Measuring Up - Multichannel

Measuring Up

In Nielsen's Shadow, Rival Rentrak Builds Momentum
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Rentrak vice chairman and CEO Bill Livek has one person to thank for the moment that put the fledgling Nielsen competitor on the map: Barack Obama.

It was the 2012 presidential campaign, after all, in which President Obama’s handlers selectively purchased advertising on networks based primarily on set-top box data, getting the message to young voters by buying time on shows not traditionally associated with that demographic.

“Obama put us on the map,” Livek said. “They [the Obama campaign] bought TV very, very differently. They bought television shows that you wouldn’t buy if you seek an 18-plus audience or a voting-age audience.

“Here they were buying programming like The Andy Griffith Show on TV Land, inventory that was completely mispriced for political,” he recalled. “That story replicates itself time and time again in other verticals.”

Rentrak, a 34-year-old company based in Portland, Ore., had already signed a few big clients, but Obama’s win insured a bluechip list of TV giants, including NBC, CBS, Fox and ABC owned-and-operated stations across the country.

And the list keeps growing. Last week, Rentrak struck two deals with units of ad behemoth WPP: An agreement to purchase the U.S.-based TV assets of its Kantar Media division, as well as a deal with ad buyer GroupM to provide local and national data tools. The deals come literally on the heels of an agreement with Zenith Media, a unit of communications behemoth Publicis Groupe, which announced it will be testing Rentrak data in several marekts as the basis for planning and buying local ads for Zenith’s clients. With those deals, Rentrak says it has contracts with all of the largest ad agency holding companies.

The Kantar Media deal, valued at about $98 million in Rentrak stock, will give the company a stronger presence in local and national TV measurement. With GroupM, Rentrak gains a client with about $105 billion in global ad billings that also shapes the relationship between TV networks and advertisers — GroupM led the push for C-plus-3 ratings, now the industry standard, in 2007.

At Rentrak’s Oct. 9 Investor Day in New York, GroupM global chairman Irwin Gotlieb hinted that the Rentrak deal could signal further changes in the overall industry.

Speaking via satellite from San Francisco, Gotlieb said that the TV landscape has changed dramatically over the past 10 to 20 years, yet viewership is measured using technology developed 50 to 60 years ago.

“If we’re going to have addressable TV, if we’re going to understand the intersection between media consumption and product consumption, if we’re going to have highly refined targeting, we have to move from sample methodology to census-based data,” Gotlieb said. “There just isn’t a choice in the matter.”

RAMPING UP RATINGS

With these deals and more, Rentrak is on the cusp of moving its TV ratings business to the next level. The company estimates that its TV-ratings business, which in 2009 accounted for less than $1 million in revenue, will top $56 million in fiscal 2015, an 80% increase from fiscal 2014’s $31 million in sales and growing the number of TV stations and cable networks it calls clients exponentially.

Wall Street is taking notice. Rentrak stock, once thought primarily as a takeover play (largely by bigger Nielsen), is now being bought on fundamentals and potential for future organic growth. The shares, which traded at about $72.07 per share on Oct. 9, are up 90% since the beginning of the year and have more than quadrupled from about $17 each five years ago.

New customers and new products on the horizon — including a planned overnight-ratings offering that would be a direct challenge to Nielsen — are expected to fuel that growth.

Rentrak initially made its mark by offering movie box-office results and video-on-demand viewership data, but its TV-measurement business will be the growth driver for the foreseeable future, Needham & Co. media analyst Laura Martin predicted.

Rentrak has added 117 television stations as clients in the last four quarters, and represents about 60 station groups with a total of 350 broadcast properties. Roughly 90 cable networks use Rentrak data — mostly channels too small to be rated by Nielsen — but that is about to change.

Rentrak could grow its cable client list to about 400 channels in the near future, Martin estimated, including some of the top 100 channels currently rated by Nielsen. And one of Rentrak’s biggest advantages — its services are priced at about 25% of Nielsen’s rate card — is helping drive growth, she said. About 100 of Rentrak’s TV-station clients have “stopped paying Nielsen entirely,” Martin estimated.

Rentrak’s emergence also is a signal of how much the media measurement game has changed in the past several years. Once the exclusive domain of Nielsen, whose overnight, age and gender ratings data have determined which shows live or die since the beginning of television, advertisers are seeking more detailed information on who is watching.

‘BIG DATA’ NEEDS

The advent of TV Everywhere, online and mobile video and social media has fueled the rising need for big data — demographics, household income and buying habits gleaned from millions of set-top boxes and other sources.

Unlike Nielsen, which gathers data from a sample of about 20,000 to 25,000 households around the country handpicked for the privilege, Rentrak gets its info from 26 million homes, representing about 60 million TV sets, from satellite TV providers DirecTV and Dish Network, telco AT&T and such cable operators as Charter Communications and Cox Communications.

Rentrak then takes that information, filters, crunches and extrapolates it, and combines it with such data points as household income and retail buying habits to present a total profile to clients. So while some advertisers may be content on getting data on whether a show is being watched by a key male or female age demographic, Rentrak customers are shown which shows are being watched by households with incomes over $200,000 annually who have bought a BMW in the past five years. It is a level of granularity that is becoming more and more commonplace.

While Nielsen’s data sample is smaller, it is also more representative, according to the company. And through its Buy and Watch segments, Nielsen too can provide clients — for an additional cost — with more detailed buying habit and income information.

