FORM 10-K -...

FORM 10-KARBITRON INC - arbFiled: March 02, 2009 (period: December 31, 2008)

Annual report which provides a comprehensive overview of the company for the past year

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10-K - ARBITRON INC.

Part III

PART I

ITEM 1. BUSINESS ITEM 1A. RISK FACTORS ITEM 1B. UNRESOLVED STAFF COMMENTS ITEM 2. PROPERTIES ITEM 3. LEGAL PROCEEDINGS ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS PART II

ITEM 5. MARKET FOR REGISTRANT S COMMON EQUITY, RELATEDSTOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIES

ITEM 6. SELECTED FINANCIAL DATA ITEM 7. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUTMARKET RISK

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES ITEM 9B. OTHER INFORMATION PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATEGOVERNANCE

ITEM 11. EXECUTIVE COMPENSATION ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ANDDIRECTOR INDEPENDENCE

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES SIGNATURES

EX-3.5 (EXHIBIT 3.5)

EX-10.12 (EX-10.12)

EX-10.13 (EXHIBIT 10.13)

EX-10.25 (EXHIBIT 10.25)

EX-21 (EX-21)

EX-23 (EX-23)

EX-24 (EX-24)

EX-31.1 (EX-31.1)

EX-31.2 (EX-31.2)

EX-32.1 (EX-32.1)

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UNITED STATESSECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

� Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2008

or� Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission file number: 1-1969

Arbitron Inc.(Exact Name of Registrant as Specified in Its Charter)

Delaware 52-0278528(State or other jurisdiction ofincorporation or organization)

(I.R.S. Employer Identification No.)

9705 Patuxent Woods DriveColumbia, Maryland 21046

(Address of principal executive offices) (zip code)

(410) 312-8000(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class Registered Name of Each Exchange on Which Registered

Common Stock, par value $0.50 per share New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes � No �

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of theSecurities Exchange Act of 1934. Yes � No �

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for such shorter period than the registrant wasrequired to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes � No �

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not containedherein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. �

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, ora smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reportingcompany” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer �

Accelerated filer �

Non-accelerated filer �(Do not check if a smaller reporting

company)

Smaller reportingcompany �

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the ExchangeAct). Yes � No �

The aggregate market value of the registrant’s common stock as of June 30, 2008, the last business day of theregistrant’s most recently completed second fiscal quarter (based upon the closing sale price of Arbitron’s common stockas reported by the New York Stock Exchange on that date), held by nonaffiliates, was approximately $1,271,611,243.

Common stock, par value $0.50 per share, outstanding as of February 23, 2009: 26,433,016 shares

DOCUMENTS INCORPORATED BY REFERENCE

Source: ARBITRON INC, 10-K, March 02, 2009

Part III incorporates certain information by reference from the registrant’s definitive proxy statement for the 2009annual meeting of stockholders, which proxy statement will be filed no later than 120 days after the end of the registrant’sfiscal year ended December 31, 2008.


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TABLE OF CONTENTS

Page No.

FORWARD-LOOKING STATEMENTS 5

PART I ITEM 1. BUSINESS 7 Overview 7 Corporate Strategy 8 Industry Background and Markets 8 Radio Audience Measurement Services 9 Diary Service 9 Portable People Meter Service 11 Radio Market Report and Other Data Services 16 Local Market Consumer Information Services 17 International Operations 18 Customers, Sales and Marketing 18 Competition 19 Intellectual Property 20 Research and Development 21 Governmental Regulation 21 Employees 22 Seasonality 22 Available Information 23 ITEM 1A. RISK FACTORS 23

Risk Factors Relating to Our Business and the Industry in Which WeOperate 23

Risk Factors Relating to Our Indebtedness 32 Risk Factors Relating to Owning Our Common Stock 32 ITEM 1B. UNRESOLVED STAFF COMMENTS 33 ITEM 2. PROPERTIES 33 ITEM 3. LEGAL PROCEEDINGS 33

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS 36

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATEDSTOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIES 36

ITEM 6. SELECTED FINANCIAL DATA 38

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS 39

Overview 39 General Economic Conditions 40 Lawsuits and Governmental Interactions 40 Discontinued Operation 40 Project Apollo Affiliate Termination 40 Impact of Hurricane Ike 41 Stock Repurchases 41 Critical Accounting Policies and Estimates 41 Results of Operations 43 Liquidity and Capital Resources 50 Off-Balance Sheet Arrangements 53 New Accounting Pronouncements 53

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUTMARKET RISK 53

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 53

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ONACCOUNTING AND FINANCIAL DISCLOSURE 91

ITEM 9A. CONTROLS AND PROCEDURES 91 Evaluation of Disclosure Controls and Procedures 91 Management’s Report on Internal Control Over Financial Reporting 91


Changes in Internal Control Over Financial Reporting 91 ITEM 9B. OTHER INFORMATION 91

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Page No.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATEGOVERNANCE 92

ITEM 11. EXECUTIVE COMPENSATION 93

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT AND RELATED STOCKHOLDER MATTERS 93

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ANDDIRECTOR INDEPENDENCE 93

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 92

PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 92 SIGNATURES 97 Exhibit 3.5 EX-10.12 Exhibit 10.13 Exhibit 10.25 EX-21 EX-23 EX-24 EX-31.1 EX-31.2 EX-32.1

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Arbitron owns or has the rights to various trademarks, trade names or service marks used in its radioaudience measurement business and subsidiaries, including the following: the Arbitron name and logo,ArbitrendsSM , RetailDirect®, RADAR®, TAPSCANTM , TAPSCAN WORLDWIDETM , LocalMotion®,Maximi$er®, Maximi$er® Plus, Arbitron PD Advantage®, SmartPlus®, Arbitron Portable People MeterTM ,PPMTM , Arbitron PPMTM , Marketing Resources Plus®, MRPSM , PrintPlus®, MapMAKER DirectSM , MediaProfessionalSM, Media Professional PlusSM , QUALITAPSM , and Schedule-ItSM .

The trademarks Windows® and Media Rating Council® referred to in this Annual Report on Form 10-Kare the registered trademarks of others.

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FORWARD-LOOKING STATEMENTS

The following discussion should be read in conjunction with our audited consolidated financialstatements and the notes thereto in this Annual Report on Form 10-K.

In this report, Arbitron Inc. and its subsidiaries may be referred to as “Arbitron,” or the “Company,” or“we,” or “us,” or “our.”

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the PrivateSecurities Litigation Reform Act of 1995. The statements regarding Arbitron in this document that are nothistorical in nature, particularly those that utilize terminology such as “may,” “will,” “should,” “likely,”“expects,” “intends,” “anticipates,” “estimates,” “believes,” or “plans” or comparable terminology, areforward-looking statements based on current expectations about future events, which we have derived frominformation currently available to us. These forward-looking statements involve known and unknown risksand uncertainties that may cause our results to be materially different from results implied by suchforward-looking statements. These risks and uncertainties include, in no particular order, whether we will beable to:

• absorb costs related to legal proceedings and governmental entity interactions and avoid related fines,limitations, or conditions on our business activities;

• successfully commercialize our Portable People MeterTM service;

• successfully manage the impact on our business of the current economic downturn generally, and in theadvertising market, in particular, including, without limitation, the insolvency of any of our customersor the impact of such downturn on our customers’ ability to fulfill their payment obligations to us;

• successfully maintain and promote industry usage of our services, a critical mass of broadcasterencoding, and the proper understanding of our audience measurement services and methodology inlight of governmental regulation, legislation, litigation, activism, or adverse public relations efforts;

• compete with companies that may have financial, marketing, sales, technical, or other advantages overus;

• successfully design, recruit and maintain PPM panels that appropriately balance research quality, panelsize, and operational cost;

• successfully develop, implement, and fund initiatives designed to increase sample sizes;

• complete the Media Rating Council, Inc. (“MRC”) audits of our local market PPM ratings services in atimely manner and successfully obtain and/or maintain MRC accreditation for our audiencemeasurement business;

• renew contracts with key customers;

• successfully execute our business strategies, including entering into potential acquisition, joint-ventureor other material third-party agreements;

• effectively manage the impact, if any, of any further ownership shifts in the radio and advertisingagency industries;

• effectively respond to rapidly changing technological needs of our customer base, including creatingnew proprietary software systems, such as software systems to support our cell phone-only samplingplans, and new customer services that meet these needs in a timely manner;

• successfully manage the impact on costs of data collection due to lower respondent cooperation insurveys, consumer trends including a trend toward increasing incidence of cell phone-only households,privacy concerns, technology changes, and/or government regulations; and

• successfully develop and implement technology solutions to encode and/or measure new forms ofmedia content and delivery, and advertising in an increasingly competitive environment.

There are a number of additional important factors that could cause actual events or our actual results todiffer materially from those indicated by such forward-looking statements, including, without limitation, thefactors set

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forth in “Item 1A. — Risk Factors” in this report, and other factors noted in Management’s Discussion andAnalysis of Financial Condition and Results of Operations, particularly those noted under “CriticalAccounting Policies and Estimates,” and elsewhere, and any subsequent periodic or current reports filed by uswith the Securities and Exchange Commission.

In addition, any forward-looking statements represent our expectations only as of the day we first filedthis annual report with the Securities and Exchange Commission and should not be relied upon asrepresenting our expectations as of any subsequent date. While we may elect to update forward-lookingstatements at some point in the future, we specifically disclaim any obligation to do so, even if ourexpectations change.

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PART I

ITEM 1. BUSINESS

Arbitron Inc., a Delaware corporation, was formerly known as Ceridian Corporation (“Ceridian”).Ceridian was formed in 1957, though its predecessors began operating in 1912. We commenced our audienceresearch business in 1949. Our principal executive offices are located at 9705 Patuxent Woods Drive,Columbia, Maryland 21046 and our telephone number is (410) 312-8000.

Overview

We are a leading media and marketing information services firm primarily serving radio, cable television,advertising agencies, advertisers, retailers, out-of-home media, online media and, through our ScarboroughResearch joint venture with The Nielsen Company (“Nielsen”), broadcast television and print media. Wecurrently provide four main services:

• measuring and estimating radio audiences in local markets in the United States;

• measuring and estimating radio audiences of network radio programs and commercials;

• providing software used for accessing and analyzing our media audience and marketing informationdata; and

• providing consumer, shopping, and media usage information services.

We provide radio audience estimates and related services in the United States to radio stations,advertising agencies, and advertisers. We estimate the size and demographics of the audiences of radiostations in local markets in the United States and report these estimates and certain related data as ratings toour customers. Our customers use the information we provide for executing advertising transactions in theradio industry. Radio stations use our data to price and sell advertising time, and advertising agencies andadvertisers use our data in purchasing advertising time. Our Radio All Dimension Audience Research(“RADAR”) service estimates national radio audiences and the size and composition of audiences of networkradio programs and commercials.

We also provide software applications that allow our customers to access our databases and enable ourcustomers to more effectively analyze and understand that information for sales, management, andprogramming purposes. Some of our software applications also allow our customers to access data owned bythird parties, provided the customers have a separate license to use such third-party data.

In addition to our core radio ratings services, we provide qualitative measures of consumerdemographics, retail behavior, and media consumption in local markets throughout the United States. Weprovide custom research services to companies that are seeking to demonstrate the value of their advertisingpropositions. We also seek to market our quantitative and qualitative audience and consumer information tocustomers outside of our traditional base, such as the advertising sales organizations of local cable televisioncompanies, national cable television networks and out-of-home media sales organizations.

We have developed an electronic Portable People Meter (“PPM”) system of audience measurement forcommercialization in the United States and have licensed our PPM technology to a number of internationalmedia information services companies to use in their media audience measurement services in specificcountries outside of the United States. See “Item 1. Business — Portable People Meter Service” below.

Our quantitative radio audience ratings services and related software have historically accounted for asubstantial majority of our revenue. The radio audience ratings service represented 81 percent, 79 percent, and79 percent of our total revenue in 2008, 2007, and 2006, respectively. The related software revenuesrepresented nine percent of our total revenue in each of 2008, 2007, and 2006. Our revenue from continuingoperations from domestic sources and international sources was approximately 99 percent and one percent ofour total revenue, respectively, for each of the years ended December 31, 2008, 2007 and 2006. Additionalinformation regarding revenues by service and by geographical area is provided in Note 19 in the Notes toConsolidated Financial Statements contained in this Annual Report on Form 10-K.

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Corporate Strategy

Our leading strategic objectives include growing our radio audience measurement business andexpanding our information services to a broader range of media, including broadcast television, cable,out-of-home media, satellite radio and television, Internet broadcasts and mobile media. Key elements of ourstrategy to pursue these objectives include:

• Improving customer relations. We intend to continue to invest in quality improvements in our radioaudience measurement services and engage with our customers, listen to and understand their needsand requirements and provide solutions that are competitive on price, quality and value.

• Diversifying revenues. We believe that growth opportunities exist in adjacent markets and intend toseek to expand our customer base by developing and marketing new information services designed toassist customers in implementing marketing strategies.

• Building on our experience in the radio audience measurement industry and our PPMtechnology to expand into information services for other types of media and/or multimedia. Insome cases, we may enter into agreements with third parties to assist with the marketing, technical andfinancial aspects of expanding into measurement services for other types of media and/or multimedia.

• Developing and commercializing the next-generation data collection and processingtechniques. Our businesses require sophisticated data collection and processing systems, software andother technology. The collection of our survey participant information in our diary-based radio ratingsservice is dependent on individuals keeping track of their listening, viewing and reading activities indiaries. The technology underlying the media measurement industry is undergoing rapid change, andwe will need to continue to attempt to develop our data collection, processing and software systems toaccommodate these changes. The development of our PPM service is in response to a growing demandfor higher quality, and more efficient and timely methods for measuring and reporting audiences.

• Addressing scale issues. We compete against many companies that are larger and have greater capitaland other resources. We will seek to explore strategic opportunities to expand our business and betterenable us to compete with such companies.

• Expanding our international PPM business. We continue to explore opportunities to license ourPPM technology into selected international regions, such as Europe and the Asia/Pacific regions. Webelieve there is an international demand for quality audience information from global advertisers andmedia.

Industry Background and Markets

Since 1965, we have delivered to the radio industry actionable and timely radio audience informationcollected from a representative sample of radio listeners. The presence of independent audience estimates inthe radio industry has helped radio stations to price and sell advertising time, and advertising agencies andadvertisers to purchase advertising time. The Arbitron ratings have also become a valuable tool for use inradio programming, distribution, and scheduling decisions.

Shifts in radio station ownership in the United States, among other factors, has led to a greater diversityof programming formats. As audiences have become more fragmented, advertisers have increasingly soughtto tailor their advertising strategies to target specific demographic groups through specific media. Theaudience information needs of radio broadcasters, advertising agencies and advertisers have correspondinglybecome more complex. Increased competition, including from nontraditional media, and more complexinformational requirements have heightened the desire of radio broadcasters for more frequent and timely datadelivery, improved information management systems, larger sample sizes, and more sophisticated means toanalyze this information. In addition, there is a demand for high-quality radio and television audienceinformation internationally from the increasing number of commercial, noncommercial, and publicbroadcasters in other countries.

As the importance of reaching niche audiences with targeted marketing strategies increases, broadcasters,publishers, advertising agencies, and advertisers increasingly require that information regarding exposure toadvertising is provided on a more granular basis and that this information is coupled with more detailedinformation

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regarding lifestyles and purchasing behavior. We believe the need to integrate purchase data information withadvertising exposure information may create future opportunities for innovative approaches to satisfy theseinformation needs.

Radio Audience Measurement Services

Diary Service

Collection of Listener Data Through Diary Methodology. We use listener diaries to gather radiolistening data from a random sample group of persons aged 12 and over in households in the 288 UnitedStates local markets in which we currently provide Diary-based radio ratings. Participants in Arbitron surveysare currently selected at random by landline telephone number. When participants in our Diary survey (whomwe refer to as “diarykeepers”) agree to take part in a survey, we mail them a small, pocket-sized diary and askthem to record their listening in the diary over the course of a seven-day period. We ask diarykeepers to reportin their diary the station(s) to which they listened, when they listened and where they listened, such as home,car, work, or other place. Although survey periods are 12 weeks long, no participant keeps a diary for morethan seven days. Each diarykeeper receives a diary, instructions for filling it out and a small cash incentive.The incentive varies according to markets, and the range is generally $1.00 to $6.00 for each diarykeeper inthe household and up to $10.00 additional per person in certain incentive programs for returned diaries. Inaddition to the cash incentives included with the diaries, further cash incentives are used at other points in thesurvey process along with other communications such as follow-up letters and phone calls to maximizeresponse rates. Diarykeepers mail the diaries to our operations center, where we conduct a series of qualitycontrol checks, enter the information into our database, and produce periodic audience listening estimates. Wecurrently receive and process more than 1.2 million diaries every year to produce our audience listeningestimates. We measure each of our local markets at least twice each year, and major markets four times peryear.

Diary Service Quality Improvement Initiatives. Throughout 2008, we invested in Diary servicequality enhancements. As part of our continuous improvement program, we intend to continue to invest inDiary service quality enhancements in 2009. Set forth below is a description of several of the significantDiary service quality initiatives we made in 2008. As the needs of our customers and the service continue toevolve, we may choose to focus on different areas for improvement during 2009 and beyond.

One of the challenges in estimating radio audiences is to ensure that the composition of surveyrespondents is sufficiently representative of the market being measured. We strive to achieve representativesamples. A measure often used by clients to assess sample quality in our ratings is proportionality, whichrefers to how well the distribution of the sample for any individual survey matches the distribution of thepopulation in the local market. For example, if eight percent of the population in a given market is comprisedof women aged 18 to 34, ideally eight percent of the diarykeepers in our sample are women aged 18 to 34.Therefore, each survey respondent’s listening should statistically represent not only the survey respondent’spersonal listening but also the listening of the demographic segment in the overall market. In striving toachieve representative samples, we provide enhanced incentives and enhanced support to certain demographicsegments that our experience has shown may be less likely to respond to encourage their participation.Households identified as having at least one member who is Hispanic receive bilingual materials. We also usebilingual (Spanish-English) interviewers for households where Spanish is the preferred language.

In the first quarter of 2008, we upgraded our diary-processing capabilities with a new state-of-the-artfacility that combines several business processes under one roof. We designed the new building, layout, andequipment to increase productivity, efficiency, and accuracy for diary processing, which will allow us toimplement future planned diary sample improvement initiatives more quickly.

Beginning with the Winter 2008 Diary survey, we implemented an enhanced sex/age enumerationinitiative. In this initiative, we ask the sex and age of each household member during placement calls. Wethen use this information in determining whether the household should receive enhanced “Young Male”premiums and other differential survey treatments applicable to households that contain one or more males18-34 years old. Households that decline to provide the requested sex/age information during the calls areasked whether the household contains

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a male within specified age ranges. We continue to use sex/age information recorded by diarykeepers inreturned diaries to assign the diaries to appropriate demographic groups.

Beginning with the Spring 2008 Diary survey, we expanded our young male promised incentive surveytreatment. Under this initiative, we offer an additional premium to households with young male respondents,aged 18-34, for each returned diary. We now offer this survey treatment to noncontinuously measuredmarkets in which the male 18-34 proportionality index is less than 60, averaged across the two most recentsurveys, initially a total of 117 markets. We also began offering a second chance to participate in our surveysto households in which respondents initially agreed to participate, but failed to return any diaries for the weekselected. The “second chance” survey week occurs approximately six weeks after the week in which thehousehold originally consented to participate. We offered this second chance in 94 markets during 2008. Allcontinuously measured Metro markets are eligible for the second chance diary treatment. In 2009, we areconsidering the implementation of a second chance to consent where households that initially decline toparticipate and households where we reach only an answering machine or voicemail will be mailed a cardwith a small cash premium and contacted again two weeks later.

Beginning with the Spring 2008 Diary survey, we also modified our High-Density Hispanic Area(“HDHA”) criteria. When a market qualifies for differential survey treatment, we then evaluate it forHigh-Density Area (“HDA”) sampling. Use of HDA sampling allows us to focus on areas where the desireddemographic is statistically most likely to reside, which we employ as a means designed to promote bettersampling and achievement of better In-Tab proportionality in our overall sample. With the significantincrease in Hispanic population in recent years, we determined during 2008 to update our criteria for a countyto be eligible for HDHA sampling. Counties are now eligible to include a High Density Hispanic Areadefinition when the county meets both of the following criteria: (i) the county contains at least one zip codewhose population is at least 40 percent Hispanic (up from the 25 percent criterion in previous surveys); and(ii) the proposed ethnically split portions of the county (HDHA and balance) must have sufficient population,as a proportion of the total Metro, to appropriately be allocated an In-Tab target of at least 21 diaries. Underour methodology, we will retain an HDHA for as long as the target for each portion of the county is at least18 diaries.

Beginning with the Fall 2008 Diary survey, we enhanced post-placement premiums for households thatagree to participate in our surveys in which at least one household member is Hispanic in applicable marketswithout an HDHA, and for households in which at least one household member is Black in applicable marketswithout a High Density Black Area. We also extended our young male promised incentive survey treatment toadditional markets.

We use a measure known as Designated Delivery Index (“DDI”) to measure our performance indelivering sample targets based on how many persons in the sample represent a particular demographic. Wedefine DDI as the actual sample size achieved for a given demographic indexed against the target sample sizefor that demographic (multiplied by 100). Beginning with the Fall 2008 survey, we established a samplebenchmark for persons aged 18-54 in all Diary markets equal to a DDI of 80. Should the actual persons 18-54DDI fall below this benchmark in a given market’s survey, we will attempt to bring the sample performanceabove that benchmark in that market in subsequent surveys.

In recent years, our ability to deliver good sample proportionality in our surveys among youngerdemographic groups has deteriorated, caused in part by the trend among some households to disconnect theirlandline phones, effectively removing these households from the Arbitron sample frame. In December 2008,we announced plans to accelerate the introduction of cell phone-only sampling in Diary markets. Beginningwith the Spring 2009 survey, we intend to add cell phone-only households to the Diary sample in 151 Diarymarkets using a hybrid methodology of address-based recruitment for cell phone-only households, whileusing random digit dialing (“RDD”) recruitment for landline households. Beginning with the Fall 2009survey, we intend to expand cell phone-only sampling to all Diary markets (except Puerto Rico). Theacceleration of cell phone-only sampling to 151 markets in the spring assumes that we will be able tocomplete the development of software necessary to support the rollout as scheduled. If we are not able todevelop the software as expected, the planned acceleration of cell phone-only sampling could be delayed. Inan effort to better target our premium expenditures to key buying demographics of the users of our estimates,beginning with the Spring 2009 Diary survey, we intend to reduce the premium for households where allmembers are aged 55 or older and redirect those premiums to households containing persons aged 18-34.

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In addition to sample proportionality, response rates are an important measure of our effectiveness inobtaining consent from persons to participate in our surveys. It has become increasingly difficult and morecostly for us to obtain consent from persons to participate in our surveys. We must achieve a level of bothsample proportionality and response rates sufficient to maintain confidence in our ratings, the support of theindustry and accreditation by the MRC. Response rates are one quality measure of survey performance amongmany and an important factor impacting costs associated with data collection. Overall response rates havedeclined over the past several years. If response rates continue to decline further or if recruitment costssignificantly increase, our radio audience measurement business could be adversely affected. We believe thatadditional expenditures will be required in the future with respect to response rates and sampleproportionality. We continue to research and test new measures to address these sample quality challenges.

Portable People Meter Service

Since 1992, we have pursued a strategy of evolving our audience ratings business from diaries, which arecompleted by hand and returned by mail from survey participants, to portable electronic measurementdevices, which passively collect information regarding survey participants’ exposure to encoded mediawithout additional manual effort by the survey participants beyond carrying the meter. We have pursued thisstrategy in an effort to improve quality by taking advantage of new technological capabilities and to addressthe vast proliferation of media delivery vehicles, both inside and outside of the home.

We have developed our proprietary PPM technology, which is capable of collecting data regardingpanelists’ exposure to encoded media for programming and advertising purposes across multiple mediaincluding, among others, broadcast and satellite radio, broadcast, cable and satellite television, Internet, andretail in-store audio and video broadcasts. The PPM meter is a small cell phone-sized device that a panel ofsurvey participants carries throughout the day. The PPM meter automatically detects proprietary codes thatare inaudible to the human ear, which broadcasters embed in the audio portion of their programming usingtechnology and encoders we license to the broadcaster at no cost. We refer to the embedding of ourproprietary codes into the audio portion of broadcasters’ programming as “encoding” the broadcast. Theseproprietary codes identify the encoded media to which a survey participant is exposed throughout the daywithout the survey participant having to engage in any recall-based manual recording activities. At the end ofeach day, the survey participant places the PPM device into a base station that recharges the device and sendsthe collected codes to Arbitron for tabulation for use in creating audience estimates.

We believe there are many advantages to our PPM technology. It is simple and easy for respondents touse. It requires no button pushing, recall, or other effort by the survey participant to identify and write downmedia outlets to which they are exposed. The PPM technology can passively detect exposure to encodedmedia by identifying each source using our unique identification codes. We believe the PPM service can helpsupport the media industry’s increased focus on providing accountability for the investments made byadvertisers. It helps to shorten the time period between when advertising runs and when audience delivery isreported, and can be utilized to provide multimedia measurement from the same survey participant. The PPMtechnology also produces high-quality motion and compliance data, which we believe is an additionaladvantage that makes the PPM data more accountable to advertisers than various recall-based data collectionmethods. The PPM technology can produce more granular data than the diary, including minute by minuteexposure data, which we believe can be of particular value to radio programmers. Because our PPM servicepanels have larger weekly and monthly samples than our Diary service, the audience estimates exhibit morestable listening trends between survey reports. Also, our PPM technology can be leveraged to measure newdigital platforms, time-shifted broadcasts (such as media recorded for later consumption using a DVR orsimilar technology), and broadcasts in retail, sports, music, and other venues.

The PPM technology could potentially be used to measure audiences of out-of-home media, print,commercials, and entertainment audio, including movies and video games. The new Audience Reactionservice offered by Media Monitors, LLC (“Media Monitors”) allows Media Monitors to combine our PPMdata with its airplay information to provide a service designed to help radio programmers who also license ourdata hear what audio was broadcast while observing changes in the audience estimates.

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Domestic. We currently utilize our PPM radio ratings service to produce audience estimates in 14United States local radio markets. We commercialized the PPM ratings service in the Houston — Galvestonand Philadelphia local markets during 2007. We commercialized the PPM ratings service in the New York,Nassau — Suffolk (Long Island), Middlesex — Somerset — Union, Los Angeles, Riverside —San Bernardino, Chicago, San Francisco, and San Jose local markets on October 6, 2008, and in the Atlanta,Dallas — Ft. Worth, Detroit, and Washington, DC local markets on December 31, 2008. We currently intendto commercialize the PPM service in another 19 local markets during 2009.

We are in the process of executing our previously announced plan to commercialize progressively ourPPM ratings service in the largest United States radio markets, which we currently anticipate will result incommercialization of the service in 49 local markets by December 2010 (the “PPM Markets”). We maycontinue to update the timing of commercialization and the composition of the PPM Markets from time totime. On November 4, 2008, we announced an adjustment to our PPM commercialization schedule.Information regarding the affected PPM Markets is set forth below. We have rebalanced our PPMcommercialization schedule in order to create financial and operational efficiencies.

Current Schedule Prior Schedule Final Diary Survey Scheduled Initial Final Scheduled Initial PPM Period Release PPM Period Release Diary Period ReleaseLocal Market Report Covered Date Report Covered Date Survey Covered DateKansas City; San Antonio;

Salt LakeCity-Ogden-Provo; LasVegas

December2009

November12 -

December 9 December

2009 March 2010 March 4 -March 31

April2010

Summer2009

June 25 -September

16 October

2009Milwaukee-Racine;

Charlotte-Gastonia-RockHill; Columbus, OH;Providence-Warwick;Pawtucket; Orlando

September2010

August 19 -September

15 October

2010 June 2010 May 27 -

June 23 July2010

Spring2010

April 1 -June 23

July2010

Media Rating Council Accreditation

The Media Rating Council, Inc. (the “MRC”) is a voluntary, nonprofit organization, comprised ofbroadcasters, advertisers, advertising agencies, and other users of media research that reviews and accreditsaudience ratings services. The MRC accreditation process is voluntary and there is no legal or compulsoryrequirement that a rating service seek accreditation or submit to an MRC audit. The MRC lends its “seal ofapproval” to ratings services that demonstrate compliance with the MRC’s standards of media rating research.MRC accreditation is not a legal or regulatory prerequisite to commercialization of any of our audienceratings services.

Although accreditation is not required, we currently are pursuing MRC accreditation for several of ouraudience ratings services. We intend to use commercially reasonable efforts in good faith to pursue MRCaccreditation of our PPM radio ratings service in each PPM Market where we intend to commercialize theservice. We have complied with and currently intend to continue to comply with the MRC Voluntary Code ofConduct (“VCOC”) in each PPM Market prior to commercializing our PPM radio ratings service in thatmarket. The VCOC requires, at a minimum, that we complete an MRC audit of the local market PPM service,share the results of that audit with the MRC PPM audit subcommittee, and disclose “pre-currency” impactdata prior to commercializing the PPM radio ratings service in that local market.

Local Markets First Considered for Accreditation During 2006 and 2007. As previously disclosed,the MRC completed initial audits of the Houston — Galveston, Philadelphia, New York, Nassau — Suffolk(Long Island), and Middlesex — Somerset — Union (collectively, the “2007 Markets”) local market PPMmethodology and execution in late 2006 in the case of Houston — Galveston, and in the first half of 2007 inthe case of the remaining 2007 Markets. In January 2007, the MRC accredited the average-quarter-hour,time-period radio ratings data produced by the PPM ratings service in the Houston-Galveston local market.For more information regarding MRC accreditation, see “Item 1. Business — Governmental Regulation.” InJune 2007, the MRC also accredited the average-quarter-hour, time-period television ratings data produced bythe PPM ratings service in the Houston-Galveston local market. Because we are not currently producingtelevision viewing estimates, we have applied to

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the MRC for temporary hiatus status for our Houston-Galveston television ratings service and the accreditationstatus of the television estimates is currently not active.

Based on initial audits completed during 2007, and our replies to the MRC’s follow-up queries, the MRCdenied accreditation of the PPM ratings services in the remaining 2007 Markets during January 2008. During2008, the MRC reaudited the Philadelphia, New York, Nassau — Suffolk (Long Island), and Middlesex —Somerset — Union local market PPM methodology and execution. The results of those reaudits, together withadditional information provided by Arbitron, were shared with the MRC PPM audit subcommittee in late2008. As of the date of this Annual Report on Form 10-K, the denial status remains in place, and the PPMservices in the Philadelphia, New York, Nassau — Suffolk (Long Island), and Middlesex — Somerset —Union local markets remain unaccredited. Among other things, the MRC identified response rates, compliancerates, and differential compliance rates as concerns it had with the PPM service in these local markets.

Local Markets First Considered for Accreditation During 2008. During 2008, the MRC completedinitial audits of the Los Angeles, Riverside — San Bernardino, Chicago, San Francisco, San Jose, Atlanta,Dallas — Ft. Worth, Detroit, and Washington, DC (collectively, the “2008 Markets”) local market PPMmethodology and execution, and the results of each of those audits were shared with the MRC PPM auditsubcommittee, together with additional information provided by Arbitron in late 2008. On January 9, 2009, weannounced that the MRC had accredited the average-quarter-hour, time-period radio ratings data produced bythe PPM ratings service in the Riverside — San Bernardino local market. With respect to the PPM service inthe remaining 2008 Markets, the MRC has taken no formal action on the initial applications for accreditationand therefore, the services are not currently accredited by the MRC.

In November 2007, we announced our decision to delay the commercialization of the PPM ratings servicein nine local markets in order to address feedback regarding the PPM service we had received from ourcustomers, the MRC, and certain other constituencies. We believe during the course of the delay, we enhancedour PPM service and during 2008, we commercialized each of the markets that we had delayed. To date, morethan 15 radio broadcasting groups, including Clear Channel Communications, Inc. (“Clear Channel”), ourlargest customer, CBS Radio, Inc., Citadel Broadcasting Corporation, Entercom Communications Corporation,Cox Radio, Inc., Radio One, Inc. and Cumulus Media Inc. (“Cumulus”), have signed long-term contracts touse the PPM service as and when we commercialize it in the PPM Markets. We believe these broadcasters,together with other broadcasters under contract to receive PPM ratings, accounted for the substantial majorityof the total radio advertising dollars in the PPM Markets in 2008. We have also signed contracts with a numberof national and regional advertising agencies to use the PPM service as and when we commercialize in thePPM Markets. We believe these agencies also accounted for the substantial majority of the national advertisingdollars spent on radio advertising in the PPM Markets in 2008.

Although additional milestones remain and there is the possibility that the pace of commercialization of thePPM ratings service could be slowed further, we believe that the PPM ratings service is both a viablereplacement for our Diary-based ratings service and a significant enhancement to our audience estimates inmajor radio markets, and is an important component of our anticipated future growth. If the pace of thecommercialization of our PPM ratings service is slowed further, revenue increases that we expect to receiverelated to the service will also be delayed.

Commercialization of our PPM radio ratings service requires and will continue to require a substantialfinancial investment. We believe our cash generated from operations, as well as access to our existing creditfacility, is sufficient to fund such requirements. We currently estimate that the 2009 annual capitalexpenditures associated with the PPM ratings service commercialization for audience ratings measurement willbe approximately $25.0 million. As we have anticipated, our efforts to support the commercialization of ourPPM ratings service have had a material negative impact on our results of operations. The amount of capitalrequired for deployment of our PPM ratings service and the impact on our results of operations will be greatlyaffected by the speed of the commercialization.

Collection of Listener Data Through PPM Methodology. In our PPM service, we gather data regardingexposure to encoded audio material through the use of our PPM meters. We randomly recruit a sample panelof households to participate in the service (all persons aged six and older in the household). The householdmembers

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are asked to participate in the panel for a period of up to two years, carrying their meters “from rise to retire”each day. Panelists earn points based on their compliance with the task of carrying the meter. Longer carrytime results in greater points, which are the basis for monthly cash incentives. Demographic subgroups that ourexperience indicates may be less likely to comply, such as younger adults, are offered higher premiums basedon their compliance. We consider the amount of the cash incentive that we pay to the PPM panelists to beproprietary information.

The PPM meter collects the codes and adds a date/time stamp to each listening occasion. At the end ofeach day, panelists place their meters in a docking station and the information is downloaded to Arbitron forprocessing, tabulation, and analysis in producing our listening estimates. We issue a ratings report for 13unique four-week measurement periods per year. We issue weekly reports to station subscribers forprogramming information. Users access the ratings estimates through an Internet-based software system.

PPM Service Quality Improvement Initiatives. As we have commercialized the PPM service in thePPM Markets, we have experienced and expect to continue to experience challenges in the operation of thePPM service similar to those we face in the Diary-based service, including several of the challenges related tosample proportionality and response rates mentioned above. We expect to continue to implement additionalmeasures to address these challenges, which will likely require expenditures that may in the aggregate bematerial. We refer to our ongoing efforts to improve our radio ratings services as our “continuousimprovement” initiatives. For example, in December 2007, we announced a “sample size guarantee” thatwould provide a partial rebate to our customers for PPM radio ratings in any PPM Market for a measurementperiod in which our actual percentage of the installed panel that provides useable data (the “average dailyIn-Tab”) among persons aged 18-54 falls below 80 percent of our published average daily In-Tab target forthat market. To date, our delivered average daily In-Tab has not fallen below the target and we have notprovided any rebates under the “sample size guarantee.”

Beginning in October 2007, we began offering weekly performance bonuses to all panelists in householdswith at least one person aged 18-24 if specified compliance criteria were met. Beginning in February 2008, weincreased this incentive and we also modified our alternate sample pool methodology. Under the revisedprocedure, we interview potential alternate households at random, and the households remain eligible forselection should a specific need emerge later in a panel for which the households’ demographic characteristicsmatch.

Beginning in April 2008, we began utilizing revised panelist communications, began informing allpanelists of the availability of travel chargers, and initiated a telephone service offering wake-up calls, otherreminder calls, and local weather updates to all panelists in households with at least one person aged 18-34 inthe Houston-Galveston, New York, and Philadelphia local markets as an additional incentive for participation.

Beginning in August 2008, we enhanced our incentive program to encourage participation among thosepersons who initially refused to participate. Beginning in September 2008, we began offering decals tohouseholds with at least one panelist aged 6-14 as a way for panelists to personalize their meters.

On February 1, 2008, we announced a series of four sample quality benchmarks that we intend to pursuewith our PPM services to enhance users’ confidence in PPM ratings as a widely accepted method for settingadvertising rates, which we refer to as “currency.” Benchmarks do not represent goals or targets forperformance, rather these benchmarks represent the level of sample performance for a given demographicgroup below which we intend to take corrective action to improve the sample performance. Specifically, thesebenchmarks concern total sample size, sample size for persons aged 18 to 34, average daily In-Tab, andresponse rates. Currently, we have at least 30 initiatives in the testing or implementation stage for the PPMservice that are designed to improve either response, compliance or both. Many of the initiatives weimplemented during 2008 assisted us in meeting or exceeding our stated benchmarks and served to establishthe more aggressive benchmarks currently in place.

In July 2008, we announced that the 80 percent sample size guarantee will now be applicable beginningwith the first month of PPM currency in each local market and that, beginning on the first anniversary of PPMcurrency in each local market, the threshold for application of the sample size guarantee will increase to90 percent of our published 18-54 average daily In-Tab target for that local market, based on a 13-reportrolling average. We also announced a new PPM sample size program designed to deliver a larger sample targetfor persons aged 12 and over. We plan to implement the increase in the persons aged 12 and over sample targetin phases, beginning in 2009.

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A program of “front-loaded treatment” initiatives, which focus on improving compliance and reducingturnover during the critical initial month of panelist participation, was tested in the PPM research test panel in2008. We expect to implement components of this program in all PPM Markets and the full program in thelowest response markets in 2009. In 2009, we intend to launch in-person coaching initiatives in the top tenmarkets for those Black and Hispanic panelists 18-34, who show initial poor compliance. We have designedthese initiatives in an attempt to reduce respondent turnover and improve compliance among thesedemographic groups.

We currently dial cell phone-only households for PPM Markets using a manually-dialed telephone-basedsample frame approach. However, we expect to implement a hybrid method of using address-basedrecruitment for cell phone-only households together with random digit dialing (“RDD”) recruitment forlandline households in 2009.

In connection with our interactions with several governmental entities, we have announced a series ofcommitments concerning our PPM radio ratings services to be implemented by us over the next several yearsand, which we believe are consistent with our ongoing efforts to obtain and maintain MRC accreditation andour continuous improvement initiatives described above. Among other things, we have agreed to increaseincrementally and to certain levels our use of address based recruitment efforts to 15 percent of all recruitmentefforts no later than July 2010 in the New York local market and no later than the end of 2010 in certain othermarkets. On January 22, 2009, we announced a plan to increase our sample target for cell phone-onlyhouseholds in all PPM markets to 12.5 percent by the end of 2009 and to 15 percent by the end of 2010, whichwe anticipate may help to increase young adult proportionality. In the New York local market only, we haveagreed to increase our sample target for cell phone-only households to 15 percent by no later than July 2010.During 2009 we have announced plans to implement similar initiatives in all PPM Markets. For moreinformation regarding our interactions and agreements with such governmental entities see “Item 3. — LegalProceedings.”

We continue to operate in a highly challenging business environment in the markets and industries weserve. Our future performance will be impacted by our ability to address a variety of challenges andopportunities in these markets and industries, including our ability to continue to maintain and improve thequality of our PPM service, and manage increased costs for data collection, arising among other ways, fromincreased numbers of cell phone-only households, which are more expensive to recruit than households withlandline phones. We will also seek to pursue MRC accreditation in all of our PPM Markets, and develop andimplement effective and efficient technological solutions to measure multimedia and advertising.

International. We have entered into arrangements with media information services companies pursuant towhich those companies use our PPM technology in their audience measurement services in specific countriesoutside of the United States. We currently have arrangements with Taylor Nelson Sofres, which has beenacquired by WPP Group plc, a global communications services group. Generally, under these arrangements wesell PPM hardware and equipment to the company for use in its media measurement services and collect aroyalty once the service is deemed commercial. Our PPM technology is currently being used for mediameasurement in seven countries, including four that have adopted PPM technology for measuring bothtelevision and radio.

Our PPM technology was first used in a commercial audience measurement panel in Belgium and has beenused to track television and radio there since 2003. In 2006, Norway adopted a service using PPM technologyto produce radio currency ratings and Kazakhstan adopted a service using PPM technology to producetelevision currency ratings. In 2007, both television and radio currency ratings were produced in Iceland usingPPM equipment. In 2008, the radio industry in Denmark began using PPM equipment under a five-yearcontract to produce radio currency ratings. Also in 2008, the PPM encoding technology was introduced intoDanish television for commercial services to identify programming sources for set-top measurement systems.This encoding technology has been similarly deployed in Singapore since 2001.

Our PPM technology has been used for television currency ratings in Montreal and Quebec, Canada, since2004. In the fourth quarter of 2008, BBM Canada, a not-for-profit, media ratings organization that produceswidely-accepted ratings for Canada, commercialized its radio ratings service in Montreal using our licensedPPM technology and equipment purchased from us. The Montreal market launch is the first phase of BBMCanada’s PPM service rollout plan. BBM Canada has also announced that it intends to launch PPM panels togenerate radio

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and television currency ratings in Toronto, Vancouver, Calgary, and Edmonton in Fall 2009. Theseinternational arrangements are currently not a material part of our business.

Radio Market Report and Other Data Services

We provide our listening estimates in a number of different reports that we publish and license to ourcustomers. The cornerstone of our radio audience measurement services is the Radio Market Report, which isavailable in all local markets for which we currently provide radio ratings. The Radio Market Report providesaudience estimates for those stations in a market that meet our minimum reporting standards. The estimatescover a wide variety of demographics and dayparts, which are the time periods for which we report audienceestimates. Each Radio Market Report contains estimates to help radio stations, advertising agencies andadvertisers understand who is listening to the radio, which stations they are listening to, and where and whenthey are listening. Our proprietary data regarding radio audience size and demographics are generally providedto customers through multiyear license agreements.

We also license our respondent-level database through Maximi$er and Maximi$er Plus, which are servicesfor radio stations, and Media Professional and Media Professional Plus, which are services for advertisingagencies and advertisers. Our respondent-level database allows radio stations, advertising agencies andadvertisers to customize survey areas, dayparts, demographics and time periods to support targeted marketingstrategies. The Maximi$er service includes a Windows-based application to access a market’s entire radioDiary database on a client’s personal computer. Radio stations use the Maximi$er service to produceinformation about their stations and programming not available in Arbitron’s published Radio Market Reports.The Maximi$er Plus service allows radio stations to access our National Regional Database (“NRD”) toanalyze ratings information for customer-defined groupings of stations in multiple markets and counties. TheMedia Professional service is designed to help advertising agencies and advertisers plan and buy radioadvertising time quickly, accurately and easily. These services integrate radio planning and buying into onecomprehensive research and media-buying tool. They allow advertising agencies and advertisers to uncoverkey areas critical to the buying process, including determining the most effective media target, understandingmarket trends and identifying potential new business. The Media Professional Plus service allows advertisingagencies and advertisers to access our NRD to create custom geographies and trade areas using radio Metro,television DMA and/or county information. Media Professional Plus also provides the data on a specifictrading area’s cost per point needed to help advertising agencies and advertisers place more efficient mediabuys. In addition to the licensing above, we offer third-party software providers and customers licenses to useproprietary software that will enable enhanced access to our respondent-level data.

In addition to the Radio Market Report, we provide a range of ancillary services that include Radio CountyCoverage Reports, Hispanic Radio Data and Black Radio Data.

RADAR. Our RADAR service provides a measurement of national radio audiences and the audience sizeof network radio programs and commercials. We provide the audience measurements for a wide variety ofdemographics and dayparts for total radio listening and for 58 separate radio networks.

We create network audience estimates by merging the radio listening of selected survey respondents withthe actual times that network programs and commercials are aired on each affiliated station. We deliver theRADAR estimates through our PC 2010 software application, which includes a suite of tools for sophisticatedanalysis of network audiences. We provide this service to radio networks, advertising agencies and networkradio advertisers.

Since 2003, the RADAR survey sample has increased from 50,000 Arbitron respondents to a surveysample of approximately 300,000 Arbitron respondents in December 2008. Data from PPM commercialmarkets are also incorporated into the RADAR survey sample.

During 2009, we intend to begin transitioning operations and production of our RADAR service from ouroffices in New Jersey to our headquarters in Maryland.

Software Applications. In addition to our reports, we license software applications that provide ourcustomers’ access to the audience estimates in our databases. These applications enable our customers to moreeffectively analyze and understand that information for sales, management and programming purposes. Theseservices also help our customers to further refine sales strategies and compete more effectively for advertising

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dollars. Some of our software applications also allow our customers to access data owned by third parties,provided the customers have a separate license to use such third-party data.

