Jodi Schwan

jschwan@sfbusinessjournal.com

Somewhere in Evansville, Ind., an old map hangs in a radio station manager’s office.

It shows ratings for the nation’s radio markets. Peter Tanz, senior vice president of Midwest Communications Inc., looked at it whenever he visited the station.

“And there’s this great big hole in the middle of the country,” he said. “That hole was where Sioux Falls is. And there’s nothing there.”

For years – decades, even – listener ratings have not been compiled for Sioux Falls radio stations.

That changed earlier this year, when Midwest, which owns seven radio stations in Sioux Falls including KELO-AM and KTWB-FM, and Chuck Brennan, who owns KBAD-FM, subscribed to Nielsen Radio Ratings.

“There weren’t any ratings for over a dozen years,” Brennan said. “People just tell you, ‘My station is great. It’s No. 1. It has all the listeners.’ And none of it is true.”

Crunching the numbers

Nielsen Holdings acquired longtime radio ratings provider Arbitron Inc. in 2013 and rebranded it Nielsen Audio.

The company’s business model requires radio stations to subscribe to its rating service to access the data and use it in conversations with advertisers.

Because the information is considered proprietary, Nielsen limits what can be published publicly about the results.

In the Sioux Falls market, ratings are based on listeners keeping diaries. For one week, a participant keeps track of each station listened to for at least five minutes. The results, based on demographics, are multiplied out in an attempt to represent the general population.

The first 529 diaries were recorded from April through June. Another set is in progress this fall.

Nielsen limits data that can be published to what it gathers from listeners 12 and older listening in any given 15-minute period. It does not allow publication of how many people are estimated to be listening, only what share of the total audience each station receives. It also does not allow publication of results related to radio stations that do not subscribe to its services.

In Sioux Falls, that includes Results Radio Townsquare Media, which has eight stations in the market.

“Some of these radio groups believe they don’t need ratings or need to pay for ratings to sell advertising,” said Mark Fratrik, chief economist for BIA/Kelsey and author of the radio report “The State of the Industry.”

“They will sell results as opposed to audience estimates,” he said. “They will say, ‘We can bring people to your showroom. Who cares what number is in the report?’ ”

Ironically, a Townsquare station emerged as the leader in local market share. The name of that station can’t be published, and the company can’t use that data in its conversations with advertisers.

Market manager Don Jacobs, naturally, has heard the information anyway.

“Obviously, the other groups will try to use numbers to persuade people that if you buy them something might happen,” he said. “In fact, it’s the strategy and message that makes things happen. I don’t want to take anything away from my people, but I think people who listen to (the top station) as their first station just put it down all day, every day.”

The second-most listened-to station is Midwest Communications’ country station KTWB-FM, which moved to 92.5 and replaced KELO-FM, which went to 101.9. KTWB has an estimated 9.4 percent average market share.

“We knew (when we bought the stations) country belonged on 92.5. So we think we made a good decision there,” Tanz said.

Behind that is Brennan’s KBAD, with an almost 7 percent average market share.

“KBAD just crushed it,” Brennan said. “We knew we had a pretty good station going, but we had no idea how dominant we were going to be. It’s really unbelievable.”

In fourth for average share is KELO-FM, with a 5.6 percent share, and tied for fifth are KRRO-FM and another Townsquare station.

The number of people overall who listen to radio in the market is impressive, Tanz said.

“They’re saying over 95 percent of residents in the four-county metro use radio each week, and that is in the top of the country. Fargo is about 93 percent, which is the closest market we (Midwest Communications) have. And nationwide, it’s just over 90 percent.”

Questioning the data

None of this resonates with Jacobs at Townsquare, however.

He’s more inclined to remember his experience with then-Arbitron after inheriting a subscription to the service when he became a general manager in 1984.

At that time, it cost between $30,000 and $35,000 annually, he estimates.

“I started digging deep to see why there would be such huge swings (in the results),” he said. “It boiled down to the fact that the sample size was way too small and they would weight the diaries they got.”

This spring in Sioux Falls, 529 diaries were used to represent a population of 215,000.

“I consider their statistics like a bikini,” Jacobs said. “What they reveal is suggestive, but what they conceal is vital.”

The results, however, can cause major changes in a market. Jacobs recalls that a popular competitor once changed formats after one ratings book showed its number had been cut in half.

“I called Arbitron and said, ‘Something isn’t right.’ I said, ‘I want you to survey 1,000 women in their primary demographic and tell me what’s going on.’ Three months later, they go, ‘Wow.’ Their information showed there had been no change in listenership.”

