Stepping up pressure on advertisers, National Broadcasting Co. said Tuesday that it would follow competitor ABC's lead and institute a new policy on how it sets ad rates.
The networks are abandoning the old method of how they guaranteed audience levels to advertisers because of what the networks claim are flaws in A. C. Nielsen Co.'s "people meter" national ratings system.
Nielsen has come under fire from ABC, CBS and NBC because television viewership declined sharply in the first quarter of the year and the ratings service has not been able to explain the falloff to the satisfaction of the networks. Nielsen maintains that it has inspected the system and can find nothing wrong with it.
Although technically different from ABC's new policy, NBC nonetheless seeks the same thing: to limit its liability from the steep falloff in viewers as recorded by Nielsen earlier this year. The NBC decision will affect a big chunk of the projected $4.3 billion in advertising time to be sold in the coming weeks.
Until now, the networks used the previous season's ratings for a show to set advertising rates for the upcoming year. Under the new system, NBC will use data from the previous six years, when available, to set the rates.
All three networks are worried about the accuracy of the current Nielsen system they might have to give advertisers hundreds of millions of dollars worth of free advertising time if ratings do not measure up to expectations. Only the fourth network, Fox, will guarantee the ratings of its shows based on the method used in past years.
Larry Hoffner, executive vice president of network sales for NBC, called the new policy an "interim solution" to the problem until a new measurement system could be devised. "We recognize there has been a trend in declining viewing, but what happened in the first quarter is larger than anything we've seen." Predictably, NBC's announcement was no more enthusiastically embraced by advertising agencies than ABC's decision had been the week earlier.
"The NBC plan builds in some anticipated decline," said Betsy Frank, director of television and new media at Saatchi & Saatchi Advertising Inc. in New York. "But it's basically the same thing as ABC's."
Frank and other advertising agency executives say they are satisfied with Nielsen's contention that the current "people meter" system is working properly. The agencies contend that the networks are using the current controversy to take the spotlight off their rapidly eroding market share.
Despite agency protests, however, there appears to be little that the agencies can do. Network television is still the only medium that provides the broad reach required of major packaged goods companies, and the alternatives, such as cable or syndication, are not yet big enough to attract national-scale advertising dollars.
But Hoffner acknowledged the confusion over new ad rates could extend the negotiations for the purchase of advertising time weeks beyond the customary July 4 wrap-up date. "It looks like a long summer," he lamented.
CBS is expected to announce its own ad rate policy by the end of the week.