Arbitron sticks with earnings guidance as economy tightens


Q2 revenues rose 10.4%, with more cash from Portable People Meter (PPM) markets, although Arbitron says it now expects full year 2009 revenues to be up less than previously predicted. Even so, and even with lobbying and litigation costs related to PPM on the rise, the radio ratings company says it still expects 2009 full year earnings per share to be up from last year.

Revenues were up 10.4% in Q2 to $86.8 million, primarily due to commercialization of PPM in Boston and recognition of pre-currency revenues from PPM in Miami, Seattle, Phoenix, Minneapolis and San Diego. Just as PPM is more expensive for broadcasters, it is also more expensive for Arbitron, so costs rose 4.2% to $85.9 million. And the company noted the additional cost of introducing cell-phone-only household sampling in 151 diary markets.

“The continued deterioration of the economy, in particular with regard to the radio market, had accelerated during the second quarter,” Arbitron CEO Michael Skarzynski said in his quarterly conference call with analysts. Because of that, Arbitron has reduced its guidance for full year 2009 revenue growth to a range of 2-6%, rather than the previous estimate of 6-10%. Even so, the company is sticking with its guidance to Wall Street that earnings per share for 2009 should be in a range of $1.40-1.55, up from $1.36 in 2008.

Skarzynski admitted that Arbitron doesn’t know how much it is going to cost for litigation and lobbying as PPM comes under increasing scrutiny by the FCC, Members of Congress and other government officials. Despite Arbitron’s continuing efforts to improve its PPM samples, he noted that some broadcasters remain opposed to PPM. It was noted later in the call that Univision has cancelled its Arbitron contracts in three markets, Miami, San Diego and Phoenix, and is not encoding for PPM there, although it continues to have contracts for PPM data is some other markets. Company officials said they were not aware of any other broadcasters planning to terminate contracts.

Noting that ad buyers are using the reduced listenership shown by PPM vs. diary measurement, one analyst said that seems like a tough sell for Arbitron to roll out a more expensive product. “Currently in an environment like today, paying more for ratings that show less is difficult. I think the viewpoint of the buyers is accountability matters – and electronic measurement, we think, makes tremendous strides towards an increased accountability for radio,” said CFO Sean Creamer.

But Arbitron officials also defended the accuracy of diaries. Skarzynski said diaries tend to work better in smaller markets because diarykeepers don’t have as many media outlets to try to recall listening to.

He was also asked about the new competition from Nielsen’s radio “sticker diaries” in 51 small markets. The CEO said Arbitron is working to retain its clients in those markets and noted that the Nielsen product is not accredited by the Media Rating Council. “We think we have a higher quality service,” Skarzynski said.

RBR/TVBR observation: Whether you love or hate PPM, you have to agree that new CEO Michael Skarzynski is getting a test under fire at Arbitron. But then, this is why he gets the big bucks.