Still Searching for Accurate Audience Measurement

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In thinking about local cable ratings and maximizing
advertising revenue, I have a strong sense that our industry is entering into exciting
times ahead.

For one, for the first time, we have real competition
brewing in the form of ADcom Information Services Inc., which recently signed a long-term
deal with Tele-Communications Inc. (now AT&T Broadband & Internet Services).

ADcom has been operating for the past few years in
Jacksonville, Fla., where it is known for its large household-metered sample and its
single-source database that merges product consumption with household viewing.

And as part of its deal with TCI, ADcom will be
experimenting with new ways of collecting local cable demographic ratings, which have been
the bane of our industry.

Another exciting development has been the recent release by
Nielsen Media Research of side-by-side "PeopleMeter" and local diary ratings.

I can't emphasize enough the significance of Nielsen
distributing such a comparison to the advertising community. Its willingness to do so is
no small symbolic gesture. I think that it means that we'll be seeing local
PeopleMeters (at least in the largest markets) in the next two years.

But perhaps the greatest excitement has come from within
our own industry, and that is the realization that as good as our local ad business is
today, there are billions of dollars that seem to naturally flow to the broadcast
industry, and the only way to redirect those revenues is to establish a valid and reliable
demographic-ratings system.

LOCAL CABLE AD SALES

In the three-year period from 1996 through 1998, local
cable ad revenues have grown at a very impressive rate -- more than 14 percent annually,
on a compounded basis. With the exception of Internet advertising, that's the highest
growth rate of any major medium today.

But consider this: At the national level, where there is a
mutually agreed-upon demographic-ratings system in the form of PeopleMeters, basic cable
has captured a 29 percent share of the $23 billion national-TV marketplace.

At the local level, where we really don't know what
our demographic rating is, our share is 17 percent of a $15 billion pie.

And at the national spot level, where agency buyers insist
on negotiating on demographic cost-per-rating points, our share is a very thin 3 percent
-- that's 3 percent of $11 billion.

CABLE'S IMPACT ON BROADCASTERS

Over the past four seasons, the entire broadcast industry
has surrendered an average of three U.S. household share points per year. Most, if not
all, of that viewing has accrued to basic cable.

Given this seismic shift in viewing -- the greatest
defection of viewers in the history of the television medium -- the question is: What has
the cable industry's impact been on broadcast-TV ad revenues?

There are two answers. Nationally, where the PeopleMeter
has leveled the playing field, the broadcast networks grew at an average annual compounded
rate of 2.4 percent from 1996 through 1998. When you take into account the rate of
inflation, the broadcast nets aren't growing in real dollar terms.

But at the local level, where the paper diary skews
everything, local broadcasters are growing at a rate of more than double that of the
national program providers (more than 5.3 percent).

SHATTERING CONFIDENCE

Our industry 15 years ago sponsored the Cable Audience
Measurement Study. Nielsen conducted the study, which revealed that paper-diary cable
ratings are wrong.

In my view, one of the major disappointments of CAMS was
that it never led to any standard adjustment to the highly biased diary ratings.

For its part, Nielsen created the Cable Audience Profile
Index, or CAP. But today, CAP is just one of several "adjustment" approaches
floating around the industry, and none of them seems to instill much confidence in local
cable ratings. (Maybe because they've never been validated.)

In addition, CAMS didn't address the practical issue
of developing a surrogate measurement for all of those systems that will never have
syndicated ratings because of their size.

Unfortunately, it succeeded in weakening what little
confidence the marketplace had in local cable ratings. A total of 15 years have come and
gone, and that confidence has hardly been restored.

PICK YOUR POISON

At the local-market level, we have either meters, meters
coupled with diaries, or just plain-old diaries. None of these choices is completely
satisfactory.

The household meter is electronic, passive and very
accurate. However, household ratings alone won't cut it with agency personnel who are
accustomed to using demographics.

To arrive at demos, Nielsen merges meters with diaries in
about 45 markets, or it uses the diary alone in more than 160 markets. And when we look at
side-by-side PeopleMeter/local-diary ratings, the demographics come out all wrong.

HOW BAD CAN IT GET?

I mentioned earlier that Nielsen released a comparison of
national PeopleMeter data and local meters and diaries. The study was conducted on behalf
of the Committee on Local Cable Audience Measurement -- a research group under the
auspices of the Cabletelevision Advertising Bureau. The study examined national
PeopleMeters as they naturally "fall" in two Nielsen territories -- the
Northeast and the Pacific.

Together, they represent about 40 percent of U.S. TV
households, or some 1,700-plus PeopleMeters. We compared PeopleMeter audience projections
with local household meters and diaries within these same two territories.

On a total-day (7 a.m. to 1 a.m.) basis, for the most
commonly negotiated demographic -- adults 25 through 54 -- diaries alone understated
basic-cable television by 41 percent.

For the four major broadcast networks, the diary was
remarkably close to the PeopleMeter -- only 2 percent difference.

When we looked at local meters and diaries together, we
received a bit of a nasty jolt. One dearly held assumption was that the meter would wash
away the diary ills. But the meter/diary system understated cable by 28 percent, while
overstating the four broadcast networks by 14 percent.

Just why broadcasters fear local metered measurement is
hard to fathom, based on this latest finding from Nielsen. Equally difficult to understand
is why the local cable industry should embrace local metered measurement with a standard
Nielsen diary wrapped around its neck.

WHERE DO WE GO FROM HERE?

Perhaps the biggest challenge is to convince
local-broadcast stations that diaries are not in their best interests. How this can be
accomplished is far beyond my power to see.

But ultimately, the cable industry doesn't have to
convince broadcasters of anything. What we have to do is to convince ourselves that there
are billions of dollars sitting in the pockets of the broadcast industry, and that they
will stay there until we have an equitable audience-rating system.

Jon Sims is vice president of research for the
Cabletelevision Advertising Bureau.

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