September 15, 2004
Why The Race Card Didn't Work For Rupert Murdoch
How Nielsen Stood Up To Murdoch Business Week
Fox played the race card to upend a new TV ratings system. It didn't work.
by Anthony Bianco in New York, with Ronald Grover in Los Angeles
Susan D. Whiting knew she was in for a long, hot summer as early as Mar. 30. That was the day Rupert Murdoch, media mogul supreme, interrupted a discussion about interactive advertising to lambaste her in front of many of TV's most powerful executives. Whiting, president and CEO of Nielsen Media Research (VNUVY ), was stunned but maintained her composure. "I'd never met Mr. Murdoch before, but I felt I had to respond," she recalls. "So I did, and then I asked if we couldn't go back to the subject we had all come to discuss."
What incensed Murdoch, the chairman of News Corp., is a Nielsen plan to change the way it tracks TV viewing in the 10 largest U.S. markets.
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Nielsen, owned by Dutch media conglomerate VNU (VNUVY ), is no stranger to controversy. Complaining about the inflexibility of Nielsen, its arrogance, and, above all, its high prices is a long-standing tradition among the TV programmers and ad agencies that have never really had a practical alternative to buying its ratings data. "The industry has a love-hate relationship with Nielsen," says David Verklin, CEO of Carat North America, a large media-buying agency. "Actually, it's hate-love, and there's not a whole lot of love in it."
This current contretemps, however, is something new for Nielsen Media -- in the virulence and breadth of the attacks directed against it. News Corp.'s (NWS ) attack transformed an intra-industry dispute over research methods into a racial and ethnic cause célèbre. This strategy was cleverly conceived to exploit Nielsen's unpopularity and inexperience in the dark arts of political string-pulling and public relations spinning. "They were totally caught off guard when Rupert came out, guns blazing," concedes Angela Mariana Freyre, a partner at Coudert Brothers LLP, outside counsel to Nielsen.
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It was not until VNU acquired Nielsen Media for a hefty $2.5 billion in 2001 that the company and newly appointed CEO Whiting announced ambitious plans to also begin using people meters to measure local audiences in the top 10 U.S. cities, beginning with Boston in 2002. The advent of the local people meter was a particularly ominous development for News Corp., which is much more heavily weighted to broadcast and lighter on cable than are the corporate parents of CBS (VIA ), NBC (GE ), and ABC.
Nonetheless, in October, 2003, Fox Television Station Group signed a comprehensive new service contract with Nielsen covering all 35 Fox stations in the U.S. Under this agreement, Fox agreed to buy people meter data in all 9 of the top 10 markets where it owned a station. By February, though, News Corp. had become so alarmed by the people-meter test-run data from New York that it demanded that Nielsen postpone the scheduled start of commercial service on Apr. 8. Whiting refused. A few weeks later, News Corp. issued a statement by Lachlan K. Murdoch, Fox's chairman (and Rupert's son), that framed its objections in a racial context: "People meters could undercount
viewership by as much as 25%, especially when quantifying viewership among minority and young viewers."
About the same time, a newly formed group called the Don't Count Us Out coalition began going after Nielsen. News Corp. has acknowledged that it supported Don't Count Us Out "financially, organizationally, and morally" but denies Nielsen's accusations that the coalition is a front for Fox. "This is a group who saw that [Nielsen's] data wasn't accurate and rose up against it on their own," says News Corp. spokesman Gary Ginsberg.
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By all appearances, Nielsen now has the whip hand in its struggle with News Corp. Whiting's public relations offensive has blunted the threat of federal oversight of the ratings business, and the company scored a crucial legal victory when a state judge in California declined to halt Nielsen's people meter rollout in Los Angeles. As for News Corp., it continues to do business with Nielsen -- incontrovertible evidence that the company's lucrative monopoly is intact.