Nielsen begins monitoring TiVo usage

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TiVo and Nielsen Media Research have developed software that allows the audience measurement company to extract viewer information from TiVo's digital video recorders.

For now, Nielsen is excluding data from households with DVRs from its industry reports, but it is trying to piece together a sample that will reveal "the impact of TiVo...upon established viewing patterns."

"We are now in the early stages of looking at data," Nielsen Chief Executive Susan Whiting said in a memo Monday.

DVRs collect information about what shows subscribers prefer to watch so that services such as TiVo's can make recommendations on other shows that a viewer might like. The process is anonymous, but privacy groups have expressed concern about what DVR companies could do with the information they gather.

TiVo has consistently found itself in the position of having to carefully balance the interests of its customers with the interests of the industry.

"This had to happen eventually and they've been working on the software for a couple of years," said Aditya Kishore, an analyst with research firm Yankee Group. "This is hugely important from a programmer's point of view because it could provide more granular information about show programming and it can demonstrate how emerging technologies are changing the behavior of TV viewers."

Viewers who save a show onto a DVR's hard drive are not counted toward the show's Nielsen share rating number, which is used to indicate the popularity of a show. Programmers use rating numbers to help sell advertising for shows. With the software, programmers could see if certain shows are being saved and watched later and have that counted in its ratings number, Kishore said.

Kishore added that the limited number of DVRs in the market wouldn't greatly affect a show's Nielsen ratings number, but the software and Nielsen's efforts so far are laying the groundwork for when new technologies, such as DVR and video on demand, do have a bigger impact on the television industry.

DVR technology is gradually being added to new products, and more companies are working on home entertainment devices that have DVR capability as the main feature. Microsoft is working with PC manufacturers to release a new home entertainment computer using an upcoming version of the Windows XP OS, called the Media Center Edition, that features DVR capabilities. PCs using the new OS are due out around the holidays. Chipmaker Intel is also working with device manufacturers on a portable media device that can store and playback digital video.

The new software could help to reveal to what degree DVR subscribers are fast forwarding through commercials, which has been one of the controversial issues surrounding DVRs, Kishore said. Entertainment companies are currently suing TiVo rival Sonicblue, which maintains the ReplayTV service, for alleged copyright infringement. DVRs using the ReplayTV service have a feature specifically for skipping commercials and another capability allowing subscribers to distribute shows to other ReplayTV subscribers over the Internet.

Nielsen has been collecting data daily from only 10 households with the devices. Although that sample is a small portion of the 422,000 subscribers to TiVo's service as of April 30, it is enough to get some preliminary data to share with clients, according to Whiting's memo.

A Nielsen representative confirmed the memo Tuesday and said the plan was to start with the first 10 households and "go from there." It's too early to determine what impact DVRs would have on the company's research, the representative said.

In her memo, Whiting said that capturing DVR usage patterns into Nielsen's reports is vital since the company's ratings are the "the currency for more than $60 billion in advertising spending in the United States."

Whiting added that extracting data is just the first step. The companies are working to develop "new business rules, editing and crediting criteria, new calculation and data processing software, and, ultimately, implement 'playback-based' reporting systems." TiVo's device functions like a VCR, allowing playback of programs but with a great deal more flexibility.

The software was downloaded to TiVo devices across the country but remains inactive unless households become part of the Nielsen system and give permission for it to be switched on, the memo said.

The companies have been working on the software for nearly two years.

News.com's Larry Dignan contributed to this report.