Radio InSights

Sam Zell's Take on Newspapers...And Maybe Radio Too

Sam Zell spoke to a group of newspaper executives this week and criticized the industry for complacency. While he was talking about newspapers, his comments could have been directed at radio. He said that newspapers have responded too slowly to rapid change. "I think the newspaper industry has stood there and watched while other media enterprises have taken our bacon and run with it. " A rather odd mixed metaphor, but true for radio too. Other media have taken radio's bacon, and it is up to us to follow the scent and take it back.

Pimping for PPM

Pharmaceutical companies fund medical researchers, corporations pay for Congressional junkets, automobile companies lend fancy new cars to reporters, and restaurants give free meals to restaurant reviewers. Why? In hopes of influencing opinion leaders that can impact their businesses. Drug companies want researchers to report positive results, corporations want Congressional support for their agendas, and restaurants want positive newspapers reviews. This is co-optation. Of course, medical researchers swear that funding did not alter the outcome of their studies, and Congressmen swear that junkets and contributions had nothing to do with their votes, but studies show the contrary.

Arbitron is a brilliant practitioner of the art of co-optation. A long time ago when radio had two viable ratings services, ARB was second. Arbitron understood that the key to gaining business was co-opting the people who influenced radio stations. They targeted media buyers, knowing that if buyers demanded Arbitron ratings, radio stations would have no alternative but to buy Arbitron ratings.

Today Arbitron is fighting a different battle. As a public company answering to Wall Street, it must somehow find a means to grow in a stagnant market. The solution? Raise Arbitron rates by 40-60% and justify it by convincing broadcasters that PPM is so much more valuable than diary ratings that staggering rate increases are justified. To help make its case, Arbitron has once again turned to the time-tested method of targeting opinion leaders. It has enlisted the help of consultants, research companies, and direct marketers to sell PPM. It has done this by throwing open the secured doors of Arbitron’s data processing department and giving cooperating companies unprecedented access to ratings data. The effort has been a spectacular success and a public relations bonanza for the company.

While Arbitron’s efforts have kept PPM in the headlines, it has succeeded in accomplishing a far more important goal. It has turned a number of consultants and research companies into boosters of PPM. It has virtually silenced criticism of PPM and created the illusion that support of PPM is radio’s obligation.

Fred Jacobs recently wrote:

When broadcasters take their protests directly to the media, and when they so obviously salivate at the hint of an Arbitron problem, the net result is to unsettle the advertising community, while raising credibility issues about PPM.  Playing "Gotcha" with PPM is easy.  There will be more snafus and mistakes down the road, as you'd expect with something so new, different, and expansive.  When these things happen, it's understandable when broadcasters become disappointed, angry, and frustrated.  But openly discrediting PPM loudly and publicly only undermines the credibility of the ratings to the people who really matter - the advertising community.

Jacobs did preface his remarks by noting that:

The fact is that broadcasters need to hold Arbitron's feet to the fire regarding PPM.  They need to ask the tough questions.  And it is incumbent upon them to challenge Arbitron's performance when they see inconsistencies or deficiencies in ratings, panel size, and/or compliance.  Arbitron needs to be accountable for its ratings and for getting PPM right.

However the essence of his blog post was to suggest that radio shouldn’t be too tough on Arbitron. Apparently it is ok to complain about problems, but not too loudly and only behind closed doors. This is quite a turn-around for a consultancy that has in the past loudly and openly (and rightly so) taken Arbitron to task for a number of failings. Perhaps this new found sympathy for Arbitron is related to the company’s new partnership with Arbitron.

Despite Jacobs' suggestion that publically criticizing PPM is tantamount to radio treason,  there is absolutely no evidence that a public discussion of PPM problems will undermine the credibility of PPM ratings. PPM problems undermine the credibility of PPM ratings. An open discussion of the problems–and there are problems–will improve the credibility of the ratings more than blind boosterism.

The little public criticism of PPM Arbitron has faced has focused almost entirely on sample sizes with the panels installed in Philadelphia and Houston. There has been virtually no public discussion of methodology, or the potential problems inherent in Arbitron’s implementation of electronic measurement. One reason is that many of the people who have been Arbitron’s most vocal critics have been co-opted by Arbitron. The publicity that comes with sharing a stage with Arbitron is far too tempting.

