• by Joe Mandese , August 6, 2009

If the TV industry were to convert to digital set-top data as the basis of advertising deals, it theoretically would shift billions of dollars in TV advertising revenues among top shows, networks and distribution platforms, according to an analysis being published today by a top Nielsen executive.

"This is not merely an academic discussion. These decisions would have major financial implications for ad buyers and sellers," Manish Bhatia, the Nielsen executive in charge with developing the research firm's digital set-top initiatives, writes in a white paper published on the Nielsen Wire. "The truth is that viewers of different viewing platforms (broadcast, cable or satellite) watch different shows, so there will be winners and losers if ratings are based on cable or satellite-based [set-top box] data instead of panels."

How profound would the impact be? According to Bhatia's analysis, which is derived from so-called "cut-back samples" representing satellite and digital cable TV only homes in its national people meter TV ratings sample, the shifts would generate $3.1 billion in incremental advertising revenues for cable TV networks, but would cost the broadcast networks an estimated $1.1 billion.

The analysis is theoretical, because the data is extrapolated from Nielsen's current national TV ratings sample and is not based on actual digital set-top data, and because shifts in advertising market shares may not necessarily directly follow shifts in TV audience share.

That said, the analysis is one of the first to put some real economic dimensions on the potential impact of a methodological shift to set-top data measurement. Put in he most common terms, it would dramatically shift the fortunes of some of America's favorite TV programs too.

Based on 2008-09 season data, ratings for Fox's "American Idol" would have done 12% better if they were derived from digital cable homes, and 7% better from satellite TV homes.

Ratings for ABC's "Desperate Housewives," meanwhile would have been 12% higher in digital cable homes, but would have declined 6.5% in satellite homes.

Overall, Fox would do 4% better, but CBS would lose 6% of its audience based on set-top ratings from digital cable households.

Bhatia cautions that the industry still is a long way from making a shift to digital set-top data as the "currency" of the TV advertising marketplace, and cites a number of pitfalls, including the fact that the data streams currently do not report persons-level viewing, and that as big as the digital set-top universe is, it still does not represent the entire U.S. TV population.

However, Bhatia also cites numerous opportunities for far more granular analysis of TV viewing patterns than are possible with Nielsen's current panel-based measurement system, and he says the company is "extremely excited about extending the insights it currently provides the industry.

"We view [set-top box] data as an extremely valuable source of information that, once adjusted for inaccuracies and gaps, can provide deeper insights on TV viewing, advertising delivery and effectiveness."

While Nielsen accelerates its own research in these areas, at least two rival services utilizing digital set-top data - one from TNS Research and another from TRA - have been commercialized in the U.S. marketplace.