• by Joe Mandese  @mp_joemandese, March 4, 2004

In a surprise move, Nielsen plans to begin including time-shifted viewing of TV programming via digital video recorders (DVRs) next year - a year ahead of original plans - due to the faster-than-expected deployment of the technology by cable and satellite TV operators. The move represents the most fundamental change in how Nielsen defines "viewing" of TV programming, since it established reporting rules for videocassette recorders in the 1980s.

The move is one of a host of changes Nielsen has begun and will continue to make in how it collects, interprets and reports TV ratings estimates, which are the underlying currency of the $60 billion U.S. TV advertising marketplace. While many of the moves are contentious and not without consequences, Nielsen has said it is making them to stay on top of a rapid changes in TV technology and viewing.

Nielsen had originally planned to begin incorporating DVR households into its TV ratings samples in 2006, but is accelerating the process "because the business and technology of television are changing much too quickly, and we have to keep apace of it," said Susan Whiting, president-CEO of Nielsen Media Research, in a letter distributed to clients on Wednesday.

To date, Nielsen had been keeping DVR households out of its samples, classifying them as "technically difficult," but a recent breakthrough with a new TV metering system enabled it to accelerate the timetable. While DVRs are only in about 3 percent to 4 percent of U.S. TV homes, according to Nielsen estimates, the penetration is much higher in some major TV markets, and the aggressive marketing of DVR services by cable and satellite operators has accelerated the penetration curve.

"The alternative is to delay, to continue bypassing greater numbers of sample homes, to do more analyses, more testing," said Whiting, noting that the ratings change is not without "risks." The risks are mainly to the continuity of TV ratings patterns and continuity and to the Nielsen clients who depend on them of TV programming, scheduling and advertising sales decisions, not to Nielsen itself, which has solidified itself as the sole provider of TV ratings estimates both nationally and locally. In fact, the only potential threat to Nielsen's TV ratings dominance in the U.S. is Arbitron's promising new portable people meter technology, which Nielsen retains an exclusive license to control for TV.

While Nielsen did not make this decision in a vacuum - it has been consulting with various client groups on the matter for two years - Wednesday's announcement to speed things came as a surprise, especially since many contentious issues still surround how the DVR households should be measured and, perhaps, more importantly, how the ratings data from those homes should be reported.

Historically, Nielsen had credited viewing to VCR-recorded programming when it was taped, not when it was played back. Some critics argued that inflates the true nature of TV viewing, since much of the VCR-recorded programming is never actually played back, or is played so far after the originally program date that it was no longer relevant from an advertising marketplace point-of-view.

But since all programming is essentially "recorded" via DVRs, Nielsen had to establish new rules for crediting viewing that count only programming that is actually played back or viewed "live." Live viewing of programming in DVR households will be reported as part of Nielsen's regular daily and overnight ratings reports. The "playback" of DVR recorded programming will be collected for seven days and included in a "re-release" of final set of aggregated ratings. Playbacks that occur seven days beyond their original recording will not be factored into Nielsen's ratings at all.

The seven-day aggregation is not an arbitrary number but comes from an industry consensus generated through Nielsen's client meetings. Nielsen said it would continue to review that seven-day window over time and would compare it to data that will be generated from a separate ratings service Nielsen recently announced with TiVo that will specifically generate viewing data on time-shifting in a panel of TiVo households.

Nielsen is also considering a shorter window of time-shifted ratings aggregation for local TV markets, because a number of important advertising categories - automotive and movies, for example - may focus only on key days of the week and have campaign strategies where ratings immediacy is critical.

Initially, Nielsen will not factor data on so-called "trick modes" of DVR viewing - fast-forwarding, pausing and rewinding - into its ratings, at least not during the first phase of reporting. This data is likely to be even more contentious than simple live or playback viewing, because it would also reveal patterns of commercial-skipping.

Nielsen said none of these changes would affect how it handles VCRs. Videotaped recordings will continue to be treated as a component of "live" viewing.

Even so, the changes in Nielsen's reporting rules could dramatically alter ratings for some heavily recorded programming that may never actually get played back. Daytime network soap operas are among the most heavily recorded genres of programming.

Nielsen said the DVR ratings will be deployed in two waves: local metered markets will incorporate them in April 2005, followed by national and local people meter services in July 2005. Nielsen said it is evaluating options to add a DVR time-shifted viewing component to its diary ratings markets.

Nielsen said the acceleration was made possible by a breakthrough with its new A/P meters, a system that originally was set to be deployed in July of this year, but which is being held back to incorporate the new DVR metering features. The A/P meters were designed specifically to measure TV programming in a digital transmission environment and require programmers to insert digital codes as part of the process.

Another big change Nielsen had to determine was how to "prompt" people meter panelists in DVR households. In non-DVR households, Nielsen simply prompts - flashes a light on its meters prompting panelists to reconfirm their presence - every time a channel is changed. But since DVRs operate in more of a "channel-less" environment, Nielsen plans to utilize a time-based prompt, meaning they will prompt people in the DVR homes to reconfirm their viewing after a specified duration of time. Nielsen executives have not yet determined how long that should be.