SMART, Nielsen Race Down to the Wire

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The race is on to determine whether SMART will become a
bona fide national-ratings challenger to Nielsen Media Research.

But the heat is on, as well. Before Statistical Research
Inc.'s SMART (Systems for Measuring and Reporting Television) versus Nielsen can become a
horse race, there may be a race against the clock.

That sense of urgency arose in early November, after SRI
president Gale Metzger told the Association of National Advertisers' television committee
that SMART could be shut down if prospective clients' letters of intent weren't converted
to firm financial commitments by Jan. 1.

Funding for the SMART Philadelphia laboratory test will run
out at year's end, but, Metzger said, "We've known all along that the lab wouldn't go
on forever."

Metzger has since backed off from that Jan. 1 stance,
saying recently that the much-publicized deadline "is not a drop-dead date. We're
making good progress [with the 19 companies that have signed letters of intent]. We're
going to find a way to do this," even if talks stretch beyond that point.

Although many industry observers felt all along that the
ultimatum was something of a bargaining strategy, meant to hasten commitments, others
believe that there's a need to set a cutoff date because the later the decision, the later
the start-up.

Metzger reiterated that at whatever point commitments are
finalized, SRI would need a two-year rollout span to take SMART national. If the Jan. 1
date were met, SMART could be operational in 2001, he said, adding that the rollout
process would cost more than $100 million.

SRI's blueprint, once it converts its letters into
"real dollars," calls for SMART to be operational two years out "at an
absolute minimum," said Audrey Steele, senior vice president and director of
strategic-media resources at Zenith Media Services. (Steele will join Fox Network as vice
president of research and marketing Dec. 4.)

SMART SKEPTCISM

Of course, SRI's plans assume that everything will go
smoothly. Jean Pool, executive vice president and director of North American media
services at J. Walter Thompson Co., feels that given its current situation, "SMART is
in danger." She cited SRI's lack of national experience, and she questioned whether
SRI, which has been tabulating Philadelphia test data from a 300-home sample, can now
mount a 5,000-home panel for a national service that quickly.

Nor does Pool see much difference between the two
archrivals. She dismissed SMART's methodology as "just as antiquated as
Nielsen's."

Moreover, other Madison Avenue sources recalled that SRI
had to postpone sending clients SMART reports from even that small-scale Philadelphia test
until last spring, after a five-month delay due to technical difficulties.

"[The Jan. 1 date] certainly could be a bargaining
ploy," said Tom Winner, director of

broadcast media at Wieden & Kennedy, "but they
seem to be in trouble."

That's not surprising, he added, since mounting a
national-ratings service is a $100 million-plus proposition. (Nielsen officials have
estimated that it could cost SRI up to $120 million to take SMART national, followed by
another $80 million-plus in yearly operating costs.)

"[SRI] needs the money," said Steve Grubbs,
executive vice president at BBDO Worldwide. "The key is that they need the support of
the TV networks and the cable community, and I'm not sure if they have it."

Grubbs added that there have been rumblings lately that CBS
and Fox Network are "reluctant" to pour more money into SMART.

The "Big Four" TV networks each have already
committed in recent weeks to four-year, $40 million Nielsen renewals. In addition, ABC,
CBS and NBC were said to have put a combined $40 million into SMART's Philadelphia
laboratory test before Fox signed on in the summer of 1997.

FINANCING?

Instead of shelling out millions of dollars more, agency
sources said, those networks are now urging SRI to seek financial backing from elsewhere
-- from outside investors, in some form.

Metzger replied, "All of the TV networks support this
on the research side. It's just that now, it's becoming a research and a CFO [chief
financial officer] kind of question."

As for reports that the networks -- particularly CBS and
Fox -- have urged SRI to seek financial backing from more than just its potential
subscribers, Metzger said, "There's been some concern all along on how the business
gets funded. Everyone wants to look at options," which, he added, is not surprising
at this stage.

"It's a normal thing that happens" in business.
SRI's pursuit of a strategic partner and funding from capital markets "remain an
option," he said.

One TV-industry source recalled that SRI once before
"went to capital markets [for funding] with a business plan, but it backed away,
because it would have had to raise its prices significantly [compared with prices if SMART
were underwritten by the industry]."

This executive felt, "If they were going to get the
money, they'd have gotten it then. SRI had more momentum a year ago, when the networks
were really beating up on Nielsen."

