• by Joe Mandese  @mp_joemandese, March 28, 2008

Nielsen Thursday began informing clients that it has been understating household coverage estimates for about 20 television networks since at least October 2007, a move that has overstated their coverage area ratings during the period, and potentially inflated advertising buys by millions of dollars.

Nielsen did not disclose which networks were affected by the glitch or precisely how much it overstated their coverage area ratings, but said it was caused by the methods it has used to calculate their coverage on satellite TV operators DirecTV and EchoStar, and that the problem was limited to the 26% of U.S. TV households that receive TV via the DBS providers.

It was unclear at press time what the potential economic fallout of the disclosure might be. Most national networks sell and guaranteed their advertising buys to advertisers and agencies on the basis of their national ratings, which would not be compromised by the coverage area ratings glitch. But it is common for smaller, less broadly distributed cable networks to negotiate advertising deals on the basis of coverage are ratings, which represents the percentage of households that actually receive those channels, which were actually tuned to their programming.

"While we know there has been some understatement in the coverage areas since at least last October, we cannot determine specific impacts going back to that time," Nielsen said in a statement distributed to clients on Thursday. "Once the data are corrected, it will give an indication of total impact."

The advisory said the problem was caused by two factors:

1) "The process we use to determine the available line-ups in most sample homes with DBS service involved tracking the various programming packages and channel lineups offered by DirecTV and EchoStar. Given the rapid growth and the increase in the number of packages and channels available, this process no longer provides the necessary level of reliability to accurately define household channel receivability, and the package templates are not consistent enough to make broad receivability decisions.

2) "Our field procedures, which require manual assessment of channels received, were not followed in all cases in DBS homes."

Nielsen said it has already begun addressing the problem, and has taken steps to ensure it doesn't happen again, including reinforcing its field procedures, and correcting its coverage estimates for the satellite households impacted by the glitch. Nielsen said the corrected data would be reflected in Nielsen's April 2008 universe estimates.

Nielsen said it also is conducting in-home visits of another 1,700 households affected by the problem, to ensure they are accurately reporting the networks they receive. Nielsen said that process would be completed within 60 days and the results would be reflected in its May and June universe estimates.