• by June 13, 2005

RFP-P-M - When radio broadcasting giant Clear Channel issued a "request for proposal" today calling for a new state-of-the-art electronic audience measurement system for the radio industry it caught some Wall Street analysts and industry trade reporters by surprise. Coming as it does midway through a four-year ratings contract with Arbitron, some thought it might signal a lack of confidence in Arbitron's ability to handle the future of radio audience measurement. Savvy media researchers saw it less as a research methodology issue and more as a negotiating tactic. While it is possible that a third-party might emerge with a proposal for a new radio measurement system that would get the support of Clear Channel, not to mention the rest of the industry, recent history would say the odds aren't that great. Navigauge, a promising automobile-based radio and outdoor measurement service, recently went bust, and the radio industry - like the rest of the media business - has move steadily away from competition and toward consolidation. It was Arbitron, in fact, that acquired its only material competitor Statistical Research Inc.'s RADAR service to consolidate local and network radio ratings under one roof.

Given such consolidation, it now seems the only way for radio giants to effectively negotiate with the radio ratings giant is to either cancel their contracts or threaten to seed competition. Both Clear Channel and Infinity tried that first tactic in their last set of contract negotiations with Arbitron and successfully reaped better terms by holding out. In the case of Clear Channel's current contract, it got Arbitron to develop ratings based on geographic trading areas that would enable it to sell more local advertising. In the case of Infinity, it got better rates.

The timing of Clear Channel's RFP and the fact that it was just about to sit down to negotiate terms for Arbitron's new sate-of-the-art audience measurement system - the portable people meter - isn't coincidental. Arbitron is scheduled to meet with its biggest radio industry clients next month to develop a plan for rolling out a PPM service for the radio industry. And it appears that Clear Channel may be seeking to generate some marketplace leverage.

Of course, it is possible that someone may step forward with an alternative plan for measuring radio, but such a plan would have to start from scratch and would have to win broad support from a cross-section of broadcasters, advertisers and agencies, not to mention all the testing and verification that would be required before a service could pass industry muster. We believe Clear Channel is genuinely trying to move the radio industry forward, but the best way to do that might be by supporting Arbitron's rollout of the PPM, a move that would actually leap-frog the TV industry, and which might give radio a short window of advantage over its broadcast brethren.

In fact, Arbitron chief Steve Morris refers to the plan as a radio industry "fast-track," and notes that the proposal could actually deliver a working PPM system for radio ratings in the U.S. as early as 2006.

"What we will unveil next month is a radio first PPM rollout plan," Morris said in response to Clear Channel's RFP. "This plan will give radio the earliest possible benefit of an electronic ratings system while allowing other media the option to participate at a later date."

That, of course, was a not-so-veiled reference to Nielsen Media Research's lack of commitment to date to agree on a joint venture with Arbitron to also develop a TV ratings system from the PPM.

It seems Arbitron is now ready to move ahead on a radio-only PPM-based ratings service, with or without Nielsen's support. But only if it can muster the support of its radio clients. To be sure, radio broadcasters have not been without their reservations. They demanded that Arbitron conduct an economic assessment of the PPM's impact on the radio industry. Arbitron has been diligent in answering those questions, as well as 218 others Morris said the radio industry have posed to it. In fact, there now appears to be only one last economic assessment standing in the way of the PPM's rollout: Whether radio broadcasters will pay for it.