Nielsen has had a monopoly over the TV ratings industry since it invented the service in 1950. However, Nielsen has been slow to adapt its current rating system to reflect viewers’ recent ability to watch TV at any time and on multiple devices. This has sparked much criticism, including heat from Linda Yaccarino, NBCUniversal’s ad sales chief.
“Imagine you’re a quarterback, and every time you threw a touchdown, it was only worth four points instead of six,” Yaccarino said at the recent international CES trade show.
Though the football metaphor may be a confusing, the gist of Yaccarino’s complaint stems from the overlying problem in today’s TV ratings: Nielsen only considers viewers of live and recently recorded TV. Nielsen fails to include the growing population who binge watches every season of their favorite shows on Netflix, Hulu, iTunes or even on-demand cable. The reason: These platforms either don’t air advertisements, or their advertisements are different from those shown during TV broadcast.
In short, advertisers don’t care how many people watch a show; they care how many people watch their advertisements.
“The perception for a long time in the industry is that Nielsen has been somewhat slow to adapt their measurement to changing patterns of media consumption,” said Tuna Amobi, an equity analyst covering media companies at S&P Capital.
While Nielsen has expanded its ratings services to cover many elements of consumer culture, it has yet to figure out a way to incorporate viewers from other platforms in its TV ratings. However, it is studying them as well as what they are saying on social media. Some recent moves:
- Expanding research on viewers watching shows through Netflix and digital-only platforms
- Expanding its partnership with Twitter to monitor social-media content about TV shows
- Analyzing data from Facebook to create “social content ratings”
To further maintain its monopoly on the TV ratings industry, in the past year Nielsen has released 69 new products and technology innovations. Most notably, Nielsen introduced a “total audience metric” to track TV viewing across video on demand, mobile and streaming. But is it enough? Either Nielsen is working hard to stay afloat of the criticism or it is worried about potential competitors.
New competitors are emerging, though they might not be enough to dethrone Nielsen, which receives hundreds of millions of dollars a year from the television industry that it measures.
Predictions for the future
The future of TV advertising is unclear.
- Will ratings even be relevant in a few years?
- Will ads be bought and sold based on specific data about viewers, such as location, occupation, salary and purchases?
However, a few things are clear:
- $70 billion in advertising dollars are traded in the United States each year based on Nielsen’s ratings.
- Hundreds of television programs live or die based on Nielsen’s ratings.
- Online viewership may continue to be insignificant to TV advertising as long as the ads shown during an online broadcast are different from the ones shown during the TV broadcast.
NBC’s Alan Wurtzel summed it up in this way: “Are we happy with the way we’re following technology and being able to measure it? No. We’re way behind. On the other hand, are Nielsen ratings important and critical to the industry and as important to the industry as they ever were? Absolutely, when you consider that if we didn’t have them, we wouldn’t get paid.