Over the past decade, the T&B sector has consolidated dramatically. Where once there were 15-20 players, there are now just a handful, fiercely competing to meet clients' demands for trimming costs and managing ads on the proliferating platforms, including the Web, digital subchannels and various mobile offerings. WideOrbit and Harris OSi are the dominant companies in the U.S. commercial TV station sector, but a number of others, including Myers, BroadView, Pilat and Sintec, want a piece of the pie.
Traffic & Billing: Fewer Firms, More Offerings
Eric Mathewson, founder and CEO of WideOrbit, typically arrives at company headquarters in San Francisco before dawn and departs after dark. So when he gets calls that open with the chatty question of how’s the weather in sunny California, he has a pat answer: “Pretty much the same as yours — 68 degrees and fluorescent.”
Mathewson’s brutal schedule underscores just how competitive the business of traffic and billing systems really is.
Highly sophisticated T&B software is the electronic air traffic control for station and network advertising. It handles everything from scheduling, insertion, invoicing and recording payments to make-goods when special news or emergency programming disrupts the regular schedule.
TV stations generated nearly $20 billion in ad revenues in 2010, according to research from BIA/Kelsey. Add to that $16 billion in broadcast network advertising and $20 billion in cable network advertising, according to other sources, and the total is just under $60 billion of annual television advertising.
Nearly every penny of it flows through a T&B system.
Over the past decade, the T&B sector has consolidated dramatically. Where once there were 15-20 players, there are now just a handful.
WideOrbit and Harris OSi are the dominant companies in the commercial TV station sector in the U.S., but others — notably Myers Information Systems, BroadView Software, Pilat Media and Sintec Media — are looking to expand and perhaps chip away at the WideOrbit/Harris OSi near duopoly.
All are trying to meet clients’ demands for trimming costs and managing ads on the proliferating platforms, including the Web, digital subchannels and various mobile offerings.
The emerging platforms increase not only scheduling complexity, the ads themselves also may vary depending on the platform. Consequently, so do the billing metrics.
“A typical ad on broadcast television is so much per spot,” says Larry Keene, CEO of the Traffic Directors Guild of America. “But with websites or digital, instead of paying X per spot, the advertiser will say ‘we’re going to pay for so many click-throughs or so many actual orders.’ Your traffic software system has to have ability to bill so much per spot for a typical order, but employ a whole different concept for the Web, or D2s.”
As for mobile DTV, the advertising model, and thus the T&B software, for that platform is evolving, Keene says.
So far, no one has designed a system that eliminates humans entirely, but T&B systems are allowing stations to significantly reduce head count.
Keene projects that traffic and billing departments will see a 15%-20% reduction this year. This follows substantial cuts since 2008 when many station groups and stations were struggling for economic survival.
With mostly his own money plus some help from venture capitalists, Mathewson founded WideOrbit in 1999. He signed up 10 clients for its first commercial T&B product, WO Traffic, in 2002.
While Mathewson retains control, Silicon Valley venture capital legend Vinod Khosla is among WideOrbit’s backers.
A year ago, privately held WideOrbit bought VCI Systems for an undisclosed amount. In doing so, it boosted its market share dramatically, bringing on board a host of clients, including station groups Freedom and Newport.
Today, the company has about 70% of TV station market share and roughly 25% of the broadcast network business, according to Mathewson. In the station segment alone, that would translate into about $14 billion worth of station advertising running through WO Traffic.
In a business where size counts, Mathewson maintains a lean and hungry attitude. “We still think of ourselves as the underdog,” he says. “At its core, this business is very simple: Make a client happy with a product you sell. I think a lot of companies kind of run out of steam on that.
“We’ll spend $30 million this year in software development to expand, maintain and improve the existing system.”
A typical T&B system business model is a multiyear lease that includes regular software updates, says the TDGA’s Keene.
WideOrbit and Harris provide several major updates a year.
Acquisitions are part of the growth strategy, Mathewson acknowledges. So is a new product, WO Central, a Web-based system that allows media buyers to transact business directly and electronically with WideOrbit station clients.
“The goal of WideOrbit has always been to make it easier to buy and sell media and create an advertising marketplace,” he says. “But before we could create a marketplace, we had to understand the inventory and it’s taken a lot longer than we expected.”
