• by Joe Mandese  @mp_joemandese, December 15, 2005

On a day when the radio industry should be looking to the future, some new mixed signals are emerging for the broadcast medium. Citing softening radio advertising market conditions, Merrill Lynch sector analyst Laraine Mancini this morning cut her long-term outlook for radio, downgraded five major radio company stocks and reduced her fourth quarter 2005 and calendar 2006 radio revenue forecasts. The revision comes as the new CBS re-brands its powerful Infinity Broadcasting unit as "CBS Radio" (see related stories today), and as industry leader Clear Channel Communications is expected to receive final proposals for a new, state-of-the-art electronic audience measurement system some believe could bolster radio's future on Madison Avenue.

But Merrill Lynch's Mancini says she now expects radio to decline 4 percent during the fourth quarter vs. her earlier prediction of 2 percent growth. She also revised her 2006 spot radio forecast to plus 2.4 percent from her earlier outlook of 3.8 percent growth. She predicted industry leader Clear Channel Radio would deliver mid-single digit growth, while Infinity Broadcasting (now CBS Radio) would be "flat," and the rest of the industry would grow only "1 percent to 2 percent." The broadcast company stocks she downgraded include: Citadel Broadcasting, Cumulus Media, Belo, Gray Television, and LIN TV.

Meanwhile, radio industry watchers are keeping a close eye on Clear Channel's request for proposals for a new radio audience measurement system to see what players step forward, and if any can unseat Arbitron as the radio industry's ratings monopoly. On Wednesday, during a briefing with trade journalists, Arbitron executives said they were confident that Arbitron's portable people meter system would win that bid, citing that it has taken ten years to develop, and that it has nearly completed its testing and its accreditation process with the industry's Media Rating Council, obstacles they said would take a new entry in the radio ratings market years to accomplish.

Nonetheless, Clear Channel executives say they do not believe Arbitron's system, which is based on 10-year-old technology, necessarily represents the current "state of art" for the industry. Arbitron executives countered that they have made numerous improvements to the technology over time.

While some see Clear Channel's RFP as a means to garner negotiating leverage over Arbitron, currently the sole provider of radio ratings in the U.S., top executives at the radio broadcaster maintain there may be better approaches to measuring radio. The company is expected to announce a new advisory board soon comprised of industry leaders including top advertisers and ad agency executives who will help vet the audience measurement proposals it has received.

Others, meanwhile, believe Clear Channel's RFP process is simply a dodge to delay what many believe would be a major readjustment of radio advertising rates that would occur as a result of more accurate radio audience estimates.

During Wednesday's press briefing Arbitron PPM President Pierre Bouvard urged broadcasters to move quickly on their decision, noting there is a "window of opportunity for radio to step up on accountability," and warned that if the industry does not move quickly its share of media plans may begin to "slip."

However, Bouvard acknowledged a major radio industry concern: that media buyers have confirmed radio advertising rates would be adjusted as a result of lower PPM audience estimates.

"The agencies assured them that when that occurs, there is a one-time cost-per-point reset," said Bouvard, adding however that there may be some upside for radio broadcasters, because some marketers may ask their ad agencies to continue buying radio at "historic points levels," despite the higher advertising rates.

Bouvard implied that Arbitron would continue to move forward with the PPM even if it somehow fails to win Clear Channel's RFP, and even if erstwhile partner Nielsen Media Research opts not to exercise its option to develop a joint TV and radio ratings service based on the PPM. Bouvard noted that Nielsen has accelerated its due diligence on its decision process and expects to decide sometime in the first quarter of 2006. He noted that Nielsen has a team of about 300 executives working on that process, about half of which are devoted to working with Jack Oken, the Nielsen executive leading the initiative.