Our TAPSCAN family of software solutions is used by many radio stations, advertising agencies andadvertisers. The TAPSCAN software is one of the advertising industry’s leading radio analysis applications. Itcan help create illustrative charts and graphs that make complex information more useful to potentialadvertisers. Other features include pre-buy research, including frequency-based tables, cost-per-point analysis,hour-by-hour and trending, use of respondent-level data, automatic scheduling and goal tracking, instant accessto station format and contact information. Our TAPSCAN Sales Management service provides softwaresystems that help radio stations manage their advertising sales process and automate the daily tasks in a salesdepartment. The TAPSCAN Sales Management applications combine a customer relationship managementsystem with scheduling and research applications and with inventory/pricing management tools. OurSmartPlus service provides media buying software systems, including the SmartPlus software, to local andregional advertising agencies for broadcast and print media. Another TAPSCAN service, QUALITAP, is alsomade available to television and cable outlets in the United States under a licensing arrangement withMarketron International, Inc.

The MapMAKER Direct service analyzes where the radio audience lives and works to provide detailedmaps and reports. Program directors can use this service to better understand their listeners and better targettheir promotional efforts. Our PD Advantage service offers radio station program directors the ability to createa variety of reports that help analyze the market, the audience and the competition.

Licensing of Respondent-Level Data. We license our respondent-level database and the related softwarewe use to calculate our audience estimates to certain customers that allow enhanced access to ourrespondent-level database. This allows third party processors and customers to produce more detailed radiolistening data by custom dayparts, demographic groups and geographic areas.

Local Market Consumer Information Services

In our radio ratings service, we provide primarily quantitative data, such as how many people are listening.We also provide qualitative data, such as consumer and media usage information to radio stations, cablecompanies, television stations, out-of-home media, magazine and newspaper publishers, advertising agenciesand advertisers. The qualitative data on listeners, viewers and readers provide more detailed socioeconomicinformation and information on what survey participants buy, where they shop and what forms of media theyuse. We provide these measurements of consumer demographics, retail behavior, and media usage in 285 localmarkets throughout the United States.

We provide qualitative services tailored to fit a customer’s specific market size and marketingrequirements, such as:

• the Scarborough Report, which is offered in larger markets;

• the RetailDirect Service, which is offered in medium markets; and

• the Qualitative Diary Service/LocalMotion Service, which is offered in smaller markets.

Each service profiles a market, the consumers and the media choices in terms of key characteristics. Theseservices cover the major retail and media usage categories. We also provide training and support services thathelp our customers understand and use the local market consumer information that we provide.

Scarborough Report. The MRC-accredited Scarborough service is provided through a joint venturebetween Arbitron and a subsidiary of Nielsen and is governed by a partnership agreement, which wasautomatically renewed until December 2012. Although our equity interest in the Scarborough Research jointventure is 49.5 percent, partnership voting rights and earnings are divided equally between Arbitron andNielsen. The Scarborough service provides detailed information about media usage, retail and shopping habits,demographics and lifestyles in 81 large United States local markets, utilizing a sample of consumers in therelevant markets.

Scarborough data feature more than 2,000 media, retail and lifestyle characteristics, which can help radiostations, television stations, cable companies, advertising agencies and advertisers, newspaper and magazine

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publishers and out-of-home media companies develop an in-depth profile of their consumers. Examples ofScarborough categories include retail shopping (e.g., major stores shopped or purchases during the past30 days), auto purchases (e.g., plan to buy new auto or truck), leisure activities (e.g., attended sporting events)and personal activities (e.g., golfing). Media information includes broadcast and cable television viewing,radio listenership, newspaper readership by section and yellow pages usage. This information is providedtwice each year to newspapers, radio and television broadcasters, cable companies, out-of-home media,advertising agencies and advertisers in the form of the Scarborough Report. Scarborough also provides aMid-Tier Local Market Consumer Study regarding media usage, retail and shopping habits, demographics,and lifestyles of adult consumers in 19 United States local markets.

We are the exclusive marketer of the Scarborough Report to radio broadcasters, cable companies andout-of-home media. We also market the Scarborough Report to advertising agencies and advertisers on ashared basis with Scarborough Research. Scarborough Research markets the Scarborough Report tonewspapers, sports marketers and online service providers. Nielsen markets the Scarborough Report totelevision broadcasters.

RetailDirect Service. Our RetailDirect service is a locally oriented, purchase data and media usageresearch service provided in 20 midsized United States local markets. This service, which utilizes diaries andtelephone surveys, provides a profile of the audience in terms of local media, retail and consumer preferencesso that local radio and television broadcasters, out-of-home media and cable companies have information tohelp them develop targeted sales and programming strategies. Retail categories include automotive,audio-video, furniture and appliances, soft drinks and beer, fast food, department stores, grocery stores, banksand hospitals. Media usage categories include local radio, broadcast television, cable networks, out-of-homemedia, newspapers, yellow pages and advertising circulars.

Qualitative Diary Service/LocalMotion Service. Our Qualitative Diary Service collects consumer andmedia usage information from Arbitron radio diarykeepers in 165 smaller United States local markets. Thesame persons who report their radio listenership in the market also answer 27 demographic, product andservice questions. We collect consumer behavior information for key local market retail categories, such asautomotive sales, grocery, fast food, furniture and bedding stores, beer, soft drinks and banking. TheQualitative Diary Service also collects information about other media, such as television news viewership,cable television viewership, out-of-home media exposure and newspaper readership. This qualitative serviceprovided for cable television companies is known as LocalMotion.

Custom Research Services. Our custom research efforts serve companies that are seeking todemonstrate the value of their advertising propositions. For example, we have provided custom researchservices for subscribers including sports play-by-play broadcasters, digital out-of-home and place-basedmedia companies, and radio station properties. Through our custom research services, we are also exploringapplications of PPM data, including nonratings programming, marketing and out-of-home services forbroadcast television and cable television. We are also exploring providing services for mobile media andcompanies that sell advertising on in-store (retail) media and sports arenas.

International Operations

India. We have formed a wholly owned subsidiary organized under the laws of India, which entity’scurrent functions include technology, research and development and oversight of outsourced softwaredevelopment in India. In the future we intend to increase staffing to perform these and additional duties,including in-house software development, although there can be no assurance we will be successful in doingso. Our India operations are currently not a material part of our business.

Portable People Meter. For a discussion of the use of our PPM technology outside of the United States,see “Item 1. — Business — Portable People Meter Service — International.”

CSW Research Limited (“Continental Research”). On January 31, 2008, we sold ContinentalResearch. Additional information regarding the sale of Continental Research is provided in Note 3 in theNotes to Consolidated Financial Statements contained in this Annual Report on Form 10-K.

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Customers, Sales and Marketing

Our customers are primarily radio, cable television, advertising agencies, advertisers, retailers,out-of-home media, online media and, through our Scarborough Research joint venture with Nielsen,broadcast television and print media. One customer, Clear Channel, represented approximately 18 percent ofour revenue in 2008. We believe that we are well positioned to provide new services and other offerings tomeet the emerging needs of broadcasting groups.

We market our services in the United States through a direct sales force that consisted of 71 sales accountmanagers and 35 customer trainers, as of December 31, 2008.

We have entered into a number of agreements with third parties to assist in marketing and selling ourservices in the United States. For example, Marketron International, Inc., distributes, on an exclusive basis,our QUALITAP software to television and cable outlets in the United States.

We support our sales and marketing efforts through the following:

• conducting direct-marketing programs directed toward radio stations, cable companies, advertisingagencies, television stations, out-of-home companies, broadcast groups and corporate advertisers;

• promoting Arbitron and the industries we serve through a public relations program aimed at the tradepress of the broadcasting, out-of-home media, Internet, advertising and marketing industries, as well asselect local and national consumer and business press;

• gathering and publishing studies, which are available for no charge on our Web site, on nationalsummaries of radio listening, emerging trends in the radio industry, Internet streaming, out-of-homeand other media industries, as well as the media habits of radio listeners and television, cable andInternet viewers;

• participating in key industry and government forums, trade association meetings, and interest groups,such as the Advertising Research Foundation, the American Association of Advertising Agencies, theNational Association of Broadcasters, the Association of National Advertisers, the European Societyfor Opinion and Marketing Research, the Television Bureau of Advertising, the CabletelevisionAdvertising Bureau, American Women in Radio and Television, Women in CableTelecommunications, the Cable & Telecommunications Association for Marketing, the NationalAssociation of Black Owned Broadcasters, Minority Media and Telecommunications Council, MediaRating Council, Committee on Local Radio Audience Measurement, Committee on Local TelevisionAudience Measurement, national Radio Research Committee and the Outdoor Advertising Associationof America, as well as numerous state and local advertising and broadcaster associations;

• participating in activities and strengthening relationships with national and local chapters of grassrootsorganizations, such as the National Council of La Raza, the National Urban League, the NationalAssociation for the Advancement of Colored People, and the Rainbow/PUSH Coalition; and

• maintaining a presence at major industry conventions, such as those sponsored by the NationalAssociation of Broadcasters, the Radio Advertising Bureau, the American Association of AdvertisingAgencies, the Advertising Research Foundation, the Cable Advertising Bureau and the OutdoorAdvertising Association of America.

Competition

We believe that the principal competitive factors in our markets are the credibility and reliability of theaudience research, the ability to provide quality analytical services for use with the audience information, theend-user experience with services and price.

We are the leader in the radio audience measurement business in the United States. During 2008, wecompeted in the radio audience measurement business in some small United States markets with EastlanResources, a privately held research company. We are also aware of at least six companies, GfK AG,Integrated Media Measurement Inc., Ipsos SA, The Media Audit (a division of International Demographics,Inc.), Nielsen, and Thompson Electronics Ltd., which are developing technologies that could compete withour PPM service.

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In November 2008, Cumulus announced that beginning in 2009 Nielsen would provide audiencemeasurement and radio ratings services in 51 small and mid-sized United States local markets in whichCumulus broadcasts (the “Cumulus Markets”). Clear Channel has also indicated that it will subscribe to theNielsen service in 17 of the Cumulus Markets. We cannot provide any assurances that Nielsen will not in thefuture seek to expand its radio ratings services beyond the 51 Cumulus Markets. Cumulus has elected not torenew its agreement with us to receive radio audience estimates in the Cumulus Markets, which expired onDecember 31, 2008. We estimate that our lost Diary revenue in the Cumulus Markets from Cumulus andClear Channel combined will be $5.0 million in 2009. Thereafter, on a full year run-rate basis in thosemarkets, we estimate a $10.0 million per year reduction of expected annual revenue as compared to assumedrenewals. We currently intend to continue to offer our Diary-based audience ratings services in the CumulusMarkets during 2009 and beyond. We also intend to offer an array of options to customers in individual localmarkets smaller than the 100 largest markets that can provide them with the data they need to appropriatelyposition their stations to maximize revenue opportunities.

We compete with a large number of other providers of applications software, qualitative data, andproprietary qualitative studies used by broadcasters, cable companies, advertising agencies, advertisers, andout-of-home media companies. These competitors include Donovan Data Systems, Interactive MediaSystems, Marketron Inc., STRATA Marketing Inc., and Telmar Information Services Corp., in the area ofapplications software, and The Media Audit (a division of International Demographics, Inc.), MediamarkResearch Inc. (a subsidiary of GfK AG) and Simmons Market Research Bureau (a subsidiary of ExperianMarketing Solutions) in the area of qualitative data.

Intellectual Property

Our intellectual property is, in the aggregate, of material importance to our business. A combination ofpatents, copyrights, trademarks, service marks, trade secret laws, license agreements, confidentialityprocedures and other contractual restrictions, are relied upon to establish and protect proprietary rights in ourmethods and services. As of December 31, 2008, 34 United States patents were issued and 39 United Statespatent applications were pending on behalf of Arbitron. Internationally, 167 foreign patents were issued and147 foreign patent applications were pending. Our patents relate to our data collection, processing systems,software and hardware applications, the PPM and its methods, and other intellectual property assets. Severalpatents relating to the PPM and its methods expire at various times beginning in 2012 and collectively are ofmaterial importance to our business.

Our audience listening estimates are original works of authorship protectable under United Statescopyright laws. We publish the Radio Market Report either quarterly or semiannually, depending on theArbitron market surveyed, while we publish the Radio County Coverage Report annually. We seek copyrightregistration for each Radio Market Report and for each Radio County Coverage Report published in theUnited States. We also seek copyright protection for our proprietary software and for databases comprisingthe Radio Market Report and other services containing our audience estimates and respondent-level data.Prior to the publication of our reports and release of the software containing the respondent-level data, weregister our databases under the United States federal copyright laws. We generally provide our proprietarydata regarding audience size and demographics to customers through multiyear license agreements.

We market a number of our services under United States federally registered trademarks that are helpfulin creating brand recognition in the marketplace. Some of our registered trademarks and service marksinclude: the Arbitron name and logo, Maximi$er, RetailDirect and RADAR. The Arbitron name and logo isof material importance to our business. We have a trademark application pending for Arbitron PPM. We alsohave a number of common-law trademarks, including Media Professional, and QUALITAP. We haveregistered our name as a trademark in the United Kingdom, Mexico, the European Union, Australia,Singapore, Chile and Japan, and are exploring the registration of our marks in other foreign countries.

The laws of some countries might not protect our intellectual property rights to the same extent as thelaws of the United States. Effective patent, copyright, trademark and trade secret protection may not beavailable in every country in which we market or license our data and services.

We believe our success depends primarily on the innovative skills, technical competence, customerservice and marketing abilities of our personnel. We enter into confidentiality and assignment-of-inventionsagreements with

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substantially all of our employees and enter into nondisclosure agreements with our suppliers and customersto limit access to and disclosure of our proprietary information.

We must protect against the unauthorized use or misappropriation of our audience estimates, databasesand technology by third parties. There can be no assurance that the copyright laws and other statutory andcontractual arrangements we currently depend upon will provide us sufficient protection to prevent the use ormisappropriation of our audience estimates, databases and technology in the future. The failure to protect ourproprietary information, intellectual property rights and, in particular, our audience estimates and databases,could severely harm our business.

Additionally, claims by third parties that our current or future products or services infringe upon theirintellectual property rights may harm our business. Intellectual property litigation is complex and expensive,and the outcome of such litigation is difficult to predict. We have been involved in litigation relating to theenforcement of our copyrights covering our radio listening estimates and patents covering our proprietarytechnology. Although we have generally been successful in these cases, there can be no assurance that thecopyright laws and other statutory and contractual arrangements we currently depend upon will provide ussufficient protection to prevent the use or misappropriation of our audience estimates, databases andtechnology in the future. Litigation, regardless of outcome, may result in substantial expense and a significantdiversion of our management and technical personnel. Any adverse determination in any litigation maysubject us to significant liabilities to third parties, require us to license disputed rights from other parties, iflicenses to these rights could be obtained, or require us to cease using certain technology.

Research and Development

Our research and development activities have related primarily to the development of new services,customer software, PPM equipment and maintenance and enhancement of our legacy operations and reportingsystems. We expect that we will continue research and development activities on an ongoing basis,particularly in light of the rapid technological changes affecting our business. We expect that the majority ofthe effort will be dedicated to improving the overall quality and efficiency of our data collection andprocessing systems, developing new software applications that will assist our customers in realizing the fullpotential of our audience measurement services, developing our PPM technology and developing asingle-source service that will be able to measure audience and other information from a number of differentforms of media. Research and development expenses during fiscal years 2008, 2007, and 2006 totaled$41.4 million, $42.5 million and $44.2 million, respectively.

Governmental Regulation

Our PPM equipment has been certified to meet Federal Communications Commission (“FCC”)requirements relating to emissions standards and standards for modem connectivity. Additionally, all PPMequipment has been certified to meet the safety standards of Underwriters Laboratories Inc. (commonlyreferred to as UL), as well as Canadian and European safety and environmental standards.

Our media research activities are subject to an agreement with the United States Federal TradeCommission in accordance with a Decision and Order issued in 1962 to CEIR, Inc., a predecessor company.This order originally arose in connection with a television ratings business, and we believe that today itapplies to our media measurement services. The order requires full disclosure of the methodologies we useand prohibits us from making representations in selling or offering to sell an audience measurement servicewithout proper qualifications and limitations regarding probability sample, sampling error and accuracy orreliability of data. It prohibits us from making statements that any steps or precautions are taken to ensure theproper maintenance of diaries unless such steps or precautions are in fact taken. It also prohibits us frommaking overly broad statements regarding the media behavior a survey reflects. The order further prohibits usfrom representing the data as anything other than estimates and from making a statement that the data areaccurate to any precise mathematical value. The order requires that we make affirmative representations inour reports regarding nonresponse by survey participants and the effect of this nonresponse on the data, thehearsay nature of a survey participant’s response, the fact that projections have been made, and the limitationsand deficiencies of the techniques or procedures used. We believe that we have conducted and continue toconduct our radio audience measurement services in compliance with the order.

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Our Diary-based Radio Market Report service is accredited by and subject to the review of the MRC, anindustry organization created to ensure high ethical and operational standards in audience measurementresearch. The MRC has accredited our Diary-based Radio Market Report service since 1968. The MRCaccredited the monthly quarter-hour audience estimates provided by our PPM radio ratings service in theHouston-Galveston local market in January 2007 and the monthly quarter-hour television audience estimatesprovided by our PPM service in Houston in June 2007, although we have requested temporary hiatus status inthe Houston-Galveston television service. The MRC accredited the monthly quarter-hour audience estimatesprovided by our PPM radio ratings service in the Riverside-San Bernardino local market in January 2009.Additional Arbitron services that are currently accredited by the MRC are RADAR, Scarborough, Maximi$erand Media Professional software, the Custom Survey Area Report (“CSAR”) and the Radio County Coverageservices. To merit continued accreditation of our services, we must: (1) adhere to the MRC’s minimumstandards for Media Rating Research; (2) supply full information to the MRC regarding details of ouroperations; (3) conduct our media measurement services substantially in accordance with representations toour subscribers and the MRC; (4) submit to, and pay the cost of, thorough annual audits of our accreditedservices by certified public accounting firms engaged by the MRC; and (5) commit to continuousimprovement of our media measurement services.

Federal and state regulations restrict telemarketing to individuals who request to be included on ado-not-call list. Currently, these regulations do not apply to survey research, but there can be no assurancethat these regulations will not be made applicable to survey research in the future. In addition, federalregulations prohibit calls made by autodialers to wireless lines without consent from the subscriber. Becauseconsumers are able to transfer a wireless number to a landline carrier or a landline number to a wirelesscarrier, it can be difficult for us to identify efficiently wireless numbers in advance of placing an autodialedcall.

On September 2, 2008, a group of broadcasters and trade associations representing some broadcasters andadvertising agencies filed an “Emergency Petition for Section 403 Inquiry” with the FCC urging the FCC toopen an inquiry, under Section 403 of the Communications Act of 1934, as amended (the “CommunicationsAct”), into our PPM radio ratings services. The group alleges that the PPM methodology undercountsminority radio listeners and that the commercialization of the PPM radio ratings service will harm minoritybroadcasters. We deny such allegations. On September 4, 2008, the FCC issued a request for public commenton the petition. Public comments were due by September 24, 2008 and reply comments were due byOctober 6, 2008. We submitted comments and reply comments to the FCC and have otherwise participated inthe public comment process, but have also asserted that the Company is not subject to the jurisdiction of theFCC, and that the FCC lacks authority under the Communications Act to address the reliability of audienceratings data, the methods used to estimate audience share, or other aspects of audience ratings. To date, theFCC has taken no formal action on the petition. We can provide no assurances that the FCC will not in thefuture assert that it has competent jurisdiction pursuant to the Communications Act to conduct aninvestigation of the Company and our PPM radio ratings services.

We received notification that the U.S. Department of Labor Wage and Hour Division will be conductingan onsite assessment of payroll records and time cards or time sheets on March 2, 2009.

Employees

As of December 31, 2008, we employed approximately 1,100 people on a full-time basis andapproximately 500 people on a part-time basis in the United States and 16 people on a full-time basisinternationally. None of our employees is covered by a collective bargaining agreement. We believe ouremployee relations are good.

Seasonality

We recognize revenue for services over the terms of license agreements as services are delivered, andexpenses are recognized as incurred. We gather radio-listening data in 302 United States local markets,including 288 Diary markets and 14 PPM Markets. All Diary markets are measured at least twice per year(April-May-June for the “Spring Survey” and October-November-December for the “Fall Survey”). Inaddition, we measure all major Diary markets two additional times per year (January-February-March for the“Winter Survey” and July-August-September for the “Summer Survey”). Our revenue is generally higher inthe first and third quarters as a result of the delivery of the Fall Survey and Spring Survey, respectively, to allDiary markets compared to revenue in the

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second and fourth quarters, when delivery of the Winter Survey and Summer Survey, respectively, is madeonly to major Diary markets. Although revenue is recognized ratably over the year in both the Diary and PPMservices, there will be fluctuations in the depth of the seasonality pattern during the periods of transitionbetween the services in each PPM Market.

Our expenses are generally higher in the second and fourth quarters as we conduct the Spring Survey andFall Survey for our Diary markets. The transition from the Diary service to the PPM service in the PPMMarkets will have an impact on the seasonality of our costs and expenses. We anticipate PPM costs andexpenses will accelerate six to nine months in advance of the commercialization of each PPM Market as webuild the panels. These preliminary costs are incremental to the costs associated with our Diary-based ratingsservice and we will recognize these increased costs as incurred rather than upon the delivery of a particularsurvey. This pattern differs from the costs pattern associated with the delivery of the Diary service. The sizeand seasonality of the PPM transition impact on a period to period comparison will be influenced by thetiming, number, and size of individual markets contemplated in our PPM commercialization schedule, whichcurrently includes a goal of commercializing 49 PPM Markets by the end of 2010. During 2008, wecommercialized 14 PPM Markets and, during 2009, we expect to commercialize 19 additional PPM Markets,13 of which we expect to commercialize in the latter half of 2009.

Scarborough typically experiences losses during the first and third quarters of each year because revenueis recognized predominantly in the second and fourth quarters when the substantial majority of services aredelivered. Scarborough royalty costs, which are recognized in costs of revenue, are also higher during thesecond and fourth quarters.

Available Information

Our Web site address is www.arbitron.com, and interested persons may obtain, free of charge, copies offilings (including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports onForm 8-K, and any amendments to those reports) that we have made with the Securities and ExchangeCommission through a hyperlink at this site to a third-party Securities and Exchange Commission filings Website (as soon as reasonably practicable after such filings are filed with, or furnished to, the Securities andExchange Commission). The Securities and Exchange Commission maintains an Internet site that containsour reports, proxy and information statements, and other information. The Securities and ExchangeCommission’s Web site address iswww.sec.gov. Also available on our Web site are our CorporateGovernance Policies and Guidelines, Code of Ethics for the Chief Executive Officer and Financial Managers,Code of Ethics and Conduct, the Audit Committee Charter, the Nominating and Corporate GovernanceCommittee Charter, the Compensation and Human Resources Committee Charter, and the Charter of the LeadIndependent Director. Copies of these documents are also available in print, free of charge, to any stockholderwho requests a copy by contacting our treasury manager.

On June 11, 2008, we submitted the annual certification of our chief executive officer to the New YorkStock Exchange (the “NYSE”) certifying that he is not aware of any violation by the Company of the NYSE’scorporate governance listing standards, pursuant to Section 303A.12 of the NYSE Listed Company Manual.On February 2, 2009, we submitted an interim written certification notifying the NYSE that on January 21,2009, Michael P. Skarzynski, President and Chief Executive Officer of Arbitron, had been added to our Boardof Directors. As of the date of this filing, we are in full compliance with Section 303A of the NYSE ListedCompany Manual.

ITEM 1A. RISK FACTORS

Risk Factors Relating to Our Business and the Industry in Which We Operate

Our future growth and success will depend on our ability to compete successfully with companies thatmay have financial, marketing, technical, and other advantages over us.

We compete with many companies, some of which are larger and have access to greater capital resources.We believe that our future growth and success will depend on our ability to compete successfully with othercompanies that provide similar services in the same markets, some of which may have marketing, technical,and other advantages. We cannot provide any assurance that we will be able to compete successfully, and thefailure to do so could have a material adverse impact on our business, financial position, and operating results.

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If the domestic and worldwide recession continues or intensifies it could adversely impact demand forour services, our customers’ revenues or their ability to pay for our services.

Our customers derive most of their revenue from transactions involving the sale or purchase ofadvertising. During challenging economic times, advertisers may reduce advertising expenditures, impactingadvertising agencies and media. As a result, advertising agencies and media may be less likely to purchaseour services, which could adversely impact our business, financial position, and operating results.

Continued market disruptions could cause broader economic downturns, which also may lead to lowerdemand for our services, increased incidence of customers’ inability to pay their accounts, an increase in ourprovision for doubtful accounts, an increase in collection cycles for accounts receivable, or insolvency of ourcustomers, any of which could adversely affect our results of operations, liquidity, cash flows, and financialcondition. During the fourth quarter of 2008 and into 2009, we have observed an increase in the averagenumber of days our sales have been outstanding before we have received payment. We periodically receiverequests from our customers for pricing concessions. The current economic environment could exacerbate thelevel of requests.

If the domestic and worldwide recession continues or intensifies, potential disruptions in the creditmarkets may adversely affect our business, including the availability and cost of short-term funds forliquidity requirements and our ability to meet long-term commitments, which could adversely affect ourresults of operations, cash flows, and financial condition.

If internal funds are not available from our operations, we may be required to rely on the banking andcredit markets to meet our financial commitments and short-term liquidity needs. Disruptions in the capitaland credit markets, as were experienced during 2008, could adversely affect our ability to draw on our bankrevolving credit facility. Our access to funds under that credit facility is dependent on the ability of the banksthat are parties to the facility to meet their funding commitments. Those banks may not be able to meet theirfunding commitments to us if they experience shortages of capital and liquidity or if they experienceexcessive volumes of borrowing requests from Arbitron and other borrowers within a short period of time.

Longer term disruptions in the capital and credit markets as a result of uncertainty, changing or increasedregulation, reduced alternatives, or failures of significant financial institutions could adversely affect ouraccess to liquidity needed for our business. Any disruption could require us to take measures to conserve cashuntil the markets stabilize or until alternative credit arrangements or other funding for our business needs canbe arranged. Such measures could include deferring capital expenditures, and reducing or eliminating futureshare repurchases, dividend payments or other discretionary uses of cash.

Our business, financial position, and operating results are dependent on the performance of ourquantitative radio audience measurement business.

Our quantitative radio audience measurement service and related software sales represented 81 percentand nine percent, respectively, of our total revenue for 2008. We expect that such sales related to our radioaudience measurement business will continue to represent a substantial portion of our revenue for theforeseeable future. Any factors adversely affecting the pricing of, demand for, or market acceptance of ourquantitative radio audience measurement service and related software, such as competition, technologicalchange, alternative means of valuing advertising transactions, or further ownership shifts in the radio industry,could adversely impact our business, financial position and operating results.

Costs associated with significant legal proceedings may adversely affect our results of operations.

We are party to a number of legal proceedings and governmental entity investigations and otherinteractions. It is possible that the effect of these unresolved matters or costs and expenses incurred by us inconnection with such proceedings or interactions could be material to our consolidated results of operations.For a discussion of these unresolved matters, see “Item 3. — Legal Proceedings.” These matters have resultedin, and may continue to result in, a diversion of our management’s time and attention.

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We are subject to governmental oversight, which may harm our business.

Federal, state, and local governmental entities have increasingly asserted that our operations are subjectto oversight by them. Our ratings services have undergone a highly public change to their methodologies ofaudience rating measurement. In particular, our PPM radio ratings service has been subject to increasingscrutiny by governmental entities relating to, among other things, state consumer protection, business, andadvertising statutes and we expect increased governmental oversight relating to this business.

The governmental oversight environment could have a significant effect on us and our business. Amongother things, we could be fined or required to make other payments, prohibited from engaging in some of ourbusiness activities, or subject to limitations or conditions on our business activities. Significant governmentaloversight action against us could have material adverse financial effects, cause significant reputational harm,or harm business prospects. New laws or regulations or changes in the enforcement of existing laws orregulations applicable to us may also adversely affect us and our business.

We may fail to attract or retain the qualified research, sales, marketing, and managerial personnel,and key executive officers required to operate our business successfully.

Our success is largely dependent on the skills, experience, and efforts of our senior management andcertain other key personnel. If, for any reason, one or more senior executives or key personnel were not toremain active in our company, our results of operations could be adversely affected.

If we do not successfully manage the transitions associated with our new CEO, it could have anadverse impact on our revenues, operations, or results of operations.

On January 12, 2009, we announced the appointment of our new President and CEO. Our success will bedependent upon his ability to gain proficiency in leading our Company, his ability to implement or adapt ourcorporate strategies and initiatives, and his ability to develop key professional relationships, includingrelationships with our employees, customers, and other key constituencies and business partners.

Our new CEO could make organizational changes, including changes to our management team and maymake future changes to our Company’s structure. It is important for us to manage successfully thesetransitions as our failure to do so could adversely affect our ability to compete effectively.

In addition, in 2009, we will incur additional expense associated with the compensation of both our newCEO and our former CEO and with restructuring costs and compensation related to our management team,even though there is no guarantee that we will successfully manage the transition of our new CEO.

If our PPM ratings service does not generate the revenues that we anticipate, or if our ability to earnsuch revenues is delayed for any reason, our financial results will suffer.

Commercialization of the PPM service is an essential component of our anticipated future growth, whichwe expect will result in increased revenues in the coming years.

Our financial results during 2009 and beyond will depend in substantial part on our success incommercializing the PPM ratings service and our ability to generate meaningful revenues from it. If ourcommercialization of the PPM service is further delayed, expected revenue increases will also be delayed andour financial results will be materially and negatively impacted. Factors that may affect the pace of thecommercialization of our PPM ratings service, and as a result, our future revenues and operating resultsinclude the following, some of which are beyond our control:

• increased government oversight or regulation;

• the acceptance of the PPM ratings service by broadcasters, advertisers and other users of our estimates;

• the impact of general economic conditions on our customers’ ability to pay increased license fees;

• the speed with which we can complete the MRC audit process, share the results of the audit with theMRC PPM audit committee, and disclose parallel “pre-currency” impact data in each local radiomarket;

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• technical difficulties or service interruptions that impair our ability to deliver the PPM ratings serviceon schedule; and

• our ability to obtain, in a timely manner, sufficient quantities of quality equipment and softwareproducts from third-party suppliers necessary to outfit our panelists.

We may be unsuccessful in obtaining and maintaining MRC accreditation for our local market radioratings services, and we may be required to expend significant resources in order to obtain and maintainMRC accreditation for our local market PPM radio ratings services, any of which could adversely impactour business.

The MRC has accredited our Diary-based radio ratings service and several of our other services includingour RADAR service, which currently incorporates radio exposure information from participants in both ourDiary service and our PPM service, which the MRC has not accredited in all markets. If the MRC elected torevoke accreditation of any currently accredited service, it could adversely impact our business.

The MRC has accredited the monthly quarter-hour audience estimates provided by our PPM radio ratingsservice in the Houston — Galveston and Riverside — San Bernardino local markets only. In January 2008,the MRC denied accreditation of the Philadelphia and New York local market PPM ratings services. TheMRC has reviewed the audit results but taken no formal action on our applications for accreditation of thePPM service in the other PPM Markets in which we have commercialized the PPM service. If the effortsrequired to obtain and maintain MRC accreditation in the PPM Markets are substantially in excess of ourcurrent expectations, or if we are required to make significant changes with respect to methodology and panelcomposition and management in order to establish that the service meets the MRC accreditation standards inany current or future PPM Market, or for any other reason, we may be required to make expenditures, theamount of which could be material.

Criticism of our audience measurement service by various governmental entities, industry groups, andmarket segments could adversely impact our business.

Due to the high-profile nature of our services in the media and marketing information service industry,we could become the target of additional government regulation, legislation, litigation, activism, or negativepublic relations efforts by various industry groups and market segments. During 2008, critics of our PPMradio ratings service urged the FCC to investigate the service and several state and municipal governmentalentities inquired about the service. We believe that any of the foregoing criticism of our methodology ornegative perception of the quality of our research could further delay the PPM commercialization ornegatively impact industry confidence in the ratings we produce, any of which could require us to makeexpenditures substantially in excess of our current expectations in an attempt to maintain such confidence.

We have limited experience designing, recruiting and maintaining PPM panels. If we are unable todesign, recruit, and maintain PPM panels that appropriately balance research quality, panel size andoperational cost, our financial results will suffer.

The commercial viability of the PPM service and, potentially, other new business initiatives, aredependent on our ability to design, recruit, and maintain panels of persons to carry our Portable PeopleMeters, and to ensure appropriate panel composition to accommodate a broad variety of media researchservices. Our research methodologies require us to maintain panels of reasonably sufficient size andreasonably representative demographic composition. Our research methodologies also require our panelists tocomply with certain standards, such as carrying the meter for a minimum number of hours each day anddocking the meter daily, in order for us to use the data collected by the meter in estimating ratings.

Through the end of 2008, we have commercialized the PPM service in 14 PPM Markets. During 2009,we intend to commercialize the service in 19 additional PPM Markets. The increasing number of panels andpanelists may prove to be more complex and resource intensive for us to manage than we currently anticipate.

Participation in a PPM panel requires panelist households to make a longer term commitment thanparticipation in our Diary-based ratings service. Designing, recruiting, and maintaining PPM panels aresubstantially different than recruiting participants for our Diary-based ratings service. We have limitedexperience in operating such PPM panels and we may encounter unanticipated difficulties as we attempt to doso. Without historical benchmarks on key sample performance metrics, it will be challenging for us tomaintain the appropriate balance of

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research quality, panel size, and operational costs. Designing, recruiting, and maintaining such panels mayalso cause us to incur expenses substantially in excess of our current expectations.

If we are unable to successfully design, recruit and maintain such PPM panels, or if we are required toincur expenses substantially in excess of our current expectations in order to do so, it could adversely impactour ability to obtain and/or maintain MRC accreditation of our PPM service or otherwise adversely impactour business, financial position and operating results.

We expect to invest in the continued development and commercialization of our PPM ratings service,which may not ultimately be successfully commercialized. The costs associated with commercialization ofthis service will adversely impact our operating results and operating margins over the commercializationperiod.

The continuing commercialization of the PPM ratings service requires and will continue to requiresignificant capital resources and a substantial financial investment over the next several years. We currentlyestimate that the 2009 annual capital expenditures associated with PPM ratings service commercialization foraudience ratings measurement will be approximately $25.0 million. We also anticipate that through thecommercialization period, our results of operations and operating margins will be materially and negativelyimpacted as a result of the commercialization of our PPM ratings service.

The amount of capital required for deployment of our PPM ratings service and the impact on our resultsof operations will be greatly affected by the speed of the commercialization. Commercialization of our PPMratings service has had a material negative impact on our results of operations and operating margins. Weexpect to continue to invest in quality and service enhancements including increasing cell phone-onlysampling designed to maintain and improve our services which could have a negative impact on margins.There can be no guarantees that we will be able to restore operating margins to historical levels.

The success of commercialization of the PPM ratings service is dependent on a single manufacturerwho produces the PPM equipment according to our proprietary design as well as on those whomanufacture parts.

We will need to purchase equipment used in the PPM ratings service and we are currently dependent onone manufacturer to produce our PPM equipment. The equipment must be produced by the manufacturer in atimely manner, in the quantities needed and with the quality necessary to function appropriately in the market.Certain specialized parts used in the PPM equipment may impact the manufacturing and the timing of thedelivery of the equipment to us. We may become liable for design or manufacturing defects in the PPMequipment. In addition, if countries and states enact additional regulations limiting certain materials, we maybe required to redesign some of our PPM components to meet these regulations. A redesign process, whetheras a result of changed environmental regulations or our ability to obtain quality parts, may impact themanufacturing and timing of the delivery of the equipment to us. Our failure to obtain, in a timely manner,sufficient quantities of quality equipment to meet our needs could adversely impact the commercialdeployment of the PPM ratings service and therefore could adversely impact our operating results.

Technological change may render our services obsolete and it may be difficult for us to develop newservices or enhance existing ones.

We expect that the market for our services will be characterized by changing technology, evolvingindustry standards, frequent new service announcements and enhancements and changing customer demands.The introduction of new services incorporating new technologies and the emergence of new industrystandards could render existing services obsolete and/or challenge current accepted levels of precision of datameasurement. Additionally, advertising-supported media may be challenged by new technologies that couldhave an effect on the advertising industry, our customers, and our services. Our continued success will dependon our ability to adapt to changing technologies and to improve the performance, features, and reliability ofour services in response to changing customer and industry demands. We may experience difficulties thatcould delay or prevent the successful design, development, testing, introduction, or marketing of our services.Our new services, such as our PPM service, or enhancements to our existing services, may not adequatelymeet the requirements of our current and prospective customers or achieve any degree of significant marketacceptance. Failure to successfully adapt to changing technologies and customer demands, either through thedevelopment and marketing of new services, or through

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enhancements to our existing services, our business, financial position, and results of operations could beadversely affected.

We are dependent on our proprietary software and hardware systems for current and future businessrequirements. Significant delays in the completion of these systems, cost overages and/or inadequateperformance or failure of the systems once completed could adversely impact our business, financialposition and operating results.

We are becoming increasingly reliant on our proprietary software and hardware systems. We are engagedin an effort to upgrade, enhance, and, where necessary, replace our internal processing software for Diary andPPM, and our client software. Significant delays in the completion of these systems, or cost overages, couldhave an adverse impact on our business and inadequate performance or failure of these systems, oncecompleted, could adversely impact our business, financial position and operating results.

If our proprietary systems such as PPM devices, media encoders, or related firmware inadequatelyperform or fail, our ability to provide our PPM services could be significantly impacted and such impactcould materially and adversely impact our business, financial position and operating results.

Defects or disruptions in our Internet-based software services could diminish demand for our servicesand subject us to substantial liability.

Because our Internet-based software services are complex and we have deployed a variety of newcomputer hardware and software, both developed in-house and acquired from third party vendors, ourservices may have errors or defects that could result in unanticipated downtime for our subscribers and harmour reputation and our business. Internet-based software services may contain undetected errors when firstintroduced or enhancements are released. We have from time to time found defects in our software servicesand new errors in our existing software services may be detected in the future. In addition, our customers mayuse our software services in unanticipated ways that may cause a disruption in software service for othercustomers attempting to access our data. Because the software services we provide are important to ourcustomers’ businesses, any errors, defects, disruptions in software service or other performance problems withour software services could hurt our reputation and may damage our customers’ businesses. If that occurs,customers could elect not to renew, or delay or withhold payment to us, we could lose future sales, orcustomers may make claims against us, which could adversely impact our business, financial position, andresults of operations.

Interruptions, delays, or unreliability in the delivery of our services could adversely affect ourreputation and reduce our revenues.

Our customers currently access our services via the Internet. As we continue to add capacity in ourexisting and future data centers, we may move or transfer data. We currently rely on a third party to providedisaster recovery data services. Despite precautions taken during this process, any unsuccessful data transfersmay impair the delivery of our services. Further, any damage to, or failure of, our systems generally couldresult in interruptions in our service. Interruptions in our service may reduce our revenue, cause us to issuecredits or pay penalties, cause customers to terminate their subscriptions and adversely affect our renewalrates and our ability to attract new customers. Our business may be further harmed if customers and potentialcustomers believe our services are unreliable.

We expect to continue to invest in the improvement of our Diary ratings service. The costs associatedwith such investment will adversely impact our operating results over the commercialization period.

During 2008, we announced significant enhancements to our Diary service and substantial acceleration ofour existing initiatives. Significant enhancements and acceleration of our cell phone-only sampling initiativeswill require a substantial investment by the Company. Our contracts do not allow us to pass the costs of theseinvestments along to our customers. Accordingly, our margins will be adversely impacted by increased coststo provide our services, without an offsetting increase in revenues. We may seek to extend the term of someof our contracts to support the required investments. If we are not able to recoup the costs of our investmentsin our Diary service our financial results will be negatively impacted.

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The loss of any of our key customers would significantly reduce our revenue and operating results.

In 2008, Clear Channel represented approximately 18 percent of our revenue. Several other largecustomers represented significant portions of our 2008 revenue.

The agreement between Clear Channel and us for services in markets outside of the PPM Markets inwhich Clear Channel operates, as well as the national RADAR service, expired on December 31, 2008. Theseservices accounted for approximately seven percent of our 2008 revenue. We are currently in negotiationswith Clear Channel regarding new license agreements for all Clear Channel stations whose contracts haveexpired.

We cannot provide any assurances that we could replace the revenue that would be lost if any of our keycustomers failed to renew all or part of their agreements with us. The loss of any of our key customers wouldmaterially and adversely impact our business, financial position and operating results.

Ownership shifts in the radio broadcasting industry may put pressure on the pricing of ourquantitative radio audience measurement service and related software sales, thereby leading to decreasedearnings growth.

Ownership shifts in the radio broadcasting industry could put pressure on the pricing of our quantitativeradio audience measurement service and related software sales, from which we derive a substantial portion ofour total revenue. We price our quantitative radio audience measurement service and related softwareapplications on a per radio station, per service or per product basis, negotiating licenses and pricing with theowner of each radio station or group of radio stations. If we agree to make substantial price concessions, itcould adversely impact our business, financial position and operating results.

Our agreements with our customers are not exclusive and contain no renewal obligations. The failureof our customers to renew all or part of their contracts could have an adverse impact on our business,financial position and operating results.

Our customer agreements do not prohibit our customers from entering into agreements with any othercompeting service provider, and once the term of the agreement (usually one to seven years) expires, there isgenerally no automatic renewal feature in our customer contracts. Because our Diary-based Radio MarketReport is delivered on a quarterly or semiannual basis and our PPM-based ratings are delivered on a monthlybasis, it is common for our customer contracts to expire before renewal negotiations are concluded. Therefore,there may be significant uncertainty as to whether a particular customer will renew all or part of its contractand, if so, the particular terms of such renewal. If a customer owning stations in a significant number ofmarkets does not renew its contracts, this would have an adverse impact on our business, financial positionand operating results.

Long-term agreements with our customers limit our ability to increase the prices we charge for ourservices if our costs increase.

We generally enter into long-term contracts with our customers, including contracts for delivery of ourradio audience measurement services. The term of these customer agreements usually ranges from one toseven years. Over the term of these agreements our costs of providing services may increase, or increase atrates faster than our historical experience. Although our customer contracts generally provide for annual priceincreases, there can be no assurance that these contractual revenue increases will exceed any increased cost ofproviding our services, which could have an adverse impact on our business, financial position and operatingresults.

The success of our radio audience measurement business depends on diarykeepers who record theirlistening habits in diaries and return these diaries to us and panelists who carry our PPM meters. Ourfailure to collect these diaries and to recruit compliant participants could adversely impact our business.

We use listener diaries and electronic data gathered from participants who agree to carry our PPM metersto gather radio listening data from sample households in the United States local markets for which wecurrently provide radio ratings. A representative sample of the population in each local market is randomlyselected for each survey. This sample is recruited by telephone to keep a diary of their radio listening for oneweek or to carry a PPM meter for a period of up to two years. To encourage their participation in our surveys,we give participants a cash incentive. It is becoming increasingly difficult and more costly to obtain consentfrom the phone sample to participate in the surveys, especially among younger demographic groups. We mustachieve response rates

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sufficient to maintain confidence in our ratings, the support of the industry and accreditation by the MRC.Our failure to successfully recruit compliant survey participants could adversely impact our business,financial position and operating results. Our survey participants do so, on a voluntary basis only, and therecan be no assurance that they will continue to do so.

Data collection costs are increasing faster than our contracted revenue growth rates and if we areunable to become more efficient in our data collection and our management of associated costs, ouroperating margins and results of operations could suffer.

Our success will depend on our ability to reach and recruit participants and to achieve response ratessufficient to maintain our radio audience measurement services. As consumers adopt modes oftelecommunication other than telephone landlines, such as cell phones and cable or Internet calling, it isbecoming increasingly difficult for us to reach and recruit participants. Recent government estimates haveindicated that a percentage of cell phone-only households have been increasing nationally. It has been ourexperience that recruiting cell phone-only households is significantly more expensive than recruiting landlinehouseholds. We have announced initiatives to increase the percentage of our cell phone-only households inour Diary and PPM samples, which could adversely impact our operating margins and results of operations.

We intend to use an address based sampling methodology to recruit cell phone-only households. Wecurrently acquire the sample from a single vendor. As our address-based sample volume increases, it may bemore difficult for our vendor and more expensive for us to acquire the necessary sample.

Our ability to recruit participants for our surveys could be adversely impacted by governmentalregulations.

We believe there is an increasing concern among the American public regarding privacy issues. Federaland state regulations restrict telemarketing to individuals who request to be included on a do-not-call list.Currently, these regulations do not apply to survey research. If these laws and regulations are extended toinclude survey research, our ability to recruit participants for our surveys could be adversely impacted. Weare evaluating alternatives to our current methodology, including using panels for our surveys andrecontacting previous consenters. In addition, federal regulations prohibit calls made by autodialers towireless lines without consent from the subscriber. Because consumers are able to transfer a wireless numberto a landline carrier or a landline number to a wireless carrier, it can be difficult for us to identify wirelessnumbers in advance of placing an autodialed call. We are using the services of a third-party supplier thattracks wireless numbers to help identify wireless numbers in our telephone sample, but there can be noassurance that all transfers of numbers are captured. If we were for any reason unable to use auto dialers inthe future, we believe it would be more expensive to recruit panelists.

