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Each 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

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

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2Case 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

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Centurion Media: Doing the Right Thing 3

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.

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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”).5Much 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

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