Felipe Yalong: CFO to the broadcast giants

FELIPE Yalong

He has built a career out of managing the financial bloodline of what eventually became the country’s dominant broadcasting firms.

He likewise helped transform the top networks into publicly listed corporations.

For 24 years, GMA Network Inc. (GMA 7) chief finance officer Felipe Yalong played a crucial part in the evolution of the highly competitive broadcasting industry.

Yalong, who was ING-Finex (Financial Executives Institute of the Philippines) CFO of the 2013, is now on his 14th year as a Kapuso—a term of endearment for anyone affiliated with GMA 7.

He groomed the network for its public debut in 2007 and contributed to its rise as a competitive player in broadcasting.

During the first 10 years of his career, Yalong was a “Kapamilya,”—which refers to anyone associated with ABS-CBN Corp., GMA 7’s archrival in the industry.

He first heard of the term “convergence” from the late Eugenio “Geny” Lopez Jr. of ABS-CBN, long before it became a byword in the media scene. He saw firsthand how the concept was applied by ABS-CBN when it pioneered in the cable business, ushering in the era of pay TV in the Philippines.

When he first stepped into the world of broadcasting in 1987, he recalls how ABS-CBN was a “poor fifth” player in terms of audience share as the industry was then dominated by the likes of IBC-13 and RPN-9.

“I saw how ABS-CBN grew into a vast empire,” he says.

For Yalong, a CFO not just gives the company the money it needs to keep the business going but plays a major role in promoting good governance and transparency, especially for a listed firm like GMA 7.

Records must be updated and any shareholder must be given access without problems, he says.

In GMA 7, the CFO also sits in the trust committee that oversees the management of the employees’ benefit funds. He believes this is crucial in safeguarding the welfare of employees.

Having risen from the ranks, Yalong has a lot of empathy for the workforce.

“When I entered the company, as early as three years into the job, they realized I really mean business. I want to make sure the employees of the network get what they should be getting and we’ve seen that,” he says, noting how GMA 7 has never experienced labor unrest.

The company worked to boost its competitiveness and, in 2002, its efforts bore fruit, finally grabbing the lead position in Metro Manila audience share.

GMA 7 has a regular staff of about 2,300 and about the same number of on- and off-cam talents.

As CFO, Yalong sees to it that accounting and finance functions are unbundled from the workload of people from the creative side of the business.

“For these people to continuously churn out creative ideas, don’t give them so much administrative work. Remember that administrative is different from creative work. As much as possible, unburden them with noncreative functions. That has been the objective of my group—the corporate services group,” he says.

On debt management, he says it is the mandate of GMA 7 shareholders—the Gozon, Jimenez and Duavit families—to avoid long-term debt even when interest rates have fallen to historical lows.

Roadmap

Like many CFOs of big corporations, Yalong is a certified public account (CPA).

He began his career at SGV after getting his Business Administration and Accounting degrees at Philippine School of Business Administration.

He spent around four years with SGV before becoming a comptroller at state-controlled National Development Corp.

In 1987, the Lopezes recruited him for ABS-CBN. He left the network when the Asian currency crisis struck in 1997. He then took a two-year break, before he found a new home in the “Kapuso” network.

Leveraging

GMA 7 has been holding off on big new projects requiring large capital outlays.

But that can change when a new aggressive stockholder comes into the picture.

“I’m for leveraging a company provided that you come into a business that will really add to the value of the company,” he says.

San Miguel Corp. president Ramon S. Ang is finalizing a deal to invest in GMA 7. He is reported to be eyeing an initial 30 percent.

With this development, Yalong says, there may soon be four major shareholders controlling the company.

Also, convergence may likely be Ang’s play for the broadcast giant, given the telecommunication frequencies and licenses held by the San Miguel group.

“Maybe [Ang] has a bigger outlook for broadcasting. We’re excited because we’re purely a broadcasting company at present. This can bring us to the next level of competition,” he says, adding that having a telecommunications affiliate will allow GMA 7 to offer more services like video on demand in multiple platforms.

At the same time, Yalong says, it’s crucial for a telco to have a content provider.

“They may have the device, but what will power traffic to their device is the content, a compelling content,” he says. “That’s the challenge to a broadcaster: To make different kind of content exclusive to those devices,” he says, noting that a mobile device user will probably not spend more than three to four minutes digesting video content.

Theoretically, a working consumer spends more time with PCs or mobile devices in any given day—longer than the time it takes them to watch TV.

Yet, Yalong believes it may still take a long time for mobile devices to become the dominant provider of video content.

“But we already challenge our producers to think that way,” he says.

The advent of the digital era also hasn’t affected yet the revenue broadcasters generate from advertising, unlike the print media, Yalong says.

This is because advertisers realize that, in terms of cost per eyeball, TV is still the “cheapest” medium, he explains.

Still a duopoly

When businessman Manuel V. Pangilinan entered the broadcasting business and launched TV5, or the Kapatid network, Yalong says this development jacked up the production costs of the two networks because of the staff piracy that took place at the time.

“In the last three years, talents really demanded so much more. We had to say okay, if we can’t give what you want, you can move on,” he says.

But things have stabilized since then.

Yalong says the broadcasting industry continues to be a duopoly.

“If you’re an advertiser and you want to reach more eyeballs, you must be present in the two networks, and capture 80 percent [audience share],” he says.

Managing production cost, he says, is a continuing challenge for any broadcasting firm.

Over the years, GMA 7 has become “very choosy” in getting exclusive talents to sign up as part of its cost management strategy.

“Close to 60 percent of production cost is talent fees. Of the total cost of the network, 50 percent is production,” he says.

Right now, GMA 7 operates two local channels, the flagship GMA 7 and the news and lifestyle-oriented GMA news TV.

Given the finite airtime that TV firms offer, a typical market segmentation strategy has been to operate multiple channels in order to widen the airtime that can be sold to advertisers. For GMA 7, however, Yalong says its two channels already provide the content “that will allow you to enter so many new platforms.”

Overseas operations

GMA 7 likewise uses some imported content, typically soap operas and other shows dubbed in Filipino. But because it operates several international channels, the imported content shown locally can not be used overseas. That is why GMA 7 continues to develop content for a widening audience.

International operations now account for 6 percent of GMA 7’s total revenues, but net profit contribution is much higher at about 15 percent. In terms of geopolitical coverage, international operations are biggest in North America, but Europe is cited as a big untapped market.

Asked about GMA 7’s brawl with the Kapisanan ng mga Brodkaster ng Pilipines (KBP) on load factor, Yalong argues that when ABS-CBN was the dominant network, KBP never observed such load limits (KBP limits the commercial load of programs to 18 minutes per hour).

“When we became very competitive, they called our attention. Historically [they were] not like that,” Yalong says. “Why are you being so hard on GMA 7? So, we resigned from KBP. But internally, we observe limits,” he says.

GMA 7 left KBP in 2003.

Aware that overloading programs with commercials can turn off an audience, Yalong says GMA 7 has since set an internal ad limit of 20 minutes an hour.

“We only exceed that during elections [season],” Yalong says.

During an election season, Yalong says, GMA 7 allows itself to load commercials to a maximum of 21 to 21.5 minutes per hour. As a tradeoff, GMA 7 will reduce internal promotions showcasing its programs.

With the elections drawing near, Yalong sees more advocacy spending towards the second half of 2015.

“For a broadcaster, 2014 will not be a good year compared to other years, but 2015 will be a better year and 2016 will be the best,” he says.