The license of enhanced access to our respondent-level data to third-party data processors andcustomers could adversely impact the revenue derived from our existing software licenses.

We license our respondent-level database and the related software we use to calculate our audienceestimates to certain customers that allow enhanced access to our respondent-level database. Previously,limited access to our respondent-level data was available only to those customers who licensed certainsoftware services directly from us. As we license our enhanced access to the respondent-level data andsoftware, sales of our existing software services may be adversely impacted.

Our success will depend on our ability to protect our intellectual property rights and we incursubstantial expense to enforce our intellectual property rights which could adversely affect our business.

We believe that the success of our business will depend, in part, on:

• obtaining patent protection for our technology, proprietary methods, and services, in particular, ourPPM service;

• defending our patents once obtained;

• preserving our trade secrets;

• defending our copyrights for our data services and audience estimates; and

• operating without infringing upon patents and proprietary rights held by others.

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We rely on a combination of contractual provisions, confidentiality procedures and patent, copyright,trademark, service mark and trade secret laws to protect the proprietary aspects of our technology, data andestimates. Several patents related to our PPM service, which expire at various times beginning in 2012, whenviewed together, are of material importance to us. These legal measures afford only limited protection, andcompetitors may gain access to our intellectual property and proprietary information. Litigation may benecessary to enforce our intellectual property rights, to protect our trade secrets and to determine the validityand scope of our proprietary rights. We have been involved in litigation relating to the enforcement of thecopyrights covering our radio listening estimates. Although we have generally been successful in these cases,there can be no assurance that the copyright laws and other statutory and contractual arrangements wecurrently depend upon will provide us sufficient protection to prevent the use or misappropriation of ouraudience estimates, databases and technology in the future. Litigation, regardless of outcome, could result insubstantial expense and a significant diversion of resources with no assurance of success and could adverselyimpact our business, financial position and operating results.

Advertisers are pursuing increased accountability from the media industry for their return oninvestments made in media which could reduce demand for our services.

Advertisers may shift advertising expenditures away from media that they perceive as less accountable,such as radio. As a result, advertising agencies and radio stations may be less likely to purchase our mediainformation services, which could have an adverse impact on our business, financial position and operatingresults.

We rely on third parties to provide data and services in connection with our current business and wemay require additional third-party data and services to expand our business in the future, which, ifavailable, could adversely impact our business.

In the event that third-party data and services are unavailable for our use or are not available to us onfavorable terms, our business could be adversely impacted. Further, in order for us to build on our experiencein the radio audience measurement industry and expand into measurement for other types of media, we mayneed to enter into agreements with third parties. Our inability to enter into these agreements with third partiesat all or upon favorable terms, when necessary, could adversely impact our growth and business.

Long-term disruptions in the mail, telecommunication infrastructure and/or air service couldadversely impact our business.

Our business is dependent on the use of the mail, telecommunication infrastructure and air service.Long-term disruptions in one or more of these services, which could be caused by events such as naturaldisasters, the outbreak of war, the escalation of hostilities and/or acts of terrorism could adversely impact ourbusiness, financial position and operating results. For example, we incurred losses related to the impact ofHurricane Ike. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results ofOperations — Impact of Hurricane Ike” for more information.

If our subsidiary in India is not successful, we may incur losses.

The success of our subsidiary in India may be dependent on our ability to attract and retain talentedsoftware developers. The market for highly skilled workers in software development in India is becomingincreasingly more competitive. If we are unable to attract and retain employees, we may need to shut downthe facility, and this could adversely impact our financial position and operating results.

If lump- sum payments made to retiring participants in our defined benefit pension plans exceed thetotal of the service cost and the interest cost in a calendar year, we would need to recognize the pro rataportion of unrecognized actuarial gain or loss equal to the percentage reduction of the projected benefitobligation, which may result in an adjustment that could materially reduce operating results.

Our defined benefit pension plans allow participants to receive a lump-sum distribution for benefitsearned in lieu of annuity payments when they retire from Arbitron. Statement of Financial AccountingStandards No. 88, “Employers’ Accounting for Settlements and Curtailments of Defined Benefit PensionPlans and for Termination Benefits,” requires that if the lump-sum distributions made for a calendar yearexceed the total of the service cost and interest cost, we must recognize for that year’s results of operationsthe pro rata portion of unrecognized

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actuarial gain or loss equal to the percentage reduction of the projected benefit obligation. Lump-sumpayments in our qualified pension plan exceeded the total of the service cost and the interest cost in 2008.This resulted in an expense of $1.7 million for the year ended December 31, 2008. If lump-sum payments inany of our pension plans again exceed the total of the service cost and the interest cost, the adjustment couldmaterially reduce operating results. See Note 14 in the Notes to Consolidated Financial Statements containedin this Annual Report on Form 10-K for more information regarding our retirement plans.

We intend to begin transitioning operations and production of our RADAR service from our offices inNew Jersey to our headquarters in Maryland during 2009.

If any of the key employees instrumental in the production of the service leave or we are otherwiseunable to replicate the service in Maryland, it could adversely impact our results of operations.

Risk Factors Relating to Our Indebtedness

Our credit facility contains restrictive covenants that limit our financial flexibility, which could adversely affect our ability toconduct our business.

On December 20, 2006, we entered into a five-year, $150.0 million revolving credit facility that contains financial terms,covenants and operating restrictions that could restrict our financial flexibility and could adversely impact our ability to conduct ourbusiness. These include:

• the requirement that we maintain certain leverage and coverage ratios; and

• restrictions on our ability to sell certain assets, incur additional indebtedness and grant or incur liens on our assets.

These restrictions may limit or prohibit our ability to raise additional debt capital when needed or could prevent us frominvesting in other growth initiatives. Our ability to comply with these financial requirements and other restrictions may be affected byevents beyond our control, and our inability to comply with them could result in a default under the terms of the agreement.

If a default occurs, either because we are unable to generate sufficient cash flow to service the debt or because we fail to complywith one or more of the restrictive covenants, the lenders could elect to declare all of the then-outstanding borrowings, as well asaccrued interest and fees, to be immediately due and payable. In addition, a default may result in the application of higher rates ofinterest on the amounts due, resulting in higher interest expense being incurred by us.

Further, as discussed above in “Risk Factors Relating to Our Business and the Industry in Which We Operate,” continued orintensified disruption in the credit markets may adversely affect our ability to draw on our credit facility, which could adversely affectour business.

Risk Factors Relating to Owning Our Common Stock

Changes in market conditions, or sales of our common stock, could adversely impact the market price of our common stock.

The market price of our common stock depends on various financial and market conditions, which may change from time to timeand which are outside of our control.

Sales of a substantial number of shares of our common stock, or the perception that such sales could occur, also could adverselyimpact prevailing market prices for our common stock. In addition to the possibility that we may sell shares of our common stock in apublic offering at any time, we also may issue shares of common stock in connection with grants of restricted stock or upon exerciseof stock options that we grant to our directors, officers and employees. All of these shares will be available for sale in the publicmarkets from time to time.

It may be difficult for a third party to acquire us, which could depress the stock price of our common stock.

Delaware corporate law and our Amended and Restated Certificate of Incorporation and Bylaws contain provisions that couldhave the effect of delaying, deferring or preventing a change in control of Arbitron or the

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removal of existing management or directors and, as a result, could prevent our stockholders from being paida premium for their common stock over the then-prevailing market price. These provisions could also limitthe price that investors might be willing to pay in the future for shares of our common stock. These include:

• a stockholders’ rights plan, which likely will limit, through November 21, 2012, the ability of a thirdparty to acquire a substantial amount of our common stock without prior approval by the Board ofDirectors;

• restriction from engaging in a “business combination” with an “interested stockholder” for a period ofthree years after the date of the transaction in which the person became an interested stockholder underSection 203 of the Delaware General Corporation Law;

• authorization to issue one or more classes of preferred stock that can be created and issued by theBoard of Directors without prior stockholder approval, with rights senior to common stockholders;

• advance notice requirements for the submission by stockholders of nominations for election to theBoard of Directors and for proposing matters that can be acted upon by stockholders at a meeting; and

• requirement of a supermajority vote of 80 percent of the stockholders to exercise the stockholders’right to amend the Bylaws.

Our Amended and Restated Certificate of Incorporation also contains the following provisions, whichcould prevent transactions that are in the best interest of stockholders:

• requirement of a supermajority vote of two-thirds of the stockholders to approve some mergers andother business combinations; and

• restriction from engaging in a “business combination” with a “controlling person” unless either amodified supermajority vote is received or the business combination will result in the termination ofownership of all shares of our common stock and the receipt of consideration equal to at least “fairmarket value.”

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our headquarters is located at 9705 Patuxent Woods Drive, Columbia, Maryland. Our New York Cityoffice serves as our home base for sales and marketing, while our executive, survey research, technology anddata collection/production operations are located in our Columbia, Maryland, facilities. In addition, we havefive regional sales offices located in the metropolitan areas of Atlanta, Georgia; Washington, DC/Baltimore,Maryland; Chicago, Illinois; Dallas, Texas; and Los Angeles, California; and operations offices in Cranford,New Jersey; Dallas, Texas; Birmingham, Alabama; and Kochi, India. We conduct all of our operations inleased facilities. Most of these leases contain renewal options and require payments for taxes, insurance andmaintenance in addition to base rental payments. We believe that our facilities are sufficient for their intendedpurposes and are adequately maintained.

ITEM 3. LEGAL PROCEEDINGS

On October 10, 2006, we filed a patent infringement lawsuit against International Demographics, Inc.(D/B/A The Media Audit), Ipsos Group S.A., Ipsos ASI, Inc., Ipsos America, Inc. aka Ipsos North Americaand Ipsos Media (collectively the “Ipsos Entities”) in the United States District Court for the Eastern Districtof Texas. The complaints alleged that International Demographics and the Ipsos Entities were infringing threepatents that we own, United States Patents No. 5,787,334, No. 5,574,962 and No. 5,483,276, each relating toelectronic audience measurement technology (collectively, the “Arbitron Patents”). On October 23, 2008, weentered into a settlement agreement with International Demographics in which International Demographicsacknowledged that the Arbitron Patents are valid, enforceable, and not otherwise subject to any equitabledefenses. International Demographics further agreed that it would not make, use, sell, offer for sale, test,demonstrate, distribute or otherwise engage in activities that would potentially infringe the Arbitron Patents.On January 13, 2009, we entered into a settlement

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agreement with the Ipsos Entities, dismissing our cause of action against them without prejudice. Inconnection with the settlement agreement, the Ipsos Entities agreed to immediately suspend any and allefforts in the United States related to commercialization, testing, and/or marketing of a portable electronicmeasurement system with regard to any and all forms of media until no sooner than January 13, 2012.

On April 30, 2008, Plumbers and Pipefitters Local Union No. 630 Pension-Annuity Trust Fund filed asecurities class action lawsuit in the United States District Court for the Southern District of New York onbehalf of a purported Class of all purchasers of Arbitron common stock between July 19, 2007, andNovember 26, 2007. The plaintiff asserts that Arbitron, Stephen B. Morris (our Chairman and formerPresident and Chief Executive Officer), and Sean R. Creamer (our Executive Vice President, Finance andPlanning & Chief Financial Officer) violated federal securities laws. The plaintiff alleges misrepresentationsand omissions relating, among other things, to the delay in commercialization of our PPM radio ratingsservice in November 2007, as well as stock sales during the period by company insiders who were not namedas defendants and Messrs. Morris and Creamer. The plaintiff seeks class certification, compensatory damagesplus interest and attorneys’ fees, among other remedies. On September 22, 2008 the plaintiff filed anAmended Class Action Complaint. On November 25, 2008, Arbitron, Mr. Morris, and Mr. Creamer each filedMotions to Dismiss the Amended Class Action Complaint. On January 23, 2009, the plaintiff filed aMemorandum of Law in Opposition to Defendants’ Motions to Dismiss the Amended Class ActionComplaint. On February 23, 2009 Arbitron, Mr. Morris, and Mr. Creamer filed replies in support of theirMotions to Dismiss.

On or about June 13, 2008, a purported stockholder derivative lawsuit, Pace v. Morris, et al., was filedagainst Arbitron, as a nominal defendant, each of our directors, and certain of our executive officers in theSupreme Court of the State of New York for New York County. The derivative lawsuit is based on essentiallythe same substantive allegations as the securities class action lawsuit. The derivative lawsuit asserts claimsagainst the defendants for misappropriation of information, breach of fiduciary duty, abuse of control, andunjust enrichment. The derivative plaintiff seeks equitable and/or injunctive relief, restitution anddisgorgement of profits, plus attorneys’ fees and costs, among other remedies.

The Company intends to defend itself and its interests vigorously against these allegations.

New York

On October 6, 2008, we commenced a civil action in the United States District Court for the SouthernDistrict of New York, seeking a declaratory judgment and injunctive relief against the New York AttorneyGeneral to prevent any attempt by the New York Attorney General to restrain our publication of our PPMlistening estimates (the “New York Federal Action”). On October 27, 2008, the United States District Courtissued an order dismissing this civil action and on October 31, 2008, we filed a notice of appeal of the DistrictCourt’s order to the United States Court of Appeals for the Second Circuit.

On October 10, 2008, the State of New York commenced a civil action against the Company in theSupreme Court of New York for New York County alleging false advertising and deceptive businesspractices in violation of New York consumer protection and civil rights laws relating to the marketing andcommercialization in New York of our PPM radio ratings service (the “New York State Action”). The lawsuitsought civil penalties and an order preventing us from continuing to publish our PPM listening estimates inNew York.

On January 7, 2009, we joined in a Stipulated Order on Consent (the “New York Settlement”) inconnection with the New York State Action. The New York Settlement, when fully executed and performedby the Company to the reasonable expectation of the New York Attorney General, will resolve all claimsagainst the Company that were alleged by the New York Attorney General in the New York State Action. Inconnection with the New York Settlement, we also agreed to dismiss the New York Federal Action.

In connection with the New York Settlement, we have agreed to achieve specified metrics concerningtelephone number-based, address-based, and cell phone-only sampling, and to take reasonable measuresdesigned to achieve specified metrics concerning sample performance indicator and In-Tab rates (the“Specified Metrics”) in our New York local market PPM radio ratings service by agreed dates. We also willmake certain disclosures to users and potential users of our audience estimates, report to the New YorkAttorney General on our performance

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against the Specified Metrics, and make all reasonable efforts in good faith to obtain and retain accreditationby the MRC of our New York local market PPM ratings service. If, by October 15, 2009, we have notobtained accreditation from the MRC of our New York local market PPM radio ratings service and also havefailed to achieve all of the Specified Metrics, the New York Attorney General reserves the right to rescind theNew York Settlement and reinstitute litigation against us for the allegations made in the civil action.

We have paid $200,000 to the New York Attorney General in settlement of the claims and $60,000 forinvestigative costs and expenses.

On October 9, 2008, the Company and certain of our executive officers received subpoenas from the NewYork Attorney General regarding, among other things, the commercialization of the PPM radio ratings servicein New York and purchases and sales of Arbitron securities by those executive officers. The New YorkSettlement does not affect these subpoenas.

New Jersey

On October 10, 2008, we commenced a civil action in the United States District Court for the District ofNew Jersey, seeking a declaratory judgment and injunctive relief against the New Jersey Attorney General toprevent any attempt by the New Jersey Attorney General to restrain our publication of our PPM listeningestimates (the “New Jersey Federal Action”).

On October 10, 2008, the State of New Jersey commenced a civil action against us in the Superior Courtof New Jersey for Middlesex County, alleging violations of New Jersey consumer fraud and civil rights lawsrelating to the marketing and commercialization in New Jersey of our PPM radio ratings service (the “NewJersey State Action”). The lawsuit sought civil penalties and an order preventing us from continuing topublish our PPM listening estimates in New Jersey.

On January 7, 2009, we joined in a Final Consent Judgment (the “New Jersey Settlement”) in connectionthe “New Jersey State Action”. The New Jersey Settlement, when fully executed and performed by theCompany to the reasonable expectation of the New Jersey Attorney General, will resolve all claims againstthe Company that were alleged by the New Jersey Attorney General in the New Jersey State Action. Inconnection with the New Jersey Settlement, we also agreed to dismiss the New Jersey Federal Action. As partof the New Jersey Settlement, the Company denies any liability or wrongdoing.

In connection with the New Jersey Settlement, we have agreed to achieve, and in certain circumstances totake reasonable measures designed to achieve, Specified Metrics in our New York and Philadelphia localmarket PPM radio ratings services by agreed dates. We also will make certain disclosures to users andpotential users of our audience estimates, report to the New Jersey Attorney General on our performanceagainst the Specified Metrics, and make all reasonable efforts in good faith to obtain and retain accreditationby the MRC of our New York and Philadelphia local market PPM ratings services. If, by December 31, 2009,we have not obtained accreditation from the MRC of either our New York and Philadelphia local market PPMradio ratings service and also have failed to achieve all of the Specified Metrics, the New Jersey AttorneyGeneral reserves the right to rescind the New Jersey Settlement and reinstitute litigation against us for theallegations made in the New Jersey Action.

The Company has paid $130,000 to the New Jersey Attorney General for investigative costs andexpenses.

Jointly in connection with the New York Settlement and the New Jersey Settlement the Company alsowill create and fund a non-response bias study in the New York market, fund an advertising campaignpromoting minority radio in major trade journals, and pay a single lump sum of $100,000 to the NationalAssociation of Black Owned Broadcasters (“NABOB”) for a joint radio project between NABOB and theSpanish Radio Association to support minority radio.

Maryland

On February 6, 2009 we announced that we had reached an agreement with the Office of the AttorneyGeneral of Maryland regarding our PPM radio ratings services in the Washington, DC and Baltimore localmarkets. In connection with the Washington, DC local market we agreed to achieve, and in certaincircumstances take

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reasonable measures designed to achieve Specified Metrics by agreed dates. We will also make certaindisclosures to users and potential users of our audience estimates and take all reasonable efforts to obtainaccreditation by the MRC of our Washington, DC local market PPM service. We have agreed to usecomparable methods and comply with comparable terms in connection with the commercialization of thePPM service in the Baltimore local market that reflect the different demographic characteristics of that localmarket and the timetable for commercializing the PPM service in the Baltimore local market. Arbitron andthe Maryland Attorney General will agree to the specific comparable terms at a later date.

We are involved from time to time in a number of judicial and administrative proceedings consideredordinary with respect to the nature of our current and past operations, including employment-related disputes,contract disputes, government proceedings, customer disputes, and tort claims. In some proceedings, theclaimant seeks damages as well as other relief, which, if granted, would require substantial expenditures onour part. Some of these matters raise difficult and complex factual and legal issues, and are subject to manyuncertainties, including, but not limited to, the facts and circumstances of each particular action, and thejurisdiction, forum and law under which each action is pending. Because of this complexity, final dispositionof some of these proceedings may not occur for several years. As such, we are not always able to estimate theamount of our possible future liabilities. There can be no certainty that we will not ultimately incur charges inexcess of present or future established accruals or insurance coverage. Although occasional adverse decisions(or settlements) may occur, we believe that the likelihood that final disposition of these proceedings will,considering the merits of the claims, have a material adverse impact on our financial position or results ofoperations is remote.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

We did not submit any matters to a vote of our stockholders during the fourth quarter of 2008.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDERMATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is listed on the New York Stock Exchange (“NYSE”) under the symbol “ARB.” As ofFebruary 23, 2009, there were 26,433,016 shares outstanding and 6,056 stockholders of record of ourcommon stock.

The following table sets forth the high and low sale prices of our common stock as reported on the NYSEComposite Tape and the dividends declared per share of our common stock for each quarterly period for thepast two years ended December 31, 2008 and 2007.

2008 1Q 2Q 3Q 4Q Full Year

High $ 46.24 $ 51.50 $ 50.87 $ 44.69 $ 51.50 Low $ 38.49 $ 43.15 $ 43.98 $ 9.90 $ 9.90 Dividend $ 0.10 $ 0.10 $ 0.10 $ 0.10 $ 0.40

2007 1Q 2Q 3Q 4Q Full Year

High $ 48.76 $ 53.42 $ 55.63 $ 52.15 $ 55.63 Low $ 42.45 $ 46.69 $ 44.90 $ 34.81 $ 34.81 Dividend $ 0.10 $ 0.10 $ 0.10 $ 0.10 $ 0.40

The transfer agent and registrar for our common stock is The Bank of New York.

On November 16, 2006, the Company announced that its Board of Directors authorized a program torepurchase up to $100.0 million of its outstanding common stock through either periodic open-market orprivate transactions at then-prevailing market prices over a period of two years through November 2008. Asof October 19, 2007, the program was completed with 2,093,500 shares being repurchased for an aggregatepurchase price of approximately $100.0 million.

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On November 14, 2007, our Board of Directors authorized a program to repurchase up to $200.0 millionin shares of our outstanding common stock through either periodic open-market or private transactions atthen-prevailing market prices over a period of up to two years through November 14, 2009. As ofFebruary 23, 2009, 2,247,000 shares of outstanding common stock had been repurchased under this programfor $100.0 million.

Arbitron Purchases of Equity Securities

Total Number Maximum Dollar Value Total Number of Average Price of Shares Purchased of Shares That May Shares Paid as Part of Publicly Yet Be PurchasedPeriod Purchased Per Share Announced Program Under the Program

October 1 - December 31 — $ — — $ 100,001,436

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ITEM 6. SELECTED FINANCIAL DATA

The selected financial data set forth below should be read together with the information under theheading “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”and Arbitron’s consolidated financial statements and related notes included in this Annual Report onForm 10-K. Our statements of income for the years ended December 31, 2008, 2007, and 2006 and balancesheet data as of December 31, 2008, and 2007 set forth below are derived from audited consolidated financialstatements included elsewhere in this Annual Report on Form 10-K. The statement of income data for theyear ended December 31, 2004 and 2005, and balance sheet data as of December 31, 2006, 2005 and 2004 arederived from audited consolidated financial statements of Arbitron not included in this Annual Report onForm 10-K.

As of and for the Years Ended December 31, 2008 2007 2006 2005 2004 (In thousands, except per share data)

Statement of Income Data Revenue $ 368,824 $ 338,469 $ 319,335 $ 300,368 $ 285,963 Costs and expenses 312,359 279,187 243,386 206,718 195,254

Operating income 56,465 59,282 75,949 93,650 90,709 Equity in net income of affiliates 6,677 4,057 7,748 7,829 7,552

Income from continuing operations beforeinterest and income tax expense 63,142 63,339 83,697 101,479 98,261

Interest (income) expense, net 1,593 (1,453) 3,092 971 6,897

Income from continuing operations beforeincome tax expense 61,549 64,792 80,605 100,508 91,364

Income tax expense 24,330 24,288 30,259 33,218 30,966

Income from continuing operations 37,219 40,504 50,346 67,290 60,398 Income (loss) from discontinued operations, net

of taxes (39) (324) 312 18 167

Net income $ 37,180 $ 40,180 $ 50,658 $ 67,308 $ 60,565

Net Income Per Weighted Average CommonShare

Basic Continuing operations $ 1.37 $ 1.38 $ 1.68 $ 2.16 $ 1.95 Discontinued operations (0.00) (0.01) 0.01 0.00 0.01

Net income per share, basic $ 1.37 $ 1.37 $ 1.69 $ 2.16 $ 1.96

Diluted Continuing operations $ 1.37 $ 1.37 $ 1.67 $ 2.14 $ 1.92 Discontinued operations (0.00) (0.01) 0.01 0.00 0.01

Net income per share, diluted $ 1.36 $ 1.35 $ 1.68 $ 2.14 $ 1.92

Cash dividends declared per share $ 0.40 $ 0.40 $ 0.40 $ 0.40 $ — Weighted average common shares used in

calculations Basic 27,094 29,399 29,937 31,179 30,972 Diluted 27,259 29,665 30,086 31,500 31,471

Balance Sheet Data Current assets $ 73,845 $ 68,618 $ 105,545 $ 160,926 $ 120,161 Total assets 199,597 180,543 210,320 254,708 199,949 Long-term debt, including the short-term

portion thereof 85,000 12,000 — 50,000 50,000 Stockholders’ equity (deficit) $ (14,495) $ 48,200 $ 89,256 $ 96,182 $ 49,208 Share-based Compensation Data Share-based compensation expense $ 8,415 $ 6,532 $ 6,545 $ 426 $ 188

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Certain per share data amounts may not total due to rounding.

We adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123R,Share-Based Payments (“SFAS No. 123R”) as of January 1, 2006. Share-based awards were previouslyaccounted for under Accounting Principles Board (“APB”) opinion No. 25, Accounting for Stock Issued toEmployees (“APB No. 25”). See Note 15 to the Notes to the Consolidated Financial Statements for furtherdiscussion and analysis.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS

The following discussion should be read in conjunction with our consolidated financial statements andthe notes thereto that follow in this Annual Report on Form 10-K.

Overview

Historically, our quantitative radio ratings services and related software have accounted for a substantialmajority of our revenue. Our radio audience ratings services represented 81 percent, 79 percent, and79 percent of our total revenue in 2008, 2007, and 2006, respectively. The related software revenuesrepresented nine percent of our total revenue in each of 2008, 2007, and 2006. While we expect that ourquantitative radio ratings services and related software will continue to account for the majority of ourrevenue for the foreseeable future, we are actively seeking opportunities to diversify our revenue base by,among other things, leveraging the investment we have made in our PPM technology by exploringapplications of the technology beyond our domestic radio ratings business.

We have entered into multi-year agreements with many of our largest customers, including agreementsfor PPM-based ratings as we commercialize the service in the PPM Markets. These agreements generallyprovide for a higher license fee for PPM-based ratings than we charge for Diary-based ratings. As a result, weexpect that the percentage of our revenues derived from our radio ratings and related software is likely toincrease as we commercialize the PPM service. Growth in revenue is expected for 2009, in particular, due to afull year impact of revenue recognized for the 12 PPM Markets commercialized in the latter half of 2008, aswell as the partial year impact related to the 19 PPM Markets scheduled for commercialization at varioustimes during 2009. The full revenue impact of the launch is also not expected to occur in the first year ofcommercialization for each of these markets because our customer contracts allow for phased-in pricingtoward the higher PPM service rate over a period of time.

The signing of Cumulus and Clear Channel with Nielsen for the radio ratings service in certain small tomid-sized markets is anticipated to adversely impact our expected revenue by approximately $5.0 million in2009 and thereafter the impact will be approximately $10.0 million per year on our expected annual revenue.Due to the current economic downturn’s impact on anticipated sales of discretionary services, as well as thehigh penetration of our current services in the radio station business, we expect that our future annual organicrate of revenue growth from our quantitative Diary-based radio ratings services will be slower than historicaltrends. Our net revenue growth for 2009 is expected to approximate the same percentage rate of growth asthat of 2008.

We depend on a limited number of key customers for our radio ratings services and related software. Forexample, in 2008, Clear Channel represented 18 percent of our total revenue. The agreement between ClearChannel and us for services in markets outside of the PPM Markets in which Clear Channel operates, as wellas the national RADAR service, expired on December 31, 2008. These services accounted for approximatelyseven percent of our 2008 revenue. We are currently in negotiations with Clear Channel regarding newlicense agreements for all Clear Channel stations whose contracts have expired. We cannot provide anyassurances that we could replace the revenue that would be lost if any of our key customers failed to reviewall or part of their agreements with us. The loss of any key customer would materially impact our business,financial position, and operating results. Because many of our largest customers own and operate radiostations in markets that we expect to transition to PPM measurement, we expect that our dependence on ourlargest customers will continue for the foreseeable future.

Commercialization of our PPM radio ratings service has and will continue to require a substantialfinancial investment. We believe our cash generated from operations, as well as access to our existing creditfacility, is sufficient to fund such requirements. We currently estimate that the capital expenditures associatedwith the PPM

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service in 2009 will be approximately $25.0 million. As we have anticipated, our efforts to support thecommercialization of our PPM ratings service have had a material negative impact on our results ofoperations. The amount of capital required for deployment of our PPM ratings service and the impact on ourresults of operations will be greatly affected by the speed of the commercialization. We anticipate that PPMcosts and expenses will accelerate six to nine months in advance of the commercialization of each PPMMarket as we build the panels. These costs are incremental to the costs associated with our Diary-basedratings service. Our cell phone-only household recruitment initiatives in both the Diary and PPM services willalso increase our cost of revenue. Growth in revenue and earnings per share remain our most importantfinancial goals. Protecting and supporting our existing customer base, ensuring our products and services arecompetitive from a price, quality and service perspective and generating financial returns are criticalcomponents to this overall goal. There can be no guarantees that we will be able to restore operating marginsto historical levels.

We continue to operate in a highly challenging business environment in the markets and industries weserve. Our future performance will be impacted by our ability to address a variety of challenges andopportunities in these markets and industries, including our ability to continue to maintain and improve ourPPM service, and manage increased costs for data collection, arising among other ways, from increasednumbers of cell phone-only households, which are more expensive to recruit than households with landlinephones. We will also seek to pursue MRC accreditation in all of our PPM Markets, and develop andimplement effective and efficient technological solutions to measure multimedia and advertising.

General Economic Conditions

Our clients derive most of their revenue from transactions involving the sale or purchase of advertising.During challenging economic times, advertisers may reduce advertising expenditures, impacting advertisingagencies and media. As a result, advertising agencies and media may be less likely to purchase our services.

Continued market disruptions could cause broader economic downturns, which also may lead to lowerdemand for our services, increased incidence of customers’ inability to pay their accounts, an increase in ourprovision for doubtful accounts, an increase in collection cycles for accounts receivable, or insolvency of ourcustomers. During the fourth quarter of 2008 and into 2009, we have observed an increase in the averagenumber of days our sales have been outstanding before we have received payment and have received somerequests for pricing concessions from our customers.

Lawsuits and Governmental Interactions

During 2008, we were involved in a number of significant civil actions and governmental interactionsprimarily related to the commercialization of our PPM service. For additional information regarding theCompany’s legal interactions, see “Item 3. — Legal Proceedings.” The net legal costs and expenses incurredby us in connection with these matters have been material. We can provide no assurance that we will notcontinue to incur legal costs and expenses at comparable rates in the future.

Discontinued Operation

On January 31, 2008, we sold the Continental Research business. Additional information regarding thesale is provided in Note 3 in the Notes to Consolidated Financial Statements contained in this Annual Reporton Form 10-K.

Project Apollo Affiliate Termination

We formed Project Apollo LLC (“Project Apollo”) with Nielsen to explore the commercialization of anational marketing research service with the objective of providing multimedia exposure data combined withsales data from a single source to produce a measure of advertising effectiveness. On February 25, 2008, weannounced that we and Nielsen, as sole members, had agreed to terminate Project Apollo. Of the $1.9 millionrecognized by us for our share of the net costs incurred by Project Apollo for the year ended December 31,2008, $1.3 million relates to its wind-down and liquidation, which was completed by June 30, 2008. Weexpect to continue investing in and developing

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opportunities that leverage our existing PPM technologies and that allow us to continue to pursue multi-mediasolutions for audience measurement.

Impact of Hurricane Ike

We are in the process of assessing the losses incurred from storm damage and business interruption inHouston and the surrounding areas within the Hurricane Ike impact zone. As a result of the relocation ofsample respondents and lack of essential services during and following the hurricane, Houston-GalvestonPPM data was issued for only three of the four weeks in the September 2008 survey and two of the fourweeks in the October 2008 survey. We estimate a related revenue loss of approximately $0.4 million. Due tothe permanent closing of our Houston call center, which suffered heavy storm damage, additional labor costswere incurred as more shifts were run at our other call centers in order to replace the lost capacity. Weestimate that the business interruption costs associated with the storm were approximately $1.5 million. Webelieve that $1.0 million of the $1.9 million aggregate loss for Hurricane Ike are recoverable throughinsurance proceeds.

Stock Repurchases

On November 14, 2007, our Board of Directors authorized a program to repurchase up to $200.0 millionin shares of our outstanding common stock through either periodic open-market or private transactions atthen-prevailing market prices through November 14, 2009. As of February 23, 2009, 2,247,000 shares ofcommon stock had been repurchased under this program for $100.0 million.

Critical Accounting Policies and Estimates

Critical accounting policies and estimates are those that both are important to the presentation of ourfinancial position and results of operations, and require our most difficult, complex or subjective judgments.

We capitalize software development costs with respect to significant internal use software initiatives orenhancements in accordance with Statement of Position 98-1, Accounting for the Costs of Computer SoftwareDeveloped or Obtained for Internal Use. The costs are capitalized from the time that the preliminary projectstage is completed and management considers it probable that the software will be used to perform thefunction intended, until the time the software is placed in service for its intended use. Once the software isplaced in service, the capitalized costs are amortized over periods of three to five years. We perform anassessment quarterly to determine if it is probable that all capitalized software will be used to perform itsintended function. If an impairment exists, the software cost is written down to estimated fair value. As ofDecember 31, 2008, and 2007, our capitalized software developed for internal use had carrying amounts of$22.8 million and $20.1 million, respectively, including $13.3 million and $10.2 million, respectively, ofsoftware related to the PPM service.

We use the asset and liability method of accounting for income taxes. Under this method, income taxexpense is recognized for the amount of taxes payable or refundable for the current year and for deferred taxliabilities and assets for the future tax consequences of events that have been recognized in an entity’sfinancial statements or tax returns. We must make assumptions, judgments and estimates to determine thecurrent provision for income taxes and also deferred tax assets and liabilities and any valuation allowance tobe recorded against a deferred tax asset. Our assumptions, judgments, and estimates relative to the currentprovision for income taxes take into account current tax laws, interpretation of current tax laws and possibleoutcomes of current and future audits conducted by domestic and foreign tax authorities. Changes in tax lawor interpretation of tax laws and the resolution of current and future tax audits could significantly impact theamounts provided for income taxes in the consolidated financial statements. Our assumptions, judgments andestimates relative to the value of a deferred tax asset take into account forecasts of the amount and nature offuture taxable income. Actual operating results and the underlying amount and nature of income in futureyears could render current assumptions, judgments and estimates of recoverable net deferred tax assets. Webelieve it is more likely than not that we will realize the benefits of these deferred tax assets. Any of theassumptions, judgments and estimates mentioned above could cause actual income tax obligations to differfrom estimates, thus impacting our financial position and results of operations.

In accordance with FASB Interpretation (“FIN”) 48, Accounting for Uncertainty in Income Taxes(“FIN No. 48”), an interpretation of FASB Statement No. 109, Accounting for Income Taxes, we include, in

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our tax calculation methodology, an assessment of the uncertainty in income taxes by establishing recognitionthresholds for our tax positions before being recognized in the financial statements. Inherent in our calculationare critical judgments by management related to the determination of the basis for our tax positions.FIN No. 48 provides guidance on derecognition, measurement, classification, interest and penalties,accounting in interim periods, disclosure and transition. For further information, see Note 13 in the Notes toConsolidated Financial Statements contained in this Annual Report on Form 10-K.

We expect to submit claims for two insurance recoveries. The first involves a number of legal mattersand governmental actions for which we have incurred a material amount of legal costs and expenses. Weestimated that $4.8 million of these costs and expenses are recoverable through insurance proceeds. Thisamount is recorded in prepaid and other current assets as of December 31, 2008. We also recorded a$1.0 million insurance recovery in prepaids and other current assets as of December 31, 2008, related todamages and business interruption losses incurred during Hurricane Ike. It is possible that the actualrecoveries related to these events will be greater or less than our estimates.

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Results of Operations

Comparison of Year Ended December 31, 2008 to Year Ended December 31, 2007

The following table sets forth information with respect to our consolidated statements of income for theyears ended December 31, 2008 and 2007.

Consolidated Statements of Income(Dollars in thousands, except per share amounts)

(Unaudited)

Years Ended Increase Percentage of December 31, (Decrease) Revenue 2008 2007 Dollars Percent 2008 2007

Revenue $ 368,824 $ 338,469 $ 30,355 9.0% 100.0% 100.0%

Costs and expenses Cost of revenue 185,632 157,175 28,457 18.1% 50.3% 46.4%Selling, general and

administrative 85,315 79,516 5,799 7.3% 23.1% 23.5%Research and development 41,412 42,496 (1,084) (2.6)% 11.2% 12.6%

Total costs and expenses 312,359 279,187 33,172 11.9% 84.7% 82.5%

Operating income 56,465 59,282 (2,817) (4.8)% 15.3% 17.5%Equity in net income of

affiliates 6,677 4,057 2,620 64.6% 1.8% 1.2%

Income from continuingoperations before interestand tax expense 63,142 63,339 (197) (0.3)% 17.1% 18.7%Interest income 623 2,118 (1,495) (70.6)% 0.2% 0.6%Interest expense 2,216 665 1,551 233.2% 0.6% 0.2%

Income from continuingoperations before incometax expense 61,549 64,792 (3,243) (5.0)% 16.7% 19.1%Income tax expense 24,330 24,288 42 0.2% 6.6% 7.2%

Income from continuingoperations 37,219 40,504 (3,285) (8.1)% 10.1% 12.0%

Discontinued operations Loss from discontinued

operations, net of taxes (462) (324) (138) 42.6% (0.1)% (0.1)%Gain on sale, net of taxes 423 — 423 NM 0.1% 0.0%

Total loss from discontinuedoperations, net of taxes (39) (324) 285 (88.0)% (0.0)% (0.1)%

Net income $ 37,180 $ 40,180 $ (3,000) (7.5)% 10.1% 11.9%

Income per weighted averagecommon share

Basic Continuing operations $ 1.37 $ 1.38 $ (0.01) (0.7)% Discontinued operations — (0.01) 0.01 —

Net income per share, basic $ 1.37 $ 1.37 $ — 0.0%

Diluted Continuing operations $ 1.37 $ 1.37 $ — 0.0% Discontinued operations — (0.01) 0.01 —

Net income per share,diluted $ 1.36 $ 1.35 $ 0.01 0.7%

Cash dividends declared percommon share $ 0.40 $ 0.40 $ — —

Certain per share data and percentage amounts may not total due to rounding.

NM — not meaningful

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Years Ended Increase December 31, (Decrease) 2008 2007 Dollars Percent

Other data: EBIT(1) $ 63,142 $ 63,339 $ (197) (0.3)%EBITDA(1) $ 80,605 $ 75,889 $ 4,716 6.2%

EBIT and EBITDA Reconciliation(1) Income from continuing operations $ 37,219 $ 40,504 $ (3,285) (8.1)%Income tax expense 24,330 24,288 42 0.2%Interest (income) (623) (2,118) 1,495 (70.6)%Interest expense 2,216 665 1,551 233.2%

EBIT(1) 63,142 63,339 (197) (0.3)%Depreciation and amortization 17,463 12,550 4,913 39.1%

EBITDA(1) $ 80,605 $ 75,889 $ 4,716 6.2%

(1) EBIT (earnings before interest and income taxes) and EBITDA (earnings before interest, income taxes,depreciation and amortization) are non-GAAP financial measures that we believe are useful to investorsin evaluating our results. For further discussion of these non-GAAP financial measures, see paragraphbelow entitled “EBIT and EBITDA.”

The following table sets forth information with regard to pension settlement costs and expensesrecognized under SFAS No. 88, (“SFAS No. 88”) Employers’ Accounting for Settlements and Curtailments ofDefined Benefit Pension Plans and for Termination Benefits for the year ended December 31, 2008. Refer toNote 14 in the Notes to Consolidated Financial Statements for additional information regarding the recognitionof these pension settlements.

(Dollars in thousands) 2008

Cost of revenue $ 885 Selling, general, and administrative 484 Research and development 301

Total costs and expenses $ 1,670

Revenue. Revenue increased 9.0% for the year ended December 31, 2008, as compared to 2007, dueprimarily to the commercialization of 12 additional PPM markets during 2008, a full year of currency revenueassociated with the Houston-Galveston and Philadelphia markets commercialized in the first half of 2007, andincreases related to the radio ratings subscriber base, contract renewals, and price escalations in multiyearcustomer contracts for our PPM service and Diary-based quantitative rating business. During the last threeyears, our efforts to support the commercialization of our PPM ratings service have had a material negativeimpact on our results of operations. Despite the growth in revenue for the year ended December 31, 2008, weanticipate that we will continue to incur additional costs related to the continued commercialization of thePPM service across the various PPM Markets. In 2009, we expect to commercialize 19 PPM Markets. Despitethe increase in revenue that is anticipated from this increased commercialization, the full impact ofcommercialization on our anticipated revenue does not occur in the first year of commercialization for eachindividual market. This is because these 19 markets are scheduled to commercialize throughout the year andour customer contracts allow for phased-in pricing toward the higher PPM service rate over a period of time.The signing of Cumulus and Clear Channel with Nielsen for the radio ratings service in certain small tomid-sized markets is anticipated to adversely impact our expected revenue by approximately $5.0 million in2009 and thereafter the impact will be approximately $10.0 million per year on our expected annual revenue.

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Cost of Revenue. Cost of revenue increased by 18.1% for the year ended December 31, 2008, ascompared to 2007. The increase in cost of revenue was largely attributable to a $24.8 million increaseassociated with our PPM ratings service, which was due primarily to increased costs related to additionalmarkets commercialized in 2008 and certain markets expected to be commercialized in 2009. The increase incost of revenue for 2008, as compared to 2007, also includes a $3.5 million increase in costs spent oninitiatives in support of our Diary rating business. We expect that our cost of revenue will continue to increaseas a result of our efforts to support the continued commercialization of the PPM service over the next twoyears. Cell phone-only household recruitment initiatives in both the Diary and PPM services will alsoincrease our cost of revenue.

Selling, General, and Administrative. Selling, general, and administrative expense increased by 7.3%for the year ended December 31, 2008, as compared to 2007, due primarily to a $5.8 million increase in legalcosts, net of anticipated insurance recoveries, related to certain legal matters and governmental interactions, a$1.7 million increase in marketing efforts mainly related to supporting our PPM service, and a $1.7 millionincrease in non-cash share-based compensation for the year ended December 31, 2008, as compared to 2007,partially offset by a $2.9 million decrease from cost-saving initiatives in our sales and marketing divisions.

Research and Development. Research and development expense decreased 2.6% during the year endedDecember 31, 2008, as compared to 2007. The decrease in research and development expenses resultedprimarily from a $4.3 million reduction associated with the development of the next generation of our clientsoftware, and a $1.2 million decrease in expenses associated with the development of our accounts receivableand contract management system, largely offset by a $2.2 million increase related to applications andinfrastructure to support our PPM service, a $1.4 million increase associated with supporting our Diaryservice, and $0.8 million in increased expenses incurred in expanding our technology operations in India.

Equity in Net Income of Affiliates. Equity in net income of affiliates increased by 64.6% due to thetermination of the Project Apollo affiliate in June 2008. Project Apollo losses were reported for four quartersduring the year ended December 31, 2007 and only two quarters during 2008. See “Item 7. Management’sDiscussion and Analysis of Financial Condition and Results of Operations — Project Apollo Termination”for a description of the decision to terminate Project Apollo.

Interest Income. Interest income decreased by 70.6% due to a $30.9 million decrease in the averageaggregate cash and short-term investment balance for the year ended December 31, 2008, as compared to2007. See “— Liquidity and Capital Resources” for further information regarding our use of cash.

Interest Expense. Interest expense increased by 233.2% due to the interest incurred on average debt of$57.2 million for the year ended December 31, 2008, as compared to $4.5 million of average debt outstandingduring 2007. The interest expense incurred during 2007 was primarily related to ongoing credit facility feesand the scheduled amortization of deferred financing costs.

Net Income. Net income decreased 7.5% for the year ended December 31, 2008, as compared to thesame period in 2007, due primarily to our continuing efforts to further build and operate our PPM servicepanels for markets launched in the third quarter of 2008, including New York, Nassau-Suffolk (Long Island),Middlesex-Somerset-Union, Los Angeles, Riverside-San Bernardino, Chicago, San Francisco, and San Jose;and those markets commercialized in the fourth quarter of 2008 and the first quarter of 2009, includingAtlanta, Dallas-Ft. Worth, Washington DC, Detroit, and Boston. Net income was also negatively impacted bycertain lawsuits and governmental interactions occurring in 2008, a portion of which is not expected to becovered by insurance, as well as cost and expenses related to pension settlements recognized underSFAS No. 88. These decreases to net income were partially offset by cost reductions associated with researchand development and the termination of the Project Apollo affiliate, which was operating at a loss. We expectthat the year-over-year net income reduction trend that was noted for 2008, as well as the previous two years,will reverse in 2009 as a result of the continued commercialization of our PPM service.

