Full Implementation of EDI Has a Way to GoWork needs to be done and a heavy investment will be required to make it fulfill its promise 3/23/2003 07:00:00 PM Eastern
WO Station Packs a Multichannel Punch
With more than 900 stations already signed on to the concept of electronic data interchange, the concept can definitely be called a success. But traffic-system vendors wonder whether the full potential of the concept will ever be realized because it will require heavy investment and nobody is volunteering.
"Everybody needs EDI, and the media companies talk about it like it's the silver bullet that will solve efficiency problems," says Martino Mingione, president of CAM Systems. "But what they'll find is, they've only solved half the problem."
Mingione and other vendors say full implementation will require unique identifier numbers for each spot sold or bought as well as the ability to negotiate within the system. Currently, EDI is used for TV media to serve as an invoicing function—removing the need for paper invoices.
"It's going to take leadership from both media companies and advertising agencies but also major vendors to help push those goals," says Bob Duncan, Encoda senior vice president and general manager, global products. "The industry wants things to be open and not tied to proprietary vendors, but it is going to take key vendors to move things."
Mingione envisions a full circle of electronic connections and circuits from "stewardship" at the agencies all the way through to sales and automation and back again for billing.
"There is broad agreement that the industry wants contracts to be documented in an efficient manner," says Eric Mathewson, founder and CEO of WideOrbit. "But there isn't broad agreement on whether or not the negotiation nature of a process is something broadcasters and agencies want handled technologically."
Speedier spot buys
The attractive aspect of negotiating via EDI is that, by making spot purchasing easier, including negotiations, EDI ensures that more of every dollar is spent on actual advertising instead of being spent on the machine that makes it possible. Right now, it's estimated that 40 cents of every dollar spent in advertising doesn't go to airtime but goes instead to commissions and support.
Once the agencies and broadcasters get used to EDI, Mingione believes, they'll soon be clamoring for more capabilities. "People will see the speed limits once they operate under it. And that's when the demand for the next generation starts."
One thing that all vendors see as a priority is the creation of a single database warehouse that gives each spot broadcast a unique identifier. Giving each spot its own ID number would make it much easier to deal with issues like make-goods and verification of a spot's actual running. The problem is, the system would cost millions to develop and millions to maintain.
"The industry needs a way to identify every individual spot," says Mathewson. "There are technological ways to make it so that the number can be generated at many different places and that they don't dupe. But, eventually, you'll need a data warehouse, and that's going to be a big job."
Another new opportunity the data warehouse would open up is in making it easier for agencies and stations to contact one another. Today, those efforts often involve faxes or letters. But, with a data warehouse, electronic data could be sent to the station or agency, and the personnel could immediately know whether the spot or avail is relevant to their needs.
"When I get a transaction on my doorstep," says VCI President and CEO Lowell Putnam, "I can look at it and know who it is and if it's appropriate for me."
Ed Adams, president and co-founder of traffic system manufacturer Optimal Solutions Inc. says that adding negotiating functionality to EDI is an age-old debate. "The big question is security," he says. "Stations at this point want to service the agency as easily as possible, but they don't want to lose the human element of the negotiation."
The vision Mingione, Putnam and others have, though, differs slightly from that of Television Advertising Bureau Executive Vice President Abby Auerbach. Although the creation of a serialization system for identifying spots is compelling, she says, the concept of using EDI for negotiating holds little interest for TVB, agencies or stations. "EDI is not about negotiation. This isn't a commodity business. Media has interesting qualities to it; it's not all about lowest CPM."
She says that EDI, as the TVB and American Association of Advertising Agencies view it, is about enabling the background process and getting the paper off the buyer's and seller's desk so they can put more emphasis and resources into negotiations.
Right now, she says, the challenge at TVB is getting agencies to accept invoices without a paper backup. "We can do EDI universally today, but there are those reticent to use it, It's a matter of getting finance people together at the agencies and AAAA and getting them comfortable with the system."
Negotiations via EDI
One company is involved with electronic negotiations. OneDomain has a system that allows agencies and stations to request and send avails via e-mail and do research and analysis.