Television’s relationship with Nielsen is a very different story. At a recent Advertising Research Foundation meeting, Nielsen’s new C-3 TV ratings were roundly criticized. Studies showed that a great deal of the company’s data were wrong. There were multiple presentations showing troubling margins of error and discrepancies associated with data.

MediaPost reports:

Several cable network executives made presentations indicating that they routinely uncover errors in Nielsen's logs, and Jeff Stern, president of Star Media, a major third-party processor of Nielsen's data who services the cable TV industry, disclosed that 30% of the data files his firm receives from Nielsen is ratings data that has been corrected.

As a result of these problems and others, the Media Ratings Council refused to acredidate Nielsens new C-3 ratings and stated that they weren’t sure when it would accredited. Despite all the criticisms and concerns, media buyers reaffirmed their commitment to C3 ratings as, “the new market currency.” As MediaPost ironically notes: This the first time in the recent history of television advertising marketplace that Madison Avenue has bought and posted its broadcast and cable network TV time on the basis of unaccredited ratings. So the television industry and Madison Avenue are using the C3 ratings despite the lack of accreditation, but at the same time aggressively publicizing Nielsen’s problems and challenging them to fix them.

Contrast television's reaction to Nielsen to that of radio’s reaction to PPM. At the recent National Association of Broadcasters convention, not a single panel discussion was devoted to PPM methodological issues. The only discussions on PPM were either by Arbitron or by companies who partnered with Arbitron to gain access to their data. Apparently, the association representing broadcasters felt it unnecessary to provide broadcasters an independent assessment of PPM. And the NAB’s kid glove handling of Arbitron is not an isolated incident. Since Arbitron’s roll out of PPM, the only information we’ve learned about PPM has been what Arbitron has wanted us to know. Confidentiality agreements have muzzled the Arbitron Advisory Council and the Media Ratings Council. Consultants and research companies have been co-opted. If the only companies given access to PPM data are those who marvel at what it can do and sing its praises, how is PPM going to get better–and more accurate?

Despite Jacobs' concerns, a squeaky wheel really does get the grease. Historically, Arbitron has not been particularly responsive to radio’s complaints. Jacobs Media championed the issue of inadequate male in-tabs for many years before Arbitron made even a token effort to address it.  It has too often stonewalled radio until it could no longer ignore a problem. What incentive does Arbitron have to fix PPM problems if they are only whispered about behind closed doors? Arbitron gadflies like Bob Neil should be thanked, not quieted because he has the courage, power, and pulpit to be heard.

The Media Ratings Council has accredited Houston PPM ratings, but has not issued a blanket accreditation to PPM ratings. Philadelphia is still not accredited and it appears that New York will be an unaccredited market as well. Broadcasters may feel a certain relief that radio is now being measured electronically, but PPM has yet to prove itself. We need to be as vigilant towards Arbitron as television is towards Nielsen.

Satellite Radio Blues

Every new technology goes through a honeymoon phase. Early on, people are so excited about the technology, that they overlook the rough edges or the things they don’t like about it. Over time, however, the newness wears off, and the little things that didn’t seem bothersome begin to bother.

A recent column in PC Magazine illustrates this evolution well. Entitled, The Satellite Radio Blues, author Lance Ulanoff recounts his growing discontent with Sirius (June 5th issue). Knowing that her husband was a Howard Stern fan, Ulanoff’s wife bought him an S50, a Sirius radio that not only plays live feeds, but can also record up to 50 hours of content.

Installing the radio in his home proved a challenge:

I must have tried dozens of different positions on three or fout different window ledges. I even held the thing outside my window, but short of climbing onto my roof, I couldn’t seem to get a consistent signal.

He goes on to tick off all the technical problems he suffered. There were significant dropouts. Whenever the signal got a little thin, voices became tinny. “I’d stop for gas and the station’s awning would block the satellite. That’s not something I ever experienced with good old terrestrial radio....I was also pretty shocked to find commercials on Stern’s and other stations. I thought the whole point of paying for this stuff is that it would be commercial free.”

The author concludes his column with this:

I barely use my satellite radio now. I never realized how much I like simply turning on the radio and listening, and not having to worry if I remembered to schedule a recording or if I could get a clear line of sight to the nearest satellite. I wonder how much I could get for this thing on eBay.

Ulanoff’s experience is not isolated. The enthusiasm towards satellite radio is waning among many of those who subscribed early on. Many listeners would rather put up with terrestrial radio’s clutter and commercials than endure the frustrations of satellite radio.

