As Nielsen Media Research prepares to move into its new "nerve center" in Oldsmar, the TV ratings goliath faces challenges from new technologies and an increasingly fragmented TV audience.
By JEFF HARRINGTON
Published August 4, 2003
OLDSMAR - The new Nielsen Media Research complex rising from what had been a forest here is part tech center, part pastel-color showroom for TV execs and all fortress.
The walls of the five buildings are "small-missile impact resistant" and able to withstand 155-mph hurricane gusts, its builders say. The complex is so sturdy, area emergency officials have asked to use it as a base in case of a catastrophic storm. Upper floors are equipped with mini-fire doors with key access because firefighters would have a hard time breaking the reinforced windows to get in.
The treasure inside is Nielsen's 25,000-square-foot computer room, which will house more than 600 servers storing coveted data on TV viewership patterns across the country.
If there's one thing Nielsen takes seriously, it's protecting its franchise of more than five decades as the demigod of television ratings. It's a pivotal role in the entertainment industry as advertisers decide where to spend some $60-billion a year on TV commercials.
So it's not surprising the company is leaving nothing to chance as it prepares to move the first of nearly 2,000 employees scattered across Pinellas County into its new complex in early September. New York may be the corporate headquarters of Nielsen Media but this Oldsmar site is taking over from the company's Dunedin offices as its "nerve center," the place where most of its employees work and most of its media measurement work is done.
Last week, Nielsen employees received word the company had signed off on a second phase of the Oldsmar complex, which would push project costs beyond $100-million by 2005. The second phase of 138,000 square feet would expand the site to a total of 612,000 square feet, cementing its status as the biggest office construction project under way in the Southeast.
Nielsen Media president and chief executive Susan Whiting said the Oldsmar complex, with its state-of-the-art capabilities, will be instrumental in keeping the company on top of changing technology.
"It's the most significant real estate investment we've ever made," said Whiting, who oversees the ratings service from the New York headquarters. "It's an indication of where we want to go as a company."
Certainly, the move comes at a crucial time.
Even as it held a near-monopoly over the business of measuring TV viewership, Nielsen Media has grappled repeatedly with the "next big thing" that was supposed to knock it off its pedestal. Cable TV. VCRs. The Internet.
Today, the challenges are as daunting as ever. Tracking TV viewing becomes harder as new technologies allow viewers to create their own program schedules. Personal video recorders like TiVo let viewers breeze through stored programs and pause live televised events. Digital cable-top boxes that permit multiple programs to be beamed over a single channel require Nielsen to devise new monitoring equipment.
And perhaps the toughest challenge: an increasingly fragmented TV audience. TV viewers splintered among more and more shows are less valued by large advertisers who want to reach the masses.
Erwin Ephron, a New York consultant who works with advertising agencies and media buyers of TV time, thinks fragmentation also means Nielsen data is getting less reliable. The more programs people can watch at a given time, the tougher it is to get an accurate account of viewing, he contends, particularly in those local markets where Nielsen relies on viewers to keep handwritten diaries of their choices.
"When you have a 300-channel universe it becomes much more difficult," Ephron said. Referring to the homes monitored by Nielsen meters in its national TV sample, he added, "The typical 5,000 to 7,000 households just won't do it anymore, and it's going to get worse."
Ephron urges a major change in the ratings process to rely less on measuring and more on "modeling." In other words, rather than attempting to record the shows being watched, the ratings company should use surveys and demographics to gauge what viewers are up to.
But don't look for Nielsen to follow his suggestion.
As it has for decades, Nielsen staunchly defends its measuring techniques and says it's up to the task of measuring new TV technologies.
Bought in 1999 by the Dutch conglomerate VNU NV, Nielsen Media doesn't disclose profits. However, VNU reported that Nielsen Media's revenues and operating results both rose in 2002 despite the soft advertising market. Nielsen Media is the single biggest part of VNU's "media and measurement group," which accounted for 24 percent of VNU's $4-billion in revenues last year. The media measurement group's revenues rose 4 percent and operating income rose 12 percent to $176-million in 2002.
Nielsen makes its money from networks, TV station owners and cable companies that buy its ratings as bait to draw in advertisers.
The company's ratings methods are a melange: the diaries relied on in smaller local markets; the electronic meters hooked up to TVs in most of the larger markets; and the more advanced "People Meters," used increasingly in Top 10 markets and for Nielsen's national survey to track both who is watching a TV and what they're watching.
Yet all of the surveys are based on relatively small samples and none directly address concerns such as digital television and personal video recorders.
For that, Nielsen is betting on new technologies such as its "active-passive" meter. Its success depends on convincing TV producers to embed all programs with coding that can be read by Nielsen's equipment in households. That would solve the problem of detecting which of multiple programs on a digital channel is being watched.
Underscoring the importance of the active-passive initiative, a large "AP Countdown" clock in Nielsen's Palm Harbor tech center has been clicking down to the rollout for more than two years. (During a recent visit, it flashed: 358 days, 19 hours, 9 minutes and 8 seconds.)
Separately, Nielsen is experimenting with software that could program a set-top box to record video-on-demand viewing information. Nielsen has a partnership with TiVo to record viewership this way on a limited basis.
According to Whiting, the company has spent hundreds of millions of dollars over the past 10 years developing software and otherwise preparing for the emerging digital world. By rolling out its digital-based system to monitor TV viewing starting in mid 2004, Nielsen is embarking on the most expensive project in its history.
Still, one recurring knock on Nielsen has been that it is too slow in rolling out new technology.
"We don't usually have issues with them moving too quickly," said George Ivie, executive director of the Media Rating Council, which accredits ratings companies like Nielsen and its rival Arbitron. "We're usually on the other side, working with them to bring things to the solution phase faster."