WO Central currently is in beta in the San Diego and Kansas City DMAs, Mathewson said.
“The industry needs this badly — it will make the industry more profitable,” he contended. “We don’t see any other company on the planet that can make this happen.”
Harris Corp., founded in 1922, has long been a leading vendor of broadcast (radio and television) hardware and software systems. In 2006, it used the acquisition of Optimal Solutions Inc., or OSi, to gain a substantial presence in the T&B space. With that buy, Harris added 350 U.S. television stations to its T&B vendor list.
But Harris quit using station count as a market share measure in 2008 as the digital conversion was occurring. The company estimates that, based on 2010 numbers, it had approximately 40% of the North American market. It notes that stations and station groups make a heavier contribution to its market penetration than do networks.
Like WideOrbit, Harris offers a suite of products, with OSi-Traffic the featured T&B element.
“OSi-Traffic was originally architected around targeting large station groups that require consistent data across all those stations,” says John Patrick, managing director of North America Media for Harris OSi. “It allows station groups to centralize back-office operations and standardize work flow. We think we lead in that area. That’s our sweet spot, but it also scales down nicely and can deploy to single stations as well.”
Mathewson views the move toward multi-tenant hosting with some caution. “If you’re a multi-million or multi-billion dollar entity, you want to make sure your information is very secure,” he says. “How do you guarantee that when your information is on the exact same servers as other entities?
“We think multi-tenant hosting over time is going to be a huge Achilles heel in cloud computing. We think the people who operate clouds recognize this and we think they’re working very hard to make sure it’s not a shortfall. But we don’t see a significant cost reduction to going multi-tenant so we aren’t going to do that.”
In a $60 billion annual ad market, smaller doesn’t mean small.
Toronto-based BroadView Software and Myers Information Systems, headquartered in Northampton, Mass., have become successful by offering alternatives to the big guys.
At Myers, the focus since the company’s founding in 1982 has been “nonprofit” broadcasters. Most in the industry conflate that with noncommercial, but there’s a difference, insists founder Crist Myers.
“A lot of our competitors label us as a noncommercial T&B system,” he says. “We think that’s unfair. Public entities have underwriters and need to produce affidavits and invoices for them. Because government funding has gone down, they have to be more aggressive on that front. We have helped the PBS system evolve so they can do more of those things…. They can break the mold a little bit.”
Myers’ ProTrack T&B system is in 95% of U.S. public TV stations, Myers says. So it’s had to look elsewhere to expand.
“In the last 10-12 years, we’ve branched out to the Pentagon, Veterans Administration, Voice of America, more state-run government entities, including the Mayor’s Office in Manhattan. And some of the biggest faith-based entities are our clients.”
The company just completed an install at the NHL Network, where its software handles all programming and scheduling responsibilities and provides real-time schedule information on the network’s website, NHL.com.
“We have a philosophy of managed growth,” Myers says. “We have a 97% retention rate over 25 years. If you try to be everything to everybody, you’re going to fail. We’re focused on keeping clients versus on sales to make our business grow.”
Commercial broadcasting, as in non-public TV stations, is also in Myers’ sights.
“We bring more than scheduling sales spots,” Myers says. “We provide integration. When a programmer schedules a piece of content, ProTrack moves the content to the appropriate place at the appropriate time, eliminating the need for manual intervention simply by what’s put on the schedule.”
Among the distinguishing characteristics of BroadView Software is that it has managed to reach across the border to develop a strong business in the U.S. Among its clients: Ion Media.
“As a smaller player, it’s an exciting time for us because we have people coming to us looking for choice,” says Arthur Drevnig, director of sales at BroadView. “BroadView has some product differentiators,” he adds. “We offer products not only for traffic but programming as well. All traffic systems are concerned about where spots go. BroadView also is concerned about the other side — how much you’re paying for programming, where the programming goes, storage.”
While size and scale matter, Keene speculates that there’s unlikely to be any more big consolidation in the T&B space in the U.S.
“The truth is, these companies have all made it to the top of their field and they wouldn’t get there if they didn’t all have very good products,” he says.