Getting down to business

Ad downturn is a bump in centralcasting plans, but savings are still in sight

Why This Matters

Open lines of communication

Open lines of communication

It's essential that remote operations have access to info

With multiple sales organizations feeding into one database in a centralcasting facility, internal and external communications become critical.

"What information will my local divisions have to do without because they don't have access or their opinion isn't heard?" says CAM Systems Vice President of Marketing and Sales Greg Maugeri.

A lack of information, he adds, can also be felt on the client's side. For example, in a non-centralized operation, a client typically would get ad confirmation from a number of departments: sales, traffic and billing. But now, they might get only one confirmation without any follow-up, and, if provision isn't made for the local division to have access to the database, it won't have the information it needs to do business on a local basis.

"That can be fatal," says Maugeri.

Wide Orbit founder and CEO Eric Mathewson notes that features like credit management and e-mail notification are needed to make things run more smoothly. "Credit management," he explains, "allows employees to know when an advertiser is late and manage the credit process so someone isn't grossly overdue on paying their bills. And, if a program is oversold, they have the information they need to bump the spots of people who don't pay on time rather than those who pay on a timely basis."

Traffic and billing systems also can help plan the sales inventory and set rates for an unlimited number of weeks in advance. For example, "rates can be set via an unlimited number of rate cards, each of which can define general rates or can be market- or customer-specific," explains PilatMedia chief functional architect Geoff Hutton. "Rates can also be set by program, providing users with the ability to define and manage premium events within the inventory."

For broadcast organizations that reach around the globe, centralized billing also has another advantage. In a multiple-currency–enabled system, Hutton notes, revenue can be reported in a single currency across the organization.

"Perhaps more important," he adds, "invoices can be raised for a single organization by many stations, and therefore revenue from advertisers can be tracked across all campaigns across all stations. This provides broadcasters with the opportunity to analyze revenue and discounts from a single advertiser across all stations and media, empowering the sales force with vital and comprehensive information for their negotiations."

What a difference a downturn makes. One year ago, the chief factor impelling broadcast groups to centralize operations was the need to reduce the cost of the transition to digital transmission. Centralization offered a way to limit spending that could not be recouped through increased audience or higher ad rates.

Today, ambitious centralcasting visions are giving way to more-practical and less complex systems. In some instances, it may be centralization of certain aspects of a station's operations. In others, it may mean involve operations that can be centralized over low-bandwidth connectivity, avoiding the cost and technical difficulties of high-bandwidth.

"There's been a definite and dramatic shift in the business model," said Jay Adrick, vice president of studio products and systems at Harris Corp. "A year ago, centralization was the buzzword, and everyone was on a mission to find out how much money they could save. A lot of studies were going on, and people announced that they would centralize their group. Due to the events of the past year, much of this activity stopped at the study phase or came to a halt altogether."

The major movement in recent months hasn't been so much by the broadcasters as by manufacturers. When groups first examined centralization, the hang-ups were primarily technological issues. Studies conducted by group engineers in the past few years showed that automation and networking technologies could indeed handle the tasks. Some broadcasters—notably the Ackerley Group, NBC and Media General—went beyond the studies and began implementing their plans.

However, as groups deepened their understanding and acquired experience, it became increasingly clear that the decisions go beyond mere technology. Centralization involves a complex web of business objectives that are more or less realized by a range of architectures. And the difficulties of untangling that web while dealing with a soft sales market put many centralcasting endeavors on the backburner.

"We're seeing regionalized centralization of stations where it makes sense rather than the whole group," says Sundance Automation Vice President of Sales and Marketing Steve Krant. "And even ending up with two or three stations in one control room is much more like a centralized operation than it used to be."

The majority of broadcasting groups today are consolidating functions only when doing so can solve significant existing problems and fulfill specific business goals. They may, for example, want to reduce personnel costs through the elimination of duplicated work across multiple stations: If a group owns a number of affiliates that run the same network programming, it can save money by prepping the programs only once and transferring them to the local station's play-to-air server.

Or a company may have acquired new stations and wants to ensure a consistent branding and look and feel. The group can take a "best-of-breed" approach and put promotional production in a single location to perform the work for the entire group. Such centralization works well for a number of other functions as well, including content prep and traffic.

One of the most important factors in deciding which activities to centralize is the cost of connectivity. Where costs are high, centralizing business processes, facilities control or master control makes sense because all of these activities require only the communication of low-bandwidth data. Doing so can result in significant savings. Media General estimates that it has reduced its head count by 22, just by centralizing traffic.

Media General has centralized sales and is pleased with the results. "I can sit in my office in Richmond [Va.] and assess the quality of the job we are doing in the field," says Jim Zimmerman, president of the company's broadcast division. "That is a significant advantage for us. We can be more forward thinking. Selling TV advertising is as pure a supply-and-demand business as exists anywhere. You can't take the spots from today's schedule and put them on tomorrow's schedule."

Centralization, he adds, allows Media General to do a better job of inventory utilization in a competitive environment "because we have a better handle on what inventory we've sold, what remains, and the pressures that remain. It also allows us to have better pricing per daypart, both up and down, depending on the market."

Media General's experience suggests that solutions that require only a small amount of bandwidth can have significant benefits. And when bandwidth costs go down, other activities that involve transferring programming material can come into play, such as centralizing media prep and consolidating libraries.

