Chapter Six, Part VI

In five thousand American homes, there are television sets that are rather different from your standard Sony. These sets have been wired by Nielsen Media Research with electronic monitoring devices called “people meters.” The people meters are designed to track, in real time, two things: what TV shows are being watched and, just as important, who is watching them. Every person in a “people-meter family” is given a unique code, which they’re supposed to use to log in each time they sit down to watch television. That way, Nielsen—which downloads the data from the people meters every night—is able to know that Mom and Dad like CSI, while their college-age daughter prefers Alias.

Nielsen, of course, wants that information because advertisers crave demographic data. Pepsi may be interested to hear that 22 million people watched a particular episode of Friends. But what it really cares about is how many people aged eighteen to twenty- four watched the episode. The people meter is the only technology that can tell Pepsi what it wants to know. So, when the major TV networks sell national advertising, it’s the people-meter data that they rely on. Five thousand families determine what ads Americans see and, indirectly, what programs they watch.

There is, of course, something inherently troubling about this. Can five thousand really speak for 120 million? But Nielsen works hard to ensure that its families are a reasonable match, in demographic terms, for the country as a whole. And while the people meters are hardly flawless—over time, people become less religious about logging in—they have one great advantage over most ways of gathering information: they track what people actually did watch, not what they remember watching or say they watched. All in all, Nielsen’s numbers are probably more accurate than your average public-opinion poll.

The trouble with people meters is that there are only five thousand of them, and they are scattered across the country. So while Nielsen’s daily ratings provide a relatively accurate picture of what the country as a whole is watching, they can’t tell you anything about what people in any particular city are watching.
That matters because not all the ads you see on prime-time television are national ads. In fact, a sizable percentage of them are local. And local advertisers like demographic information as much as national advertisers do. If you own a health club in Fort Wayne, Indiana, you’d like to know what Tuesday prime-time show eighteen- to thirty-four-year-olds in Fort Wayne watch. But the people meters can’t tell you.

The major networks have tried to solve this problem with what’s known as “sweeps.” Four times a year—in February, May, July, and November—Nielsen sends out 2.5 million paper diaries to randomly selected people in almost every TV market in the country and asks them to record, for a week, what programs they watch. Nielsen also collects information on all the people who fill out diaries, so that at the end of each sweeps month it’s able to produce demographic portraits of the country’s TV markets. The networks’ local stations—the affiliates—and local advertisers then use the information from those diaries to negotiate ad rates for the months ahead.

What’s curious about this system is that it’s lasted so long— sweeps have been around since the early days of television—even though its flaws are so obvious and so profound. To begin with, there’s no guarantee sweeps ratings are accurate. The lower the response rate to a random survey, the greater the chance of error, and the sweeps system has a remarkably low response rate—only 30 percent or so of the diaries that Nielsen distributes are filled out. That helps create what’s called “cooperator bias,” which means that the people who cooperate with the survey may not watch the same programs as people who don’t. (In fact, they almost certainly don’t.) And the low-tech nature of the diaries creates problems, too. People don’t fill out the diaries as they’re actually watching TV Like most of us, they procrastinate and fill out the diaries at the end of the week. So what people record will be what they remember watching, which may not match what they did watch. People are more likely to remember high-profile shows, so the diary system inflates network ratings while deflating the ratings of smaller cable networks. The diaries are also no good at chronicling the restless viewing habits of channel surfers.

Even if the diaries were accurate, though, they wouldn’t be able to tell advertisers or the networks what people are really watching most of the time. That’s because network programming during sweeps months has almost nothing in common with network programming during the other eight months of the year. Be cause sweeps matter so much to local stations, the networks are forced into what’s called “stunt” programming. They pack sweeps months with onetime specials, expensive movies, and high-profile guest appearances. February 2003, for instance, became the month of Michael Jackson on network television, with ABC, NBC, and Fox all spending millions of dollars on shows about the bizarre pop singer. And that same month saw the long-awaited (at least by a few) climaxes to the unreality-TV sagas The Backelorette and Joe Millionaire. The networks also have to air only new episodes of their best shows. During sweeps months, no reruns are allowed.

Stunt programming is bad for almost everyone: the advertisers, the networks, and the viewers. Advertisers, after all, are paying prices based on ratings that reflect stunt programming. Allen Banks, executive media director at Saatchi and Saatchi, North America, has called sweeps “a sham, a subterfuge.” The picture they give you is anything but typical of what’s going on the rest of the year,” he has said. Some advertisers do try to account for the impact of sweeps when buying ad time, but since in most local markets sweeps represent the only hard data they have, the numbers still end up being disproportionately important.

For the networks, meanwhile, sweeps months mean that much of their best—in the loose sense of the word—programming will be wasted in head-to-head competition. During sweeps month, in any given hour there may be two or three shows worth watching (if you really like television). But viewers can only watch one of those shows. Had the networks been able to air those shows at different times instead of against each other, the total number of people who watched them would have been much higher. By pitting their best shows against each other, the networks actually shrink their total viewership. In the same vein, sweeps are bad for TV viewers because they guarantee a paucity of new and interesting programming in non-sweeps months. If you’re a connoisseur of lurid spectacle, your cup runneth over in November. But in January, you will be drowning in a sea of reruns.

