July 2006 - Editor's Perspective

Has Television Advertising Found an Answer to the DVR?

There’s been a lot of buzz lately about the new metrics for determining TV ad rates. For 65 years, broadcasters have set those rates based on average viewership of television programs. However, the industry may throw out that formula and set the price based on viewership of commercials.

Why the change? For the past year, advertisers and broadcasters have debated about whether programs that are watched during playback on a digital video recorder (DVR) actually count toward viewership.

This change is primed to take place during the 2007 upfront.

Nielsen Media Research recently announced its intention to provide data, beginning this fall, on the number of viewers who are watching commercials during the break.

The decision by the research firm came after the major networks requested it. Yet, critics say there’s a lot to be worked out between advertisers and the broadcasters in terms of how such data will be utilized.

The Associated Press recently reported that the new Nielsen data will not only reveal commercial viewership, but also data of commercials played back on a DVR seven days after a program’s airing.

This has ignited a major debate within the industry. According to a July TVWeek.com article, some media buying agencies, such as Magna Global, say that Nielsen’s data is “not acceptable” as a means for setting ad deals.

Steve Sternberg, EVP of research at Magna Global, told TVWeek.com that in order to “even be considered for use as currency” to determine ad rates, Nielsen’s commercial ratings must be calculated based on live viewers or live viewers incorporating DVR audiences who view a program on the same day as its airing.

AP also reported that advertisers have argued with broadcasters about paying for viewership due to concerns about ad skipping and the fact that Nielsen’s sample is currently comprised of fewer households with DVRs compared to the national average.

However, Nielsen says its sample will increase to reflect the national average of DVR penetration by the end of 2006.

I’m certain most would agree that much needs to be ironed out with regard to how the data will be used to negotiate ad rates. Yet, this will nevertheless, be a historic moment if this goes forward as planned.

What I find interesting about the AP article is that broadcasters, such as CBS, believe that between 40 percent and 50 percent of audiences who playback programs on their DVR watch the commercials rather than skipping them.

What’s more, the networks believe this could be a blessing to top-rated shows that go head-to-head with other competing networks’ highly rated programs, especially if audiences record their shows to be viewed later on.

It will be interesting to see how this all plays out once the first bit of Nielsen data is released. Will the new metrics be as popular as “American Idol?” Or will it simply bomb in the ratings? Stay tuned.

Vitisia Paynich


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