Ratings Changes Fuel Broadcast and Cable Fight

The war of words between TV stations and cable operators over the relative merits of their advertising avails will escalate again next month, when Nielsen unveils an expanded, updated version of its local ratings reports.

Broadcasters and cable operators, convinced the changes will boost their businesses, eagerly await the new reports. Some have already prepared presentations into which numbers can be dropped once the November reports arrive in mid December.

"It's interesting how both sides look at this as a great opportunity," said Bill Spell, vice president of sales at Cox Television.

The changes have to do with the way local audiences are portrayed in the report. Data on viewing via DBS services, which ad buyers and sellers now must calculate using household-penetration figures, will be added, revealing how much viewing actually occurs in wired homes.

Broadcasters had pressed for this change, arguing that advertising agencies haven't always taken into account the fact that not all viewing of cable networks occurs in cable households: Some of it, they say, comes through DirecTV or EchoStar.

In another change, buyers and sellers will for the first time be able to see broadcast and cable ratings side by side in the report, instead of receiving the broadcast numbers and then waiting several weeks for those related to cable.

An even more significant change lowered the threshold that non-local channels must meet to appear in the local reports. Networks that once had to reach 19.5% of local households will now have to reach only 9.5%.

Cable operators had lobbied for this switch, which will mean that many more cable networks will appear in local ratings reports.

"The sheer fact that agencies on a local basis will have access to all cable ratings means they'll now have the true picture of what's happening with the TV audience," said Nicole Buie, director of research for Cox Media. "It's monumental for us."

Cox has been training its account executives on how to use the new data and has been reaching out to agencies, trying to prepare them for the changes. Agency executives report that rep firm National Cable Communications (NCC) has also been working to demystify the new ratings format.

This coaching could be critically important because the amount of data in future Nielsen local ratings reports will vastly increase. Media-buying agencies welcome it but maintain that it could be more than a year before they can effectively use it because third-party software used to build media schedules can't accommodate much of the new information. "The data is in two decimals, but the buying screens can only display one decimal," said Kathy Crawford, president of Mindshare, a media-buying company owned by WPP Group.

Buyers can get to the data using their research screens, Crawford said, but this isn't as easy as it sounds, especially considering how much more data will be flowing in on the new Nielsen reports. "There will be more than 10 times the amount of data delivered in the new reports than has been delivered in the past. We need computers to handle all this data, but our current systems can't accommodate it."

While cable operators try to capitalize on all the new data, broadcasters are preparing a campaign of their own. Sales managers expect, among other things, to be able to point out how many cable networks achieve ratings of a 1 or less. Cox Television is among those with presentations that have been prepared and await only the addition of actual numbers before being shipped to stations. "The new Nielsen reports allow us to offer a real-time comparison of the value an advertiser is receiving," Spell said. "A station will be able to take a cable spot that appears inexpensive and compare delivery of the spot in terms of viewers with an over-the-air spot. It will become a real-time comparison of value. That's what we're excited about."

The issue of value is central to broadcasters' current defense against cable, which each year takes a bigger bite out of the local and national spot revenue stream.

"Local cable is dramatically different than network cable for advertisers," said Chris Rohrs, president of the Television Bureau of Advertising. "On the network side, broadcast gets about double what cable networks do, but on the local side, it's exactly the opposite. Local cable spots are two, three or four times the cost-per-point of broadcast."

One reason for this, he maintains, is that agencies tend to rely too heavily on ratings data provided by cable sellers, who can inflate estimated ratings when submitting proposals. "It's very hard to get good, accurate numbers for local cable," Rohrs said. As a result, many agencies rely on figures provided by cable operators to both plan and post buys.

"There's no proof of performance in local cable," Rohrs said. "Agencies aren't posting local cable, and they don't verify that spots ran, because CMR doesn't track local cable."

Anderson confirms that most agencies don't buy Nielsen's cable tape and are short on data, but she argues that there are other ways to protect advertisers' interests. Among them: Fusion. A method developed by NCC and media-buying agencies, Fusion helps correct the nagging problem of missing, or "zero-cell," demographic ratings for cable. It has also had the effect of producing more-realistic ratings estimates, she said. "The cable operators balked at using Fusion at first because the numbers were much lower than the ones they were estimating. We insist that they use it." Anderson also said Carat has been "trying to hold [cable buys] to broadcast costs-per-point."

Rohrs still isn't satisfied. Even in Boston, where local people meters provide what is generally agreed to be the most accurate local viewing data in the country, cable sellers have overestimated ratings by as much as 50%-60% over a network's most recent actual performance, he said.

Cable sellers counter that aggressively estimated ratings may be a response to the inadequacies of current methods for measuring local audiences. "Nielsen's diary/meter methodology is widely believed to under-report cable viewership by between 25% and 50% on a demographic basis," said Sean Cunningham, president of the Cabletelevision Advertising Bureau.

Besides, he added, ratings inflation is hardly a phenomenon unique to cable. "The practice of broadcast sweeps inflates local broadcast audience estimates by a minimum of 5%-7%, because these estimates are used across the full 12-month period."

Crawford, whose agency increased its spending on local cable this year, agrees with Rohrs that cable pricing can be too high. "I keep telling cable operators they'd get more of our business if they'd start to compete more on price."

In the end, the market dictates price, Cunningham observed, and growing use of cable indicates the price isn't too steep. "Cable will finish 2003 up 11% in spot and local, while broadcast is struggling to deliver 1% growth. In fact, of the roughly $600 million in incremental spot and local ad spending that came into the markets in 2003, cable took 70% of it, or roughly $420 million. All other spot/local media are at best flat and more often down."