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Casting about for savings

As broadcasters move to centralized operations to cut costs, manufacturers see potential for increased revenues 7/22/2001 08:00:00 PM Eastern

With television-station groups and networks facing the challenge of a move to digital broadcasting, the concept of centralcasting is moving up the to-do list for engineers at both stations and manufacturers. Turning an investment in digital technology into a way to cut operational costs is not only desired, it's a must.

The problem is, for all the talk about centralcasting, trying to define what exactly it is remains the toughest task of all. And for independent and small-market stations, the benefits of centralcasting may be a non-issue because they have little to actually centralize.

"Each station group is different," says Anthony Gargano, president and CEO of AgileVision. "They differ in number of stations owned, markets served, networks vs. independents, and amount of local news and local programming. Then there are the differences in technical and business cultures. Groups and network O&Os occupy varying points along the scale of extremely centralized technical and/or business philosophies at one end to extremely decentralized at the other."

In the broadest concept, centralcasting is serving multiple broadcast facilities from one central point that holds the material. The products and technology needed to complete the task are determined by what is being distributed. Graphics, programming and commercials are just a few of the types of content that could be served from a central point. Video servers and automation systems definitely fit into the mix, but so could graphics devices and ancillary gear for monitoring.

The end result of this diversity of ideas is that manufacturers can't simply offer cookie-cutter solutions. In turn, that makes shopping for products needed for centralcasting a bit trickier. The equipment needs depend greatly on what part of a station group's operation will be centralized. It begins with an evaluation of what a group wants to do and can afford to do.

David Weber, Odetics vice president of marketing, says his company recommends that customers evaluate their blend of broadcast-business characteristics, among them geographical dispersion, current systems investment, competitive forces, personnel effectiveness and financial resources.

"They should identify the most costly yet least mission-critical actions in their overall business process," he continues. "From this analysis, a group should be able to determine where it can gain operational leverage and/or cost savings from either the central 'mother ship' or from the group's resources without sacrificing quality and timeliness."

Adds Gargano, "Each group needs to carefully analyze all aspects of its operations and its individual station operations and assess where the opportunities lie to extract efficiencies that strengthen the group without weakening perceived local-station presence."

He adds that, once this is complete, there is a framework for analyzing the financial factors that dictate the costs and the ROI opportunity with centralcasting: specifically, the costs of labor, content distribution and the necessary capital equipment.

Weber notes that a hybrid model proves to be attractive in most cases. "One such model calls for business and administrative services to be centralized at a main site, local content acquisition to remain at a local station, and content management and delivery functions to be partially centralized and partially distributed."

The buzz and hype around centralcasting may give the appearance of nothing but good times and cost savings for those who take the plunge, but manufacturers do caution that centralized operations should be approached realistically.

"Station groups need to look at what areas can be combined without having an impact on the local flavor of their broadcasts," says Robert C. Johnson, president of Sundance Digital. "Once these areas are defined, the current costs and the cost savings to consolidate can be calculated quickly."

For all the talk of centralcasting, though, few broadcasters have actually implemented it. One group that has is the Ackerley Group, which has trademarked the phrase "Digital CentralCasting." The group now has 15 stations being served by three hubs.

"The great thing about centralcasting is that it creates a level playing field for our stations regardless of size and resources," says Chris Ackerley, co-president of the Ackerley Group. "We installed a SeaChange MPEG-2 Broadcast MediaCluster multichannel video-server system at our hubs in Syracuse, N.Y.; Bakersfield, Calif.; and Salinas, Calif., and we were able to upgrade all of our stations to digital, fiber-optic signals through one central location without having to convert each individual station."

Ackerley says outfitting each hub costs $1 million to $2 million, including hardware and software used to store, program, edit and broadcast digital television content. "In five years, we expect centralcasting to yield positive returns as we continue to improve our programming and our local-news product and ratings, which will drive revenue growth," he adds. "By 2002, we expect our operating margins for our TV Group to grow to approximately 30%."

Johnson points to the work Sundance did for Ackerley as an example of how having affiliates from one network eases operations.

"The first project we did for Ackerley involved combining five ABC affiliates in upstate New York," he says. "Obviously, these affiliates all had virtually identical network programming, and it made automating and trafficking their operation relatively easy. Ackerley has since grown its Syracuse hub to include other networks, and its Salinas hub includes several very different stations. But Ackerley was able to do centralcasting because it had stations geographically close together and in areas where it could get fiber connections affordably."

But Johnson adds that centralcasting may not always be the financial panacea that it appears to be. "While there are some obvious cost savings associated with it, an improper implementation could actually end up costing more," he explains. "The ability to move video from station to station is the first question that must be addressed, and this is not always cost-effective.

"At this point," he adds, "the single largest holdup for centralcasting is the cost of the bandwidth for stations to move signals from one location to another."

Omnibus CEO Andy Ioannou agrees. "Saving dollars is what this is all about. So why would anyone spend a huge sum to automate and centralize operations and then face the enormous cost associated with the required bandwidth to sustain this activity?"

Lisa Hobbs, director of marketing at Tandberg Television, says that broadcasters have grown accustomed to using terrestrial DS-3 links at 45 Mb/s but a link at speeds between standard T-1 at 1.5 Mb/s and the DS-3 speed would be beneficial. Tandberg Television is also a member of the Video Services Forum (VSF), which is addressing, among other things, video-transport issues.

"Even with access to fractional ATM capacity," Hobbs says, "a telco offering in the mid 20-Mb/s range would likely be more cost-effective for broadcasters looking to transmit a limited number of channels and/ or a limited amount of bandwidth.

"With the dramatic improvements in encoding quality today," she adds, "1080i video at 15Mb/s or 16Mb/s, or 720p video down to 10 to 12 Mb/s, is quite acceptable for DTV transmissions to the home. It all comes down to the content of the video being encoded. For distribution to the station, anything from 19.39 Mb/s up to 45 Mb/s can be used, depending on whether the signal is just passing through on its way to the digital transmitter or whether local news or other material is going to be added on site."

Even with the last-mile connectivity issue resolved, centralcasting operations may not be able to extend as fully into a station group's operation as hoped. "A potential concern is a lack of commonality between stations," says Johnson. "For example, if a station group wanted to combine the operations of a Fox, UPN, WB and CBS station in one facility and those stations were geographically separated, centralcasting would probably not be a good idea. The efficiencies of combining operations do not come into play as much when the stations being combined do not have anything in common to begin with."

If a group can't install a massive centralcasting operation that offers single-facility control of multiple stations, certain tasks are becoming more attractive. Observes Michel Proulx, of broadcast-equipment manufacturer Miranda: "You can see more broadcasters buying raw telco bandwidth in the form of fractional ATM capacity for file transfer and video transmission."

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