Is C7 Worth It?
Since 2007, the TV industry has been using the so-called C3 metric -- which measures the number of people who watch a show’s commercials either live or after three days of DVR playback -- to buy and sell primet-time advertising. Now, with DVR playback constituting a much larger share of the TV audience, most of the big broadcast networks want to change the metric to C7, which would give them credit for commercials viewed a full week after the original airing.
You can’t blame the networks for trying to squeeze more revenue from their principal asset at a time of increased time-shifting and growing competition from both cable networks and the Internet. But I wonder if the incremental gain will be worth the effort it might take to wrest that concession from advertisers.
There’s a reason that C3 was established in the first place, and it wasn’t just because it was a compromise between Live and 7-Day ratings. A Nielsen analysis showed that nearly half of all time-shifted viewing of commercials occurred on the same day as the original airing (probably because viewers forgot they were actually time-shifting) and that a large majority of commercial viewing had already been seen by the end of Day 3. In other words, there wasn’t all that much to be gained by moving the measurement out to seven days.
CBS’s Les Moonves, one of the principal advocates for C7 ratings, correctly pointed out at a recent UBS conference that "the overnight [ratings] are less significant than they ever were.” The new CBS drama "Elementary,” for example, only gets about 60% of its viewing live, with the remaining 40% of its viewership coming from time-shifting.
But just because total viewing for “Elementary” increased 40% through DVR viewing doesn’t mean that commercial viewing increased 40% during the same period. And besides, the question on the table isn’t how much commercial viewing gains from Live to Day 7, but how much it gains from Day 3 to Day 7.
CBS has one of the best research departments in the business, so presumably they have calculated the total gain from C3 to C7, and presumably they have made the strategic decision that this is worth the fight. Of course not all shows gain 40% of their audience from playback: sports, news and reality television gain much less from DVR viewing than popular sitcoms and dramas. This means the networks have to be careful they don’t end up robbing Peter to pay Paul by unintentionally shifting revenue from the shows with little time-shifting to the ones with a lot. Not every network can be above average in their time-shifting, so presumably there will be winners and losers. (Unless you assume that the advertisers are going to allocate more budget to network TV to account for C7, which is a big assumption.)
So if the metric shifts to C7, will it make that much difference to the bottom line? If a show gets a commercial rating that’s 5% higher than C-3, will that result in 5% more revenue? Probably not. Advertisers are likely to argue that commercial viewing is less valuable the more distant it appears from the original airing. That would be especially true for products such as movie openings and holiday sales (although pure brand advertising should still be almost as valuable a week later).
A stronger argument against C& is that incremental time-shifted commercial viewing is already taken into account by advertisers. The industry’s approach to television viewed outside the home is instructive here. For years the networks pushed Nielsen to measure viewing in the office, in hotels, in bars and in other homes -- and when Nielsen actually did develop an out-of-home measurement, most networks declined to buy it, noting that this viewing was already baked into existing rates. Similarly, it’s hard to imagine that advertisers don’t know that programs with a lot of C3 viewing also get more C7 viewing and already price accordingly.
If the networks really want to de-emphasize overnight ratings, maybe they should stop sending out press releases touting their overnight wins. Given the amount of effort that goes into bragging about overnight performance, a normal person might conclude that the networks think this is the most important metric.
In the meantime, by all means try to get C7 established as the key metric. Just don’t expect it to be a financial panacea.