Influential Media Buyer GroupM Seeks Big Changes in TV Measurement for 2017 Upfront (EXCLUSIVE)

Lyle Schwartz GroupM
Courtesy of GroupM

Madison Avenue has a new sheriff who would like to shake up the way advertisers pay for TV.

Lyle Schwartz is the new president of investment at GroupM, the large media buying unit of ad giant WPP that administers the spending of approximately $30 billion worth of advertising from blue-chip marketers including Unilever, Anheuser-Busch InBev and American Express across the U.S. and Canada. When GroupM asks for something, the media outlets that depend on advertising dollars tend to listen. And in 2017, they may well hear Schwartz tell them they need quickly to find a better way to measure TV viewership across all screens.

“Maybe 2017 is the year when we can buy programs across the devices,” Schwartz told Variety in his first interview since being named GroupM’s chief investment officer earlier this month. “I can tell you the technological capability could be available for next year’s upfront.”

If Schwartz can persuade the nation’s big media companies to agree on a common measurement framework to tally viewers across TV, digital and mobile, the move could be a huge benefit to networks struggling with declining linear ratings. Every year after the May upfront presentations, dozens of networks haggle over advance advertising commitments worth tens of billions of dollars — all based on viewership of commercial breaks on linear television. With more consumers – particularly the younger ones advertisers desire most – moving to mobile tablets, time-shifted viewing and on-demand video streaming, that reach has declined significantly. Consider that the second-season finale of “American Idol” reached 38.06 million viewers in 2002. In contrast, the second-season finale of “Empire,” one of TV’s most popular programs, reached just 10.8 million in 2016.

“I’m hoping that we move to a much more holistic measure of audience, so that the audience will actually be coming back, and be counted,” said Schwartz. “I don’t think the audience ever really went away from viewing this content. I think that our ability to measure it, aggregate it and monetize it has been the leading problem. I am hopeful that this year as an industry we can attack what needs to be done, and work on a product that is to the benefit of all involved.”

Several big media companies would stand to gain by adopting what has become known in the industry as “total audience measurement.” Viacom, owner of channels including Nickelodeon, MTV and Comedy Central that appeal primarily to younger viewers, has seen its reach among traditional TV viewers plummet in recent years – along with its stock price. Broadcast networks, which have suffered as more consumers record their favorite programs and watch them at times of their own choosing with a DVR, would regain some of their ballast in primetime. And companies like Comcast and Disney that invest heavily in sports broadcasts like the Olympics and “Monday Night Football” would get credit for audiences that are stating to watch even live match-ups – the one programming format that resisted the erosion trend until this year – through alternate video means.

ESPN in recent months has started to cut advertising deals that call for measurement of viewers watching TV in hotels, bars and other people’s homes, said Eric Johnson, the Disney-owned outlet’s executive vice president of global ad revenue and sales operations. “As you might expect, these audiences look a little bit different than the traditional TV audiences being captured by the Nielsen samples,” he said.

Other companies also want the total measure to become standard. “One of the challenges we all face as an industry is bringing back some consistency in measurement. All screens being measured and audience aggregation are good for us, and these are things we definitely want to work with brands and agencies to bring to the forefront,” said Randy Freer, chief operating officer of 21st Century Fox’s Fox Networks Group.

Another broadcast TV giant is also optimistic about the potential for the changes Schwartz is seeking.”By the time we negotiate next year’s upfront, we believe Nielsen’s new total audience ratings will be a big part of the negotiations,” said CBS Corp. chairman-CEO Leslie Moonves, during a recent call with investors. “With viewing habits changing, this will become a very big number. In fact, when all platforms are counted we have more total viewers watching our shows today than we did 15 years ago.”

Comcast’s NBCUniversal, ABC, Time Warner’s Turner, AMC Networks and Discovery Communications declined to make executives available for comment on Schwartz’s proposal. CBS declined to comment beyond Moonves’ remarks during the its Nov. 3 earnings call.

