Forget the iPod. The Portable People Meter, another pocket-sized gadget, is about to change the broadcast radio industry forever.
Arbitron, the company that tallies listeners so broadcasters can set advertising rates, is moving away from paper diaries. Instead, Arbitron is paying listeners in a growing number of markets to carry Portable People Meters.
These high-tech gadgets, also known as PPMs, look like pagers and record what radio stations are playing in the background.
PPMs collect extremely accurate data. They’re not like diaries, which usually contain a listener’s best guess of what radio stations he heard, hour by hour, week after week.
Yet accuracy means stations that once were at the top of the heap in terms of popularity and advertising sales soon may find themselves near the bottom.
“This is probably the most important thing to happen to radio since FM came along,” said Marv Nyren, regional vice president and general manager of the Chicago stations owned by Indianapolis-based Emmis Communications Corp. “If people aren’t listening, you’re not going to get credit.”
Ratings also will be more frequent. PPM figures will come out monthly, whereas figures from Arbitron’s diaries came out quarterly. The age range of listeners also will drop from 12 and older to 6 and older.
The rollout of PPMs is happening slowly. The largest markets, such as New York and Los Angeles where Emmis has stations, are going first. On Friday, the Philadelphia market became the first to release ratings based on PPM data; the new information showed that far more adults listen to radio at work than previously thought.
For decades, radio has sold itself to advertisers as a medium that consumers spend lots of time with. The preferred way of rating a station has been by the “average quarter-hour,” which is the number of people who listen to a given station per 15-minute segment.
The Arbitron diaries are partially responsible for this philosophy. Listeners who fill them out often do so weekly, not daily, even though they’re not supposed to, and they report listening to certain radio stations for large blocks of time based on what they remember.
Therefore, broadcasters have spent long hours and lots of money building brands for their stations, with jingles and slogans. A brand is something a listener will remember.
As Jeff Smulyan, chairman and CEO of Emmis, put it: “We’re not in the radio business. We’re in the diary-retrieval business.”
But in recent years, other studies have shown that the time consumers spend listening to the radio is down. Many analysts blame new technologies, such as the Internet, iPods and satellite radio, which give people more options and divide their time.
Whatever the reason, preliminary PPM figures seem to bear that out.
The number of listeners per average quarter-hour is down compared with those reported in Arbitron diaries. But the “cume,” or cumulative number of listeners that radio stations reach per week, is up. That shows consumers don’t actually listen to a single station for hours at a time. They channel surf.
“Radio is becoming a reach medium, similar to TV,” Nyren said.
That means Emmis, Clear Channel and other broadcasters will have to start selling their stations in a whole new way:
They’ll have to retrain advertisers to look at the “cume” rating, not the average-quarter-hour rating. They’ll have to prove that radio still has listeners, even if the average-quarter-hour ratings aren’t as high as they once were.
Dave Van Dyke, president and CEO of the radio market research firm Bridge Ratings, said he has talked to advertisers who say they plan to increase their budgets for radio once they have more accurate data from PPMs.
But he’s skeptical.
“I think, because it’s a significant change, the ad agencies will have an advantage. It’s resetting the game,” Van Dyke said.