• by Erik Sass  @eriksass1, November 7, 2007

Bob Neil, the president and CEO of Cox Radio, gave radio measurement firm Arbitron a fierce tongue-lashing during his company's third-quarter conference call on Tuesday, calling the source of radio's ratings currency a "monopoly" while criticizing its new Portable People Meter ratings as deeply flawed. Neil made the remarks in response to a series of questions from financial analysts about Arbitron ratings.

During the conference call, Neil said Cox revenues were down 1% in the third quarter compared to the same period last year, to $111.8 million. As a result, net income fell 16% to $20.2 million. Neil said these results were in line with the general radio markets where Cox owns stations. However, he implied that revenues are being negatively affected by the ambiguity surrounding PPM.

"Poor sampling in Houston and Philadelphia does shake the users' confidence in the data," according to Neil, who said this effectively dampens demand for radio advertising. "If I was an agency person, I certainly would question the reliability of that kind of data. I find it disingenuous of them to defend sampling that is in the 50%-60% indexing range by saying it's still accurate."

Neil and the bosses of other big radio broadcasters have complained in the past about Arbitron's "in-tab" numbers for PPM, which the company aggregates in monthly, weekly, and daily figures, representing the number of people who are actually carrying the PPM device in a given time period. Specifically, they note that Arbitron is missing its own target sample sizes for average weekly in-tab measurement.

Arbitron distinguishes between the average weekly in-tab figures and average daily in-tab figures (which provide the main currency for ad sales) but radio executives say the variation in weekly figures serves to undermine confidence in daily figures. In August, Arbitron said it planned to meet target sample sizes by the beginning of October, but radio execs say it has failed to do so.

Looking to the future, Neil struck an ominous note about further PPM rollouts: "If New York and Los Angeles start coming in with 18-24 indexing at 50% of the target sample, that is not going to be a good thing. It's not going to be a good thing for Arbitron, the radio industry, or advertisers relying on that data."

During the conference call, Neil added that Arbitron's under-sampling of minorities means that "Hispanic and African-American formats take big hits"--warning that "it is going to affect them from a revenue standpoint pretty dramatically."

In the same vein, in August the National Association of Black Owned Broadcasters criticized "significant flaws" in the PPM service, saying the two most important age cohorts--18-24 and 25-34--both suffered from substantial under-representation.

Neil also complained that Arbitron failed to familiarize media buyers with the new data, as promised: "Many of the agencies out there just haven't been properly trained on what all of this means." As a result, "there's a tremendous amount of chaos," with agencies are "all over the road" in their approach to buying radio ad inventory.

Finally, Neil went on to say there are also sample size problems with Arbitron's current diary service: "It's not just PPM. This is a major issue, because the diary is going to be around for a while in a lot of markets. These guys have to get working in their research department to figure out how to get their sample sizes up."

However, Neil warned that Arbitron's status as a de facto monopoly in radio audience measurement makes it difficult to bring pressure to bear: "There's no real competition in the marketplace, so they behave as a monopolist. I wish you could sit down and have a very lucid conversation about it, and get them to do what they need to do, but they won't." In this situation, Neil said it is incumbent on the entire radio industry--including advertisers and media buyers--to present a united front to Arbitron demanding more accurate ratings.