Sweeps, then, are not very good at measuring who’s watching what; they force advertisers to pay for unreliable and unrepresentative data; and they limit the number of viewers the networks can reach over the course of a year. Everyone in television knows this, and believes that the industry would be much better off with a different way of measuring local viewership. But even though there is a better alternative available__namely Nielsen’s people meters— everyone in television continues to participate in the sweeps system and play by its rules. This raises an obvious question: Why would so many people acquiesce in such a dumb system?

The immediate answer is that it’s too expensive to change. People meters are costly to install and even more costly to keep running, since they’re always on. Wiring every local market with people meters would cost . . . well, it’s not exactly clear since Nielsen refuses to release any data on how expensive the people meters are. But at the very least, if you wanted to wire thousands of homes in each of the country’s 210 TV markets, you’d likely be talking at least nine figures. That’s a lot more than the paper diaries—which people fill out for free—cost, even with the postage included.

Still, even $1 billion isn’t that much money in the context of the TV and advertising industries as a whole. Every year something like $25 billion in ad money is spent on the basis of sweeps data, which means that $25 billion is almost certainly being misspent. The networks, meanwhile, spend hundreds of millions of dollars every year during sweeps that could certainly be better spent elsewhere, while they also pay a price for the suicidal competition that sweeps creates. So it seems likely that investing in people-meter technology__or something like it—would be the collectively intelligent thing to do, and would leave the networks and the advertisers much better off.

The problem is that even though most of the players in the TV business would be better off if they got rid of sweeps, no single player would he better off enough to justify spending the money on an alternative. Local advertisers in Sioux Falls, for instance, would obviously like it if they knew that the ratings of the CBS affiliate in Sioux Falls were really accurate. But local advertisers in Sioux Falls don’t spend enough money to make it worth their while to invest in people meters for the town. And ABC might prefer not to have to stunt program, but it doesn’t get much direct economic benefit from a more accurate local-rating system.

One obvious answer would be for everyone to pitch in and fix the system. But that strategy collides with the stinging critique of the possibility of cooperation that the sociologist Mancur Olson offered in his 1965 book, The Logic of Collective Action. Olson focused his work around the dilemma that interest groups, like the American Medical Association, faced in trying to get individual members to participate. Since all doctors benefited from the AMA’s lobbying efforts, but no one doctor’s effort made much of a difference in the success or failure of those efforts, Olson thought that no doctors would voluntarily participate. The only answer, he argued, was for the groups to offer members other benefits—like health insurance or, in the case of the AMA, its medical journal—--that gave them an incentive to join. Even then, Olson suggested that it would be difficult at best to get people to do things like write a letter to Congress or attend a rally. For the individual, it would always make more sense to let someone else do the work. Similarly, if the group of networks and stations and advertisers were to act, everyone in the business—including those who did nothing— would reap the benefits. So everyone has an incentive to sit on their hands, wait for someone else to do something, and free ride. Since everyone wants to be a free rider, nothing gets done.

As we’ve seen, it’s not clear that Olson’s critique is as universally applicable as it was once thought to be. Groups do cooperate. People do contribute to the common good. But the fact that people will contribute to the common good doesn’t mean that businesses necessarily will. The kind of enlightened self-interest that can lead people to cooperate requires an ability to think about the long term. Corporations are, perhaps because investors encourage them to be, myopic. And in any case, the way the TV industry is organized makes the networks and advertisers more susceptible to the collective-action trap than they otherwise would be.

The way Nielsen ratings are paid for exacerbates the problem. Since sweeps data is valuable to both the affiliates and the advertisers, you might imagine that the cost would be split between them. In fact, though, the affiliates pay 90 percent of the cost of collecting and analyzing the sweeps diaries, and since the one who pays is the one who has the power, the affiliates dictate what happens to sweeps. As it turns out, they’re the only players in television who like sweeps. The diary system, after all, favors recognizable names and networks, which means it inflates the affiliates’ ratings at the expense of smaller stations. The affiliates don’t pay any of the hundreds of millions of dollars the networks spend on sweeps programming. They just reap the benefits. As for the negative effect that sweeps has on viewership in the other eight months of the year, the affiliates don’t really care about those months, since their ratings aren’t being tracked then, It’s only a little bit of an overstatement, in fact, to say that the only shows the affiliates care about are those that air in February, May, July, and November. Far from wanting to use people meters, the affiliates are actively hostile to them. In fact, when Nielsen introduced people meters into Boston in 2002, not a single affiliate signed up for the service. The stations decided that no ratings would be better than the people- meter numbers.

As much as the persistence of sweeps testifies to the problem of collective action, it also demonstrates the perils of allowing a single self-interested faction to dictate a group’s decision. If funding a reliable local-ratings system was something that historically the networks and advertisers had helped pay for, they might actually have had some leverage when it came to revamping the system. Instead, they’re effectively dancing to the affiliates’ tune.

All in all, its a grim picture, even if you leave out Joe Millionaire and Michael Jackson’s face. It is a picture that’s going to change—as cable becomes important, the paper-diary system looks more and more like a relic, and in 2003 Nielsen announced that it would go ahead and roll out people meters in the country’s top-ten television markets. But what remains striking is that a multibillion-dollar industry has been stuck for a long time with a backward, inaccurate technology because the major players could not figure out how to cooperate. If successful solutions to cooperation problems are often, as in the case of the uprising against Richard Grasso, the result of individually irrational acts producing collectively rational results, the failure to solve cooperation problems is often the result of the opposite phenomenon. On their own, all the key players in the TV industry have been smart. But together, they’ve been dumb.

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