Yet Ivie says being cautious and methodical has its advantages. "They don't design a lot of stuff that doesn't work," he said.
Nielsen may have time to react before some new technologies become mainstream. Consider, for instance, that out of nearly 30,000 homes equipped with Nielsen meters, only eight have high-definition TV.
"There's a certain percentage of the population they can get away with not measuring at any one point in time," said James Peacock of Peacock Research, a TV industry consultant. "If it's half of 1 percent (not being measured), the odds are the industry will tolerate that while they develop a solution."
Peacock, who previously worked for Arbitron, said Nielsen Media has shown a knack for adapting to changing technology. "I would never bet against Nielsen," he said.
Not that the media ratings icon hasn't fallen short in some areas.
In the TV industry, Nielsen shoulders criticism for failing to measure some audiences, such as viewers in hotel rooms, sports bars and college dorms. Backers of televised sporting events and teen-oriented shows have complained for years that their viewing audience is under-represented by advertisers because of Nielsen's home-based ratings system.
Scott Brown, a Nielsen senior vice president overseeing technology, said his company faces some tricky problems in those areas. How, for example, does Nielsen get consent of hotel guests to monitor their viewing even if it promises to keep results private? And how does it estimate viewing when sports bars air multiple events simultaneously on different jumbo screens?
Now, Nielsen is seeking ways to monitor viewing in college dorm rooms, but the test that starts this month is merely a trial run to consider possible solutions.
A few years ago, Nielsen executives decided they could hardly stay on the cutting edge of technology with their staff working out of offices spread across Pinellas County.
Employees at Nielsen's 30-year-old main offices in Dunedin have to drive to Palm Harbor to meet face-to-face with the company's tech center employees, who work out of a former Food Lion grocery store.
Others work out of a field training school in Bay Vista and leased offices in Highland Commons.
That's where the new research and operations center in Oldsmar comes into play. Only a call center in Dunedin and a small print center in Crystal Beach will not relocate.
Susan Buchanan, Nielsen Media's general manager of operations in Pinellas County, is counting on increased efficiency and productivity when most of her staff unites under one roof. About 850 employees will move to Oldsmar this fall and another 900 by early 2005 when the second phase of the complex is finished, according to Buchanan.
Each room in the Oldsmar complex will be equipped for high-speed data transmissions. Rows of conference booths will give visiting Nielsen customers privacy while they read through viewership diaries.
With onsite amenities such as a fitness center, cafeteria and laundry dropoff, Nielsen hopes to make employees happy and keep them on the corporate campus throughout the day, another potential boost to productivity.
Massive satellite dishes atop the main building are on an intricate system of rollers so they can be maneuvered easily to pick up signals.
For the first time, Buchanan said, Nielsen will have a large green space outdoors to entertain clients and visiting executives from New York. The first big event on the calendar: an open house in October.
Employees refer to the hoopla around the new complex as NFL, for "New Florida Location." They like to say they had the kickoff long ago. Now they're awaiting the Super Bowl, a.k.a. the open house ceremonies Oct. 1.
Even before move-in date, the complex has been a morale booster for staffers. "Most of them are thrilled," Buchanan said, "and they haven't even seen it yet."
Chief business: Estimates TV viewing audiences for TV networks, stations, cable companies and others.
Headquarters: New York City
President and CEO: Susan Whiting
Key operations center: Dunedin, moving to Oldsmar this fall
Bay area employees: 3,700, including 1,800 full-time
Ownership: Dutch conglomerate VNU
Nielsen time line
1923 Arthur C. Nielsen, 26, founds the A.C. Nielsen Co. to conduct market research.
1942 Commercial network radio measurement service begins using Nielsen's Audimeter in sample homes.
1949 The Mailable Tape Audimeter records radio usage information on a 35mm film cartridge, which is mailed back to Nielsen.
1950 The Nielsen Television Index, a nationwide audience measurement service, is established.
1950 Nielsen acquires the radio and television Hooper Ratings service.
1954 "Recordimeters" introduced to verify accuracy of diaries in radio and television sample homes.
1959 First "Instantaneous Audimeter" installed in New York.
1963 Nielsen discontinues radio audience measurement service to focus on television.
1971 "Storage Instantaneous Audimeter" is capable of storing TV set usage data for delivery to Nielsen, usually overnight.
1973 National daily ratings become available.
1980 Nielsen Homevideo Index established to provide measurement service for cable and home video.
1982 Daily cable ratings become available.
1984 A.C. Nielsen is acquired by the Dun & Bradstreet Corp.
1987 Nielsen begins to rely solely on the People Meter to measure national TV ratings.
1995 Nielsen conducts its first national measurement, using a telephone survey, of Internet usage.
1997 Nielsen Media Research becomes part of Cognizant Corp., after the breakup of the Dun & Bradstreet Corp. A.C. Nielsen is spun off as a separate public company.
1998 Nielsen Media becomes independent publicly traded company on the New York Stock Exchange.
1999 Nielsen/NetRatings begins reporting weekly Internet ratings data.
1999 VNU acquires Nielsen Media for $2.7-billion.
2001 VNU purchases A.C. Nielsen, reuniting it with Nielsen Media.
2002 VNU puts all its media measurement operations worldwide under the brand of Nielsen Media Research.
- Source: Nielsen Media Research
The TV audience
Out of 105.5-million TV homes in the United States:
- 100 percent have color television sets.
- 34 percent have two TV sets.
- 40 percent have three or more TV sets.
- 91 percent have a VCR.
- 69 percent receive wired cable.
- 40 percent receive wired pay cable.
- 81 percent receive wired cable or an alternate delivery system such as satellite dishes.
