Arbitron testifies before the New York City Council.

Arbitron Inc. released the following statement summarizing its testimony before the New York City Council regarding the Arbitron Portable People Meter radio ratings services.

In the remarks of Steve Morris, chairman, president and chief executive officer, Arbitron Inc., and in documents submitted to the City Council, Arbitron emphasized that:

The participants in the Arbitron Portable People Meter (PPMTM ) radio ratings services are as representative of the diversity of New York and other top markets as diary respondents are today;

The fundamental techniques used to recruit PPM respondents in New York and other markets are the same as Arbitron uses for the diary;

The difference between PPM ratings and diary ratings is a function of the survey tool, not the sample. PPM collects actual exposure; the diary, recall-based “habitual” behavior;

The paper and pencil diary allows loyal listeners, of any and all formats, to overstate their habitual listening;

Broadcasters of all formats, including urban and Hispanic, who have embraced PPM, have improved their audiences and their standing in the marketplace;

Arbitron will continue to adhere to the Media Rating Council Voluntary Code of Conduct and will continuously strive to improve the PPM radio ratings service;

Arbitron remains committed to working constructively with the Council and with clients in the radio industry to address specific diary-to-PPM transition issues.

Arbitron does not believe that the FCC has jurisdiction over the Company or its operations and assets and consequently lacks the authority to commence a Section 403 investigation.

Arbitron has great respect and appreciation for the work of the City Council and for the critical and unique role that Black and Hispanic-targeted radio provides as a voice for the diverse communities of New York City.

Testimony of Steve Morris, chairman, president, chief executive officer New York City Council Committee Hearing

September 10, 2008

Good morning. I’m Steve Morris, and I am the CEO of Arbitron. Seated with me is Bob Patchen, Arbitron’s Chief Research Officer.

Thank you for the opportunity to present Arbitron’s views on why the Portable People Meter is a superior radio ratings system and how its success is critical to the future of all radio broadcasters, the advertisers who use radio, and its listeners.

Arbitron has great respect and appreciation for the work of the City Council and for the critical and unique role that Black and Hispanic targeted radio plays as a voice for the diverse communities of New York City. For those reasons we are committed to working together with the Council and with minority broadcasters in a voluntary, collaborative and supportive manner.

What we are debating here is change– change of the survey instrument — from a recall-dependent, paper and pencil diary to an electronic, completely passive, objective measurement device.

The industry demanded a more precise and credible measurement tool for radio just as they have for all media.

Paper and pencil diaries are simply not up to the task of reliably recording actual listening behavior in large, complex markets such as New York. And paper and pencil diaries are not up to the critical task of providing New York advertisers with the credible, accountable measures that they demand of radio and of every other advertising medium. The Internet, with more accountable, electronic measures of its audience, is taking ad revenue from radio as radio struggles to compete using diary-based ratings.

What we are not changing is the fundamental, decades-old technique we use to recruit our respondent samples. As with the paper and pencil diary, for PPM we:

o configure samples based on annually updated US census data,
o recruit by telephone, and
o provide larger cash incentives for Blacks, Hispanics and 18-34 year olds of all races and ethnicities.

And while cell-phone only households are not included in the paper and pencil diary method, we do sample cell phone only households in PPM.

As our written submission details, the PPM sample is as representative of the diversity of New York City and of the New York radio market as the diary sample is today.

The roughly 30 percent lower ratings, that we see in PPM versus the paper and pencil diary, are primarily attributable to one key factor: the diary tends to overstate a listener’s actual exposure to radio.

Let me show you what I mean:

Here are individual pages from three actual diaries from the New York Spring Survey:

One for an African American female, age 39
One for a Hispanic male, age 24
One for a non-Black, non-Hispanic “Other” male, age 28

What you see are long, uninterrupted blocks of listening. And there are thousands of diaries just like these from New York and other markets across the country.

If we are to take these and other diary pages literally, we would have to believe that no one ever goes to a meeting; no one ever turns down the radio to talk on the phone; and no one ever steps outside for a breath of fresh air.

We would also have to believe that everyone turns the radio on and off at exactly the same time each and every weekday – almost always at the top or the bottom of the hour.

This isn’t how real people live their lives. And this isn’t how real people use radio. If anyone needs proof, we now have it in the PPM.

It is no surprise that this sort of overstated “heavy listening” is more common with the paper and pencil diary than with the PPM. The PPM can only report what you actually hear….not your perception of what you heard.

Here’s another example.

