As Nielsen recalculates its ratings following a software snafu, network executives and media buyers say the new figures are unlikely to result in ABC having to make its advertisers whole, but it will exact a price on Nielsen’s reputation.
On Oct. 10, the measurement giant attempted to be transparent by publicly disclosing that a defective piece of software had been incorrectly attributing some view of broadcast and syndicated shows to ABC since March.
Clients who do business based on ratings numbers say their confidence in Nielsen has been damaged by the incident. For Nielsen, making this type of error hurts at a time when Rentrak is starting to look like a challenger in the TV measurement business.
“You pay Nielsen a lot of money to measure this stuff and ever since March, what they’ve been giving us has been incorrect. That’s worrisome,” said Sam Armando, senior VP, director of strategic intelligence at Starcom MediaVest Group.
Steve Hasker, Nielsen global president, said the company’s initial plan was to redo its ratings going back to Aug. 18 when new shows began to premiere. That’s also when the unusual differences between Nielsen’s local market network numbers and its national numbers grew big enough to raise alarms.
Hasker said that Nielsen would be meeting with clients to see if the recalculations needed to go back further. Media agency sources said they told Nielsen they needed the numbers fixed all the way back to March, when the faulty software that caused some viewing of broadcast and syndicated shows not carrying Nielsen’s watermarks was first incorrectly attributed to ABC.
Nielsen never issued the C3 commercial ratings most media buys are based on for this season; buyers wanted C3 to be recalculated for the end of the 2013-14 TV year to ensure that their clients got what they paid for, and Nielsen agreed to provide them.
At first blush, it appears that the changes would be too small to affect whether or not programming reached guaranteed levels. “The actual change in ratings is not significant,” said Armando. “In some cases, because of the small ratings, the percentages are big.”
They were big enough to snatch a rare ratings victory from ABC’s World News Tonight over NBC’s Nightly News. In primetime, the biggest gainer with the new numbers was NBC’s Sunday Night Football, which rose 0.156 of a point among adults 18-49. The biggest decliner was ABC’s Resurrection, which fell 0.32 when the rejiggered numbers came out.
Still, over a quarter, those impressions could add up. Though network executive said they didn’t anticipate the glitch affecting their guarantees, it would seem easy for ABC to deliver fresh make-goods to make up for any newly discovered underdelivery issue. Trickier would be what happens if it turns out the bad numbers indicated make-goods were allotted that the new numbers show weren’t necessary. Nielsen itself doesn’t seem to be liable if mistakes result in gains or losses for its clients.
Nielsen’s clients were also concerned that Nielsen had a quality control issue. Even a small variance between the numbers coming out of the new software and the old software should have raised alarm bells and didn’t, one agency executive said. Nielsen told clients it is working on a plan to more closely scrutinize fluctuations in its data.
Ultimately, the industry has little recourse but to continue to work with Nielsen. While more networks, station owners and agencies sign up with rival Rentrak, it is unlikely to supplant Nielsen in the near future.
“We don’t want Rentrak to do what Nielsen does now,” said one media buyer. “With fragmentation increasing, we want them to aim for what we’ll need in the future, with big data providing granularity that a sample can’t.”
In a report last week, analyst Todd Juenger said that Nielsen’s position in the TV industry is safe for the time being.
Noting how Nielsen’s stock declined after WPP, which owns the largest media buying agency holding company, took a stake in Rentrak, analyst Todd Juenger of Sanford C. Bernstein said that Nielsen “is now trading as if its dominant position in U.S. TV measurement is in serious jeopardy. We do not believe it is.” The stock was also being hurt by the notion that TV advertising itself is in jeopardy.
Juenger said he upgraded Nielsen stock to “Outperform.” The revenue Nielsen gets from its ratings business “does not vary with the advertising revenue of its client. Nielsen’s measurement contracts are long-term, fixed-fee contracts with annual escalators,” he said. “As long as TV advertising is a ‘scores of billions of dollars business,’ and there are no viable substitutes to Nielsen as the currency, Nielsen is in a position to continue commanding mid-single-digit revenue growth.”
But Rentrak CEO Bill Livek said that, particularly in light of Nielsen’s latest problem, the industry ought to have two sources of data in order to better analyze the industry. And besides, choice is a good thing. “Coke needs Pepsi. Pepsi needs Coke,” he said. “Rentrak believes in measuring massive and passive information, and then statistically adjusting for what you can’t measure. That is a better alternative.”
MORE LAYOFFS FORECAST FOR MEDIA COMPANIES
THE TOUGH economic time hitting the media business is likely to impact more staffers in the near future.
“It’s going to be terrible for employees. Employees are going to get whacked in this environment,” said analyst Michael Nathanson of MoffettNathanson Research.
Scripps Networks Interactive this month offered senior staffers voluntary buyouts, but more cost cuts and job losses are probably on their way.
Time Warner’s Turner Broadcasting unit also did voluntary buyouts before announcing plans to eliminate nearly 1,500 positions. Warner Bros. is also terminating about 1,000 people. The company will be taking a $400 million restructuring charge against earnings in the second half of the year.
In an email to staffers, Scripps Network CEO Kenneth Lowe said a tough ad market, declining ratings, industry consolidation and greater competition were reasons for belt-tightening.
“As a result, even companies out-performing their peers as we are have to change to reflect the evolving landscape,” Lowe said in the email.
Like at Turner, the costcutting will probably go beyond the voluntary layoffs. “We plan to announce any project and/ or job eliminations resulting from this budget process by the end of the year,” Lowe said.
Nathanson said it’s inevitable that more media companies will follow in Time Warner’s and Scripps’ footsteps.