In early November, Metzger announced that Kraft Foods, The
Walt Disney Co.'s Buena Vista Television, Young & Rubicam's The Media Edge, Saatchi
& Saatchi Advertising and Zenith Media had signed letters of intent for the SMART
national-ratings service. They joined 14 others -- among them Procter & Gamble Co.,
the Big Four TV networks, the Disney-owned ESPN networks (the first cable company to ink a
letter of intent) and major ad agencies BBDO Worldwide, Grey Worldwide, McCann-Erickson
Worldwide Advertising, TN Media, Leo Burnett USA's Starcom Media Services and MacManus
Group's TeleVest.

Those letters, SRI's announcement said, "affirm their
confidence in SRI's [SMART] business plan … and their interest in moving to contract
discussions."

TWO-HORSE RACE?

Through the years, Nielsen has been a whipping boy for
various cable, broadcast-TV, ad-agency and client executives for its shortcomings, as well
as for its legendary reluctance to respond to customer needs. Nielsen has recently moved
to improve its methods and to change its attitude in some ways -- largely due to the
threat of SMART, as Grubbs and other agency executives have maintained in the past.

But in a reversal of fortune, in recent weeks, Nielsen has
seemingly come from behind to make it a much tougher horse race for SMART by signing a
spate of contract renewals.

Even so, some agency executives hope that this will remain
a two-horse race. As Steele observed, "Clients will still need both services for at
least a year [in order] to have side-by-side comparisons" of ratings data.

Bob Igiel, executive vice president of Y&R and its
media division, The Media Edge, felt much the same way. Y&R and Media Edge have signed
up for both services during November, but he's unsure whether there is enough money out
there to support the two. And yet, he noted, "It's very hard to imagine not running
some parallel numbers."

When asked what she considered SMART's key benefits, Beth
Gordon, president of Media Edge, cited "custom demographic breaks on-demand, software
that you can use on the first try and no special analysis fees."

Still, Igiel warned, "It behooves SMART to be smart
about what they charge."

Winner felt that "there's probably not enough
money" to support both. "As much as we all carp about Nielsen and the need for
an alternative, Nielsen is still the best that we've got," he said. "And it'd be
hard to walk away."

"[Metzger] is facing the classic problem," said
Alec Gerster, chairman of Grey's new MediaCom media spinoff.

"You'd love to think that there's room for
competition, but first, people have to put their money where their mouth is."

Nielsen's recent rash of contract-renewal announcements --
including the Big Four -- struck Grubbs as "a PR [public-relations] effort on their
part. They tend to be complacent and react only when threatened."

ANOTHER PLAYER

But Metzger didn't see Nielsen's rash of renewals as
hurting SMART's survival chances.

"For the most part, those [deals] were part of normal
business," he said, with Nielsen's Time Warner Inc. deal being the only unusually
long-term pact, at seven years. "I expect [current Nielsen clients] to continue to be
Nielsen subscribers," even if they sign with SMART.

Apparently in the minority, Ira Sussman, senior vice
president and director of national research at Western International Media Corp., wasn't
convinced that there's a crying need for a second national-ratings service.

"Nielsen has come a long way [in national measurement]
in the past few years," Sussman said. In his view, Nielsen's problem lies elsewhere.
"It needs to improve its local service. At the local level, the diary is a poor
tool," he complained.

Nielsen is also facing some competitive pressure on the
local-ratings front from ADcom Information Services Inc. That upstart researcher -- which
has been tabulating data for MediaOne in Jacksonville, Fla., for about two years -- got
two major booster shots earlier this fall. One came when Tele-Communications Inc. signed
on to get local ratings in San Francisco and Dallas.

And ADcom's plans to roll out its
local-cable-ratings-measurement service across the top 30 markets got a big assist
recently when WPP Group PLC bought a major stake in the company in late September. Ad
agencies Ogilvy & Mather Worldwide and J. Walter Thompson Co. and researcher Kantar
Group are under the WPP umbrella.

Sussman applauded Nielsen's active or planned tests of such
new technologies as its Active/Passive Meter and its proposed use of "People
Meters" for local ratings.

There have also been published reports in November
indicating that many broadcast-TV-station research directors are overcoming their longtime
reluctance to switch to People Meters from diaries.

Still, Nielsen's plan to keep track of viewing in the
multichannel world of digital is not without its own snags. By mid-November, the
researcher had installed only one-half of its test households, and Nielsen spokesman Jack
Loftus could not say when the first data printouts would start coming from that test.

"We're focusing on doing it right," he added.

Nielsen had originally announced that its 500 homes would
be installed during the first quarter of 1998, and that initial data were expected from
its A/P Meter test by the third quarter.

During this test, spanning more than one-dozen states,
one-half of the participating homes will have the A/P Meter, and the rest will have both
the new meter and the current metering system, for comparison purposes. The new meter
technology can identify the source of encoded programs and commercials as broadcast TV,
cable, VCR, satellite, video game or computer (Internet).

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