Nielsen Plummets, Rentrak Soars On News Of Ratings Glitch, Cuban Investment

The TV ratings gods both gaveth and tooketh away Thursday as two unrelated stories sent the shares of Nielsen plummeting and rival Rentrak soaring. News that Nielsen had disclosed a major TV ratings glitch contributed to a sell-off driving its share value down 9%, while reports that billionaire Mark Cuban had upped his stake in Rentrak sent its shares up a corresponding 9%.

"We think this is an over-reaction in the case of Nielsen but potentially warranted for Rentrak," Deutsche Bank analyst Matt Chesler opined in an equity research report sent to investors this morning. Chesler said the glitch disclosed by Nielsen would actually have "minimal impact" on the bottom line of the research giant, because it was not the type of error that would cause Nielsen to "be on the hook" for "restitution or lawsuits" related to any makegoods television networks might have to offer advertisers.

"While concerns are understandable," he wrote, "this scenario is highly unlikely based on our understanding of the facts and conversations with multiple senior media execs."

Chesler said Deutsche Bank's investigation found that the error does not affect the "media tape files" that are fed into ad agency buying systems such as Donovan Data Systems that actually process the data for "transactional purposes.

"In other words, the glitch has nothing to do with day-to-day trading models as media is not negotiated on reach & frequency metrics."

That wasn't 100% clear to some of the agency executives Wednesday when they were contacted by MDN Sept. 22) about the Nielsen disclosure.

That story incorrectly implied that that the glitch may have impacted Nielsen's C3 ratings, which are the currency of national TV advertising buys, and the basis of most audience guarantees between networks and advertisers. Nielsen's initial disclosure said it had been distributing "incorrect data for time-shifted data streams" in its NPower system since Jan. 31. It said the NPower system is used by clients to calculate the reach and frequency and "qualified GRPs," or gross rating points, which are what ad agencies use to plan their TV advertising buys.

Nielsen was not available to comment on the glitch Wednesday or Thursday morning when MDN contacted a company spokesperson, but issued a statement late Thursday after the story published. It states: "There is no impact to C3 commercial data, ratings and projections, electronic data files used by other processors, or to reach or any other NPower-reported data."

But media buyers contacted by MDN Wednesday said the glitch "potentially" could lead to requests for makegoods, and that it was at the very least "another embarrassment" for Nielsen. It also comes as the company is making a major push to convince Madison Avenue that its new Nielsen Online Campaign Ratings, or NOCR, should become the "GRP" for online advertising buys.

The timing may have been coincidental, but the disclosure Thursday that dot-com billionaire Mark Cuban had significantly increased his holdings of shares of Rentrak sent that company's value soaring.

In a regulatory filing, Cuban who owns and operates high-definition cable and satellite TV network HDnet, as well as the Dallas Mavericks NBA team, said he had acquired an additional 207,000 shares of Rentrak stock, bringing his total holding up to 973,000 shares, or 8.7% of its shares. The Deutsche Bank report noted that Rentrak shares soared 9% on the news closing at $13.63 per share. The report gives Rentrak shares a "target price" of $15.

Deutsche Bank's Chesler wrote that the Nielsen snafu does represent an "opportunity" for Rentrak investors: "Nielsen's TV glitch does, however, probably open up an opportunity for Rentrak, which is seeing disappointingly slow rates of adoption for its competitive offering. It is not unreasonable to think that TV stations and cable networks currently on the fence might now give Rentrak another look as a source of highly granular data. That said, simply because Nielsen's credibility has suffered a blow does not mean that the issues with set-top box data instantly go away and that the industry will start trading on Rentrak data."

Cuban, who is known to be a shrewd investor, especially when it comes to media and technology companies, told MDN that his decision to increase his position in Rentrak was based mainly on the quality of its products and services.

"In my opinion it's the best source of audience information and the future of audience measurement on both a local and national basis," he said.

Wayne Friedman contributed to this story.

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