On Wednesday, the Media Rating Council (MRC) officially suspended accreditation for Nielsen's national TV ratings service. For months, the measurement dictator has been embroiled in controversy about the currency used to transaction billions of dollars in ad revenue, with the Video Advertising Bureau (VAB) leading the charge, saying Nielsen's numbers during the COVID-19 pandemic undercounted viewers. Nielsen currently generates upwards of $60 billion in annual advertising spending.
The MRC is a nonprofit organization created in 1963 with government backing and a mandate to monitor stakeholders in the television business in the wake of the 1950s quiz-show scandals. The company formally informed Nielsen of the possibility of a suspension action on Aug. 12 for the National Television service and on Aug. 20 for the Local Market services. Accreditation for the local services had been on hiatus since January 2021. On Aug. 17, Nielsen informed MRC that it planned to add Broadband-Only (BBO) homes to its local panels in October 2021. MRC previously had concerns with Nielsen's Local Market services. After the Board assessed Nielsen's ability to properly integrate BBO viewing at a local market level, it suspended the accreditation for the Local Markets as well.
The decision, which will take effect in mid-September, follows an audit conducted by the MRC board, which consists of representatives of all members, currently around 160, with TV networks of various types making up less than a third, and agency and client representatives making up the rest.
The audit found that Nielsen likely under-counted adult viewers aged 18-to-49 by 2% to 6% in February. In addition, TV usage for adults 18-to-48 was down by 1% to 5%. As a result, the VAB claimed Nielsen's inability to accurately measure TV audiences resulted in a loss of national ad revenue over 12-months of at least $468 million. Demanding accountability, in July, the VAB asked the MRC to suspend Nielsen's accreditation.
In recent months, media companies and advertisers have amplified criticism of Nielsen. NBCUniversal recently issued a request for proposals to a vast host of third-party firms seeking to create a new measurement system. NBCU and its peers have offered advertisers a blended set of metrics in recent years to highlight social media reach, delayed-viewing statistics, and other proof points as they cope with secular drops in live ratings.
What Led To MRC's Audit of Nielsen
In April, networks and distributors demanded an audit of Nielsen, claiming that Nielsen's allowed its panel size to dwindle during the pandemic, which resulted in the undercounting of the number of people using television. Under fire, Nielsen refused the audit and defended its methodology, saying its numbers - which showed significant declines since the pandemic - are accurate. Nielsen declared that changes in viewers' behavior and the cancellation of games by sports leagues were responsible for the drop in viewing, stating in an April blog post:
"Nielsen looked internally at its own process for estimating the ratings via our observational panel, a source of audience estimates that fuels the media industry. While this drove a sample size smaller than it was pre-COVID, it remains robust and representative".
Nielsen asserted that total TV viewing had gone down in recent years, with a decline of nearly 20% in the first quarter of 2021, a percentage that is not good for networks about to sell advertising for the 2021-22 season. Nielsen's chief research officer, Mainak Mazumdar, stated the company has gone back and found nothing in its research to indicate they needed to make adjustments. Instead, Nielsen suggested that the pandemic had both "bottlenecked and accelerated aspects of the media industry, serving as a polarizing factor for consumer segments, all driven by COVID. Responding further, Mazumdar added:
"What we see is despite the decline in the sample. There is no material statistical difference, right the error has increased, but the confidence interval is still high, as we have reported. We feel the standard error needs to be accounted for when folks are forecasting their inventory for rest of the year into upfront."
However, after maintaining for a month that its figures were accurate, in May, Nielson confirmed that its figures did, in fact, need adjustment.
The MRC Statement Following Decision
MRC Executive Director and CEO George Ivie expressed hope that Nielsen would work with the organization to regain compliance as soon as possible. Ivie said in a statement, "While we are disappointed that the situation has come to this, we believe these are the proper actions for the MRC to take at this time." The statement continued:
"MRC's Board of Directors, which represents an extremely broad range of industry constituencies, and includes advertisers, agencies, and media companies of all types, is strongly unified in its positions on these matters. MRC stands committed in our willingness to work with Nielsen toward the goal of being able to restore accreditation to these important services at the earliest possible time, and it is our hope that Nielsen likewise will continue to engage with MRC and its clients in pursuit of that goal."
With a Monopoly on the Market, Nielsen Vows to Work with MRC
Since 1950, Nielsen has been the only source for measuring network TV audiences. In 2019, to fill what it said was a missing link in its portfolio, Nielsen acquired Sorenson Media, an addressable TV technology provider. With the purchase, Nielsen insisted it had all the components to build an "end-to-end, AI-optimized platform" for targeted TV ads that encompasses delivery, data-driven targeting, unified campaign management, and measurement.
While competition has undoubtedly tried to join the ratings game with Nielsen, none have succeeded, mainly due to a lack of adoption by potential clients and lack of investors. Once synonymous with television ratings and "Nielsen homes," the company has expanded into other entertainment measuring markets and has essentially enjoyed a monopoly in the playing field. The company has often used patents to retain that monopoly. And this goes back decades.
Following the MRC's announcement on Wednesday, Nielsen vowed to work with the organization to resolve issues. We know that the role we play is critical to your business – and the industry as a whole. In a statement issued on Thursday, Nielsen CEO David Kenny said, "We want to be transparent about the factors the MRC called out in their decision, the actions we are taking to address outstanding issues and the ongoing work we're doing to build a new measurement model that reflects where the industry is going." Kenny added:
"While we are disappointed with this outcome, the suspension will not impact the usability of our data," the measurement provider said in a statement. "Nielsen remains the currency of choice for media companies, advertisers, and agencies. We are committed to the audit process, and during this pause in accreditation, we will work with the MRC on resolving this suspension. We will also take the opportunity to focus on innovating our core products and continue to deliver data that clients can rely on, ultimately creating a better media future for the entire industry."