• by David Goetzl  @dgoetzl, Joe Mandese  @mp_joemandese, August 17, 2009

News of a new audience measurement consortium comprised of some of Nielsen's biggest customers raises as many questions as it answers. What is known, is that the story, first reported Friday by the Financial Times, caught Nielsen executives off guard. On Thursday, during a conference call to update investors on key developments, Nielsen CFO Brian West acknowledged growing competition in the media audience measurement business, but gave know indication that an industry-wide consortium was in the wings.

West most likely was alluding to a rapidly expanding roster of firms that have been racing to "commercialize" an abundant supply of audience data being collected by digital set-top devices, including TNS Research, TRA Analytics, Rentrak, TiVo, and others.

"We think we're as competitive as anyone on that and we have [the] unique opportunity to bring that combined measurement," West told investors on the call. "But there are a lot of folks out there that will always try to offer a very precise analytic in order to answer a very specific question."

A Nielsen spokesman declined to comment on news of the new consortium, but various industry executives confirmed Nielsen was "blindsided" by he story, and is scrambling to assess the impact of an initiative comprised of some of its largest customers, including the major TV networks, advertisers like Procter & Gamble and Unilever, and agencies like Starcom MediaVest Group and Group M.

It wouldn't be the first time big Nielsen clients banded together to develop an alternative to Nielsen's TV ratings, which have monopolized the U.S. TV advertising marketplace for more than half a century. In 1998, Statistical Research Inc. President Gale Metzger convinced the networks and Madison Avenue's biggest agencies to sign a letter of intent to support the rollout of SMART, but when push came to shove, the industry ultimately failed to back the new, state-of-the-art audience measurement system, making it another in a long line of attempts by companies such as AGB, Arbitron, R.D. Percy & Co. that failed to mount a viable alternative to Nielsen.

At about the same time that SMART was mounting its bid, Madison Avenue even explored organizing an industry-owned consortium that would design, bid and oversee a new TV ratings system that would have competed with Nielsen. The concept, known as a JIC, or joint industry committee, is common practice in Canada and in many overseas markets, but when the U.S. Advertising Research Foundation proposed it here, Nielsen cried antitrust, and the ARF quickly backed down, even though several executives said a JIC would not violate U.S. antitrust laws.

But the abundant, free-flowing availability of digital set-top data has significantly reduced the barrier to entry for new Nielsen competitors, one of whom, Florida real estate tycoon Frank Maggio, tried but failed to organize a cooperative that would have competed with Nielsen. Maggio's plan was to make the cable and satellite TV operators who actually own the set-top data, partners in his erin Media audience measurement initiative. In a federal antitrust suit that has since been settled out of court, Maggio claimed that Nielsen's anti-competitive business practices created a barrier to entry. Terms of the settlement have not been disclosed, but Maggio has remained a staunch critic of Nielsen.

"People don't believe Nielsen ratings," Maggio told MediaDailyNews after learning of the new research consortium. "They accept Nielsen ratings."

The reality is that the U.S. media industry already is beginning to commercialize a wide variety of digital set-top data initiatives. Publicis' SMG unit was an early subscriber to both TNS' and TRA's new digital set-top ratings services, and has even negotiated "enhanced measurement" deals with a variety of cable networks based on them.

Other players ranging from Google to Microsoft to comScore to the cable industry's own Canoe Ventures are also seen as potential third-party suppliers of such data.

What the industry has so far lacked, and what has been a major advantage of Nielsen's, is an organizing principle that would give a new audience measurement system the trading "currency" equivalent of Nielsen's ratings. To do that, the entire industry would have to agree to buy and sell on the basis of the data the way they do now with Nielsen's ratings, and not simply to utilize the data to glean better insights about who is watching television.

But a key goal of the new consortium reportedly isn't simply to understand what's going on with TV, it's to better understand what is going on across all of the screens that video programming is increasingly being consumed on: TV, computers, and personal hand-held devices. The truth is that Nielsen also has its own "three-screen" strategy, as well as a digital set-top initiative of its own, and it recently put it under the charge of Manish Bhatia, one of the founder's of Nielsen Online, and a highly regarded researcher.

During last Thursday's call with investor's, Nielsen's West boasted, "We also think that in areas like set-top box analytics we also have initiatives under way that make us competitive on that front as well."

Nielsen, in fact, has been racing forward so fast, with so many initiatives, that it has given some of its customers pause that it has taken its eyes of its main ball of TV currency data. In addition to its digital set-top efforts, Nielsen has disparate services measuring TV, online and mobile audiences, and has begun fusing them to produce consolidated three-screen reports. Nielsen has also added a so-called "convergence panel" tracking the online usage behavior of TV households in its national people meter system that is the currency of the TV advertising industry.

And Nielsen, of course, is also controlled by a group of large private equity firms that will soon be seeking an exit strategy to profit from their buyout from the once publicly traded company. That strategy could include yet another public spin-off, something that might be unlikely in the current economic environment, or a sale to a big strategic investor, or a break-up.

How the new consortium could influence those scenarios is far from clear. Even though the consortium reportedly plans to have a new audience measurement system in place by this fall, there are still important thresholds that would need to be achieved before it could truly rival Nielsen. Among them, is broad industry acceptance, and utilization, which would likely also depend on some form of validation.

To that end, George Ivie, executive director of industry watchdog the Media Rating Council, said the MRC supports "media measurement innovation regardless of the source," but cautioned, "the industry should learn from recent experiences and take a little time to set specific-purpose goals and standards up front in these emerging areas."

In particular, he said the industry needs to develop a "good foundation of standards for metrics, quality and reporting" for a new cross-measurement system aggregating data from digital set-tops and other sources.

"As of now, such specific-purpose industry measurement standards do not exist," he noted.