Radio groups that operate in small and mid-size markets are revaluating whether they want to renew their ratings contracts in light of what they say is lower ROI from their ratings investments and a need to cut costs during a global pandemic that has severely eroded ad revenues. Group heads say the cost of ratings are out whack with their revenues, especially in today’s depressed marketplace.
Mid-West Family, which owns stations in eight small and medium markets, dropped Nielsen’s diary-based service in Madison, WI and Rockford, IL nearly two years ago. “Less and less business is being driven by ratings and the cost keeps going up so there is less of a benefit,” says Tom Walker, President and GM of the company’s Madison cluster. Going without ratings hasn’t hampered the company’s ability to do business in those markets, Walker says, and the company remains a Nielsen subscriber in a handful of other markets.
A top exec at a radio group with hundreds of stations, mostly in small and medium markets, says it’s “more than likely” they won’t renew their ratings contracts in almost all of their markets as they come up for renewal. “The prices are just out of control,” said this exec, who spoke under condition of anonymity. “We have a number of markets where the price we’re paying Nielsen is more than 50% of our [pre-COVID] cash flow in the market. As national and agency business declines, the ratings just aren’t as critical to us from a sales standpoint.”
Michael Wright, COO at Midwest Communications, says agency business is declining while local direct is on the upswing at its 82 stations in small and medium markets. Local billings at its Central Wisconsin cluster rose from 50% to 73% during the past six years and other markets are as high as 90%.
Straining the relationship between Nielsen and some of its clients, sources say, is the company’s unwillingness to provide a temporary price break or more favorable terms during the pandemic. “Nielsen came off in this scenario as not being a partner to us,” Wright says. “We’re going to have some very long discussions when our contracts are up about whether or not we’re going to renew – and where.” While Wright says ratings are still “essential” in markets like Nashville and Knoxville, the company sees less ROI on ratings in many other markets.
Nielsen Audio Managing Director Brad Kelly says he understands the process clients are undertaking. “Scrutinizing the ROI on every dollar spent is just smart business,” he says. “Nielsen is going through that very same process now. In cases where a radio metro marketplace can no longer financially support measurement and clients opt out, Nielsen will exit the market. It’s a straight economic decision on both sides.”
The growing use of first and third party data sources to help drive revenue is another contributor to the move away from ratings. Attribution providers, such as AnalyticOwl, Veritone and LeadsRX, are helping broadcasters prove the value of their campaigns and optimize creative. “These analytic tools have been incredible in helping us secure business, says one radio exec. “We think that’s the future, much more so than any kind of quantitative ratings service.”
Nine Market Closures May Only Be The Beginning
Citing a lack of financial support, Nielsen said in late July it would stop measuring radio in nine smaller U.S. markets, eight of which are markets where Townsquare Media operates. When Inside Radio contacted Townsquare to ask if it had cancelled Nielsen in those eight markets, the company confirmed it had. In a follow-up, when asked if Townsquare had notified Nielsen of any other markets they were planning to cancel, the company confirmed it cancelled all 51 of their Nielsen markets with rolling end dates given the various acquisitions of radio operators they have made since 2010.
Nielsen awards discounts based on subscribing to 90% or more of the markets a company operates in, making it unlikely that radio’s largest groups will opt out in smaller markets. The trend of broadcasters opting not to subscribe to ratings in smaller markets isn’t surprising to Dr. Ed Cohen, who spent 14 years with Arbitron and two with Nielsen. “The pandemic may be the trigger for more companies to look more closely but I think the question has been there for years as to whether the value is there in the smaller markets,” says Cohen, most recently VP of Ratings and Research at Cumulus Media. “It’s up to Nielsen to come up with something new to help these small markets to make more money. I think they will do whatever they can to help.”
Nielsen says the ratings diary is still the most cost effective way to measure mid and small market radio and that it will continue as its primary instrument in these markets. But Kelly says the company is “actively evaluating big data and return-path-type-data for radio, and how it might be utilized to supplement, augment, or amplify the efficacy of our measurement service. As we demonstrated on the TV side of things, a hybrid methodology can be extraordinarily effective,” Kelly says.