When people cared about Nielsen ratings

Back in early 2013, I published an article saying that Nielsen ratings were going to include streaming. I’m sure they do by now, but I don’t think I wrote a followup article. Here’s why: People stopped paying attention to Nielsen ratings. Not all people, just regular people.

The Nielsen monopoly

The company originally named for its founder. Arthur C. Nielsen, was founded in 1923 and by the 1970s was one of the most powerful media companies on the planet. They exist for a sole purpose: to know what people are watching. The business model was simple: get regular folks to record their viewing habits in paper journals. Then, gather all that information together. Once a quarter, sell it to TV stations who would then know how much to charge for ads. The more people were watching, the more they could charge.

The Nielsen ratings were a part of pop culture. People knew what they meant. Low-rated programs were likely to be canceled. High-rated ones would go on for years. The Nielsen ratings literally determined what people watched.

This system worked flawlessly for decades, when broadcast TV was the only game in town. Even as cable came in, it was still important. However, in the 21st century, things turned around.

First, it was pay-TV companies.

The entire Nielsen effect is based on the idea that people watch free, advertiser-supported television. If you sell ads to keep afloat, you need to know how much to charge. Nielsen’s ratings books told you that. However, in the last bit of the 20th century, broadcasters figured out that there was a much more reliable way to get money than ad sales.

The FCC rules changed in 1999 with the first rules regarding “retransmission consent.” Prior to this time, a TV station had the right to demand its programming be carried locally. However, there was constant fighting about what that meant. Cable companies in the 1990s routinely substituted their own commercials for the ones the TV stations provided, and that meant ad sales became a problem. The new doctrine cleared this up. Cable and satellite providers could show a broadcast signal for free as long as they didn’t change it and add their own commercials; but, starting in 1999 this was only true if the station didn’t demand money for it.

In other words, TV stations gained the right to charge cable and satellite companies for a broadcast signal. Within a few years, “retrans” fees were making more for stations than commercials. So, ratings became less important to local broadcasters as they pulled their cash in off the top, getting it straight from pay-TV companies who would then sell their own ads.

Then, it was DVRs.

By the mid ’00s, there was a new threat to the Nielsen rating system. People started routinely skipping commercials and watching TV after the crucial “3-day” period that Nielsen actually counted. Both of these things come straight from the rise of the DVR and its impact on the way we watched TV ten years ago. By 2010, TV watched live was less common than it had ever been, replaced by recordings that people watched on their own time. Nielsen struggled to keep up.

Premiums were a left hook…

Then came the rise of premium channels. A channel like HBO doesn’t run commercials. Instead, they take subscription fees right off the top. So they don’t terribly care about ratings except to know whether or not a particular show is getting people to watch. This has been true since the early 1970s but it’s only been since the rise of shows like Game of Thrones that premium channels have really eaten into the ratings. Before that, premium channels showed mostly movies, the same ones over and over so people didn’t have to worry about missing their favorite shows.

…and streaming was a right cross.

The real knockout punch for “the cult of Nielsen,” though, was streaming. Whether it’s a provider app like WatchESPN or a service like Netflix, they just don’t need someone else telling them who’s watching. Built into the very fabric of the streaming system was a way to know who was watching. Sophisticated algorithms predicted the type of people who watched, and suddenly it seemed like Nielsen didn’t have a seat at the table.

Today, Nielsen is still out there. They’ve gotten more sophisticated, but the funny thing is people just don’t care. I’m sure broadcasters still pay attention, but broadcast TV is now a small part of a large ecosystem, and there are a lot of different services out there to choose from. So while they probably did get around to rating streaming services, I have to bet that those streaming services probably just don’t care.

About the Author

Stuart Sweet
Stuart Sweet is the editor-in-chief of The Solid Signal Blog and a "master plumber" at Signal Group, LLC. He is the author of over 8,000 articles and longform tutorials including many posted here. Reach him by clicking on "Contact the Editor" at the bottom of this page.