New media upends TV ratings system

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By Basil Katz

NEW YORK (Reuters) – The explosion of ways people watch television is confounding the media industry, which has relied for decades on the Nielsen ratings but now must adapt to the realities of the Internet and on-demand video.

Americans are watching more TV than ever — an average of 151 hours a month — on more networks and in increasingly diverse ways. Industry heavyweights and analysts are calling for a new ratings system to keep up.

At first there was a “crisis in measurement” due to the scarcity of data, said Alan Wurtzel, president of research and media development at NBC Universal, which is 80-percent owned by General Electric Co.

But now, he said, content providers are “drowning in data.”

Broadcasters, content providers and advertisers including consumer products giants Unilever and Procter & Gamble Co are all trying to adapt.

“In the past one-and-a-half years there has been a geometric increase in consumers’ access to the Internet for video, and the metrics market has not kept up,” Wurtzel said.

Though little more than 2 percent of television viewing is done on the Internet, Hulu.com, which combines video from 150 broadcasters on a single platform, has seen its audience grow fourfold in the last year, according to The Conference Board/TNS. Hulu is a joint venture owned by media giants NBC, News Corp and The Walt Disney Co.

COALITION TO SEEK BETTER METRICS

This month 15 of the biggest broadcast network companies, advertisers and media-buying agencies formed the Coalition for Innovative Media Measurement (CIMM) to help improve audience metrics.

CIMM is a LLC composed of 15 voting members, from Unilever and Procter & Gamble to MTV Networks and the Omnicom Group Inc.

Each has contributed $100,000 for a minimum two-year engagement.

CIMM is expected to seek two bids from ratings and data companies: one to conduct set-top box research, the other for cross-platform viewing.

Thanks in part to the conversion to digital cable, many Americans are accessing their favorite shows through set-top boxes provided by cable or satellite companies.

This has led to an explosion of new audience data from half a dozen companies that mine set-top boxes for viewer habits.

Factor in TiVo and video-on-demand systems with upcoming Internet video portals OnDemand Online by Comcast Corp or Time Warner Inc’s TV Everywhere — and getting uniform data becomes that much more difficult.

“With more than 500 channels, and linear and nonlinear viewership, we’re far from the three networks that captivated 90 percent of the viewership 30 years ago,” said Alan Gould, a media analyst at Natixis Bleichroeder.

NIELSEN SAYS UP TO DATE

But Nielsen ratings still hold sway over the buying and selling of advertising.

Major broadcast networks spend roughly $1 billion dollars every year to get ratings from Nielsen, estimates Larry Gold, who publishes Inside Research, a newsletter on the market research industry.

“It has control of the marketplace,” he said.

This is an often-heard gripe against Nielsen, which says it has made significant investments in acquisitions, infrastructure, and research that address the new ways people use media.

As for CIMM, Susan Whiting, chairwoman of Nielsen Media Research, said, “We share all of the objectives of the leaders of the coalition, and we are interested in hearing more about their plans.”

But for Tracey Scheppach, a senior vice president at SMG Exchange, an offshoot of CIMM member Starcom MediaVest, part of France’s Publicis Groupe, Nielsen is partly to blame for the metrics lag.

“While audiences have fragmented, Nielsen’s panel size has not kept up,” said Scheppach. That has led to “dumbed down, inaccurate data,” she said.

For instance, broad audience categories such as women between the ages of 18-49 are hard to translate into targeted advertising.

“There’s bound to be a difference between an 18-year-old woman in Manhattan and a 49-year-old woman in some rural area,” says Alan Gould. “There has been no matching of consumer behavior with the ads.”

(Editing by Daniel Trotta and Xavier Briand)

© Thomson Reuters 2009 All rights reserved

Moody’s Investors Service has changed its Industry Sector Outlook for the US Broadcast TV sector to “stable” from “negative.” The credit ratings firm said the new outlook expresses Moody’s expectations for the fundamental credit conditions in the industry over the next 12 to 18 months. 

The outlook change incorporates Moody’s view that broadcast revenue declines will moderate in the second half of 2009 and that growth will resume in 2010, supported by political advertising and a mild recovery in advertising markets. 

Moody’s analysts now say the boost from political advertising should provide local TV broadcasters additional time to realize a return of core advertising demand as their local economies heal. Furthermore, “given the combination of fixed costs inherent in the business plus cost cutting initiatives undertaken during the downturn, the majority of the revenue lift will likely fall through to EBITDA,” said Moody’s analyst Karen Berckmann. The stable outlook indicates that Moody’s does not expect business conditions for the broadcasters to materially improve or worsen. 

Positive indicators, the Moody’s update said, include the improving trend in consumer confidence, which rose to a better than expected 73.5 in September, marking the highest point since January 2008. The increase could portend firmer consumer expenditures, and expectations for higher consumer spending typically lead advertisers to boost their marketing budgets. In Moody’s view, while not growing significantly, advertising budgets are beginning to open up and have ceased declining. 

“Nevertheless, multiple constraints will likely hinder the return of more meaningful near-term growth, and some downside risks remain. Moody’s does not anticipate a return to job creation prior to the second half of 2010. Additionally, TV broadcasters rely heavily on local advertising, which will likely lag national advertising in terms of recovery. Auto advertising, which comprises a significant portion of revenue for most broadcasters, will also remain a pressure point as vehicle sales in 2010 are expected to remain far below historical levels,” Moody’s said.

“Furthermore, the stable outlook does not necessarily presage positive ratings actions; indeed, the potential for further negative actions remains, particularly given lingering liquidity concerns at the lower end of the ratings scale. Covenant challenges will likely continue for many of these issuers, and access to the credit markets remains uncertain,” the ratings agency noted. Some companies have achieved covenant relief, Moody’s said, but added that the amendments might require companies to return to lenders for another round of negotiations. 

RBR-TVBR observation: