Ratings Wars

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For years television programmers, advertisers, and agencies have been grousing about Nielsen Media Research, the national television ratings company. They say the sample Nielsen uses isn't representative, that detailed information doesn't reach clients fast enough, and that the service is too expensive. But despite such jawboning, the industry has been unwilling to support the steps necessary to improve the service. Every so often, a would-be Nielsen competitor has appeared on the scene, sometimes with technical innovations in tow, only to be stood up by Nielsen clients who, for all of their talk, have steadfastly refused to lend financial support to a second service.

But now the stakes are escalating. After a summer in which prime-time cable network viewers outnumbered those of the four broadcast networks combined during most weeks, it seems only a matter of time before the same can be said of the regular TV season. Naturally, the broadcast networks want to keep their share of the ad pie-some $13 billion of $44.5 billion in total TV spending- and they're hoping that a new ratings service will help. They've bet $40 million on the latest Nielsen challenger, Statistical Research, Inc. (SRI), and have promised millions more in the hope that SRI can deliver the goods, and for a cheaper price.

Four years ago, ABC, CBS, NBC, and Fox, as well as a handful of advertisers, agencies and cable networks, commissioned the Westfield, New Jersey-based SRI to create a better TV ratings system. The result was Systems for Measuring And Reporting Television, or SMART, which SRI installed in a sample of 500 households in Philadelphia. In August the networks and several advertising agencies pledged an additional $60 million of the projected $100 million that SRI says it will need to ramp up to the national level, hopefully in the next few years. But Nielsen plans to burst SRI's bubble before then with a number of its own service improvements, including a long-awaited online reporting system, DART (Direct Access Research Tools), which at press-time was scheduled to launch in mid-September.

Nielsen's national ratings service (the company also measures local TV viewing) is based on a sample of 5,000 television households, or an estimated 11,000 people. To do this, Nielsen installs two meters in each home: one for recording program data-when and where a TV/VCR is tuned-and another device called a People Meter, for recording "persons data"-who's doing the viewing. One problem with Nielsen's People Meter, some say, is that participants are required to push a button on a remote (each participant picks a number on the box by which to identify themselves) whenever they start and stop their viewing-a lot to ask of a zoned-out couch potato, a multitasking parent, or a child.

"When researchers go to bed at night thinking about issues with Nielsen, number one is the validity of that sample," says Jonathan Sims, vice president of research for the Cabletelevision Advertising Bureau. Because the Nielsen technology required to meter homes is invasive-every TV set and VCR must be opened up-many prospective candidates choose not to be monitored at all, skewing the randomness of the sample. Similarly, when a new TV set or cable box is added to a home, the household is dropped from the sample until the new equipment is wired. Not surprisingly, these households also tend to be the wealthiest or most prodigious TV viewers, valuable commodities indeed for broadcast networks hurting for better demographics and higher ratings.

Critics point out that SMART also relies on a People Meter-like box, but SRI's remote uses cute little illustrations on its remote-rather than Nielsen's numbered buttons-a more user-friendly device, they say, that encourages participation in the Philadelphia test. And SRI has adopted a more network-friendly definition of viewing: Whereas Nielsen instructs its sample participants to log in when they are watching TV, SMART asks all participants to do so when they are in the room, whether they are watching a show or not. And installing SMART technology doesn't require ripping apart every TV set and VCR in the home. Instead, SMART hardware attaches to the outside of a set and scans a new uniform television program code (UTPC), which the company developed along with broadcast network engineers.

In the past, Nielsen has also worked with customers to develop various identifying codes that are embedded in the TV video, but the UTPC would be far more pervasive and fundamental to the SMART service. Nielsen has also talked since 1993 about making better use of encoding for collecting program data, but has yet to do so.

Another advantage of the proposed SMART service may be its reporting capabilities. When SMART is up and running nationally, SRI claims it will be able to report ratings in 10-second increments as part of its basic service, affording media buyers greater insight into whether a viewer is watching their commercials or surfing around to other shows. Nielsen counters that such a level of detail proposed by SRI would be impossible to handle with SMART's current PC technology. Nielsen's DART service, for example, uses a database of 1.4 terrabytes (three years of viewing), but can only report in one-minute increments.