But Ulanoff’s frustrating experience is not entirely good news for radio. Many of the problems that he experienced with satellite radio are equally troublesome with HD Radio. Spotty coverage, signal drop-out, and other technical problems plague HD Radio as much as satellite radio. Listening to HD Radio during the author’s commute through Penn Station would probably be just as troublesome as was his experience with Sirius. HD Radio can only succeed if it is just as easy to enjoy as analog FM.

The World has Changed. The Industry has Not.

New York Times Magazine in its September 2 issue featured a profile of Rick Rubin, co-head of Columbia Records. If you want to understand why the record business is in free-fall (and why radio may well follow it into the abyss), the article is well worth reading.

The most telling quote is not from Rubin, but from David Geffen. “The music business as a whole has lost its faith in content....It’s no longer about making music, it’s all about how to sell music.” Substitute radio for record and the observation is just as accurate.

As part of the company’s attempt to figure out how to sell music, Columbia invited 20 college students to work on digital marketing and promotion projects over last summer. At the end of summer, they conducted focus groups with the students, “to try to take the pulse of the elusive music audience.” Mark DiDia, head of operations at Columbia summarized what they learned:

They confirmed what we already knew....The kids all said that a) no one listens to the radio anymore, b) they mostly steal music, but they don’t consider it stealing, and c) they get most of their music from iTunes on their iPod.....The biggest thing in their life is word of mouth. That’s how they hear about music, bands, everything.

If this is an example for what passes for research at the labels, it’s no wonder the business is in trouble. Having a couple dozen college students work at Columbia for the summer and then having them participate in research that purports to measure the pulse of a whole generation rivals focus groups done in station conference rooms. Worse than providing worthless information, this kind of research provides misleading and distracting information.

Cume ratings in college age demos have declined from 96% in 1998 to 92% this year. TSL has declined from 21 hours to 18 hours. So the notion that “no one listens to radio anymore” is obviously false. Since this is apparently something that DiDia already knew, one wonders whether the observation was something these students believed before hand or something they learned at Columbia. Equally telling is another comment by Rubin:

There was a time when if you had something that wasn’t good, through muscle and lack of other choices, you could push that not so good product through those channels. And that’s how the music business functioned for 50 years. Well, the world has changed. And the industry has not.

As with the earlier quote, we could replace music with radio and the assessment would be as valid. When listeners had limited options, we could produce not so good programming and do ok. Today that doesn’t work. People now have options. They don’t have to put up with a dozen radio stations. They can now shop around. If they can’t find what they want on the radio, there’s satellite, there’s streaming, and there’s downloading. The world has changed. And the (radio) industry has not. Unless we want to become just as irrelevant as the record industry, we have to change.

If Brands Are Built over Years, Why Are They Managed over Quarters?

If Brands Are Built over Years, Why Are They Managed over Quarters? is the provocative title of an article in the July-August issue of Harvard Business Review. The authors, Leonard Lodish and Carl Mela state that powerful brands have been weakened by a preoccupation with short term results. Companies have reallocated spending away from long-term brand building and toward promotions and short term results.

While the authors focus on consumer goods, they could be talking about radio. They write:

Despite the growing evidence that (long-term) marketing strategies yield positive long-term results, companies continue to manage their brands with a short-term perspective. This orientation is exacerbated by Wall Street analysts who focus on quarterly figures to value firms and advise clients.

Foreshadowing the potential impact of monthly ratings with PPM, they continue,

The increasing availability of more thinly sliced short term data has led to a greater emphasis on short-term marketing productivity, to the detriment of the long-run health of brands.

The authors conclude:

Brand management today is like driving a car by looking only a few feet ahead. The drivers can change direction rapidly, but they’re not necessarily on a path that will take them where they want to go. In the face of an increasingly fragmented media...brand managers cannot afford to be steering their brands in the wrong direction. Mounting evidence suggests that a short term orientation erodes a brand’s ability to compete in the marketplace.

While Harvard Business Review is probably not high on the reading lists of radio group heads, this article should be required reading. As an industry we have abandoned any pretense of building radio stations. Legendary powerhouse stations are being milked in an effort to squeeze every possible bit of short-term profit. The end result is that station shares are declining across the board. Thus far in this decade, for every station that has gained market share, two have declined. At a time when radio is under attack from satellite, streaming, iPods, and others and we should be strengthening our brands, we have done just the opposite.