An Interview with A.C. Nielsen, Jr. by Karen S. F. Buzzard

Karen S. F. Buzzard:

An Interview with A.C. Nielsen, Jr. (conducted on August 11, 2001):

Untitled1See Historical Journal of Film, Radio, and Television (Vol. 35 No. 3) for Companion Piece on ‘The Rise of Market Information Regimes and the Historical Development of Audience Ratings”

A.C. Nielsen, Sr. and Jr. 
 

Abstract:  The author conducted an interview with ratings pioneer, Arthur C. Nielsen, Jr. (1919-2011) son of Arthur C. Nielsen Sr. (I897-I980) in September 2001 at his office in Northbrook, Illinois. Nielsen. Sr. was the founder and former chairperson of the A.C. Nielsen Company. The A.C. Nielsen Company was part of the rise of a system of independent suppliers of information assessing market performance that are publicly available and are used by stakeholders in the market to assess their performance and the performance of their competitors, known as information regimes. Nielsen, Sr. made his name and business fortune by providing inventory audits for retailers. Ratings were really but an extension of this system of audits to provide feedback and greater control of the selling process. Nielsen Jr., discusses how his father began his marketing business, how his marketing business led to his entry into ratings industry, his own contributions to the A.C. Nielsen company, the origin of key technological innovations, such as the company’s major method employed to conduct audience surveys, the Audimeter, and its improvements, the introduction of computers, his key competitors in the ratings industry, and the 1963 Congressional Investigation into the ratings, known as the Harris Hearings, after its chair, Oren Harris, which attempted to clean up of the ratings industry and its aftermath.

Keywords: A. C. Nielsen, Nielsen, ratings, audience research, audience ratings, Oren Harris, Harris Hearings.

Q: How did your father get started in his business?  

My father got an idea for a business while working for the publisher of an electrical goods magazine. In those days there were not many advertising agencies that prepared ads for industrial manufacturers. That was his job. For example, when a representative of General Electric or Westinghouse wanted to place an ad for their new generator, my father would prepare the ad for them. He noticed that these competitors stressed the good features of their equipment. Oftentimes two or more manufacturers claimed that their products were the best even though they were virtually identical. His idea was to determine by actual measurement which machine did, in fact, the best for a particular application. He proposed the idea to his employer who saw no merit in the young man’s idea. So, in order to pursue it, he raised $45,000 from college friends and founded A. C. Nielsen Company This was in 1923.

The business grew nicely until the Great Depression of the early Thirties. At that time, he had 45 engineers who traveled around the country trying to find out which machine did the best jobs for a specific task, making what he called performance surveys for factories. He used samples or surveys.

When the depression came along, manufacturers were interested in the problem of how to sell the output of the machines that they had. They saw no need to buy additional equipment. Their big problem was how to sell what they could produce. My father’s business dropped off dramatically reaching the point where there were only six employees. By 1930 (the seventh year of the company’s operation) annual sales had climbed from $52,081 to $205,854, but as the Great Depression of 1929-33 gripped the country, sales declined 75% falling lower than the year the company started. They had one prospect left in New York. They took a vote as to whether to divide up what was left in the cash drawer or send my Dad to New York hoping that he could get the business. There was only one problem. There was only enough money to him to New York. If he didn’t get the order, there was no way for him to get home. That night he explained to his 13-year old son the wonders of the capitalist system. He explained to me that by investing his life savings of $54, I could become a stockholder and participate in the company’s profits. As I went to bed, I heard my mother berating him for taking the poor boy’s life savings and pouring it what she affectionately referred to as a rat hole. Fortunately, he made the sale. I recovered his investment many times over eventually becoming head of the company. It turned out to be a pretty good rat hole.

The company discontinued Industrial Performance Surveys and began experimenting with a variety of methods for measuring the retail sale of food and drug products. He switched his business from production or manufacturing problems to consumer products, gradually added makers of consumer goods and then broadcasters of radio and television.

Q: How did you (Arthur C. Nielsen, Jr.) start in your father’s business? What innovations were you more involved personally with in the marketing or the ratings end of the business?

