Local cable is about to become more lucrative. And buying ad time is about to become more challenging. That's assuming Nielsen Media Research continues to introduce its controversial local people meter (LPM) into top markets, despite debates that that it undercounts minorities and has other problems.
Those cable spots will be more valuable because, under the new system, local ratings for many cable networks are expected to grow 30% or more. That should mean additional ad revenue. In markets where it will launch, the LPM replaces a household meter and paper diary used to generate household and demographic ratings.
The bigger challenge for media buyers will come because the LPM will churn out demographic ratings every day, as opposed to a few times a year.
"The point is that we're dealing with a proliferation of data," says Kathy Crawford, president of local broadcast at MindShare.
Moreover, the electronic LPM does a better job of detecting viewers than the diary, which requires users to write down everything they watch. As a result, far more cable networks will have ratings in local markets. The number will grow from a handful to perhaps dozens.
"There are two impacts on local cable," says Nielsen's Jack Loftus. "One is that the numbers go up, which everybody knows. In New York, 80 or 90 channels go up, while 18 or 19 go down. Ratings that are 0.5 or 0.6 go to something like 0.9 or 1.2. Those are still small numbers, but they are huge percentage increases.
"Those numbers all come from somewhere. They come out of the big guys' hides. The people meter picks up the incidental viewing going to these channels, which the diary doesn't pick up."
For some cable networks, such as BET, the local people meter has shown that the audience is larger than formerly believed. That raises a problem for broadcast stations like those involved in the LPM's launch in Boston two years ago, controversial there, too, because Beantown broadcasters didn't want to pay for a service that was likely to aid cable.
"In the beginning, it was a bit difficult to have Boston operating off a people-meter system and the rest of the country operating in a standard Nielsen system," says Tracy Arrington, senior media buyer at GSD&M. "We were really hard pressed to go to our clients and say, 'The [broadcast] numbers have gone down significantly. Therefore, your costs have increased significantly. But Nielsen says it's more accurate.'
"We had a lot of questions and problems in the beginning. I don't think it's a perfect system, but it is slowly and surely being improved upon."
The current controversy surrounding the LPM—causing its rollout to be delayed at least once already in New York, Los Angeles, and Chicago—includes broadcasters' concerns that ratings will fall. Clearly, though, there are other issues.
As the group Don't Count Us Out wrote in an ad that ran in New York newspapers before Memorial Day, "Nielsen wants to introduce a new system for measuring local television ratings that may undercount African-American and Hispanic viewers.
CBS and Tribune Co. also both asked Nielsen to delay the launch until the industry's Media Rating Council is satisfied Nielsen has corrected flaws it detected. But Nielsen bowed the New York local people meter last Thursday, anyway.
Media buyers and cable systems—by and large, longtime supporters of the LPM—say Nielsen's sample for the LPM has been a problem but is getting resolved.
"In the sample characteristics [in Los Angeles] since Sept. 25, on a monthly basis," says Lucy Hughes, director or research at Adlink, "we haven't come within the statistical range that we are comfortable with.
"For example," she explains, "62% of homes in L.A. have wired cable. We would like to see between 58% and 62% of the sample to be in that bucket. Nielsen still has not reached that level; only 57% have wired cable. There are five to eight sample characteristics that are underrepresented, including head of household under 35, household size, and the Hispanic strata."
Hughes, like most advocates of the LPM, believes that Nielsen will resolve sampling problems prior to the system's release.
In Los Angeles, the LPM is scheduled for July 8. Chicago's LPM will go live in August. Nielsen's goal remains getting LPMs into the 10 largest markets by 2006.
But if it's flawed, who needs it?
Most media buyers say the answer is simple. If Nielsen works out the kinks in its samples, the LPM will deliver vastly superior information to the household meter and diary.
Crawford, for instance, says the LPM will get rid of the zero cell, which appears in the report when Nielsen's household meter picks up viewing but no comparable demographic data is logged into the diary. "Having a household with no people is lunacy, which is what we're faced with now," she says. "The LPM makes a more valid number."
Moreover, ratings generated by a mostly passive system are widely believed to be more reliable than those based on what people log into a diary. People in the LPM sample simply indicate on a remote control that they are watching TV.
The LPM also makes buying ad time on local cable comparable to buying it on broadcast stations. "You're able to keep track of your schedules. You're also able to get that immediate return and secure under-delivery," Arrington says, referring to the additional spots offered to make up for ads purchased in shows that generated lower ratings than promised.
"And it's certainly more convenient," she adds, "in estimating [ratings for] special programming and sports."
Once the LPM is introduced into more markets, there may be more controversy. But Arrington says, after a time, the buying and selling of media will return to normal. With the LPM in Boston, "there was a little bit of chaos when it was first introduced, and there was a lot of controversy over sample size," she says.
"Once it stabilized, we did see an increase in cable ratings pretty much across the board in the major demographics. But it wasn't drastic. It's not going to put the broadcasters out of business."
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