If anyone can get the TV companies to agree to new rules, Schwartz is a prime candidate. He has fought similar battles in the not-too-distant past. In 2006, he played an instrumental role in a grueling, months-long process that prompted the networks and their advertisers to accept a new form of TV ratings as the currency for advertising deals. His background in research is seen as well suited to a new environment in which advertisers are relying more heavily on reams of consumer data – encompassing everything from set-top box evidence of how viewers watch TV to geographic buying patterns found in convenience-store loyalty cards – to help them place commercials more precisely on networks, in dayparts and alongside specific programs.

For decades, advertisers used Nielsen’s program ratings to guide them as to how much they should or should not pay to advertise on TV. Working with his predecessor, the influential ad buying executive Rino Scanzoni, Schwartz in 2006 convinced buyers and sellers alike to adopt “commercial ratings,” or the average viewership of a commercial break, as the new currency to replace age- and gender-based demographic ratings. GroupM pushed the concept as a way to help advertisers understand who was watching ads as more consumers adopted the fast-forwarding capabilities of the DVR in their homes. Several years later, GroupM helped establish “C7” deals, or pacts that took into account the number of viewers watching ad breaks within seven days of a program’s initial airing, a nod to the increasing numbers of viewers catching up with programs on their own timetables.

GroupM has continued to wield great power in the advertising marketplace. Earlier this year, as many TV networks closed their annual upfront haggling, GroupM held fast against NBCUniversal and Turner, refusing for weeks to capitulate to their demands for heady rate increases for TV ad time. Those two companies took more time than rivals to close negotiations. according to media buyers with knowledge of the negotiations.

In short, GroupM tends to push the market to new places. Nielsen believes it has built the new total-audience system Schwartz would like to make mainstream. “There are pieces already used in the market today,” said Jessica Hogue, Nielsen’s senior vice president of product leadership, in an interview. “We have been working with clients to enable components of that measure and to evaluate the data and insights.” Certain networks that have signed up for total audience ratings will be able to see how the measures worked in 2016, she said, giving them ample data to help negotiate for next season. Nielsen rival comScore has also been working to introduce a similar framework to measure audiences across various screens.

As the number of consumers using new screens grows, advertisers can’t ignore them, said Schwartz, and need to come up with a broader framework for doing deals. At present, many of the negotiations for mobile streaming and other types of emerging viewer behavior are being struck between individual advertisers, media buyers and TV venues – but terms made with, say, Viacom don’t necessarily translate to pacts established with, say, ABC.

“It becomes very complicated to process lots of one-off deals,” said ESPN’s Johnson. “It definitely makes it difficult to aggregate.”

Measuring more screens, said Schwartz, would nod to the simple fact that audiences are migrating elsewhere, and then offer big marketers a new way to buy commercials more efficiently. “If I have an ad in ‘Survivor,’ and it’s on a laptop or it’s on a tablet, or on a 56-inch TV screen, the consumer is still choosing to watch that content, and if I can actually measure whether they are exposed to the ads, then, yeah, I think they do count,” said Schwartz. Agencies may try to determine different values for audiences of various screens under the new system, he suggested, and may also want to haggle over how much to pay for viewers who watch content more than a week after it initially debuts.

None of this can be done overnight. Adopting the new technology means investing in an internal infrastructure that will accommodate it, and several TV ad-sales executives noted the costs of doing so can be hefty. Some believe the Nielsen system needs more work before it’s ready for use in actual negotiations. “While Nielsen and comScore are both actively working to bring cross-platform solutions to the marketplace, there is still work to be done to ensure that all campaigns are measured accurately,” said Jon Steinlauf, president of national ad sales and marketing at Scripps Networks Interactive, owner of Food Network and HGTV.

Yet most executives think the move to new all-encompassing metrics is inevitable and will help stave off what has become a general decline in TV viewership. “There has to be a lot of coming together in the marketplace to make sure we have agreed-upon standards,” said ESPN’s Johnson. Even so, he added: “I think it could be a reality.”

(above, pictured: GroupM’s Lyle Schwartz)