I started in my father’s business as a trainee where I would work in each department of my father’s business. On my first day, my father reminded me that I would be the dumbest man in the company. I was placed in a training program where I worked in each department. My father thought of a brilliant way to be sure that I understood the business from the ground floor up. I could not get out of that department until I thought of one way of making that department better and getting the department head to agree. So through these means, I learned the whole business from one end to the other and it helped me a great deal later in life, when I became first President and then Head of the Board, because I could see how it all fit together. By the time of his retirement, I had conceived of about half of Nielsen’s Company’s 143 businesses.

After graduating from high school, I joined the Army in the Engineer Corps. When I was stationed at the Aberdeen Proving Ground, I saw a machine being developed by two young men, 28 years of age, and professors at the University of Pennsylvania. It seemed to me that the machine, with a few modifications, would do the job for Nielsen very well—much better than what we had been using. When the War ended, I joined the Company and persuaded my father to make an agreement with them—John Mauchly and Presper Eckert. Nielsen placed an order in January of 1946 to build a machine to do our market research work. The machine was delivered in 1951 being completed by the Remington Rand Company, a company that took over the Mauchly Eckert Computing Company after they ran out of funds. The machine was the first commercial computer—UNIVAC 1– and is now in the Smithsonian Institute.   We were one of the earliest users of the electronic equipment. Beginning in 1952, this enabled the Nielsen Company to deliver its reports faster, at lower costs, and with more comprehensive analysis than our competitors.

During the early part of my career, I was involved in the marketing side of the business. Eventually my father turned over the broadcast audience research business to me. The broadcast rating business is a very difficult one. It was plagued by the fact that you had to work for both the buyer and the seller and their interests were often divergent. In marketing you only had one client. The work in marketing was very satisfying because we were helping our clients and relationships were always very good between the Nielsen representative and the client but that was not always the case in the broadcast ratings business.

Q: What do you consider your father’s and your company’s key innovations in marketing and ratings?

There are four. First, we measured the sales of certain consumer products accurately together with the factors that were believed to influence their sale. Based on an objective analysis of this information, we were able to aid the manufacturers in developing products that were most desired by consumers and promoting their sale and distribution in the most efficient manner. I mention this because other early pioneers such as George Gallup and Claude Robinson accomplished the same thing by asking questions, such as “What did you buy last?” Were you thinking of buying a particular product? to a cross section of the population. These methods became popular but proved ineffectual because they did not get the correct answers whereas Nielsen’s methods did. Nielsen’s system, on the other hand, was an objective one which determined what they actually purchased and what caused the sale. So, by figuring out what caused the sale, it was possible to improve the clients’ results.

My father believed that for a business to succeed, decisions should be based upon objective facts. This was particularly true in the case of marketing where success depended upon the favorable response of millions of buyers. He observed that on that account there was much waste which, if it could be reduced, would permit products to be sold at lower prices increasing people’s standard of living. The pertinent facts could, he believed, be obtained from small samples that, if systematically and continuously collected, would provide a “moving picture” of a market. He believed that the “facts” should be precise and capable of being expressed by a number. Furthermore, he was able to convert the data he collected into a specific plan for the conduct of his clients’ business.

However, most business executives in the 1920’s and 30’s were unfamiliar with statistical methods and the idea that very small samples, if carefully selected, could produce reliable data so this was a tough sales pitch but one that eventually lead to his company’s success.   It is for this reason that my father believed that ratings were a measure of quantity not quality. The Audimeter was simply a measure of set tuning, whether the set was on or off and if on, to what channel it was tuned. It was a measure of whether viewers had their sets tuned to a program and therefore by extension, commercials, rather than whether viewing liked the program viewed.

During the Thirties, Forties, and most of the Fifties, advertisers, who paid most of the cost of the ratings reports during this period, believed the family listened or watched the family console as a unit. Therefore, the measure of success was the number of households watching a program. The concept of a family watching more than one set or watching separately did not develop until the 60’s. The changes in consumer viewing habits lead to advertising seeking demographics information about their viewers or listening.

