• by David Goetzl  @dgoetzl, February 5, 2007

An influential Wall Street analyst says commercial ratings are less likely to hurt network revenues than rumored worst-case scenarios. In a new report, Merrill Lynch's Jessica Reif Cohen labeled concerns about the potential impact as "overblown."

Commercial ratings aren't likely to be used as currency in the coming upfront, Reif Cohen wrote, but will be phased in over the next year. However, the belief that the data would show a precipitous falloff in viewership during ad breaks "is not as dramatic as many believe."

On a related issue--how to attach value to viewing that occurs via DVRs--Reif Cohen wrote that buyers and sellers both feel an urgency to resolve the issue pre-upfront. She believes the two sides could reach a compromise, in which buyers would be charged for DVR viewing in the two or three days after "live" broadcasts, that is, "live plus two day" and "live plus three day" rating streams.

But she also suggested that the tussle could result in "live plus same day" metrics employed, where advertisers pay for all viewing that occurs in the 24 hours after the broadcast window. The issue isn't likely to be resolved until deep into the spring--perhaps not until the eve of the upfront.

Eventually, commercial ratings that measure how many people view ads when watching via DVRs could render the debate moot.

What impact will commercial ratings have on network revenues? The report said many advertisers already operate under the assumption that their ads don't reach as many people as the programs they run in--so they spend their dollars accordingly. But research shows that viewer migration during commercials is not as large as assumed.

Reif Cohen's report is based on opinions expressed in panels held internally at the Wall Street firm on Jan. 26. Sell-side panelists included David Poltrack, executive vice president-research and planning at CBS, and buy-side representatives Bill Cella, vice chairman at Draft FCB, and David Verklin, CEO Carat Americas.

Commercial ratings could ultimately benefit networks if advertisers pay a premium to learn how many people are actually viewing their spots.

"The increased accountability inherent in commercial ratings could help offset some of the concern about what advertisers are actually getting when they purchase television advertising, improving the medium's competitive position vis-a-vis the Internet, which has long had an advantage with respect to measurability," Reif Cohen wrote.

As for cable networks, panelists believe a decline in commercial ratings compared to program ratings "is often, but not always greater for cable networks." There are some issues in tracking national spots on cable that broadcasters don't face, which causes some alarm for the CAB when adopting commercial ratings as a metric.