CHICAGO (CN) — Since 1950, the Nielsen TV ratings service has been one of the primary methods U.S. television producers use to measure viewership, but a new lawsuit questions if it should remain so.
Alongside several other TV entertainment companies, The Weather Channel's parent company Weather Group LLC accuses the Nielsen Company of undercounting TV viewership with an "outdated" data collection system.
The lawsuit filed Wednesday morning in Cook County Circuit Court also claims that, due to the Nielsen system's alleged deficiencies, television producers collectively lost over $700 million in lost ad revenue between September 2020 and December 2021.
"Nielsen is the most well-known television ratings service provider in the country, but it relies on an antiquated panel system to estimate television viewership," the complaint states. "This is a crude tool that does not reliably measure television viewership in the Twenty-First Century."
The Nielsen Company was founded in Chicago in 1923, and began tracking television viewership in 1950. It famously tracked the number of people watching the first televised presidential debate between Richard Nixon and John F. Kennedy in 1960; according to its data, over 70 million people tuned in.
To track viewership, Nielsen recruits households across the U.S. to join a "research panel" for data collection. Participating households are given a "people meter" recording device to hook up to their televisions, along with a remote control. These meters allow individual household members to select their age and gender so that this data can be correlated with what programs they were watching and when. Nielsen then sells this data to television companies, which they use to calculate how to sell air time to advertisers.
Currently about 40,000 American households participate in Nielsen's system, less than 1% of the estimated 121 million TV-watching homes in the U.S. as of 2020. Weather Group's lawsuit claims this system is inadequate to properly track viewership in the age of streaming and pandemic lockdown binge-watching.
"During the pandemic, media companies publicly complained that Nielsen was undercounting TV viewership across the entire country. These complaints revealed that Nielsen's research panel - already too small to capture modern TV viewership - had decreased in size even further due to an inability to go into the field to repair or replace hardware, or install hardware for new families who joined the panel," according to the lawsuit.
The suit claims that for years now, Nielsen could have implemented better practices or made use of better technology - like smaller competitor Comscore's set-top boxes that digitally track the number of households viewing a particular TV show - but didn't due to its comfortable position at the top of the ratings service industry. As a result, the suit alleges, Nielsen has significantly underreported viewership to Weather Group and other industry players that rely on accurate viewership numbers to manage their ad sales.
To bolster its argument, Weather Group also points to Nielsen losing its accreditation from the Media Rating Council, a nonprofit that manages accreditation for U.S. media research and rating companies, in September 2021.
“While we are disappointed that the situation has come to this, we believe these are the proper actions for the MRC to take at this time,” George W. Ivie, executive director and CEO of the MRC, said in a statement at the time.
Nielsen says it requested a hiatus from MRC-accredited status itself in August 2021 to address concerns the MRC raised over the course of the Covid-19 pandemic. These included growing its pool of data-collecting households, as well figuring out how to factor in the viewership of households that only watch programming available online and via streaming services.
"We understand and accept the issues laid out – which is why we recently requested a hiatus in accreditation to address them. In fact, we have already taken considerable action on these items," Nielsen CEO David Kenny said in a statement to clients in 2021.
Though Nielsen claims it requested this hiatus to to implement methodology changes, Wednesday's lawsuit filed alleges this claim was a preemptive move to save face before its accreditation was revoked.
"Nielsen has known about these problems for years, yet it continued to cause media companies like the plaintiffs to spend millions for its worthless ratings services," the complaint states. "Nielsen is now scrambling to address the serious concerns raised by its media company customers, but the damage has already been done for companies like plaintiffs."
Kenny doesn't seem to rebut most of the lawsuit's assertions. In a separate 2021 open letter to Nielsen's clients, he admitted the company "hasn't been perfect."
"We were slow to explain how the health and safety-related measures we took led to a reduction of our panel size," he said in the letter, though he also added that the company was trying to take its clients' and the MRC's criticism to heart.
"We have increased the frequency and openness of our communications and will share future developments in a more timely and transparent manner. We have and will continue to respond to the MRC and our clients on areas we can improve, as their audiences are changing at a rapid pace," Kenny wrote.
For Weather Group and its co-plaintiffs – CF Entertainment and Entertainment Studios Networks – the mea culpa is too little, too late. On top of compensatory damages, they want out of their current contract rates with Nielsen and a promise that any future contracts with the company will have lower rates.
"The industry is fed up with Nielsen's antiquated system," the lawsuit states.