Radio faces big media test

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Media executives long have short-shrifted radio when it comes to parceling out media buys. And it's no wonder. The radio industry's antiquated systems for taking advertising orders and sending invoices to agencies are stunting its growth and wasting an estimated 8% to 9% in revenue annually, according to radio industry executives.

But that may change this year, if major radio rep companies including Katz Media and Interep succeed in pushing through new electronic data interchange pilot programs designed to automate most radio ad invoicing for the first time.

Katz last month conducted its first major test of electronic invoicing with WPP Group's MindShare Worldwide, with the aim of setting new standards for invoices sent to all major agencies, eliminating human error and costly paperwork. Interep is conducting similar tests with its own systems and agencies.

"Given the success of our test, we will finally see some major progress with EDI, but radio still lags far behind other media industries in automation," says Kathy Crawford, president of local broadcast at MindShare, New York.


David Prager, Katz Media VP-chief information officer, says the radio industry is poised for a great leap forward this year that will ultimately help its bottom line. The biggest challenge is the sheer number and diversity of radio stations, which are owned by a few large groups like Clear Channel Communications and ABC Radio, plus many small operators.

"The majority of radio stations will be doing electronic invoicing by the end of this year, which is part one of the total EDI solution, where eventually ads will be ordered, verified, invoiced and tracked electronically in real time," says Mr. Prager.

But major media buying agencies, including some of those involved in the current EDI tests, are skeptical about how far electronic invoicing will spread this year.

"Progress has been made, but things still bog down in smaller markets where stations have not yet made the technology investment to move to EDI," says Maribeth Papuga, senior VP-local broadcast, MediaVest, New York, a division of Publicis Groupe's Starcom MediaVest Group. "Before a total electronic loop is born that will make it as easy for agencies to buy radio as it is in other media, the existing systems must be overhauled."

radio-agency bridge

For instance, a bridge must be created between the computerized traffic systems used by the radio stations and the agencies' order-and-invoicing software that would allow media buyers to observe the status of a radio station ad order on the Web in real time, she says.

"A type of `middleware' is needed to let existing legacy systems talk to one another, and the costs of developing such a thing are unimaginable right now by any of the players," says Ms. Papuga.

The TV industry has not resolved all its EDI order-and-invoice issues either, but radio lags too far behind it in automation, says Ms. Crawford.

"I applaud the rep firms for the initiative they're taking, but there are so many more radio stations than TV stations, and the complexities of moving to a new technology are enormous for a good part of the industry," Ms. Crawford says.

Yet the pressure for radio to catch up with other media is intensifying, says Mary Bennett, exec VP-marketing for the Radio Advertising Bureau, New York.

"EDI must become a top priority for every radio station manager for radio to maximize its power and get its full share of revenues," she says.