Arbitron’s Q3 2010 results showed revenue of $99.5 million, an increase of 1.4% as compared to revenue of $98.1 million during Q3 2009. Revenue increased due to the commercialization of the Portable People Meter ratings service in 10 additional markets vs. the five markets commercialized in Q3 2009. The increase in revenue was partially offset by the impact of the decision by Cumulus and Clear Channel to subscribe to Nielsen Radio Audience Measurement’s diary-based radio ratings service in a some small and medium-sized markets (primarily affected Q1 results); and the impact of a few customers, including Univision, that were subscribers in 2009 but reduced their level of service or did not subscribe in 2010.
Costs and expenses for the quarter increased by 7.0%, from $73.5 million in 2009 to $78.6 million in 2010, due primarily to the continued commercialization of the PPM service and investments in programs to recruit persons age 18-34 in PPM and diary markets.
For the quarter, net income was $11.3 million, a decrease of 17.4% compared with $13.7 million for Q3 2009. Earnings per share (diluted) was $0.42 for the quarter versus $0.51 for Q3 2009.
For the nine months ended 9/30, revenue was $283.7 million, an increase of 0.1% vs. revenue of $283.4 million for the same period in 2009. Costs and expenses for the nine months ended September 30, 2010 increased by 1.0%, from $234.8 million to $237.0 million.
Arbitron President and CEO Bill Kerr said on the call that radio has come a long way since he joined the company as CEO in January. “My conversations with radio group heads are significantly more upbeat now than they were just nine months ago. In the third quarter, the radio advertising marketplace continued its recovery. Most analysts are projecting 2010 ad revenue will be up some six to seven percent over last year.”
He also brought up Arbitron’s Media Mix modeling initiative, which aims to improve the analytical methods used by marketers to evaluate the tangible impact that radio advertising has on sales. “Our work today leads us to believe that adding the PPM into these models will very well help radio—diary as well as PPM markets—claim a larger share of the advertising pie. There’s much more to do, but the project is off to a promising start.”
PPM is now in 43 top markets, accounting for nearly half of all radio ad revenues. Kerr said panels for the final five markets are recruited and are already into their two-month pre-currency period. “We continue to expect that we will complete the commercialization of our PPM service by the end of the year. As we work to complete the PPM commercialization, we are also focused on the quality of our diary and PPM services.”
He noted that while overall cooperation rates for all types of survey research have declined over the past several decades, and admitted Arbitron has been adversely impacted. Getting younger demos to participate is a big challenge, and is more costly: “We did two targeted in-person recruiting in three markets in July. On 10/10, we expanded the program to cover the high-density Black and Hispanic areas in the top 10 markets. And we are working to bring this targeted technique to 24 top markets by the end of this year.”
They are also working hard to get more cell phone households in their sample for both diary and PPM markets. That will help get younger demos a greater proportion of the sample, as many younger households are cell-only. But Kerr noted recruiting these households is 3-4 more times as costly as land-line households. These expense ratios are declining, however.
Arbitron is updating its revenue and earnings per share guidance for 2010. For FY 2010, Arbitron now expects its revenue increase to be near the lower end of the previously announced range of 2% to 6% vs. 2009. Earnings per share (diluted) for the full year 2010 is now expected to be $1.60 to $1.65, compared to the company’s previous earnings guidance of $1.50 and $1.75 per share (diluted.)
Kerr also reiterated that Arbitron acquired Integrated Media Measurement Inc. (IMMI), an innovator in cell-phone based ratings technologies, in June. It combines a mobile phone-based digital monitoring platform with PC monitoring software. It can passively track individuals’ exposure to TV, radio cinema ads, digital OOH and mobile and online media. Having cell-phone and internet-based technologies to supplement PPM meters and panels will help Arbitron down the road with cross-platform and new business strategies.
RBR-TVBR observation: The immediate goal really needs to be recruiting younger sampling demos in a cost-effective manner. And getting them will be best done by recruiting cell-phone only households. IMMI’s technology may well be a solution down the road in doing this. In the meantime, Arbitron’s PPM 360 device (introduced 6/21), makes it easier for panelists – younger and older alike – to participate. Smaller than its predecessor, PPM 360 doesn’t have to be returned to a docking station in the panelist’s home to transmit its measurement data. It is instead sent via a wireless signal.