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FROM THIS EPISODE

This is Celia Hirschman with On the Beat for KCRW.

The economic livelihood of a commercial radio station is largely driven by one single factor. Ratings. Ratings are the estimate of the number of people listening to that station during a specific period of time. For almost 60 years, Arbitron has been the recognized company to estimate listeners, and release the data. Their method of estimating has been surprisingly basic. They randomly reach out to a portion of the American public by telephone, asking them keep a weekly diary of what stations they listened to and when. At the end of each week, the completed diaries are returned to Arbitron for tabulation.

The data is then compiled into a book. The book literally determines the value of an advertising spot on the station. And for commercial radio, advertising revenue determines the programming and the economic health and wealth of that station.

So when Arbitron began shifting their monitoring methodology from a diary system to an electronic data-capturing system, many in radio were concerned. The electronic device that captures listening habits is called a People Meter. Carried throughout the day by randomly selected participants, the meter electronically gathers inaudible codes that identify which stations the listener is choosing. While the meter is docked in its cradle at night for recharging, it sends the listener data to a central computer for tabulation. The station's rating, based on that data, is compiled and released every month.

Last year Arbitron tested the People Meter in Houston and Philadelphia. The results were vastly different than ratings compiled from written diaries. This month Arbitron launched the People Meter in New York, Los Angeles, Chicago, and San Francisco –- in other words, in four of the largest radio markets. The ratings were released as "currency" ratings, which means that any future advertising values should be based on the new findings.

Arbitron's move prompted an outcry from radio. Last week, in an effort to stop the People Meter system, New York Attorney General Andrew Cuomo announced he was filing a lawsuit against Arbitron. Cuomo argued that the People Meter sampling did not accurately reflect the population of New York. His argument was based on the fact that cellphone-only households and non-English speaking listeners were excluded from participating. These two specific demographics make up a significant percentage of the New York radio listeners.

While the transition from a diary system fraught with human error potential to an electronically-based monitoring system makes sense, the Attorney General of New York is correct. Arbitron has been well aware of the sampling concerns for over a year now, and has not dramatically shifted its practices. They've been selling the old diary system for decades to radio station. Those stations built their entire economic model around the ratings. Suddenly, a number of stations just lost significant net worth from a company that had been selling them different information for decades.

When the record industry shifted from written-sales diaries to electronic sales-monitoring systems called SoundScan at record stores, the music industry argued over the new results with passion. SoundScan adjusted their methodology to recognize the complex marketplace and built a responsible system that everyone could live with, though many would never like. Arbitron should be following the same path.

This is Celia Hirschman with On the Beat for KCRW.

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