"Bandwidth costs continue to drop," says Adrick. "People are finding IP-based connectivity at reasonably low prices. I've heard $70,000 a year for a full-time 45-Mb/s IP pipe, including the last mile; that's door-to-door. Those are low figures compared to the numbers we were hearing a year ago."

Lower connectivity costs have encouraged groups to centralize programming functions. Florical Systems Chief Technology Officer Mark Bishop sees two disparate trends. One is that some groups are centralizing specific processes, such as media prep or traffic. Other groups take the opposite approach: centralizing a larger system, adding many spokes to the hub, and working to get economies of scale.

Bishop notes NBC's looking to the scalability of a hub/spoke system. "Our customers tell us that, as you add more and more spoke stations, the payback really starts to grow. For example, look at NBC's purchase of Telemundo. They see their hub system as a competitive advantage for them because they can go out and acquire smaller stations or groups and keep their overhead fairly stable. It positions them for massive growth, where they can absorb numerous stations and only add to the payback of their economies of scale."

Achieving economies of scale, though, requires a fairly large number of spokes connected to the hub; Bishop estimates the number to be 20 to 30 stations. A consortium of 19 public-television stations in the Washington, Oregon, Alaska and California is about to find out if this is the case.

Although public-TV stations may not use the same business models as their commercial counterparts, they find themselves in similarly straitened circumstances, requiring them to lower their costs. The consortium has contracted with Harris as consultant, designer and integrator of the Advanced Digital Delivery Entity (ADDE), which will connect the member stations, consolidate master-control operations, and provide a central programming library.

"We'd like to grow it a little," comments Dennis Haarsager, associate vice president for educational telecommunications and technology at Washington State University at Pullman, who is heading the project. "The model would work best with at least 20 entities, and we're pretty close. It wouldn't work at all with only five." According to Haarsager, the project has been under way for about two years, with the aim of designing a system to preserve the advantages of local community-based operations while gaining the advantages of centralized operation that the public systems sees in the commercial-broadcasting world.

Although the front lines of technology— namely video servers and monitoring—get the attention, it's often the back-room functions, like traffic and billing, that make centralcasting work. Those areas alone introduce new complexities beyond last-mile connectivity and video servers.

Wide Orbit founder and CEO Eric Mathewson likens traffic-system operation to a game of chess. Traffic for a centralized operation? "It's like playing multiple chess games at once."

The technical part of centralization is the easiest to pull off, from either the hardware or software side, says CAM Systems Vice President of Marketing and Sales Greg Maugeri. "Where the trickiness comes in is at the business level, with the need to redefine workflow and make critical business decisions as to how things will operate."

Traffic- and billing-system vendors, in particular, have responded to centralcasting needs. Though automation vendor Encoda Systems still dominates, such companies as VCI, Wide Orbit and CAM Systems are making headway. And the resulting competition is producing deeper feature sets and more tightly integrated systems.

One example is Wide Orbit's Station 3.0 traffic and billing system, which is having its first live install this week, at WTKR(TV) Norfolk, Va. This version, says Mathewson, is suitable for a multistation, multichannel application from a centralized database. "A single team of traffic operators can run multiple stations and can also have time-shifted programming. It's designed to simplify the process to run multiple stations at the same time. In the past, you would run five traffic systems shoulder to shoulder."

Each database entry is tagged for whatever channel or station is needed. Features include drag-and-drop from one daypart or day to another and automatic replacement of both spots in a "bookend."

And companies like CAM Systems are seeing centralized billing extend beyond broadcast and into cable. The company's Eclipse traffic and billing system is being used by Fox News Channel, as well as by a number of cable MSOs. Eclipse is designed for local-cable traffic and billing, Maugeri says, noting other systems intended for network-cable traffic and billing, network-cable sales planning and programming-rights and -clearances management, and broadcast-TV-station operations.

The ability to traffic large amounts of programming and spots is one part of the centralized equation; another is to improve communications. With sales departments and account executives having direct access to the traffic system, sales can manage its accounts more effectively, according to Dave Netz, Encoda Systems vice president of marketing.

Maugeri says the effect on account executives will be small because their primary responsibility, selling, won't necessarily change. The changes will typically be in the departments that receive the order hand-off.

But there are some benefits for the sales team.

"If operations such as data entry can be streamlined, the focus can be on generating revenues, not on the details," says Netz. "The approval process can also be expedited, since local orders can be routed to local credit managers and national orders can be routed to national credit managers."

PilatMedia chief functional architect Geoff Hutton cites work being done by Discovery International with his company's IBMS system, which enables sales across three continents. "By providing a complete picture of all the group's activities, it facilitates advanced selling methodologies," he says. "In centralizing all its operations into the single, integrated database available in IBMS, Discovery International is able to offer advertisers the ability to place global campaigns against live avails and guarantee delivery of bookings."

While cost reduction and savings remain the primary incentives, broadcasters are aware of the advantages that centralization offers them going forward. As the consolidation of ownership in the industry continues, it provides a way to standardize technology, policies and procedures and to accomplish the integration of a corporate culture as companies grow.

Station groups also recognize that, sooner or later, they will be in the multiplatform delivery business. Whether providing programming for wireless devices, broadband systems or over-the-air multichannel services, centralization will let them take advantage of opportunities as the business models for new services emerge.