Why Deal Structure Matters In National TV
We discuss the pros and cons of entering the National TV marketplace with a corporate buy (vs. individual brand buys).
UPDATE (4/9/21): On 3/31/21, Nielsen announced that it had delayed the introduction of BBO homes into the 56 LPM and Set Meter DMA's scheduled to incorporate this data on April 1 until October, 2021. The official currency in these DMAs will not include BBO homes, however Nielsen communicated on 4/9/21 that it has made an exception to its permissible use policy to allow clients who placed buys prior to 3/31/21 to utilize Impact Data including BBO homes for posting during the April-September period, if it is not feasible to rerate these buys to the non-BBO currency. Impact Data may not normally be used for posting, as it is not currency. This announcment does not affect the 137 RPD+ DMAs in which BBO homes were incorporated beginning 1/1/21.
The Local TV marketplace’s evolution to impressions-based buying transactions is well underway. Last year we wrote about the charge led by local TV stations and ownership groups to capture long-tail (fragmented and eroded) viewing and discussed what advertisers needed to consider.
Since then, two major events have been a catalyst pushing this into practice. First, the pandemic fast-forwarded trends in viewing habits: Streaming viewership is bigger than ever before. Second, after much industry debate and committee work, Broadband Only (BBO) homes are now incorporated into Nielsen Local Universe Estimates effective January, 2021 for RPD+ markets and April, 2021 for Local People Meter (LPM) and Set Meter markets. Below are some FAQs to inform MMi Clients and their partner Agencies.
Broadband Only Homes are TV Households that receive Local TV programming by means other than Over The Air (OTA) or Cable/Satellite (ADS). This includes streaming services (called vMVPDs in industry jargon) that – in addition to various nationally-available content – also carry a local signal, such as Fubo TV, Hulu Live, YouTube TV and AT&T Now. The Nielsen definition also includes homes that pass a tuning test for receivability of local TV content (5+ more minutes of local content), called “BBO qualified” homes. There is a third bucket of “all other” BBO homes that do not receive local content which – although included in the Nielsen Local universes – as part of a grand compromise with sellers, will not be used in the calculation of ratings until October, 2022 (leading to modestly higher ratings until those “all other” homes are included).
Nielsen has been tracking Broadband Only Homes for a number of years, but the turning point to include these households in the standard Nielsen universes and incorporate them into the currency on which TV commercials are transacted has been challenged by the TVB (the industry organization for the local stations/sellers). Based on middle-school math, if the universe (denominator) grows, the rating (percentage out of the universe) falls. BBO homes that view local TV at all tend to watch less of it. Counting these homes in the local universes may provide a more accurate picture, but it will generally translate to lower ratings for local stations. With viewing fragmentation and erosion, ratings have already been falling even before expanding universes.
Yes, if you are the advertiser. Marketers need to understand their customer base as broadly as possible. Measuring how many people view Local TV ads should be counted out of how many people have access to Local TV content – at minimum. (It would be better to understand this relative to all people with any kind of screen, but that is a much larger discussion for a different day.)
The Nielsen projections the past several years demonstrate a decline in non-BBO Local TV Households (HH), or OTA/Cable/Satellite only, which can no longer be ignored. In 2021, HHs which are not Broadband Only represent only 82% of total TV HHs (103.0 million). The inclusion of BBO homes, alternately, represents 96% of all U.S. TV HHs (121.0 million out of the total 125.7)). Including BBO homes captures an important 14% of homes (national average that varies by market) with often different viewing habits.
If you are the local stations, then No, including BBO homes in the universe is less desirable per explanation in item above, at least in the short term. It represents a likely decrease in ratings. However, it can be argued that those lost ratings are not there in the first place, and that marketplace supply and demand dynamics – fueled by accurate audience delivery data – will drive stability over time. If your 2.0 rating is now a 1.9, but it’s still the biggest thing out there, certain advertisers will pay a premium for that, particularly since everything else just got smaller as well.
As you might expect, universes are larger when adding BBO homes, but the magnitude varies widely by market. Nielsen TV Homes in Los Angeles increase from 5.0 million in October 2020 to 5.7 million (+16%, including 1.0 million BBO homes). In Miami, which has lower BBO penetration, the universe increases from 1.6 million to 1.7 million (+8%).
With the inclusion of BBO homes, ratings to local stations generally go down because the denominator (Universe) is larger than before, while these BBO homes tend to watch less Local TV than their non-BBO counterparts (resulting in a numerator that does not keep pace).
Total Impressions to local stations, however, generally go up because viewing by BBO homes is captured (and wasn’t previously).
However, keep in mind the characteristics also change because the demographics and viewing habits of BBO homes are different. Again, the degree varies by market. According to Nielsen Impact Data for October 2020, Age of Head-of-Household Under 35 composition in Atlanta goes from 13% to 19%, in Los Angeles from 12% to 16%, and in Miami from 11% to 14%. Hispanic composition change in these three markets is minimal.
