With the introduction of people meters and the expansion of the sample in 1987, it was possible to look at TV audiences on a minute-by-minute basis and to compare audience levels during program content to audience levels during commercial time. Yet, the currency was not changed to reflect this more precise way to measure advertising value. Why did the currency remain the program audience as opposed to the commercial audience?
First of all, any change in the currency of a market of this size was certain to be disruptive. The industry had just digested the conversion to the people-meter system, and no one was eager to take on another change in audience measurement.
Second, analysis of the relationship between program audiences and commercial audiences revealed that a conversion from program to commercial audience would have relatively little practical impact. The relationship between program audiences and commercial audiences was found to be very stable over time and by program. The conversion to commercial-audience measurement would add a new level of complexity to the measurement process: the identification of commercial minutes. It would also add substantially to the cost of the measurement system. In the end, the relative value between the various network and individual program options would be essentially unchanged. It did not seem worth the cost and effort to undertake this complex currency conversion when it would have no appreciable impact on the evaluative process. So, the program-audience measurement persisted.
The case for change
So why make this change now?
To say the least, things have changed. Consider the following:
The last point needs further clarification.
In the 2006-2007 upfront market, the buyers and sellers found themselves confronted with a series of different possible currency options: live only, live plus same day and live plus seven days. After a prolonged period of negotiations, the sellers blinked and accepted live only as the currency. However, they made it clear they were doing so temporarily and would readdress the issue of what the proper currency should be before the next upfront.
The past currency has been discredited, and a new currency has to replace it. The current live-only, program-audience measurement that served as the interim currency in this upfront does not properly reflect the overall value of the medium as an advertising vehicle or the relative value of the extensive number of individual program options within the medium.
Let me illustrate how the continuation of a live-only, program-based currency would devalue the medium.
On a live-plus-seven-day basis, DVR playback accounts for 7% of the total program audience for the average broadcast-network program. That is for the Nielsen sample, in which only 10% of the homes have DVRs. Actual DVR penetration is more like 12% and growing. So, as Nielsen catches up to the market and DVR penetration continues to grow, that 7% is going to grow as well.
One key matchup this season is the battle between "CSI" and "Grey's Anatomy." When two of TV's most popular programs go head-to-head, DVR use is sure to increase. Let's look at the performance of these two programs in DVR households.
The live-only rating among adults 25-54 for "Grey's Anatomy" in DVR homes is 7.9. The live-plus-seven-day rating among adults 25-54 is 18.2. Yes, that's right, 18.2. Playback accounts for more of this program's audience in DVR homes than live viewing. The comparable numbers for "CSI" are 6.2 for live only and 14.2 for live plus seven days. The ratings among adults 25-54 for these two programs in non-DVR homes are 10.4 for "Grey's Anatomy" and 9.4 for "CSI."
Yes, viewing among adults 25-54 is 75% higher for "Grey's Anatomy" and 51% higher for "CSI" in DVR homes.
From the broadcasters' perspective, they cannot continue to give this DVR-playback audience away for free.
Of course, advertisers do not want to pay for these viewers if they are all fast-forwarding through the commercials. This ability to skip ads is what led to the delay in the upfront negotiations. However, we now know more than we did at the time of those negotiations. We know, from minute-by-minute measurements, that about 40% of the commercials in programs played back are not skipped.
We can continue to debate the value of a commercial seen in fast-forward mode, but there can be no rationale for discounting the 40% of commercials that are viewed in their normal form during playback.
With the conversion to commercial-minute measurement, we will have a measurement that gives the program credit for the playback audience that watches the commercials but not the audience that fast-forwards through the commercials. We will also have a measurement that reflects the overall audience for the commercials in each program instead of the larger program audience.
So why delay the conversion to this new, more valid currency measurement?
The proponents of a delay have legitimate concerns. There are many issues concerning the accuracy of the process for commercial-minute identification. There are particular challenges concerning the application of this measure to some cable-network programs and to syndicated programs. These concerns are real and must be addressed. However, we know from analysis already completed that these concerns are not of great significance in practical terms when weighed against the distortions resulting from the current measures.
Employing this "level playing field" argument, those seeking to delay the provision of this commercial-audience measure are proposing a timetable that would defer its adoption as a currency until the 2008-2009 upfront market. They are overlooking one key fact: The present live-only, program-audience-based currency is broken, and it cannot be fixed. We need a new currency now, not a year or two years from now.
When I listen to the arguments of those calling for a more deliberative approach to this measurement challenge, I cannot help but think they are somewhat naively looking for a one-time, all-encompassing fix. The need for a changed currency brought about by consumers' adoption of the DVR is just the tip of the iceberg. Video on demand, mobile access to TV programming and cross-platform program availability will render any change in currency transitory. The video marketplace is a dynamic one that requires a dynamic audience-measurement system.
Dating back to the introduction of people meters, we have enjoyed a stable, one-size-fits-all audience-measurement system. However, it is clear we need a new measurement system. It must be a dynamic, multifaceted system that may not allow for uniformity of application.
Any further delay in addressing the immediate need for a new audience-measurement currency runs the risk of devaluing TV advertising as a powerful marketing force at a time when the medium is demonstrating new creative vitality and audience engagement.
Let's begin the transition now.
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David F. Poltrack is chief research officer of CBS Corp. and president of CBS Vision.