EBIT and EBITDA. We believe that presenting EBIT and EBITDA, both non-GAAP financialmeasures, as supplemental information helps investors, analysts, and others, if they so choose, inunderstanding and evaluating our operating performance in some of the same manners that we do becauseEBIT and EBITDA exclude certain items that are not directly related to our core operating performance. Wereference these non-GAAP financial

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measures in assessing current performance and making decisions about internal budgets, resource allocationand financial goals. EBIT is calculated by deducting interest income from income from continuing operationsand adding back interest expense and income tax expense to income from continuing operations. EBITDA iscalculated by deducting interest income from income from continuing operations and adding back interestexpense, income tax expense, and depreciation and amortization to income from continuing operations. EBITand EBITDA should not be considered substitutes either for income from continuing operations, as indicatorsof our operating performance, or for cash flow, as measures of our liquidity. In addition, because EBIT andEBITDA may not be calculated identically by all companies, the presentation here may not be comparable toother similarly titled measures of other companies. EBIT decreased by 0.3% for the year ended December 31,2008, as compared to 2007, due primarily to continuing efforts and expenditures to further build our PPMservice panels in accordance with the PPM Market commercialization schedule, as well as cost and expensesrelated to pension settlements recognized under SFAS No. 88. These decreases in earnings were substantiallyoffset by higher revenues incurred in 2008, relating in large part to the commercialization of 12 PPM Marketsin 2008, cost reductions related to research and development, and lower affiliate share losses incurred as aresult of our termination of the Project Apollo LLC in June 2008. EBITDA increased 6.2% because thisnon-GAAP financial measure excludes depreciation and amortization, which for 2008, experienced anincreasing net trend resulting from higher PPM capital expenditures in 2008, as compared to 2007.

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The following table sets forth information with respect to our consolidated statements of income for theyears ended December 31, 2007 and 2006.


Percentage of Increase (Decrease) Revenue 2007 2006 Dollars Percent 2007 2006

Revenue $ 338,469 $ 319,335 $ 19,134 6.0% 100.0% 100.0%

Costs and expenses Cost of revenue 157,175 120,698 36,477 30.2% 46.4% 37.8%Selling, general and

administrative 79,516 78,511 1,005 1.3% 23.5% 24.6%Research and development 42,496 44,177 (1,681) (3.8)% 12.6% 13.8%

Total costs and expenses 279,187 243,386 35,801 14.7% 82.5% 76.2%

Operating income 59,282 75,949 (16,667) (21.9)% 17.5% 23.8%Equity in net income of

affiliates 4,057 7,748 (3,691) (47.6)% 1.2% 2.4%

Income from continuingoperations before interestand tax expense 63,339 83,697 (20,358) (24.3)% 18.7% 26.2%Interest income 2,118 3,010 (892) (29.6)% 0.6% 0.9%Interest expense 665 6,102 (5,437) (89.1)% 0.2% 1.9%

Income from continuingoperations before incometax expense 64,792 80,605 (15,813) (19.6)% 19.1% 25.2%Income tax expense 24,288 30,259 (5,971) (19.7)% 7.2% 9.5%

Income from continuingoperations 40,504 50,346 (9,842) (19.5)% 12.0% 15.8%

Income (loss) fromdiscontinued operations, netof taxes (324) 312 (636) (0.1)% 0.1%

Net income $ 40,180 $ 50,658 $ (10,478) (20.7)% 11.9% 15.9%

Income per weighted averagecommon share

Basic Continuing operations $ 1.38 $ 1.68 $ (0.30) (17.9)% Discontinued operations (0.01) 0.01 (0.02)

Net income per share, basic $ 1.37 $ 1.69 $ (0.32) (18.9)%

Diluted Continuing operations $ 1.37 $ 1.67 $ (0.30) (18.0)% Discontinued operations (0.01) 0.01 (0.02)

Net income per share,diluted $ 1.35 $ 1.68 $ (0.33) (19.6)%

Cash dividends declared percommon share $ 0.40 $ 0.40 $ — —

Certain per share data and percentage amounts may not total due to rounding.

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Increase (Decrease) 2007 2006 Dollars Percent

Other data: EBIT(1) $ 63,339 $ 83,697 $ (20,358) (24.3)%EBITDA(1) $ 75,889 $ 93,089 $ (17,200) (18.5)%

EBIT and EBITDA Reconciliation(1) Income from continuing operations $ 40,504 $ 50,346 $ (9,842) (19.5)%Income tax expense 24,288 30,259 (5,971) (19.7)%Interest income 2,118 3,010 (892) (29.6)%Interest expense 665 6,102 (5,437) (89.1)%

EBIT(1) 63,339 83,697 (20,358) (24.3)%Depreciation and amortization 12,550 9,392 3,158 33.6%

EBITDA(1) $ 75,889 $ 93,089 $ (17,200) (18.5)%

(1) EBIT (earnings before interest and income taxes) and EBITDA (earnings before interest, income taxes,depreciation and amortization) are non-GAAP financial measures that we believe are useful to investorsin evaluating our results. For further discussion of these non-GAAP financial measures, see paragraphbelow entitled “EBIT and EBITDA.”

Revenue. Revenue increased 6.0% for the year ended December 31, 2007, as compared to the sameperiod in 2006, due primarily to $14.7 million of increases related to the radio ratings subscriber base, contractrenewals, and price escalations in multiyear customer contracts for our quantitative data license revenue, a$3.4 million increase in Scarborough revenue resulting primarily from new business contracts, and a$2.1 million increase in PPM International revenues, partially offset by decreased national marketing pilotpanel revenues, which due to the formation of Project Apollo LLC in February 2007, were now being recordeddirectly by the affiliate. Effective with the formation of Project Apollo LLC, we recorded our share of ProjectApollo’s net operating results through the equity in net income of affiliates line of our consolidated incomestatement.

Cost of Revenue. Cost of revenue increased by 30.2% for the year ended December 31, 2007, ascompared to the same period in 2006. Cost of revenue increased as a percentage of revenue to 46.4% in 2007from 37.8% in 2006. The increase in cost of revenue was largely attributable to an increase in our quantitative,qualitative and software application services of $41.8 million, which was comprised substantially of a$21.1 million increase in PPM service rollout costs largely associated with the management and recruitment ofthe PPM panels for the Philadelphia, New York, Los Angeles, and Chicago markets; a $9.7 million increase inexpenses associated with PPM ratings costs that were classified as research and development in 2006 and ascost of revenue in 2007; a $1.7 million increase in Diary data collection and processing costs; and a$3.1 million increase associated with response rate initiatives; a $2.2 million increase in royalties, substantiallyassociated with our Scarborough affiliate; a $2.0 million increase due to operating costs associated with theopening of a third participant interviewing center during the first quarter of 2007; and a $1.7 million increaseassociated with computer center costs. Additionally, PPM International cost of revenues increased by$1.1 million for the year ended December 31, 2007, as compared to the same period in 2006. These increaseswere partially offset by a $6.5 million decrease in national marketing research service costs, which due to theformation of Project Apollo, were being expensed directly by the affiliate. We recorded our share of ProjectApollo’s net operating results through the equity in net income of affiliates line of our consolidated incomestatement.

Selling, General and Administrative. Selling, general and administrative expenses increased by 1.3% forthe year ended December 31, 2007, as compared to the same period in 2006. The increase in selling, generaland administrative expenses was due primarily to a $1.2 million increase in expenses and amortization relatedto our accounts receivable and contract management system that was implemented during the second quarterof 2006, a

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$0.9 million increase in marketing communication costs, and a $0.8 million increase in expenses for mergerand acquisition advisory services incurred during the year ended December 31, 2007, as compared to thesame period in 2006. These increases were partially offset by a $2.2 million decrease associated with loweremployee incentive plan expenses.

Research and Development. Research and development expenses decreased 3.8% during the year endedDecember 31, 2007, as compared to the same period in 2006. The decrease in research and developmentexpenses resulted primarily from a $9.7 million decrease in expenses associated with PPM ratings costs thatwere classified as research and development in 2006 and as cost of revenue in 2007, partially offset by a$3.9 million increase in expenses associated with our continued development of the next generation of ourclient software, a $2.9 million increase related to applications and infrastructure to support the PPM service,and a $1.2 million increase in expenses to support our Diary rating service.

Equity in Net Income of Affiliates. Equity in net income of affiliates (relating collectively toScarborough and Project Apollo) decreased by 47.6% for the year ended December 31, 2007, as compared tothe same period in 2006, due primarily to the formation of Project Apollo in February 2007. Our share of theProject Apollo affiliate loss was $4.3 million and our share of Scarborough’s income increased by$0.6 million for 2007, as compared to 2006.

Interest Income. Interest income decreased 29.6% during the year ended December 31, 2007, ascompared to the same period in 2006 due to lower average cash and short-term investment balances, whichwere partially offset by higher interest rates.

Interest Expense. Interest expense decreased 89.1% for the year ended December 31, 2007, as comparedto the same period in 2006, due to our prepayment of our senior-secured notes obligation on October 18,2006. In accordance with the provisions of the note agreement, we were obligated to pay an additionalmake-whole interest amount of $2.6 million as a result of the prepayment. Borrowings under our new 2006revolving credit facility did not commence until the fourth quarter of 2007. As a result, outstandingborrowings on average and the related interest expense were significantly lower during the year endedDecember 31, 2007, as compared to the same period in 2006.

Income from Continuing Operations. Income from continuing operations decreased 19.5% for the yearended December 31, 2007, from the same period in 2006, due primarily to planned expenses required to buildour PPM rollout panels for the Philadelphia, New York, Chicago, and Los Angeles markets, and to supportthe strategic development of our PPM ratings business. Incremental expenses incurred in support of our Diaryratings service and our Project Apollo national marketing research service also contributed to the decrease inincome from continuing operations, partially offset by a decrease in interest expense associated with ourprepayment of our senior-secured notes obligation in 2006.

EBIT and EBITDA. We have presented EBIT and EBITDA, both non-GAAP financial measures, assupplemental information that we believe is useful to investors to evaluate our results because they excludecertain items that are not directly related to our core operating performance. EBIT is calculated by deductinginterest income and adding back interest expense and income tax expense to income from continuingoperations. EBITDA is calculated by deducting interest income and adding back interest expense, income taxexpense, and depreciation and amortization to income from continuing operations. EBIT and EBITDA shouldnot be considered substitutes either for income from continuing operations as indicators of our operatingperformance, or for cash flow, as measures of our liquidity. In addition, because EBIT and EBITDA may notbe calculated identically by all companies, the presentation here may not be comparable to other similarlytitled measures of other companies. EBIT decreased 24.3% and EBITDA decreased 18.5% for the year endedDecember 31, 2007, as compared to the same period in 2006, due primarily to planned expenses required tobuild our PPM rollout panels for the Philadelphia, New York, Chicago, and Los Angeles markets, and tosupport the strategic development of our PPM ratings business. Incremental expenses incurred in support ofour Diary ratings service and our Project Apollo pilot national marketing research service also adverselyimpacted EBIT and EBITDA for the year ended December 31, 2007, as compared to the same period in 2006.

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Liquidity and Capital Resources


Working capital, which is the amount by which our current assets exceed (are less than) our currentliabilities, was ($28.6) million and ($45.8) million as of December 31, 2008, and 2007, respectively.Excluding the deferred revenue liability, which does not require a significant additional cash outlay, workingcapital was $28.7 million and $20.9 million as of December 31, 2008, and 2007, respectively. Cash and cashequivalents were $8.7 million and $21.1 million as of December 31, 2008, and 2007, respectively. We expectthat our cash position as of December 31, 2008, cash flow generated from operations, and our availablerevolving credit facility (“Credit Facility”) will be sufficient to support our operations for the next 12 to24 months.

Net cash provided by operating activities was $44.9 million and $65.1 million for the years endedDecember 31, 2008, and 2007, respectively. Of this $20.2 million decrease in operating activities, a$12.7 million change is associated with increased accounts receivable balances, which resulted from bothhigher PPM service billings recorded in conjunction with the commercialization of 12 PPM Markets in thelatter half of 2008, and also from decreased collections from our customers in the midst of a decliningeconomy, which has had an adverse impact on the radio industry. Because PPM-derived surveys deliver morefrequently than Diary surveys, revenue was recognized sooner for the 12 PPM Markets commercialized in2008 than historical trends and consequently, a $10.6 million change in deferred revenue occurred for the yearended December 31, 2008, as compared to 2007. Net cash provided by operating activities also reflects a$6.3 million increase in prepaids and other current assets, which consists largely of a $5.8 million insuranceclaim receivable recorded in 2008 for cost recoveries related to certain legal matters, governmentalinteractions, and Hurricane Ike business interruption loss and damages.

These reductions in cash provided by operating activities were partially offset by a $5.9 million increasein cash flows from operating activities related to accrued expenses and other current liabilities, which wascomprised primarily of a $2.1 million fluctuation in payroll, bonus, and benefit accruals during both 2008 and2007, a $1.8 million accrual elimination in 2007 related to the expiration of Project Apollo cost sharingarrangements, and a $1.7 million increase associated with accrued taxes. In addition, operating activities wereimpacted by a $5.4 million increase in depreciation related to increased PPM equipment capital expendituresfor 2008, as compared to 2007.

Net cash used in investing activities was $31.5 million and $0.7 million for the years ended December 31,2008, and 2007, respectively. This $30.8 million increase in cash used in investing activities was primarilydue to $27.6 million of net short-term investment sales made during 2007. No investment purchases or salesactivity occurred during 2008. Prior to the end of 2007, all of our short-term investments were sold to helpfund the completion of our then authorized $100.0 million stock repurchase program. For further informationregarding the impact to our consolidated financial statements of our stock repurchase programs, see thediscussion of the net financing activities below.

The change in cash flow associated with investing activities was also impacted by a $6.7 million increasein capital spending in 2008, primarily related to PPM equipment and PPM-related software capitalization, aswell as machinery and equipment purchased in conjunction with expanding our research and developmentsubsidiary in India. These cash outflows were partially offset by a $2.2 million net cash inflow related to ourdiscontinued operation (i.e., Continental). See Note 3 — Discontinued Operations to the Notes toConsolidated Financial Statements in this Form 10-K for further information.

Net cash used in financing activities was $26.9 million and $76.0 million for the years endedDecember 31, 2008, and 2007, respectively. This $49.1 million decrease in net cash used in financingactivities was due largely to $61.0 million in increased net borrowings under our Credit Facility to assist ourcash flow from operations with funding our stock repurchase program in 2008 as compared to 2007. Thisdecrease in net cash used was partially offset by a reduction in proceeds from stock option exercises resultingprimarily from a decrease in our average stock price during the latter half of 2008.

On December 20, 2006, we entered into an agreement with a consortium of lenders to provide up to$150.0 million of financing to us through a five-year, unsecured revolving credit facility. The agreementcontains an expansion feature for us to increase the total financing available under the Credit Facility to$200.0 million with such increased financing to be provided by one or more existing Credit Facility lendinginstitutions, subject to the

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approval of the lending banks, and/or in combination with one or more new lending institutions, subject to theapproval of the Credit Facility’s administrative agent. Interest on borrowings under the Credit Facility iscalculated based on a floating rate for a duration of up to six months as selected by us.

Our Credit Facility contains financial terms, covenants and operating restrictions that potentially restrictour financial flexibility. Under the terms of the Credit Facility, we are required to maintain certain leverageand coverage ratios and meet other financial conditions. The agreement potentially limits, among other things,our ability to sell assets, incur additional indebtedness, and grant or incur liens on our assets. Under the termsof the Credit Facility, all of our material domestic subsidiaries, if any, guarantee the commitment. Currently,we do not have any material domestic subsidiaries as defined under the terms of the Credit Facility. Althoughwe do not believe that the terms of our Credit Facility limit the operation of our business in any materialrespect, the terms of the Credit Facility may restrict or prohibit our ability to raise additional debt capitalwhen needed or could prevent us from investing in other growth initiatives. Our outstanding borrowingsincreased from $12.0 million at December 31, 2007, to $85.0 million at December 31, 2008 to supplementour cash flow from operations in the funding of our outstanding stock repurchase program. We have been incompliance with the terms of the Credit Facility since the agreement’s inception. As of February 23, 2009, wehad $75.0 million in outstanding debt under the Credit Facility.

On November 14, 2007, our Board of Directors authorized a program to repurchase up to $200.0 millionin shares of our outstanding common stock through either periodic open-market or private transactions atthen-prevailing market prices over a period of up to two years through November 14, 2009. As ofFebruary 23, 2009, 2,247,400 shares of outstanding common stock had been repurchased under this programfor $100.0 million.

In 2008 and 2007, the Board continued to approve the payment of quarterly dividends of $.10 percommon share to the stockholders of record as of the close of business on the 15th of each quarter-end month.For 2008 and 2007, a quarterly dividend payment was made in the month following each quarter-end. Thereis no assurance that the quarterly dividend will continue.

Commercialization of our PPM radio ratings service requires and will continue to require a substantialfinancial investment. We believe our cash generated from operations, as well as access to the Credit Facility,is sufficient to fund such requirements for the next 12 to 24 months. We currently estimate that the 2009capital expenditures related to the PPM service will be approximately $25.0 million. The amount of capitalrequired for further deployment of our PPM ratings service and the impact on our results of operations will begreatly affected by the speed of commercialization. We anticipate that PPM costs and expenses will acceleratesix to nine months in advance of the commercialization of each PPM Market as we build the panels. Thesecosts are incremental to the costs associated with our Diary-based ratings service. Cell phone-only householdrecruitment initiatives in both the Diary and PPM services will also increase our cost of revenue.


Working capital, which is the amount by which our current assets exceed (are less than) our currentliabilities, was ($45.8) million and ($4.6) million as of December 31, 2007, and 2006, respectively. Excludingthe deferred revenue liability, which does not require a significant additional cash outlay, working capital was$20.9 million and $62.0 million as of December 31, 2007, and 2006, respectively. Cash and cash equivalentswere $21.1 million and $31.0 million as of December 31, 2007, and 2006, respectively. There were noshort-term investments as of December 31, 2007. Short-term investments was $27.6 million as ofDecember 31, 2006.

Net cash provided by operating activities was $65.1 million and $68.1 million for the years endedDecember 31, 2007, and 2006, respectively. The $3.0 million decrease in net cash provided by operatingactivities was mainly attributable to a $9.8 million decrease in income from continuing operations, whichresulted primarily from planned costs required to build panels for the commercialization of the PPM service,and a $3.8 million fluctuation for reduced accruals related to payroll and bonus costs for the year endedDecember 31, 2007, as compared to the same period in 2006. The decreases in cash previously mentionedwere partially offset by a $6.3 million fluctuation associated with prior year net purchases of PPMInternational inventory as compared to a reduction during 2007 and a $3.2 million net increase in depreciationand amortization caused by increased capitalization of PPM equipment

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and related software, as well as software related to the accounts receivable and contract management systemimplemented during the second quarter of 2006 and a $0.9 million cash inflow fluctuation for accruedinterest.

Net cash used by investing activities was $0.7 million for the year ended December 31, 2007 and net cashprovided by investing activities was $35.4 million for the year ended December 31, 2007. The approximately$36.0 million decrease was attributable to a $27.3 million decrease in net sales of variable-rate demand notesissued by municipal government agencies and auction-rate securities for the year ended December 31, 2007,as compared to the same period in 2006. No auction-rate securities were held at December 31, 2007. Therepurchases of shares in 2006 and 2007 of $170.0 million in aggregate, and the repayment of the$50.0 million of senior secured note obligation in 2006 resulted in reduced available cash to invest inshort-term investments during the year ended December 31, 2007, as compared to the same period in 2006.Increased capital spending of $5.6 million, related primarily to purchases of computer equipment andleasehold improvements for the year ended December 31, 2007, as compared to the same period in 2006, anda $2.9 million investment in the Project Apollo affiliate paid during the year ended December 31, 2007, alsocontributed to the decrease in net cash flow attributable to investing activities.

Net cash used in financing activities was $76.0 million and $111.1 million for the year endedDecember 31, 2007 and 2006, respectively. The $35.1 million fluctuation was driven primarily by our$50.0 million debt repayment made during the quarter ended December 31, 2006, of our then-outstandingsenior secured note obligation as compared with $12.0 million of net borrowings in the year endedDecember 31, 2007, under our revolving credit facility. Additionally, a $1.8 million increase in proceeds wasreceived from stock option exercises for the year ended December 31, 2007, as compared to the same periodin 2006, which was the result of higher average stock prices during the first six months of the year endedDecember 31, 2007. These increases in cash flow were partially offset by the $30.0 million increase in stockrepurchases.

Contractual Obligations

The following table summarizes our contractual cash obligations as of December 31, 2008 (inthousands):

Payments Due By Period Less Than 1 - 3 3 - 5 More Than 1 Year Years Years 5 Years Total (In thousands)

Long-term debt (A) $ 1,111 $ 87,222 $ — $ — $ 88,333 Operating leases (B) 8,945 15,218 10,956 24,249 59,368 Purchase obligations (C) 5,406 — — — 5,406 Contributions for retirement

plans (D) 3,536 — — — 3,536 Unrecognized tax benefits (E) 192 1,080 148 — 1,420

$ 19,190 $ 103,520 $ 11,104 $ 24,249 $ 158,063

(A) See Note 10 in the Notes to Consolidated Financial Statements for additional information regarding ourrevolving credit facility (amounts in table consist of future payments of $85.0 million for long-termborrowings, and $3.3 million for interest).

(B) See Note 12 in the Notes to Consolidated Financial Statements.

(C) Other than for PPM equipment purchases, we generally do not make unconditional, noncancelablepurchase commitments. We enter into purchase orders in the normal course of business, and theygenerally do not exceed one-year terms.

(D) Amount represents an estimate of our cash contribution for 2009 for retirement plans. Future cashcontributions will be determined based upon the funded status of the plan. See Note 14 in the Notes toConsolidated Financial Statements.

(E) The amount related to unrecognized tax benefits under FIN No. 48 in the table includes $0.2 million ofinterest and penalties. See Note 13 in the Notes to the Consolidated Financial Statements.

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Off-Balance Sheet Arrangements

We did not enter into any off-balance sheet arrangements during the years ended December 31, 2008,2007 or 2006, nor did we have any off-balance sheet arrangements outstanding as of December 31, 2008, or2007.

New Accounting Pronouncements

FASB Staff Position SFAS No. 132(R)-1 amended SFAS No. 132(R), Employers Disclosures aboutPensions and Other Postretirement Benefits, to provide guidance on an employer’s disclosures about planassets of a defined benefit pension or other postretirement plan. The disclosure requirements are effective forfiscal years ending after December 15, 2009. We do not expect such adoption to have a material impact onour consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”),which defines fair value, establishes guidelines for measuring fair value and expands disclosures regardingfair value measurements. SFAS No. 157 does not require any new fair value measurements but rathereliminates inconsistencies in guidance found in various prior accounting pronouncements. We adoptedSFAS No. 157, effective January 1, 2008, for all financial assets and liabilities and the impact to theconsolidated financial statements was immaterial. In accordance with FASB Staff Position 157-2, theprovisions of SFAS No. 157 are effective for nonfinancial assets and liabilities for fiscal years beginning afterNovember 15, 2008. We are evaluating the impact of adopting the nonfinancial asset and nonfinancialliability provisions of SFAS No. 157, but do not currently expect such adoption, effective January 1, 2009, tohave a material impact on our consolidated financial statements.

Effective December 31, 2006, the Company adopted SFAS No. 158, Employers’ Accounting for DefinedBenefit Pension and Other Postretirement Plans (“SFAS No. 158”). In accordance with the provisions ofSFAS No. 158, the measurement date for measuring plan assets and benefit obligations was required to be asof the date of a company’s fiscal year-end statement of financial position effective for fiscal years endingafter December 15, 2008. See Note 14 in the notes to consolidated financial statements for disclosures relatedto the impact on our consolidated financial statements resulting from our adoption of the measurement dateprovision of SFAS No. 158, effective December 31, 2008.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk

We hold our cash and cash equivalents in highly liquid securities.

In December 2006, we entered into an agreement with a consortium of lenders to provide us up to$150.0 million of financing through a five-year, unsecured revolving credit facility. Interest on borrowingsunder the Credit Facility will be calculated based on a floating rate for a duration of up to six months. We donot use derivatives for speculative or trading purposes. As of December 31, 2008, we reported outstandingborrowings under the Credit Facility of $85.0 million, which is also equal to the obligation’s fair value. Ahypothetical market interest rate change of 1% would have an impact of $0.9 million on our results ofoperations over a 12-month period. A hypothetical market interest rate change of 1% would have no impacton either the carrying amount or the fair value of the Credit Facility.

Foreign Currency Risk

Our foreign operations are not significant at this time, and, therefore, our exposure to foreign currencyrisk is not material. If we expand our foreign operations, our exposure to foreign currency exchange ratechanges could increase.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The report of the independent registered public accounting firm and financial statements are set forthbelow (see Item 15(a) for a list of financial statements and financial statement schedules):

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ARBITRON INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Reports of Independent Registered Public Accounting Firm 55 Consolidated Balance Sheets as of December 31, 2008 and 2007 57 Consolidated Statements of Income for the Years Ended December 31, 2008, 2007 and 2006 58 Consolidated Statements of Stockholders’ (Deficit) Equity for the Years Ended December 31, 2008,

2007 and 2006 59 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2008, 2007

and 2006 60 Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007, and 2006 61 Notes to Consolidated Financial Statements 62 Consolidated Schedule of Valuation and Qualifying Accounts 90

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders Arbitron Inc.:

We have audited the accompanying consolidated balance sheets of Arbitron Inc. and subsidiaries as ofDecember 31, 2008 and 2007, and the related consolidated statements of income, stockholders’ (deficit)equity, comprehensive income and cash flows for each of the years in the three-year period endedDecember 31, 2008. In connection with our audits of the consolidated financial statements, we also haveaudited the financial statement schedule listed under item 15(a)(2). These consolidated financial statementsand financial statement schedule are the responsibility of the Company’s management. Our responsibility is toexpress an opinion on these consolidated financial statements and financial statement schedule based on ouraudits.

We conducted our audits in accordance with the standards of the Public Company Accounting OversightBoard (United States). Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used and significant estimates made by management,as well as evaluating the overall financial statement presentation. We believe that our audits provide areasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all materialrespects, the financial position of Arbitron Inc. and subsidiaries as of December 31, 2008 and 2007, and theresults of their operations and their cash flows for each of the years in the three-year period endedDecember 31, 2008, in conformity with U.S. generally accepted accounting principles. Also in our opinion,the related financial statement schedule, when considered in relation to the basic consolidated financialstatements taken as a whole, presents fairly, in all material respects, the information set forth therein.

As discussed in Notes 2 and 14, of the notes to the consolidated financial statements, the Companyadopted the recognition and disclosure provisions and the measurement date provisions of Statement ofFinancial Accounting Standards No. 158, Employer’s Accounting for Defined Benefit Pension and OtherPostretirement Plans as of December 31, 2006 and 2008, respectively and Financial Accounting StandardsBoard Interpretation No. 48, Accounting for Uncertainty in Income Taxes on January 1, 2007.

We also have audited, in accordance with the standards of the Public Company Accounting OversightBoard (United States), Arbitron Inc.’s internal control over financial reporting as of December 31, 2008,based on criteria established in Internal Control — Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission, and our report dated March 2, 2009, expressed anunqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

/s/ KPMG LLP

Baltimore, MarylandMarch 2, 2009

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders Arbitron Inc.:

We have audited Arbitron Inc.’s internal control over financial reporting as of December 31, 2008, basedon criteria established in Internal Control — Integrated Framework issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO). Arbitron Inc.’s management is responsible formaintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting, included in the accompanying Management’s Report on InternalControl over Financial Reporting. Our responsibility is to express an opinion on the Company’s internalcontrol over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting OversightBoard (United States). Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all materialrespects. Our audit included obtaining an understanding of internal control over financial reporting, assessingthe risk that a material weakness exists, and testing and evaluating the design and operating effectiveness ofinternal control based on the assessed risk. Our audit also included performing such other procedures as weconsidered necessary in the circumstances. We believe that our audit provides a reasonable basis for ouropinion.

A company’s internal control over financial reporting is a process designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of recordsthat, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of thecompany; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparationof financial statements in accordance with generally accepted accounting principles, and that receipts andexpenditures of the company are being made only in accordance with authorizations of management anddirectors of the company; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detectmisstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk thatcontrols may become inadequate because of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.

In our opinion, Arbitron Inc. maintained, in all material respects, effective internal control over financialreporting as of December 31, 2008, based on criteria established in Internal Control — Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting OversightBoard (United States), the consolidated balance sheets of Arbitron Inc. as of December 31, 2008 and 2007,and the related consolidated statements of income, stockholders’ (deficit) equity, comprehensive income andcash flows for each of the years in the three-year period ended December 31, 2008, and our report datedMarch 2, 2009, expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP


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ARBITRON INC.

Consolidated Balance SheetsDecember 31, 2008 and 2007

(In thousands, except par value data)

2008 2007

Assets Current assets

Cash and cash equivalents $ 8,658 $ 21,141 Trade accounts receivable, net of allowance for doubtful accounts of

$2,598 in 2008 and $1,688 in 2007 50,037 34,171 Inventory 2,507 829 Prepaid expenses and other current assets 10,167 3,676 Current assets of discontinued operations — 5,677 Deferred tax assets 2,476 3,124

Total current assets 73,845 68,618 Investment in affiliates 14,901 15,262 Property and equipment, net 62,930 50,183 Goodwill, net 38,500 38,500 Other intangibles, net 950 1,252 Noncurrent assets of discontinued operations — 1,869 Noncurrent deferred tax assets 7,576 4,089 Other noncurrent assets 895 770

Total assets $ 199,597 $ 180,543

Liabilities and Stockholders’ (Deficit) Equity Current liabilities

Accounts payable $ 15,401 $ 10,338 Accrued expenses and other current liabilities 29,732 27,702 Current liabilities of discontinued operations — 4,651 Current portion of long term debt — 5,000 Deferred revenue 57,304 66,768

Total current liabilities 102,437 114,459 Long-term debt 85,000 7,000 Other noncurrent liabilities 26,655 10,884

Total liabilities 214,092 132,343

Commitments and contingencies — — Stockholders’ (deficit) equity

Preferred stock, $100.00 par value, 750 shares authorized, no sharesissued — —

Common stock, $0.50 par value, authorized 500,000 shares, issued32,338 shares as of December 31, 2008, and 2007 16,169 16,169

Net distributions to parent prior to March 30, 2001 spin-off (239,042) (239,042)Retained earnings subsequent to spin-off 226,345 279,996 Common stock held in treasury, 5,928 shares in 2008 and 4,028 shares in

2007 (2,964) (2,014)Accumulated other comprehensive loss (15,003) (6,909)

Total stockholders’ (deficit) equity (14,495) 48,200

Total liabilities and stockholders’ (deficit) equity $ 199,597 $ 180,543

See accompanying notes to consolidated financial statements.

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ARBITRON INC.

Consolidated Statements of IncomeYears Ended December 31, 2008, 2007, and 2006

(In thousands, except per share data)

2008 2007 2006

Revenue $ 368,824 $ 338,469 $ 319,335

Costs and expenses Cost of revenue 185,632 157,175 120,698 Selling, general and administrative 85,315 79,516 78,511 Research and development 41,412 42,496 44,177

Total costs and expenses 312,359 279,187 243,386

Operating income 56,465 59,282 75,949 Equity in net income of affiliates 6,677 4,057 7,748

Income from continuing operations before interest and incometax expense 63,142 63,339 83,697 Interest income 623 2,118 3,010 Interest expense 2,216 665 6,102

Income from continuing operations before income tax expense 61,549 64,792 80,605 Income tax expense 24,330 24,288 30,259

Income from continuing operations 37,219 40,504 50,346 Discontinued operations

(Loss) income from discontinued operations, net of taxes (462) (324) 312 Gain on sale of discontinued operations, net of taxes 423 — —

Total (loss) income from discontinued operations, net oftaxes (39) (324) 312

Net income $ 37,180 $ 40,180 $ 50,658

Income per weighted-average common share Basic

Continuing operations $ 1.37 $ 1.38 $ 1.68 Discontinued operations (0.00) (0.01) 0.01

Net income $ 1.37 $ 1.37 $ 1.69

Diluted Continuing operations $ 1.37 $ 1.37 $ 1.67 Discontinued operations (0.00) (0.01) 0.01

Net income $ 1.36 $ 1.35 $ 1.68

Weighted-average common shares used in calculations Basic 27,094 29,399 29,937 Potentially dilutive securities 165 266 149

Diluted 27,259 29,665 30,086

Dividends declared per common share outstanding $ 0.40 $ 0.40 $ 0.40

Note: Certain per share data amounts may not total due to rounding.

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ARBITRON INC.

Consolidated Statements of Stockholders’ (Deficit) EquityYears Ended December 31, 2008, 2007, and 2006

(In thousands)

Net Distributions to Parent Retained Accumulated Number of Prior to Earnings Common Stock Other Total Shares Common Additional March 31, 2001 Subsequent Held in Comprehensive Stockholders’ Outstanding Stock Paid-in Capital Spin-off to Spin-off Treasury Loss (Deficit) Equity

Balance atDecember 31, 2005 31,044 16,169 94,908 (239,042) 228,211 (647) (3,417) 96,182

Net income — — — — 50,658 — — 50,658 Other comprehensive

income (loss) Foreign currency

translation — — — — — — 431 431 Retirement and

post-retirementliabilities — — — — — — 5,154 5,154

Income tax expense — — — — — — (2,140) (2,140)Dividends declared — — — — (11,964) — — (11,964)Common stock issued 640 — 19,096 — — 313 — 19,409 Noncash share-based

compensation — — 6,538 — — 7 — 6,545 Common stock

repurchased (1,992) — (69,004) — — (996) — (70,000)Tax benefits from

share-based awards — — 2,060 — — — — 2,060 Impact of

SFAS No. 158adoption — — — — — — (7,079) (7,079)

Balance atDecember 31, 2006 29,692 16,169 53,598 (239,042) 266,905 (1,323) (7,051) 89,256



translation — — — — — — 53 53 Retirement and

post-retirementliabilities — — — — — — 198 198

Income tax expense — — — — — — (109) (109)Dividends declared — — — — (11,783) — — (11,783)Common stock issued 712 — 20,908 — — 356 — 21,264 Noncash share-based

compensation — — 6,532 — — — — 6,532 Common stock

repurchased (2,094) — (98,953) — — (1,047) — (100,000)Tax benefits from

share-based awards — — 2,609 — — — — 2,609 Reclass of negative

APIC to retainedearnings — — 15,306 — (15,306) — — —

Balance atDecember 31, 2007 28,310 16,169 — (239,042) 279,996 (2,014) (6,909) 48,200



translation — — — — — — (1,087) (1,087)Retirement and

post-retirementliabilities — — — — — — (12,468) (12,468)

Income tax benefit — — — — — — 5,238 5,238 Dividends declared — — — — (10,826) — — (10,826)Common stock issued 347 — — — 10,065 164 — 10,229 Noncash share-based

compensation — — — — 8,406 9 — 8,415 Common stock

repurchased (2,247) — — — (98,876) (1,123) — (99,999)Tax benefits from

share-based awards — — — — 830 — — 830 Impact of

SFAS No. 158measurement dateadoption Service, interest, and

expected returncomponent — — — — (207) — — (207)

Amortization of priorservice andactuarial losscomponent — — — — (223) — 223 —

Balance atDecember 31, 2008 26,410 $ 16,169 $ — $ (239,042) $ 226,345 $ (2,964) $ (15,003) $ (14,495)


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ARBITRON INC.

Consolidated Statements of Comprehensive IncomeYears Ended December 31, 2008, 2007, and 2006

(In thousands)

2008 2007 2006

Net income $ 37,180 $ 40,180 $ 50,658 Other comprehensive (loss) income, net of tax Change in foreign currency translation adjustment, net of tax

benefit (expense) of $429, $(19), and $(168) for 2008, 2007, and2006, respectively (658) 34 263

Change in retirement liabilities, net of tax benefit (expense) of$4,809, $(90), and $(1,972) for 2008, 2007, and 2006,respectively (7,659) 108 3,182

Other comprehensive (loss) income (8,317) 142 3,445

Comprehensive income $ 28,863 $ 40,322 $ 54,103


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ARBITRON INC.

Consolidated Statements of Cash FlowsYears Ended December 31, 2008, 2007, and 2006

(In thousands)

2008 2007 2006

Cash flows from operating activities Net income $ 37,180 $ 40,180 $ 50,658 Less: Income (loss) from discontinued operations, net of taxes (39) (324) 312

Income from continuing operations 37,219 40,504 50,346 Adjustments to reconcile income from continuing operations to net

cash provided by operating activities Depreciation and amortization of property and equipment 17,161 11,773 7,842 Amortization of intangible assets 302 777 1,550 Loss on asset disposals 1,550 1,263 591 Loss due to SFAS No. 88 pension settlements 1,670 — — Asset impairment charges 48 831 638 Deferred income taxes 2,400 1,768 3,902 Equity in net income of affiliates (6,677) (4,057) (7,748)Distributions from affiliate 8,100 7,800 6,800 Bad debt expense 1,636 1,175 890 Non-cash share-based compensation 8,415 6,532 6,545 Changes in operating assets and liabilities

Trade accounts receivable (17,502) (4,813) (6,089)Prepaid expenses and other assets (6,184) 124 (690)Inventory (1,678) 2,964 (3,351)Accounts payable 5,352 485 1,178 Accrued expense and other current liabilities 2,307 (3,558) 1,794 Deferred revenue (9,464) 1,175 4,638 Other noncurrent liabilities 1,426 121 (1,067)

Net operating activities from discontinued operations (1,194) 198 380

Net cash provided by operating activities 44,887 65,062 68,149

Cash flows from investing activities Additions to property and equipment (32,005) (25,333) (19,691)Purchases of short-term investments — (170,545) (456,975)Proceeds from sales of short-term investments — 198,170 511,910 Investments in affiliate (1,062) (2,885) — Payments for business acquisition (522) — — Net investing activities from discontinued operations 2,123 (60) 128

Net cash (used in) provided by investing activities (31,466) (653) 35,372

Cash flows from financing activities Proceeds from stock option exercises and stock purchase plan 10,331 21,347 19,584 Stock repurchases (99,999) (100,000) (70,000)Tax benefits realized from share-based awards 830 2,609 1,875 Dividends paid to stockholders (11,022) (11,914) (12,103)Payments for deferred financing costs — — (447)Borrowings issued on long-term debt 140,000 35,000 — Payments of long-term debt (67,000) (23,000) (50,000)

Net cash used in financing activities (26,860) (75,958) (111,091)

Effect of exchange rate changes on cash and cash equivalents (31) 37 362

Net decrease in cash and cash equivalents (13,470) (11,512) (7,208)Cash and cash equivalents at beginning of year 22,128 33,640 40,848

Cash and cash equivalents at end of year $ 8,658 $ 22,128 $ 33,640

Cash and cash equivalents from continuing operations at end of year 8,658 21,141 31,012 Cash and cash equivalents from discontinued operations at end of year — 987 2,628

Cash and cash equivalents at end of year $ 8,658 $ 22,128 $ 33,640


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ARBITRON INC.

Notes to Consolidated Financial Statements

1. Basis of Presentation

Basis of Consolidation

The consolidated financial statements of Arbitron Inc. (“Arbitron” or the “Company”) for the year endedDecember 31, 2008, reflect the consolidated financial position, results of operations and cash flows of theCompany and its subsidiaries: Arbitron Holdings Inc., Audience Research Bureau S.A. de C.V., CeridianInfotech (India) Private Limited, Arbitron International, LLC, and Arbitron Technology Services IndiaPrivate Limited. All significant intercompany balances and transactions have been eliminated inconsolidation. The Company consummated the sale of CSW Research Limited and Euro Fieldwork Limited, asubsidiary of CSW Research Limited, on January 31, 2008. The financial information of CSW ResearchLimited and Euro Fieldwork Limited has been separately reclassified within the consolidated financialstatements as a discontinued operation. See Note 3 for further information.

Description of Business

Arbitron is a leading media and marketing information services firm, primarily serving radio, cabletelevision, advertising agencies, advertisers, retailers, out-of-home media, online media and, through theCompany’s Scarborough Research (“Scarborough”) joint venture with The Nielsen Company, broadcasttelevision and print media. The Company currently provides four main services: measuring and estimatingradio audiences in local markets in the United States; measuring and estimating radio audiences of networkradio programs and commercials; providing software used for accessing and analyzing our media audienceand marketing information data; and providing consumer, shopping, and media usage information services.

2. Summary of Significant Accounting Policies

Revenue Recognition

Syndicated or recurring products and services are licensed on a contractual basis. Revenues for suchproducts and services are recognized over the term of the license agreement as products or services aredelivered. Customer billings in advance of delivery are recorded as a deferred revenue liability. Deferredrevenue relates primarily to quantitative radio measurement surveys which are delivered to customers in thesubsequent quarterly or monthly period. Software revenue is recognized ratably over the life of the agreementin accordance with Statement of Position 97-2, Software Revenue Recognition. Through the standard softwarelicense agreement, customers are provided enhancements and upgrades, if any, that occur during their licenseterm at no additional cost. Customer agreements with multiple licenses are reviewed for separation under theprovision of Emerging Issues Task Force (“EITF”) No. 00-21, Accounting for Revenue Arrangements withMultiple Deliverables. Sales tax charged to customers is presented on a net basis within the consolidatedincome statement and excluded from revenues.

Expense Recognition

Direct costs associated with the Company’s data collection, diary processing and deployment of theCompany’s Portable People Meter ratings business are recognized when incurred and are included in cost ofrevenue. Selling, general, and administrative expenses are recognized when incurred. Research anddevelopment expenses consist primarily of expenses associated with the development of new products andcustomer software and other technical expenses including maintenance of operations and reporting systems.

Cash Equivalents

Cash equivalents consist primarily of highly liquid investments with insignificant interest rate risk andoriginal maturities of three months or less.

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Notes to Consolidated Financial Statements — (Continued)

Short-term Investments

There were no short-term investment assets recorded on the Company’s consolidated balance sheet as ofDecember 31, 2008, and 2007. All of the Company’s short-term investment assets, if any, are classified asavailable-for-sale securities in accordance with the Financial Accounting Standards Board’s (“FASB”)Statement of Financial Accounting Standards (“SFAS”) No. 115, Accounting for Certain Investments in Debtand Equity Securities. No short-term investment transactions occurred during 2008. During 2007, and 2006,purchases and sales of short-term investments consisted of the buying and selling of variable rate demandnotes and auction rate securities. These investments were investment grade, highly liquid securities. TheCompany conducted these transactions through various financial institutions which were evaluated for theircredit quality. Because the Company’s short-term investment transactions were traded at par, the amount ofrealized gains and losses included in earnings was zero.

Trade Accounts Receivable

Trade accounts receivable are recorded at invoiced amounts. The allowance for doubtful accounts isestimated based on historical trends of past due accounts and write-offs, as well as a review of specificaccounts.

Inventories

Inventories consist of PPM equipment held for resale to international licensees of the PPM service. Theinventory is accounted for on a first-in, first-out (FIFO) basis.

Property and Equipment

Property and equipment are recorded at cost and depreciated or amortized on a straight-line basis over theestimated useful lives of the assets, which are as follows:

Computer equipment 3 years Purchased and internally developed software 3 – 5 years Leasehold improvements Shorter of useful life or life of lease Machinery, furniture and fixtures 3 – 6 years

Repairs and maintenance are charged to expense as incurred. Gains and losses on dispositions areincluded in the consolidated results of operations at the date of disposal.

Expenditures for significant software purchases and software developed for internal use are capitalized.For software developed for internal use, all external direct costs for materials and services and certain payrolland related fringe benefit costs are capitalized in accordance with Statement of Position 98-1, Accounting forthe Costs of Computer Software Developed or Obtained for Internal Use. The costs are capitalized from thetime that the preliminary project stage is completed and management considers it probable that the softwarewill be used to perform the function intended until the time the software is placed in service for its intendeduse. Once the software is placed in service, the capitalized costs are amortized over periods of three to fiveyears. Management performs an assessment quarterly to determine if it is probable that all capitalizedsoftware will be used to perform its intended function. If an impairment exists, the software cost is writtendown to estimated fair value.

Investment in Affiliates

Investment in affiliates is accounted for using the equity method where the Company has an ownershipinterest of 50% or less and the ability to exercise significant influence or has a majority ownership interest butdoes not have the ability to exercise effective control.

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Goodwill and Other Intangibles

Goodwill represents the excess of costs over fair value of assets of businesses acquired. Goodwill andintangible assets acquired in a purchase business combination and determined to have an indefinite useful lifeare not amortized, but instead tested for impairment at least annually in accordance with the provisions ofSFAS No. 142, Goodwill and Other Intangible Assets (“SFAS No. 142”). The Company performs its annualimpairment test at the reporting unit level as of January 1st for each fiscal year. SFAS No. 142 also requiresthat intangible assets with estimable useful lives be amortized over their respective estimated useful lives totheir estimated residual values, and reviewed for impairment in accordance with SFAS No. 144, Accountingfor the Impairment or Disposal of Long-Lived Assets (“SFAS No. 144”).

Goodwill and intangible assets not subject to amortization are tested annually for impairment, and aretested for impairment more frequently if events and circumstances indicate that the asset might be impaired.An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value.

