'Simplify' now cable's watchword

Industry sees electronic data interchange reducing massive ad-purchasing paperwork

By Lee Hall -- Broadcasting & Cable, 3/26/2001

The cable industry is shifting into high gear to simplify the advertising-buying process for networks, ad agencies and local cable systems.

National Cable Communications, which places the majority of national spot buys on local systems will roll out its "Internet solution" in July as it tries to convert the entire buying and billing process to a paperless electronic stream.

"Everything starts with us, because we are the guy in the middle," said Robin Kroopnick, senior vice president of electronic data services at NCC.

The move is the latest step in cable's five-year, multimillion-dollar move toward electronic data interchange (EDI).

NCC has invested nearly $3 million to develop software and processes to simplify ad servicing for the more than 2,100 EDI-enabled cable systems. Before 1997, when the industry's EDI efforts began in earnest, virtually all cable buying and billing was conducted on paper, creating massive headaches for agencies, systems and advertisers alike.

"It was like Santa Claus here every day," Kroopnick said of postal carriers who would deliver bags and bags of paper orders and invoices. Each had to be checked by hand to certify that commercials had run as scheduled. "It was a nightmare," she said.

Because of the nature of the cable landscape, spot advertising buys are frequently spread over dozens or even hundreds of systems. Every transaction on every system had at least one piece of paper associated with it, and every piece of paper had to be reconciled by a human.

"It was 10 times more labor-intensive to buy cable than broadcast. We had to do something," said Joe Ostrow, chief executive, Cabletelevision Advertising Bureau. "Before EDI, there literally was a ton of paperwork that had to happen. I don't know how many forests we defoliated."

Today, after thousands of task-force meetings, reports and recommendations, NCC processes nearly 15,000 electronic invoices and affidavits each month. About 85% of all spot cable orders are now handled electronically.

"It has made our lives immeasurably easier. NCC's goal is to make it so easy for us to buy local cable that we don't even blink," said Kathy Crawford, executive vice president of local broadcast operations at Initiative Media, a Los Angeles-based agency, and one of 44 large agencies engaged in NCC's EDI initiative.

Adding an Internet component this summer will expand the EDI effort to thousands of smaller cable systems and agencies that don't have the resources for a full-scale EDI endeavor.

While electronic processing of ad buys may seem like a no-brainer, it has not always been an easy sell. Cable systems still get the bulk the revenue from subscriptions, not advertising, so EDI has not been a top priority for some. The more enlightened, however, see the potential for ad-revenue growth at a time when subscription revenue is leveling. The current economic environment only worsens the situation.

Cable networks, far more dependent on advertising income, have spearheaded the EDI drive from day one. Today, 65 networks transmit and receive information electronically with 52 national and regional ad agencies. Their EDI transactions total about 75% of the $10 billion network cable sales market.

Before EDI, the sales staff at networks often spent hours on the phone and at the fax machine transmitting information to agencies and going over the data spot by spot.

"Now we can initiate a file transfer with the push of a button and know that an exact copy of the data in our systems is sent directly to the client," said Elizabeth Hobby, director of EDI and online advertising operations, Discovery Networks U.S.

EDI is not perfect. Software can identify and kick out discrepancies, but those must still be examined by hand. And agencies complain about billing problems.

"We still have cases to this day where systems not only fail to bill us in a timely manner," Crawford said. "They sometimes don't bill us at all."

But the transition to EDI is smooth enough, and the cable industry is now looking toward the next step: serialization, or assigning a discrete identifier to each individual spot.

That would allow networks to make copy changes, transfer them electronically, and track each commercial more closely, theoretically reducing errors and misunderstandings to near zero. "That would be the ultimate evolution," Hobby noted, "but it is proving to be a much more cumbersome project than people anticipated."