• by Joe Mandese  @mp_joemandese, July 23, 2004

The radio industry is poised at a crossroads that could well determine its future place in Madison Avenue's media mix, but some of its biggest players are loath to make the investment necessary to grow, or even maintain its share. That was the subtext of the message delivered by radio ratings giant Arbitron during a second quarter earnings briefing with analysts on Thursday.

At a time when Arbitron is driving ahead with research innovations that could well level radio's playing field with other media, the company said three of its biggest customers are balking. One of them, Infinity Broadcasting, one of the largest radio broadcasters, has not renewed its contract for Arbitron's radio ratings and is trying to nurture an alternative plan with a tertiary player. More critically, the three, including Infinity, Cox Radio and Radio One, all are refusing to encode their radio broadcasts during a critical test of the new portable people meter system Arbitron and its partner Nielsen plan to test in Houston beginning this year.

The portable people meter, or PPM, is deemed by some to be a development that will finally equalize the relative impact of radio's audience reach with the more dominant medium of television, but some radio insiders fear that the move could also destabilize the economics of the radio industry, and have called on Arbitron and the Radio Advertising Bureau to conduct an independent assessment of the new meter's implications for the radio business. There biggest fear is that by capturing the out-of-home viewing of broadcast and cable TV outlets, radio could lose relative share of broadcast ad impressions, and consequently, share of the advertising pie.

But according to results of some new research conducted jointly by Arbitron and media services giant OMD, there is far more planning upside than downside for radio to be realized by the PPM.

"When radio is added to TV in a media plan, it brings in a significant number of unique consumers not reached by television alone," Stephen Morris, president-CEO of Arbitron, said during Thursday's briefing. "These findings make a strong case for giving radio a more significant piece of a media plan."

That indeed seemed to be the indication when OMD research chief Beth Uyenco and Arbitron executives presented the findings at the recent ESOMAR research conference, but Morris said many of those findings would be vetted by the information generated from Arbitron's and Nielsen's Houston tests, which begin later this year, and are expected to yield findings beginning in April of 2005.

But the whole endeavor could be in jeopardy with three big radio players refusing to participate, a position Morris said is putting them at odds with Madison Avenue. "We're hearing an increasing chorus from the buying community urging radio to participate," he said.

In fact, many players within the radio industry have been pushing for the innovation, and see the move toward electronic measurement of radio audiences - as well as the ability to measure them directly alongside TV and potentially other media - as a critical step toward the radio medium's credibility and accountability.

RAB president Gary Fries has been taking a risky position by pushing his members to support this despite the apparent antipathy from some big players, and in just the past week, radio giant Clear Channel Communications has taken several steps to lead the industry in a new direction (see related story in today's MediaDailyNews).

Meanwhile, Morris noted that the PPM has gotten a huge vote of approval from north of the border, citing BBM Canada's decision to roll out the PPM as the official radio ratings currency in Quebec and Montreal beginning this fall as the endorsement of a major industrialized nation.

"The barriers to change are very, very high, so when a major economy and a major country like Canada takes this kind of a step... that in our mind, at least, counts as a pretty significant statement of confidence by a very sophisticated media industry that does very detailed analysis before they make a decision to move."

Canada's endorsement of the PPM, and the fact that Nielsen recently announced plans to merge its Canadian operations into a joint venture that would be controlled operationally by BBM, has been seen by many in the U.S., including some key lawmakers, as key development, but Morris implied that the development of PPMs nonetheless would be much slower in the U.S. than in other markets, because "of where the processes stand."

One of those processes, he acknowledged, is purely economic, and the fact that Arbitron is calling on the radio industry invest on multiple fronts, but especially on the game-changing PPM system, at a time when radio broadcasters are feeling their own economic pinch.

To offset some of its dependency on the radio industry, Arbitron has been moving rapidly to develop alternate revenue streams, especially new media planning and software systems that would tap greater revenues from Madison Avenue. Earlier this year, it acquired Marketing Resources Plus, a major media planning software provider, from Nielsen parent VNU, and has been moving aggressively in that direction. On Thursday, Morris said Arbitron plans to introduce a "new planning tool" in the next several months.

The company also has ambitious plans to expand its measurement well beyond radio. It is concurrently rolling out a national "marketing" panel that incorporates PPMs to measure media usage with product scanner data to capture product purchases in consumer households. The company is looking at applying that to the measurement of print media as well, and is considered a dark horse against Nielsen to develop a new global positioning satellite-based technology for measuring outdoor media usage.