• by Joe Mandese  @mp_joemandese, June 25, 2004

Arbitron, a publicly held media research firm that has been depending on shareholder backing to support aggressive expansion plans including the development of a portable people meter system and a new outdoor media measurement service, Thursday disclosed it would lose millions in 2004 revenues due to a fallout with one of its biggest customers, Viacom's Infinity Broadcasting unit.

Infinity, one of the largest radio broadcasters and a major outdoor media company too, said it would not renew its contract with Arbitron for its Spring 2004 survey, a move Arbitron calculated would shave about $12 million off its 2004 revenue estimates.

As a result, Arbitron revised its 2004 financial guidance from a growth rate of between 5 and 7 percent to a decrease of between 5 and 7 percent over 2003, with net income projected to be flat to down 2 percent. While it's not uncommon for big radio clients to cancel their Arbitron contracts to negotiate more favorable terms or to get the researcher to modify its research methods, Arbitron did not indicate Infinity's motives for the move. Several years ago, another big Arbitron customer Clear Channel Communications withheld its contract renewal in a move to force Arbitron to develop a new radio market clustering system that created a means of compiling ratings based on retail advertisers' actual trading areas.

"We remain willing to work with Infinity Broadcasting," stated Steve Morris, president-CEO of Arbitron.

The development couldn't come at a worse time for the radio ratings giant, now the sole supplier of both local and network radio ratings data in the U.S. It has been pouring millions into the development of its portable people meter system in the U.S., with no clear indication whether its erstwhile partner in the venture, Nielsen Media Research, ever will move forward on the plan. It's also been developing an innovative new outdoor media ratings service, built in part on high-tech global positioning satellite technology, that some observers also believe has little chance of gaining critical market support due to a rival plan by Nielsen that some consider the superior product. An aggressive plan to develop an Internet streaming media ratings service has largely failed and has been massively scaled back. The company invested $25.8 million in research and development costs during 2003, according to its annual report.

Arbitron has also been on a buying spree as part of an aggressive effort to diversify its business base beyond its captive radio ratings marketplace. In March, it acquired media planning software provider Marketing Resources Plus from Nielsen parent VNU for $8.9 million in cash.

On a positive note, Canadian TV industry executives indicate that the market is likely to approve a plan to move forward with an expansion of Arbitron's portable people meter system north of the border, despite some resistance from Canadian advertisers and Canadian research rival Nielsen.

Meanwhile, Arbitron said it would continue negotiating with Infinity for a new radio ratings contract, and has one advantage on its side: time. While Infinity can forego radio ratings for the short-term, it eventually would need to succumb to pressure from media buyers armed with Arbitron's ratings in advertising sales negotiations.