• by Gary Holmes , December 13, 2011

As I discussed in last week’s column, despite numerous technological and methodological drawbacks, the idea of using set-top boxes to derive “currency” ratings continues to be popular in the television industry.  Specifically I opined that set-top-box measurement would be less accurate on a national level than Nielsen’s National People Meter sample and predicted that set-top boxes would not be used to develop national ratings for a long time, if ever.

This week I’m looking at the prospect of using set-top boxes to measure local markets, where the need for a new kind of measurement is more obvious and urgent.

Among the 210 local markets that Nielsen measures, only 25 are served by Local People Meters (the same technology that’s used for national ratings).  Of the remaining markets, 31are measured by a combination of set meters and diaries, while the remaining 159 are measured by paper diaries alone.

For all the problems with set-top-box measurement, even a flawed electronic service would be better than one based on diaries, and local markets are where the measurement services are concentrating their set-top-box efforts.  Rentrak has signed a number of local TV stations to its TV Essentials service, while Nielsen successfully completed “proof of concept” tests that showed it could functionally blend set-top-box data with samples in local markets.

In other words, it is technologically possible that Nielsen or another service could offer true set-top-box measurement in local markets soon. But there are two major obstacles: industry acceptance and access to data.

In terms of industry acceptance, the loudest voices now seem to support set-top-box measurement, lulling outside observers into thinking there is a consensus on the issue.  But there are winners and losers whenever there’s a measurement change, and those who feel disadvantaged scream loud and long.  Witness the problems Nielsen experienced installing Local People Meters in the largest local markets: it ended up being accused of racism and hauled before Congress twice.  More recently, it found itself in a firestorm when it tried to make “live-plus-same-day” ratings the primary local currency.

The fractured nature of the local market makes it particularly difficult to effect changes there.  In a challenging economic environment, a myriad of station groups, local agencies, and trade associations all jockey for the slightest advantage.  And frankly, there’s a lot more short-term thinking at the local level, where the focus is on the next sweeps period and little effort is put into long-term structural changes.     

The second obstacle to set-top box measurement is access to data. No measurement company --  Nielsen, Rentrak or anyone else -- can roll out a ratings service to all the markets now served by diaries unless they have a national footprint of set-top boxes, enough to cover every single market. And to build a national footprint, they would need to sign almost every major cable and satellite company to get enough usable boxes to cover those markets.  

Measurement companies have been negotiating for years with the MSOs, satellite companies and telecos to get access to set-top boxes, and after all this time have only reached a few deals.  The difficulties that Project Canoe faces shows how hard it is to get the cable companies to work together on anything.

But even if all the cable companies did commit to working on a set-top-box service, does Nielsen really want its local measurement business to be completely vulnerable to the evolving business strategies of the MSO? 

For Nielsen, having access to set-top boxes in all markets would be a matter of life and death, but for the MSOs, licensing set-top boxes to Nielsen would be small potatoes.   Once it had Nielsen under its thumb, what would prevent one or more set-top box owners from deciding not to renew a licensing agreement, or ask for considerably more money? Every year it seems there is another retransmission battle between an MSO and a network over content fees. A Nielsen that built its whole local business strategy around using set-top boxes and had to renegotiate deals with no leverage of its own would be constantly at the tender mercies of the set-top box owners.

For its part, Nielsen believes that technological advances have given the MSOs an increased ability and incentive to share set-top-box data.  Nielsen also believes cable companies won’t pull the plug on access deals since cable networks receive better ratings with electronic measurement. (As someone whose cable company once held the Academy Awards hostage during a retransmission dispute, however, I am skeptical that the MSOs won’t play hardball to get a short-term gain.)

Nielsen also says it is developing a lightweight meter that could deployed in a small local sample and used to supplement set-top-box data. This meter will be tested in late 2012.  Of course the beauty of this meter is that it could be used as a backup in a market if a MSO did withdraw set-top-box data.

Nielsen’s also investigating new kids of diaries to get at demographic data.  These include computer and smartphone-based diaries, which would be more user-friendly than paper diaries.

Clearly someone needs to develop an electric ratings system for local markets, and it’s encouraging that Nielsen is investigating new technologies.  But instead of pursuing set-top-boxes measurement, which relies on the cooperation of the MSOs and satellite companies, I think it would be better to leapfrog ahead to new technologies (including apps) that allow Nielsen to do so independently.

Given how long it takes for new measurement ideas to obtain industry acceptance, set-top-box measurement is not around the corner.  (It took almost five years for Nielsen to launch its Extended Screen service, which added online program viewing into the national ratings.)  The industry and the measurement companies should think creatively about different solutions.  Otherwise, they’ll still be using diaries a decade from now.