Start-up rivals target Nielsen

TNS, Erin, others challenging monopoly

The digital set-top box represents the Holy Grail for marketers; a virtual treasure-trove of TV viewing data — if it can be effectively harnessed.

It could also mean the end of Nielsen Media Research’s monopoly over the $600 million TV ratings business, if TNS, Comscore, ErinMedia or a host of other startups have their way.

Nielsen measures TV viewing based on data collected from 11,000 homes, and spends millions every year to maintain and improve that sample.

But few in media, let alone Nielsen itself, believe TV ratings will be based solely on such a sample by the end of the decade. The question is not if but who will be the one to standardize set-top data and create a system that measures every single television.

“If you look at the future of audience measurements, where you are measuring exposure across television, mobile phones and the Internet, you are going to want to go beyond the current sample,” says CBS research chief David Poltrack. “That does allow competitive entry, and new competitors are already active in this area.”

Any new competitor will get the active, if covert, support of media companies who have long chafed at Nielsen’s fees and who would like nothing more than to break up its monopoly of the TV ratings business.

“Nobody likes a company that has too much power,” says Todd Dagres, principal at Boston-based venture firm Spark Capital, which is setting up a $25 million funding round for competitor ErinMedia.

But Nielsen also is attempting to get into the set-top data business, even though it knows it could render its core business — sample-based ratings — obsolete.

Last week, it announced the creation of a new business unit, Nielsen DigitalPlus, to investigate the market, and inked a deal with DirectTV to analyze set-top data. But Nielsen is coming late to the game: DirectTV already has a deal with London-based research firm TNS to do essentially the same thing, a sign of how competitive the space could become.

The past is littered with failed attempts to supplant Nielsen in the ratings business, with Liberty Media and AT&T among those who have tried. Among the hurdles even today is that it’s difficult for the technology to discern if a TV is turned on and not just the cable box.

But media and agency execs say the transition is inevitable, especially as video moves to the Web and to cell phones, where each individual user can be measured and tracked.

If Nielsen is going to remain the standard currency in the digital set-top era, it will take some bruising competition to get there.

An example of that is the skirmishes with Florida-based ErinMedia, which has developed technology it believes will make the concept of a “Nielsen Family” obsolete.

The company is in the middle of an antitrust suit against Nielsen in which it argues Nielsen’s longterm, staggered contracts with media companies prevents others from entering the ratings market.

Two weeks ago, news leaked that Spark Capital was putting together a funding round, which is contingent on landing big media and advertising firms as investors. Ad group Publicis and Time Warner are said to be joining the round.

A week later, Nielsen put out a press release that it was launching its own division to measure set-tops, Nielsen DigitalPlus.

ErinMedia CEO Frank Maggio, a Florida developer, accused Nielsen of timing its announcement to drive potential backers away from ErinMedia.

“It’s a monopolistic, bully tactic,” Maggio says. “They have had every opportunity to build a business around (set-top box data) for years.”

Nielsen denies Maggio’s charge. “It’s all garbage and we have nothing more to say about it,” a spokesman said.

Nielsen is hoping to differentiate its service by knitting set-top data to its regular ratings sample, and even its consumer products research division AC Nielsen, Internet research division, NetRatings and Claritas.

Since the acquisition of Nielsen parent VNU by a private equity consortium, former GE exec and now CEO David Calhoun has changed the name of the company to the Nielsen Co., acquired the portion of Nielsen NetRatings it didn’t already own, and integrated AC Nielsen with the TV ratings business.

“Nielsen is trying to be the de facto ratings system across all media,” Dagres says.

But there is some equivocation within Nielsen as to whether that means the 11,000 Nielsen families will go the way of the black-and-white TV. “There is no clear consensus within Nielsen on that,” says SVP Jed Myers, who heads Nielsen’s new set-top measurement division. “Enough people believe it is worth investigating and has great potential, but a lot can be derived from the sample approach.”

Once known mostly for taking Nielsen to court, ErinMedia is gaining credibility on Madison Avenue. “They are moving from a curiosity factor to being perceived as a real player in the advertising community,” says analyst Jack Myers.

“I like the fact that they are a potential competitor to Nielsen,” says Tim Brooks, exec VP of research at Lifetime. “Their measurement plan has some good elements to it — the key there is can you get the deals with (cable and satellite operators) because both TNS and Nielsen are after that data.”

Spark principal Dagres, who is also backing Michael Eisner’s digital video play Veoh, sees TV ratings as a $1 billion business dominated by a monopolist that is unprepared to cope with changes in the industry.

“We are still in the dark ages of audience measurement,” he says. “The customers (advertisers and media companies) do not want to stay in the clutches of this monopoly and will conspire against it.”