Still, Nielsen's reporting ability has long been a sore spot with some customers. The company's answer to such complaints is DART, which promises to give minute-by-minute information on viewing, as well as near-instant access to several other of the most frequently requested custom analyses. Historically, custom analyses-tabulations not included in a standard Nielsen report-have taken up to three months to be compiled for clients, often making the information worthless by the time it arrived.

But even SRI may not be the silver bullet its supporters hope it will be. Since the company began in April reporting both program and persons data, reactions have been mixed, largely because SRI is seen as a puppet of the networks. And, as one insider who supports SMART acknowledges, "SRI definitely underestimated a lot of costs. The cost of metering 500 households in Philadelphia is the tip of the iceberg. They also underestimate the information technology involved." The source also scoffs at current projections by SRI that it will take only $100 million to roll out SMART into a national platform. So why support SRI? "To gain leverage from Nielsen" in price negotiations, says the source, "and to promote competition."

More or less Historically, Nielsen's pricing policy has been "to sell the same slice of baloney six different ways," says Bob Igiel, U.S. director of broadcast for Young & Rubicam's Media Edge buying service. For example, the cost of each custom analysis is not included in Nielsen's basic service. Sources estimate that at least 10 percent of Nielsen's $350 million in annual revenues comes from custom analyses, and this could increase if DART flies. (Nielsen is also saddled with debt that some clients fear will be passed on to them, as a result of its July initial public offering.)

Asked whether he will subscribe to DART, Nicholas Schiavone, NBC senior vice president of research, responds, "I can't go to [General Electric chairman] Jack Welch and say, 'I just bought the Nielsen service for $10 million, but I have to pay them another half-million to get the data out.' That's the formula for getting fired at GE. So you know what the answer is here? No. No more." In contrast, SMART will give buyers the whole kit and caboodle of ratings data for one price-or for even less than Nielsen's basic service, claims SRI president Gale Metzger.

Nielsen won't comment on its pricing, but even if it did, company spokesman Jack Loftus says that such discussions would be premature: "There's no indication that [SRI] has the knowledge, capability or funding to produce a national service anywhere near the quality of Nielsen's. They've spent $40 million over the course of four years and produced zip."

Can SRI succeed where so many others have failed? "In one respect, the parallel doesn't exist," says Cabletelevision Advertising Bureau's Sims, who once worked for Auditors of Great Britain (AGB)-the company whose competition forced Nielsen to develop the People Meter. "AGB foolishly created a national service without a full financial commitment [from the marketplace]," Sims says. But, he adds, "Not only are Gale Metzger and Gerald Glasser of SRI among the best media research professionals in the country, they also weren't born yesterday. And they will not go to a national service until they have full-fledged national commitment."

Some believe that building a national ratings service from scratch is to SRI's advantage because, they say, Nielsen's existing infrastructure is out of date and costly to upgrade and maintain. "It's really quite difficult for an incumbent to launch a second service because all of its resources go into just getting their regular service running and producing reports," says Beth Uyenco, senior vice president and director of media research for DDB Needham.

But there are others who say the fundamental problem is simply that broadcast network ratings are going down, not because Nielsen is screwing up, but because fewer people are watching network television. "[SMART] is a broadcast network owned-and-operated system, designed from the get-go to provide higher ratings," says Nielsen's Loftus. David Marans, senior partner at J. Walter Thompson, concurs. "We don't like the idea of wasting time and energy in pursuit of a heavily seller-created enterprise." Besides, Nielsen has been around for almost half a century, through thick and thin-and thinner. SRI will have to roll out its service in a big way if it hopes to challenge the champ.

Call it the holy grail of the TV research set: the passive meter. No buttons to push. Just sit in front of the tube and the meter knows you're watching. Mom gets up to raid the fridge during a commercial? The meter knows that, too.

The concept first emerged in the mid-'80s when Roger Percy developed a gadget mounted to a TV set that could use infrared rays to recognize viewers by their shapes and body heat. Ad agency execs were elated: Finally they'd know just who was watching their 30-second spots and who was channel surfing or away from the set. The euphoria, however, was short-lived: A rumor started going around that the passive meter couldn't tell the difference between Junior and the family pet, or between Dad and the radiator.

Still, Nielsen soon responded to the passive meter mania and came up with its own idea for one. Nicholas Schiavone, NBC senior vice president of research, recalls that during a demonstration of the gadget in the early '90s, he removed the eyeglasses from a Nielsen technician, put them on, and was immediately identified by the meter as the technician. Without getting too personal, Schiavone says, "Other than the glasses, we didn't look anything like each other."

