As the TV industry lurches in fits and starts toward a digital environment, Nielsen Media Research has let its clients know that it will begin the transition to digital people meters (known as "Active/Passive" meters) starting in the summer of 2004.
Beyond that, Nielsen Media Research President Susan Whiting says talks are ongoing to expand the panel of national Nielsen households to 10,000 homes, or double the current panel size. Whiting says Nielsen would like to implement the household expansion within three years but it's contingent on working out an agreement with stations, networks and advertisers. For larger entities, that won't cause much of a strain, but, for smaller stations, it could add significant costs.
Some network officials said last week that Nielsen's transition to digital meters can't come soon enough. "It's not just a good thing, it's a necessary thing," says David Poltrack, executive vice president, research and planning at CBS. "The old metering technology cannot survive in a digital world."
Alan Wurtzel, president, research and media development, NBC agrees. "The A/P meter is not a luxury; it's a necessity—2004 can't come soon enough."
But cost will likely become an issue. Nielsen has spent hundreds of millions of dollars over the past decade developing new techniques for measuring audiences in the digital world, and much of that has been passed on to clients.
The current network contracts—each network pays about $15 million a year for NTI ratings—expires at the end of the 2002-03 season, and one source says Nielsen is seeking a 20% increase next time.
Still, there's wide agreement improvements must be made because the world around Nielsen ratings has changed.
Change with the times
"We're in a situation now where we need Nielsen to be the research equivalent of America putting a man on the moon by the end of the decade," with respect to measuring digital TV, Wurtzel says.
For the first 50 years, television has been an analog-based medium where Nielsen has measured channels on different frequencies. It worked because, at any one time, only one program was transmitted per channel.
But that all changes in the digital world where signal compression allows for the simultaneous transmission of multiple programs in a single channel. As a result, digital meters must measure individual programs; channels are no longer relevant for ratings purposes.
That's where the encoders come in. The device attaches two digital signatures to each program at its transmission point. One code identifies the video stream, the other its audio stream. The codes are like fingerprints: No two sets of codes are the same, so that a specific show can be identified regardless of the distribution source.
In a memo written a month ago, Whiting told clients of the roll-out plans and stressed the importance of the encoder purchases. "Measured media, including hundreds of local TV stations, broadcast networks, national and regional cable networks, and national syndicators must have encoding equipment installed and operating smoothly" for Nielsen to roll out its new A/P system by 2004.
Under the current plan, Nielsen would gradually introduce the digital meters—for both the national panel and the 55 (and counting) local markets that are measured electronically.Nielsen's decision to move full speed ahead with its own digital technology raises questions about the future deployment of Arbitron's portable people meter (PPM). The PPM is a pager-like device people carry with them throughout the day that records all the TV and radio signals they are exposed to inside the home and out.
Nielsen has been participating in an Arbitron test in the Philadelphia area, with an eye toward a partnership.
Researchers like the PPM because it captures the increasing amount of out-of-home viewing and listening that Nielsen's in-home meter does not.
The other big selling point is users don't have to mess with it a lot: They clip it on in the morning and stick it in a charger at night. Nielsen's people meter gets rapped for forcing people to push buttons every time they start and stop watching TV.
The Arbitron PPM system's biggest flaw is the cooperation rate—the number of people initially and randomly who agree to participate. It's well below acceptable levels.
In her memo to clients, Whiting said PPM "will involve a great deal more research and development."
Until then, she wrote, "It is vital for us to continue on our path of A/P meter deployment to ensure measurement of television in the near future."
But, she stressed, "the A/P system will constitute our core platform for measuring television in the future digital and analog environment."
Sources say that Nielsen and Arbitron are renegotiating their agreement. If those talks conclude successfully, sources say, Nielsen and Arbitron expect to do additional research projects on the PPM aimed at improving sample cooperation rates as well as engineering refinements. "They're engaged and involved," says Arbitron Vice President Thom Mocarsky
That's research that would be separate and apart from the three-month extension of the Philadelphia market test that Arbitron announced last week.
TV executives say Nielsen's future ratings (specifically, demographic data) would be improved by embracing elements of the PPM, and indications are that Nielsen is seriously exploring its potential.
Not like the old days
CBS's Poltrack takes Nielsen officials at their word that "they recognize the potential certainly in capturing the out-of-home data that they are currently missing. They appreciate that there is a value to this type of measurement."
But NBC's Wurtzel would like to see Nielsen embrace the PPM methodology in a much bigger way than he's seen to date.
As a methodology for capturing demographic data, the PPM better reflects TV's evolution from the sort of gather-round-the-set mentality of the 1950s-'70s to the much more personal medium it has become today, says Wurtzel. Out-of-home viewing is just one facet of that personal way in which we now tend to watch TV, he says.
"There are more sets than people in some homes," he says. And mom is no longer logging the rest of the family in on the people meter—everybody is much more on their own. "So who's pushing the buttons? Teenagers? I doubt it. Guys? No."
Clients want a bigger panel of Nielsen homes because of the increasing number of viewing choices, which makes the current panel size less accurate.
Pinpointing a date certain to introduce the new digital meters is big news in the ad business. Whiting said, "We've been building to it for a long time and through a lot of testing, and we're very excited about it."
In order for the new digital meters to collect and report accurate data, Nielsen wants every national and local broadcast, cable and satellite outlet in the country to purchase new digital encoders that help identify programs.
The encoders cost between $5,000 and $6,000 each.
"For a station that's cash flowing $50 million the cost of the encoders isn't a problem," says John Tupper, chairman of Fox TV affiliates advisory board. "But, for a station that's cash flowing $150,000, it's a problem."