The loss of customers for Arbitron's radio ratings took a bite out of the research firm's third-quarter revenues, as disclosed on Tuesday.
Arbitron's total revenues fell 4.3% from $102.5 million in the third quarter of 2008, to $98.1 million in the same period of 2009. This had a negative impact on earnings, with net income falling 19.5% from $17 million last year to $13.7 million this year.
Arbitron executives cited a number of factors for the dip in revenues, including one of the sharpest economic downturns in recent memory. However, the company is also feeling the heat from new competition in the radio ratings business, where it has long enjoyed a de facto monopoly.
Specifically, Nielsen has been wooing clients for radio ratings in mid-sized markets, touting its sticker-based diary system as a more precise alternative to Arbitron's diaries, in which panelists keep handwritten records of their radio listening.
So far, Nielsen has managed to lure away business from Cumulus, Clear Channel Radio and ESPN Radio in several dozen mid-sized markets. Both radio groups have lauded Nielsen's ratings as more accurate, partly because of Nielsen's decision to include a large proportion of cell phone-only households, which tend to skew younger -- giving radio broadcasters and advertisers a better picture of listening among crucial young adult demos.
In June, Nielsen also signed up ESPN Radio and Maverick Media for ratings in select markets. Arbitron has responded by increasing participation by cell phone-only households in many of its measurement markets.
Arbitron's revenues were also affected by Univision's boycott of ratings produced by Arbitron's Portable People Meter, a passive electronic measurement device, in several big markets. (Arbitron is switching from paper diaries to PPM measurement in the top 50 markets, but not mid-sized or small markets, because of the greater cost associated with PPM.)
Univision, like a number of other minority radio broadcasters, has protested that Arbitron's PPM ratings panels do not adequately represent minority audiences, leading to large apparent drops in minority radio ratings when diary markets switch to PPM.
These complaints have resulted in lawsuits by state attorneys general in New York, New Jersey and Maryland, and more recently in hearings by Congress and the Federal Communications Commission.
As noted, Univision has taken the additional step of refusing to subscribe to PPM ratings in big markets with large Spanish-speaking populations, including Miami, San Diego and Phoenix. In addition to the negative effect on Arbitron's revenues, the Univision boycott is also undermining the ratings currency's perceived reliability in those big markets.