Feasting on Famine

While radio was taking it on the chin last year, at least one company did quite well for itself, according to this post from Radio InSights, “PPM Generates More Revenue . . . For Arbitron”:

What we do know is that during a time when local radio revenue declined by nearly $6 billion, radio increased what it paid Arbitron by about $84 million.

This during a time when radio groups were slashing operating budgets.

As Jerry Del Colliano regularly documents, massive layoffs have cut deeply into radio’s talent pool. Program directors have been put in charge of stations thousands of miles apart. Even large market radio stations have been automated, with entire staffs eliminated.

As the post notes, as radio struggled, Arbitron had a banner year:

[A]s the industry spiraled into recession revenues began a free-fall. Revenue in 2009 dropped 18% alone from the previous year after a 9% drop the previous year.

Nearly $6 billion in annual billing has evaporated since 2006’s peak. If predictions of a 6% rise in revenue for the year come true, the industry will recoup less than a billion dollars of the accumulated loss.

That’s the bad news.

The good news is that Arbitron escaped the recession unscathed. The company is headed for another record breaking year…. Arbitron has managed to grow over 20% as radio crashed.

Arbitron is rather tight-lipped about what it charges radio stations. However, as a public company, it is required to release quarterly revenue reports. Last year, a year when radio revenue declined 18%, Arbitron had revenues of $385 million, up $16 million over the previous year.

So how much does your station have to pay for the “privilege” of moving to the Purple People Meter from the diary system? Though it’s closely held information, you can bet it ain’t cheap. As Harker Research tells you:

We know that station fees comprise 85% of Arbitron’s revenue, so radio stations paid the company about $327 million in 2009. Since Arbitron’s diary business is mature, there’s very little growth there. The real growth product is PPM. Seventeen markets switched from diary to PPM last year.

Assuming most of Arbitron’s revenue growth comes from the transition to PPM means that each new PPM market has to pay the company another million dollars for the privilege.

That is money that once went to salaries, marketing, and other productive investments.

And, as the article concludes, is this the best use of station revenue in these hard times? Is it prudent use of taxpayer money by public radio bean counters in an attempt to pull their heads out, or is it just throwing good money after bad?

Local radio paid 1.5% of its revenue to Arbitron in 2007. Local radio is now paying 2.4% of its top-line revenue to Arbitron. Arbitron should not be faulted for doing what every business tries to do, which is to grow its business. The question is whether radio has its priorities right.

What other radio station budget line has gone up 11% in the past two years? In what other areas have radio stations decided to invest more money in the past two years? Air talent? Marketing?

Deep programming and marketing cuts have seriously imperiled radio at a time when it can least afford it. Under assault by digital alternatives, radio should be at its best. Instead of investing in the product, radio is plundering the product to spend ever increasing dollars with Arbitron.

Is that really the best investment of radio’s shrinking dollars?

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