Copyright 2004 The McGraw-Hill Companies, Inc


By Anthony Bianco in New York, with Ronald Grover in Los Angeles


Susan D. Whiting knew she was in for a long, hot summer as early as Mar. 30. That was the day Rupert Murdoch, media mogul supreme, interrupted a discussion about interactive advertising to lambaste her in front of many of TV's most powerful executives. Whiting, president and CEO of Nielsen Media Research, was stunned but maintained her composure. ``I'd never met Mr. Murdoch before, but I felt I had to respond,'' she recalls. ``So I did, and then I asked if we couldn't go back to the subject we had all come to discuss.''

What incensed Murdoch, the chairman of News Corp., is a Nielsen plan to change the way it tracks TV viewing in the 10 largest U.S. markets. Beginning late last year, Nielsen began phasing out the written diaries it has used since the 1950s in favor of an electronic device called the people meter that measures audiences much more reliably. In people meter test runs in New York and Los Angeles, many high-profile programs on News Corp.'s Fox network took ratings hits, including several geared to blacks and Hispanics. In an attempt to force a delay in Nielsen's conversion to people meters, News Corp. funded a grassroots political campaign accusing the ratings company of disenfranchising minority viewers.

Whiting, 48, has had to defend herself and her company in dozens of public forums, including a U.S. Senate hearing and stormy city council meetings in New York and Los Angeles. At least 40 members of Congress criticized Nielsen. Whiting, who moved up to CEO in 2002 after 24 years at the company, also endured a tongue-lashing by the Reverend Al Sharpton, who stormed into her office while a contingent of reporters waited outside.

HIGH-HANDED

Nielsen, owned by Dutch media conglomerate VNU, is no stranger to controversy. Complaining about the inflexibility of Nielsen, its arrogance, and, above all, its high prices is a long-standing tradition among the TV programmers and ad agencies that have never really had a practical alternative to buying its ratings data. ``The industry has a love-hate relationship with Nielsen,'' says David Verklin, CEO of Carat North America, a large media-buying agency. ``Actually, it's hate-love, and there's not a whole lot of love in it.''

This current contretemps, however, is something new for Nielsen Media -- in the virulence and breadth of the attacks directed against it. News Corp.'s attack transformed an intra-industry dispute over research methods into a racial and ethnic cause celebre. This strategy was cleverly conceived to exploit Nielsen's unpopularity and inexperience in the dark arts of political string-pulling and public relations spinning. ``They were totally caught off guard when Rupert came out, guns blazing,'' concedes Angela Mariana Freyre, a partner at Coudert Brothers LLP, outside counsel to Nielsen.

The people meter is a long-established technology widely used around the world to measure TV audiences. Since the 1970s, Nielsen has used a so-called set meter to track the viewing of its sample households. It tells Nielsen what is being watched -- but not who is watching. Four times a year, Nielsen collects the finer demographic data prized by advertisers by asking all viewers to fill out a diary detailing their TV watching for a week. It's no secret that many families keep their diaries haphazardly. The people meter provides much more reliable data by automatically recording every channel change and by adding a set-top console that all viewers identify themselves by the push of a button or two.

In 1987, Nielsen introduced people meters into its national sample, which consists of 5,000 households across the country. The new meters proved that people of all ages and races were far more diverse in their viewing habits than the written diaries had shown. Ratings points -- and ad dollars -- migrated en masse from high-rated shows to low-rated ones and from broadcast to cable networks. Many broadcasters complained bitterly at first, but the national people meter ratings now set the standard for TV measurement in the U.S.

It was not until VNU acquired Nielsen Media for a hefty $2.5 billion in 2001 that the company and newly appointed CEO Whiting announced ambitious plans to also begin using people meters to measure local audiences in the top 10 U.S. cities, beginning with Boston in 2002. The advent of the local people meter was a particularly ominous development for News Corp., which is much more heavily weighted to broadcast and lighter on cable than are the corporate parents of CBS, NBC, and ABC.

Nonetheless, in October, 2003, Fox Television Station Group signed a comprehensive new service contract with Nielsen covering all 35 Fox stations in the U.S. Under this agreement, Fox agreed to buy people meter data in all 9 of the top 10 markets where it owned a station. By February, though, News Corp. had become so alarmed by the people-meter test-run data from New York that it demanded that Nielsen postpone the scheduled start of commercial service on Apr. 8. Whiting refused. A few weeks later, News Corp. issued a statement by Lachlan K. Murdoch, Fox's chairman (and Rupert's son), that framed its objections in a racial context: ``People meters could undercount viewership by as much as 25%, especially when quantifying viewership among minority and young viewers.''