Impairment of Long-Lived Assets

Long-lived assets, such as property, plant, and equipment, and purchased intangibles subject toamortization, are reviewed for impairment whenever events or changes in circumstances indicate that thecarrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measuredby a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected tobe generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, animpairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fairvalue of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value lesscosts to sell, and effective with the date classified as held for sale, are no longer depreciated. The assets andliabilities of a disposal group classified as held for sale, as well as the results of operations and cash flows ofthe disposal group, if any, are presented separately in the appropriate sections of the consolidated financialstatements for all periods presented.

Income Taxes

Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities arerecognized based on the future tax consequences attributable to differences between financial statementcarrying amounts of existing assets and liabilities and their respective tax bases and operating loss and taxcredit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to applyto taxable income in years in which those temporary differences are expected to be recovered or settled. Theeffect on deferred tax assets and liabilities of a change in tax rate is recognized in income in the period thatincludes the enactment date.

Net Income per Weighted Average Common Share

The computations of basic and diluted net income per weighted-average common share for 2008, 2007,and 2006 are based on the Company’s weighted-average shares of common stock and potentially dilutivesecurities outstanding.

Potentially dilutive securities are calculated in accordance with the treasury stock method, which assumesthat the proceeds from the exercise of all stock options are used to repurchase the Company’s common stockat the average market price for the period. As of December 31, 2008, 2007, and 2006, there were options topurchase 1,713,557, 1,685,251, and 2,102,596 shares of the Company’s common stock outstanding,respectively, of which options to purchase 1,646,825, 183,110, and 767,894 shares of the Company’scommon stock, respectively, were excluded from the computation of the diluted net income perweighted-average common share, either because the options’ exercise prices were greater than the averagemarket price of the Company’s common shares or assumed repurchases from proceeds from the options’exercise were antidilutive. The Company elected to use the short-cut

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method of determining its initial hypothetical tax benefit windfall pool and, in accordance with provisionsunder SFAS No. 123R, Share-Based Payments, (“SFAS No. 123R”) the assumed proceeds associated withthe entire amount of tax benefits for share-based awards granted prior to SFAS No. 123R adoption were usedin the diluted shares computation. For share-based awards granted subsequent to the January 1, 2006SFAS No. 123R adoption date, the assumed proceeds for the related excess tax benefits were considered inthe diluted shares computation.

Translation of Foreign Currencies

Financial statements of foreign subsidiaries are translated into United States dollars at current rates at theend of the period except that revenue and expenses are translated at average current exchange rates duringeach reporting period. Net translation exchange gains or losses and the effect of exchange rate changes onintercompany transactions of a long-term nature are recorded in accumulated other comprehensive loss instockholders’ (deficit) equity. Gains and losses from translation of assets and liabilities denominated in otherthan the functional currency of the operation are recorded in income as incurred.

Advertising Expense

The Company recognizes advertising expense the first time advertising takes place. Advertising expensefor the years ended December 31, 2008, 2007 and 2006, was $1.8 million, $1.7 million and $1.8 million,respectively.

Accounting Estimates

The preparation of the consolidated financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities atthe date of the consolidated financial statements and the reported amounts of revenues and expenses duringthe reporting period. Significant items, if any, subject to such estimates and assumptions may include:valuation allowances for receivables and deferred income tax assets, loss contingencies, and assets andobligations related to employee benefits. Actual results could differ from those estimates.

Legal Matters

The Company is involved, from time to time, in litigation and proceedings arising out of the ordinarycourse of business. Legal costs for services rendered in the course of these proceedings are charged toexpense as they are incurred.

Leases

The Company conducts all of its operations in leased facilities and leases certain equipment which haveminimum lease obligations under noncancelable operating leases. Certain of these leases contain rentescalations based on specified percentages. Most of the leases contain renewal options and require paymentsfor taxes, insurance and maintenance. Rent expense is charged to operations as incurred except for escalatingrents, which are charged to operations on a straight-line basis over the life of the lease.

New Accounting Pronouncements

FASB Staff Position SFAS No. 132(R)-1 amended SFAS No. 132(R), Employers Disclosures aboutPensions and Other Postretirement Benefits, to provide guidance on an employer’s disclosures about planassets of a defined benefit pension or other postretirement plan. The disclosure requirements are effective forfiscal years ending after December 15, 2009. The Company does not expect such adoption to have a materialimpact on the Company’s consolidated financial statements.

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In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS No. 157”),which defines fair value, establishes guidelines for measuring fair value and expands disclosures regardingfair value measurements. SFAS No. 157 does not require any new fair value measurements but rathereliminates inconsistencies in guidance found in various prior accounting pronouncements. The Companyadopted SFAS No. 157, effective January 1, 2008, for all financial assets and liabilities and the impact to theconsolidated financial statements was immaterial. In accordance with FASB Staff Position 157-2, theprovisions of SFAS No. 157 are effective for nonfinancial assets and liabilities for fiscal years beginning afterNovember 15, 2008. The Company is evaluating the impact of adopting the nonfinancial asset andnonfinancial liability provisions of SFAS No. 157, but does not currently expect such adoption, effectiveJanuary 1, 2009, to have a material impact on the Company’s consolidated financial statements.

Effective December 31, 2006, the Company adopted SFAS No. 158, Employers’ Accounting for DefinedBenefit Pension and Other Postretirement Plans (“SFAS No. 158”). In accordance with the provisions ofSFAS No. 158, the measurement date for measuring plan assets and benefit obligations was required to be asof the date of a company’s fiscal year-end statement of financial position effective for fiscal years endingafter December 15, 2008. See Note 14 in the notes to consolidated financial statements for disclosures relatedto the impact on the Company’s consolidated financial statements resulting from its adoption of thismeasurement date provision of SFAS No. 158, effective December 31, 2008 for the Company.

3. Discontinued Operation

During the fourth quarter of 2007, the Company approved a plan to sell CSW Research Limited(“Continental Research”), which represents a component of the Company’s international operations. OnJanuary 31, 2008, the Continental Research business was sold at a gain on sale of $0.4 million. In accordancewith SFAS No. 144, the net assets, results of operations, and cash flow activity of Continental Research werereclassified separately as a discontinued operation within the consolidated financial statements for all periodspresented. The following tables present key information associated with the net assets and operating results ofthe discontinued operations for the reporting periods included in the Company’s 2008 consolidated balancesheet and income statement (in thousands):

December 31, December 31, Assets and Liabilities of Discontinued Operations 2008 2007

Cash $ — $ 987 Receivables — 4,112 Deferred taxes-current — 49 Prepaids and other current assets — 529

Current assets — 5,677

Property, plant and equipment — 46 Goodwill — 2,058 Deferred taxes-noncurrent — (235)

Noncurrent assets — 1,869

Total assets $ — $ 7,546

Accounts payable $ — $ 1,499 Accrued expenses and other current liabilities — 2,526 Deferred revenue — 626

Total liabilities $ — $ 4,651

Accumulated other comprehensive income $ — $ 376

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Years Ended December 31, Results of Operations of Discontinued Operations 2008 2007 2006

Revenue $ 1,011 $ 13,578 $ 9,915

Operating (loss) income (791) 119 313 Net interest income 7 126 92

(Loss) income before income tax benefit (expense) (784) 245 405 Income tax benefit (expense) 322 (569) (93)

(Loss) income from discontinued operations, net of taxes (462) (324) 312 Gain on sale, net of taxes 423 — —

Total (loss) income from discontinued operations, net of tax $ (39) $ (324) $ 312

During December 2007, a $1.4 million distribution of accumulated earnings was received by theCompany from Continental Research in anticipation of the sale. This distribution was recognized as taxabledividend income in the United States. The related tax accrual was recognized as additional income taxexpense and included in the results of discontinued operations for the year ended December 31, 2007.

4. Inventories

Inventories as of December 31, 2008, and 2007, consisted of $2.5 million and $0.8 million, respectively,of PPM equipment held for resale to international licensees of the PPM service.

5. Investment in Affiliates

As of December 31, 2008, investment in affiliates consisted of the Company’s 49.5% interest inScarborough, a syndicated, qualitative local market research partnership. As of December 31, 2007,investment in affiliates also included the Company’s 50.0% interest in Project Apollo LLC, a pilot nationalmarketing research service, which was subsequently terminated on June 30, 2008. Both investments havebeen accounted for using the equity method of accounting. The following table shows the investment activityfor each of the Company’s affiliates during 2008 and 2007. Scarborough was the only affiliate owned by theCompany during 2006.

Summary of Investment Activity in Affiliates (in thousands)

Year Ended December 31, 2008 Year Ended December 31, 2007 Scarborough Project Apollo LLC Total Scarborough Project Apollo LLC Total

Beginning balance $ 14,420 $ 842 $ 15,262 $ 13,907 $ — $ 13,907 Equity in net income

(loss) 8,581 (1,904) 6,677 8,313 (4,256) 4,057 Distributions from

affiliates (8,100) — (8,100) (7,800) — (7,800)Non-cash investments

in affiliates — — — — 2,213 2,213 Cash investments in

affiliates — 1,062 1,062 — 2,885 2,885

Ending balance $ 14,901 $ — $ 14,901 $ 14,420 $ 842 $ 15,262

Under the Scarborough partnership agreement, the Company has the exclusive right to licenseScarborough’s services to radio stations, cable companies, and out-of-home media, and a nonexclusive rightto license Scarborough’s services to advertising agencies and advertisers. The Company pays a royalty fee toScarborough based on a percentage of revenues. Royalties of $26.8 million, $26.4 million and $24.0 millionfor 2008, 2007 and

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2006, respectively, are included in cost of revenue in the Company’s consolidated statements of income.Accrued royalties due to Scarborough as of December 31, 2008, and 2007, of $6.3 million and $6.0 million,respectively, are included in accrued expenses and other current liabilities in the consolidated balance sheets.

Scarborough’s revenue was $69.3 million, $67.4 million and $61.1 million in 2008, 2007 and 2006,respectively. Scarborough’s net income was $17.0 million, $16.6 million and $15.5 million, respectively.Scarborough’s total assets and liabilities were $36.4 million and $2.1 million, and $36.5 million and$3.0 million, as of December 31, 2008, and 2007, respectively.

On February 25, 2008, the Company announced its agreement with Nielsen to terminate Project ApolloLLC. Project Apollo LLC’s revenue was $0.6 million and $3.3 million for the years ended December 31,2008, and 2007, respectively. As a result of the termination, Project Apollo LLC’s net assets were liquidatedas of June 30, 2008. Project Apollo LLC’s assets and liabilities were $3.1 million and $1.4 million as ofDecember 31, 2007, respectively. Project Apollo LLC’s net loss was $3.8 million and $8.5 million for theyears ended December 31, 2008, and 2007, respectively.

6. Property and Equipment

Property and equipment as of December 31, 2008, and 2007 consist of the following (in thousands):

2008 2007

Purchased and internally developed software $ 44,463 $ 35,089 Portable People Meter equipment 28,915 17,883 Computer equipment 17,327 14,388 Leasehold improvements 14,435 11,910 Machinery, furniture and fixtures 8,828 7,164

113,968 86,434 Accumulated depreciation and amortization (51,038) (36,251)

Property and equipment, net $ 62,930 $ 50,183

For the Years Ended December 31, Summary of Other Information 2008 2007 2006

Depreciation and amortization expense $ 17,161 $ 11,773 $ 7,842 Impairment charges $ 48 $ 831 $ 638 Interest capitalized during the year $ 107 $ 42 $ 1,032

7. Goodwill and Other Intangible Assets

Goodwill is measured for impairment annually as of January 1, under the guidance set forth inSFAS No. 142. In addition, a valuation will be performed when conditions arise that could potentially triggeran impairment. During 2008, 2007 and 2006, the Company tested its goodwill in accordance withSFAS No. 142 and concluded that no impairment charge was required. Intangible assets, which consistprimarily of acquired software, customer lists and noncompete agreements, with finite lives are beingamortized to expense over their estimated useful lives. As of December 31, 2008 and 2007, the Company hadno intangible assets with indefinite useful lives.

2008 2007 2006

Amortization expense for intangibles $ 302 $ 777 $ 1,550

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Future amortization expense for intangible assets is estimated to be as follows:

Amount

2009 $ 141 2010 $ 141 2011 $ 141 2012 $ 141 2013 $ 141 Thereafter $ 245

In accordance with SFAS No. 144, the net assets, results of operations, and cash flow activity ofContinental Research, including any related goodwill, have been reclassified as a discontinued operation heldfor sale and will be presented separately from the continued operations within the reported consolidatedfinancial statements for all periods presented. See Note 3 for further information.

8. Prepaids and Other Current Assets

Prepaids and other current assets as of December 31, 2008, and 2007, consists of the following (inthousands):

2008 2007

Insurance recovery receivables $ 5,775 $ — Survey participant incentives and prepaid postage 1,621 1,144 Other 2,771 2,532

Prepaids and other current assets $ 10,167 $ 3,676

During 2008, the Company was involved in a number of significant securities law related legal actionsand governmental interactions primarily related to the commercialization of our PPM service. The Companybelieves the costs associated with certain of these securities law related legal actions and governmentalinteractions will be eligible for coverage under the Company’s Director’s and Officer’s insurance. TheCompany incurred $6.2 million in legal fees and costs in defense of its positions during 2008, related to thoseactions and interactions, of which $4.8 million are probable to be recovered through insurance. The$4.8 million of insurance recovery related to legal costs was reported as a reduction to selling, general, andadministrative expense on the income statement. The Company also recorded an insurance claims receivablerelated to business interruption losses and damages incurred as a result of Hurricane Ike as of December 31,2008. Estimated revenue losses and estimated net incremental costs associated with the damages to theCompany’s Houston operations were $0.4 million and $1.5 million, respectively. The Company believes that$1.0 million of the $1.9 million aggregate loss for Hurricane Ike are probable to be recovered throughinsurance. The $0.8 million portion of the recovery related to business interruption was reported as areduction to cost of goods sold and the approximate $0.2 million portion related to property damage wasreported as a reduction to selling, general, and administrative expense.

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9. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities as of December 31, 2008, and 2007 consist of thefollowing (in thousands):

2008 2007

Employee compensation and benefits $ 18,609 $ 17,832 Royalties due to Scarborough 6,318 5,965 Dividend payable 2,633 2,829 Other 2,172 1,076

$ 29,732 $ 27,702

10. Long-term Debt

Long-term debt as of December 31, 2008, and 2007 was $85.0 million and $12.0 million, respectively.The balance as of December 31, 2007, included $5.0 million of short-term borrowings, which represented theportion of the Company’s revolving credit facility subject to an irrevocable notice of prepayment at that time.

On October 18, 2006, the Company prepaid its then-outstanding senior-secured notes obligation using$50.0 million of its available cash and short-term investments. Under the original terms of the noteagreement, the notes carried a fixed interest rate of 9.96% and a maturity date of January 31, 2008. Inaccordance with the provisions of the note agreement, the Company was obligated to pay an additionalmake-whole interest amount of $2.6 million. The Company accelerated the amortization of the outstandingbalance of deferred financing costs associated with the debenture in the amount of $0.3 million. Both of theseamounts were expensed as interest in the Company’s financial statements during 2006.

On December 20, 2006, the Company entered into an agreement with a consortium of lenders to provideup to $150.0 million of financing to the Company through a five-year, unsecured revolving credit facility (the“Credit Facility”) expiring on December 20, 2011. The agreement contains an expansion feature to increasethe total financing available under the Credit Facility to $200.0 million with such increased financing to beprovided by one or more existing Credit Facility lending institutions, subject to the approval of the lendingbanks, and/or in combination with one or more new lending institutions, subject to the approval of the CreditFacility’s administrative agent. The Credit Facility includes a $15.0 million maximum letter of creditcommitment.

Interest paid in 2008, 2007, and 2006 was $2.3 million, $0.5 million, and $7.5 million, respectively.Interest capitalized in 2008, 2007, and 2006 was $0.1 million, less than $0.1 million, and $1.0 million,respectively. Non-cash amortization of deferred financing costs classified as interest expense in 2008, 2007,and 2006 was $0.1 million, $0.1 million, and $0.4 million, respectively. The interest rate on outstandingborrowings as of December 31, 2008, and 2007, was 1.31% and 5.80%, respectively.

The Credit Facility has two borrowing options, a Eurodollar rate option or an alternate base rate option,as defined in the agreement. Under the Eurodollar option, the Company may elect interest periods of one,two, three or six months at the inception date and each renewal date. Borrowings under the Eurodollar optionbear interest at the London Interbank Offered Rate (LIBOR) plus a margin of 0.575% to 1.25%. Borrowingsunder the base rate option bear interest at the higher of the lead lender’s prime rate or the Federal Funds rateplus 50 basis points, plus a margin of 0.00% to 0.25%. The specific margins, under both options, aredetermined based on the Company’s ratio of indebtedness to earnings before interest, income taxes,depreciation, amortization and non-cash share-based compensation (the “leverage ratio”), and is adjustedevery ninety days. The agreement contains a facility fee provision whereby the Company is charged a fee,ranging from 0.175% to 0.25%, applied to the total amount of the commitment. Under the terms of the CreditFacility, the Company is required to maintain certain leverage and coverage ratios and meet other financialconditions. The agreement contains certain financial covenants, and limits,

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among other things, on the Company’s ability to sell certain assets, incur additional indebtedness, and grant orincur liens on its assets. Under the terms of the Credit Facility, all of the Company’s material domesticsubsidiaries, if any, guarantee the commitment. As of December 31, 2008, and 2007, the Company had nomaterial domestic subsidiaries as defined by the terms of the Credit Facility. As of December 31, 2008, and2007, the Company was in compliance with the terms of its Credit Facility agreement.

If a default occurs on outstanding borrowings, either because the Company is unable to generatesufficient cash flow to service the debt or because the Company fails to comply with one or more of therestrictive covenants, the lenders could elect to declare all of the then outstanding borrowings, as well asaccrued interest and fees, to be immediately due and payable. In addition, a default may result in theapplication of higher rates of interest on the amounts due.

11. Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss as of December 31, 2008, and 2007 were asfollows (in thousands):

2008 2007

Retirement plan liabilities, net of tax $ (14,719) $ (7,283)Foreign currency translation, net of tax (284) 374

Accumulated other comprehensive loss $ (15,003) $ (6,909)

12. Commitments and Contingencies

Leases

The Company conducts all of its operations in leased facilities and leases certain equipment which haveminimum lease obligations under noncancelable operating leases. Certain of these leases contain rentescalations based on specified percentages. Most of the leases contain renewal options and require paymentsfor taxes, insurance and maintenance. Rent expense is charged to operations as incurred except for escalatingrents, which are charged to operations on a straight-line basis over the life of the lease. Rent expense was$9.0 million, $8.9 million and $9.3 million in 2008, 2007, and 2006, respectively.

Future minimum lease commitments under noncancelable operating leases having an initial term of morethan one year, are as follows (in thousands):

2009 $ 8,945 2010 8,016 2011 7,202 2012 6,053 2013 4,903 Thereafter 24,249

$ 59,368

Legal Matters

The Company is involved, from time to time, in litigation and proceedings arising out of the ordinarycourse of business. Legal costs for services rendered in the course of these proceedings are charged toexpense as they are incurred.

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During 2008, the Company was involved in a number of significant legal actions and governmentalinteractions primarily related to the commercialization of our PPM service. The Company incurred$6.2 million in legal fees and costs in connection with these actions and interactions during 2008, of which$4.8 million are probable to be recovered through insurance. In accordance with SFAS No. 5, Contingencies,no contingent losses have been recorded for these claims as of December 31, 2008 because the Companybelieves the likelihood of a significant loss is remote.

The Company believes the costs associated with certain of these securities law related legal actions andgovernmental interactions and securities law issues related thereto will be eligible for coverage under theCompany’s Director’s and Officer’s insurance.

13. Income Taxes

The provision for income taxes on continuing operations is based on income recognized for consolidatedfinancial statement purposes and includes the effects of permanent and temporary differences between suchincome and income recognized for income tax return purposes. As a result of the reverse spin-off fromCeridian, deferred tax assets consisting of net operating loss and credit carryforwards were transferred fromCeridian to the Company, along with temporary differences related to the Company’s business. The netoperating loss carryforwards will expire in varying amounts from 2009 to 2028.

The components of income from continuing operations before income tax expense and a reconciliation ofthe statutory federal income tax rate to the income tax rate on income from continuing operations beforeincome tax expense for the years ended December 31, 2008, 2007 and 2006 are as follows (dollars inthousands):

2008 2007 2006

Income from continuing operations before income tax expense: U.S. $ 61,898 $ 64,562 $ 80,470 International (349) 230 135

Total $ 61,549 $ 64,792 $ 80,605

Income tax expense: Current:

U.S. $ 19,628 $ 20,817 $ 25,463 State, local and foreign 2,302 1,703 894

Total 21,930 22,520 26,357

Deferred: U.S. 469 478 1,410 State, local and foreign 1,931 1,290 2,492

Total 2,400 1,768 3,902

$ 24,330 $ 24,288 $ 30,259

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2008 2007 2006

U.S. statutory rate 35.0% 35.0% 35.0%

Income tax expense at U.S. statutory rate $ 21,542 $ 22,677 $ 28,211 State income taxes, net of federal benefit 2,770 1,902 2,183 Tax-exempt interest income — (613) (1,052)Meals and entertainment 294 358 278 Foreign tax credit and capital loss carryforward 282 (452) — (Decrease) increase in valuation allowance for foreign tax

credit (282) 452 — Reduction in valuation allowance for state NOLs — (12) (252)Adjustments to tax liabilities 257 294 722 Other (533) (318) 169

Income tax expense $ 24,330 $ 24,288 $ 30,259

Effective tax rate 39.5% 37.5% 37.5%

The effective tax rate on continuing operations was 39.5% for the year ended December 31, 2008. Theeffective tax rate increased from 37.5% in 2007 to 39.5% in 2008 primarily due to decreased tax benefits fromthe Company’s tax-exempt interest income earned during the year ended December 31, 2008 as compared tothe same period in 2007, and due to increased income tax rates in certain states.

During 2008, certain liabilities for tax contingencies related to prior periods were recognized inaccordance with FASB Interpretation No. 48 (“FIN No. 48”), Accounting for Uncertainty in Income Taxes.Certain other liabilities were reversed due to the settlement and completion of income tax audits and returnsand the expiration of audit statutes during the year. The net tax expense of these changes and other items was$0.2 million in 2008.

On January 1, 2007, the Company adopted the provisions of FIN No. 48, and assessed all materialpositions taken on income tax returns for years through December 31, 2006, that are still subject toexamination by relevant taxing authorities. The impact of applying the provisions of FIN No. 48 wasimmaterial to the Company’s consolidated financial statements.

The following table summarizes the activity related to the Company’s unrecognized tax benefits as ofDecember 31, 2008 (in thousands):

Total

Balance at January 1, 2008 $ 981 Increases related to current year tax positions 147 Increases related prior years’ tax positions 442 Expiration of the statute of limitations for the assessment of taxes (150)

Balance at December 31, 2008 $ 1,420

During 2008, the Company’s net unrecognized tax liabilities for certain tax contingencies increased by$0.4 million to $1.4 million as of December 31, 2008. If recognized, the $1.4 million of unrecognized taxbenefits would reduce the Company’s effective tax rate in future periods.

The Company accrues potential interest and penalties and recognizes income tax expense where, underrelevant tax law, interest and penalties would be assessed if the uncertain tax position ultimately were notsustained. The Company has recorded a liability for potential interest and penalties of $0.2 million as ofDecember 31, 2008.

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Management determined it is reasonably possible that certain unrecognized tax benefits as ofDecember 31, 2008 will decrease during the subsequent 12 months due to the expiration of statutes oflimitations and due to the settlement of certain state audit examinations. The estimated decrease in theseunrecognized federal tax benefits and the estimated decrease in unrecognized tax benefits from various statesare both immaterial.

The Company files numerous income tax returns, primarily in the United States, including federal, state,and local jurisdictions, and certain foreign jurisdictions. Tax years ended December 31, 2005 throughDecember 31, 2007, remain open for assessment by the Internal Revenue Service. Generally, the Company isnot subject to state, local, or foreign examination for years prior to 2003. However, tax years 1990 through2002 remain open for assessment for certain state taxing jurisdictions where net operating loss (“NOL”)carryforwards were utilized on income tax returns for such states since 2003.

Temporary differences and the resulting deferred income tax assets of continuing operations as ofDecember 31, 2008, and 2007, were as follows (dollars in thousands):

2008 2007

Deferred tax assets Current deferred tax assets Accruals $ 2,273 $ 1,900 Net operating loss carryforwards 203 1,224

2,476 3,124 Noncurrent deferred tax assets Benefit plans $ 11,213 $ 5,966 Depreciation 1,526 2,101 Accruals 731 805 Net operating loss carryforwards — 202 FAS 123R share-based compensation 5,378 3,588 Partnership interest 2,285 2,265 Other 1,093 685

22,226 15,612 Less valuation allowance (332) (452)

Total deferred tax assets 24,370 18,284

Deferred tax liabilities Noncurrent deferred tax liabilities Goodwill and other intangible amortization $ (12,097) $ (8,229)Benefit plans (2,084) (2,707)Other (137) (135)

Total deferred tax liabilities (14,318) (11,071)

Net deferred tax assets $ 10,052 $ 7,213

In assessing the realizability of deferred tax assets, management considers whether it is more likely thannot that some portion or all of the deferred tax assets will be realized. The ultimate realization of the deferredtax assets is dependent upon the generation of future taxable income during periods in which the temporarydifferences become deductible and before tax credits or net operating loss carryforwards expire. Managementconsidered the historical results of the Company during the previous three years and projected future U.S. andforeign taxable

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income and determined that a valuation allowance of $0.3 million and $0.5 million was required as ofDecember 31, 2008 and 2007, respectively for certain capital loss and foreign tax credit carryforwards.

Income taxes paid on continuing operations in 2008, 2007 and 2006 were $19.8 million, $19.3 millionand $25.6 million, respectively.

14. Retirement Plans

Adoption of SFAS No. 158 Measurement Date Provisions

In September 2006, the FASB issued SFAS No. 158, which requires that the measurement date of benefitplans be as of the date of the Company’s fiscal year-end statement of financial position effective for fiscalyears ending after December 15, 2008. The Company adopted the measurement provisions of SFAS No. 158,effective as of December 31, 2008. As of the Company’s prior fiscal year ended December 31, 2007, theCompany’s measurement date was September 30, 2007. In accordance with SFAS No. 158, the Companyrecognized an adjustment to retained earnings associated with the first three months of the 15 month transitionperiod between measurement dates. The amount recorded as a reduction to retained earnings for all of theCompany’s defined benefit plans combined was $0.4 million.

Recognition of SFAS No. 88 Settlement

In accordance with our retirement plan provisions, retirement plan participants may elect, at their option,to receive their retirement benefits either in a lump sum payment or an annuity. According to SFAS No. 88,Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and forTermination Benefits, if the lump sum distributions paid during the plan year exceed the total of the servicecost and interest cost for the plan year, the unrecognized loss or gain should be recognized for the pro rataportion equal to the percentage reduction of the projected benefit obligation. Lump sum payments exceededthis threshold during the year ended December 31, 2008. Accordingly, the Company recognized a loss of$1.7 million in the results of operations as follows:

(Dollars in thousands) 2008

Cost of revenue $ 885 Selling, general, and administrative 484 Research and development 301

Total costs and expenses $ 1,670

Lump sum payments did not exceed the threshold during 2007 or 2006 and therefore, no settlementrelated loss was recognized in either 2007 or 2006.

Pension Benefits

Certain of the Company’s U.S. employees participate in a defined benefit pension plan that closed to newparticipants effective January 1, 1995. Benefits under the plan for most eligible employees are calculatedusing the final five-year average salary of the employee. Employees participate in this plan by means of salaryreduction contributions. Retirement plan funding amounts are based on independent consulting actuaries’determination of the Employee Retirement Income Security Act of 1974 funding requirements.

For purposes of measuring the Company’s benefit obligation as of December 31, 2008, the measurementdate for the Company’s defined benefit plans in 2008, a discount rate of 5.37% was used. This discount ratewas chosen using an analysis of the Hewitt Bond Universe yield curve that reflects the plan’s projected cashflows. A 6.00% discount rate, which was determined using Moody’s AA Corporate Bond yields, was used formeasuring the September 30, 2007 benefit obligation. Due primarily to the effect of declining marketconditions, the pension

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plan’s investments yielded significant losses, which caused the fair value of plan assets to decrease as ofDecember 31, 2008, as compared to the fair value at September 30, 2007. In addition, the plan’s projectbenefit obligation increased, partially due to the use of a lower discount rate as of the December 31, 2008.The Company’s projected benefit obligations exceeded plan assets by $14.0 million as of December 31, 2008,and $2.6 million as of September 30, 2007. Pension cost was $1.1 million, $1.1 million and $1.4 million for2008, 2007 and 2006, respectively.

The Company’s expected long-term rate of return on assets is 8.0%. The Company employs a total returninvestment approach whereby a mix of equities and fixed income investments is used to maximize thelong-term return of plan assets for a prudent level of risk. The intent of this strategy is to minimize planexpenses by outperforming plan liabilities over the long run. Risk tolerance is established through carefulconsideration of plan liabilities, plan funded status, and corporate financial condition. The investmentportfolio contains a diversified blend of equity and fixed income investments. Furthermore, equityinvestments are diversified across U.S. and non-U.S. stocks as well as growth and value stocks. Investmentrisk is measured and monitored on an ongoing basis through annual liability measurements, periodicasset/liability studies and periodic investment performance reviews.

The Company’s investment strategy is to diversify assets so that adverse results from one asset or assetclass will not have an unduly detrimental effect on the entire portfolio. Diversification includes by type, bycharacteristic, and by number of investments, as well as by investment style of management organization.Cash held and intended to pay benefits is considered to be a residual asset in the asset mix, and therefore,compliance with the ranges and targets specified shall be calculated excluding such assets. Assets of the plando not include securities issued by Arbitron. The target allocation for each asset class is 60% equity securitiesand 40% debt securities. Arbitron’s pension plan weighted-average asset allocations as of December 31,2008, and September 30, 2007, by asset category were as follows:

Plan Assets as of December 31, September 30, Asset Category 2008 2007

Equity securities 60% 59%Debt securities 39% 40%Cash and cash equivalents 1% 1%

Total 100% 100%

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The components of net periodic cost and other comprehensive loss for the twelve months endedDecember 31, 2008, 2007, and 2006, are as follows (in thousands):

Net Periodic Cost 2008 2007 2006

Service cost of benefits $ 783 $ 869 $ 966 Interest cost 2,026 1,781 1,651 Expected return on plan assets (2,423) (2,208) (1,970)Amortization of net actuarial loss 728 661 719 Amortization of prior service cost 22 22 22

Total $ 1,136 $ 1,125 $ 1,388

Other changes in plan assets and projected benefit obligationrecognized in other comprehensive loss

Net actuarial loss arising this period 12,229 696 N/A Actuarial loss charged to expense due to settlement (1,670) Net actuarial loss amortized this period (728) (661) N/A Prior service cost amortized this period (22) (22) N/A

Recognized in other comprehensive loss 9,809 13 N/A

Recognized in net periodic pension cost and other comprehensiveloss $ 10,945 $ 1,138 N/A

Measurement date change adjustment recognized directly intoaccumulated other comprehensive loss

Net actuarial loss $ (182) N/A Prior service cost $ (6) N/A

The Company’s estimate for contributions to be paid in 2009 is $2.7 million. The expected benefitpayments are as follows (in thousands):

2009 $ 1,687 2010 $ 1,277 2011 $ 1,671 2012 $ 1,877 2013 $ 2,119 2014 - 2018 $ 13,106

The accumulated benefit obligation for the defined benefit pension plan was $30.8 million as ofDecember 31, 2008, and $30.4 million as of September 30, 2007.

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The funded status of the plan as of the measurement dates of December 31, 2008, and September 30,2007, and the change in funded status for the measurement periods ended December 31, 2008, andSeptember 30, 2007 are shown in the accompanying table for the Company’s pension plan, along with theassumptions used in the calculations (dollars in thousands):

Pension Plan Fifteen Months Ended Twelve Months Ended December 31, September 30, 2008 2007

Change in projected benefit obligation At beginning of period $ 34,889 $ 31,934 Service cost 979 869 Interest cost 2,532 1,781 Plan participants’ contributions 392 347 Actuarial loss 2,171 2,053 Benefits paid (4,661) (2,095)

At end of period $ 36,302 $ 34,889

Change in fair value of plan assets At beginning of period $ 32,273 $ 28,474 Actual return on plan assets (7,029) 3,565 Employer contribution 1,362 1,982 Plan participants’ contributions 392 347 Benefits paid (4,661) (2,095)

At end of period $ 22,337 $ 32,273

Funded status — net pension liability at fiscalyear end $ (13,965) $ (2,616)

Amounts recognized in accumulated othercomprehensive loss

Net actuarial loss $ 19,244 $ 9,595 Prior service cost $ 22 $ 50 Estimated amounts of accumulated other

comprehensive loss to be recognized as netperiodic cost during the subsequent period

Net actuarial loss $ 994 $ 728 Prior service cost $ 22 $ 22 Measurement date adjustment to retained

earnings $ 284 N/A Weighted-average assumptions

Discount rate — components of cost 6.00% 5.75%Discount rate — benefit obligations 5.37% 6.00%

Expected return on plan assets 8.00% 8.00%Rate of compensation increase N/A N/A

Supplemental Retirement Benefits

The Company also sponsors two nonqualified, unfunded supplemental retirement plans; the BenefitEqualization Plan and the Supplemental Executive Retirement Plan (“BEP” and “SERP” respectively or“Supplemental Plans” combined). The purpose of the BEP is to ensure that pension plan participants will notbe deprived of benefits

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otherwise payable under the pension plan but for the operation of the provisions of Internal Revenue Codesections 415 and 401. The accumulated benefit obligation for the BEP as of December 31, 2008, andSeptember 30, 2007, was $5.0 million and $2.3 million, respectively. The SERP is a supplemental retirementplan for the Company’s chief executive officer. The accumulated benefit obligation for the SERP as ofDecember 31, 2008, and 2007, was $0.7 million and $0.5 million, respectively.

As of December 31, 2008 and 2007, prepaid pension costs related to the Supplemental Plans of$0.4 million and $0.3 million, respectively, were held in benefit protection trusts and included in othernoncurrent assets in the consolidated balance sheets. The Company’s estimate for contributions to be paid in2009 is $0.7 million. The expected benefit payments for the Supplemental Plans are as follows (in thousands):

2009 $ 728 2010 $ 1,132 2011 $ 404 2012 $ 446 2013 $ 401 2014 - 2018 $ 1,943

The components of net periodic cost and other comprehensive loss (income) for the Supplemental Plansfor the twelve months ended December 31, 2008, 2007, and 2006 are as follows (in thousands):

Net periodic cost 2008 2007 2006

Service cost of benefits $ 118 $ 130 $ 57 Interest cost 234 209 162 Amortization of net actuarial loss 184 193 123 Amortization of prior service credit (22) (22) (22)

Total $ 514 $ 510 $ 320

Other changes in plan assets and projected benefit obligationrecognized in other comprehensive loss (income)

Net actuarial loss arising this period $ 2,726 $ 71 N/A Net actuarial loss amortized this period (184) (193) N/A Prior service credit amortized this period 22 22 N/A

Recognized in other comprehensive loss (income) $ 2,564 $ (100) N/A

Recognized in net periodic cost and other comprehensive loss (income) $ 3,078 $ 410 N/A


Net actuarial loss $ (33) N/A Prior service cost $ 6 N/A

The funded status as of the measurement dates of December 31, 2008, and September 30, 2007, and thechange in funded status for the measurement periods ended December 31, 2008, and September 30, 2007 areshown in the

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accompanying table for the Company’s supplemental retirement plans, along with the assumptions used in thecalculations (dollars in thousands):

Supplemental Retirement Plans Fifteen Months Ended Twelve Months Ended December 31, September 30, 2008 2007

Change in projected benefit obligation At beginning of period $ 4,001 $ 3,653 Service cost 145 130 Interest cost 285 209 Plan participants’ contributions 48 64 Actuarial loss 2,726 75 Benefits paid (177) (130)

At end of period $ 7,028 $ 4,001

Change in fair value of plan assets At beginning of period $ — $ — Actual return on plan assets — — Employer contribution 177 130 Plan participants’ contributions — — Benefits paid (177) (130)

At end of period $ — $ —

Funded status $ (7,028) $ (4,001)

Contributions between measurement date and yearend N/A 16

Net pension liability at fiscal year end $ (7,028) $ (3,985)


Net actuarial loss $ 4,231 $ 1,722 Prior service credit $ (22) $ (50)Estimated amounts of accumulated other


Net actuarial loss $ 557 $ 184 Prior service credit $ (22) $ (22)Measurement date adjustment to retained

earnings $ 105 N/A Weighted-average assumptions Discount rate

Components of cost 6.00% 5.75%Benefit obligations 5.37% 6.00%

Expected return on plan assets N/A N/A Rate of compensation increase N/A N/A

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Postretirement Benefits

The Company provides health care benefits for eligible retired employees who participate in the pensionplan and were hired before January 1, 1992. These postretirement benefits are provided by several health careplans in the United States for both pre-age 65 retirees and certain grandfathered post-age 65 retirees.Employer contributions to these plans differ for various groups of retirees and future retirees. Employeeshired before January 1, 1992 and retiring after that date may enroll in plans for which a Company subsidy isprovided through age 64. As of December 31, 2008, and September 30, 2007, the measurement dates for theCompany’s valuations for the fiscal years ended December 31, 2008, and 2007, respectively, the Company’sdiscount rate on its actuarially determined benefit obligations was 5.37% and 6.00%, respectively. The 5.37%discount rate for 2008 was chosen using an analysis of the Hewitt Bond Universe yield curve that reflects theplan’s projected cash flows. The discount rate for 2007 was determined using Moody’s AA Corporate bondyields.

The Company’s postretirement benefit liability was $1.8 million and $1.5 million as of December 31,2008, and 2007, respectively. The Company’s postretirement benefit expense was $0.2 million for each of theyears ended December 31, 2008, 2007, and 2006, respectively. The plan is unfunded.

The Company expects to make $0.1 million in contributions in 2009. The expected benefit payments areas follows (in thousands):

2009 $ 108 2010 $ 114 2011 $ 120 2012 $ 130 2013 $ 139 2014-2018 $ 827

The components of net periodic pension cost and other comprehensive loss (income) for the twelvemonths ended December 31, 2008, 2007, and 2006, are as follows (in thousands):

Net Periodic Cost 2008 2007 2006

Service cost of benefits $ 41 $ 39 $ 36 Interest cost 94 87 83 Amortization of net actuarial loss 34 44 47

Total $ 169 $ 170 $ 166

Other changes in plan assets and projected benefit obligationrecognized in other comprehensive loss (income)

Net actuarial loss (gain) arising this period $ 129 $ (67) N/A Net actuarial loss amortized this period (34) (44) N/A

Recognized in other comprehensive loss (income) $ 95 $ (111) N/A

Recognized in net periodic cost and other comprehensive loss (income) $ 264 $ 59 N/A


Net actuarial loss $ (8) N/A

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The accompanying table presents the balances of and changes in the aggregate benefit obligation as of themeasurement dates of December 31, 2008, and September 30, 2007 (in thousands):

Postretirement Plan Fifteen Months Ended Twelve Months Ended December 31, September 30, 2008 2007

Change in benefit obligation during the period At beginning of period $ 1,548 $ 1,535 Service cost 51 39 Interest cost 118 87 Plan participants’ contributions 48 28 Actuarial loss (gain) 129 (67)Benefits paid (144) (74)

At end of period $ 1,750 $ 1,548

Change in fair value of plan assets At beginning of period $ — $ — Employer contribution 96 46 Plan participants’ contributions 48 28 Benefits paid (144) (74)

At end of period $ — $ —

Funded status $ (1,750) $ (1,548)Contributions between measurement date and year

end N/A 16

Net postretirement liability at fiscal year end $ (1,750) $ (1,532)


Net actuarial loss $ 610 $ 523 Measurement date adjustment to retained

earnings $ 42 N/A Estimated amounts of accumulated other


Net actuarial loss $ 43 $ 34 Weighted-average assumptions Discount rate

Components of cost 6.00% 5.75%Benefit obligations 5.37% 6.00%

Expected return on plan assets N/A N/A Rate of compensation increase N/A N/A

The assumed health care cost trend rate used in measuring the postretirement benefit obligation was9.00% for pre-age 65 and post-age 65 in 2008, with pre-age and post-age 65 rates declining to an ultimate rateof 5.00% in 2016. A 1.0% change in this rate would change the benefit obligation by approximately$0.1 million and the aggregate service and interest cost by less than $0.1 million.

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401(k) Plan

Arbitron employees may also participate in a defined contribution plan that is sponsored by theCompany. The plan generally provides for employee salary deferral contributions of up to 17% of eligibleemployee compensation. Under the terms of the plan, Arbitron contributes a matching contribution of 50% upto a maximum of 3% of eligible employee compensation related to employees who are pension participantsand up to a maximum of 6% of eligible employee compensation related to employees who are not pensionparticipants. The employer may also make an additional discretionary matching contribution of up to 30% upto the maximum, which is either 3% or 6% of eligible employee compensation depending upon theemployee’s participation in the pension plan. The Company’s costs with respect to its contributions to thedefined contribution plan were $2.7 million, $2.2 million and $2.4 million in 2008, 2007, and 2006,respectively.

15. Share-Based Compensation

The following table sets forth information with regard to the income statement recognition of share-basedcompensation (in thousands):

2008 2007 2006

Cost of revenue $ 756 $ 681 $ 567 Selling, general and administrative 7,131 5,431 5,586 Research and development 528 420 392

Share-based compensation $ 8,415 $ 6,532 $ 6,545

The total income tax benefit recognized in the income statement for share-based compensationarrangements was $3.3 million, $2.4 million, and $2.5 million for the years ended December 31, 2008, 2007,and 2006, respectively. No capitalized share-based compensation cost was incurred during the years endedDecember 31, 2008, 2007, and 2006. The net tax benefit realized for the tax deductions from option exercisedand stock awards vesting during the year was $0.8 million, $2.6 million, and $1.9 million for the years endedDecember 31, 2008, 2007, and 2006, respectively.

On May 13, 2008, the Company’s shareholders approved the 2008 Equity Compensation Plan thatprovides for the grant of share-based awards, including stock options, stock appreciation rights, restrictedstock, and restricted stock units. The maximum amount of authorized share awards to be issued under thisplan is 2,500,000 shares of the Company’s common stock and of this amount, a maximum of 625,000 sharesof the Company’s common stock are authorized to be issued for awards other than stock options and stockappreciation rights. The expiration date of the 2008 Equity Compensation Plan is May 13, 2018.

The Company currently has three active stock incentive plans (“SIP” individually or “SIPs” collectively)from which awards of stock options, nonvested share awards and performance unit awards are available forgrant to eligible participants: the 1999 SIP, a stockholder-approved plan; the 2001 SIP, anon-stockholder-approved plan; and the 2008 Equity Compensation Plan, a stockholder-approved plan. TheCompany’s SIPs permit the grants of share-based awards, including stock options and nonvested shareawards, for up to 8,104,009 shares of common stock. The Company believes that such awards align theinterests of its employees with those of its stockholders. Eligible recipients in the SIPs include all employeesof the Company and any nonemployee director, consultant and independent contractor of the Company. TheCompany’s policy for issuing shares upon option exercise or conversion of its nonvested share awards anddeferred stock units is to issue new shares of common stock, unless treasury stock is available at the time ofexercise or conversion. As of December 31, 2008, shares available for grant were 112,029, 15,368, and2,500,000, under the 1999, 2001, and 2008 plans, respectively.

As of December 31, 2008, 2,736 of the outstanding stock options were originally granted under two ofthe Company’s inactive SIPs, the 1993 and 1996 SIPs, both stockholder-approved plans. No shares areavailable for grant under these inactive plans.

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In some cases, the vesting of share-based awards is accelerated due to an employee’s retirement. Prior tothe adoption of SFAS No. 123R, the amount disclosed for the Company’s pro forma compensation expensedid not include an acceleration of expense recognition for retirement eligible employees. For share-basedarrangements granted subsequent to the adoption of SFAS No. 123R, the Company accelerates expenserecognition if retirement eligibility affects the vesting of the award. If the accelerated pro forma expenserecognition had occurred prior to January 1, 2006, the share-based compensation expense for the years endedDecember 31, 2008, 2007, and 2006, would have been lower by less than $0.1 million, $0.5 million and$1.1 million, respectively.

Stock Options

Stock options awarded to employees under the SIPs generally vest annually over a three-year period,have five-year or 10-year terms and have an exercise price not less than the fair market value of theunderlying stock at the date of grant. Stock options granted to directors under the SIPs generally vest upon thedate of grant, are generally exercisable six months after the date of grant, have 10-year terms and have anexercise price not less than the fair market value of the underlying stock at the date of grant. Certain optionand share awards provide for accelerated vesting if there is a change in control of the Company (as defined inthe SIPs).

