After complaining for years that Nielsen's (NYSE:NLSN) ratings didn't accurately gauge its audience and value, Comcast (NASDAQ:CMCSA)-owned CNBC finally decided to part ways with the ratings giant. Instead, CNBC will partner with Cogent Reports, The Wall Street Journal reports, to deliver ratings information to advertisers. The issue for CNBC's departure: It feels Nielsen underreports the size of its audience by not tracking out-of-home, daytime viewers.
And CNBC has a legitimate concern here. Even Nielsen admits that its ratings do not accurately reflect out-of-home viewing. And for a channel that's viewed on trading floors, banks, and other businesses worldwide, this can skew its audience size downward and hurt its standing with the Madison Avenue set. Obviously, advertisers look at things like income, demographics, and propensity to spend, but the size of the audience is generally the most important factor to advertisers.
So while I believe CNBC is in the right for making the move, the real audience CNBC needs to convince is its advertisers, and that may be easier said than done.
Changing the metric probably won't change the trend, and are out-of-home viewers worth less?
The multimillion-dollar question is whether advertisers and ad firms will pay more money for CNBC using this new metric. That said, changing the measurement won't change CNBC's trajectory. After reporting Nielsen daytime viewer ratings as high as 310,000 in the first quarter of 2008, when the market was in full meltdown, the company reported an average audience of 177,000 people in 2014, its least watched year since 1995. Unfortunately for CNBC, 2014 was the inverse of the "if it bleeds, it leads" maxim of journalism. Good economic news is actually bad for business.
In addition, advertisers might not consider out-of-home viewers of the same quality as home viewers. In many out-of-home viewing experiences, whether at a gym, a job, a mall, or the diminished trading floor of the NYSE, the experience tends to be of lower quality, with the sound turned off in many instances.
Obviously, CNBC as an astute news programmer overcame these handicaps with flashing chyrons, bold lettering, and a scrolling ticker tape, but advertisers probably don't fare as well. It will be hard to ask for top dollar for these viewers. So if advertising firms are looking for simply more viewers, CNBC will be able to provide them using Cogent, but internal marketing metrics such as return on investment calculations and brand awareness surveys will probably remain the same.
If Fox Business is of any indication, this may be a tough sell to advertisers
Although advertising firms haven't weighed in full scale, the competition appears to be more bearish on CNBC's prospects. In fact, Fox Business Ad EVP Paul Rittenberg defended Nielsen and gave an ominous warning to CNBC by stating, "Only using the numbers you like is a little tough to sell."
And while at first sight this may sound like a odd position to take, considering Fox Business probably faces the same out-of-home viewing issues that CNBC does, this may be the wisest position for his network's parent company, 21st Century Fox (NASDAQ:FOXA).
For those unaware of the current media landscape, 21st Century Fox owns both Fox Business and Fox News. And when it comes to cable news, Fox News is by far the leader when it comes to Nielsen's in-the-home viewing metrics. It's been the No. 1 cable news network for the past 13 years, according to the ratings firm.
In the event that the metric is changed to include out-of-the home viewing and adopted by advertising firms, it's possible for ad dollars to flow away from No. 1 Fox News to CNBC or other out-of-the-home viewed favorites such as Disney's ESPN.
Nielsen's been slow to adapt on a host of fronts
And while I find this a tough sell for CNBC, there are other networks frustrated with Nielsen's methodology. The Journal reports that Viacom is also looking to lessen Nielsen's lock on audience measurement by developing lines of business not dependent on the firm. Nielsen has also struggled to address the rise of streaming-video services such as Netflix, Hulu Plus, and Amazon.com's Prime Instant Video, only recently rolling out a monitoring service to address this format last month.
But in the end, CNBC is asking to be treated differently from other networks in terms of ad spend, and this could be difficult for ad firms to accept. In addition, with ad-based dollars flowing away from television, and toward digital and mobile mediums, asking for more money in this environment using an entirely new viewing metric may be a tough sell indeed.
Jamal Carnette owns shares of Apple. The Motley Fool recommends and owns shares of Amazon.com, Apple, Google (A and C shares), Netflix, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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.