Nielsen also has embraced social media: It tracks mobile TV viewing via a relationship with Facebook and TV-related conversations through a partnership with Twitter.

“Whether its social impact, over the top, over the air — because 10% of the country watches an over-the-air signal — or mobile or a tablet, cable or satellite, we measure it all,” Nielsen senior vice president of local media product leadership Farshad Family said.

ROOM FOR TWO?

While the two companies are obviously targeting the same universe of customers, they both believe they can happily coexist, perhaps even cooperate.

“The important question is where is this [measurement] headed,” said Nielsen executive vice president and managing director of local media Matt O’Grady. “Digital viewing and traditional linear viewing of video and TV are colliding, and so the measurement is colliding as well between big data and panels.”

He said Nielsen continues to work with big data and that mobile and tablet measurement is dependent upon effective use of big data.

But O’Grady stressed that big data is not a replacement for panel data, which gives the age and sex of a viewer. “There will always be a gold-standard high quality panel to use in conjunction with a big data source,” he said.

In 2011, Viacom had a highly publicized ratings spat with Nielsen, giving Rentrak the chance to show how its set-top data could be dramatically different from Nielsen’s panel method. “Not necessarily a watershed event, but it was supportive of the need for two [measurement companies],” Livek said.

Nielsen is still by far the world leader in providing TV-measurement data and it too offers clients a treasure trove of demographic, household and other data that sets the tone for the $70 billion U.S. TV ad market.

And though Rentrak is moving the measurement conversation toward more granular data, it’s still a long way from ever surpassing the TV-ratings champ.

With about $5.7 billion in revenue in fiscal 2013, Nielsen also dwarfs Rentrak, with fiscal 2014 sales of $75.6 million, financially. Even with the exponential growth rates expected by Wunderlich Securities media analyst Matt Harrigan over the next five years — he estimates 2021 sales of $475.2 million — Rentrak still would be less than one-tenth the size of Nielsen.

TRACKING TIMESHIFTING

Nielsen is grappling with shifting viewing habits and advertisers who are looking for ratings that reflect the propensity of most TV watchers to time-shift. Already the industry has adopted a C-plus-3 rating benchmark, which tracks viewership for the three days after a program originally airs.

As so-called “appointment TV” is being pushed further aside by DVRs, tablets, computers and smartphones, other networks and broadcasters have lobbied for a C-plus-7 rating -- which Nielsen also provides -- that would track viewership for seven days after a program originally airs.

While Nielsen argues that appointment TV is certainly not dead — according to its research, the vast majority of television viewing is still done live — it is not ignoring the changing landscape. The company has launched its own mobile measurement product which measures viewership on tablets and smartphones and is readying an approach to track viewership outside of the home — on tablets, computers, mobile devices and even in restaurants and bars — using portable people meters, or devices that hook onto a respondents belt or purse and track their TV viewing.

Nielsen began testing the devices — used for about a decade by Arbitron (now Nielsen Audio) to track radio listeners — for gauging out-of-home TV viewership in the Chicago market earlier this year, with encouraging results. It is currently figuring out its plans to move forward with the service in the near future.

“The market is headed to a place where the advertisers want to understand their audiences in a much more detailed, nuanced way,” O’Grady said. Nielsen this year introduced Local Buyer Reach, which includes purchasing information from 40 different categories including automotive, retail shopping and grocery sales. It has received strong interest, he said.

But Nielsen is still hampered by its sample approach, Harrigan said. “For the local markets, it’s just absurdly small.”

THINKING LOCALLY

“In Portland, there are probably 800 [Nielsen] meters, where Rentrak would literally have hundreds of thousands of TVs that we look at. Of those 800 people, if 25 go on vacation or are not watching the news, you will see a big dip in the ratings,” Rentrak corporate president Cathy Hetzel said. “We don’t have a ratings bounce because we have such a massive and stable database.”

Zenith Media chief data officer Rob Jayson said while the agency will continue to use Nielsen data in some markets; the intention is to eventually move to Rentrak data exclusively and is testing using the Rentrak data in several markets. While he said that could pose some risk, “the upside for this is immense. The downside, which is sticking with a broken system that we don’t believe serves our clients’ interest, is also big.”

Zenith Media is part of Zenith Optimedia, which has more than 7,400 employees in 262 offices across 74 countries. Parent Publicis Groupe is the world’s third-largest communications group, and the world’s secondlargest media counsel and buying group.

“The integration of data is definitely where the whole media industry is going, the ability to join the dots together and see what’s working,” Jayson said. “You just can’t do that under a small panel size or a diary system.”

Rentrak had long ago carved out a niche providing data on movie-studio box office and video-on-demand viewership for cable operators. But Livek, an industry veteran who took the helm in 2009, saw an even bigger opportunity — using the census-based data that Rentrak gleaned from set-top boxes and merging it with the demographic, household income and purchasing data to provide brand owners and advertisers with the in-depth information on buying habits they’ve been looking for.

“Most people thought you could never compete with Nielsen,” Livek said. “I actually felt that we could absolutely compete with Nielsen without competing with them at all, and that was in inventing a new category.”

That led to additional business with TV-station groups, as well as other smaller networks and ad agencies that use Rentrak information to track make-goods when shows don’t provide the agreed upon audience for advertisers.

In addition to its existing products in the TV Everywhere and online video arena, Rentrak also is developing an overnight product similar to Nielsen’s that could be released to the local market next year.

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