The Company uses historical data to estimate option exercise and employee termination in order todetermine the expected term of the option; identified groups of optionholders that have similar historicalexercise behavior are considered separately for valuation purposes. The expected term of options grantedrepresents the period of time that such options are expected to be outstanding. The expected term can vary forcertain groups of optionholders exhibiting different behavior. The risk-free rate for periods within thecontractual life of the option is based on the U.S. Treasury strip bond yield curve in effect at the time of grant.Expected volatilities are based on the historical volatility of the Company’s common stock.

The fair value of each option granted during the years ended December 31, 2008, 2007 and 2006, wasestimated on the date of grant using a Black-Scholes option valuation model that used the assumptions notedin the following table:

Assumptions for options granted to employees and nonemployee directors 2008 2007 2006

Expected volatility 23.99 - 31.31% 24.61 - 26.52% 26.59 - 27.35%Expected dividends 1.00 - 3.00% 1.00% 1.00%Expected term (in years) 5.50 - 6.00 5.75 - 6.25 5.25 - 6.25Risk-free rate 1.44 - 3.44% 3.43 - 4.91% 4.35 - 5.01%Weighted-average volatility 25.26% 25.45% 27.32%Weighted-average term (in years) 5.93 5.94 5.74Weighted-average risk-free rate 2.90% 4.59% 4.70%Weighted-average grant date fair value $11.40 $14.86 $12.55

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A summary of option activity under the SIPs as of December 31, 2008, and changes during the year thenended, is presented below:

Weighted- Average Weighted- Remaining Aggregate Average Contractual Intrinsic Value Options Shares Exercise Price Term (Years) (In thousands)

Outstanding at January 1, 2008 1,685,251 $ 38.46 Granted 323,471 42.44 Exercised (269,848) 33.62 Forfeited or expired (25,317) 41.05

Outstanding at December 31, 2008 1,713,557 $ 39.93 6.64 $ 1

Vested or expected to vest atDecember 31, 2008 1,706,582 $ 39.92 6.65 $ 1

Exercisable at December 31, 2008 1,282,837 $ 39.05 5.98 —

As of December 31, 2008, there was $3.3 million of total unrecognized compensation cost related tooptions granted under the SIPs. This aggregate cost is expected to be recognized over a weighted-averageperiod of 2.1 years.

2008 2007 2006

Intrinsic value of options exercised $ 3,688 $ 7,787 $ 5,421 Cash received from options exercised $ 9,071 $ 19,934 $ 18,184

Nonvested Share Awards

A summary of the status of the Company’s nonvested share awards as of December 31, 2008, andchanges during the year ended December 31, 2008, is presented below:

Weighted-Average Nonvested Share Awards Shares Grant-Date Fair Value

Outstanding at January 1, 2008 169,929 $ 43.53 Granted 105,356 43.99 Vested (64,805) 42.76

Nonvested at December 31, 2008 210,480 $ 43.97

Expected to vest at December 31, 2008 210,480 $ 43.97

The Company’s nonvested share awards generally vest over four or five years on either a monthly orannual basis. Compensation expense is recognized on a straight-line basis using the market price on the dateof grant. As of December 31, 2008, there was $7.1 million of total unrecognized compensation cost related tononvested share-based compensation arrangements granted under the SIPs. This aggregate cost of nonvestedshare awards is expected to be recognized over a weighted-average period of 1.8 years. The total fair value ofshare awards vested, using the fair value on vest date, during the years ended December 31, 2008, 2007, and2006, was $2.0 million, $1.4 million, and $0.7 million, respectively.

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Deferred Stock Units

A summary of the status of the Company’s deferred stock units as of December 31, 2008, and changesduring the year ended December 31, 2008, is presented below:

Weighted-Average Nonvested Deferred Stock Units Shares Grant-Date Fair Value

Outstanding at January 1, 2008 26,569 $ 42.86 Granted 30,886 37.52 Vested (33,336) 38.21

Nonvested at December 31, 2008 24,119 $ 42.46

Vested at December 31, 2008 64,911 $ 39.91

Expected to vest at December 31, 2008 24,119 $ 42.46

As of December 31, 2008, the total unrecognized compensation cost related to deferred stock unitsgranted under the SIPs was $1.0 million and such cost is expected to be recognized over a weighted-averageperiod of 1.0 year. Deferred stock units granted to employees are issued at the fair market value of theCompany’s stock upon the date of grant, vest annually on a calendar year-end basis over the remainingpost-grant period ended December 31, 2009, and are convertible to shares of common stock, subsequent totheir termination of employment. Deferred stock units granted to nonemployee directors vest immediatelyupon grant, are convertible to shares of common stock subsequent to their termination of service as a director,and are issued at the fair market value of the Company’s stock upon the date of grant. Other deferred stockunit information for the years ended December 31, 2008, 2007, and 2006, is noted in the following table(dollars in thousands):

2008 2007 2006

Shares granted to employee directors 21,667 21,667 18,186 Shares granted to nonemployee directors 9,219 4,786 7,264 Fair value of shares vested $ 570 $ 778 $ 275

Employee Stock Purchase Plan

On May 13, 2008, the Company’s stockholders approved an amendment to its compensatory EmployeeStock Purchase Plan (“ESPP”) increasing the maximum number of shares of Company common stockreserved for sale under the ESPP from 600,000 to 850,000. The purchase price of the stock to ESPPparticipants is 85% of the lesser of the fair market value on either the first day or the last day of the applicablethree-month offering period. Other ESPP information for the years ended December 31, 2008, 2007, and 2006is noted in the following table (dollars in thousands):

2008 2007 2006

Number of ESPP shares issued 46,091 35,078 39,597 Amount of proceeds received from employees $ 1,158 $ 1,327 $ 1,226 Share-based compensation expense $ 292 $ 309 $ 287

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16. Significant Customers and Concentration of Credit Risk

The Company’s quantitative radio audience measurement business and related software licensingaccounted for the following percentages of revenue:

2008 2007 2006

Quantitative Radio Business 81% 79% 79%Related Software Licensing 9% 9% 9%

The Company had one customer that individually represented approximately 18.0%, 19.0%, and 20.0%of its annual revenue for the years ended December 31, 2008, 2007, and 2006, respectively. The Company hashistorically experienced a high level of contract renewals.

17. Financial Instruments

Fair values of accounts receivable and accounts payable approximate carrying values due to theirshort-term nature. Due to the floating rate nature of the Company’s Credit Facility, the fair values of the$85.0 million and $12.0 million in related outstanding borrowings as of December 31, 2008, andDecember 31, 2007, respectively, also approximate their carrying amounts. There was no short-term portionof the long-term debt recorded as of December 31, 2008. The $12.0 million of debt recorded as ofDecember 31, 2007, included $5.0 million in short-term obligations under the Credit Facility.

18. Stock Repurchases

On January 24, 2006, the Company announced that its Board of Directors authorized a program torepurchase up to $70.0 million of its outstanding common stock through either periodic open-market orprivate transactions at then-prevailing market prices through December 31, 2006. As of June 29, 2006, theCompany completed the program by repurchasing 1,991,944 shares for an aggregate purchase price of$70.0 million.

On November 16, 2006, the Company announced that its Board of Directors authorized a program torepurchase up to $100.0 million of its outstanding common stock through either periodic open-market orprivate transactions at then-prevailing market prices over a period of two years through November 2008. Asof October 19, 2007, the program was completed with 2,093,500 shares being repurchased for an aggregatepurchase price of approximately $100.0 million.

On November 14, 2007, the Company’s Board of Directors authorized a program to repurchase up to$200.0 million of the Company’s outstanding common stock through either periodic open-market or privatetransactions at then-prevailing market prices over a period of two years through November 14, 2009. As ofDecember 31, 2008, the Company repurchased 2,247,400 shares of outstanding common stock under thisprogram for $100.0 million.

19. Enterprise-Wide Information

The following table sets forth the revenues for each group of services provided to our external customersfor the years ended December 31, 2008, 2007, and 2006 (in thousands):

2008 2007 2006

Service Revenues Radio audience measurement services $ 297,132 $ 267,804 $ 253,042 Local market consumer information services 36,872 36,393 33,266 Software applications 34,820 34,272 33,027

Total revenues $ 368,824 $ 338,469 $ 319,335

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ARBITRON INC.


The following table sets forth geographic information for the years ended December 31, 2008, 2007, and2006 (in thousands):

United States International(1) Total

2008 Revenues $ 364,425 $ 4,399 $ 368,824 2007 Revenues $ 333,164 $ 5,305 $ 338,469 2006 Revenues $ 315,208 $ 4,127 $ 319,335

(1) The revenues of the individual countries comprising these amounts are not significant enough to requireseparate disclosure.

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20. Quarterly Information (Unaudited) (dollars in thousands, except per share data):

Three Months Ended March 31 June 30 September 30 December 31

2008 Revenue $ 94,065 $ 78,655 $ 102,526 $ 93,578 Gross profit 58,955 26,070 60,731 37,436 Income from continuing operations 16,312 625 16,900 3,382 (Loss) income from discontinued

operations, net of taxes (45) (25) 55 (24)Net income $ 16,267 $ 600 $ 16,955 $ 3,358 Income per weighted average common

share Basic Continuing operations $ 0.58 $ 0.02 $ 0.63 $ 0.13 Discontinued operations — — — —

Net income $ 0.58 $ 0.02 $ 0.64 $ 0.13

Diluted Continuing operations $ 0.58 $ 0.02 $ 0.63 $ 0.13 Discontinued operations — — — —

Net income $ 0.57 $ 0.02 $ 0.63 $ 0.13

Dividends per common share $ 0.10 $ 0.10 $ 0.10 $ 0.10 2007 Revenue $ 89,148 $ 75,867 $ 93,322 $ 80,132 Gross profit 59,324 32,224 58,871 30,875 Income from continuing operations 15,526 3,722 17,121 4,135 Income (loss) from discontinued

operations, net of taxes (31) 66 99 (458)Net income $ 15,495 $ 3,788 $ 17,220 $ 3,677 Income per weighted average common

share Basic

Continuing operations $ 0.52 $ 0.12 $ 0.58 $ 0.15 Discontinued operations — — — (0.02)

Net income $ 0.52 $ 0.13 $ 0.58 $ 0.13

Diluted Continuing operations $ 0.52 $ 0.12 $ 0.57 $ 0.14 Discontinued operations 0.00 0.00 0.00 (0.02)

Net income $ 0.52 $ 0.13 $ 0.58 $ 0.13

Dividends per common share $ 0.10 $ 0.10 $ 0.10 $ 0.10

Per share data are computed independently for each of the quarters presented. Therefore, the sum of thequarterly net income per share will not necessarily equal the total for the year. Per share data may not totaldue to rounding.

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Arbitron Inc.Consolidated Schedule of Valuation and Qualifying Accounts

For the Years Ended December 31, 2008, 2007, and 2006(In thousands)

2008 2007 2006

Allowance for doubtful trade accounts receivable: Balance at beginning of year $ 1,688 $ 1,397 $ 1,146 Additions charged to expenses 1,636 1,162 890 Write-offs net of recoveries (726) (871) (639)

Balance at end of year $ 2,598 $ 1,688 $ 1,397

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTINGAND FINANCIAL DISCLOSURE

There have been no changes in, or disagreements with, accountants on accounting and financialdisclosure.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s chief executive officer and chief financial officer,evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2008. The term “disclosurecontrols and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other proceduresof a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submitsunder the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules andforms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that informationrequired to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicatedto the company’s management, including its principal executive and principal financial officers, as appropriate to allow timelydecisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed andoperated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment inevaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of the Company’s disclosurecontrols and procedures as of December 31, 2008, the Company’s chief executive officer and chief financial officer concluded that, asof such date, the Company’s disclosure controls and procedures were effective at the reasonable assurance level.

Management’s Report on Internal Control Over Financial Reporting

Arbitron’s management is responsible for establishing and maintaining adequate internal control over financial reporting (asdefined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our management assessed the effectiveness of ourinternal control over financial reporting as of December 31, 2008. In making this assessment, our management used the criteria setforth by the Committee of Sponsoring Organizations of the Treadway Commission in “Internal Control-Integrated Framework.” Basedupon that assessment, our management has concluded that, as of December 31, 2008, our internal control over financial reporting iseffective based on these criteria.

The attestation report of KPMG LLP, our independent registered public accounting firm, on the effectiveness of our internalcontrol over financial reporting is set forth on page 56 of this Annual Report on Form 10-K, and is incorporated herein by reference.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)under the Exchange Act) that occurred during the quarterly period ended December 31, 2008, that have materially affected, or arereasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

2009 Non-Equity Incentive Plan

On February 24, 2009, the Compensation and Human Resources Committee (the “Committee”) of the Board of Directors of theCompany met and approved a non-equity incentive plan for the Company’s executive officers for 2009, which would be payable inearly 2010 (the “Incentive Plan”).

The Incentive Plan provides for an annual cash payment that is performance linked based upon the Company’s earnings pershare (weighted 40%), revenue (weighted 20%), Portable People Meter commercialization and

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improvement program (weighted 20%), and diary market improvement program (weighted 20%). TheIncentive Plan provides for a target cash payment for each executive officer, expressed as a percentage ofbase salary. The target Incentive Plan payment for Michael Skarzynski, the Company’s President, and ChiefExecutive Officer is equal to 100% of base salary. The target Incentive Plan payments for other executiveofficers range from 45-55% of base salary.

The Committee has discretion to authorize a greater or lesser amount in the event the 2009 goals areexceeded or are not met. In the event that the 2009 goals are achieved, the Committee also has discretion toaward additional amounts based upon its evaluation of a combination of other quantitative and qualitativeconsiderations, including stock price, as determined by the Committee.

Bylaw Amendment

On February 25, 2009, the Board of Directors of the Company adopted and approved, effectiveimmediately, an amendment to Article I of the Company’s bylaws changing the location of the Company’sprincipal executive offices from New York City, New York to Columbia, Maryland.

Specifically, the amendment deleted the prior Article I of the bylaws in its entirety, and replaced it withthe following:

“ARTICLE I

OFFICES

The registered office of Arbitron Inc. (the “Corporation”) in the State of Delaware shall be located in theCity of Wilmington, County of New Castle. The executive offices of the Corporation shall be located in theCity of Columbia, Howard County, State of Maryland. The Corporation may have such other offices, eitherwithin or without the States of Delaware and Maryland, as the Board of Directors may designate or as thebusiness of the Corporation may require from time to time.”

The foregoing description of the amendment is qualified in its entirety by reference to the full text of theCompany’s Second Amended and Restated Bylaws, which are attached hereto as Exhibit 3.5 and incorporatedherein by reference.

Board of Directors

On February 25, 2009, Director and Chairman of the Board of Directors, Stephen B. Morris, notified theCompany that he would not stand for reelection at the Company’s 2009 Annual Meeting of Stockholders,which will be held on May 26, 2009. Mr. Morris’ decision not to stand for reelection was not the result of anydisagreement with the Company related to its operations, policies, or practices.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information related to directors, nominees for directorships, and executive officers required by this Itemis included in the sections entitled “Election of Directors” and “Executive Compensation and OtherInformation” of the definitive proxy statement for the Annual Stockholders Meeting to be held in 2009 (the“proxy statement”), which is incorporated herein by reference and will be filed with the Securities andExchange Commission not later than 120 days after the close of Arbitron’s fiscal year ended December 31,2008.

Information regarding compliance with Section 16(a) of the Securities Exchange Act of 1934 required bythis item is included in the section entitled “Other Matters — Section 16(a) Beneficial Ownership ReportingCompliance” of the proxy statement, which is incorporated herein by reference.

Arbitron has adopted a Code of Ethics for the Chief Executive Officer and Financial Managers (“Code ofEthics”), which applies to the Chief Executive Officer, the Chief Financial Officer and all managers in thefinancial

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organization of Arbitron. The Code of Ethics is available on Arbitron’s Web site at www.arbitron.com. TheCompany intends to disclose any amendment to, or a waiver from, a provision of its Code of Ethics on itsWeb site within four business days following the date of the amendment or waiver.

Information regarding the Company’s Nominating Committee and Audit Committee required by thisItem is included in the section entitled “Election of Directors” of the proxy statement, which is incorporatedherein by reference.

ITEM 11. EXECUTIVE COMPENSATION

Information required by this Item is included in the sections entitled “Election of Directors — DirectorCompensation,” “Compensation Discussion and Analysis,” and “Executive Compensation and OtherInformation” of the proxy statement, which is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information required by this Item regarding security ownership of certain beneficial owners, directors,nominees for directorship and executive officers is included in the section entitled “Stock OwnershipInformation” of the proxy statement, which is incorporated herein by reference.

The following table summarizes the equity compensation plans under which Arbitron’s common stockmay be issued as of December 31, 2008.

Number of Securities Remaining Available for Number of Securities to be Weighted-Average Future Issuance Under Issued Upon Exercise of Exercise Price of Equity Compensation Plans Outstanding Options, Outstanding Options, (Excluding Securities Warrants and Rights Warrants and Rights Reflected in Column (a)) Plan Category (a) (b) (c)

Equity compensationplans approved bysecurity holders 1,856,785 $ 40.11 2,612,029

Equity compensationplans not approvedby security holders 156,282 $ 43.70 15,368

Total 2,013,067 $ 40.39 2,627,397

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTORINDEPENDENCE

Information regarding certain relationships and related transactions required by this Item is included inthe section entitled “Certain Relationships and Related Transactions” of the proxy statement, which isincorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information required by this Item is included in the section entitled “Independent Auditors and AuditFees” of the proxy statement, which is incorporated herein by reference.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Documents filed as part of this report

(1) Financial Statements: The following financial statements, together with the report thereon ofindependent auditors, are included in this Report:

• Independent Registered Public Accounting Firm Reports

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• Consolidated Balance Sheets as of December 31, 2008 and 2007

• Consolidated Statements of Income for the Years Ended December 31, 2008, 2007 and 2006

• Consolidated Statements of Stockholders’ Deficit Equity for the Years Ended December 31, 2008,2007 and 2006

• Consolidated Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and 2006

• Notes to Consolidated Financial Statements for the Years Ended December 31, 2008, 2007 and2006

(2) Consolidated Financial Statement Schedule of Valuation and Qualifying Accounts

(3) Exhibits:

Exhibit No. Description

3.1

Restated Certificate of Incorporation of Arbitron Inc. (formerly known as CeridianCorporation) (Filed as Exhibit 4.01 to Ceridian’s Registration Statement on Form S-8 (FileNo. 33-54379) and incorporated herein by reference).

3.2

Certificate of Amendment of Restated Certificate of Incorporation of Arbitron Inc. (formerlyknown as Ceridian Corporation) (Filed as Exhibit 3 to Ceridian’s Quarterly Report onForm 10-Q for the quarter ended June 30, 1996 and incorporated herein by reference).

3.3

Certificate of Amendment of Restated Certificate of Incorporation of Arbitron Inc. (formerlyknown as Ceridian Corporation) (Filed as Exhibit 3.01 to Ceridian’s Quarterly Report onForm 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference).

3.4

Certificate of Amendment to Restated Certificate of Incorporation of Arbitron Inc. (formerlyknown as Ceridian Corporation) (Filed as Exhibit 3.4 to Arbitron’s Annual Report onForm 10-K for the year ended December 31, 2000 and incorporated herein by reference).

3.5 Second Amended and Restated Bylaws of Arbitron, Inc., effective as of February 25, 2009. 4.1

Specimen of Common Stock Certificate (Filed as Exhibit 4.1 to Arbitron’s Annual Report onForm 10-K for the year ended December 31, 2000 and incorporated herein by reference).

4.2

Rights Agreement, dated as of November 21, 2002, between Arbitron and The Bank of NewYork, as Rights Agent, which includes the form of Certificate of Designation of the Series BJunior Participating Preferred Stock asExhibit A, the Summary of Rights to Purchase Series BJunior Participating Preferred Shares asExhibit B and the Form of Rights Certificate asExhibit C (Filed as Exhibit 99.1 to Arbitron’s Form 8-K, filed November 21, 2002 andincorporated herein by reference).

4.3

Amendment No. 1 to Rights Agreement, dated as of January 31, 2007, between Arbitron andThe Bank of New York, as Rights Agent (Filed as Exhibit 4.3 to Arbitron’s Annual Report onForm 10-K for the year ended December 31, 2006 and incorporated herein by reference).

10.1

Arbitron Executive Investment Plan (Filed as Exhibit 10.10 to Arbitron’s Annual Report onForm 10-K for the year ended December 31, 2004 and incorporated herein by reference).*

10.2

Form of Non-Qualified Stock Option Agreement (Filed as Exhibit 10.1 to Arbitron’s CurrentReport on Form 8-K, dated February 23, 2005 and incorporated herein by reference).*

10.3

Form of Non-Qualified Stock Option Agreement for Annual Non-Employee Director StockOption Grants (Filed as Exhibit 10.2 to Arbitron’s Current Report on Form 8-K, datedFebruary 23, 2005 and incorporated herein by reference).*

10.4

Form of Non-Qualified Stock Option Agreement for Initial Non-Employee Director StockOption Grants (Filed as Exhibit 10.3 to Arbitron’s Current Report on Form 8-K, datedFebruary 23, 2005 and incorporated herein by reference).*

10.5

Form of Non-Qualified Stock Option Agreement in Lieu of Fees Grants (Filed as Exhibit 10.4to Arbitron’s Current Report on Form 8-K, dated February 23, 2005 and incorporated herein byreference).*

10.6

Amended and Restated Arbitron Inc. Director Deferred Compensation Procedures. (Filed asExhibit 10.18 to Arbitron’s Annual Report on Form 10-K for the year ended December 31,2005 and incorporated herein by reference)*

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10.7

Form of Deferred Stock Unit Agreement for Non-Employee Directors (Non-Employee DirectorPost-2005 Stock-for-Fees Deferred Stock Unit). (Filed as Exhibit 10.19 to Arbitron’s AnnualReport on Form 10-K for the year ended December 31, 2005 and incorporated herein byreference)*

10.8

Arbitron Inc. Benefit Equalization Plan (Filed as Exhibit 10.20 to Arbitron’s Annual Report onForm 10-K for the year ended December 31, 2004 and incorporated herein by reference).*

10.9

Arbitron Inc. 2001 Broad Based Stock Incentive Plan (Filed as Exhibit 10.14 to Arbitron’sQuarterly Report on Form 10-Q for the quarter ended March 31, 2002 and incorporated hereinby reference).

10.10

Arbitron Inc. 2008 Equity Compensation Plan (Effective as of May 13, 2008) (Filed asExhibit 10.1 to Arbitron’s Quarterly Report on Form 10-Q for the quarter ended September 30,2008, and incorporated herein by reference).*

10.11

Arbitron Employee Stock Purchase Plan (Amended and Restated as of May 13, 2008) (Filed asExhibit 10.2 to Arbitron’s Quarterly Report on Form 10-Q for the quarter ended September 30,2008 and incorporated herein by reference).*

10.12

Executive Transition Agreement between Arbitron Inc. and Stephen B. Morris, datedDecember 30, 2008*

10.13

Executive Employment Agreement between Arbitron Inc. and Michael P. Skarzynski, datedJanuary 7, 2009*

10.14

Customer Contract, dated as of December 27, 2004, by and between Arbitron Inc. and ClearChannel Communications, Inc. (Filed as Exhibit 10.26 to Arbitron’s Annual Report onForm 10-K for the year ended December 31, 2004 and incorporated herein by reference).

10.15

1999 Stock Incentive Plan Form of Restricted Stock Agreement (Filed as Exhibit 10.1 toArbitron’s Current Report on Form 8-K, dated February 22, 2006 and incorporated herein byreference).*

10.16

CEO Deferral Election Form for Restricted Stock (Filed as Exhibit 10.1 to Arbitron’s CurrentReport on Form 8-K, dated March 28, 2006 and incorporated herein by reference).*

10.17

CEO Deferred Stock Unit Agreement, entered into and effective as of March 31, 2006, by andbetween the Company and Stephen B. Morris. (Filed as Exhibit 10.2 to Arbitron’s CurrentReport on Form 8-K, dated March 28, 2006 and incorporated herein by reference).*

10.18

Form of Executive Retention Agreement (Filed as Exhibit 10.3 to Arbitron’s Quarterly Reporton Form 10-Q for the quarter ended September 30, 2008 and incorporated herein byreference).*

10.19

Credit Agreement dated as of December 20, 2006 among Arbitron Inc. the Lenders Partythereto, Citizens Bank of Pennsylvania as Documentation Agent, Citibank, N.A. and WachoviaBank, National Association as Co-Syndication Agents and JPMorgan Chase Bank, NA asAdministrative Agent J.P. Morgan Securities Inc. as Sole Bookrunner and Sole Lead Arranger(Filed as Exhibit 10.1 to Arbitron’s Current Report on Form 8-K, dated December 20, 2006 andincorporated herein by reference).

10.20

Amended and Restated Schedule of Non-Employee Director Compensation (Filed asExhibit 10.1 to Arbitron’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2008and incorporated herein by reference.)

10.21

Form of Restricted Stock Unit Agreement Granted Under the 1999 Stock Incentive Plan (Filedas Exhibit 10.2 to Arbitron’s Quarterly Report on Form 10-Q for the quarter ended March 31,2007 and incorporated herein by reference).*

10.22

CEO Restricted Stock Unit Grant Agreement Granted Under the 1999 Stock Incentive Plan(Filed as Exhibit 10.3 to Arbitron’s Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2007 and incorporated herein by reference).*

10.23

Form of 2008 CEO Restricted Stock Unit Agreement Granted Under the 1999 Stock IncentivePlan (Filed as Exhibit 10.2 to Arbitron’s Quarterly Report on Form 10-Q for the quarter endedMarch 31, 2008 and incorporated herein by reference).*

10.24

Radio Station License Agreement to Receive and Use Arbitron PPM Data and Estimates,effective May 18, 2006, by and between the Company and CBS Radio Inc. (Filed asExhibit 10.2 to Arbitron’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006and incorporated herein by reference.)

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10.25 Form of Non-Qualified Stock Option Agreement Under the 2008 Equity Compensation Plan* 10.26

Master Station License Agreement to Receive and Use Arbitron Radio Audience Estimates,effective May 18, 2006, by and between the Company and CBS Radio Inc. (Filed asExhibit 10.3 to Arbitron’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006and incorporated herein by reference.)

10.27

Radio Station License Agreement to Receive and Use Arbitron PPM Data and Estimates byand between Arbitron and Clear Channel Broadcasting, Inc. dated June 26, 2007 (Filed asExhibit 10.1 to Arbitron’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2007and incorporated herein by reference.)

21 Subsidiaries of Arbitron Inc. 23 Consent of Independent Registered Public Accounting Firm. 24 Power of Attorney. 31.1

Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Actof 2002.

31.2

Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Actof 2002.

32.1

Certification of the Chief Executive Officer and Chief Financial Officer pursuant toSection 906 of the Sarbanes-Oxley Act of 2002.

* Indicates management contract or compensatory plan, contract or arrangement required to be filed as anExhibit.

(b) Exhibits

(c) Financial Statement Schedules

See (a)(2) above.96


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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, we have dulycaused this report to be signed on behalf by the undersigned, thereunto duly authorized.

ARBITRON INC.

By: /s/ Michael P. SkarzynskiMichael P. SkarzynskiChief Executive Officer and President

Date: March 2, 2009

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed belowby the following persons on behalf of the Company in the capacities and on the dates indicated.

Signature Title Date

/s/ MICHAEL P. SKARZYNSKI

Michael P. Skarzynski

Chief Executive Officer, Presidentand Director (Principal ExecutiveOfficer)

March 2, 2009

/s/ SEAN R. CREAMER

Sean R. Creamer

Executive Vice President of Financeand Planning and Chief FinancialOfficer (Principal Financial andPrincipal Accounting Officer)

March 2, 2009

*

Stephen B. Morris

Chairman

*

Shellye L. Archambeau

Director

*

David W. Devonshire

Director

*

Philip Guarascio

Director

*

William T. Kerr

Director

*

Larry E. Kittelberger

Director

*

Luis B. Nogales

Director

* Director


Richard A. Post *By:

/s/ TIMOTHY T. SMITH

Timothy T. SmithAttorney-in-Fact

March 2, 2009

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Exhibit 3.5

SECOND AMENDED AND RESTATED BYLAWSOF

ARBITRON INC.

Effective as of February 25, 2009

__________________

ARTICLE IOFFICES

The registered office of Arbitron Inc. (the “Corporation”) in the State of Delaware shall be located in the City of Wilmington,County of New Castle. The executive offices of the Corporation shall be located in the City of Columbia, Howard County, State ofMaryland. The Corporation may have such other offices, either within or without the States of Delaware and Maryland, as the Boardof Directors may designate or as the business of the Corporation may require from time to time.

ARTICLE IISTOCKHOLDERS

Section 1. Annual Meeting. An annual meeting of the stockholders shall be held for the purpose of electing directors at such date,time and place, either inside or outside of the State of Delaware, as may be designated by the Board of Directors from time to time.Any other proper business may be transacted at the annual meeting.

Section 2. Special Meetings. Special meetings of stockholders may be held for any purpose or purposes and may be called at anytime by the Chairman, by the Board of Directors, or by a committee of the Board of Directors that has been duly designated by theBoard of Directors and whose powers and authority, as expressly provided in a resolution of the Board of Directors, include the powerto call such meetings, but such special meetings may not be called by any other person or persons.

Section 3. Place of Meeting. Meetings of stockholders shall be held at such place as may be designated by the person or personscalling the meeting. The Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, butmay instead be held solely by means of remote communication, in accordance with provisions of the Delaware General CorporationLaw. If no designation is made, meetings of stockholders shall be held at the executive offices of the Corporation in New York.

Section 4. Notice of Meeting. Written notice stating the place, if any, date and hour of the meeting, the means of remotecommunication, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, and,in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be given not less than 10 nor more than60 days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, notice is given when depositedin the United States mail, postage prepaid, directed to the stockholder at the address that appears on the records of the


Corporation. Such notice shall be given in accordance with, and shall be deemed effective as set forth in, Sections 222 and 232 (or anysuccessor section or sections) of the Delaware General Corporation Law.

Section 5. Fixing Date for Determination of Stockholders of Record. (A) In order to determine the stockholders entitled to noticeand to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or otherdistribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock orfor the purpose of any other lawful action other than stockholder action by written consent, the Board of Directors may fix, inadvance, a record date, which shall not be less than 10 nor more than 60 days before the date of such meeting, nor more than 60 daysprior to any other action. A determination of stockholders of record entitled to notice of and to vote at a meeting of stockholders shallapply to any adjournment of the meeting unless the Board of Directors shall elect to fix a new record date for the adjourned meeting.

(B) In order that the Corporation may determine the stockholders entitled to consent to corporate action in writing without ameeting, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixingthe record date is adopted by the Board of Directors, and which date shall not be more than 10 days after the date upon which theresolution fixing the record date is adopted by the Board of Directors. Any stockholder of record seeking to have the stockholdersauthorize or take corporate action by written consent shall, by written notice to the Secretary of the Corporation, request the Board ofDirectors to fix a record date. The Board of Directors shall promptly, but in all events within 10 days after the date on which such arequest is received, adopt a resolution fixing the record date. If no record date has been fixed by the Board of Directors within 10 daysof the date on which such a request is received, the record date for determining stockholders entitled to consent to corporate action inwriting without a meeting, when no prior action by the Board of Directors is required by applicable law, shall be the first date onwhich a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to itsregistered office in the State of Delaware or its executive offices, or to any officer or agent of the Corporation having custody of thebook in which proceedings of stockholders meetings are recorded, and in each such case directed to the attention of the Secretary ofthe Corporation. Delivery shall be by hand or by certified mail, return receipt requested. If no record date has been fixed by the Boardof Directors and prior action by the Board of Directors is required by applicable law, the record date for determining stockholdersentitled to consent to corporate action in writing without a meeting shall be at the close of business on the date on which the Board ofDirectors adopts the resolution taking such prior action.

Section 6. Voting Lists. The officer or agent having charge of the stock transfer records for shares of the Corporation shall compile,at least ten days before each meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting, or anyadjournment thereof, arranged in alphabetical order, with the address of (but not the electronic mail address or other electronic contactinformation, unless the Board of Directors so directs) and the number of shares held by each stockholder. This list, for a period of tendays prior to such meeting, shall be open to examination by any stockholder for any purpose germane to the meeting: (i) on areasonably accessible electronic network, provided that the information

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required to gain access to such list is provided with the notice of the meeting, or (ii) during usual business hours at the principal placeof business of the Corporation. If the meeting is to be held at a place, then such list shall also be produced and kept open at the timeand place of the meeting and shall be subject to the inspection of any stockholder during the whole time of the meeting. If the meetingis to be held solely by means of remote communication, then such list shall also be open to the examination of any stockholder duringthe whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall beprovided with the notice of the meeting.

Section 7. Quorum. Unless otherwise provided by the Delaware General Corporation Law or the Corporation’s certificate ofincorporation, a majority of the outstanding shares of the Corporation entitled to vote, represented in person or by proxy, shallconstitute a quorum at any meeting of stockholders. If less than a majority of the outstanding shares are represented at a meeting, amajority of the shares so represented may adjourn the meeting from time to time without further notice, except that no meeting shallbe adjourned for more than thirty days without further written notice. At such adjourned meeting at which a quorum shall be presentor represented, any business may be transacted which might have been transacted at the meeting as originally noticed. Thestockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawalof enough stockholders to leave less than a quorum.

Section 8. Required Vote. At all meetings of stockholders for the election of directors, a plurality of the votes of shares present inperson or represented by proxy at the meeting and entitled to vote on the election of directors shall be sufficient to elect. All otherelections and questions shall, unless otherwise provided by express provision of the Delaware General Corporation Law, theCorporation’s certificate of incorporation or these bylaws, be decided by the affirmative vote of a majority of the shares of stockpresent in person or represented by proxy at the meeting and entitled to vote on the subject matter in question.

Section 9. Proxies. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporateaction in writing without a meeting may authorize another person or persons to act on the stockholder’s behalf by proxy, and suchauthority may be granted by any means authorized or permitted by express provisions of the Delaware General Corporation Law. Nosuch proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period.

Section 10. Voting of Shares. Subject to Article IV of the Corporation’s certificate of incorporation, each outstanding shareentitled to vote shall be entitled to one vote (which shall not be divisible) upon each matter submitted to a vote at a meeting ofstockholders.

Section 11. No Cumulative Voting. Every stockholder shall have the right to vote in person or by proxy for the number of shares ofstock held by said stockholder for each director to be elected. No cumulative voting for directors shall be permitted.

Section 12. Business to be Conducted. (A) At any annual meeting of stockholders, only such business shall be conducted, and onlysuch proposals shall be acted on, as are properly

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brought before the meeting. In order for business to be properly brought before the meeting, the business must be either (1) specifiedin the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (2) otherwise properlybrought before the meeting by or at the direction of the Board of Directors, or (3) otherwise properly brought before the meeting by astockholder. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by astockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, astockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than90 days nor more than 120 days prior to the meeting;provided,however, that in the event that less than 100 days’ notice or priorpublic disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be soreceived not later than the close of business on the 10th day following the day on which such notice of the date of the annual meetingwas mailed or such public disclosure was made, whichever first occurs. A stockholder’s notice to the Secretary shall set forth as toeach matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be broughtbefore the annual meeting and the reasons for conducting such business at the annual meeting, (b) the name and record address of thestockholder proposing such business, (c) the class and number of shares of the Corporation which are beneficially owned by thestockholder, and (d) any material interest of the stockholder in such business.

(B) Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at the annual meeting except inaccordance with the procedures set forth in this Section 12 of Article II,provided,however, that nothing in this Section 12 of Article IIshall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting.

(C) The chairman of the annual meeting shall, if the facts warrant, determine and declare to the meeting that business was notproperly brought before the meeting in accordance with the provisions of this Section 12 of Article II, and if the chairman should sodetermine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not betransacted.

(D) At any special meeting of the stockholders, only such business shall be conducted as shall have been stated in the notice for themeeting.

Section 13. Stockholder Nomination of Directors. Not less than 90 days nor more than 120 days prior to the date of the annualmeeting, any stockholder who intends to make a nomination at the annual meeting shall deliver a notice to the Secretary of theCorporation setting forth (A) as to each nominee whom the stockholder proposes to nominate for election or reelection as a director,(1) the name, age, business address and residence address of the nominee, (2) the principal occupation or employment of the nominee,(3) the class and number of shares of capital stock of the Corporation which are beneficially owned by the nominee and (4) any otherinformation concerning the nominee that would be required, under the rules of the Securities and Exchange Commission, in a proxystatement soliciting proxies of the election of such nominee; and (B) as to the stockholder giving the notice, (1) the name and recordaddress of the stockholder and (2) the class and number of shares of capital stock of the Corporation which

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are beneficially owned by the stockholder;provided, however, that in the event that less than 100 days’ notice or prior publicdisclosure of the date of the annual meeting is given or made to stockholders, notice by the stockholder to be timely must be sodelivered not later than the close of business on the 10th day following the day on which such notice of the date of the meeting wasmailed or such public disclosure was made, whichever first occurs. Such notice shall include a signed consent to serve as a director ofthe Corporation, if elected, of each such nominee. The Corporation may require any proposed nominee to furnish such otherinformation as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as adirector of the Corporation.

ARTICLE IIIBOARD OF DIRECTORS

Section 1. General Powers. The affairs, property and business of the Corporation shall be managed by its Board of Directors.

Section 2. Number, Tenure, Election and Qualifications. Except as otherwise provided in the Corporation’s certificate ofincorporation, the number of directors of the Corporation shall be as determined from time to time by resolution of the Board ofDirectors. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 8 of this Article III,and each director shall hold office until the next annual meeting of stockholders and until his or her successor shall have been electedand qualified, or until his or her earlier death, resignation or removal. Directors need not be residents of the State of Delaware orstockholders of the Corporation.

Section 3. Regular Meetings. Regular meetings of the Board of Directors may be held at such places inside or outside the State ofDelaware and at such times as the Board of Directors may from time to time determine by resolution, and if so determined noticesthereof need not be given.

Section 4. Special Meetings. Special meetings of the Board of Directors may be held at any time or place inside or outside theState of Delaware whenever called by or at the request of the Chairman or any two directors. The person or persons who call orrequest a special meeting of the Board of Directors may fix the time and place for holding such special meeting.

Section 5. Notice. Notice of any special meeting shall be delivered at least two hours previously thereto by written notice deliveredpersonally or mailed to each director at his or her business address, or by telecopy, facsimile or electronic transmission. If mailed,such notice shall be deemed to be delivered on the third business day after it is deposited in the United States mail so addressed, withpostage thereon prepaid. If notice be given by telecopy, facsimile or electronic transmission, such notice shall be deemed to bedelivered upon transmission by sender to the addressee’s telecopier, facsimile machine or computer. Any director may waive notice ofany meeting before or after the time stated therein. Except as set forth below, the waiver must be in writing, signed by the directorentitled to the notice, or made by electronic transmission by the director entitled to the notice.

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The attendance of a director at a meeting, in person or by telephone as provided by law, shall constitute a waiver of notice of suchmeeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because themeeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meetingof the Board of Directors need be specified in the notice or waiver of notice of such meeting.

Section 6. Quorum. At any meeting of the Board of Directors, a majority of the directors then in office shall constitute a quorumfor the transaction of business, but if less than such majority is present at a meeting, in person or by telephone as provided by law, amajority of the directors present may adjourn the meeting from time to time without further notice.

Section 7. Manner of Acting. The act of the majority of the directors present at a meeting at which a quorum is present shall be theact of the Board of Directors.

Section 8. Vacancies. Except as otherwise provided in the Corporation’s certificate of incorporation, any vacancy occurring in theBoard of Directors by reason of death, resignation, disqualification or other cause, or resulting from any increase in the authorizednumber of directors, may be filled by the affirmative vote of a majority of the directors then in office, though less than a quorum, or bya sole remaining director. A director elected to fill a vacancy shall hold office until the next annual meeting of stockholders and until asuccessor shall have been elected and qualified, or until his or her earlier death, resignation or removal.

Section 9. Compensation. The compensation of directors shall be fixed by resolution of the Board of Directors or any committeedelegated such authority by the Board of Directors. Such resolution shall not preclude any director from serving the Corporation inany other capacity and receiving compensation therefor.

Section 10. Presumption of Assent. A director of the Corporation who is present at a meeting of the Board of Directors at whichaction on any corporate matter is taken shall be presumed to have assented to the action taken unless his or her dissent shall be enteredin the minutes of the meeting or unless he or she shall file a written dissent to such action with the person acting as the secretary of themeeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the Corporationimmediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.

Section 11. Action by Directors in Lieu of Meeting. Any action required or permitted to be taken at any meeting of the Board ofDirectors, or any committee thereof, may be taken without a meeting if all members of the Board or committee as the case may be,consent thereto in writing, or by electronic transmission, and the writing or electronic transmission is delivered to the Corporation forinclusion in the minutes of proceedings of the Board or committee.

Section 12. Telephonic Meetings. Members of the Board of Directors may participate in a meeting of the Board by anycommunication by means of which all participating directors

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can simultaneously hear each other during the meeting. A director participating in a meeting by this means is deemed to be present inperson at the meeting.

Section 13. Chairman of the Board of Directors. The Board of Directors may, in its discretion, elect a Chairman, who shallperform such duties as may be assigned by the Board of Directors from time to time, and shall, when present, preside at all meetingsof the stockholders and of the Board of Directors. The Chairman shall serve in such capacity at the pleasure of the Board of Directorsor until his or her earlier resignation, death or removal.

Section 14. Director Emeritus. The Board of Directors may, in its discretion, appoint any person who has served as, but no longeris, a director of the Corporation to the position of director emeritus. A director emeritus shall serve at the pleasure of the Board ofDirectors, and shall provide such advice and counsel to the Board of Directors as may be requested by the Chairman. A directoremeritus may attend meetings of the Board of Directors, but shall not vote at such meetings. Where such a person is also a formerChairman of the Board, he or she may also be named chairman emeritus.

ARTICLE IVCOMMITTEES

Section 1. Number, Tenure and Qualifications. The Board of Directors may appoint from among its members committeescomposed of two or more directors, to serve at the pleasure of the Board of Directors. In addition, the Board of Directors mayestablish additional committees composed of directors and members of management of the Corporation.

Section 2. Powers. The Board of Directors may delegate to committees appointed under Section 1 of this Article IV any of thepowers of the Board of Directors, except as prohibited by the Delaware General Corporation Law.

Section 3. Meetings. The notice and other procedures for committee meetings shall be the same as for special meetings of theBoard of Directors.

Section 4. Vacancies. The Board of Directors shall have the power at any time to change the membership of any committee, to fillall vacancies or to dissolve any such committee.

ARTICLE VOFFICERS

Section 1. Number and Election. The officers of the corporation shall be a Chief Executive Officer, a President, a Chief FinancialOfficer, a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors. The Board of Directors or the ChiefExecutive Officer may also elect or appoint Vice Presidents and such other officers as it may deem necessary or desirable. Any personmay hold more than one office at one time.

Section 2. Term of Office. The officers of the Corporation shall hold office until their successors are chosen and qualify or untiltheir earlier death, resignation or removal. Any officer

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may be removed with or without cause at any time by the Board of Directors or Chief Executive Officer, whichever appointed suchofficer. Removal of an officer shall be without prejudice to his or her contract rights, if any.

Section 3. Chief Executive Officer. The Chief Executive Officer, subject to the provisions of these bylaws and to the direction ofthe Board of Directors, shall have ultimate authority for decisions relating to the general management and control of the business andaffairs of the Corporation. The Chief Executive Officer shall perform such other duties as may be assigned by the Board of Directorsfrom time to time and shall, in the absence of the Chairman of the Board of Directors, preside at all meetings of the stockholders andof the Board of Directors.

Section 4. President. The President shall be the chief operating officer and, subject to the provisions of these bylaws and to thedirection of the Board of Directors and the Chief Executive Officer, shall have such powers and shall perform such duties as may beassigned by the Board of Directors or by the Chief Executive Officer from time to time.

Section 5. The Vice Presidents. Each Vice President shall have such powers and shall perform such duties as may be assigned tothe Vice President by the Board of Directors or by the Chief Executive Officer from time to time.

Section 6. Chief Financial Officer. The Chief Financial Officer shall be the principal financial officer of the Corporation, withprincipal responsibility for the financial affairs of the Corporation, and, subject to the provisions of these bylaws and to the directionof the Board of Directors and the Chief Executive Officer, shall have such powers and shall perform such duties as may be assignedby the Board of Directors or Chief Executive Officer from time to time.

Section 7. The Secretary and Assistant Secretaries. The Secretary shall keep the minutes of the stockholders’ and Board ofDirectors’ meetings; see that all notices are duly given in accordance with the provisions of law and of these bylaws; be custodian ofthe corporate records and of the seal of the Corporation; keep or cause to be kept a register of the mailing address of each stockholder;have general charge of the stock transfer records of the Corporation; and in general perform all duties incident to the office ofSecretary and such other duties as from time to time may be assigned to the Secretary by the Board of Directors or by the ChiefExecutive Officer.

An Assistant Secretary shall have such powers and shall perform such duties as may be assigned by the Board of Directors, theChief Executive Officer or the Secretary from time to time.

