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La Ley 107.9's owner struggles with Arbitron & NASDAQ

The Spanish Broadcasting System (SBS), which owns Chicago's La Ley/WLEY-FM 107.9, along with 20 other radio stations in the United States and Puerto Rico, has been making more headlines than it cares for lately. Between its ongoing struggles with Arbitron and its ongoing struggles to stay financially afloat, the company has spent a great deal of time in front of various judges & panels. This week, a few results have come up for SBS from these struggles.

Last year, SBS refused to participate with the PPM encoding of its 21 stations. Arbitron quickly sued SBS over this. This week, a New York State judge ruled that SBS must continue to encode its stations for Arbitron's PPM service, regardless of the company's ongoing disputes with Arbitron. The judge felt that despite SBS arguments about the validity of the PPM system -- even if the arguments are indeed proved correct, SBS signed a contract with Arbitron and demanded the company fulfill their signed agreements.

The PPM Coalition, who along with SBS and many others, are in a lawsuit with Arbitron over the PPM problems, put out a statement yesterday, proclaiming their disappointment with the judge's decision. The statement said "the Court was concerned only with the contractual relationship between the parties and could not consider the more significant issue of the decimation of diversity on the nation's airwaves."

SBS released their own statement of disappointment today. It had the following to say:

SBS has been actively dealing with Arbitron, the sole provider of ratings information, since the introduction of PPM. As a member of both the PPM Coalition and the Spanish Radio Association (SRA), SBS has been one of the many outspoken critics of this new methodology. It has been and continues to be our contention that the PPM service unfairly discounts the listening audiences of both Urban and Hispanic communities. We have been consistent in our fight and have repeatedly asked that Arbitron gain accreditation from the MRC before implementing this methodology currency in any market. These pleas have been ignored by Arbitron, who has instead decided to continue its rollout despite being accredited in only two markets (they are currently in 33 markets).

We contend that Arbitron has not lived up to their contractual obligation to deliver reliable and accurate ratings. After Arbitron refused our repeated demands to rectify the situation, we concluded that Arbitron repudiated the parties' agreements. If they were not going to provide us with reliable information, we saw no need to encode.

The court's ruling on the temporary restraining order was measured based on a concern that other minority radio broadcasters would follow suit and turn-off their encoders. This, of course, bespeaks to the bigger problem - minority broadcasters' fundamental dissatisfaction with Arbitron's PPM methodology. The court increased the bond amount to $250,000 to cover the losses that SBS may sustain during the interim period. While disappointed by the ruling, SBS looks forward to presenting a full defense and having the court adjudicate the full merits of the case.

"Arbitron continues to treat its customers with disdain. We will abide by the judge's order to encode while we await our day in court to dispute Arbitron's claims and prove that we are truly the ones being harmed," said Frank Flores, Chief Revenue Officer of SBS. "The fact the MRC, PPMC and Congress are continuing to meet with Arbitron to try to correct the flaws of PPM, undermines Arbitron's contention that its PPM methodology is sound."

SBS received some good news in a couple of other areas, however. The New York State judge who ordered SBS to continue its PPM encoding, also ordered Arbitron to post a $250,000 bond covering potential damages to SBS, while the two companies battle out their complaints. The judge suggested the two sides resolve thier issues using a mediator, although that is very unlikely.

In other somewhat good news for SBS, NASDAQ has granted them an extension to prevent the company's stock from being delisted. In December, NASDAQ warned SBS that since their stock had dropped so low, they would be delisted because they fell out of compliance with NASDAQ's strict standards. SBS quickly filed for an extension to get their stock prices higher. That extension was finally granted this week. SBS now has until June 7, 2010 to return to the minimum of $1.00 per share or it will indeed be delisted.

The Spanish Broadcasting System is the largest publicly traded Hispanic-controlled media and entertainment company in the US. The company continues to deny rumors of any future bankruptcy.

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