The PPM Storm.

You know it’s one thing hearing from your local weatherman that the storm of the century is approaching and it’s quite another living through the actual storm. Such is the case with Arbitron’s newest method of measuring radio listening called PPM.

There has been much written about the effects this measurement would have on our business and how the gross miscalculations of our audience would affect us. It appears that we might have not have taken into account the full dramatic impact this could have on the entire radio industry. For instance, it should be noted that both New York and Los Angeles markets have seen significant downtrends, the likes of which most of us have never witnessed.

In New York alone the months leading up to October (PPM became currency on 10/6/08) were lackluster to say the least but nothing compared to what they are now. Consider that in July, August and September the New York Radio market posted loses in the range of -8 to-9% in revenue. In October, the very month that PPM was officially named currency, the market losses were posted at -17.3% followed by -19.1% in November and the just released December figures indicate that the market has fallen even further to -19.8% in total revenues. In LA the market went from being down -12.3% in October to an astonishing -29.6% in November and the most recent December figures the market continues to show a devastating falloff in revenue to the tune of -21%. Is it the bad economy? Perhaps, but isn’t it funny that just as soon as these markets started dealing in the new currency they started taking these incredible nose dives. Cause and effect?

In my opinion an overwhelming YES. How could it not be? In our world PPM has devastated the NY minority stations where we are dealing with clients that are demanding 30-40% discounts based on what they call “new” information about our audience. That is if they are even considering buying us because of these new ratings. It has affected us in ways most of us could not have imagined. The morning drive audience figures are the most telling. Our stations have seen an average quarter hour ratings drop off of as much as 60% from what was reported in the last diary analysis in the spring of last year. Morning drive is our “prime time”, as it is for most radio stations in the country, but yet in PPM ratings we have seen these incredible drops without any change in personalities or music orientation. None what so ever!

We (Spanish language radio stations) are not alone when dealing with these unexplained losses in morning drive efficiencies. The general market has also seen the same realignment in audience deliveries. Many of the stations that had top rated morning drive programs have seen their numbers fall so much that their midday and pm drive programs deliver more audience. Take into account that the #1 general market morning show among A18-34 in Spring ’08 is now delivering 120% less in average quarter hour rating in the December PPM…yes 120% LESS! That would translate into a dramatically severe loss of revenue which should be a huge flag on any CFO’s forecast. The same morning show ranked #1 in A25-54 years old and now in the December PPM they are tied for 3rd place delivering 50% less in ratings. Wasn’t this new and improved system supposed to be good for radio because it makes us accountable and helps us to be more competitive with other media?

The stations that have charged more for morning drive in the past are now being asked to re-submit their rates plans in accordance with the drop in delivery. Since PPM has become currency I personally have had numerous conversations with many buyers in New York who have complained to me that they simply cannot make their morning drive efficiencies work in PPM – for any station! To make matters worse, any increases in midday and afternoon ratings can’t make up for the dramatic drop off in morning drive as far as revenue is concerned. Isn’t that just great! In just three short months our friends at Arbitron have managed to realign the way we do business and hardly anyone from the general market has taken notice.

How long will it take before they realize the same thing we have seen since the beginning? There is something wrong here and it doesn’t take a statistician or a research consultant to notice it. Look at the numbers and tell me that they make sense. When are the bright leaders in our industry going to wake up and stop suspending their own logic for the sake of what they might have perceived as some form of electronic advancement in audience measurement? It will not take long before major markets like New York and Los Angeles are dealing with market losses in 100’s of millions of dollars and the blame won’t only lie totally on the suffering economy but maybe the way some company, whose sole purpose is to provide accurate audience information, has failed the industry. Big Time!

The storm has arrived and we need to deal with the clean up and fast.

By Frank Flores