Rating TV's future

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TV's digital revolution signals the sharpest redefinition of the medium since Nielsen Media Research began tallying TV ratings in 1950. If Nielsen can't quell buyer and seller frustration over its market clout and pace of innovation, there could be opportunity for a new player to redefine ratings for the next generation of TV.

One intriguing option: ratings via the cable set-top box, seen by media buyers as a potential alternative to Nielsen's limited cache of people meters.

"Nielsen measures 5,000 sampled households to cover 108 million actual households in this country," said Andrew Green, managing partner-director of communication insights at Omnicom Group's OMD. "There are about 80 million set-top boxes out there. It's not that all of them could suddenly be used for audience measurement, but imagine if we even had 1 million boxes."

Advanced digital set-top boxes enable cable and satellite distributors to track viewers "every second of the day that the television is on," Mr. Green said, rating actual viewing of both programs and commercials. While there are privacy issues, he believes consumers could be given incentives to participate.

Comcast, the top cable system operator, is testing how digital set-top boxes can record audience data. "We are gathering records, set-tuning minutes off the set-top box and examining a whole host of metrics," said Jonathan Sims, VP-research at Comcast. If this becomes a ratings system, Mr. Sims said, Comcast would turn over ratings data processing to a third party to avoid any conflict.

There are obstacles in drawing ratings from a census of digital set-top boxes. The boxes, used with premium cable services, don't give a representative sample of U.S. TV viewers. And boxes only measure what's playing on the TV; Nielsen people meters track who is watching.

Another measurement solution is the portable people meter developed by radio tracker Arbitron, which has been testing the technology with Nielsen in Philadelphia since 2001. The pager-like devices capture audio signals coded into programming so Nielsen and Arbitron can measure a participant's TV and radio use in the home and at venues such as bars.

"There's probably no single solution to audience television measurement," said Jack Loftus, Nielsen senior VP-communications. "There are probably multiple solutions, and multiple methodologies, and whether it's diaries, set-top boxes, people meters, portable meters, I think in the future there will be a mixture of all these." Mr. Loftus said Nielsen is talking to major cable systems about adding set-top census data to its mix. Between now and 2006, Nielsen also plans to double its national people meter sample to about 10,000 homes by expanding its local people meters to the top 10 markets.

"To be in the business of TV audience measurement," Mr. Loftus said, "you have to change, and we're doing that. There is a good, healthy fire burning under everyone here."

Nielsen Media Research has money to burn. VNU's forecast shows the unit's revenue will grow about 9% this year to nearly $700 million, and it expects 8% to 10% growth in coming years. Nielsen is the biggest part, and a standout performer, in a VNU media-measurement group that this year expects at least a 21% profit margin.

Nielsen revenue has soared 53% since VNU paid $2.7 billion for it in late 1999; U.S. ad spending, after recession and recovery, is up about 11% in that period.

Nielsen, the currency of U.S. TV advertising, supplies seven broadcast networks, more than 60 cable networks, more than 100 syndicated programs and more than 150 agencies and advertisers with national ratings.

It's not moving fast enough for critics. It's been four years since Nielsen announced a local people meter rollout, and yet the system is still available only in one market, Boston. Local demographic information for the other 209 still comes from handwritten diaries. Donna G. Campbell, VP-media services division at the American Association of Advertising Agencies, blasts the slow rollout of local people meters as "pathetic."

"Here, basically, you have a monopoly," said Alan Wurtzel, president-research and media development at General Electric Co.'s NBC. "When there is a monopoly, there is no compelling motivation to go out and do your best." NBC, nevertheless, in February re-upped with a seven-year contract Nielsen billed as the largest media-research deal ever.

Mr. Loftus disputed assertions that Nielsen is a monopoly and said it is delivering for its customers. "There's nothing out there, in any contract that we have, that would prevent any company from ... setting up a competing rating service."

Some have tried. Global ratings provider AGB Group, R.D. Percy & Co. and even Arbitron have made attempts at national broadcast measurement; all folded because of cost and lack of support. The last big play was Smart, created by Statistical Research Inc. and backed by major networks. A national rollout was scrapped in 1999 after it failed to get launch money from advertisers. Gale Metzger, the brains behind Smart, does not believe a rival will be able to take on Nielsen. "It's far too expensive," said Mr. Metzger, now senior consultant at Knowledge Networks/SRI. He believes the only solution is for Nielsen to work more closely with networks and advertisers.

Those customers don't appear to be a happy lot. In a controversial survey last year by British market researcher Peter Menneer of broadcasters, advertisers and media agency executives in 23 countries that use TV people meters, Nielsen U.S. customers had the greatest level of dissatisfaction. The U.S. system to many observers from other regions is "almost primitive," he wrote in the report, released at a conference of research groups ESOMAR and the Advertising Research Foundation.

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