Upfront 07

Industry Fixates on Plummeting Live Audiences

As Ratings Wither in Face of DVRs and New Nielsen Methodology, Broadcasters Pursue Other Metrics

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NEW YORK (AdAge.com) -- Climate change is wreaking havoc on the airwaves. Everywhere marketers look, they see network prime-time ratings melting away -- huge blocks of audiences simply snapping off, top-rated shows sinking to record lows.
DVRs and Nielsen Media Research have had a devastating effect on the TV environment.
DVRs and Nielsen Media Research have had a devastating effect on the TV environment.

Digital video recorders and Nielsen Media Research's ability to track users have become to TV what global warming is to planet Earth. In January 2006, Nielsen began tracking DVR usage; previously, homes with DVRs were simply excluded from the sample.

By upfront time, the issue of whether advertisers would pay for viewers who were in all likelihood fast-forwarding through commercials became a deal breaker. Broadcast networks argued that viewers watching up to a week later ought to have the same value as someone watching live. Agencies balked, making live ratings the main currency used by advertisers.

'Live' showing huge declines
What makes this more painful for networks is that the live ratings advertisers see are showing huge declines. For example, for the coveted 18-to-49-year-old demo so far this season (through week 30), every broadcast network's average rating in prime time is down based on the live numbers.

Fox, with its "American Idol" glacier holding firm, leads the pack with 4.9 million viewers in the 18-49 demo and a 3.8 rating, but that's down 2.8% from 5.04 million last season with a 3.9 rating. Next comes ABC with 3.86 million viewers, down 12.3%; CBS with 3.78 million, down 9.6%; and NBC at 2.8 million, off 16.7%.

Why the big drop-off? Part of it may be Nielsen methodology, and part of it is the continuing defection from live viewing to time-shifting. And things are only going to get worse, according to a consensus of analysts who predict the TV environment will be subjected to unheard-of patterns of erosion.

"The decline this year is staggering," says Shari Anne Brill, VP-director of programming at Carat USA, New York, and a veteran TV-research executive. "The delayed viewing puts [the ratings] back [up]. A lot of delayed viewing occurs within that first day. For [the week through Tuesday, April 17] in broadcast prime, 46% of minutes were time-shifted minutes."

Source: Nielsen Media Research

It isn't only agencies watching the shift. Alan Wurtzel, president-research and media development at NBC Universal, is seeing the same thing. "We are beginning to see the real impact," he says. "There are programs that are getting a huge post-viewing number. ... When it comes to the DVR, it is our friend, and it gives people an opportunity to see what they wouldn't have seen. The bad news is we don't get paid for it. That's what's frustrating."

Shaw misses on a gamble
During last year's upfront, Mike Shaw, ABC's president-sales and marketing, made the case for getting paid on the basis of the full live-plus-seven-days rating. Mr. Shaw hoped his rivals would stick with that view. They didn't, and ABC watched as Fox and CBS moved ahead of the market doing deals based on live numbers, setting the standard for the rest of the industry.

The live numbers don't include same-day playback, so even viewers watching shows just a minute or two after they're scheduled are not included in the ratings. More importantly, agency buyers don't pay for them.

It's no wonder NBC is upset. The network barely pokes its head into Nielsen's live top-10 rankings on the 18-to-49 list, but "The Office" is No. 1 and "Studio 60 on the Sunset Strip" is No. 5 among shows with the biggest percentage increases in live-plus-seven, or shows watched within a week of the original broadcast. Through April 1, "The Office" had a 3.78 live rating among 18- to 49-year-olds and a 4.62 in live-plus-seven.

No one will say exactly what those lost, time-shifting viewers are worth in ad spending, though one estimate from a broadcast-network executive suggests the figure could be as much as $600 million annually for a single network.

Deeper penetration of DVRs
Next year, the televisual El NiƱo will continue to rain on broadcast-network ratings as DVR penetration grows. Forrester Research predicts 55% of homes, or 65 million, will have DVRs by 2011. Magna Global's forecast, from a report dated March 2007, is a little less extreme. It supposes that by 2010, DVR subscribers will reach 36.6 million, or 31% of TV households, up from 18.7 million, or 16.9%, at the end of 2006.

Already, the discouraging data have resulted in a forceful shift in conversation away from program ratings and toward other ways of measuring ad effectiveness. NBC Universal -- home of Bravo and Sci-Fi Channel, both subject to heavy DVR viewing -- is looking at commercial ratings but also pursuing engagement as a supplement to live ratings.

NBC Universal also is investing in research that will tell it more about DVR viewers' habits. It argues that a recent Millward Brown study shows recall isn't substantially reduced when viewers watch ads in fast-forward mode.

"I feel like the industry is going to have to move toward a different kind of metric," Mr. Wurtzel says. "Nielsen doesn't go away, but there has to be a metric on ad effectiveness."
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