Nielsen Plans to Track Viewership
Of TV Commercials for First Time
July 11, 2006; Page A1
Nielsen Media Research, the firm that calculates national television ratings, plans to answer one of advertising's most pressing questions: How many people actually watch TV commercials?
In November, Nielsen will begin for the first time to provide formal ratings for commercial breaks, a move with far-reaching implications for the fast-changing media world.
Currently, Nielsen, a unit of Dutch media company VNU NV, provides ratings only for individual TV programs in their entirety. Commercial prices are based on that overall rating. The higher the rating of a particular show the more money a TV network can charge advertisers for a spot shown during that program.Both TV networks and advertisers expect the new Nielsen ratings will show that viewership declines noticeably when a program breaks for commercials. A particularly big drop could fuel advertisers' push for changes in how ads are incorporated into shows, reinforcing demands for fewer or shorter ad breaks and lower ad rates. It could also accelerate the flow of advertising dollars out of television to the Internet and new digital media.
"Prices should go down," says Bruce Goerlich, executive vice president and director of strategic resources at Publicis Groupe SA's ZenithOptimedia, a firm that buys advertising time on behalf of corporate clients and other marketers. "If I was a buyer, I would be taking the stance of, 'Quite frankly, what you said you were delivering, you weren't.' "
Television executives aren't likely to roll over, though. Jeff Zucker, chief executive of General Electric Co.'s NBC Universal Television Group, says there's "no reason to believe" the new ratings will put pressure on prices. "The bottom line is that there is still no better way to reach a mass audience," he says.
Any softening of ad prices would be a big blow for the nation's TV networks and their parent companies. Media stocks overall have been depressed in recent years as technology has whipsawed the industry. Many big advertisers have already cut back on traditional TV spots. General Motors Corp., for example, says its spending on 30-second prime-time commercials declined by 50% in the five years between 2000 and 2005.
In the recently concluded "upfront" ad-sales negotiations, where major networks sold the bulk of their ad time for the coming fall season, overall ad commitments fell slightly compared with the previous year, which itself was down from the year before. Ad buyers and sellers believe the new commercial ratings could help determine pricing for ad time starting with next year's upfront session.
Since the industry's early days, networks and advertisers have debated how many people watch the 30-second spots sprinkled throughout TV programs. Viewers have long used commercial breaks to grab something to eat or change channels. Questions about the effectiveness of commercials have increased in the past couple of years as digital video recorders, or DVRs, such as TiVo, have become more popular, making it easier for people to zip through the ad breaks in shows recorded earlier.
The new ad ratings, to be offered retroactively to the September start of the coming fall TV season, will measure the average viewership for all the national commercial minutes that run during a program. They won't track individual commercials or specific commercial time slots.
The new ratings will be gathered the same way Nielsen compiles its existing TV ratings. The firm will use set-top monitors in 10,000 Nielsen homes, checking viewers' TVs several times per minute to determine what show is on. The monitors record whether viewers are changing the channel during a commercial break or zapping through the break with a DVR.
As for visits to the fridge or bathroom, Nielsen viewers are supposed to use another device to record when they leave a room in which a set is playing. The system isn't foolproof, but a Nielsen spokesman says the company believes more than 90% of its viewers comply with this rule.
Finding new ways to measure consumer involvement with media is crucial for Nielsen. Its CEO, Susan Whiting, has announced a flurry of initiatives to measure everything from video playback on cellphones to TV viewing in sports bars. Although the company is the sole provider of national TV ratings, it faces competition from a host of firms that survey measures such as viewer response to ads.
The introduction of commercial ratings comes as advertisers and their agencies are increasingly focused on measuring the results of the commercials they create. Advertising has long been viewed as a game of chance, with marketers putting money into costly TV commercials without any clear idea of whether the ads drive sales of their products or yield greater recognition among consumers.
But the Internet gives marketers the ability to determine the number of people who click on an ad, sign up for a test drive at a local car dealership or choose to receive an email newsletter. Ads on other emerging media outlets, such as cellphones and video on demand, are also providing a measure of consumer response. TV, however, still commands the largest share of ad dollars. In 2005, advertisers spent about $54 billion on local, cable and network TV, according to TNS Media Intelligence.
"Proof of performance measures become one of the things that people can use to separate the wheat from the chaff," says Jon Swallen, TNS Media Intelligence's senior vice president of research.
Network executives argue that advertisers have long known some viewers stop watching during commercial breaks and they say current ad prices reflect this. While Nielsen hasn't previously provided ratings for commercials, it has provided networks with detailed viewership data tracking programs minute-by-minute. Networks and advertisers have been able to crunch this data to figure out how many people watched their commercials, but these calculations were of limited use in ad negotiations because they weren't done in a uniform fashion.
Networks say the new ratings could be good for them because they provide the hard numbers advertisers have long sought. Mike Shaw, president of sales and marketing for Walt Disney Co.'s ABC, says the new metric means networks can go to advertisers and say, "Here is exactly who watched your commercial. They didn't graze. They didn't go to other channels."
Alan Wurtzel, president of research for NBC Universal, agrees, saying commercial ratings "at last address all of the basic issues that advertisers have: Are people seeing my commercial and how effective is it?"
The new rating could also provide something networks have been pushing for lately -- a way to capture the number of viewers watching a program recorded on a DVR. About 14% of the nation's television homes have DVRs, according to ad-buying and research firm Magna Global, a unit of Interpublic Group of Cos. In their latest ad-sales talks, networks asked advertisers for ad rates that reflected the increasing number of viewers thought to be watching TV on DVRs. Advertisers, believing these viewers generally speed through the ads, refused.
"Top shows get [DVR] playback much more often," says David Poltrack, executive vice president and chief research officer for CBS Corp. As part of that playback, he suggests, "we should see a net gain in total commercial exposure over time for the most popular programs."
But the new system may also give advertisers evidence to push for changes in the structure of commercial breaks. Advertisers have long been concerned that the increasing ad "clutter" in TV programs is reducing the value of their ads. Some advertisers have tried asking for specific positions in commercial breaks -- such as the first or last spot -- in hopes of attracting more attention. But networks typically have been reluctant to make such commitments.