About the same time, a newly formed group called the Don't Count Us Out coalition began going after Nielsen. News Corp. has acknowledged that it supported Don't Count Us Out ``financially, organizationally, and morally'' but denies Nielsen's accusations that the coalition is a front for Fox. ``This is a group who saw that [Nielsen's] data wasn't accurate and rose up against it on their own,'' says News Corp. spokesman Gary Ginsberg.

With the help of a bevy of high-powered media consultants who had held senior positions in the Clinton White House -- including press secretary Joe Lockhart -- Don't Count Us Out rapidly enlisted dozens of Democratic lawmakers and scores of minority advocacy groups. The group also took aim at the masses, hiring canvassers to take its anti-Nielsen message door to door and unleashing a barrage of print and TV advertising. So many complaints poured into Nielsen's New York office that its phone and e-mail systems crashed.

Nielsen was caught off guard in part because it thought it had bent over backwards to ensure that blacks and Hispanics were fully represented. Black households make up 21.2% of the new New York people meter sample, compared with 17.3% of the city's population as measured by the 2000 census; the comparable numbers for Latinos are 16.8% and 16.1%. Whiting says that Nielsen deliberately ``over-sampled'' minority households because of the possibility that blacks and Latinos were undercounted in the census. ``The official benchmarks may be too low,'' she says.

Don't Count Us Out made much of the fact that many of the shows with the steepest ratings drops in New York were geared to people of color. For example, The Parkers, Girlfriends, Eve, and Half & Half suffered potentially fatal declines of 27% to 62%. However, the coalition failed to mention the jump in viewership for other minority-themed programs on cable. In March, black viewership of Black Entertainment Television soared 180%. Among Latino viewers, Telefutura's ratings jumped 83%.

JUST NOT HERE

Nielsen wasn't counting minority viewers out: It was counting them elsewhere. Rating points were shifting en masse from broadcast to cable, reflecting what had occurred in Boston and nationally. As measured by the people meter, blacks in New York spent 54.2% of their viewing time on cable, compared with the 39.2% reported by the diaries. For Latinos, the shift was less dramatic but still significant at 43.8% to 34.6%.

Even as politicians rushed to enlist in Don't Count Us Out, executives of other media companies kept a wary distance. They not only saw no evidence of racial bias in Nielsen's people meter numbers, but generally disapproved of News Corp.'s rabble-rousing tactics. ``Buying full-page ads in The New York Times is not an effective way of bringing about change in the science of television measurement,'' says Gayle Metzger, a longtime Nielsen critic who tried to start a competing company in the 1990s.

Whiting, a Wisconsin native, is not the combative sort, but her graciousness masks a steely resolve. Combining what one friend calls ``an almost nerdy, Midwestern frankness'' with a deep knowledge of the science of television ratings, Whiting was fiercely imperturbable as she ventured out to meet with people meter opponents located around the country. ``I've seen her get mad, but the only way you can tell is that her face turns red,'' says Jack Loftus, Nielsen's communications chief. ``I've never seen her lose her cool.''

It was a testament to the CEO's effectiveness that Senator Hillary Clinton, the NAACP's Kwiese Mfume, and other high-profile supporters of Don't Count Us Out quietly backed away from the coalition. On Sept. 7, the Reverend Jesse Jackson stepped forward to endorse Nielsen in an open letter addressed to members of the Rainbow/PUSH Coalition. ``People meter measurements prove that audiences of color -- like other viewers -- are shifting their allegiances from big broadcast channels like News Corp.'s Fox Television to smaller channels and networks,'' said Jackson.

At the same time, though, Whiting antagonized such major clients as CBS, Tribune Broadcasting, and Univision by insisting on going live with the people meter service in New York without first obtaining the blessing of the Media Ratings Council, an independent industry group. MRC's auditors discovered a host of technical shortcomings of the same sort that had bedeviled previous people meter conversions and which TV executives attribute to Nielsen's overeagerness to begin charging for people meter data and preserve its 25% profit margins. Nielsen has won conditional MRC accreditation in Los Angeles and is working to fix sampling flaws in New York and Chicago.

By all appearances, Nielsen now has the whip hand in its struggle with News Corp. Whiting's public relations offensive has blunted the threat of federal oversight of the ratings business, and the company scored a crucial legal victory when a state judge in California declined to halt Nielsen's people meter rollout in Los Angeles. As for News Corp., it continues to do business with Nielsen -- incontrovertible evidence that the company's lucrative monopoly is intact.

The Meter Is Running
Nielsen Media's new people meter records a big drop in the number of blacks watching network TV, but an equally large rise in its share of cable:
NETWORK SHARE*
-15%
CABLE SHARE*
+15%
* Percentage point change, New York audience in March, 2004
Data: Nielsen Media Research