Arbitron ConCall: The Cost Of Settling ... And Getting CPOs
January 12, 2009 at 2:26 PM (PT)
ARBITRON held an impromptu conference call to discuss its executive change, the PPM settlements and the MRC approval in RIVERSIDE, and while their stance on those issues were consistent to what they previously expressed, some new insight could be gleaned from their comments.
The ARBITRON executives didn't provide and new info into the settlements. Outgoing CEO STEVE MORRIS said they were self-explanatory, and that he was glad the changes and improvements were "essentially in line to what we're already doing." Yet he did describe the negotiations to reach the settlements as "extremely grueling."
Now that we established that the 'Radio First' methodology is capable of accreditation, it's up to us to properly execute it
The lion's share of the discussion, as well as a Q&A session which consisted of a JP MORGAN analyst asking several questions, revolved around the financial implications of the settlements. The roughly $600,000 in settlement fees and costs will be magnified by what CFO SEAN CREAMER estimated to be $4-6 million in legal fees for the 4th quarter, with additional legal expenses to "trickle in" to 1Q '09.
"They all represent incremental costs," CREAMER said. "With respect to the methodology initiative, many of those increased costs were already contemplated in our business model, so they don't fundamentally alter our business plan."
However, it appears that ARBITRON, like other companies, didn't take into account the growth rate of cell phone-only households. "That's one area we're monitoring closely, the increasing incidence of CPO households," CREAMER said, "It's much more manually intensive and expensive to recruit; those household can be up to three times more expensive. A few years ago The CPO segment of the audience was 7-8%, now it's 16-18%. The rapid increase in CPOs was not contemplated.
"We're struggling with this issue, as we utilize a more expensive method now than we'll be using in future when CPOs become easier to find," he added. "The haystack will become smaller, and the [CPO] needles larger. As we continue commercialization of PPM, we learn more about this and we build better panels, which will increase efficiencies. Then we can assume such efficiencies in our pricing models."
Naturally, MORRIS and CREAMER were also heartened by the MRC accreditation in RIVERSIDE. "We realize it's just one market, MORRIS admitted, "but it's the first market accredited using our 'Radio First' methodology. Now that we established that the 'Radio First' methodology is capable of accreditation, it's up to us to properly execute it."