NMT ‘Rightsizes’ To Move Ahead
By Carl Lindemann
National Mobile Television’s SVP of Operations Frank Coll has a favorite rumor from the many that swirled around his company since he took charge last spring. “It’s both humorous and sad at the same time,” he says. “The word was that one of our trucks out doing a Pittsburgh baseball telecast was going to get padlocked by the Allegheny Sheriff before the game. According to the story, I knew it was going to happen but didn’t tell anyone. When I got word about this from the EIC, I had to laugh. But I also had to reassure the crew that everything was OK.”
Coll has had his hands full navigating the turbulence that has rocked the company he has served since 1990. “We’re still in the process of what I would refer to as ‘rightsizing’ rather than downsizing,” says Coll. “We still don’t have the overhead numbers where we need to get them to continue the business at a sustainable rate for our investors and lenders, but we’re very close.”
To date, the bulk of the rightsizing has come in two phases. Earlier in the year, the company’s last three analog trucks were retired and sold, and the Dallas field-shop operation was shuttered. This impacted about 20 employees. Last month, NEP acquired two HD units and their contracts supporting CBS Sports agreements covering PGA Golf, NFL football, and NCAA basketball. Coll says some 18 employees were affected by this transaction, with most moving over to NEP to help keep the trucks maintained properly.
According to Coll, these moves have stabilized the company for the time being. What’s unclear is how to get back on track with the transition to HD, a key to long-term survival.
“In the short term, we have very good prospects for continued operation and keeping biz at current level,” says Coll. “We still have a very talented group of employees and some very good customers who are behind us 100%. However, in order to sustain the business we have today, we need to be able to move with that business into the HD world in a bigger way.”
The challenge, he says, is getting the financial backing to do that. “We’re not very attractive now in terms of getting the needed investments,” he says. “We need to make ourselves more attractive over the next 12-18 months by cleaning up our balance sheet further so we can get the capital to rebuild.”
Complicating the outlook is the downturn in the financial markets.
“The impact of the credit markets is like throwing salt into the wound,” notes Coll. “A bad credit market makes it very difficult to operate. People should know that we’re not going away tomorrow, but we have a hard road ahead. It’s hard to compete and to continue to service the business we have in this economic environment, but we are committed to getting it done right.”
What’s at the root of NMT’s troubles, and are there larger lessons for the mobile-production industry? Coll says the key is finding the most economical scale for an operation. Bigger isn’t necessarily better. In fact, large operations can be at a disadvantage.
“The problems we’ve had weren’t all caused by the move to HD and the financial markets. Rather, they were rooted among several business decisions the company made in the late 1990s,” explains Coll. “We went from a 10-truck operation in 1990 to a 50-plus-truck operation in 1999 plus our UK unit. I think it is very difficult to operate a business of that size in our industry.”
His theory is that NMT had not only an overwhelming amount of overhead per truck in order to properly service customer needs but also a regionally diverse customer base that required widespread operations. “That structure severely inflated our overhead costs to crushing levels,” he says. “Smaller competitors had less overhead [per truck], but we were forced to compete at their pricing level. The lines of revenue versus expense diverge, and you get into trouble. Because the margins are so slim, the structure of the business we had in our heyday wasn’t sustainable.”
The risk for the industry as a whole, Coll believes, is the coming price pressure from an economic downturn. If TV sports ad revenues decline, networks will be under the gun to cut costs, but mobile-production vendors, already operating on razor-thin margins, may find it impossible to give ground.
“If the price point is moved lower, you will see more failures,” says Coll. “We’re unfortunately an excellent example of what can happen. As an industry, we continue to shoot ourselves in the foot by coming to the aid of our customer base at our own peril. But in the end, you can’t squeeze any more blood from this rock.”