Revenues gained only 4.7% for the first half of 2008 at Arbitron, but the company is sticking with its guidance to Wall Street that the full year will be up 8-10%. That’s because the Portable People Meter (PPM) rollout, resuming this fall, is expected to accelerate revenues.
As you might expect, Wall Street analysts wanted to know about any cost impact from Arbitron’s announcement that it would increase PPM sample delivery 12+ by 10%. “There are at least three ways to get us there,” Morris said.
Arbitron promised at last week’s Arbitron Radio Advisory Council meeting that the sample increase would come at no cost to clients. Morris said the most efficient approach would be the one that broadcasters had repeatedly suggested – eliminate measurement of 6-11 year-olds and reallocate those meters to the demos that broadcasters care about. But Morris noted that if Arbitron can figure out a way to monetize that 6-11 demo, those revenues would subsidize the cost of increasing sample in other demos. The first step, though, will be increasing cell phone-only household recruiting, which was planned anyway, and which Morris expects to increase 18-54 representation in PPM panels. The third way to “get at it,” Morris said, is “sample stratification,” a complexity that he passed on trying to explain in the context of a Wall Street conference call. But he assured the analysts that in any case, the 10% sample increase for PPM would not require any adjustment to their financial models.
“Sample size is going to be an issue for us forever,” Morris said, but he said feedback from broadcasters following last week’s announcement has been positive.
Morris also noted that there is a “political component” to criticism of PPM, which charges that the ratings methodology undercounts minorities. But he insisted that the PPM data is “effective and reliable” for all ethnic groups.
For Q2, Arbitron reported that revenues increased 3.7% to $78.7 million. Costs increased 9% to $82.4 million, largely due to expenditures for the commercialization of PPM. So, that was an operating loss of $3.8 million, vs. a profit of $229,000 a year ago. But after adding in $5.2 million in net income from affiliates, largely its stake in Scarborough, Arbitron posted earnings before interest and taxes (EBIT) of $1.4 million, compared to $5.3 million a year ago.
RBR/TVBR observation: Arbitron subscribers may be wishing they were in the radio ratings business, rather than the radio business. Despite the tough advertising environment for stations, Arbitron insists that it has seen no drop-off in contract renewals – except, of course, the well-publicized RFP by Cumulus Media to replace Arbitron diary ratings with some other form of radio ratings in its smaller markets for the start of next year. Arbitron admits it is somewhat more difficult to sell software and other non-ratings products in the current economy, but it is still projecting revenue growth from diaries – and a big boost as PPM revenues come in from more markets.