Section 8. The Treasurer and Assistant Treasurers. The Treasurer shall have charge and custody of and be responsible for allfunds and securities of the Corporation; receive and give receipts for monies due and payable to the Corporation from any sourcewhatsoever; deposit all such monies in the name of the Corporation for safekeeping in appropriate banks, trust companies or otherdepositories; and in general perform all of the duties incident to the office of

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the Treasurer and such other duties as from time to time may be assigned by the Board of Directors or by the Chief Executive Officer.

An Assistant Treasurer shall have such powers and shall perform such duties as may be assigned by the Board of Directors, theChief Executive Officer or the Treasurer from time to time.

Section 9. Compensation. The compensation of the officers shall be fixed from time to time by the Board of Directors, or by anycommittee of the Board of Directors or any officer of the Corporation delegated such authority by the Board of Directors.

ARTICLE VIINDEMNITY

Section 1. Indemnification Rights. To the maximum extent permitted by law, the Company shall indemnify any Eligible Person(as defined below) (including such person’s heirs, executors and personal representatives) against any and all Amounts (as definedbelow) incurred or imposed in connection with, or which result from, any Proceeding (as defined below) (other than a proceedinginitiated by such person) in which such person is or may become involved by reason of being an Eligible Person.

Section 2. Advancement of Expenses. In connection with any Proceeding, the Company may advance Expenses (as defined below)to any Eligible Person upon receipt of an undertaking by or on behalf of such person to repay such advance if it shall ultimately bedetermined that such person is not entitled to indemnification by the Company.

Section 3. Rights Not Exclusive. The rights provided in this Article shall not be deemed exclusive of any other right or rights towhich any Eligible Person may be entitled under any agreement, vote of stockholders, or otherwise.

Section 4. Definitions. For purposes of this Article:

(A) “Amounts” shall include judgments, penalties, fines, amounts paid in settlement, and Expenses.

(B) “Company” shall mean the Corporation and any corporation at least a majority of whose voting securities having ordinaryvoting power for the election of directors (other than securities having such voting power only by reason of the occurrence of acontingency) which is, at the time of alleged events giving rise to the Proceeding, owned by the Corporation and/or one or more of itsmajority-owned subsidiaries.

(C) “Eligible Person” shall mean:

(1) A director, officer or employee of the Company;

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(2) A director, officer or employee of the Company who at the specific written request or resolution of the Board of Directorsof the Corporation is, at the time either of the Proceeding and/or of the alleged events giving rise to the Proceeding, serving as adirector, officer or employee of any other company, partnership, limited liability company, joint venture, trust, employee benefit planor other enterprise;

(3) A fiduciary or co-fiduciary of an employee benefit plan of the Company as those terms are defined in the EmployeeRetirement Income Security Act of 1974; or

(4) Such other person as may be determined by the Board of Directors from time to time.

(D) “Expenses” shall mean all reasonable attorneys’ fees and all other disbursements or expenses of the types customarily incurredin connection with prosecuting, defending, preparing to prosecute or defend, investigating, or preparing to be a witness in aProceeding.

(E) “Proceeding” shall include any actual, threatened or completed action, suit, arbitration, alternative dispute resolutionmechanism, investigation, administrative hearing, or other formal claim that could result or has resulted in personal liability, whethercivil, criminal, administrative or investigative.

ARTICLE VIIINDEMNIFICATION AGREEMENTS

The Corporation shall have the express authority to enter into such agreements as the Board of Directors deems appropriate for theindemnification of present or future directors and officers of the Corporation in connection with their service to, or status with, theCorporation or any other corporation, entity or enterprise with whom such person is serving at the express written request of theCorporation.

ARTICLE VIIICERTIFICATES FOR SHARES AND THEIR TRANSFER

Section 1. Certificates for Shares. The shares of the Corporation shall be represented by certificates, provided that the Board ofDirectors may authorize some or all of any or all classes or series of the Corporation’s stock shall be uncertificated. Such certificates,if used, shall be signed by the Chairman, President or any Vice President and by the Treasurer, Assistant Treasurer, Secretary orAssistant Secretary, or by any other officers determined by the Board of Directors in accordance with law.

Section 2. Transfer of Shares. Where shares of the Corporation are presented to the Corporation with a request to register transfer,the Corporation shall register the transfer as requested if the certificate representing such shares is endorsed by the appropriate personor persons, reasonable assurance is given that those endorsements are genuine, the Corporation has no duty to inquire into adverseclaims or has discharged that duty, applicable law relating to the

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collection of taxes has been complied with, and the transfer is in fact rightful or is to a bona fide purchaser.

ARTICLE IXFISCAL YEAR

The fiscal year of the Corporation shall begin on the first day of January and end on the thirty-first day of December, nextsucceeding.

ARTICLE XDIVIDENDS

The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in themanner and upon the terms and conditions provided by law and the Corporation’s certificate of incorporation.

ARTICLE XISEAL

The Board of Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the name ofthe Corporation, the year of incorporation, 1912, the state of incorporation and the words, “Corporate Seal.”

ARTICLE XIIAMENDMENT

These bylaws may be amended by either (i) the Board of Directors, or (ii) by the holders of eighty percent (80%) of the outstandingshares of stock of the Corporation entitled to vote on such amendment.

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EXHIBIT 10.12

ARBITRON INC.EXECUTIVE TRANSITION AGREEMENT

PARTIES:

ARBITRON INC. (A DELAWARE CORPORATION)142 W. 57TH STREET

NEW YORK, NY 10019-3300

AND

STEPHEN B. MORRIS (“You”)

DATE: December 30, 2008

RECITALS

Arbitron wishes to obtain your assistance for an orderly management transition during 2009, and you have agreed to assist with thetransition as Chief Executive Officer, or as Adviser to the Board of Directors after you cease to be Chief Executive Officer, and asChairman of the Board. The parties wish to replace any and all prior agreements and undertakings with respect to your employment,except as specified in this agreement (the “Agreement”).

NOW, THEREFORE, in consideration of your acceptance of and continuance in your service-providing relationship as describedabove and the parties’ agreement to be bound by the terms contained herein, the parties agree as follows:

ARTICLE1

DEFINITIONS

1.01 “Arbitron” means ARBITRON INC., any Subsidiary; and any successor in interest by way of consolidation, operation of law,merger or otherwise.

1.02 “Base Salary” means regular cash compensation paid on a periodic basis exclusive of benefits, bonuses or incentive payments.

1.03 “Board” means the Board of Directors of Parent Corporation.

1.04 “Disability” means either (i) that you are unable to engage in any substantial gainful activity by reason of any medicallydeterminable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous periodof not less than 12 months, or (ii) that you are by reason of any medically determinable physical or mental impairment that can beexpected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacementbenefits for a period of not less than three months under the Company’s accident and health plan. You will be deemed disabled ifeither determined to be totally disabled by the Social Security Administration, or if determined to be disabled by the Company orunder the Company’s disability insurance program provided that such determination complies with the above definition.

1.05 “Parent Corporation” means ARBITRON INC., any successor in interest by way of consolidation, operation of law, merger orotherwise. “Parent Corporation” shall not include any Subsidiary.


1.06 “Separation from Service” means a cessation of service-providing relationship as defined in Treas. Reg. Section 1.409A-1(h).

1.07 “Subsidiary” means (a) any corporation at least a majority of whose securities having ordinary voting power for the election ofdirectors (other than securities having such power only by reason of the occurrence of a contingency) is at the time owned by ParentCorporation and/or one or more Subsidiaries; and (b) any division or business unit (or portion thereof) of Parent Corporation or acorporation described in clause (a).

ARTICLE2

EMPLOYMENT, DUTIES AND TERM

2.01 EMPLOYMENT. Upon the terms and conditions set forth in this Agreement, Arbitron hereby continues to employ you, and youaccept such continued employment.

2.02 DUTIES. You shall devote your full-time and best efforts to Arbitron and to fulfilling the duties of your position as President andChief Executive Officer, and member of the Board. You shall comply with Arbitron’s policies and procedures to the extent they arenot inconsistent with this Agreement, in which case the provisions of this Agreement prevail. During 2009, you will transition fromthe position of President and Chief Executive Officer into an advisory role.

2.03 TERM. Subject to the provisions of Article 4, this Agreement and your employment shall continue until December 31, 2009;provided that the Board reserves the right to approve and appoint your successor as President and Chief Executive Officer with theduties attendant to such office and after such appointment you shall remain an employee (and, for such time as the Board chooses,Chairman) and be available to provide transition assistance, consultation, and advice through December 31, 2009.

ARTICLE3

COMPENSATION AND EXPENSES

3.01 BASE SALARY. Arbitron shall pay you a Base Salary at the rate of $57,240 per month for each month of calendar year 2009prior to and including the month in which Arbitron appoints your successor as President and Chief Executive Officer (or, if earlier, themonth in which you transition to an advisory role). Beginning with the month following the appointment of your successor asPresident and Chief Executive Officer or your transition to an advisory role, Arbitron shall pay you a Base Salary at the rate of$11,250 per month through December 31, 2009. (“Blended Base Salary” for purposes of other provisions of this Agreement will be atthe blended rate from the two preceding sentences, based on the portion of 2009 as President and Chief Executive Officer and treatingthe rest of 2009 as being at the lower rate.) Arbitron will make the payments specified pursuant to this Section 3.01 as long as youremployment has not previously ended as a result of a termination of employment under Section 4.01, 4.02(a), or 4.03.

3.02 BONUS AND INCENTIVE. Bonus or incentive compensation shall be at the sole discretion of Arbitron, but Arbitron anticipatesthat you will be eligible for a bonus of 75% of your Blended Base Salary for 2009.

3.02A GRANT OF RESTRICTED STOCK AWARDS. In consideration of your service as Chief Executive Officer and as aninducement for you to execute this Agreement, subject to approval by the Compensation Committee, Arbitron agrees to grant you inFebruary 2009 a Restricted Stock Award for 43,333 shares of common stock, $0.50 par value per share, of the Company (“CommonStock”), which award shall vest in full on December 31, 2009, provided that you remain on the Board or in the continuous employ orservice of the Company as of such date. The grant shall be subject to appropriate adjustment pursuant to Section 9 of the Arbitron Inc.2008 Equity Compensation Plan (the “Equity Plan”) as a result of any of the events described in Section 9 of the Equity Plan thatoccur after the date hereof. You confirm


your prior (i) waiver of any rights that you have or may have to accelerate the vesting of any Restricted Stock Awards or any stockoption upon your retirement and (ii) agreement that you will not sell, transfer or otherwise dispose of shares of Common Stockcovered by the Restricted Stock Award during any consecutive 12 month period that exceed an amount equal to 25% of the aggregatenumber of shares of Common Stock represented by the Restricted Stock Award; provided that the restriction in clause (ii) shallterminate upon your death or a Change of Control. In the event the term of this Agreement is terminated due to your death orDisability or upon a Change of Control (as defined in the Equity Plan), the Restricted Stock Award, if granted under thisParagraph prior to such termination, shall be vested in full in accordance with the provisions of the Equity Plan but no further grantunder this paragraph will be made thereafter. The Company will issue the Restricted Stock Award in the form of a restricted stockgrant as to 50% of the shares and a deferred stock unit with respect to the other 50% of the shares.

3.03 VACATION. You shall be entitled to vacation at a rate consistent with past practices while you remain President and ChiefExecutive Officer but will cease to accrue vacation after leaving those positions.

3.04 BENEFITS. You shall be entitled to participate during 2009 in any benefit plans of Arbitron that cover you and that provide forparticipation based on your level of continuing services. If your medical coverage ceases under the terms of Arbitron’s plan, you willbe able to obtain continuation coverage (“COBRA Coverage”) for the lesser of the period for which you are entitled to such coverageand 18 months. You will be responsible for any premiums owed for such coverage. In addition, Arbitron will provide you and yourspouse with the 2009 annual physical in March 2009, at the same facility and on the same basis as in prior years, even if your servicesas President and Chief Executive Officer have already then ceased.

3.05 BUSINESS EXPENSES. Arbitron shall, consistent with its policies in effect from time to time, bear all ordinary and necessarybusiness expenses incurred by you in performing your duties as an employee of Arbitron, provided that you account promptly for suchexpenses to Arbitron in the manner prescribed from time to time by Arbitron. Notwithstanding the foregoing, (i) the expenses eligiblefor reimbursement may not affect the expenses eligible for reimbursement in any other taxable year, (ii) such reimbursement must bemade on or before the last day of the year following the year in which the expenses were incurred, and (iii) the right to reimbursementis not subject to liquidation or exchange for another benefit.

3.06 SUPPLEMENTAL RETIREMENT BENEFIT.

(a) ENTITLEMENT.

(1) SEPARATION FROM SERVICE. Subject to Sections 3.06(a)(2), 3.06(a)(3) and 3.06(a)(4), you shall be entitled to asupplemental retirement benefit pursuant to this Section 3.06 following your Separation from Service with Arbitron at any timefor any reason, except as specified in Section 3.06(a)(2).

(2) FORFEITURE. You or your surviving spouse, as the case may be, shall not be entitled to receive or retain a supplementalretirement benefit pursuant to this Section 3.06 if you breached or breach any of your obligations arising under Article 5 of thisAgreement or if Arbitron terminates your employment for Cause. If, after you or your surviving spouse, as the case may be, hasreceived a benefit pursuant to this Section 3.06, Arbitron determines that you are not entitled to the benefit, you or your survivingspouse, as the case may be, shall promptly repay to Arbitron the benefit payment previously received pursuant to thisSection 3.06 together with interest on such payment for the period beginning on the date on which it was paid and ending on thedate on which it is repaid to Arbitron, at the prime rate of interest (or such comparable index as may be adopted) establishedfrom time to time by the Bank of America National Trust and Savings Association, New York, New York, or its successor ininterest, as in effect from time to time during the period in question.


(3) DEATH. Except as provided in Section 3.06(d), no benefit shall be paid pursuant to this Section 3.06 to you or any otherperson if your employment with Arbitron terminates because of your death or if you die after your termination of employmentwith Arbitron but before your supplemental retirement benefit pursuant to this Section 3.06 is paid to you.

(4) OTHER CONDITIONS. As a condition to receiving any benefit pursuant to this Section 3.06, you or your surviving spouse,as the case may be, agrees to provide to Arbitron on a timely basis any such information as Arbitron may reasonably request todetermine the entitlement of you or your surviving spouse, as the case may be, to a benefit pursuant to this Section 3.06 or theamount or timing of the benefit payment or to resolve any other issue or assist Arbitron in making any determination regardingthe benefit.

(b) COMMENCEMENT AND FORM. Subject to compliance with Section 3.08, the benefit pursuant to this Section 3.06 shall bepaid on July 1, 2010 (or such later date as is required by Section 6.09 below) in the form of a lump sum cash payment.

(c) AMOUNT.

(1) DETERMINATION DATE. The amount of your benefit pursuant to this Section 3.06 shall be a lump sum amount that isactuarially equivalent to a monthly benefit, paid in the Normal Form and calculated as though commencing as of theDetermination Date, equal to one-twelfth of the excess of:

(A) the sum of:

(i) the product of your Final Average Pay multiplied by your Years of Service through the calendar year during whichyou attained age 62 multiplied by .025 plus

(ii) the product of your Final Average Pay multiplied by your Years of Service following the calendar year during whichyou attained age 62 multiplied by .0167; over

(B) the Offset Amount.

(2) ACTUARIAL EQUIVALENCE. For the purpose of this Section 3.06(c), actuarial equivalence for a given DeterminationDate shall be based on the annual interest rate on 30-year Treasury securities for the month of November of the calendar yearimmediately preceding the calendar year that includes the Determination Date, as determined in accordance with publishedguidance from the Internal Revenue Service pursuant to Section 417(e)(3) of the Code and mortality rates per the “applicablemortality table” published in Revenue Ruling 2001-62, as modified or replaced before the Determination Date to provideguidance from the Internal Revenue Service pursuant to Section 417(e)(3) of the Code as of the Determination Date.

(d) DEATH BENEFITS.

(1) DEATH BEFORE DETERMINATION DATE. If you die before the Determination Date, your surviving spouse, if any,shall, subject to Sections 3.06(a)(2) and 3.06(a)(4), be entitled to a surviving spouse benefit. The benefit shall be paid to yoursurviving spouse on or as soon as administratively practicable after the Determination Date in the form of a lump sum cashpayment. The amount of the surviving spouse benefit pursuant to this Section 3.06(d)(1) shall be equal to fifty percent (50%) ofthe


amount of the supplemental retirement benefit that would have been paid to you pursuant to this Section 3.06 had you terminatedemployment on the date of your death (or, if earlier, on the actual date on which you terminated employment) and lived until youreceived your supplemental retirement benefit. If your surviving spouse dies after becoming entitled to a surviving spouse benefitpursuant to this Section 3.06(d)(1) but before the benefit is paid to the surviving spouse, the benefit shall be paid to the survivingspouse’s estate at the same time the benefit would have been paid to the surviving spouse had she lived.

(2) DEATH ON OR AFTER DETERMINATION DATE. If you die on or after the Determination Date but before payment ofyour supplemental retirement benefit pursuant to this Section 3.06, the benefit that would have been paid to you had you livedshall, subject to Sections 3.06(a)(2) and 3.06(a)(4), be paid to your estate at the same time the benefit would have been paid toyou had you lived.

(e) NONASSIGNABILITY. The benefit pursuant to this Section 3.06 and the right to receive a future benefit pursuant to thisSection 3.06 may not be anticipated, alienated, sold, transferred, assigned, pledged, encumbered or subjected to any charge or legalprocess.

(f) NATURE OF INTEREST. Nothing contained in this Section 3.06 is to be construed as providing for assets to be held for thebenefit of you or your surviving spouse. If you or your surviving spouse acquires a right to receive benefit payments pursuant tothis Section 3.06, that right is no greater than the right of any unsecured general creditor of Arbitron.

(g) DETERMINATIONS. Arbitron shall make all determinations as to entitlement and amount of any benefit payment pursuant tothis Section 3.06. Arbitron shall have discretionary power and authority to interpret, construe, apply, enforce and otherwiseadminister the terms of this Section 3.06 and any reasonable determination made by Arbitron in good faith shall be binding andconclusive on you and your surviving spouse. Any determination by Arbitron denying a claim by you or your surviving spouseshall be stated in writing and shall set forth the specific reason for the denial. Arbitron shall afford a reasonable opportunity to theclaimant for a full and fair review of the determination denying the claim. A claimant must exhaust the procedure described in thisSection 3.06(g) before pursuing the claim in any other proceeding.

(h) SPECIAL DEFINITIONS. The definitions set forth in this Section 3.06(h) apply in construing this Section 3.06 unless thecontext otherwise indicates. Other terms used in this Section 3.06 have the meanings ascribed to them in Article 1 of thisAgreement. In addition, the general provisions of Article 5 of this Agreement apply to this Section 3.06 unless the contextotherwise indicates.

(1) “Arbitron” means, for purposes of Sections 3.06(a)(4), 3.06(f), 3.06(g) and 3.06(h), Arbitron Inc. and any successor ininterest by way of consolidation, operation of law, merger or otherwise, but not any Subsidiary.

(2) “Determination Date” means the first day of the fourth calendar month following your Separation from Service withArbitron.

(3) “Final Average Pay” means your “final average pay” as defined in the Retirement Plan but determined by disregarding anypart of the definition of final average pay in the Retirement Plan that is included in compensation for purposes of that or similarplans under Section 401(a)(17) of the Code. If the Retirement Plan is terminated effective as of a date that is before the date onwhich you terminate employment with Arbitron, the previous sentence shall be applied after the effective date of the terminationof the Retirement Plan based on the definition of final average pay in effect under the Retirement Plan on the effective date ofthe termination of the Retirement Plan as if the Retirement Plan had continued in effect.


(4) “Normal Form” means monthly payments to you for your life with the last payment made for the month during which youdie and with no death benefits payable to any person.

(5) “Offset Amount” means the annual benefit to which you would be entitled under the “offset plans” if your benefit under theoffset plans commenced as of the Determination Date and was paid in the Normal Form, based on the terms of the offset plans ineffect and applicable to you on the Determination Date or, if earlier, as of the effective date of the termination of an offset plan.If the Determination Date is before the earliest date on which your benefit could commence under an offset plan, the OffsetAmount with respect to that offset plan shall be determined by calculating the Offset Amount as of the earliest date on whichyour benefit could commence under the offset plan and then reducing that benefit by one fourth of one percent for each month bywhich the offset date precedes the earliest date on which your benefit could commence under the offset plan. The Offset Amountshall be determined without regard to the actual timing of commencement and form of your benefit pursuant to the offset plans.For the purpose of this Section 3.06(h)(5), the offset plans are the Retirement Plan, the Arbitron Inc. Benefit Equalization Plan,and any defined benefit pension plan maintained by any previous employer of you which was or is operated by such previousemployer as a qualified plan pursuant to Section 401(a) of the Code, or any successor to any such plans.

(6) “Retirement Plan” means the Arbitron Inc. Retirement Plan as from time to time amended.

(7) “Years of Service” means (A) each calendar year from and including 1994 through and including 2000 and (B) each calendaryear after 2000 and before 2010 during any part of which you are an employee of Arbitron (as classified by Arbitron at the timewithout regard to any subsequent retroactive reclassification). You will not be credited with any Years of Service for any periodof employment with Arbitron after 2009.

3.07 TRANSITIONAL COMPENSATION. Subject to compliance with Section 3.08, in consideration of your service as required inthe transition to a new Chief Executive Officer and as Chairman of the Board during part or all of 2009 and assuming youremployment ends other than under Section 4.01, Arbitron shall pay you or your estate, on July 1, 2010 (or such later date as isrequired by Section 409A), $1,018,888.67, reduced by any required tax withholdings. Arbitron waives any requirement that youprovide consulting services under your employment agreement with Arbitron, most recently amended as of July 3, 2006 (the“Predecessor Agreement”).

3.08 RELEASE. Payments under Sections 3.06 and 3.07 are conditioned upon your providing a release of claims in favor of Arbitronon or after December 31, 2009 and before February 1, 2010 on a form to be provided by Arbitron, substantially in the form attached asExhibit A hereto, which release becomes binding on you.

ARTICLE4

EARLY TERMINATION

4.01 TERMINATION FOR CAUSE. Arbitron may terminate this Agreement and your employment immediately for cause. For thepurpose hereof “cause” means:

(a) fraud;

(b) misrepresentation;


(c) theft or embezzlement of Arbitron assets;

(d) intentional violations of law involving moral turpitude;

(e) failure to follow Arbitron’s conduct and ethics policies; and/or

(f) your continued failure to attempt in good faith to perform your duties as reasonably assigned to you pursuant to Section 2.02 fora period of 60 days after a written demand for such performance which specifically identifies the manner in which it is alleged youhave not attempted in good faith to perform such duties.

In the event of termination for cause pursuant to this Section 4.01, you shall be paid at the usual rate of your Base Salary as then ineffect through the date of termination specified in any written notice of termination.

4.02 TERMINATION WITHOUT CAUSE. Either you or Arbitron may terminate this Agreement and your employment withoutcause on at least 20 days’ written notice. In the event of termination of this Agreement and of your employment pursuant to thisSection 4.02, compensation shall be paid as follows:

(a) if the notice of termination is given by you, you shall be paid at the usual rate of your Base Salary as then in effect through the20 day notice period in accordance with the regular payroll schedule, provided that Arbitron may shorten the period and pay youthe remainder of the 20 days’ worth of Base Salary as then in effect;

(b) if the notice of termination is given by Arbitron, (i) you shall be paid at the usual rate of your Base Salary as then in effectthrough the 20-day notice period, however, Arbitron shall have the option of making termination of the Agreement and youremployment effective immediately upon notice in which case you shall be paid a lump sum representing the value of 20 days’worth of Base Salary as then in effect, subject to any delay required by Section 6.09, and (ii) you shall receive payment, starting onthe 60th day after the date employment ends (assuming prior compliance with this Section 4.02(b) and delayed if required bySection 6.09), equal to the sum of the Base Salary scheduled to be paid for the remainder of 2009 and 75% of the Blended BaseSalary. This payment shall be made ratably over the remainder of 2009 (or, if the payment must be delayed, over the time left in2009 when this provision is triggered) on a regular payroll period basis. To receive the payments in clause (ii), you must execute arelease in a form provided by Arbitron of all legally-releasable claims against Arbitron and its affiliates and their directors, officers,employees, and agents, which release must become binding and irrevocable during the 60 days. If the 60 day period ends in 2010,payments subject to this release will be paid between January 1, 2010 and March 15, 2010, subject to any delay required by Section6.09.

4.03 TERMINATION IN THE EVENT OF DEATH OR DISABILITY. This Agreement shall terminate in the event of your death ordisability.

(a) In the event of your death during 2009, Arbitron shall pay an amount equal to 175% of your Blended Base Salary. Such amountshall be paid (1) to the beneficiary or beneficiaries you designated in writing to Arbitron, (2) in the absence of such designation, tothe surviving spouse, or (3) if there is no surviving spouse, or such surviving spouse disclaims all or any part, then the full amount,or such disclaimed portion, shall be paid to the executor, administrator or other personal representative of your estate. The amountshall be paid as a lump sum as soon as practicable following Arbitron’s receipt of notice of your death but, in any event within30 days thereafter.

(b) In the event of your Disability during 2009, Base Salary shall be terminated as of the date such Disability is determined.

(c) In the event of termination by reason of your death or Disability during 2009, Arbitron


will pay to your or your heirs an amount, if any, equal to (1) the amount you would have received in annual incentive plan bonusfor the year in which termination occurs had “target” goals been achieved, multiplied by (2) a fraction, the numerator of which shallbe the number of whole months you were employed in 2009 and the denominator of which is 12. The amount payable pursuant tothis Section 4.03(c) shall be paid within 15 days after the date such bonus would have been paid had you remained employed forthe full fiscal year.

4.04 ENTIRE TERMINATION PAYMENT. The compensation provided for in this Article 4 for early termination of this Agreementand termination pursuant to this Article 4 shall constitute your sole remedy for such termination. You shall not be entitled to any othertermination or severance payment that may be payable to you under any other agreement between you and Arbitron.

ARTICLE5

NON-COMPETITION, NON-RECRUITMENT, AND NON-DISPARAGEMENT

5.01 GENERAL. The parties hereto recognize and agree that (a) you are a senior executive of Arbitron and a key executive ofArbitron, (b) you have received, and will in the future receive, substantial amounts of Confidential Information (as defined in thePredecessor Agreement), (c) Arbitron’s business is conducted on a worldwide basis, and (d) provision for non-competition,non-recruitment and non-disparagement obligations by you is critical to Arbitron’s continued economic well-being and protection ofArbitron’s Confidential Information. In light of these considerations, this Article 5 sets forth the terms and conditions of yourobligations of non-competition, non-recruitment and non-disparagement during and subsequent to the termination of this Agreementand/or your employment for any reason.

5.02 NON-COMPETITION.

(a) Unless the obligation is waived or limited by Arbitron in accordance with Section 5.02(b), you agree that while employed or amember of the Board and for a period of 12 months following your ceasing to be a member of the Board or, if later, of yourtermination of employment for any reason (the “Restrictive Period”), you will not directly or indirectly, alone or as a partner,officer, director, shareholder or employee of any other firm or entity, engage in any commercial activity in competition with anypart of Arbitron’s business as conducted as of the date of such termination of employment or with any part of Arbitron’scontemplated business with respect to which you have Confidential Information. For purposes of this subsection (a), “shareholder”shall not include beneficial ownership of less than five percent (5%) of the combined voting power of all issued and outstandingvoting securities of a publicly held corporation whose stock is traded on a major stock exchange. Also for purposes of thissubsection (a), “Arbitron’s business” shall include business conducted by Arbitron or its affiliates and any partnership or jointventure in which Arbitron or its affiliates is a partner or joint venturer; provided that, “affiliate” as used in this sentence shall notinclude any corporation in which Arbitron has ownership of less than 15% of the voting stock.

(b) At its sole option Arbitron may, by written notice to you at any time within the Restrictive Period, waive or limit the time and/orgeographic area in which you cannot engage in competitive activity.

(c) During the Restrictive Period, prior to accepting employment with or agreeing to provide consulting services to, any firm orentity which offers competitive products or services, you shall give 30 days’ prior written notice to Arbitron. Such written noticeshall describe the firm and the employment or consulting services to be rendered to the firm or entity, and shall include a copy ofthe written offer of employment or engagement of consulting services. Arbitron’s failure to respond or object to such notice shallnot in any way constitute acquiescence or waiver of Arbitron’s rights under this Article 5.


(d) If you fail to provide notice to Arbitron pursuant to Section 5.02(c) and/or in any way violates its non-competition obligationpursuant to Section 5.02, Arbitron may enforce all of its rights and remedies provided to it under this Agreement, in law and inequity.

5.03 NON-RECRUITMENT. For a period of 12 months following your ceasing to be a member of the Board or, if later, followingyour termination of employment for any reason, you will not initiate or actively participate in any other employer’s recruitment orhiring of Arbitron employees. This provision shall not preclude you from responding to a request (other than by your employer) for areference with respect to an individual’s employment qualifications.

5.04 NON-DISPARAGEMENT. You will not, during the term or after the termination or expiration of this Agreement or youremployment, make disparaging statements, in any form, about Arbitron, its officers, directors, agents, employees, products or serviceswhich you know, or have reason to believe, are false or misleading.

5.05 SURVIVAL. The obligations of this Article 5 shall survive the expiration or termination of this Agreement and youremployment.

ARTICLE6

GENERAL PROVISIONS

6.01 NO ADEQUATE REMEDY. The parties declare that it is impossible to measure in money the damages that will accrue to eitherparty by reason of a failure to perform any of the obligations under this Agreement and therefore injunctive relief is appropriate.Therefore, if either party shall institute any action or proceeding to enforce the provisions hereof, such party against whom such actionor proceeding is brought hereby waives the claim or defense that such party has an adequate remedy at law, and such party shall noturge in any such action or proceeding the claim or defense that such party has an adequate remedy at law.

6.02 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the successors and assigns ofParent Corporation and each Subsidiary, whether by way of merger, consolidation, operation of law, assignment, purchase or otheracquisition of substantially all of the assets or business of Arbitron, and any such successor or assign shall absolutely andunconditionally assume all of Arbitron’s obligations hereunder.

6.03 NOTICES. All notices, requests and demands given to or made pursuant hereto shall, except as otherwise specified herein, be inwriting and be delivered or mailed to any such party at its address:

(a) ARBITRON INC.9705 Patuxent Woods DriveColumbia, Maryland 21046Attention: Chief Legal Officer

(b) To you:

At your last address on the records of Arbitron

Either party may, by notice hereunder, designate a changed address. Any notice, if mailed properly addressed, postage prepaid,registered or certified mail, shall be deemed dispatched on the registered date or that stamped on the certified mail receipt, and shall bedeemed received within the second business day thereafter or when it is actually received, whichever is sooner.

6.04 CAPTIONS. The various headings or captions in this Agreement are for convenience only and shall not affect the meaning orinterpretation of this Agreement.


6.05 GOVERNING LAW; JURY TRIAL WAIVER. The validity, construction and performance of this Agreement shall be governedby the laws of the State of New York and any and every legal proceeding arising out of or in connection with this Agreement shall bebrought exclusively in the appropriate courts of the State of New York, each of the parties hereby consenting to the exclusivejurisdiction of such courts for this purpose. Arbitron and you each hereby irrevocably waive any right to a trial by jury in any action,suit or other legal proceeding arising under or relating to any provision of this Agreement.

6.06 CONSTRUCTION. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effectiveand valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, suchprovision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provisionor the remaining provisions of this Agreement.

6.07 WAIVERS. No failure on the part of either party to exercise, and no delay in exercising, any right or remedy hereunder shalloperate as a waiver thereof; nor shall any single or partial exercise of any right or remedy hereunder preclude any other or furtherexercise thereof or the exercise of any other right or remedy granted hereby or by any related document or by law.

6.08 MODIFICATION. Any changes or amendments to this Agreement must be in writing and signed by both parties.

6.09 TAX WITHHOLDING; SECTION 409A COMPLIANCE. All payments under this Agreement are subject to any required tax orother withholdings. If and to the extent any portion of any payment, compensation or other benefit provided to you in connection withyour employment termination is determined to constitute nonqualified deferred compensation within the meaning of CodeSection 409A (“Section 409A”) and you are a specified employee as defined in Section 409A(a)(2)(B)(i), as determined by theCompany in accordance with its procedures, by which determination you hereby agree that you are bound, such portion of thepayment, compensation or other benefit shall not be paid before the earlier of (i) the first day following the expiration of the six monthperiod measured from the date of your Separation from Service or (ii) the date of your death following such separation from service(the “New Payment Date”). The aggregate of any payments that otherwise would have been paid to you during the period between thedate of separation from service and the New Payment Date shall be paid to you in a lump sum on such New Payment Date, and anyremaining payments will be paid on their original schedule. For purposes of this Agreement, each amount to be paid or benefit to beprovided shall be construed as a separate identified payment for purposes of Section 409A, and any payments that are due within the“short term deferral period” as defined in Section 409A shall not be treated as deferred compensation unless applicable law requiresotherwise. Neither the Company nor you shall have the right to accelerate or defer the delivery of any such payments or benefitsexcept to the extent specifically permitted or required by Section 409A. This Agreement is intended to comply with the provisions ofSection 409A and the Agreement shall, to the extent practicable, be construed in accordance therewith. Terms defined in theAgreement shall have the meanings given such terms under Section 409A if and to the extent required to comply with Section 409A.In any event, the Company makes no representations or warranty and shall have no liability to you or any other person, other than withrespect to payments made by the Company in violation of the provisions of this Agreement, if any provisions of or payments underthis Agreement are determined to constitute deferred compensation subject to Code Section 409A but not to satisfy the conditions ofthat section.

6.10 TAX REIMBURSEMENT.

(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payments ordistributions by Arbitron to or for your benefit (whether paid or payable or distributed or distributable pursuant to the terms of thisAgreement or otherwise, but determined without regard to any payments required under this Section 6.10) (collectively, the“Payments”) would be subject to the excise tax imposed by Section 4999 of the Code or any


interest or penalties are incurred by you with respect to such excise tax (such excise tax, together with any such interest andpenalties, are hereinafter collectively referred to as the “Excise Tax”), then you shall be entitled to receive an additional payment (a“Gross-Up Payment”) in an amount such that, after payment by you of all taxes (and any interest or penalties imposed with respectto such taxes), including any income taxes and Excise Tax imposed upon the Gross-Up Payment, you retain an amount of theGross-Up Payment equal to the Excise Tax imposed upon the Payments.

(b) Subject to the provisions of Section 6.10(d), all determinations required to be made under this Section 6.10, including whetherand when a Gross-Up Payment is required and the amount such Gross-Up Payment and the assumptions to be utilized in arriving atsuch determination, shall be made by Arbitron’s external auditors (the “Accounting Firm”), which shall provide detailedsupporting calculations both to Arbitron and you within 15 business days of the receipt of notice from you that there has been aPayment, or such earlier time as is requested by Arbitron. In the event that the Accounting Firm is serving as accountant or auditorfor the individual, entity or group effecting the Change of Control, you shall appoint another nationally recognized accounting firmto make the determinations required hereunder (which accounting firm shall then be referred to as the “Accounting Firm”hereunder). All fees and expenses of the Accounting Firm shall be borne solely by Arbitron. Any Gross-Up Payment, as determinedpursuant to this Section 6.10, shall be paid by Arbitron to you within five days of the receipt of the Accounting Firm’sdetermination. Any determination by the Accounting Firm shall be binding upon Arbitron and you.

(c) As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by theAccounting Firm hereunder, it is possible that Gross-Up Payments which should have been made by Arbitron will not have beenmade (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that Arbitron exhausts itsremedies pursuant to Section 6.10(d) and you thereafter are required to make a payment of any additional Excise Tax, theAccounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptlypaid by Arbitron to or for the benefit of you.

(d) You shall notify Arbitron in writing of any claim by the Internal Revenue Service or any other taxing authority that, ifsuccessful, would require the payment by Arbitron of any Gross-Up Payment. Such notification shall be given as soon aspracticable but no later than ten business days after you know of such claim and shall apprise Arbitron of the nature of such claimand the date on which such claim is requested to be paid. You shall not pay such claim prior to the expiration of the thirty-dayperiod following the date on which it gives such notice to Arbitron (or such shorter period ending on the date that any payment oftaxes with respect to such claim is due). If Arbitron notifies you in writing prior to the expiration of such period that it desires tocontest such claim, you shall:

(i) give Arbitron any information reasonably requested by Arbitron relating to such claim;

(ii) take such action in connection with contesting such claim as Arbitron shall reasonably request in writing from time to time,including accepting legal representation with respect to such claim by an attorney reasonably selected by Arbitron;

(iii) cooperate with Arbitron in good faith in order to effectively contest such claim; and

(iv) permit Arbitron to participate in any proceedings relating to such claim;

provided, however, that Arbitron shall bear and pay directly all costs and expenses (including additional interest and penalties)incurred in connection with such contest and shall indemnify and


hold you harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto)imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions ofthis Section 6.10(d), Arbitron shall control all proceedings taken in connection with such contest and, at its sole option, may pursueor forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of suchclaim and may, at its sole option, either direct you to pay the tax claimed and sue for a refund or contest the claim in anypermissible manner, and you agree to prosecute such contest to a determination before any administrative tribunal, in a court ofinitial jurisdiction and in one or more appellate courts, as Arbitron shall determine; provided further, however, that if Arbitrondirects you to pay such claim and sue for a refund, Arbitron shall advance the amount of such payment to you on an interest-freebasis and shall indemnify and hold you harmless, on an after-tax basis, from any Excise Tax or income tax (including interest orpenalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to suchadvance; and provided further that any extension of the statute of limitations relating to payment of taxes for your taxable year withrespect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, Arbitron’scontrol of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and youshall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxingauthority.

(e) If, after the receipt by you of an amount advanced by Arbitron pursuant to Section 6.10(d), you become entitled to receive anyrefund with respect to such claim, you shall (subject to Arbitron’s complying with the requirements of Section 6.10 promptly pay toArbitron the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after thereceipt by you of an amount advanced by Arbitron pursuant to Section 6.10(d), a determination is made that you shall not beentitled to any refund with respect to such claim and Arbitron does not notify you in writing of its intent to contest such denial ofrefund prior to the expiration of thirty days after such determination, then such advance shall be forgiven and shall not be requiredto be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to bepaid.

Any Gross-Up Payment shall be paid not later than the end of the tax year following the tax year in which the determination underthis Section 6.10 was made.

6.11 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and understanding between the parties hereto inreference to all the matters herein agreed upon. This Agreement replaces in full all prior employment agreements or understandings ofthe parties hereto, and any and all such prior agreements or understandings are hereby rescinded by mutual agreement; provided,however, that you agree that Article V of the Predecessor Agreement (relating to confidentiality, disclosure, and assignment ofintellectual property) remains in full force and effect).

Signatures on Page Following


IN WITNESS WHEREOF, The parties hereto have caused this Agreement to be duly executed and delivered as of the day and yearfirst above written. EXECUTIVE ARBITRON INC. /s/ Stephen B. Morris By: /s/ William T. Kerr Stephen B. Morris William T. Kerr Title: Chair, Compensation and Human Resources Committee


EXHIBIT 10.13

ARBITRON INC.

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made January 7, 2009 by and between Arbitron Inc., a Delawarecorporation (the “Company”), and Michael P. Skarzynski, an individual (“you”) (and, together, “Parties”).

NOW THEREFORE, in consideration of your acceptance of employment, the Parties agree to be bound by the terms contained inthis Agreement as follows:

1. Engagement. Beginning January 12, 2009 (the “Effective Date”), the Company will employ you as President and ChiefExecutive Officer of the Company. You will report solely and directly to the Board of Directors of the Company (the “Board”). Youwill have the responsibilities, duties and authorities the Board specifies from time to time, which will be commensurate with thepresident and chief executive officer of public entities of similar size and character. The Board will appoint you as a Director in aspecial Board meeting before or as soon as practicable following the Effective Date. For so long as you remain Chief ExecutiveOfficer of the Company, the Board intends to nominate you to the Board and, if elected by the Company’s stockholders you will servein such capacity without additional consideration while employed. You will at all times comply with all policies of the Company thenin effect.

2. Commitment. During and throughout the Employment Term (as defined in Section 3 below), you must devote substantially allof your full working time and attention to the Company. During the Employment Term, you must not engage in any employment,occupation, consulting or other activity for direct or indirect financial remuneration unless approved by the Board; provided, however,that you may, subject to compliance with the notice and consent requirements set forth in the Company’s Corporate GovernancePolicies and Guidelines, (i) serve in any capacity with any professional, community, industry, civic (including governmental boards),educational or charitable organization, (ii) serve on for-profit entity board(s) having obtained prior consent and written approval fromthe Board’s Nominating and Corporate Governance Committee and (iii) subject to the Company’s policies applicable to allemployees, make investments in other businesses and manage your and your family’s personal investments and legal affairs; providedthat any such activities described in clauses (i)-(iii) above do not materially interfere with the discharge of your duties as the ChiefExecutive Officer of the Company. You will perform your services under this Agreement at the Company’s headquarters in Columbia,Maryland.

3. Employment Term. You are an at-will employee. Your employment with the Company under this Agreement will begin on theEffective Date and will continue until your employment terminates (such employment period, the “Employment Term”).

4. Cash and Stock Compensation.

(a) Base Salary. During your employment hereunder, you will receive a base salary at a monthly rate of $41,666.67, annualizingto $500,000 (“Base Salary”). The Company


will pay your Base Salary in accordance with the Company’s regular payroll practices. The Board will review your Base Salary noless frequently than annually. If increased, the increased Base Salary will become the Base Salary for all purposes of this Agreement.Your Base Salary will not be decreased without your written consent.

(b) Incentive Bonus. Upon meeting the applicable performance criteria established by the Company’s Compensation andHuman Resources Committee of the Board (the “Compensation Committee”) in its sole discretion, you will be eligible to receive anannual incentive bonus (the “Annual Bonus”) for a given fiscal year of the Company targeted at an amount equal to 100% of yourBase Salary in effect at the beginning of such fiscal year (“Target Bonus”). For performance exceeding such applicable performancecriteria in the sole judgment of the Compensation Committee, the Annual Bonus will be increased to an amount in excess of theTarget Bonus up to a maximum of 200% of your Base Salary in effect at the beginning of such fiscal year, which additional bonusamount the Compensation Committee will determine in its sole discretion. The Annual Bonus, if any, will be paid when otherexecutives receive their bonuses under comparable arrangements but, in any event, between January 1 and April 30 of the yearfollowing the year with respect to with it is earned. The Company will pay you the 2009 Annual Bonus in the minimum amount of$250,000 provided that you are an employee in good standing as of December 31, 2009.

(c) Compensatory Stock Awards. Subject to the Compensation Committee’s approval, as soon as administratively practicableon or following the Effective Date, the Company will grant you an equity award to be valued at $1,250,000 on the date of grant, withthe award divided by value into 50% stock options and 50% restricted stock units (where the value for the options is determined usingthe Company’s standard Black-Scholes assumptions applied as of the date of grant and where the value for the restricted stock units isdetermined by dividing the target value for the restricted stock units by the Common Stock’s fair market value on the date of grant)(the “Inducement Grant”), each with respect to the Company’s common stock, par value $0.50 (the “Common Stock”). Subject to theCompensation Committee’s further approval, you will receive an additional grant (the “First Year Grant”) prior to or in connectionwith the February 2009 grant cycle, valued at $1,250,000 and divided into options and restricted stock units in the same manner as theInducement Grant but based on the fair market value of the Common Stock on the First Year Grant date. Grants will be under theCompany’s 1999 Stock Incentive Plan or 2008 Equity Compensation Plan as the Compensation Committee selects (as applicable andwith any successor plan, the “Stock Plan”). Assuming continued employment, the options under the Inducement and First Year Grantswill each vest in equal amounts on an annual basis over a three year period following the date of grant (beginning with one-third onthe first anniversary), and otherwise will contain the same terms and conditions as the Company’s standard form of nonqualified stockoption agreement adopted for use under the applicable Stock Plan, except as modified by this Agreement. Assuming continuedemployment, the restricted stock units under the Inducement and First Year Grants will each vest in equal amounts on an annual basisover a four year period following the date of grant (beginning with 25% on the first anniversary) and otherwise will contain the sameterms and conditions as the Company’s standard form of restricted stock unit agreement adopted for use under the applicable StockPlan, except as modified by this Agreement. The Compensation Committee at its sole discretion will consider the grant of additionalcompensatory stock awards to you no less frequently than annually.

