The young firm sees a growing opportunity in providing a service that, for a fee, frees TV stations from the considerable costs of maintaining and upgrading their local master control and from manning it around the clock.
Encompass Aims To Cut Centralcasting Costs
Encompass Digital Media—a new name to many in the broadcast industry—is approaching TV station groups, offering to provide centralcasting services that, it claims, could slash annual operating costs by as much as half.
Encompass has put proposals in the hands of eight groups and is “at contract stage” with two of them, according to Jarred Kennedy, SVP of business operations.
“We are getting great traction in the market,” he said, declining to identify any of the groups. “We think it’s because the product and service we offer resonates with where the industry is right now. We think it creates a lot of value for our clients.
“Our challenge today is to convince our potential partners—the station groups—that it makes more sense for us to do this for them than for them to do it themselves.”
Encompass was formed in 2008 to provide content distribution services by CEO Simon Bax, COO Bill Tillson and private equity firm Wasserstein & Co. It got its operational start after purchasing Andrita Media Center, a network origination facility in Los Angeles.
Bax was EVP and CFO of Pixar Animation Studios until its sale to Disney in 2006. Tillson doubles as CEO of Broadcast Cable Services Inc., a cable consulting firm. He has overseen the launch of more than 200 cable television networks in North America, Asia, Latin America and Europe, and has negotiated facilities and transponder transactions in excess of $2.5 billion.
The company raised it profile and expanded it capabilities by bracketing 2010 with two other major acquisitions. In January, it acquired the satellite services division of Crawford Communications in Atlanta, and, in December, it struck a deal to purchase the content distribution business of Ascent Media for $120 million.
Encompass must still guide the Ascent deal past regulators in several countries, but it expects no problems and hopes to close the deal in the first quarter of this year.
With the assemblage of assets, Encompass manages and distributes video and other content via fiber, satellite, accelerated IP and FTP links. It also provides production and post-production services.
Current clients include A&E Networks/Lifetime, Sony, NBCU, CBS, Disney/ABC, BBC Worldwide, the U.S. Department of Defense, MTV, ESPN, NHL, Discovery Networks, DirecTV Sports Networks, NFL Network, YES Network, Scripps, Hallmark, Channel Five and TV Guide. Ascent will bring with it CNN, CNBC, Bloomberg, Thomson Reuters and others.
When Encompass purchased the Crawford assets, it took over its centralcasting contract with NBCU. Under that contract, Encompass ingests all the programming for each of the NBC O&Os, mixes in promos and commercials and sends it out to the stations via fiber (with satellite backup).
The NBCU model—plus the huge economies of scale offered by its global fiber network—led Encompass into the station centralcasting. “It really gave us the anchor point for building this business,” said Kennedy. “That relationship was complemented by the broadcast knowledge and expertise derived from our network origination operations.”
Encompass is now offering the NBC model to other stations. All its proposed systems would operate the same way, with the only differences being the kind of connectivity used.
Stations would pay a monthly fee for the service on a long-term contract, but would be freed from the considerable costs of maintaining and upgrading their local master control and from manning it around the clock.
The savings will vary depending on the number and size of the stations in the group, he said. “Typically for a middle-market DMA station, we think if you include the depreciation of the capital equipment one needs to buy and maintain, one sees reductions in the 30 to 50 percent range in operating costs.”
Broadcasters interested in centralcasting systems have the option of taking the do-it-yourself approach, but they will have to use their own staff to design and operate the facility and buy their own equipment and connectivity, he said.
In the end, they will be hard-pressed to match the price at which Encompass can provide the services, he said.
Shawn Maynard, VP-general manager of Florical, a maker of station automation technology used in centralcasting, does not see Encompass as competition, but as a potential customer.
“A station may want to use a service provider, but still specify it wants a Florical Acuitas system,” he said.
John Wadle, VP of technology for Omnibus, a Florical competitor, said Encompass is already a customer, using several of its iTX systems in Los Angeles and Atlanta. “We’re not in the service bureau business, so we don’t see ourselves as competition for Encompass,” said Wadle. “We either sell to a station group or to a company like Encompass.”
The Encompass centralcasting system uses dedicated fiber with satellite backup. The company provides each station in a system with a small equipment rack along with an integrated MPEG-4 receiver/decoder for a station-provided satellite dish.
Encompass works with the individual station to determine the type of fiber connectivity. Typically the default is DS3. “For stations looking for a more aggressive price point, we are also willing to work with them on other technologies such as MPLS.”
MPLS—multiprotocol label switching—is a telecommunications network that directs and carries data from one network node to the next with the help of labels. MPLS dispenses with the cell-switching and signaling-protocol baggage of ATM.
MPLS is a promising technology and Encompass is cooperating with its vendors to bring it to the broadcast environment, Kennedy said. It works well now for nonlinear applications, but in linear applications—such as a broadcast environment—one has to be careful about latency. “We think MPLS will allow us to roll this service out to even smaller stations,” Kennedy said.
“Some stations may have hubbed a few stations on a small scale or co-located stations. They may have experimented with the hubbing concept,” he said. “But in the past year, more and more groups have become open to the idea.”
For most broadcasting, centralcasting is a major learning process, Kennedy said. “It’s not until you are really get into an operation that you realize the nuances of keeping a channel on the air. It takes a lot of work to find all the small issues.
“A lot of station group owners … realize that the environment and technology has changed,” he said. “There’s now a way to safely and securely hub stations at a cost-effective price point that allows stations to improve the quality of feeds they are delivering into their market.
“I’ve been impressed at how people are open to this,” Kennedy added. “Now it’s just a matter of working with them to see what makes sense for their particular operation and way of doing things.”