The iPod, and the $1.99-per-episode television programming that Apple introduced with it, have brought home how much the TV business that Nielsen tracks is changing. Viewers once tied to their living room couches are becoming mobile, watching TV when and where they want.
Those changes mean the longtime ratings maven has to overcome major technology challenges if it wants to keep its customers--the TV networks and their advertisers--happy. To get a handle on things, Nielsen is expanding its tools to reach TiVos, cell phones and iPods. It's also grappling with a broad rethinking of what its viewership measurements mean.
"The problem with the way Nielsen has approached the problem is that their focus has been completely on the program," said Kate Sirkin, global research director for media buying giant Starcom MediaVest Group. "We want to know the truth about who's actually watching the ads we're putting out on television."
For an industry that pulls in an estimated $70 billion per year in advertising, it's hard to understate how important getting at that "truth" is. In the age of portable devices and TiVo ad-skipping, advertisers want to know if people are indeed watching the commercials, not just the shows. And if Nielsen can't help them do it, they may not be so willing to buy the pricey reports the ratings company sells.
Already, they're increasingly getting data directly from companies like TiVo, which can offer a look at exactly what viewers are watching.
That's hardly good news for Nielsen. But to understand how tricky these changes will be for the ratings giant, it's good to explain how the 70-year-old service has traditionally collected data, as well as the changes it's made in recent years.
The majority of Nielsen's local ratings are still produced the old-fashioned way: Randomly selected panels of viewers are given diaries to record their daily TV watching habits as accurately as possible. That's less accurate than electronic measurements, but small markets don't have enough advertising funding to support investment in expensive equipment, the company says.
In larger markets, Nielsen has long used tools that can sense what channel a TV is tuned to. And since the early 1990s, Nielsen has been developing a way to instead identify specific programs, no matter when or how they are being viewed.
To make this possible, Nielsen developed technology to insert a code into TV shows' audio tracks that makes a sound, inaudbile to human ears, about every two and half seconds. That sound carries information about which station the show came from and when it was broadcast.
For the last year and half, Nielsen has been distributing detectors that can "hear" this signal to some members of its audience panels. By comparing the time encoded in the signal with the actual clock time, the company can now tell whether those viewers are watching a live broadcast or a recording.
This system also has a backup that takes a full audio "fingerprint," or unique audio signature, of shows being watched on a home TV, and compares this to a central database of shows. This level of redundancy helps the ratings be even more accurate, the company says.
The first big change from this system will be seen starting Dec. 26, when the company uses its new technology to begin focusing on the use of digital video recorders such as TiVo, reporting whether viewers watched a show live, later the same day of broadcast, or within seven days of the date it was aired.
The company has also promised to use the technology to give advertisers a better indication of whether commercials are being watched or skipped, Starcom's Sirkin said. But she still wants Nielsen to step up the pace of change.
"It's happening too slowly, and still with not enough focus on what the advertisers and the agencies want," Sirkin said. "We just have to keep shouting."
Getting to devices like cell phones or iPods can be trickier, but it's possible, the company says.
Nielsen is working with the major consumer electronics companies to develop software that can sit on phones or the iPod itself and track what's being watched. In the case of the iPod, the company may put software on a computer that registers what is being transferred to the device, and then later check the device's logs to see which files have actually been played. As with any of these technologies, that would require the permission of the iPod-owning panel member, but it's technically feasible, the company says.
"There is an inexhaustible supply of consumer devices that come on the market every year, and they're getting really clever," Nielsen Chief Technology Officer Bob Luff said in an interview with CNET News.com. "But as I've said before, we've never met a device we couldn't measure."
Maybe so, but Nielsen may still see its ratings crown tarnish if it doesn't keep up with changing behavior as well as the technology itself. Radio research company Arbitron, for example, has developed new technology that measures consumers' exposure to media outside the home, and is seeking a joint venture with Nielsen to launch it into the TV world.
Arbitron has created a tool it calls the Portable People Meter, which is carried around like a small cell phone and picks up its own code embedded in the audio of a program wherever a viewer is. That allows the company to track viewing even at bars, or at friend's homes, for example.
The company is testing it in Houston and says it has found that about 15 percent of TV viewing, for all ages and demographics, actually takes place outside the home. It's now trying to persuade Nielsen to adopt the portable device for its own measurement panels.
"Our main priority is to get Nielsen to agree to the joint venture," said Arbitron spokesman Tom Mocarsky.
For its part, Nielsen says it is still evaluating the Arbitron technology and will decide, by the first quarter of 2006, whether to use it.
However, some believe all of this doesn't address concerns that the fundamental ad-supported business model of television is changing, some experts say. If people begin buying programming by the episode, or watching commercial-free video on demand, the old measurement systems will need more radical change than what Nielsen is planning.
"I think you're seeing a breakdown of the traditional model, where television had sponsorship and was delivered over the air, or by cable and satellite," said Erwin Ephron, a longtime TV industry consultant. "The bigger story is really a rethinking of what television is."