How Nielsen Stood Up to Murdoch; Fox played the race card. It Didn't Work
- Originally published in Business Week September 20, 2004
Copyright 2004 The McGraw-Hill Companies, Inc
By Anthony Bianco in New York, with Ronald Grover in Los Angeles
Susan D. Whiting knew she was in for a long, hot summer as early as
Mar. 30. That was the day Rupert Murdoch, media mogul supreme,
interrupted a discussion about interactive advertising to lambaste her
in front of many of TV's most powerful executives. Whiting, president
and CEO of Nielsen Media Research, was stunned but maintained her
composure. ``I'd never met Mr. Murdoch before, but I felt I had to
respond,'' she recalls. ``So I did, and then I asked if we couldn't go
back to the subject we had all come to discuss.''
What incensed Murdoch, the chairman of News Corp., is a Nielsen plan to
change the way it tracks TV viewing in the 10 largest U.S. markets.
Beginning late last year, Nielsen began phasing out the written diaries
it has used since the 1950s in favor of an electronic device called the
people meter that measures audiences much more reliably. In people
meter test runs in New York and Los Angeles, many high-profile programs
on News Corp.'s Fox network took ratings hits, including several geared
to blacks and Hispanics. In an attempt to force a delay in Nielsen's
conversion to people meters, News Corp. funded a grassroots political
campaign accusing the ratings company of disenfranchising minority
viewers.
Whiting, 48, has had to defend herself and her company in dozens of
public forums, including a U.S. Senate hearing and stormy city council
meetings in New York and Los Angeles. At least 40 members of Congress
criticized Nielsen. Whiting, who moved up to CEO in 2002 after 24 years
at the company, also endured a tongue-lashing by the Reverend Al
Sharpton, who stormed into her office while a contingent of reporters
waited outside.
HIGH-HANDED
Nielsen, owned by Dutch media conglomerate VNU, is no stranger to
controversy. Complaining about the inflexibility of Nielsen, its
arrogance, and, above all, its high prices is a long-standing tradition
among the TV programmers and ad agencies that have never really had a
practical alternative to buying its ratings data. ``The industry has a
love-hate relationship with Nielsen,'' says David Verklin, CEO of Carat
North America, a large media-buying agency. ``Actually, it's hate-love,
and there's not a whole lot of love in it.''
This current contretemps, however, is something new for Nielsen Media
-- in the virulence and breadth of the attacks directed against it.
News Corp.'s attack transformed an intra-industry dispute over research
methods into a racial and ethnic cause celebre. This strategy was
cleverly conceived to exploit Nielsen's unpopularity and inexperience
in the dark arts of political string-pulling and public relations
spinning. ``They were totally caught off guard when Rupert came out,
guns blazing,'' concedes Angela Mariana Freyre, a partner at Coudert
Brothers LLP, outside counsel to Nielsen.
The people meter is a long-established technology widely used around
the world to measure TV audiences. Since the 1970s, Nielsen has used a
so-called set meter to track the viewing of its sample households. It
tells Nielsen what is being watched -- but not who is watching. Four
times a year, Nielsen collects the finer demographic data prized by
advertisers by asking all viewers to fill out a diary detailing their
TV watching for a week. It's no secret that many families keep their
diaries haphazardly. The people meter provides much more reliable data
by automatically recording every channel change and by adding a set-top
console that all viewers identify themselves by the push of a button or
two.
In 1987, Nielsen introduced people meters into its national sample,
which consists of 5,000 households across the country. The new meters
proved that people of all ages and races were far more diverse in their
viewing habits than the written diaries had shown. Ratings points --
and ad dollars -- migrated en masse from high-rated shows to low-rated
ones and from broadcast to cable networks. Many broadcasters complained
bitterly at first, but the national people meter ratings now set the
standard for TV measurement in the U.S.
It was not until VNU acquired Nielsen Media for a hefty $2.5 billion in
2001 that the company and newly appointed CEO Whiting announced
ambitious plans to also begin using people meters to measure local
audiences in the top 10 U.S. cities, beginning with Boston in 2002. The
advent of the local people meter was a particularly ominous development
for News Corp., which is much more heavily weighted to broadcast and
lighter on cable than are the corporate parents of CBS, NBC, and ABC.
Nonetheless, in October, 2003, Fox Television Station Group signed a
comprehensive new service contract with Nielsen covering all 35 Fox
stations in the U.S. Under this agreement, Fox agreed to buy people
meter data in all 9 of the top 10 markets where it owned a station. By
February, though, News Corp. had become so alarmed by the people-meter
test-run data from New York that it demanded that Nielsen postpone the
scheduled start of commercial service on Apr. 8. Whiting refused. A few
weeks later, News Corp. issued a statement by Lachlan K. Murdoch, Fox's
chairman (and Rupert's son), that framed its objections in a racial
context: ``People meters could undercount viewership by as much as 25%,
especially when quantifying viewership among minority and young
viewers.''