A second contribution is that he conceived the concept of a share of market as the most appropriate means of measuring a brand’s performance. It was similar to the cost per thousand for ratings. I believe this came out of his early experience working in factories where he would develop a ratio of performance for different machines to determine which machine produced the most widgets per hour at the lowest cost. Out of this experience grew the idea of share of market as the measure of marketing performance. If the product’s “share of market” increased, it confirmed that the manufacturer’s product and marketing plan were being well received by buyers. Nielsen, Sr., once revealed that this idea came to him when traveling from his home in Chicago to New York City as he worked all night drawing charts designed to portray and clarify a specific problem suggesting the desirability of a specific move by the client. During this time, charts typically were hand drawn—this time with crayons borrowed from his young son, Art Jr.

A third contribution is that the company developed a reliable method for measuring in a timely manner the size and characteristics of radio and TV broadcast audiences. The Nielsen Company worked this project on faithfully for seventeen years before the service broke even.

And fourth, we developed the concept of cost per thousand as a measure of the efficiency of a specific program or commercial in reaching potential buyers of the product or services. This was made possible because of our projectable ratings, which meant our sample could be projected to the entire U.S. TV radio and TV population because we used random sampling.

These are the four fundamental things you have to give him credit for accomplishing. They are key influences.

Q: Nielsen houses 143 businesses within its market research company. Was one of the 143, ratings? How did you get started in ratings and could you describe the innovation of your key method, the Audimeter?  

Yes, one of the 143 businesses was ratings, about half of which I conceived myself. Ratings were about 10% of total business but it was the best known of all services. It helped us get the name Nielsen identified with good quality work. Prospects for a new service knew about our work and were willing to give us a try at something else. Ratings were never a big part of the overall business.

For a long period of time, after the concept of the retail audit became successful, my father turned his interest to the ratings business. He got into it at the suggestion of Lever Brothers, the US subsidiary of the Dutch-UK Unilever. The market research director of Lever, Professor Robert Elder realized that there needed to be a better method of determining how many people listened to a program and whether they were the best prospects for what they were selling. Lever was in Boston so he went to MIT. He was interested in meeting an engineering professor there by the name of Louis Woodruff. Would Professor Woodruff be able to invent a machine that would measure of what people were listening to? Professor Woodruff succeeded. However, he did not want to go into business so Dr. Elder, in 1936, turned to my father. We were doing other marketing research work for the company. Dr. Elder wanted us to take over the patents on the instrument and try to start a business. The first Audimeter made a wax recording of set tuning, when the set was on and off, the time of day, the length of time, and the station to which the set was tuned for a period of a month. However, it was costly and slow because Nielsen personnel were initially required to pick up the tape recording before tabulating the results.

So that’s how we got into the ratings business. The machine worked but it was not practical. It took six to seven years of effort on part of Nielsen before we offered the service finally in 1942. The system for both decoding these tapes and getting the programs that were being carried on the air every moment had to be worked out. After six years of effort, Nielsen reached the point where it was able to measure national radio audiences. It took this long to improve the Audimeter and develop the necessary devices, which could decode the wax tape on which the tuning data was recorded.

By 1949, Nielsen had introduced a further improved Audimeter that we called the Mailable Tape Audimeter, the purpose of which was to improve the speed of delivery of reports.  The use of the photographic process was an important advance as it solved the problem of how to get a time mark at the beginning and end of the tape. Prior to that time when wax tape was employed, a field auditor had to go to the home to determine the start and stop points.

The Mailable Tape Audimeter made an electric recording or graphic record on a photographic tape when connected to the radio receiver and rendered personal visits by field representatives unnecessary. [1] This was accomplished as the tapes were mailed from the sample homes. It was no longer necessary for a field representative to visit the homes and collect the tap and mail them to our production center in Chicago.

Q: Could you describe how the instantaneous storage meter was invented?

In 1961, one of our engineers Mr. Hugo Rush developed a machine that we called the Instantaneous Audimeter. The Instantaneous Audimeter was introduced in response to the American Research Bureau introduction of its own electronic meter, known as Arbitron. It was capable of storing TV tuning data and then forwarding the data overnight by telephone lines to our Chicago office. We could record radio audiences instantaneously. It was a very impressive device. One could see on a display panel how many people were listening at that moment to each particular station. While the device was technically very impressive it cost too much to operate. The reason for the high cost was that the phone company charged for the use of each telephone line 24 hours a day. You can imagine the cost to run a long distance telephone line 24-hours a day. This made the machine impractical. Nevertheless, we kept working on the meter and our laboratory eventually developed a better model. This device was first used successfully in New York. The large amount of advertising in this town was very important. We could also pay the telephone company their local rate rather than the long distance one.

