The radio industry's hopes were pegged on Arbitron's Portable People Meter, a passive electronic measurement device that was supposed to replace paper diaries in the nation's top media markets earlier this year.
Confronted with stagnant radio revenues in 2006-2007, executives from some of the big radio groups would frequently reassure investors that everything would change when the PPM service came online. CBS Radio, in particular, has been an enthusiastic supporter of PPM at every stage. However, not everyone agreed with CBS.
A group of broadcasters led by Clear Channel Radio raised questions about PPM's sampling methodology and supported alternative measurement systems, like the "smart phone" proposed by MediaAudit and Ipsos. (Their objections were probably part of behind-the-scenes price negotiations, as Arbitron was demanding a 60% price premium over the paper diary system.)
They also demanded that Arbitron obtain accreditation from the Media Rating Council for PPM before it was adopted as the industry standard. Arbitron ended up getting MRI accreditation for PPM in Houston, and eventually most of the big radio broadcasters signed up for the service; Clear Channel, one of the last holdouts, threw in the towel in June 2007.
Since then, however, the sampling issues have resurfaced, and Arbitron has found itself caught in a whirl of lawsuits. The trouble began earlier this year when minority broadcasters complained that the audience samples under-represented African-American and Hispanic listeners, leading to drastic ratings drops for urban-format radio stations under PPM, compared to the paper diaries.
Clear Channel, Cox Radio, Cumulus, Inner City, Radio One and Saga also wrote letters to Arbitron demanding that it delay the introduction of PPM service until the sampling methodology was improved. Several of these groups also took out ads criticizing Arbitron in the radio trade press.
Under pressure from the industry, Arbitron announced in June that it would delay the commercialization of PPM in top markets by a period of six to nine months. Arbitron had originally scheduled commercialization of PPM ratings for top American markets beginning with New York and Long Island in December 2007, followed by Los Angeles and Chicago in March of this year, and San Francisco and San Jose in June 2008. But Arbitron announced on Nov. 26, 2007 that it would delay commercialization in all these markets until September 2008.
Radio groups like Radio One, Inner City and the Spanish Broadcasting System--warning that Arbitron wasn't doing enough to fix the system--took their grievances to Congress, the Federal Communications Commission and the New York City Council. Responding to these complaints, New York State Attorney General Andrew Cuomo sued Arbitron to further delay the commercialization of PPM ratings in New York, on the grounds that the sampling methodology under-represents African-Americans and Hispanics, thus violating New York State civil rights law.
Last week, Cuomo also expanded his investigation of Arbitron to include possible securities fraud, according to The Wall Street Journal. The investigation centers on allegations that Arbitron executives engaged in stock fraud and insider trading. The allegations resemble a separate class-action lawsuit brought by Arbitron investors that accuses the company of issuing "materially false and misleading statements," by suggesting that PPM ratings would be introduced on schedule, when some executives knew otherwise. The plaintiffs argue that the alleged deception constitutes a violation of the Securities Exchange Act of 1934.
There are no such legal imbroglios in the world of magazine measurement, but critics say the industry has made even less progress in rolling out new measurement methodologies. In March of this year, the Magazine Publishers of America outlined a new audience-based metric to replace the circulation rate-base system that has long been the currency for ad sales in magazines. The MPA invited research companies to submit proposals for metrics that fit the criteria, hoping to begin a bidding process for the new standard. However, to all appearances, the initiative has gathered dust since then.
The proposal for a new system was sketched out by consultants from McKinsey & Co., which called for a metric based on detailed, issue-specific data about readers, including age, gender, income and reader engagement with advertising. The MPA said that the system, supported by publishers, should make issue-specific data available six to eight weeks after distribution for weekly magazines (eight to 12 weeks for monthlies).
This faster delivery schedule, it was hoped, would allow magazines to compete more effectively with the Internet, where data on Web site traffic and consumer interaction are often available within days of a campaign running.
The MPA proposal was interpreted by some as a way of putting pressure on Mediamark Research and Intelligence, which last year introduced an issue-specific Readership Study with some--but not all--of the elements described above. Originally, the MRI issue-specific service was based on single-source surveys of its panel of about 200,000 magazine readers. The data, collected as a supplement to MRI's "Survey of the American Consumer" through online questionnaires, documents the accumulation of audiences for specific issues of magazines over time, giving publishers and media buyers a view of issue-to-issue changes in magazine readership.
However, publishers complained that it lacked information on reader engagement. Subsequently, in August of this year, MRI responded to this criticism with its acquisition of GfK Starch. This allowed MRI to combine its focus on measuring and describing audiences with Starch's focus on determining the reception and impact of ads.