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Nielsen's Whiting Stands Firm

5/30/2004 08:00:00 PM Eastern

How the Nielsen Ratings Work

How the Nielsen Ratings Work

Nielsen uses three basic methods to calculate audience estimates, or ratings, for TV shows.

The original diary method, introduced in the 1950s, requires viewers to write TV choices on a form and is used to measure TV viewing of local stations in smaller markets, largely because it's cheaper. Nielsen mails forms to families in each market four times a year during the sweeps periods (February, May, July, and November). Viewers fill in program titles, times, channels, and who in the household was watching. Errors are likely in this method because rarely do viewers chronicle their habits so precisely.

In the 1970s, a hybrid diary/meter method was introduced to more accurately measure viewing levels. But those hybrid meters measure only household viewing data, and the demographic data in those markets is still based on diaries. That's why Nielsen began the hunt for a better overall method.

The newest method, the "people meter," was launched in 1987 to measure network audiences but is being rolled out for local ratings in the top 10 TV markets by 2006. The method has generated much controversy. For one thing, cable ratings generally gain, while broadcast station ratings tend to drop under the new system. For another, critics say it undercounts blacks and Hispanics.

How does it work? A meter attached to the back of the TV set scans the channels received every 2.7 seconds and picks up every viewed channel. A separate hand-held remote control monitors who is watching the set at any particular time, which Nielsen uses to create demographics for each show. Every night, the viewing data are downloaded to Nielsen's main ratings-processing center in Oldsmar, Fla., where the ratings are tabulated and sent to clients via computer the next morning.

Sidebars:

How the Nielsen Ratings Work

Nielsen Media Research President Susan Whiting has spent her career avoiding the spotlight. Lately, she can't seem to get away from it.

News Corp. Chairman Rupert Murdoch upbraided her in a room full of the industry's most powerful executives a few weeks ago over a controversial new TV-rating method. Then, former presidential candidate Al Sharpton charged into her office, CNN in tow, questioning her sensitivity to racial issues. Now some members of Congress, concerned about Nielsen's accuracy, are calling for an independent audit of its methods.

Whiting, a genial but shy Midwestern blonde who joined Nielsen as a 21-year old manager-trainee 26 years ago, is ready for her closeup. She's on a mission to increase Nielsen's ratings reliability, while pushing new products for measuring TV audiences. And though a CEO for only 18 months, Whiting is already in the throes of a bruising public-relations battle with hard-hitting media titans. The issue: the local people meter (LPM), Nielsen's new method for measuring TV audiences in the big urban centers.

Late last week, Whiting scored a big victory when the National Association for the Advancement of Colored People endorsed the LPM. In a lobbying effort that culminated in a meeting with NAACP President Kweise Mfume, she persuaded the group, which had expressed reservations about the LPM, to support it.

At 47, Whiting is the unlikely head of the most influential company in the TV business. But she has never been comfortable in the spotlight—a character trait instilled in her from childhood. Growing up with Quaker values, she says, "I'm uncomfortable with some of the focus on me as an individual. This is a large company, and we do a lot of different things, and it takes a lot of different people to perform well."

The company she runs can determine whether a show—or a network—lives or dies. As the lone source for network ratings, upon which all TV advertising sales are based, Nielsen is the sole arbiter of value in the industry. Over the course of TV's upfront season now in progress, advertisers will commit close to $18 billion in national ads for the coming year. Including local TV stations, the Nielsen ratings are used to price some $60 billion in TV ads annually.

The woman who oversees the research giant is, perhaps more than anything, a survivor. In the past three decades, Whiting has navigated four changes in ownership, some of which left the company in worse shape. Network executives say Dun & Bradstreet, for example, which owned the company in the 1980s and early 1990s, wrung cash out but reinvested little for Nielsen to make essential technology upgrades. "They have been an abused child in terms of being a cash cow for their owners for years," says a senior network research executive.

Despite the tough environs, Whiting climbed ahead largely by taking the lead on development of new money-making products. She first gained the attention of Nielsen superiors in the early '80s, when she saw the cable-network business rocket ahead and pushed Nielsen to start a cable-ratings service. In the 1990s, clients clamored for more information about advertising expenditures, and she led the team that came up with ad-tracking service Monitor-Plus to chronicle which advertisers air spots on which networks or stations and how much they spend.

Although Whiting has a reputation for responsiveness, critics say Nielsen is slow to fix what they believe are critical measurement problems, such as out-of-home viewing in second homes and bars. Nielsen counters that it is working with competitor Arbitron on a new pager-like unit for audience measurement, one that does not require viewers to log in every time they watch TV (as the people meter requires) and one that also measures viewing outside the home. Nielsen has an agreement with Arbitron to fund research with an option to jointly bring it to market.

Even now, launching local people meters is part of a broader selling mission for Whiting: preparing Nielsen to measure audiences in the age of digital TV. The analog meters now used can't measure viewing of programs recorded by TiVo-type digital video recorders (DVRs), which are now in roughly 3% of the nation's homes and will be in 10% in a year. Tim Brooks, executive vice president, research, for Lifetime, says Nielsen's inability to measure DVRs is the company's "number-one issue because Nielsen will be excluding from the sample the heaviest-viewing and most upscale 10% of the nation's TV homes."

