Penalties for networks, but not Nielsen
While payments under Nielsen’s U.S. TV contracts certainly are favorable, so are other terms.
Nielsen contracts have penalties for networks that stray from rules, according to people familiar with the matter. But they appear to have no stipulated penalties for Nielsen should its measurements prove inaccurate and cost media companies money. Nielsen is also not penalized for losing accreditation by the industry’s Media Rating Council, which helps police accuracy, according to Nielsen’s Kenny, who has said as much in remarks to financial analysts.
Allen’s lawsuit seeks damages based on Nielsen measurement errors and what the company said is implication in Illinois contract law that Nielsen was required to retain MRC accreditation. But that case remains in limbo as the parties battle over whether it should be heard in state or federal court.
Networks, on the other hand, have requirements they can be penalized for beyond just not paying their bills. Non-disclosure agreements, which Nielsen has at times threatened to enforce through lawsuits according to one industry executive, can bar any customer from making public Nielsen ratings data alongside any alternative measurement.
“The threat of legal action and NDAs is a big part of [Nielsen’s] toolbox,” the executive said. “Getting out from under the universe-size boulders that these contracts represent on people’s balance sheets,” the executive said, is ultimately what will be required for networks to invest more in alternative measurement and innovation.
Interestingly, such an NDA on side-by-side comparisons doesn’t appear to be part of Nielsen’s new contract to measure audiences on Amazon Prime’s “Thursday Night Football.” Amazon, a big digital media player that negotiated a new contract at a time when Nielsen was facing growing competition, has been regularly citing its own audience measurement, supplemented with data from a separate unnamed third-party partner, alongside Nielsen numbers, in weekly reports. Amazon’s numbers have shown audiences 1.3 million to 1.8 million larger than Nielsen’s.
Read more: Nielsen and Amazon strike 'TNF' deal
While not citing any network executives specifically, Watts said in an interview earlier this year that grumblings about the toll the high cost of Nielsen measurement contracts takes on the rest of the research, analytics and innovation budgets, is common.
Nielsen typically represents 90% of a network’s measurement and innovation budget, said one industry executive, leaving little else for investment in alternatives or new approaches, such as basing deals on client business outcomes, attention or other factors.
Networks have historically agreed to such terms for one reason: They couldn’t ditch Nielsen contracts and still do business. CBS, though it threatened to drop Nielsen measurement in 2019, ultimately reached an agreement, given the marketplace largely insists on Nielsen as a currency. As one former network executive summed it up: “It’s a brutal negotiation.”
Why a new panel could change things
A competitive panel ultimately could be what it takes for U.S. TV networks’ efforts to level the playing field with Nielsen in bargaining—and could pay off for them despite the cost.
There’s plenty of debate among measurement and network executives about whether another panel of 40,000 households is really needed. After all, there are plenty of big device data sets capturing viewing information from tens of millions of households.
But Nielsen executives, even as they build their own big-data Nielsen One offering, have regularly pointed out the shortcomings of device data, including their own, which they say only can be overcome with help of its panel.
Nielsen’s Chief Data and Research Officer Mainak Mazumdar made perhaps the most detailed case yet at last month’s ANA Measurement and Accountability Conference for why no set of tens of millions of set-top-boxes or automated content recognition (ACR) system using smart TVs could ever accurately measure U.S. audiences without calibration by Nielsen’s panel. Among other things, Mazumdar said big device data sets don’t capture multicultural and lower-income households fully, don’t capture over-the-air viewing, may count viewing when people leave their set-top boxes running but turn off the TV, and may fail to pick up many of the ads that run.