Another contender was Arbitron, which had an ongoing local TV measurement business at the time, and was familiar to agencies and broadcasters. Arbitron was set to introduce a product called ScanAmerica, which tried to incorporate purchasing and lifestyle information into a TV sample by asking participants to use a product wand connected to the set that would scan the barcodes of all their purchases. At an Advertising Research Foundation seminar in the mid-'80s in which the service was introduced, a skeptical Chiat Day executive said that his family was already hard-pressed for time just to go shopping and get the groceries in from the car, let alone to scan them once inside the house. A Campbell's Soup executive, also at the seminar, predicted that when he tried to download ScanAmerica data, his hard drive wouldn't even be able to hold a quarter-hour's worth.

Like Arbitron, AGB (Auditors of Great Britain) was another well-established mid-1980s competitor, and one AGB innovation was adopted by and remains an integral part of Nielsen's system: the people meter. It was in reaction to AGB's proposed service that Nielsen gave up using handwritten diaries for its national sample and switched to the electronic device it currently uses to record who's watching what.

Check it out! Question: How many people rent the video of The Scarlet Letter rather than check the book out of the local library?

In other words, is The Scarlet Letter a masterpiece or a Blockbuster? Libraries are more interested in which of their services you use regularly-audio and videotapes, newspapers, periodicals, microfilm, lectures, exhibits, computers, CD-ROMs-than whether you checked out any particular book. In fact, so service-oriented is the public library system that at some libraries, cardholders in good standing are never removed from the membership rolls, even after they are dead. Which means that Nathaniel Hawthorne himself could check out a copy of The Scarlet Letter tomorrow.

The most recent library survey, conducted in May by The Gallup Organization for the American Library Association, found that 66 percent of adult Americans stopped into a public library during the past year. That's a pretty impressive number, until you remember that libraries are popular places not only because they have books, but also free admission and climate control. (For most of last August, air conditioning turned out to be more fundamental than reading anyway.)

Still, 81 percent of those adults who stopped into a public library actually went so far as to check out a book. Since the adult population of the United States, courtesy of the U.S. Census Bureau (www.census.gov), works out to about 207.8 million, the number of actual book-checker-outers comes to 111 million-but not, I suspect, 111 million checked-out copies of Hawthorne's classic. There must be a couple of Grishams in there somewhere, and it's not inconceivable that some deranged Ayn Rand devotee has been signing out and returning The Fountainhead 20 times a day for the past year in a misbegotten tribute. (For some reason the Census Bureau has yet to start tracking deranged Ayn Rand devotees.)

A library doesn't really need that many copies of Hawthorne's classic anyway, since there's always the Classics Illustrated edition (great graphics in a portable, non-elitist package); Barron's Notes (concise capsule descriptions for the soon-to-be-tested); online e-texts (such as the one at http://eldred.ne.mediaone.net/ nh/sl.html-use "Find in Page" to locate the word bodice); and 23 different editions for sale at Amazon.com. And as soon as PBS figures out how a dog could commit adultery, Wishbone will star in "The Scarlet Litter." In short, the library system at large doesn't care whether you check out The Scarlet Letter or the librarian, as long as you stop in.

The Video Software Dealers Association (www.vsda.org/newsite/vsda/), on the other hand, wants to know just who's checking out which film on which date for how much. The VSDA's membership, more than 3,500 member companies nationwide, deals in product, not services. The association supplies statistics to its retail members through its VidTrac system, which tracks (among other things) the top 1,000 weekly video and game rentals, what we video-savvy types call "turns." Between May 1997 and May 1998, according to VidTrac, The Scarlet Letter-I refer to the 1995 Demi Moore version; oddly enough neither the 1926 Lillian Gish adaptation nor Wim Wenders' Der Scharlachrote Buchstabe made the VSDA's list-racked up a minimum of 1.17 million turns. (Whenever a movie falls out of the top 1,000, it drops off the VSDA report, hence the minimum.)

During this entire period the video's weekly turns hovered around 10,000-except for the first week of 1998, when they doubled. No one knows what this means, but I have two possible explanations. The spike in The Scarlet Letter rentals represents either a horde of desperate high-school students suddenly recalling that they were supposed to read the book during winter break, or a horde of journalists looking for clever adultery analogies to use in reference to the Paula Jones lawsuit.

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