He also paid a consultant to go through diaries and found “one household had filled out multiple diaries in the same handwriting listening to the same station all day, all week long.”

Jacobs also doesn’t pay for any independent research. To gauge his audience, he watches promotions to see who is entering and runs an annual campaign on all stations in January to solicit listener surveys.

“The average person listens to 2.5 stations,” he said. In his experience with ratings, the typical diary included one station the person wrote down “just to get it done. The true sampling of the marketplace wasn’t there.”

Nielsen data is reliable, economist Fratrik said.

“It’s what you use to sell billions in advertising revenue,” he said.

In larger markets, Nielsen has moved to an electronic listener monitoring system, which may be more accurate but also is more expensive, he said.

“In a small market like Sioux Falls, that wouldn’t work. There isn’t enough of a marketplace there for this technology.”

Tanz, who subscribes to Nielsen in most of his markets, said it’s worth the investment.

“It was a pretty good guess,” he said. “This is an estimate. And over time with more surveys taken, the results will settle in and be more valuable to people making advertising decisions. But I think they made a pretty good first guess.”

Effect on advertising

Brennan approaches the issue from a dual role of radio station owner and advertising buyer. As owner of Dollar Loan Center, he said he was one of the biggest buyers of radio time in the past decade.

“And we never had ratings. It’s just crazy. And I’m in tons of markets. California, Utah, Nevada and everywhere has ratings. It’s just inane,” he said, adding interest from advertisers in KBAD has tripled since the spring book came out.

“We’re getting calls from people. Before, we’d have to go out and tell them we have a great station. Our advertising has been great since this. They see these real numbers.”

Media buyer Paul Thompson at HenkinSchultz Creative Services, who has worked in radio sales, calls the ratings a “10,000-foot view of the radio market.”

“There weren’t any huge surprises,” he said. “I kind of take the ratings with a grain of salt. It was a smaller book, and it would be nice to have a three-book average to take any hard conclusions. Trying to project less than 600 diaries to a population over 200,000, you’re kind of taking some liberties unless you read between the lines.”

While several clients have asked about the ratings, Thompson said he hasn’t made “any big decisions strictly on the numbers.”

“I keep them in the back of my head,” he said. “In Sioux Falls, I just know all the stations so well and believe I’m buying audiences and people rather than ratings points. The strength of the live talent and shows and programming they’re running and the type of music they’re running make a big difference in trying to target your demographic.”

Ratings are more useful to advertisers outside the market who aren’t familiar with it, Fratrik said.

“When Nielsen wasn’t surveying Sioux Falls, they were still selling ads,” he added. “Is it easier to sell with numbers? Of course. But Nielsen charges a decent amount, so it’s a business decision.”

Jacobs sells his advertising clients on strategy.

“We have a lot of advertisers who have small budgets and can only afford one station, but if they’re on consistently and frequently and have a great strategy, they get 2.5 audiences, not one, and that’s the key to success.”

Industry shift

Local radio also finds itself in an evolving marketplace.

Fratrik’s “The State of the Industry” report finds “local radio stations in recent years have seen meager increases in total industry revenues and even some slight decreases in over-the-air advertising revenues.”

At the same time, revenues generated through other means such as digital advertising, events and promotions “have increased substantially in terms of percentage changes.”

“Local radio stations still reach a vast majority of their audiences during the week, but those listeners have many more options available to them,” Fratrik wrote. “Many radio station have recognized that they need to broaden their reach in their local communities and be more than just over-the-air broadcasters.”

In addition to providing programming digitally, Midwest Communications’ radio stations “do contesting through social media, offer news and community information, news on our websites, entertainment news,” Tanz said. “All media companies are really looking to move to a place where they can offer the consumer information in whatever format the consumer wants to receive it.”

A focus on local personalities also helps compete with streaming services such as Pandora and Sirius XM, Jacobs said.

“The advantage is we have a lot of live local people,” he said. “So all our on-air people, whether it’s news, sports or announcers, write stories for our stations. Sometimes they’re opinions. So we have lots of content.”

The Townsquare group also “has a pretty good online presence” and owns an event company that works in tandem with radio, Fratrik said.

“What we tell radio stations … is don’t look at yourself as a radio station,” he said. “You’re a local media operation reaching your audience in many different ways and selling that reach to local and national advertisers.”

While it’s a difficult shift in thinking for some, other radio groups are finding success, Fratrik said.

“We don’t expect over-the-air revenue to grow more than 1 or 2 percent depending on local economic conditions, but as long as they’re into other activities and services, radio can maintain its position,” he said. “It’s a challenging industry. It’s not like it was 20, 30 years ago when everybody listened to the radio, but it survived.”