PPM Delay To Lower Arbitron Projected '08 Revs
November 27, 2007 at 8:39 AM (PT)
In a hastily arranged conference call, ARBITRON CEO STEVE MORRIS admitted that the PPM delay in nine markets will put a major hit on its 2008 financial projections, costing the ratings company anywhere from 22-33 cents per share in 2008 revenue, but it won't impact 2009 projections.
MORRIS and CFO SEAN CRAMER were peppered with questions from WALL STREET analysts for almost 90 minutes; at the same time as ARBITRON’s stock price was dropping over 20% in early trading. (Follow the stock price here.)
It's getting harder and harder to get people to answer the phone, and things like call waiting makes it even more difficult ... In general thatâ??s the hardest nut to crack."
"We're working on the assumption that the resolution will take about six months to bring the panels under alignment," MORRIS said. "In the meantime, we'll be keeping the diary panels active for nine months. Running diaries simultaneously with the PPM in those markets, he said, is the reason for the lower financial projections.
Yet he also asserted that he doesn't plan on passing on the extra costs onto radio. "We don't see a fundamental change," MORRIS said. "There are always have costs of recruitment; what allowed us to maintain our margins for many years is taking the attitude that we're new on the learning curve, and we'll will find that a lot of automation will offset whatever additional expenses are incurred."
"Not all costs are incremental," CFO SEAN CRAMER added. "For instance, we can redeploy and redirect our incentives from over-represented demos to under-represented. We will gain efficiencies through our past experiences and further automation."
MORRIS made a point of downplaying his earlier remarks about "trade-offs" with radio, denying that ARBITRON was expecting a cost increase quid pro quo for better data. "There are lots of trade-offs in the negotiating process," he said. "When we talk to the MRC, we talk about give and take on everything from technical changes to higher response rates, based on judgment and balance. I don't see a point where we can go back and change the basic price structure."
Other Quick Takes
* The announced delays will have no impact on contracts ARBITRON has with radio. There are no clauses for cancellations. "The specific PPM charges kick in when the market is commercialized," CRAMER noted.
* While data will still be collected in NEW YORK and "warm markets" such as LOS ANGELES and CHICAGO as the system is tweaked, ARBITRON does not plan on releasing it until any necessary changes are implemented. If all things work out, it is possible that some data could be released in the spring.
* Could the delay be longer than six months? "Of course it's possible," MORRIS answered, "but we don't expect it to be."
* What needs to happen to make ARBITRON's loudest critics happy? "We can't do anything about vocal and venomous critics," he said. "That's not in my control. We can address the overall needs of the markets and the majority of broadcasters and buyers. If we do that well and responsibly, we'll be fine."
MORRIS did cite the difficulty in recruitment. "It's getting harder and harder to get people to answer the phone, and things like call waiting makes it even more difficult," he said. "In general that’s the hardest nut to crack."
Left unanswered -- an unasked by the WALL STREET analysts who dominated the Q&A -- was whether ARBITRON would remedy that by reverting to the door-to-door recruitment methods used in HOUSTON. (ALL ACCESS asked that question after the conference call; ARBITRON's reponse is reported in the story above.)
Is Radio Ready For PPM?
When asked if radio was ready for the PPM, MORRIS replied, "It is a big change, no question about it. Not only is the data more granular and frequent, but the overall audience numbers change a lot. The way certain formats [are impacted now] is different than what it was with the diary. There's a lot of think through and get your mind around, and it doesn't happen overnight. It can take a full year for the new numbers to settle out in a market, and we haven't had that yet in PHILADELPHIA. We will continue to educate and help [radio stations] get their minds around it ... that combined with the fundamental drive by advertisers for accountability will help us."