About the same time, a newly formed group called the Don't Count Us Out
coalition began going after Nielsen. News Corp. has acknowledged that
it supported Don't Count Us Out ``financially, organizationally, and
morally'' but denies Nielsen's accusations that the coalition is a
front for Fox. ``This is a group who saw that [Nielsen's] data wasn't
accurate and rose up against it on their own,'' says News Corp.
spokesman Gary Ginsberg.
With the help of a bevy of high-powered media consultants who had held
senior positions in the Clinton White House -- including press
secretary Joe Lockhart -- Don't Count Us Out rapidly enlisted dozens of
Democratic lawmakers and scores of minority advocacy groups. The group
also took aim at the masses, hiring canvassers to take its anti-Nielsen
message door to door and unleashing a barrage of print and TV
advertising. So many complaints poured into Nielsen's New York office
that its phone and e-mail systems crashed.
Nielsen was caught off guard in part because it thought it had bent
over backwards to ensure that blacks and Hispanics were fully
represented. Black households make up 21.2% of the new New York people
meter sample, compared with 17.3% of the city's population as measured
by the 2000 census; the comparable numbers for Latinos are 16.8% and
16.1%. Whiting says that Nielsen deliberately ``over-sampled'' minority
households because of the possibility that blacks and Latinos were
undercounted in the census. ``The official benchmarks may be too low,''
she says.
Don't Count Us Out made much of the fact that many of the shows with
the steepest ratings drops in New York were geared to people of color.
For example, The Parkers, Girlfriends, Eve, and Half & Half
suffered potentially fatal declines of 27% to 62%. However, the
coalition failed to mention the jump in viewership for other
minority-themed programs on cable. In March, black viewership of Black
Entertainment Television soared 180%. Among Latino viewers,
Telefutura's ratings jumped 83%.
JUST NOT HERE
Nielsen wasn't counting minority viewers out: It was counting them
elsewhere. Rating points were shifting en masse from broadcast to
cable, reflecting what had occurred in Boston and nationally. As
measured by the people meter, blacks in New York spent 54.2% of their
viewing time on cable, compared with the 39.2% reported by the diaries.
For Latinos, the shift was less dramatic but still significant at 43.8%
to 34.6%.
Even as politicians rushed to enlist in Don't Count Us Out, executives
of other media companies kept a wary distance. They not only saw no
evidence of racial bias in Nielsen's people meter numbers, but
generally disapproved of News Corp.'s rabble-rousing tactics. ``Buying
full-page ads in The New York Times is not an effective way of bringing
about change in the science of television measurement,'' says Gayle
Metzger, a longtime Nielsen critic who tried to start a competing
company in the 1990s.
Whiting, a Wisconsin native, is not the combative sort, but her
graciousness masks a steely resolve. Combining what one friend calls
``an almost nerdy, Midwestern frankness'' with a deep knowledge of the
science of television ratings, Whiting was fiercely imperturbable as
she ventured out to meet with people meter opponents located around the
country. ``I've seen her get mad, but the only way you can tell is that
her face turns red,'' says Jack Loftus, Nielsen's communications chief.
``I've never seen her lose her cool.''
It was a testament to the CEO's effectiveness that Senator Hillary
Clinton, the NAACP's Kwiese Mfume, and other high-profile supporters of
Don't Count Us Out quietly backed away from the coalition. On Sept. 7,
the Reverend Jesse Jackson stepped forward to endorse Nielsen in an
open letter addressed to members of the Rainbow/PUSH Coalition.
``People meter measurements prove that audiences of color -- like other
viewers -- are shifting their allegiances from big broadcast channels
like News Corp.'s Fox Television to smaller channels and networks,''
said Jackson.
At the same time, though, Whiting antagonized such major clients as
CBS, Tribune Broadcasting, and Univision by insisting on going live
with the people meter service in New York without first obtaining the
blessing of the Media Ratings Council, an independent industry group.
MRC's auditors discovered a host of technical shortcomings of the same
sort that had bedeviled previous people meter conversions and which TV
executives attribute to Nielsen's overeagerness to begin charging for
people meter data and preserve its 25% profit margins. Nielsen has won
conditional MRC accreditation in Los Angeles and is working to fix
sampling flaws in New York and Chicago.
By all appearances, Nielsen now has the whip hand in its struggle with
News Corp. Whiting's public relations offensive has blunted the threat
of federal oversight of the ratings business, and the company scored a
crucial legal victory when a state judge in California declined to halt
Nielsen's people meter rollout in Los Angeles. As for News Corp., it
continues to do business with Nielsen -- incontrovertible evidence that
the company's lucrative monopoly is intact.
The Meter Is Running
Nielsen Media's new people meter records a big drop in the number of
blacks watching network TV, but an equally large rise in its share of
cable:
NETWORK SHARE*
-15%
CABLE SHARE*
+15%
* Percentage point change, New York audience in March, 2004
Data: Nielsen Media Research