• by Joe Mandese , June 13, 2005

In a surprise move that could send ripples through the spot radio advertising marketplace, Clear Channel Communications, the largest radio broadcaster, and the biggest customer of radio ratings monopoly Arbitron, Monday announced plans to back the development of a new radio ratings system.

Clear Channel said it invited Arbitron to participate in what it called a "request for proposal for a new, "state-of-the-art" radio ratings system that would more accurately represent radio's "true performance and value to advertisers, but it did not indicate what other companies might participate.

In a statement, Clear Channel Radio CEO John Hogan implied that radio's "influence and reach" has been underreported and "diluted" by Arbitron's current audience measurement system.

Every since it acquired the Radar network radio ratings service from Statistical Research Inc., Arbitron has been the sole provider of radio audience ratings used by both national marketers and local advertisers as the basis of their radio negotiations and post-buys. Shortly after acquiring Radar, Arbitron scrapped what many considered to be a superior audience measurement method based on telephone surveys and replaced it with one utilizing paper diaries, which have also been the basis for Arbitron's local radio audience measurements.

Arbitron has been moving aggressively to develop a promising new electronic measurement system, which would utilize portable people meters (PPM) to measure both radio and TV ratings, and potentially other media as well. It is currently conducting a test of the system in Houston, its second major market trial of the method. VNU's Nielsen Media Research unit has an option to develop a joint venture with Arbitron based on the PPM system, but has not yet indicated whether it plans to move forward. VNU and Arbitron separately have been pitching national marketers on an expensive single-source measurement service that would track both media exposure and product usage, of which the PPM is the core media measurement component. To date, no major marketer other than P&G has indicated plans to support that service.

One company that has raised its profile with a new state-of-the-art measurement system is Navigauge, a company that has been rolling out a media measurement system, which tracks both radio and outdoor media exposure electronically via portable meters installed in automobiles.

Today's announcement is not the first time the radio giant has put Arbitron on the run. In 2003, Clear Channel threatened to pull the plug on its ratings contract with Arbitron over contract renegotiations. At the time, Arbitron said Clear Channel represented 21 percent of its revenues. In December 2004, Clear Channel signed a new, four-year contract with Arbitron covering radio ratings through the Fall 2008 survey. As part of that deal, Clear Channel forced Arbitron to develop new radio ratings software that would enable the broadcaster to develop ratings estimates based on the geographic trading areas of regional advertisers, as opposed to the standard market areas traditionally used by Arbitron and Nielsen.