Another ambitious goal Whiting has set for the company is to double the number of Nielsen "families" in the national ratings sample to 10,000 from 5,000. Given the fractured TV audience today, say cable networks and others, the current sample is not large enough to accurately report viewing levels for many of the newer niche networks.

Shy by conventional standards, Whiting is meek compared with the egos of clients she serves, such as Michael Eisner of Disney, Sumner Redstone of Viacom, and, of course, Murdoch. And she's patient. In 1998, Whiting sealed an unprecedented seven-year deal with Time Warner for ratings services covering the entire corporation. Negotiations dragged on for three years, but her persistence paid off. Time Warner agreed to pay a then-record $150 million over the life of that contract. Last year, both NBC and Viacom signed long-term deals worth between $400 million and $500 million.

With such long-term deals, Whiting enjoys the support of its current parent, Dutch publishing company VNU. "The numbers have been real good," says John Dimling, non-executive chairman of Nielsen Media Research and Whiting's immediate predecessor. "From their standpoint, it's sort of 'What's not to like?'" Although VNU doesn't break out Nielsen's financials, company executives confirm that Nielsen saw double-digit growth in revenue and profit from 1998 to 2003. In 2003, Nielsen revenue was an estimated $600 million, pretax profit about $200 million.

But, with Fox's campaign against Nielsen, carried out in newspaper ads, demonstrations, mailings, and a telemarketing blitz, Whiting may be in the biggest test of her leadership yet. An ad run last week in The New York Times
by the "Don't Count Us Out" Coalition, which has pushed Nielsen for independent reviews, charged that Nielsen's "flawed system" could have a "dramatic effect on the diversity of television programming."

Fox is aggressively trying to derail Nielsen's bid to implement LPMs in the top markets because, it charges, the system undercounts viewing by African-Americans—a significant part of Fox's audience—by 25%.

Fox's campaign is "unprecedented, wrong, and intentionally inaccurate," Whiting counters. Nielsen has issued data that it says refute Fox's charge. Still, members of Congress are calling on Nielsen to address the complaints.

Nielsen says its data show that African-American viewing under the LPM system is the same as under the diary method but is simply spread over more channels, especially cable channels, resulting in less viewing for the Fox stations. MediaCom Co-CEO Jon Mandel, other agencies, and some broadcasters, including ABC, NBC and CBS, agree with Nielsen. And so do outlets specifically targeting African-American audiences, such as cable networks BET and TV One, which is owned by Radio One and Comcast.

Univision spoke up last week with a separate complaint: The New York sample doesn't have enough young Hispanics. The network said it won't buy the service until the problem is fixed.

At a meeting hosted by News Corp.'s TV Guide Channel in New York and attended by CBS CEO Leslie Moonves and NBC programming czar Jeff Zucker, among others, Murdoch took a shot at Whiting. During the meeting, which TV Guide set up to solicit ideas for building audience, someone made a comment about ratings. "Murdoch went ballistic and said, if we weren't dealing with a damn monopoly," his stations wouldn't be subjected to 30% lower ratings under Nielsen's new service, says Mandel.

Whiting said something "sort of calming and defusing," Mandel adds, "but didn't go after him."

Whiting rarely gets flustered or loses her cool, say colleagues, but she isn't shy about standing her ground. "When she's upset about something, she tends to get very quiet," says a Nielsen staffer who reports to her. "She'll ask questions. You answer them. Then you beat a hasty retreat."

When Sharpton arrived at Nielsen's Manhattan headquarters recently for a meeting with Whiting, he seemed eager to brawl. "He tried to goad her into an argument," says a company source, "but she didn't go for it."

Meanwhile, the agency that accredits the service declined late last week to endorse the LPM in New York. Nonetheless, Nielsen says it will activate the service this week, with Los Angeles, Chicago, and San Francisco to follow.

Whiting is standing firm for now. "We plan to go ahead on June 3," she says, "because we have a high-quality, more accurate system."

How the Nielsen Ratings Work

How the Nielsen Ratings Work

Nielsen uses three basic methods to calculate audience estimates, or ratings, for TV shows.

The original diary method, introduced in the 1950s, requires viewers to write TV choices on a form and is used to measure TV viewing of local stations in smaller markets, largely because it's cheaper. Nielsen mails forms to families in each market four times a year during the sweeps periods (February, May, July, and November). Viewers fill in program titles, times, channels, and who in the household was watching. Errors are likely in this method because rarely do viewers chronicle their habits so precisely.

In the 1970s, a hybrid diary/meter method was introduced to more accurately measure viewing levels. But those hybrid meters measure only household viewing data, and the demographic data in those markets is still based on diaries. That's why Nielsen began the hunt for a better overall method.

The newest method, the "people meter," was launched in 1987 to measure network audiences but is being rolled out for local ratings in the top 10 TV markets by 2006. The method has generated much controversy. For one thing, cable ratings generally gain, while broadcast station ratings tend to drop under the new system. For another, critics say it undercounts blacks and Hispanics.

How does it work? A meter attached to the back of the TV set scans the channels received every 2.7 seconds and picks up every viewed channel. A separate hand-held remote control monitors who is watching the set at any particular time, which Nielsen uses to create demographics for each show. Every night, the viewing data are downloaded to Nielsen's main ratings-processing center in Oldsmar, Fla., where the ratings are tabulated and sent to clients via computer the next morning.

 

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