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How do Nielsen TV Ratings Work?

Nielsen ratings need no introduction to TV veterans. It is the most recognized audience measurement provider for the TV industry. Nielsen ratings are the final results for a particular TV show or program. TV channels and networks use these ratings to charge advertisers accordingly. The higher the ratings of a particular TV show, the higher the advertising rates during the program. However, the calculation of Nielsen ratings is not widely understood. If you have been curious about how exactly Nielsen ratings work, then read on.

Nielsen Ratings – How do they actually work?

The Nielsen rating system is an 8-step process that involves surveys, random sampling, software, and data analysis. The rating process has evolved continually over the years. Technology has changed, opening up new challenges for accurate ratings. Then there’s the fact that there is an entire generation of people who don’t watch TV in the traditional way. Cord-cutters present their own challenges to Nielsen. However, we will get to that later. First, let’s look at how the rating process works:

  1. Establishment Survey
  2. Sample Selection
  3. People-meter Installation
  4. Daily Polling
  5. Audio Reference Site
  6. Matching Audio References with People-meters
  7. Consolidation
  8. Data Delivery

Sounds like a lot to digest, doesn’t it? Don’t worry, we will be looking at each step in turn. Let’s begin.

1. Establishment Survey

The first step in the Nielsen rating process is a large-scale survey across the population set. The purpose of this survey is to define the population set. It also defines the characteristics of the represented population. In this process, the population set is the number of households across America. Defining the households or the population set correctly is very important because the sample set is a subset of this population. This means that each household selected for the sample should accurately represent the rest of the population. Nielsen draws upon census data, as well as the address book and telephone databases to draw the total population set. Choosing the sample set or “Nielsen households” is the next step in the rating process.

2. Sample Selection

Selecting the sample is the second step in the eight-step rating process. Nielsen selects Nielsen households through a random sample of the total households in America. Obviously, this “random” sample has a careful statistical process behind it. The selected Nielsen households represent different, important parts of the total population. Moreover, each Nielsen household that contributes data to ratings represents other similar households. This similarity takes into account:

  • Population distribution
  • Income distribution
  • Geographical distribution
  • Age, race, gender, and other demographics

The company recalculates its population and sample set every year to continue to provide accurate data to TV networks.

3. People-meter Installation

Next is the installation of the people-meter in the sample households. This piece of technology usually gets installed on every working TV in the household. What it does is gather data on the TV viewing habits in the household.

However, Nielsen doesn’t just waltz in and install hardware on all working TV sets in your house. First, it sends a letter to all of its prospective households. The letter explains the methods and information that Nielsen will collect using them. The letter also explains the importance of participating in the sample as a Nielsen household. In return, households usually get a small “Thank You” gift for agreeing to participate. This is not an effort to “pay” for viewer ratings. It’s only a small compensation for the time and trouble the household takes to become part of the process.

Households have the option to decline, in which case Nielsen will contact an alternate home. The process is statistically clinical, so alternate households can cause some deviation from the actual results.

4. Daily Polling

Now we come to the data the people-meter collects and transmits. The people-meter typically collects 5 types of data:

  • TV switch On time
  • Digital audio signature of the watched channel
  • Channel source
  • Who is watching
  • TV switch Off time

Every night, between 2:00 and 6:00 am, the people-meter transmits the data it stored during the day to Nielsen. The people-meter is both a metering device as well as a reporting device. All individual people-meters in a household network together with a single home unit. Every night, this home unit uploads the data on viewing it collected, based on the 5 data types listed above.

5. Audio Reference Site

While all of this is happening, there is a separate Audio Reference site set up. This site captures the unique audio signature for each broadcasted TV channel. All these audio signatures are in store in one central location: the audio reference site. Why does Nielsen need to do this? The audio signatures from the audio reference sites should match against the data from people-meters. This makes for more statistical accuracy.

6. Matching Audio References with People-meters

The next step in the process is matching audio signatures centrally. This is where the audio reference site comes in handy. Audio signatures from the people-meter need to match with reference audio signatures. This lets Nielsen define what channels were on at what time on what TV in a specific household. The audio signature from the people-meter is not enough on its own. Nielsen needs to confirm that the audio signatures from the people-meter, in fact, match the signatures on the audio reference site.

7. Consolidation

Now we come to the consolidation of the collected audio signatures and data. A central software controls the processes of collecting data. The same software controls data consolidation and validation. The raw data from every home unit in every sample household consolidates into an actionable minute-by-minute database.

8. Data Delivery

Subscribers to Nielsen can download the last day’s consolidated data. These are the ratings that we discussed above. The data also presents a number of other information points. The major metrics that Nielsen provides include:

Ratings of a particular program, which is a percentage of total households with a TV.

The share of a particular program, which is the percentage of households watching a TV show out of total households with a TV switched on.

Cume, which is the cumulative audience or reach of a particular program

Frequency, the average number of times people watched a particular program during a specific time-frame.

GRP or Gross Ratings Points, which is the total viewing audience for a particular program or ad during a specific time-frame.

AQH or Average Quarter Hour, which is how many households had the average minimum TV time during a specific 15-minute period of viewing.

Conclusions

By now you should have a clearer idea about how Nielsen ratings work. This means you must also have a clearer idea of the more pressing challenges the rating system faces. Online platforms and mobile apps offer more avenues for entertainment. Netflix, Amazon Prime, Hulu, and many other streaming services have disrupted traditional TV viewing. There are a ton of TV apps like HBO GO and HBO Now, that let users take their entertainment mobile. The cord-cutter generation poses a number of challenges to traditional TV networks as well as rating systems. Nielsen is already adapting, evidenced by Nielsen Twitter Ratings and partnering with SocialGuide. How the future plays out is anyone’s guess at this point.

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