Broadcasters Hesitate To Switch Ratings System

After more than a decade of development and testing, Arbitron has proposed rolling out later this year a high-tech device for measuring radio audiences called the Portable People Meter. It would be the first switch in radio ratings methodology in 40 years, something ad buyers say is long overdue.The ratings company wants contractual commitments from a major segment of both buyers and sellers of the $20 billion-plus annual radio ad market before it will proceed with the PPM. Buyers have stepped up. Sellers, who will pay for most of the increased costs of the device, have not. In the last two weeks, Interpublic Group, WPP, Publicis Groupe and Aegis Group's Carat have all signed agreements to use the new system, Arbitron confirmed. Collectively, those buyers account for more than 60 percent of U.S. radio billings, or more than $12 billion, according to sources. But here's the catch: Broadcasters are balking at the high price of the switch, which Arbitron says will cost between 45 percent to 60 percent more than the current system. Currently, stations pay anywhere from $50,000 to upwards of $1 million annually, depending on the size of their market, sources said. One wild card: Nielsen Media Research may partner with Arbitron on the PPM, which could defray added costs to stations. Nielsen's decision is due March 31. Regardless, buyers say that it is crucial that sellers embrace the new system soon. Otherwise, they say, radio will risk losing its share of ad dollars going forward, because the current ratings system provides inaccurate and untimely information about the audience. "This is an opportunity for radio to step forward and show that it is not afraid to take on a higher level of accountability," said Sue Johenning, evp, director of local broadcast, IPG's Initiative. "As an industry, if the sellers do not get on board, then radio has lost a big opportunity for better radio measurement, and then we're really talking about loss of revenue, because radio has to be considered in the same category as other broadcast media from an ROI perspective." While TV broadcasters and cable operators have adopted better forms of measurement in recent years, said Johenning, "radio is just sitting back there in the dark ages," relying on an antiquated form of audience measurement. Arbitron still collects radio ratings data the way it did when it entered the business in 1965—via handwritten diaries filled out by listeners that are mailed back to the company. The diaries are often filled out after the fact. Researchers question their accuracy, noting that it is unlikely, for example, that a commuter will remember how many times and to what stations they listened to when they fill out a diary at the end of a week. The PPM, a small device that listeners carry like pagers, automatically tracks stations that are tuned in via codes that are embedded in the audio signals. In recent tests in Philadelphia and Houston, the PPM data showed that listeners tune to about twice as many stations on average as people indicate in their diary entries. As a result, the average rating per station drops between 10 percent and 20 percent, according to an Arbitron rep. A major concern on broadcasters' part is that the lower ratings recorded by the PPM would translate to lower rates paid by advertisers. But buyers say that's not the case, because they realize that the change in methodology lowers ratings but not audience levels, and therefore requires only a one-time increase in cost-per-thousand listener rates. "This is a currency adjustment, end of story," says Kathy Crawford, president, local broadcast, WPP's MindShare. And major radio broadcasters say they won't be rushed into a hasty decision to commit to the PPM. "There are definitely issues," said the CEO of one top-five radio group. "The industry as a whole is pretty pissed off right now that Arbitron is trying to put third-party pressure on radio companies by going to the agencies."With proposed cost increases of 45 percent or more, "there is just no way anybody is signing that piece of paper until all the issues are taken care of." The CEO said issues include lower ratings recorded under PPM and concern that certain audience segments may not be adequately represented by the new technology. The CEO also said major broadcasters want to slow the process down: "I would sign now, but for the next two years, let's do three to five markets. Lets make sure it works," and then roll out the rest of the markets after that. Arbitron has proposed a five-year rollout that would cover the top 50 markets, where about 80 percent of all the radio ad dollars are spent. Buyers want a faster timetable. Complicating a speedier rollout is an RFP issued last summer by Clear Channel Communications soliciting alternative ratings systems. "Until that is done, certainly nobody [among major radio broadcasters] is going to commit," said a major radio group executive. "Arbitron is trying to strong-arm everybody because they have a monopoly." But Arbitron doesn't see it that way. "Three years ago, broadcasters gave us a pre-launch checklist of things that needed to be done," said Pierre Bouvard, president, sales and marketing, media services, Arbitron. The list required a second major market test (completed in Houston), getting accreditation from the Media Rating Council (a trade group that audits ratings systems for reliability) and funding an independent economic impact study that would measure the effect the new service would have on broadcaster revenues. The impact study, conducted by Forrester Research, concluded that radio was more likely to increase revenues in the future with the PPM—and face spending cuts by advertisers without it. "We have done what the industry asked us to do," and the system is now ready to be deployed, said Bouvard. Susan Nathan, svp, director of media knowledge at IPG's Universal McCann, said that "the PPM isn't perfect, but it's a hell of a lot better than the diary." Broadcasters will do their industry "a disservice not to jump on board." Other buyers agreed. "It's so critical" to get a new radio ratings system in place, said Agnes Lukasewych, vp, account director of radio broadcast at Havas' MPG, which is currently in discussion with Arbitron about signing up for the PPM. Listening patterns are different with the more accurate PPM, she said. And the differences benefit radio, because the industry won't be penalized for the smaller station ratings, and at the same time, "radio has a reach story we didn't have before."

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Broadcasters Hesitate To Switch Ratings System

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