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(d) Relocation Expenses and Temporary Living Expenses. The Company directs you to work at its Columbia, Marylandheadquarters and will assist in relocation expenses. You agree that you will use best efforts to relocate your primary residence during2009. Providing that you relocate to a residence in proximity to Columbia, Maryland, the Company will reimburse you for relocationexpenses and temporary living expenses up to a maximum of $300,000. The residual balance of relocation expenses and temporaryliving expenses will expire if not used by December 31, 2010. Qualified relocation and temporary living expenses will cover realestate commission fees and transfer tax fees for the sale of your residence in New Jersey, moving costs, temporary housing rental fees,moving costs, legal fees, inspection fees, mortgage financing fees for the purchase of your new residence in proximity to theCompany’s headquarters in Columbia, Maryland and applicable gross-up for federal taxes. Without limiting the foregoing andnotwithstanding any other provision of this Agreement to the contrary, in no event will reimbursement for temporary housing rentalfees exceed $5,000 for any month. Any payments or expenses provided in this Section 4(d) will be paid in accordance withSection 7(c). If your employment ends before December 31, 2010 (the “Relocation Repayment Date”) as a result of your resignationor your termination for Cause, you agree to repay a pro rata portion of the relocation expenses, with the proration determined based onthe number of days remaining between the date your employment ends and the Relocation Repayment Date as compared with the totalnumber of days between the Effective Date and the Relocation Repayment Date.

(e) Tax Preparation and Financial Planning. The Company will pay you an annual allowance of $10,000 for tax preparation andfinancial planning. Any payments or expenses provided in this Section 4(e) will be paid in accordance with Section 7(c).

5. Employee Benefits.

(a) Employee Welfare and Retirement Plans. You will, to the extent eligible, be entitled to participate at a level commensuratewith your position in all employee welfare benefit and retirement plans and programs the Company provides to its executives inaccordance with Company policies.

(b) Business Expenses. Upon submission of appropriate documentation in accordance with its policies , the Company willpromptly pay to or reimburse you for all reasonable business expenses that you incur in performing your duties under this Agreement,including, but not limited to, travel, entertainment, professional dues and subscriptions, as long as such expenses are reimbursableunder the Company’s policies. Any payments or expenses provided in this Section 5(b) will be paid in accordance with Section 7(c).

(c) Paid Time Off. You will be entitled to paid time off in accordance with the standard written policies of the Company withregard to executives.

6. Termination of At-Will Employment.

(a) General. Subject in each case to the provisions of this Section 6, nothing in this Agreement interferes with or limits in anyway the Company’s right to terminate your employment at any time, for any reason or no reason, with or without notice, and nothingin this Agreement confers on you any right to continue in the Company’s employ. If your employment ceases due to death or for anyother reason or for no reason, you will be entitled to receive (in addition to any compensation and benefits you are entitled to receiveunder Section 6(b) or 6(c) below): (i) any earned but unpaid Base Salary through and including the date of termination of

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your employment, (ii) any earned but unpaid Annual Bonus, (iii) unreimbursed business expenses in accordance with the Company’spolicies; (iv) unpaid relocation or temporary living expenses incurred as of such date (subject to the requirements of Section 4(d)); and(v) any amounts or benefits to which you are then entitled under the terms of the benefit plans then sponsored by the Company inaccordance with their terms (and not accelerated to the extent acceleration does not satisfy Section 409A of the Internal Revenue Codeof 1986, as amended (“Section 409A” of the “Code”)). Notwithstanding any other provision in this Agreement to the contrary, anyseverance benefits to which you may be entitled will be provided exclusively through the terms of this Section 6 of this Agreement.

(b) Termination Without Cause. If, during the Employment Term, the Company terminates your employment without Cause(defined below), you will be entitled to the following severance benefits:

(i) Cash Severance. The Company will pay to you in cash (i) an amount equal to two times your Base Salary, paid in equalinstallments over a 24 month period following the Effective Release Date (as defined below) in accordance with the Company’sstandard payroll policies and procedures and in a manner not inconsistent with Section 7 hereof, and (ii) a bonus component (the“Bonus Component”). If you are terminated without cause during 2009, the Bonus Component will be $500,000. If, for subsequentyears, the Annual Bonus for your year of termination is determined by the Compensation Committee under a program intended toqualify as performance-based for purposes of Section 162(m) of the Code (an “Exempt Bonus”), you will be paid the BonusComponent under the timing provided in Section 4(b) of this Agreement as though you had remained employed, with the BonusComponent determined under the factors for such Annual Bonus, but without the exercise by the Compensation Committee ofnegative discretion as provided in Treas. Reg. § 1.162-27(e)(2)(iii)(A) (with the expectation, if all performance factors are satisfied,that the Bonus Component would be two times Target Bonus). If the Annual Bonus for your year of termination is not intended tobe an Exempt Bonus, the Bonus Component will be two times Target Bonus paid in the timing provided in Section 4(b) of thisAgreement.

(ii) Benefits. The Company will also pay the full cost of the health care premiums otherwise payable by you upon yourelection of health care continuation coverage for yourself and your qualified beneficiaries as provided under the ConsolidatedOmnibus Budget Reconciliation Act of 1985 (“COBRA”) until the earlier of 18 months or your ceasing to qualify for COBRAcoverage (such as by obtaining subsequent coverage).

(iii) Release. To receive any severance benefits provided for under this Agreement or otherwise, you must deliver to theCompany of a general release of claims on the form the Company provides, which must become irrevocable within 60 daysfollowing the date of your termination of employment. Benefits will be paid or commence no later than 30 days after such releasebecomes effective (except for delays described above for the Bonus Component); provided, however, that if the last day of the60 day period for an effective release falls in the calendar year following the year of your date of termination, the severancepayments will be paid or commence no earlier than January 1 of such subsequent calendar year. The date on which your release ofclaims

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becomes effective is the “Effective Release Date.” You must continue to comply with the covenants under Sections 8 and 9 belowto continue to receive severance benefits.

(c) Change in Control. If, within 12 months following a Change in Control, your employment ends on a termination withoutCause, in addition to the compensation and benefits described in Section 2(b)(i) and (ii) above and subject to the release requiredunder Section 2(b)(iii), any outstanding equity compensation awards will fully and immediately vest and, as applicable, becomeexercisable, provided that the Board will have the right to suspend exercises or sales with respect to such equity compensation pendingsatisfaction of the release requirement, and provided that the vesting will not accelerate the distribution of shares underlying equityawards if such acceleration would trigger taxation under Section 409A(a)(1)(B). The treatment in this Section 6(c) appliesnotwithstanding any contrary provisions in the applicable Stock Plan or any award agreement. For the purpose of this Agreement,“Change of Control” means:

(i) consummation of a merger or consolidation to which the Company is a party if the individuals and entities who werestockholders of the Company immediately before the effective date of such merger or consolidation have beneficial ownership (asdefined in Rule 13d-3 under the Exchange Act) of less than 50% of the total combined voting power for election of directors of thesurviving Company immediately following the effective date of such merger or consolidation; or

(ii) the direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) in the aggregate ofsecurities of the Company representing 51% or more of the total combined voting power of the Company’s then issued andoutstanding securities by any person or entity, or group of associated persons or entities acting in concert; provided, however, thatfor purposes hereof, any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or anycorporation controlled by the Company will not constitute a Change of Control; or

(iii) the direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Exchange Act) in the aggregate ofsecurities of the Company representing 25% or more of the total combined voting power of the Company’s then issued andoutstanding securities by any person or entity, or group of associated persons or entities acting in concert if such acquisition is notapproved by the Board before any such acquisition; provided, however , that for purposes hereof, any acquisition by any employeebenefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company will notconstitute a Change of Control; or

(iv) consummation of the sale of the properties and assets of the Company, substantially as an entirety, to any person or entitywhich is not a wholly-owned subsidiary of the Company; or

(v) the liquidation of the Company is consummated; or

(vi) a change in the composition of the Board at any time during any consecutive 24-month period such that the ContinuityDirectors cease for any reason to constitute at least a 70 % majority of the Board. For purposes of this clause, “Continuity

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Directors” means those members of the Board who either (A) were directors at the beginning of such consecutive 24-month period,or (B) were elected by, or on the nomination or recommendation of, at least a two-thirds majority of the then-existing Board.

(d) Termination for Cause.

(i) General. If, during the Employment Term, the Company terminates your employment for Cause, you will be entitled onlyto the payments described in Section 6(a) (excluding, on a termination for Cause, clause (ii) of Section 6(a)). You will have nofurther right to receive any other compensation or benefits after such termination or resignation of employment, except asdetermined in accordance with the terms of the employee benefit plans or programs of the Company or as required by law.

(ii) Cause. For purposes of this Agreement, “Cause” means termination of your employment because of (i) fraud;(ii) misrepresentation; (iii) theft or embezzlement of assets of the Company; (iv) your conviction, or plea of guilty or nolocontendere to any felony (or to a felony charge reduced to a misdemeanor), or, with respect to your employment, to anymisdemeanor (other than a traffic violation), or your intentional violations of law involving moral turpitude; (v) material failure tofollow the Company’s conduct and ethics policies; and/or (vi) your continued failure to attempt in good faith to perform your dutiesas reasonably assigned by the Board to you for a period of 60 days after a written demand for such performance that specificallyidentifies the manner in which it is alleged you have not attempted in good faith to perform such duties.

(e) Death or Disability. Your employment hereunder will terminate immediately upon your death, or if the Board, based uponappropriate medical evidence, determines you have become physically or mentally incapacitated so as to render you incapable ofperforming your usual and customary duties as President and Chief Executive Officer of the Company for a continuous period inexcess of 180 days. Employment termination under this subsection is not covered by Section 6(b) or 6(c).

(f) Further Effect of Termination on Board and Officer Positions. If your employment ends for any reason, you agree that youwill cease immediately to hold any and all officer or director positions you then have with the Company or any affiliate, absent acontrary direction from the Board (which may include either a request to continue such service or a direction to cease serving uponnotice without regard to whether your employment has ended), except to the extent that you reasonably and in good faith determinethat ceasing to serve as a director would breach your fiduciary duties to the Company. You hereby irrevocably appoint the Companyto be your attorney to execute any documents to effect your ceasing to serve as a director and officer of the Company and anysubsidiary, should you fail to resign following a request from the Company to do so. A written notification signed by a director or dulyauthorized officer of the Company that any instrument, document or act falls within the authority conferred by this clause will beconclusive evidence that it does so. The Company will prepare any documents, pay any filing fees, and bear any other expensesrelated to this section.

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7. Effect of Section 409A of the Code.

(a) Six Month Delay. If and to the extent any portion of any payment, compensation or other benefit provided to you inconnection with your separation from service (as defined in Section 409A of Code) is determined to constitute “nonqualified deferredcompensation” within the meaning of Section 409A and you are a specified employee as defined in Section 409A(a)(2)(B)(i) of theCode, as determined by the Company in accordance with its procedures, by which determination you hereby agree that you are bound,such portion of the payment, compensation or other benefit will not be paid before the earlier of (i) the day that is six months plus oneday after the date of separation from service (as determined under Section 409A) or (ii) the tenth (10th) day after the date of yourdeath (as applicable, the “New Payment Date”). The aggregate of any payments that otherwise would have been paid to you duringthe period between the date of separation from service and the New Payment Date will be paid to you in a lump sum on such NewPayment Date, and any remaining payments will be paid on their original schedule.

(b) General 409A Principles. For purposes of this Agreement, each amount to be paid or benefit to be provided will beconstrued as a separate identified payment for purposes of Section 409A, and any payments that are due within the “short termdeferral period” as defined in Section 409A will not be treated as deferred compensation unless applicable law requires otherwise.Neither the Company nor you will have the right to accelerate or defer the delivery of any such payments or benefits except to theextent specifically permitted or required by Section 409A. This Agreement is intended to comply with the provisions of Section 409Aand the Agreement will, to the extent practicable, be construed in accordance therewith. Terms defined in the Agreement will have themeanings given such terms under Section 409A if and to the extent required to comply with Section 409A. In any event, the Companymakes no representations or warranty and will have no liability to you or any other person, other than with respect to payments madeby the Company in violation of the provisions of this Agreement, if any provisions of or payments under this Agreement aredetermined to constitute deferred compensation subject to Code Section 409A but not to satisfy the conditions of that section.

(c) Expense Timing. Payments with respect to reimbursements of business expenses will be made on or before the last day ofthe calendar year following the calendar year in which the relevant expense is incurred. The amount of expenses eligible forreimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year.

8. Confidentiality, Disclosure, and Assignment

(a) Confidentiality. You will not, during or after the Employment Period, publish, disclose, or utilize in any manner anyConfidential Information obtained while employed by the Company. If you leave the Company’s employ, you will not, without theCompany’s prior written consent, retain or take away any drawing, writing, or other record in any form containing any ConfidentialInformation. For purposes of this Agreement, “Confidential Information” means information or material of the Company that is notgenerally available to or used by others, or the utility or value of which is not generally known or recognized as standard practice,including:

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(i) information or material relating to the Company and its business as conducted or anticipated to be conducted; businessplans; operations; past, current or anticipated software, products or services; customers or prospective customers; or research,engineering, development, manufacturing, purchasing, accounting, or marketing activities;

(ii) information or material relating to the Company’s inventions, improvements, discoveries, “know-how,” technologicaldevelopments, or unpublished writings or other works of authorship, or to the materials, apparatus, processes, formulae, plans ormethods used in the development, manufacture or marketing of the Company’s software, products or services;

(iii) information on or material relating to the Company that when received is marked as “proprietary,” “private,” or“confidential”;

(iv) the Company’s trade secrets;

(v) software of the Company in various stages of development, including computer programs in source code and binary codeform, software designs, specifications, programming aids (including “library subroutines” and productivity tools), interfaces, visualdisplays, technical documentation, user manuals, data files and databases of the Company; and

(vi) any similar information of the type described above that the Company obtained from another party and that the Companytreats as or designates as being proprietary, private or confidential, whether or not developed by the Company.

Notwithstanding the foregoing, “Confidential Information” does not include any information that is properly published or in the publicdomain; provided, however, that information that is published by or with the your aid outside the scope of employment or contrary tothe requirements of this Agreement will not be considered to have been properly published, and therefore will not be in the publicdomain for purposes of this Agreement.

(b) Business Conduct and Ethics. During your employment with the Company, you will not engage in any activity that mayconflict with the Company’s interests, and you will comply with the Company’s policies and guidelines pertaining to business conductand ethics.

(c) Disclosure. You will disclose promptly in writing to the Company all inventions, discoveries, software, writings and otherworks of authorship that you conceived, made, discovered, or written jointly or singly on Company time or on your own time,providing the invention, improvement, discovery, software, writing or other work of authorship is capable of being used by theCompany in the normal course of business, and all such inventions, improvements, discoveries, software, writings and other works ofauthorship shall belong solely to the Company.

(d) Instruments of Assignment. You will sign and execute all instruments of assignment and other papers to evidence vestitureof your entire right, title and interest in such inventions, improvements, discoveries, software, writings or other works of authorship inthe Company, at the Company’s request and expense, and you will do all acts and sign all

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instruments of assignment and other papers the Company may reasonably request relating to applications for patents, patents,copyrights, and the enforcement and protection thereof. If you are needed, at any time, to give testimony, evidence, or opinions in anylitigation or proceeding involving any patents or copyrights or applications for patents or copyrights, both domestic and foreign,relating to inventions, improvements, discoveries, software, writings or other works of authorship you conceived, developed orreduced to practice, you hereby agree to do so, and if you leave the Company’s employ, the Company will pay you at an hourly ratemutually agreeable to the Company and you, plus reasonable traveling or other expenses, subject to Section 7(c) of this Agreement.

(e) Your Declaration. Except as provided in this subsection, you have no inventions, data bases, improvements, discoveries,software, writings or other works of authorship useful to the Company in the normal course of business that you conceived, made orwrote before the date of this Agreement and that are excluded from this Agreement. The excepted invention is your US Patent20050068938 covering Internet Enhanced Cordless Phone (the “Patent”). If the Board determines in reasonable exercise of itsbusiness judgment that the Patent is necessary or convenient for the operation of the Company’s business in the ordinary course youagree to negotiate in good faith, and to seek agreement with your two co-patent holders in such negotiations with the Companyregarding a world-wide, non-exclusive, royalty-free license covering the Company’s use of the Patent.

(f) Survival. The obligations of this Section 8 will survive the expiration or termination of this Agreement and youremployment.

9. Non-Competition, Non-Recruitment, and Non-Disparagement.

(a) General. The Parties recognize and agree that (a) you are becoming the President and Chief Executive Officer of theCompany and will be a key executive of the Company, (b) you will in the future receive, substantial amounts of the Company’sconfidential information, (c) the Company’s business is conducted on a worldwide basis, and (d) provision for non-competition,non-recruitment and non-disparagement obligations by you is critical to the Company’s continued economic well-being and protectionof the Company’s confidential information. In light of these considerations, this Section 9 sets forth the terms and conditions of yourobligations of non-competition, non-recruitment, and non-disparagement during and subsequent to the termination of this Agreementand/or the cessation of your employment for any reason.

(b) Non-Competition.

(i) Unless the Company waives or limits the obligation in accordance with Section 9(b)(ii), you agree that duringemployment and for the longest of 12 months following the cessation of employment for any reason not covered by Section 6(b) or6(c), 18 months if Section 6(b) applies, and 24 months if Section 6(c) applies (the “Noncompete Period”), you will not directly orindirectly, alone or as a partner, officer, director, shareholder or employee of any other firm or entity, engage in any commercialactivity in competition with any part of the Company’s business as conducted as of the date of such termination of employment orwith any part of the Company’s contemplated business with respect to which you have confidential information. For purposes ofthis clause (i), “shareholder” does not include beneficial ownership of less than 5% of the

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combined voting power of all issued and outstanding voting securities of a publicly held corporation whose stock is traded on amajor stock exchange. Also for purposes of this clause (i), “the Company’s business” includes business conducted by the Company,its subsidiaries, or any partnership or joint venture in which the Company directly or indirectly has ownership of not less than onethird of the voting equity. For purposes of this Section 9, competitors of the Company currently include but are not limited to GfKAG, IMM, Inc., The Nielsen Company B.V., Taylor Nelson Sofres PLC, and WPP PLC.

(ii) At its sole option the Company may, by written notice to you at any time within the Noncompete Period, waive orlimit the time and/or geographic area in which you cannot engage in competitive activity.

(iii) During the Noncompete Period, before accepting employment with or agreeing to provide consulting services to, anyfirm or entity that offers competitive products or services, you must give 30 days’ prior written notice to the Company. Such writtennotice must be sent by certified mail, return receipt requested (attention: Office of the Chief Legal Officer with a required copy tothe Chair of Compensation Committee), must describe the firm and the employment or consulting services to be rendered to thefirm or entity, and must include a copy of the written offer of employment or engagement of consulting services. The Companymust respond or object to such notice within 30 days after receipt, and the absence of a response will constitute acquiescence orwaiver of the Company’s rights under this Section 9.

(iv) If you fail to provide notice to the Company under Section 9(b)(iii) and/or in any way violate your non-competitionobligation under Section 9(b), the Company may enforce all of its rights and remedies provided to it under this Agreement, in lawand in equity, without the requirement to post a bond, and you will be deemed to have expressly waived any rights you may havehad to payments under Sections 6(b) or 6(c) or acceleration under Section 6(c).

(c) Non-Recruitment. During employment and for a period of 12 months following cessation of employment for any reason,you will not initiate or actively participate in any other employer’s recruitment or hiring of the Company’s employees.

(d) Mutual Non-Disparagement. You will not, during employment or after the termination or expiration of this Agreement,make disparaging statements, in any form, about the Company, its officers, directors, agents, employees, products or services that youknow, or have reason to believe, are false or misleading. The Company’s officers and directors will not, during your employment orafter the termination or expiration of this Agreement, make disparaging statements, in any form, about you that they know, or havereason to believe, are false or misleading.

(e) Survival. The obligations of this Section 9 survive the expiration or termination of this Agreement and your employment.

10. Miscellaneous.- 10 -


(a) Notices. All notices, demands, requests or other communications required or permitted to be given or made hereunder mustbe in writing and must be delivered, telecopied or mailed by first class registered or certified mail, postage prepaid, addressed asfollows: If to the Company: Arbitron Inc. Office of Chief Legal Officer 9705 Patuxent Woods Drive Columbia, MD 21046 If to you: At your last address on file with the Company

or to such other address as either party may designate in a notice to the other. Each notice, demand, request or other communicationthat is given or made in the manner described above will be treated as sufficiently given or made for all purposes three days after it isdeposited in the U.S. certified mail, postage prepaid, acceptance confirmation or at such time as it is delivered to the addressee (withthe return receipt, the delivery receipt, the answer back or the affidavit of messenger being deemed conclusive evidence of suchdelivery) or at such time as delivery is refused by the addressee upon presentation.

(b) No Mitigation/No Offset. You are not required to seek other employment or otherwise mitigate the value of any severancebenefits contemplated by this Agreement, nor will any such benefits be reduced by any earnings or benefits that you may receive fromany other source. The amounts payable hereunder will not be subject to setoff, counterclaim, recoupment, defense or other right whichthe Company may have against you or others. Notwithstanding any other provision of this Agreement, any sum or sums paid underthis Agreement will be in lieu of any amounts to which you may otherwise be entitled under the terms of any severance plan, policy,program, agreement or other arrangement sponsored by the Company or an affiliate of the Company.

(c) Waiver of Jury Trial. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED,THE PARTIES HEREBY WAIVE, AND COVENANT THAT THEY WILL NOT ASSERT (WHETHER AS PLAINTIFF,DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT OR OTHER PROCEEDINGARISING IN WHOLE OR IN PART UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE RELEASE ITCONTEMPLATES, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT,TORT OR OTHERWISE, THE PARTIES AGREE THAT ANY PARTY MAY FILE A COPY OF THIS PARAGRAPH WITH ANYCOURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED-FOR AGREEMENT AMONG THEPARTIES IRREVOCABLY TO WAIVE THEIR RIGHTS TO TRIAL BY JURY IN ANY PROCEEDING WHATSOEVERBETWEEN THEM RELATING TO THIS RELEASE OR TO ANY OF THE MATTERS CONTEMPLATED UNDER THISAGREEMENT, RELATING TO YOUR EMPLOYMENT, OR COVERED BY THE CONTEMPLATED RELEASE.

(d) Severability. Each provision of this Agreement must be interpreted in such manner as to be effective and valid underapplicable law, but if any provision of this

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Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of suchprohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.Moreover, if a court of competent jurisdiction determines any of the provisions contained in this Agreement to be unenforceablebecause the provision is excessively broad in scope, whether as to duration, activity, geographic application, subject or otherwise, itwill be construed, by limiting or reducing it to the extent legally permitted, so as to be enforceable to the extent compatible with thenapplicable law to achieve the intent of the Parties.

(e) Assignment. This Agreement will be binding upon you and will inure to the benefit of (i) your heirs, beneficiaries, executorsand legal representatives upon your death and (ii) this Agreement will be binding upon any legal successor of the Company. Any legalsuccessor of the Company will be treated as substituted for the Company under the terms of this Agreement for all purposes. As usedherein, “successor” will mean any firm, corporation or other business entity that at any time, whether by purchase or merger orotherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company.

None of your rights to receive any form of compensation payable under this Agreement will be assignable or transferable exceptthrough a testamentary disposition or by the laws of descent and distribution upon your death or as provided in Section 10(g) hereof.Any attempted assignment, transfer, conveyance or other disposition (other than as aforesaid) of any interest in your rights to receiveany form of compensation hereunder will be null and void; provided, however, that notwithstanding the foregoing, you will be allowedto transfer vested shares subject to stock options or the vested portion of other equity awards consistent with the rules for transfers to“family members” as defined in Securities Act Form S-8. Any attempted assignment, transfer, conveyance or other disposition (otherthan as aforesaid) of any interest in your rights to receive any form of compensation hereunder will be null and void.

(f) No Oral Modification, Cancellation or Discharge. This Agreement may only be amended, canceled or discharged in writingsigned both by you and the Chair of the Compensation Committee of the Board.

(g) Survivorship. The respective rights and obligations of Company and you hereunder will survive any termination of youremployment to the extent necessary to the intended preservation of such rights and obligations.

(h) Beneficiaries. You will be entitled, to the extent applicable law permits, to select and change the beneficiary or beneficiariesto receive any compensation or benefit payable hereunder upon your death by giving the Company written notice thereof in a mannerconsistent with the terms of any applicable plan documents. If you die, severance then due or other amounts due hereunder will bepaid to your designated beneficiary or beneficiaries.

(i) Withholding. The Company will be entitled to withhold, or cause to be withheld, any amount of federal, state, city or otherwithholding taxes or other amounts either required by law or authorized by you with respect to payments made to you in connectionwith your employment hereunder.

(j) Company Policies. References in the Agreement to Company policies and procedures are to those policies as they may beamended from time to time by the Company.

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(j) Governing Law. This Agreement must be construed, interpreted, and governed in accordance with the laws of Maryland,without reference to rules relating to conflicts of law.

(k) Entire Agreement. This Agreement and any documents referred to herein represent the entire agreement of the Parties andwill supersede any and all previous contracts, arrangements or understandings between the Company and you.

Signatures on Page Following- 13 -


IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed and you have hereunto set your hand, as ofthe day and year first above written, to be effective as of the Effective Date. ARBITRON INC.: By: /s/ William T. Kerr

William T. Kerr Chair of Compensation and Human Resources Committee EXECUTIVE: /s/ Michael P. Skarzynski

Michael P. Skarzynski - 14 -


EXHIBIT 10.25

ARBITRON INC. 2008 EQUITY COMPENSATION PLANNON-STATUTORY STOCK OPTION AGREEMENT

THIS AGREEMENT evidences the grant by Arbitron Inc. (the “Company”) on ___, 20___(the “Date of Grant”) to [Name] (the“Optionee”) of an option to purchase shares of the Company’s common stock.

A. The Company has adopted the Arbitron Inc. 2008 Equity Compensation Plan (as may be amended or supplemented, the “Plan”)authorizing the Board of Directors of the Company, or a committee as provided for in the Plan (the Board or such a committee to bereferred to as the “Committee”), to grant stock options to employees of the Company and its Subsidiaries (as defined in the Plan).

B. The Company desires to give the Optionee an inducement to acquire a proprietary interest in the Company and an addedincentive to advance the interests of the Company by granting to the Optionee an option to purchase shares of common stock of theCompany pursuant to the Plan.

Accordingly, the parties agree as follows:

1.Grant of Option.

The Company has granted to the Optionee the right, privilege and option (the “Option”) to purchase [Shares] shares (the “OptionShares”) of the Company’s common stock, $0.50 par value (the “Common Stock”), according to the terms and subject to theconditions hereinafter set forth and as set forth in the Plan. The Option is not intended to be an incentive stock option within themeaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

2.Option Exercise Price.

The per share price to be paid by Optionee in the event of an exercise of the Option will be $___.

3.Duration of Option and Time of Exercise.

3.1Initial Period of Exercisability. Except as provided in Sections 3.2 and 3.3 hereof, the Option shall become exercisable withrespect to one-third of the Option Shares on each of the first, second and third anniversaries of the Date of Grant, assuming theOptionee’s continued employment. The foregoing rights to exercise the Option will be cumulative with respect to the Option Sharesbecoming exercisable on each such date, but in no event will the Option be exercisable after, and the Option will become void andexpire as to all unexercised Option Shares at, 5:00 p.m. (Eastern Standard Time) on the tenth anniversary of the Date of Grant (the“Time of Option Termination”).

3.2Termination of Employment.

(a)Termination Due to Death or Disability. In the event the Optionee’s employment with the Company and all Subsidiaries isterminated by reason of death or disability, the Option


will become immediately exercisable in full and remain exercisable until the Time of Option Termination.

(b)Termination for Reasons Other Than Death or Disability. In the event that the Optionee’s employment with the Companyand all Subsidiaries is terminated for any reason other than death or disability, or the Optionee is in the employ of a Subsidiary andthe Subsidiary ceases to be a Subsidiary of the Company (unless the Optionee continues in the employ of the Company or anotherSubsidiary), all rights of the Optionee under the Plan and this Agreement will immediately terminate without notice of any kind,and the Option will no longer be exercisable; provided, however, that, if such termination is due to any reason other thantermination by the Company or any Subsidiary for Cause (as defined in Section 9 of this Agreement), the Option will remainexercisable to the extent exercisable as of such termination for a period of three months after such termination (but in no event afterthe Time of Option Termination).

3.3Change in Control.

(a)Impact of Change in Control. If a Change in Control Event (as defined in Section 9 of this Agreement) of the Companyoccurs the Option will become exercisable as provided in any then applicable employment or retention agreement by and betweenthe Company and the Optionee and will remain exercisable until the first anniversary of the date the Option becomes exercisable, ifat all, except as the Committee determines otherwise in connection with the Change in Control Event. In addition, if a Change inControl Event of the Company occurs, the Committee, in its sole discretion and without the consent of the Optionee, may determinethat the Optionee will receive, with respect to some or all of the Option Shares, as of the effective date of any such Change inControl Event of the Company, cash in an amount equal to the excess of the Fair Market Value (as defined in the Plan) of suchOption Shares as determined by taking into account such Change in Control Event of the Company over the option exercise priceper share of the Option.

(b)Authority to Modify Change in Control Provisions. Prior to a Change in Control Event, the Optionee will have no rightsunder this Section 3.3, and the Committee will have the authority, in its sole discretion, to rescind, modify, or amend thisSection 3.3 without the consent of the Optionee.

4.Manner of Option Exercise.

4.1Notice. This Option may be exercised by the Optionee in whole or in part from time to time, subject to the conditions containedin the Plan and in this Agreement, by delivery, in person, by facsimile or electronic transmission or through the mail, to the Companyat its principal executive office in Columbia, Maryland (Attention: Corporate Secretary), of a written notice of exercise. Such noticemust be in a form satisfactory to the Committee, must identify the Option, must specify the number of Option Shares with respect towhich the Option is being exercised, and must be signed by the person or persons so exercising the Option. In the event that theOption is being exercised, as provided by the Plan and Section 3.2 of this Agreement, by any person or persons other than theOptionee, the notice must be accompanied by appropriate proof of right of such person or persons to exercise the Option. If theOptionee retains the Option Shares purchased, as soon as practicable after the effective exercise of the Option, the Optionee will berecorded on the stock transfer books of the Company as the owner of the Option Shares purchased.

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4.2Payment. At the time of exercise of the Option, the Optionee must pay the total exercise price of the Option Shares to bepurchased entirely in cash (including a check, bank draft or money order, payable to the order of the Company), though a cashlessexercise as described in Section 5(f)(2) of the Plan, by such other method approved by the Committee, or by a combination of suchmethods.

5.Rights and Restrictions of Optionee; Transferability.

5.1Employment. Nothing in this Agreement will interfere with or limit in any way the right of the Company or any Subsidiary toterminate the employment of the Optionee at any time, nor confer upon the Optionee any right to continue in the employ of theCompany or any Subsidiary at any particular position or rate of pay or for any particular period of time.

5.2Rights as a Stockholder; Effect on Running the Business. The Optionee will have no rights as a stockholder unless and until allconditions to the effective exercise of the Option (including, without limitation, the conditions set forth in Sections 4 and 6 of thisAgreement) have been satisfied and the Optionee has become the holder of record of such shares. No adjustment will be made fordividends or distributions with respect to the Option Shares as to which there is a record date preceding the date the Optionee becomesthe holder of record of such Option Shares, except as may otherwise be provided in the Plan or determined by the Committee in itssole discretion. The Optionee understands and agrees that the existence of an Option will not affect in any way the right or power ofthe Company or its stockholders to make or authorize any adjustments, recapitalizations, reorganizations, or other changes in theCompany’s capital structure or its business, or any merger or consolidation of the Company, or any issuance of bonds, debentures,preferred or other stock, with preference ahead of or convertible into, or otherwise affecting the Company’s common stock or therights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or anyother corporate act or proceeding, whether or not of a similar character to those described above.

5.3Restrictions on Transfer. Except pursuant to testamentary will or the laws of descent and distribution or as otherwise expresslypermitted by the Plan, no right or interest of the Optionee in the Option prior to exercise may be assigned or transferred, or subjectedto any lien, during the lifetime of the Optionee, either voluntarily or involuntarily, directly or indirectly, by operation of law orotherwise. The Optionee will, however, subject to applicable laws be entitled to designate a beneficiary to receive the Option uponsuch Optionee’s death in the manner provided by the Plan, and, in the event of the Optionee’s death, exercise of the Option (to theextent permitted pursuant to Section 3.2(a) of this Agreement) may be made by the Optionee’s designated beneficiary.

5.4Restrictions Regarding Employment.

(a) The Optionee agrees that he or she will not take any Adverse Actions (as defined below) against the Company or anySubsidiary at any time during the period that the Option is or may yet become exercisable in whole or in part or at any time beforeone year following the Optionee’s termination of employment with the Company or any Subsidiary, whichever is later (the“Restricted Period”). The Optionee acknowledges that damages which may arise from a breach of this Section 5.4 may beimpossible to ascertain or prove with certainty. Notwithstanding anything in this Agreement or the Plan to the contrary, in the eventthat the Company determines in its sole discretion that the Optionee has taken Adverse Actions against the Company or anySubsidiary at any time during the Restricted Period, in addition to other legal remedies which may be available, (i) the Companywill be entitled to an immediate injunction from a court of competent jurisdiction to end such Adverse Action, without further proofof damage, (ii) the Committee will have the authority in its sole discretion to terminate immediately all rights of the Optionee underthe Plan and this Agreement without notice of any kind, and (iii)

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the Committee will have the authority in its sole discretion to rescind the exercise of all or any portion of the Option to the extentthat such exercise occurred within six months prior to the date the Optionee first commences any such Adverse Actions and requirethe Optionee to disgorge any profits (however defined by the Committee) realized by the Optionee relating to such exercisedportion of the Option or any Option Shares issued or issuable upon such exercise. Such disgorged profits paid to the Company mustbe made in cash (including check, bank draft or money order) or, with the Committee’s consent, shares of Common Stock with aFair Market Value on the date of payment equal to the amount of such payment. The Company will be entitled to withhold anddeduct from future wages of the Optionee (or from other amounts that may be due and owing to the Optionee from the Company ora Subsidiary) or make other arrangements for the collection of all amounts necessary to satisfy such payment obligation.

(b) For purposes of this Agreement, an “Adverse Action” will mean any of the following: (i) engaging in any commercialactivity in competition with any part of the business of the Company or any Subsidiary as conducted during the Restricted Periodfor which the Optionee has or had access to trade secrets and/or confidential information; (ii) diverting or attempting to divert fromthe Company or any Subsidiary any business of any kind, including, without limitation, interference with any business relationshipswith suppliers, customers, licensees, licensors, clients or contractors; (iii) participating in the ownership, operation or control of, orbeing employed by, or connected in any manner with any person or entity which solicits, offers or provides any services or productssimilar to those which the Company or any Subsidiary offers to its customers or prospective customers, (iv) making, or causing orattempting to cause any other person or entity to make, any statement, either written or oral, or convey any information about theCompany or any Subsidiary that is disparaging or that in any way reflects negatively on the Company or any Subsidiary; or (v)engaging in any other activity that is hostile, contrary or harmful to the interests of the Company or any Subsidiary, including,without limitation, influencing or advising any person who is employed by or in the service of the Company or any Subsidiary toleave such employment or service to compete with the Company or any Subsidiary or to enter into the employment or service ofany actual or prospective competitor of the Company or any Subsidiary, influencing or advising any competitor of the Company orany Subsidiary to employ to otherwise engage the services of any person who is employed by or in the service of the Company orany Subsidiary, or improperly disclosing or otherwise misusing any trade secrets or confidential information regarding theCompany or any Subsidiary.

(c) Should any provision of this Section 5.4 of the Agreement be held invalid or illegal, such illegality shall not invalidate thewhole of this Section 5.4 of the Agreement, but, rather, the Agreement shall be construed as if it did not contain the illegal part ornarrowed to permit its enforcement, and the rights and obligations of the parties shall be construed and enforced accordingly. Infurtherance of and not in limitation of the foregoing, the Optionee expressly agrees that should the duration of or business activitiescovered by, any provision of this Agreement be in excess of that which is valid or enforceable under applicable law, then suchprovision shall be construed to cover only that duration, extent or activities that may validly or enforceably be covered. TheOptionee acknowledges the uncertainty of the law in this respect and expressly stipulates that this Agreement shall be construed ina manner that renders its provisions valid and enforceable to the maximum extent (not exceeding its express terms) possible underapplicable law. This Section 5.4 of the Agreement does not replace and is in addition to any other agreements the Optionee mayhave with the Company or any of its Subsidiaries on the matters addressed herein.

6.Securities Law and Other Restrictions.4


Notwithstanding any other provision of the Plan or this Agreement, the Company will not be required to issue, and the Optioneemay not sell, assign, transfer or otherwise dispose of, any Option Shares, unless (a) there is in effect with respect to the Option Sharesa registration statement under the Securities Act of 1933, as amended, and any applicable state or foreign securities laws or anexemption from such registration, and (b) there has been obtained any other consent, approval or permit from any other regulatorybody which the Committee, in its sole discretion, deems necessary or advisable. The Company may condition such issuance, sale, ortransfer upon the receipt of any representations or agreements from the parties involved, and the placement of any legends oncertificates representing Option Shares, as may be deemed necessary or advisable by the Company in order to comply with suchsecurities law or other restrictions.

7.Withholding Taxes.

The Company is entitled to (a) withhold and deduct from future wages of the Optionee (or from other amounts that may be due andowing to the Optionee from the Company), or make other arrangements for the collection of, all legally required amounts necessary tosatisfy any federal or provincial withholding tax requirements attributable to the Option, or (b) require the Optionee promptly to remitthe amount of such withholding to the Company before acting on the Optionee’s notice of exercise of the Option. In the event that theCompany is unable to withhold such amounts, for whatever reason, the Optionee agrees to pay to the Company an amount equal to theamount the Company would otherwise be required to withhold under federal, state, or local law.

8.Certain Definitions. For purposes of this Agreement, the following additional definitions will apply:

(a) “Cause” will have the meaning set forth in any employment or other agreement or policy applicable to the Optionee or, if nosuch agreement or policy exists, will mean (i) dishonesty, fraud, misrepresentation, theft, embezzlement or injury or attemptedinjury, in each case related to the Company or any Subsidiary, (ii) any unlawful or criminal activity of a serious nature, (iii) anybreach of duty, habitual neglect of duty or unreasonable job performance, or (iv) any material breach of any employment, service,confidentiality or noncompete agreement entered into with the Company or any Subsidiary.

(b) “Change in Control Event” will have the meaning set forth in the Plan plus such other event or transaction as the Board shalldetermine constitutes a Change in Control, or such other meaning as may be adopted by the Committee from time to time in its solediscretion.

9.Subject to Plan.

The Option and the Option Shares granted and issued pursuant to this Agreement have been granted and issued under, and aresubject to the terms of, the Plan. The terms of the Plan are incorporated by reference in this Agreement in their entirety, and theOptionee, by execution of this Agreement, acknowledges having received a copy of the Plan. The provisions of this Agreement will beinterpreted in a manner consistent with the Plan, and any ambiguities in this Agreement will be interpreted by reference to the Plan. Inthe event that any provision of this Agreement is inconsistent with the terms of the Plan, the terms of the Plan will prevail.

10.Miscellaneous.5


10.1Binding Effect. This Agreement will be binding upon the heirs, executors, administrators and successors of the parties to thisAgreement.

10.2Governing Law. This Agreement and all rights and obligations under this Agreement will be construed in accordance with thePlan and governed by the laws of the State of Delaware, without regard to conflicts or choice of law rule or principle that mightotherwise refer construction or interpretation of this Agreement to the substantive laws of another jurisdiction.

10.3Entire Agreement. This Agreement and the Plan set forth the entire agreement and understanding of the parties to thisAgreement with respect to the grant and exercise of the Option and the administration of the Plan and supersede all prior agreements,arrangements, plans and understandings relating to the grant and exercise of the Option and the administration of the Plan.

10.4Amendment and Waiver. Other than as provided in the Plan, this Agreement may be amended, waived, modified or canceledonly by a written instrument executed by the parties to this Agreement or, in the case of a waiver, by the party waiving compliance.

IN WITNESS WHEREOF, the Company has caused this option to be executed under its corporate seal by its duly authorizedofficer. This option shall take effect as a sealed instrument. ARBITRON INC.

By: Name: Title:

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PARTICIPANT’S ACCEPTANCE

The undersigned hereby accepts the foregoing option and agrees to the terms and conditions thereof. The undersigned herebyacknowledges receipt of a copy of the Plan. PARTICIPANT:

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Exhibit 21

ARBITRON INC.

SUBSIDIARIES State or Other JurisdictionSubsidiaries and Their Affiliates: of Incorporation Arbitron Holdings Inc. DelawareArbitron International, LLC (1) DelawareCeridian Infotech (India) Private Limited IndiaAudience Research Bureau S.A. de C.V. MexicoArbitron Technology Services India Private Limited (1) India

(1) Is a subsidiary of Arbitron Inc. and Arbitron Holdings, Inc.


Exhibit 23

Consent of Independent Registered Public Accounting Firm

The Board of DirectorsArbitron Inc.:

We consent to the incorporation by reference in the registration statement (No. 333-82522) on Form S-3 and registration statements(Nos. 33-49601, 33-61551, 33-34035, 2-9757, 33-56833, 33-54379, 33-56325, 33-62319, 33-64913, 333-01793, 333-01887,333-03661, 333-28069, 333-58143, 333-58145, 333-66643, 333-50757, 333-83455, 333-89565, 333-39384, 333-56296, 333-56826,333-85492 and 333-124663) on Form S-8 of Arbitron Inc. of our reports dated March 2, 2009, with respect to the consolidated balancesheets of Arbitron Inc., as of December 31, 2008 and 2007, and the related consolidated statements of income, stockholders’(deficit) equity, comprehensive income and cash flows for each of the years in the three-year period ended December 31, 2008, andthe related financial statement schedule and the effectiveness of internal control over financial reporting as of December 31, 2008,which reports appear in the December 31, 2008 annual report on Form 10-K of Arbitron.

As discussed in Notes 2 and 14 of the notes to the consolidated financial statements, the Company adopted the recognition anddisclosure provisions and the measurement date provisions of Statement of Financial Accounting Standards No. 158, Employer’sAccounting for Defined Benefit Pension and Other Postretirement Plans on December 31, 2006 and 2008, respectively and FinancialAccounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes on January 1, 2007.

/s/ KPMG LLP



Exhibit 24

POWER OF ATTORNEY

The undersigned, a Director of Arbitron Inc. (the “Company”), a Delaware corporation, does hereby make, nominate and appointSEAN R. CREAMER and TIMOTHY T. SMITH, and each of them, to be my attorney-in-fact for six months from the date hereof,with full power and authority to execute for and on behalf of the undersigned the Company’s Annual Report on Form 10-K for thefiscal year ended December 31, 2008, to be filed with the Securities and Exchange Commission pursuant to the Securities ExchangeAct of 1934, as amended; provided that such Form 10-K is first reviewed by the Audit Committee of the Board of Directors of theCompany and by my attorney-in-fact, and his/her name, when thus signed, shall have the same force and effect as though I hadmanually signed such Form 10-K.

I have signed this Power of Attorney as of February 24, 2009.

/s/ Stephen B. Morris

Stephen B. Morris

/s/ Shellye L. Archambeau

Shellye L. Archambeau /s/ David W. Devonshire

David W. Devonshire /s/ Philip Guarascio

Philip Guarascio /s/ William T. Kerr

William T. Kerr /s/ Larry E. Kittelberger

Larry E. Kittelberger /s/ Luis G. Nogales

Luis G. Nogales /s/ Richard A. Post

Richard A. Post


Exhibit 31.1

CERTIFICATION

I, Michael P. Skarzynski, certify that:

1. I have reviewed this annual report on Form 10-K of Arbitron Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined inExchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed underour supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or personsperforming the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialinformation; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting.

Date: March 2, 2009 /s/ Michael P. Skarzynski Michael P. Skarzynski President and Chief Executive Officer


Exhibit 31.2

CERTIFICATION

I, Sean R. Creamer, certify that:

1. I have reviewed this annual report on Form 10-K of Arbitron Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made, not misleadingwith respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periodspresented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined inExchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed underour supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, ismade known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report ourconclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by thisreport based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that hasmaterially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control overfinancial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or personsperforming the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialinformation; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting.

Date: March 2, 2009 /s/ Sean R. Creamer Sean R. Creamer

Executive Vice President of Finance andPlanning and Chief Financial Officer


Exhibit 32.1

WRITTEN STATEMENT OF CHIEF EXECUTIVE OFFICERAND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 906 OF THESARBANES-OXLEY ACT OF 2002

The undersigned, the Chief Executive Officer and the Chief Financial Officer of Arbitron Inc. (the “Company”), each hereby certifiesthat, to his knowledge, on the date hereof:

(a) the Annual Report on Form 10-K of the Company for the year ended December 31, 2008 filed on the date hereof with theSecurities and Exchange Commission (the “Annual Report”) fully complies with the requirements of Section 13(a) or 15(d)of the Securities Exchange Act of 1934, as amended; and

(b) the information contained in the Annual Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company.

/s/ Michael P. Skarzynski

Michael P. Skarzynski

Chief Executive Officer Date: March 2, 2009 /s/ Sean R. Creamer

Sean R. Creamer Chief Financial Officer Date: March 2, 2009

_______________________________________________Created by 10KWizard www.10KWizard.com


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