Impact Data has already been released for May 2020, July 2020, September 2020, and October 2020. The impact data for November 2020 was released in late February, followed by December 2020 in late March, and January 2021-March 2021 shortly thereafter (for Metered markets only since already currency for RPD+ markets). Buyers can use this data to understand how the BBO homes and new/expanded universes view certain dayparts, programs, and stations to inform projections for future buys.
These changes including BBO homes need to be considered in addition to the regular annual universe updates that are refreshed every October. Impact data for May-September 2020 is based on the prior (annual) universes, with Local BBO. Impact data for October 2020 reflects updated (annual) universes, with Local BBO.
No, there is no choice regarding which universe to use. There is only one universe that is currency for Nielsen moving forward, and it will include Local TV BBO Homes effective 1Q21 for RPD+ and 2Q21 for LPM and Set Metered markets. All quarterly posts will be calculated off the currency data. The one wrinkle here is that, in a bit of a concession to sellers, for the period from April 2021 through September 2022, only “qualified” BBO homes (those which watch at least 5 minutes of TV on a local station) will be included in the denominator for ratings calculations in Nielsen metered markets. This so-called “Sum of Weights” will lessen the ratings impact to local stations during this period. (Wait, what? I know.)
But, your organization might want to consider whether Ratings or Impressions work best for you moving forward. (Please read on for more on that topic.)
Given the universe conversion, the complexity of estimating, and the likelihood for ratings to go down (further), many are converting to impressions as the basis for Local buying. Stations were already asking to transact on impressions to capture the long tail viewing, and large station ownership groups such as NBC are now “mandating” it. (MMi puts “mandate” in quotes because advertisers hold the purse strings and should make the decisions right for them instead of blindly accepting seller recommendations.) For Advertisers, however, there are also benefits to being able to add impressions and compare pricing across media channels and DMAs with different universes.
In the impact data for Atlanta (per Nielsen summary published in early February), the Late News on the ABC affiliate on Adults 25-54 goes from a 2.93 rating in October down to a 2.40 rating on the new universe currency (-18%). But the impressions go from 65,076,000 up to 66,590,000 (+2%). With this example, you can see why the sell-side is pushing further for impressions-based transactions (instead of ratings). And also how a TRP loss that great might be problematic for an advertiser and its stakeholders not well-versed in media math, because impressions are actually up. The ratings are “going down”, because they weren’t there in the first place.
As we’ve noted, the sell-side would like to transact on impressions, and there’s a case to be made with the new universes and layers of complexity that some advertisers are ready to abandon ratings as well. Moving to impressions also allows for simplification in adding deliveries across media channels or comparing CPMs. Auditors note: Just because impressions are not percentage-based, that does not automatically mean they are appropriately additive in every case. Let’s say that again. Just because you can add two numbers together does not mean that you should. We are already seeing agencies add Nielsen demo impressions (say Adults 18-49) to streaming non-demo impressions (i.e. total views). This is bad math. Yes, you end up with a total, but a total of what?
Back up a moment to why TRPs have been the basis of Local TV buys for decades: they represent the gross sum total of individual spots each reaching a percentage of a particular universe, population, or market, and translate directly to a reach and frequency curve. Advertisers who are focused on a given market might want to continue this practice. Organizations with Local Dealers, Franchisees, or Co-Ops may choose to continue expressing media impact in TRPs for their stakeholders (and media pricing in Costs-Per-Point). Even if they translate this to impressions (and CPMs) for executing their buys. Whether companies switch to impressions or stick with ratings, they will want to educate key constituent groups on these changes in the marketplace and currency – because they will have to address changes in either event.
At MMi, we can process either TRPs or Impressions. It is best practice that planned and actual performance be expressed in the same language, and we do thus require that media plans for buys posted on impressions be submitted on impressions. We cannot make assumptions about what universe an agency may have used in doing any translations to TRPs during its planning process. .
The change is happening, and it is the right thing for the industry. If it complicates your life, take the opportunity to move to Impressions-based planning and buying and you’ll be better positioned for cross-media measurement in the future. Industry models can still give you your reach and frequencies. If you have local stakeholders in a given market, keep your TRP goals and document the rules for translation to how you provide those goals to your buyers and hold the downstream supply chain accountable.
Want to talk more about what these changes mean for your Brand? MMi lives for this stuff. Give us a call.
Photo Credits: © Jason Kolenda, Piotr Adamowicz, and Gregory Johnston (respectively) | Dreamstime.com
We discuss the pros and cons of entering the National TV marketplace with a corporate buy (vs. individual brand buys).
Agencies regularly present Over Delivery as a more-is-better phenomenon, but in media it represents a resource allocation problem. In fact, when allowed as regular practice, it demonstrates mismanagement of advertiser funds.