Three months after attorneys general in New York and New Jersey filed lawsuits against Arbitron charging the radio ratings research company with "deceptively claiming that its Portable People Meter system is valid, fair, and representative of diverse radio markets," a settlement has been reached by the three parties.

As part of the stipulated order of consent, Arbitron will re-work its PPM system and pay $260,000 "to resolve claims of fraud and illegality." The Columbia, Md.-based company will also shell out $100,000 to a pair of minority trade associations -- the National Association of Black-Owned Broadcasters and the Spanish Radio Association -- to support minority radio.

The company also agreed to pay the state of New Jersey $130,000 for investigative costs and expenses.

The agreement says Arbitron must "cure key flaws and substantially improve the PPM methodology in the New York and Philadelphia markets by, for example, increasing the recruitment of individuals who only use cell-phones (a disproportionate percentage who are racial minorities) and ensuring that a higher proportion of panelists across racial demographics successfully operate the PPM."

Arbitron will also be required to fund a study, overseen by the New York attorney general, "to determine and cure measurable bias the PPM methodology may have on racial minorities." The study is due by July 15.

Arbitron will also be required to pay for an advertising campaign "of at least $25,000 dedicated to promoting minority radio." It will also be required to obtain accreditation from the Media Rating Council.

"The radio airwaves should represent the diversity of New York State," said attorney general Andrew Cuomo. "With this lawsuit, we sought to address the misrepresentation of a flawed product in the marketplace and its impact on the communities that need the most protection. This agreement ensures that Arbitron will fairly measure radio listenership in New York and fairly represent New York’s diverse radio market. As Arbitron works to improve this product, which should not have been released in its current form, my office will aggressively hold Arbitron to rigorous standards to make PPM a better product."

New Jersey attorney general Anne Milgram said the settlement was "important" because "it will ensure that Arbitron consumers are receiving a more accurate sampling product while, at the same time, ensuring that minority owned broadcasting outlets are competing on a more level playing field."

Arbitron said in a statement that "[B]roadcasters, agencies and advertisers in New York can continue to use PPM measurement of radio without any hesitation or reservation. We are also pleased to be able to resolve this action within the framework of our continuous improvement program for the Portable People Meter ratings service in the New York."

Arbitron said it will recruit panelists using a combination of telephone number and addressed-based sampling methods beginning this month. It said it has "committed to use the address-based sampling technique for 15% of our recruitment efforts in New York by July 2010."

Arbitron will also increase the sample target for persons residing in cell-phone-only households to 15% of the total New York sample target by July 2010, and set a target of 20% for the New York sample performance indicator (SPI) by 2010. It also agrees "to make all reasonable efforts to achieve a minimum 15% SPI level by July 2009, 16% SPI level by October 2009, and 17% SPI level by June 2010."

The company adds that it will take all reasonable measures to achieve average in-tab rates of at least 75% for all age/sex and race/ethnicity demographic groups by April 1, and to ensure that subcategories comprising 10% or more of the New York metro population fall within 90% of the overall 75% target.” It agrees to provide to subscribers monthly reports detailing the PPM installed and in-tab sample sizes by individual zip code in the New York market.

Jim Winston, executive director of the National Association of Black Owned Broadcasters, which had battled against the PPM launch for about two years, said he is "grateful" to the attorneys general for taking up this issue. "It is gratifying to see real progress being made in getting Arbitron to correct the flaws in the PPM design and implementation," said Winston, adding, "We are cautiously optimistic that the settlement will bring about an improved PPM product."

Charles Warfield, president/COO of ICBC Holdings, which owns 17 radio stations, including two in New York City, stated, "This has been a long, difficult battle, and we are hopeful that the settlement negotiated by attorney general Cuomo and attorney general Milgram will restore some integrity to the ratings research process. If Arbitron complies with the terms of the settlement, PPM should be substantially improved. I hope our company and the radio industry, which must rely upon Arbitron’s PPM data, will see more reliable and accurate audience data as a result of this settlement."

Winston added, "One of the most important aspects of the settlement is that the attorneys general will engage in ongoing oversight of Arbitron to make certain that it complies with the terms of the settlement. That gives the settlement real teeth, and gives us a degree of confidence that we will see a better PPM product from Arbitron in the months ahead."

But Winston wants Arbitron to extend the terms of the agreement to all markets where it has already launched PPM or will soon launch the new metered service. "Unfortunately, this settlement only applies in the New York City and Philadelphia markets. As Arbitron continues to roll-out PPM in other markets, we hope that other jurisdictions will consider compelling Arbitron to extend the terms of this settlement to their markets. This ongoing litigation is not good for Arbitron, minority broadcasters or the radio industry."

Winston said, "Absent such an agreement by Arbitron, the problems identified by the New York and New Jersey attorneys general will continue to plague broadcasters in every other market in which Arbitron has imposed or will impose its PPM system. We hope we won't have to fight this battle in every market where Arbitron is rolling out PPM, but absent an agreement by Arbitron to make this a nationwide settlement, this battle will continue."