The software firm's purchase of VCI Solutions this week will give it about 70% of U.S. traffic and billing market share. Founder Eric Mathewson (right) says one result of the deal will be more participation in TVB's ePort electronic ad transaction system. “WideOrbit supports ePort and VCI did not,” Mathewson says. “This deal is a boost for the industry because we will support ePort going forward. We think its a win-win for us and for the industry.”
VCI Buy Expands WideOrbit’s Orbit
With WideOrbit’s purchase this week of VCI Solutions, the company has moved from having a zero market share in broadcast traffic and billing systems when it was started 10 years ago to now serving as much as 70% of American television stations.
WideOrbit was founded in 1999 after Eric Mathewson recognized that antiquated software in the media industry was hampering the ability of media outlets to operate efficiently. At that time, Encoda Systems (purchased by Harris Corp. in 2004) had 85% of the market and VCI Solutions the rest.
Today, WideOrbit claims to be the overwhelmingly dominant player in the market and the fastest growing traffic software company in America. “Since then we have taken tremendous market share from what is now Harris and we took a little bit of market-share from VCI prior to buying them,” said Mathewson
Mathewson said the purchase of VCI was an all-cash deal and, since no government approval is required, it’s expected to become final at the end of October. However, he wouldn’t reveal the price he paid for VCI.
WideOrbit, which will drop the VCI brand, will take on about a dozen service and support personnel from VCI to support current customers for the duration of their contracts. However, no executives will make the transition, including industry pioneer and VCI founder Lowell Putnam.
“Lowell Putnam will not being joining the management team of WideOrbit,” said Mathewson. “I believe he will be moving on to another vocation.”
Putnam was one of the founding fathers of the broadcast traffic and billing industry. He’s the son of Bill Putnam, the founder of Springfield Television, a corporation that owned three TV stations, including WWLP, the NBC affiliate in Springfield, Mass.
In 1976, Lowell Putnam, Bill’s son, graduated from college and went to work for his father. Lowell was given the challenge of creating a traffic and billing software package to replace Springfield Television’s existing system. Lowell sat with each person in the operation and learned their workflow and interviewed them on the requirements of a new system.
Lowell, with a small programming team, successfully created what became STARS I, and replaced the BIAS system at all Springfield Television properties. When Springfield Television was sold in 1984, Lowell started his own company, VCI Solutions.
Attempts to reach Putnam were unsuccessful. Phones were not being answered at VCI Solutions and he was unreachable by e-mail.
WideOrbit has moved well beyond the 1,100 television stations, 800 radio stations and 100 cable networks it now calls clients. Today, it’s also involved in outdoor advertising, mobile technology and even taxicab video.
A big reason for the sale, said Mathewson, is that VCI generated more than 50% of its revenue from cable channels. That’s an area that WideOrbit needs, he said, as the company is working on several new products for cable networks.
The economic shakeout in the television industry had little to do with the sale, Mathewson said. “This acquisition is about WideOrbit taking market share from its competitors over time, to the point where it just wasn’t viable for VCI to be a long-term entity providing solutions to broadcasters.”
Mathewson said his company is out-investing all its competitors, including Harris. “Harris still has Sinclair and Belo, but we’ve taken a lot from them,” he said.
Not true, said Bob Duncan, vice president and general manager of Harris Media Software Solutions. “There are lots of ways to cut up market share,” he said. “In our view, we split the market pretty much evenly between ourselves and WideOrbit. They are a strong competitor as we are and we compete head-to-head in virtually every transaction.”
He said Harris has about 500 TV station clients in North America that serve thousands of digital channels. “The issue when you talk about television stations is how many digital channels do you serve. There are many ways to derive arithmetic around those counts. There are many ways to make the numbers say what you like.”
As to investment, Duncan said Harris is very committed to the media market and is “investing heavily” in its software products, which not only includes traffic, but the advertising and digital-out-of-home markets as well. “Connecting buyers and sellers is an important initiative for the industry,” Duncan said.
At this year’s NAB Show, VCI introduced Orion Discovery, an advanced solution that was billed to manage business with predictive analytics. Mathewson said the new system was never installed. VCI’s only product in the field is the Orion Business System, which WideOrbit will own with all its associated intellectual property.
“We are always looking for good and great ideas on how to improve our software and I’m certain there are parts of VCI’s software that should be included in our suite of products,” Mathewson said. However, he said, at the end of their contracts, he hoped the VCI users would switch over to the WideOrbit products.
Another boost from the sale goes to ePort, the system run by TVB that creates an “electronic bridge” for buying and selling TV spots. It allows any buyer, station or national rep to exchange transactions.
Launched in February 2007, ePort was aimed at reducing the labor and high costs of buying spot TV — a move that TVB hoped would keep advertisers from straying to cable and other easier-to-buy media.
“WideOrbit supports ePort and VCI did not,” said Mathewson. “This deal is a boost for the industry because we will support ePort going forward. We think its a win-win for us and for the industry.” Harris also supports ePort.
Mathewson said his company has also been developing WO Central, its own marketplace, to make it easier to sell and purchase media. “It’s a sea change workflow tool and will take time,” he said. “We think the industry needs substantial new solutions to make it easier to buy and sell media.”
When asked if broadcasters might view WideOrbit now as a monopoly in traffic and billing systems, Mathewson paused and then noted that his company has been the leader in the space for some time.
“There are areas where we have great market share and areas where we have very little market share,” he said. “We are the only company that has been a service provider to all media forms versus just one media form. That has tremendous value to large media companies.
“People’s fear of a monopoly is that the monopoly is not responsive or has bad customer service; that [it has] predatory pricing policies. But that hasn’t been our behavior. It’s the same team managing and growing WideOrbit for the last 10 years when we had zero market-share. We have a really strong, positive reputation for customer service and support. And a very solid product that people are happy to be running their revenue on.”
More on TV Automation: