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Local TV Is Moving Away From Ratings

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For decades TV ratings have been the currency for ad rates on local broadcast television. The medium negotiated with cost-per-point (CPP) or how much will it cost to reach 1% of any local TV markets population. This allowed advertisers to evaluate pricing across all TV markets from the largest New York with 7.1 million TV households, to the smallest Glendive, Montana with 3,600 TV households.

In the near future, the negotiating currency when buying local TV advertising is expected to change. In a press release, the Television Bureau of Advertising (TVB), a trade group representing over 800 local TV stations and broadcast groups, is recommending to the advertising community to begin using audience impressions as the basis for striking ad deals rather than TV ratings. According to BIA Advisory Services, local broadcast TV will generate $17.3 billion this year in ad dollars.

BIA’s managing director Rick Ducey argued, “Local TV is a bit late to adopt viewer impressions as the way to buy and sell TV ads compared to other ad platforms. Even national TV uses impressions as the core currency.” Ducey added, “Ratings require a minimum audience level to be reported. With declining ratings, many target audience segments fall off the radar of advertisers wanting to reach them. A shift for local TV to impressions lets these audiences be found and monetized, and impressions let advertisers build and evaluate video campaigns across local TV and digital video platforms.”

In a statement, Steve Lanzano, president and CEO of the TVB said, “As technology continues to weave its way into how and where we watch local broadcast television, it’s imperative for the industry to measure the entire audience, no matter where they watch. The use of impressions simplifies how we evaluate media across platforms and makes it easier to include local TV in the cross-platform consideration set.” In today’s environment, Lanzano emphasizes the importance to measure beyond linear television to include such local TV outlet as web sites, mobile and streaming services.

There are several reasons why the TVB and station groups are pushing for the change. Audience measurement is improving, stations groups are rolling out streaming services and impression base negotiating has been the currency for other media including network TV and digital media.

Changes in Audience Measurement Methodology: Besides TV ratings, Nielsen has also always measured the audience impressions of local TV stations. In addition, Nielsen has replaced paper TV diaries with return path data (RPD) from multichannel video program distributors (MVPD) such as Comcast, DISH and AT&T, etc. RPD measures household tuning and Nielsen then models demographic audiences from nearby People Meters via Viewer Assignment. Nielsen also now measures out-of-home TV audiences in major markets using the Portable People Meter (PPM), which picks up audio signals from TV stations.

Nielsen’s main rival comScore, also uses RPD data for household tuning and provides estimated audiences for local TV stations. The use of RPD data provides a more robust sample for local TV audiences. The implementation of RPD can also be integrated with first-party or third-party data for better targeting, helping to facilitate the move toward audience impressions.

Streaming Video: Several prominent TV stations groups are rolling out their own streaming services. Nexstar, Sinclair and Cox are in various stages of implementing an OTT service. Nexstar (which recently acquired Tribune) is testing an OTT service for its San Francisco owned station KRON with plans to roll out a similar service in other markets. In January, Sinclair introduced its own local OTT service called Stirr. In July, Sinclair said Stirr had reached one million downloads. In 2016 Cox launched Contour an OTT service. Sinclair and Cox are also involved in a joint venture NewsON, which streams local news.

These OTT services can help circumvent blackouts stemming from breakdowns in retrans negotiations, can reach cord cutters and gives local stations a “place at the table” as consumer adoption of streaming video continues to grow. The OTT industry also uses audience impressions.

Stations/Agencies: Already several prominent stations groups have announced their support of moving from TV ratings to audience impressions. These include the NBCUniversal, CBS, ABC and Hearst. Several prominent advertising agencies have also been evaluating the move to audience impressions for local TV. Magna says they have been buying impression base buying since early 2015. Dentsu Aegis has been using impression base buying since January 2017. Other agencies recognize the move from ratings to audience impressions is inevitable and makes sense.

The goal for stations is for the industry to move from ratings toward audience impressions by next year. Ad agencies think the move may take a little longer.

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