Media economy
Deal: Live + 3 and commercial ratings
By Kevin Downey
May 14, 2007, 07:24

The big conundrum going into this year’s upfront market has been over what role two new sets of ratings data would play in the pricing of TV ad time for the coming broadcast season: ratings for shows watched after their initial live airing and ratings for the actual minutes in a given hour when ads run.

Would they play any role this upfront? Many thought the entire issue would be kicked to next year's upfront.

The conundrum has been resolved.

Late last week the broadcast networks and major media buying agencies agreed to set pricing for next year’s broadcast season using commercial ratings and live-plus-three-day ratings, or shows viewed within three days of their initial broadcast.

The new currency for upfront negotiations meets the desire among buyers for pricing based on actual ratings for the ad periods, which are lower than for shows, and those of the networks, which have seen an ever-increasing number of viewers go uncounted as more and more use TiVos and other delayed viewing devices to watch shows at a later date. Some shows see audience gains of as much as 2 million viewers when delayed viewing is included.

The existing system only counts viewers who see the show live, as it airs.

In reaching their agreement, negotiators reasoned that the lower ratings during the commercial breaks would be offset by the increase in the number of delayed viewers, leaving the networks and buyers negotiating over inventory of about the same size as under the old currency.

The big media buying agencies believed to have joined in the deal include MediaVest, Magna Global and Mediaedge:cia, among others, but none has confirmed participation.

Mid-size and smaller agencies, which are not part of the deal, will negotiate on the older currency, ratings for actual shows and live-only. The new data requires advanced computer systems for analysis, beyond the capacities of all but the largest buying shops.

The networks will have the most to gain for shows airing in primetime and daytime, two areas in which there's a large share of delayed viewing paired with high retention levels during commercial breaks. Syndicated television will benefit because of high viewer retention.

Cable networks and broadcast’s late-night programs will take the biggest hits because of lower retention rates and less delayed viewing compared to network primetime. Cable loses about 10 percent of viewers during commercials and there's far less recording of shows for later viewing as compared to network primetime.

Similarly, the broadcast networks’ late-night shows, like NBC’s “Tonight Show with Jay Leno” and CBS’s “Late Show with David Letterman,” lose 10 percent or more of program ratings with commercial ratings with virtually no time-shifted viewing to make up for it.

Up until late Friday it seemed like this year’s $24 billion upfront would be a repeat of 2006, clouded over by the delayed viewing and commercial ratings issues. Delayed viewing data was first released last year by Nielsen Media Research. Commercial ratings first will be available later this month. Last year’s upfront came to a screeching halt when buyers and sellers could not come to terms on Nielsen’s DVR-recorded ratings.

Though reached late last week, neither the agencies nor the networks have formally announced their agreement on the new upfront currency. Word of the deal was leaked to Media Life last week and several major media buying agencies confirmed that the new currencies would be used in most of their deals this upfront.

They note that smaller agencies that don’t have the computer systems or personnel to crunch the data will probably stick with live-only ratings this year.

The cable TV networks, with nothing to gain from the new currency, will probably look to hold out another year. But by next year's upfront, the two new currency will be fully in use across broadcast, cable and syndication.

The broadcast networks were leading the push for live-plus-three-day ACMRs, and understandably.

Network primetime loses about 5 percent of its program ratings in the 18-49 demographic during commercial breaks, according to a MediaVest analysis of fourth-quarter Nielsen ratings. But when time-shifted viewers are factored back in, it all but makes up for the declines.

Network daytime programs will actually do better with the new currency than the live-only ratings because the falloff in ratings from programs to commercials is only 1 percent, which is more than made up for with time-shifted viewing.

Syndicated TV should fare well with the new currency. Magna Global recently reported that syndicated programs are mostly viewed live, not time-shifted, and syndicated TV outperforms both network and cable TV in holding onto viewers during commercial breaks.

But all that said, this year's agreement is hardly the last when it comes to currency, and there will almost certainly be new disagreements in coming years.

Network negotiators aren’t completely satisfied with average-commercial-minute ratings because they include all spots that air during a show as an average. They'd like to see ratings for the individual ad pods. Buyers want ratings for specific commercials or commercial pods and will probably begin pressuring Nielsen to provide this data and for the networks to agree to using it perhaps as early as next year.