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Having a one or two percentage point advantage doesn’t mean you’re going to win all the time. It just means that given enough time and enough bets, you can win a little more than you lose. Before you head to Las Vegas, however, remember that the casinos have very deep pockets and no matter how good a player you are, they can probably outlast you.
Arbitron ratings are a lot like playing Blackjack. If you’ve got a good radio station, the odds are in your favor that you are going to have a good book. But there is no guarantee. Good stations have bad books too. The problem with Arbitron ratings (both diary and PPM markets) has to do with the fact that sample sizes (the in-tabs) are not large enough to produce consistent numbers. Hence we have flukes, wobbles, and spikes.
Flukes, wobbles, and spikes are so common that we all take them for granted. (OK, maybe not everyone.) When the numbers drop unexpectedly, we can be pretty sure that we’ll pop back up in a trend or two. If we have a tremendous book and little explanation for the spike, we can expect that the station will settle back down over the next few trends.
Promising clients that we will achieve a specific rating point and offering compensation if we do not assumes that Arbitron ratings are reasonably accurate and consistent. However, we know that they aren’t. That’s why posting and guaranteeing listening levels has the potential to add a whole additional level of financial risk to radio stations. If broadcasters compensate advertisers when ratings come in lower than expected, but there’s no station compensation when the ratings come in higher, it’s like the Blackjack player who can only lose.
Canadian broadcasters understand this and guarantees are a two way street. Advertisers get compensation when ratings end up lower than guarantees, and broadcasters get compensated when ratings are higher than guarantees. That way the wobbles will average out so that some of the time we over-achieve what we promised, and other times we under-achieve what we promised. It’s like the Blackjack player that knows he is going to lose some hands, but hopes his winning hands more than compensate.
This is the only fair way to take into account the flukes, wobbles, and spikes that are part of Arbitron ratings. Unfortunately, the model floated by RAB does not include additional station compensation. This needs to be addressed. Like the millionaire Blackjack player that loses just a little bit each hand, but still ultimately ends up losing everything, compensation without reciprocity will ultimately cost radio stations far more than posting could ever gain.
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