you mean? Even if I have a local advertiser who’s
willing to pay top dollar on
the rate card—Northpark’s discounted contract will take
precedence over a higher rate
paid by all other advertisers? Are you saying the Northpark
contract also trumps annual
contracts we already have in place? How’s that supposed to
work?
Bennett handed her the contract.
Read it for yourself. Look at section six on page four. It says

the Northpark purchases of
our commercials supersede all existing and future contracts with
other advertisers. I don’t
think it can be any plainer than that.
Porter looked at section six of the contract.
That’s exactly what it says. When this gets out, our sales people
won’t be able to sign up
any new advertisers—at any price—because we won’t be able to
promise them their spots
will actually make it on the air. There’s too much chance they’ll
be bumped by
Northpark. And, I don’t even want to think about what our
existing advertisers are going
to say. At best, we’ll lose our credibility with them. At worst,
we’ll get sued. Our contracts
with existing advertisers contain a provision about being pre-
empted only due to emer-
gencies or other advertisers paying a higher rate; not a lower
one!
2020.
Bennett was certain the contract meant financial disaster for
Centurion. It would be

one thing if Northpark bought only the unsold commercial time.
But, the way he read
the contract, Northpark was entitled to buy any commercial
spots they wanted (prime-
time and elsewhere) at deeply discounted rates. The real kicker
in the contract was that
all the Centurion Cable systems had to guarantee at least 90
percent of the spots
Northpark bought would run and would not be pre-empted—
even if other advertisers
were willing to pay more.
Bennett went on to describe telephone conversations he had
earlier that day with the
five other vice presidents of Centurion Cable.
After I got off the phone with you, I called every other vice
president in the cable divi-
sion. None of them saw this coming. Nobody can believe a
contract of this magnitude
could have—or would have—been kept so hush-hush. It’s just
not the way Centurion
does things. Even though it’s been like a revolving door in the
president’s office, every-
one who’s been in that position since I’ve been at Centurion has
told the vice presidents
to handle our own sales contracts. Every vice president I talked
to today said this con-
tract will make their region lose millions . . . just like it will do
to us.
In Bennett’s southeast region in 2006, they were selling their
commercial inventory
at prices ranging from $80 to $180 per thirty-second spot (with
an average of $100
each). The deal that Fowler negotiated with Northpark allowed

them to purchase any
of Centurion’s commercial advertising inventory for re-sale at
prices discounted by 70
percent off the regular advertising rates. Consequently, almost
overnight, Bennett’s sys-
tems could be replacing revenue which averaged $100 per
commercial with revenue
averaging only $30 each! What had been a deeply discounted
$30 spot turned into a
$150 penalty if the spot purchased by Northpark did not air.
When she was hired as Sales Director, Porter began tracking the
percentage of
unsold inventory as well as the rates at which commercials were
sold. She knew it was
an important way to measure the effectiveness of her
department and also to measure
their progress from year to year. Before Porter joined Centurion
Cable, their unsold
inventory was at 80 percent, significantly higher than the
industry average of 70 per-
cent. She had steadily built her department and customer base
and at the mid-point of
2006, they had achieved a level of 60 percent for unsold
inventory. Porter knew that
some of their success was due to a strong economy in their
region. More importantly,
Bennett had given her total authority to negotiate rates with
customers, to build “pack-
ages” for multiple programs purchased, and to discount rates for
annual contracts. As
she showed two charts to Bennett (see Exhibit 2 and Exhibit 3),
she commented:
Look at these graphs. The first shows the dramatic decrease we
have achieved in unsold

inventory. Our region has gone from 80 percent when you first
joined Centurion ten
years ago to 60 percent for the first half of 2006. Right now we
are ten percentage points
below the industry average. We’ve achieved that while
simultaneously increasing rates for
the spots we sell. Our sales department worked their fannies off
to achieve numbers like
this. I’ve sacrificed a lot personally to make all this happen. Do
you think Fowler even
looked at this data?
Bennett reassured Porter he knew their success in achieving the
dramatic changes in
advertising sales had been due to her efforts. He felt Fowler was
not interested in any
kind of data. There had to be something else going on. Maybe
Fowler was just trying
to make himself look good at the expense of everyone else.
2008
2020.
Exhibit 2 Centurion Cable—Southeast Region, Percent of

Unsold Inventory,
FY 1997–2006
Note: Data presented in the …

Each time Richard Bennett reached across his desk for the ma.docx

Recommended

Recommended

More Related Content

Similar to Each time Richard Bennett reached across his desk for the ma.docx

Similar to Each time Richard Bennett reached across his desk for the ma.docx (20)

More from joellemurphey

More from joellemurphey (20)

Recently uploaded

Recently uploaded (20)

Each time Richard Bennett reached across his desk for the ma.docx