On the left is diary data and on the right is PPM data, from the same person, one year apart. In the diary, this person reports similar radio listening for each weekday. The PPM data show a much more varied picture.

o More stations listened to (6 vs. 4)
o 44 percent more listening occasions (26 vs. 18)
o Each individual occasion is 39 percent shorter (57 minutes vs. 93 minutes)
Here is another example, this time from an African-American respondent. Again, the PPM data show a much more varied view of radio listening.
o Twice as many stations listened to (4 vs. 2)
o More than twice as many episodes (27 vs. 11)
o Each individual episode is 70 percent shorter (83 minutes vs. 281 minutes)

The difference in ratings between the diary and the PPM is not about the sample. It’s about how the diary lends itself to overstated listening particularly by loyal listeners. The more loyal the listener, the more likely a diary-keeper will overstate listening. It is the primary driver of the 30 percent overall reduction in audience in PPM versus the diary.

It makes sense that urban and Spanish-language radio stations that spend the majority of their time servicing their local community would develop a special loyalty with their listeners. However, it’s not just urban and Spanish-language stations that are impacted by this affinity for a station or a personality. The phenomenon affects all stations and formats in varying degrees.

For example, WABC, a talk radio station that features personalities such as Rush Limbaugh and Sean Hannity, has an audience that is 89 percent comprised of persons who are not African-American or Hispanic. The July 2008 PPM ratings for Persons 25-54 for WABC are only 40 percent of those reported by the diary. That’s a 60 percent reduction.

Let me say that again: For Adults age 25-54, the demographic most sought by advertisers, WABC has less than HALF the audience in PPM than they have in the diary. We see the same sort of large differences for WBBR and for WOR.

In our written submission, we highlight the successes that broadcasters who serve urban and Hispanic audiences are already having using the more reliable and detailed audience estimates that PPM delivers. They are improving their programming; building their audiences and showing their advertisers how effective their formats are in the marketplace. They are succeeding by harnessing the power of PPM. In Houston, our first commercialized PPM market, after initially suffering a ratings decrease, with programming changes the number one and number two stations among listeners twelve years and older are both urban formatted stations owned by Radio One, a majority Black-owned broadcaster.

We have also included exhibits that show how Arbitron is committed to helping the entire radio industry, including urban and Hispanic stations, make a smooth transition to PPM.
We recognize that PPM, like any new technology, can be disruptive. We believe that it is our responsibility to enable the community that uses and is affected by this new and vastly superior technology to make the transition with as little disruption as practicable, yet without sacrificing the progress that PPM represents.

This Council will be asked to vote on a resolution recommending that the FCC launch an investigation into PPM. We believe that would be a mistake. Most importantly, the FCC does not have jurisdiction over our service. Diverting everyone’s time and attention to a proceeding on the part of a federal agency that lacks both jurisdiction and specialized knowledge is not the best use of anyone’s resources. We should be working constructively with our clients in the radio industry to address specific diary-to-PPM transition issues.

Furthermore, Arbitron adheres to the Voluntary Code of Conduct of the Media Rating Council, which requires three things prior to commercializing a market:

1. a rigorous independent audit of a market
2. a review of that audit by a committee of industry representatives; and
3. a pre-currency period during which customers can prepare for the transition from diary to PPM.
We work tirelessly with the MRC to continually improve the PPM service, just as we have for decades with the diary.

Accreditation is a very difficult and time-consuming standard to achieve. By design of the MRC’s Voluntary Code of Conduct, it is not required prior to commercializing a market. The path we have chosen-commercializing in a market and continuing to seek accreditation-is the path chosen, to our knowledge, by the other major audience measurement companies.

As I conclude, let me summarize my main points. These are important and they represent the heart of this whole debate:

o Contrary to what our critics would like you to believe, the PPM respondents are every bit as representative of the diversity of New York and other top markets as the diary is today.
o The fundamental techniques we use to recruit PPM respondents are the same as we use in the diary.
o What drives the difference between PPM ratings and diary ratings is the survey tool, not the sample. PPM collects ACTUAL exposure; the diary “habitual” behavior.
o The paper and pencil diary allows loyal listeners, of any and all formats, to overstate their habitual listening. We can show you thousands upon thousands of such diaries in our research center in Columbia, Maryland.
o Broadcasters of all formats, including urban and Hispanic, who have embraced PPM, have improved their audiences and their standing in the marketplace.
o We are committed to working constructively with our clients in the radio industry to address specific diary-to-PPM transition issues.
o We will continue to strictly adhere to the MRC’s Voluntary Code of Conduct including fulfilling the predicates necessary to commercialize a market, and continuously improving the PPM service.

Thank you for your time and attention to this important issue.

(End of remarks)

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