According to data released last week from Arbitron's portable- people-meter trial in Houston, listeners tune in to twice as many stations but are listening for about half as long as previously reported under the paper-diary measurement system.
The PPM numbers also indicated a 20% drop in ratings and a 35% lower rating for morning drive- radio's most expensive day part.
The practice of having a listener hand record every single time he or she flips the radio dial tends to undercount the number of stations listened to during the day. For example, the average diary indicates a person listens to about 2.2 stations while the average PPM indicates about 4.2 stations. The audience, in other words, is spread more thinly across a greater number of stations and will likely cause radio planners and buyers to expand the number of stations included on a buy in order to reach the same amount of gross ratings points.
"Radio has never experienced a currency change," said Pierre Bouvard, president of Arbitron's PPM and international initiatives, comparing it to the conversion of the franc to the euro. "Cost-per points will have to be reset. The number of commercials needed for certain reach goals and frequency goals will have to be rethought."
Some analysis was harsher, suggesting that years of potentially inaccurate listening data harvested from an antiquated diary system could mean radio advertisers haven't gotten the ratings points they bought and may have been paying more for less.
Rich Russo, senior VP-director of broadcast, JL Media, has suspected the paper-diary system's tendency to over report for years. As a result, he tries to overbuy gross rating points by about 35% to ensure he actually gets the amount he needs.
"If stations start adjusting their cost per points, it will mean we've obviously been overcharged for quite some time," he said.
The degree to which cost-per points could be adjusted could spell setbacks for the radio-industry players, many of whom are hoping to increase rates by tightening inventory. While radio CPMs have only grown 14% since 2001, broadcast TV rates swelled 30%.
Mr. Bouvard concentrated on the positive change the PPM spells for radio buyers and advertisers, noting the consistent cumulative increase: "In our conversations with advertisers and agencies, they say this is the sticking point. Radio is a reach medium and it doesn't know it."
Erwin Ephron, founder of Ephron Consultancy and a longtime media researcher, echoed the point, one he's been preaching as of late.
"Radio's always been positioned as a frequency medium because it's relentlessly retail oriented," said Mr. Ephron. "But that's not the way buying is done nationally. Radio has reach capabilities that are often ignored." He said the PPM figures make radio "more compelling" for national advertisers.
The PPM is a passive pager-like media-measurement system that picks up inaudible codes embedded within audio streams. In Houston, more than 100 media properties encoded their signals, including about 45 cable networks, 45 radio stations and 16 broadcast networks. Cox and Radio One stations chose not to participate in the trial. Another useful buying tool to come out of the Houston trial is the ability to index TV watching and radio listening.
Dennis McGuire, VP-regional spot director at Carat USA, which buys for CBS, compared it to a qualitative study. "It will help agencies buying for broadcast networks find the radio listeners most likely to tune in," he said, "and help buyers and planners using a mix of TV and radio maximize frequency."
All Arbitron markets are still using a paper-diary measurement system, but the company hopes to commercialize PPMs in the next year and roll them out to the top 50 markets in the next three to five.