Only about a week after CBS (NYSE:CBS) agreed to expand its relationship with Nielsen Holdings (NYSE:NLSN), which included the now controversial "hybrid" methodology of measuring local TV audiences, the National Association of Broadcaster (which includes two executives from CBS) have asked Nielsen to delay the rollout of the new service until it has been more thoroughly tested.
The issue centers around Nielsen adding "broadband-only homes" in the samples it uses to measure local TV. The NAB is concerned it may not accurately reflect the actual number of viewers in the area if it results in a reduction in counting traditional TV households. If that is the outcome, it is easy to see why the industry would call for Nielsen to delay the implementation of the service. After all, these metrics are the currency used by broadcasters and marketers to determine ad prices.
Near the end of January, CBS and Nielsen expanding their existing agreement to include measuring how viewers watched TV across a variety of devices. The measurement of local television viewership using the hybrid method was part of that new agreement. This suggests that CBS must have been contacted by its peers soon afterwards in order to press Nielsen to hold off on the initiative.
I draw that conclusion from the fact the NAB said there was "unanimous support" by its board of directors concerning a resolution demanding Nielsen halt the program. Sitting on the board are John Orlando, executive vice president-government affairs at CBS, as well as Dan Mason, president and CEO of CBS Radio. Orlando serves on the Television Board of the NAB, while Mason serves on the executive board of the NAB.
Whatever happened between the expansion agreement between CBS and Nielsen to change the outlook, the NAB (including CBS) is now presenting a united front on this issue.
CBS' metric strategy
For some time, CBS stated that it will continue to use every means it can to accurately measure all the eyes watching its content across every screen or device.
While all TV companies want this, CBS has a lot more at stake since it is the leader in overall viewership. The leader in the key 18-49 demographic also has a lot to lose if metrics aren't accurate.
CBS has enjoyed a huge boost in its share price over the last five years, and is up by over 941% during that time. It wants to maintain that pace using accurate metrics, even as the number of people watching broadcast television continues to shrink. CEO Leslie Moonves believes the company still has strong viewership, just that it has migrated to smaller, mobile screens.
This is apparently why it has decided to go along with the rest of the members of the NAB concerning the delayed rollout of the hybrid method.
Fox and local focus
Since 21st Century Fox (NASDAQ:FOXA) has such a strong local focus, it is also important to it to ensure it gets the most accurate local metrics in order to get the best ad prices for its stations.
Of the major broadcasters, Fox is second only to CBS in its performance over the last five years, being up over 461% during that time. The overall entertainment industry has been on a huge upward climb, and it wants to be sure measuring the number of people viewing its TV content in a fragmented market is done using the best methodology available.
This is especially important to Fox after it spun off its News Corp. unit in 2013. It is now well positioned to take advantage of its strengths, and once the launch of its powerful Avatar film franchise over a period of three years takes place, it should enjoy a nice boost in its share price when coupled with its TV performance.
It's overall TV viewership has fallen recently, but it still attracts a good crowd in the key 18-49 demo.
Metrics are the currency of the TV industry on the ad side of the business. With numerous ways to view content at this time, it's imperative Nielsen and other metric companies use the best methodology to ensure accuracy.
It appears that Nielsen is not going to heed the demands of the NAB and is going to go ahead with the planned rollout of the new service. It did say that it is considering a variety of options to mitigate the concerns of the NAB going forward, however.
I don't think that this will have much of an impact on the broadcasters in the short term, but it does need to be watched closely in order to take into account whether or not viewers are being counted correctly. Any inaccuracies will have a real impact on the ad revenue and earnings of the companies.
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Gary Bourgeault has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.