Rating the Raters

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I'm Matt Holzman with The Business Brief, a guide to what's happening in and around the business.

Nielsen, by far the biggest of the media ratings companies, proudly announced last week that they will start counting on-line and DVR-TV watching this fall. To which I say to Nielsen, "Welcome to 2008."

It's shocking how slow they've been to deal with Hulu and iTunes and phone viewing and time shifting and all of that. Even this recent announcement is really a red herring when you read the fine print: Nielsen counts web-views and recorded programs as long as the shows contain the exact same ads they did when they aired on TV, which is like never, since advertisers have been smart enough to tailor strategies for people who watch TV when things air and the people who watch programs using more modern means.

Even before they got behind the technology, ratings data was suspect. And that is true today as it was in the days before computers, when there was some excuse for it. For instance, Nielsen has admitted times when some of their "families" were not following instructions correctly. And recently, Arbitron, a radio ratings service, reported that KCRW – this very station – had mysteriously lost 200,000 listeners, only to regain them a few months later. That's just not possible.

The problem is that Arbitron and Nielsen rely on methods that would cause concern to a first year statistics student, including basing their ratings on incredibly small samples. In LA, a megalopolis of 13 million, Arbitron relies on data from something 2,700 people. That's just not enough.

But the blame shouldn't completely be laid at the feet of the raters. They've only been reacting to their clients' demands. And the media community hasn't been sure it wanted to know the truth. It's predicted that accurate audience numbers would be smaller than they currently are. That would hurt media outlets like TV and radio stations, whose rates would have to go down, and media buyers, whose income is based on a percentage of the money they spend for advertisers.

But fragmenting audiences and slow advertising sales mean that better numbers are starting to make more sense than keeping things the same. It's one thing to make quarterly programming decisions based on bad numbers; it's another to use them to guide the future of your entire industry.

As a result, the networks announced the Coalition for Innovative Media Measurement in September. Spearheaded by NBC, which clearly has the least to lose under a new measurement paradigm, the CIMM will "work to explore and identify new methodologies and approaches to audience measurement." In other words, count viewers no matter how they watch, and count them accurately. A number of other companies, including TiVo, have also started offering better ratings services for the digital age.

Nielsen's sad reaction to all of this was its half-baked announcement about web and DVR measurements. But I say it's too little too late.

In the digital age, when you can get real data from cable boxes and Internet streams, Nielsen is rapidly becoming irrelevant. It was bound to happen; after all, how long were we going to believe that anyone was watching Two and a Half Men?

I'd love to know what you think. You can comment on today's Business Brief or subscribe to the podcast at KCRW.com/TheBusinessBrief. For KCRW, I'm Matt Holzman.



Matt Holzman