For more than 50 years, Nielsen Media Research has been the yardstick of the TV business. Its viewership numbers influence billions in ad dollars. But the company has faced a barrage of criticism over its demographic representation and ability to measure new technologies like digital video recorders and video-on-demand. Nielsen responds that it has a panoply of changes slated for the ratings system. Paul Donato, senior VP-chief research officer, talked to correspondent Daisy Whitney about the impending revisions. Below is an edited transcript.
ADVERTISING AGE: What changes lie ahead for the ratings system?
PAUL DONATO: Certainly DVR, VOD, any new technology like wireless TV are all very important for us to measure. We have just begun to install [active/passive] meters in our local-market samples. The A/P meter is the best measurement of set tuning in this digital environment. It's really the meter that's going to help us measure DVR time-shifted viewing.
With a DVR, the concept of a channel goes away, and with VOD the concept of a channel goes away. Broadcasters and networks and distributors are all asked to insert a unique identifying code in their programming in both audio and video, and that allows us to identify the time when the program content was issued.
AA: What's going to happen with VOD?
MR. DONATO: To program to and for VOD, you have to understand where the viewing time is coming from. So our plan for measuring VOD is to ensure it's measured and reported as part of the overall TV ratings experience. It becomes very difficult to value VOD if it's separate.
AA: A lot of advertisers aren't shy about expressing their frustrations with VOD measurement. When the A/P meter starts tracking VOD, will that issue be resolved?
MR. DONATO: Yes, it will provide a comprehensive measure of VOD. It feels like where we were with DVRs nine months ago.
AA: Which of your new initiatives will have the biggest impact?
MR. DONATO: We don't know yet whether VOD or DVR [together] is going to be the biggest. [The] technology [has the] potential for changing people's behavior so significantly. I think there is a concern that the technology could [have] the biggest [impact]. People are trying to understand what the business model looks like moving forward in a world of DVRs, VOD and commercial avoidance.
AA: There are critics of Nielsen who say that the sample methodology is outdated and set-top box data would be better. What do you think?
MR. DONATO: We're a big fan of integrating set-top box data into samples and providing larger sample sizes. There are two to three limitations of set-top box data that no one is acknowledging. You don't have personal data. It's just household. While it's possible to do modeling of the person's data, the mathematics of it are much more complex. It is limited to that reporting for the universe that has a back channel [the set-top box must reside in a digital cable home]. And information would only be provided for people who opt in, and that is limited.
AA: So what do you do with the sample?
MR. DONATO: The national size is doubling [from 5,000 to 10,000]. We are at about 8,000 now and are going to be to 10,000 by the middle of next year. We are also developing what we believe to be low-cost meters that could be deployable in smaller markets.
AA: In a TiVo age is Nielsen still as relevant?
MR. DONATO: It's more relevant than ever. It's more complex-the process of integrating wireless, VOD and DVRs into one service requires the breadth of the tool kit we are talking about. What made TV is the ability to go to a buying system and compare all kinds of TV on the same system.
AA: What's the next big thing for Nielsen?
MR. DONATO: [We need] to address the microprogramming. People are programming to smaller and smaller segments of the universe, to certain age groups within demos. That puts more and more pressure on a larger sample in a way that has never been done in a TV programming environment.