It's not news to any of us in the Public, Educational, and Government Access industry (PEG) that traditional funding models are rapidly changing. The trend is moving in the direction of having more money earmarked for buying big stuff (we call these capital purchases) than for the day-to-day operational costs. But here's the twist: these days, things like mobile and OTT streaming apps are becoming super important for local cable channels to share all the important local news and updates. These apps are digital assets that need a bit of cash not only to get up and running but also, just like your cable channel, have some ongoing costs to keep them running smoothly.
So, you might be wondering, how can you make sure your media center's budget is used smartly in this new scenario. Well, let's start by getting a clear idea of what a capital budget and digital assets really mean. This will help us figure out which pot of money is best for supporting your OTT and Mobile Streaming App needs. Let's dive in!
Capital Budget
Alright, let's break it down. Think of a capital budget as one piece of your media center's money puzzle. It's possible to have an operating budget without a capital budget, but not the other way around.
Here’s the fun part: capital budgets are more about the long game. They're not just tied to the regular fiscal year. Imagine you're jazzing up a new studio - the budget for that project could stretch over 2 years, rather than just sticking to the usual fiscal calendar.
Now, what goes into a capital budget? It's all about the big stuff – upgrading or keeping your physical assets in tip-top shape. Think of it as the budget for your big, lasting purchases.
Examples include:
- Building renovation
- Equipment purchases
- Technology infrastructure
- Intellectual property acquisition
Operating Budget
Alrighty, let's talk about your operating budget – it's like your yearly game plan for money coming in and going out. For a PEG media center, this is where you jot down all the regular stuff: your rent, the electric bill, what you pay your awesome team, and even those paper clips and post-its.
On the flip side, where's the cash coming from? This is where you count things like franchise fee payments, those cool sponsorships, and any money you make from production services.
Here's the thing: often, people think of the operating budget as the go-to place for all sorts of expenses. It's kind of like the big umbrella that covers pretty much everything you're spending day-to-day.
Operating vs Capital
Okay, let's dive into the world of PEG fees and budgets. Usually, cable companies chip in with a franchise or PEG fee to your media center. Sometimes, there's this special pot of money, that's just for big purchases – we call this the capital fund. The rule is, this money is only for buying stuff, so you can't use it for day-to-day expenses like paying your team or covering the rent.
Now, let's talk about something like a video playback automation system (think of something cool like a Cablecast VIO 2). This is a piece of equipment you can actually touch, so it goes under capital expenses.
Here's a neat trick: if you've accidentally put some expenses in your operating budget that really belong in the capital budget, shifting them over can give your operating budget some breathing room.
So, what are those sneaky items that often end up in the operating budget when they shouldn’t? Let's find out!
Digital Assets
Often in the PEG world, we see capital purchases like cameras, lights, and microphones. Digital assets like OTT and mobile streaming apps or a website are also considered capital purchases but can be overlooked in the budgeting process because they are digital.
Other digital asset examples include:
- Trademarks and digital branding
- Copyrights for videos and music
- Domain Names
- Websites
- Digital Marketing Assets
- Content Libraries, live video or graphics
- Cloud storage space
Why Budget Digital Assets in Capital?
The cable companies are offering more capital funds to PEG centers than operating funds. Correctly allocating your OTT and mobile streaming app development as a capital expense can unlock capital funds that weren’t previously available to you.
Your Over-the-Top apps are assets for streaming platforms like Roku or Amazon Fire TV can be purchased from your capital funds and amortized over the years because they are something you own, they are not operational cost. Moving projects that were previously allocated to your operating budget into your capital budget will help reduce your long term operating costs while maximizing your capital budget.
What Does Amortizing Mean?
Amortizing a capital purchase, like the build of an OTT or mobile app, is spreading the cost of a long-term asset over its useful life. Each media center or city may have its own accounting rules on how an asset is amortized.
Essentially, instead of recognizing the entire cost of the capital purchase the first day it was acquired, it is spread out.
This accounting practice is beneficial because it can help match the expenses of the asset with the potential revenue it generates. For example, if using OTT and mobile streaming platforms begins generating more viewers and more content sponsors, you will more easily see that change.
Also, by spreading it out over its useful life, you will know when your OTT and mobile streaming apps will need to be updated.
Can other Cablecast Products be a Capital Purchase?
Cablecast is a hardware and software company. Our video playback automation systems, like the Cablecast VIO or the Cablecast OMNI, are additional examples of assets that can be added to your capital budget. Video playback automation systems are another way to invest in your media center. A quality experience for your viewers to watch your programming is an investment in your station.
Move your Cablecast Branded app to your capital budget to free up operating costs and invest in your media center. Cablecast can also help you reach viewers on Android, Apple TV, iPhone and iPad. Reach out to our sales team for more information.
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