OneDomain Vice President Ed Salgado says the resistance to EDI as a negotiating tool doesn't make sense given that electronic negotiations are done today by fax. "With that system, the station re-inputs the fax electronically, and, if it's a proposal, they fax back to the agency, who then inputs the fax electronically, and then they fax back to the station again."
The resistance appears to be cultural as well. For stations that don't have rep firms, negotiating via EDI makes sense, according to Salgado.
But national rep firms aren't enthusiastic about it. "Rep firms really want to control the data going across," he says. "If the agency or advertiser could easily communicate with the station, that hurts the rep firm."
For example, using OneDomain's iAvail product, which costs $30 a month, a station could send out a request for 200 avails electronically. For those not using an electronic system, that would typically require 200 faxes. "Now they can type it in once and send it via e-mail, and they'll even be able to see if the e-mail was read," Salgado says. "With a fax, they can't even verify if it was delivered."
Adams believes there will always be a need for rep firms, even with negotiations via EDI.
"Stations will always need a second tier of support," he says. "Whatever happens, the rep firms will just have to adapt and embrace it. In the end, if technology moves forward, it means more time to sell."
Differing opinions on negotiating via EDI aside, there is consensus on the need for a system that assigns unique ID numbers to each spot. Auerbach notes that unique ID numbers have been discussed for many years but the increasing fragmentation of the industry makes use of IDs more attractive.
"We need to explore issues like serialization although the focus of EDI is on the transaction side of the business," she says. "We just want to streamline the process and offer many more choices and details to the EDI user. Things like paperwork are enormously time-consuming, and you get the focus off of what is supposed to be important: negotiation."
Given the costs involved with an effort to offer serialization, though, the question becomes not how or when but who: Who is responsible for the investment in developing and implementing the system?
Auerbach believes it will be the trading partners that will lead such an effort because the benefits of improving the background process will give them new efficiencies. "There will be costs involved, but we're trying to keep those to replacement costs because business right now is a labor-intensive paper process," she says, "Efficiency will cost a little bit but certainly less than what everyone is spending now."
But getting the trading partners to see those benefits could be difficult.
"There's no obvious payback for something like this," says Putnam. "You'll improve things and be more efficient, but the ROI needs to be quantified. And why should someone do something out of the goodness of their heart? If it helps everyone, that's nice, but someone will want a return."
Adams believes it will be the agencies that set the agenda. As for who will pick up the cost, he believes it needs to be a third party without any business conflicts. That most likely points to the TVB or AAAA, but both organizations have said funding of such a project isn't currently in the realm of possibility.
The other problem facing such a project, according to Adams, is that there needs to be certainty that the stations and agencies will both embrace it.
"Nothing would be worse," he says, "than to invest in creating such a system and have the stations and agencies not be interested in it."
Mathewson believes the network O&Os will most likely be the ones to drive the process. "They'll espouse a solution, and the rest of the industry will, over time, adopt that solution."
The other push in EDI involves creating a common transport to enable information to flow along the EDI highway. Auerbach says those efforts are centered on XML, and the support of vendors has been strong. "Not all the transactions today are happening in XML because of legacy systems and the costs associated with turning them to XML language. But the newest vendors, like VCI or WideOrbit, are ready to go."
Adds Mingione, "The TVB understood that the way these EDI interfaces should be put together is through an XML data standard, and that is a standard that is conducive to supply-chain management."
The traffic systems offered today continue to evolve to meet the promise of EDI. Encoda, for example, will soon be offering XML support in its system. It also will head to NAB with its new Broadcast Master product available in both a turnkey system for single stations or an enterprise-size system for centralcasting or multicasting needs.
"It's a Wintel-based system that is currently deployed in about 80 channels around the world," says Duncan. "It offers an integrated broadcast footprint that contains programming, scheduling, sales and finance information." He says it uses a simple, integrated database environment that compartmentalizes components of the operation.
He believes that the trade organizations have done a good job of pushing the development of standards but now it may be up to other industry players to finish the job. "We're at the part where a vendor is going to push progress."