News this week that Cumulus Media announced it will stop subscribing to Arbitron’s ratings service for its stations in markets 100+ come the end of this year and has issued a ratings service RFP May 14th as the deadline for response (4/14/08 RBR #73) has us scratching our heads a bit. Are they just posturing with Arbitron, a la Clear Channel and The Media Audit?
First, we asked the most likely contender about this: Eastlan Ratings CEO Mike Gould, who currently services 80 radio markets. He tells us Cumulus came to them some 15 days ago with a preliminary version of the RFP: “Cumulus seems to be arriving at the same spot that many other small and medium market broadcasters are—something isn’t working here in terms of the cost from the service that the leading ratings provider is providing and the ROI we get. We’ve got an industry whose revenues are flat and this service’s cost keeps going up. So does it make sense to look at that occasionally? I think it does.
With Cumulus, the same way it is with anybody else that comes to that conclusion—that’s our business, we’d love to explore alternatives with them. If there’s something that makes sense and benefits both of us we’d love to explore alternatives with them. Or in this case, Cumulus in this RFP has mentioned they are not opposed to starting their own service. If we can add some expertise to that from a consulting standpoint—because we’ve been there—we’d be happy to do that.”
That really may be where Cumulus is heading. Looking at the RFP (http://ratingsrfp.cumulus.com/Default.aspx), we started to notice how hard it will really be (and perhaps stupid) for any ratings company currently in the business for radio to adhere to the literal handcuffs of stipulations this RFP would put on. Sure, it’s worth some 5-10 million in business, but at what costs? And the timeline is too tight—submit by 5/14 and Cumulus selects finalists by 6/1. Wow.
1. There are significant changes and huge handcuffs. So much so that they may already have their solution in place. There are a couple of ridiculous clauses—they have to have sole ownership of the research. So they want credibility, but they also want it to be proprietary. That’s contrary to what most in the industry know about audience measurement. Also, it says “In the event the contract is terminated for performance issues or is not renewed, all historical data, rights to data use, related intellectual properties like branding and source code become the exclusive property of Cumulus.” So if a ratings company signs on to this, their current clients may be writing checks to Cumulus next year because Cumulus has terminated the contract.
2. Cumulus has to approve all costs associated with the service—so the ratings company has to submit design and testing plans, facility improvement, software development, interview costs, support training, gross profit, etc.
3. Cumulus says they want data for the 54 markets once a year—in the fall. It would ruin the business model for Arbitron, for one.
4. There’s no promise of length of contract, so how could a RFP respondent recover their initial startup costs with a potentially short relationship?
RBR/TVBR observation: Imagine for a moment that Roper or Gallup responds to this RFP. For them, it’s just 54 market studies—which they do all the time—custom, tailored research for clients. The clients own the data. So the only real challenge is for Cumulus to find somebody like Gallup to work in conjunction with Cumulus to write a piece of software to display the needed data. So the solution that they may come to—or already have—will come from outside the broadcast community. If Cumulus announces they’ve teamed with a huge company like Gallup for ratings, what might that do to Cumulus’ stock price? What might that do for Gallup entering the radio biz?