Eventually we were successful in developing a small computer that could be installed in a home capable of storing listening for an entire day. Late at night our big computer polled all of the sample homes systematically. The data were summarized in a report available to clients first thing the following morning. This was a very substantial commercial development as it permitted the delivery of our reports overnight. Rapid delivery of rating reports was considered to be very important by the industry. By 1974 the Nielsen Company was able to deliver ratings on a daily basis. In 1977 Nielsen made further improvements in its basic meter. The new meter with increased memory had the ability to monitor 16 different attachments with listening scanned every 2.7 seconds.

Q: Could you discuss the invention of the people meter?

The people meter was invented in the 1950’s in a laboratory in Birkenstead, England. We had a partnership with Bedford Atwood and it was there that the people meter was invented. It was a joint venture. Some years later we tried it out in Florida. The meter produced ratings that were lower than those produced by the present method. For this reason, broadcasters were unwilling to support it at that time.

Audits of Great Britain (AGB) was another example of broadcasters inducing another research company to compete with Nielsen. AGB was a very credible research company. In fact, it was the biggest company in the business in Europe. It had grown out of this earlier Atwood partnership with Nielsen. The principals in AGB were Messrs. Audley, Gapper and Brown. They were the three partners of Bedford Atwood. When Nielsen merged with Atwood, neither company was making any money. It became apparent that by putting the two companies together there would be savings, having only one production system. The business might become profitable for the first time. After this was achieved, the three principals, Messrs. Audley, Gapper and Brown, called on the owner, Mr. Attwood and asked him for an increase in their pay. They had been on short rations, so to speak, for some time in the battle between Nielsen and Atwood. Mr. Atwood’s response was “Gentlemen, the keys to the Bentleys”. In short, he fired all three of them.

The three partners changed their name from Audley, Gapper and Brown to Audits of Great Britain (AGB). Atwood and Nielsen each owned 50% of the lab set up to improve meters in England. It was there as I said that someone thought of the idea of the people meter. In those days the broadcast industry in England put out tenders every five years and anyone could bid on the job to measure TV. Since Atwood had fired these three fellows, when the next time came for the opportunity to bid, they formed their own company and got the work away from Atwood and Nielsen. They had knowledge of how to do the job. Some years later they came to the United States, called on Nielsen’s customers telling them they could do the job for half what Nielsen was charging them. They reported that Nielsen was a big monopoly and had big fat profits. Unfortunately that wasn’t true. Furthermore, they offered to double the Nielsen sample size and so make their service more accurate. Their offers scared us quite a bit since they had been measuring audiences throughout Europe. Our people sat up night and day to try to figure out how we could accomplish the same thing. Nielsen introduced its own people meter to compete with AGB in the United States in 1987.

We were greatly concerned that maybe these fellows were smarter than we were and figure out a better method of doing the work. Unfortunately, we couldn’t figure out how it was possible. It turned out that they couldn’t either. According to the press, they lost somewhere between 80 and 90 million dollars. They ran a test in Boston and were unable to make their system operate properly.

Measuring the U.S. audience is a much more difficult job than people realize. I don’t think users realize how complicated the system is. The people from IBM who helped us to develop our system many years ago told me it was the most difficult problem that had ever been undertaken with their machines. People think that if they have a meter, they can measure what was being broadcast – the time and the station.

However, first you have to persuade a cross-section of the people to join the sample. Then you have to find out what program is being measured and there are hundreds of stations and cable operators. You can imagine that when several hundred broadcasters broadcasting twenty-four hours a day matching up what program is on a broadcaster or cable station is a difficult problem. Programs are changing all the time–for example, the ballgame runs over and then there is a cut into the program schedule, a newsbreak story by the President. In other words, the program’s schedule is constantly in flux. To do that job correctly takes a lot of talent and a lot of fine people. People at the A.C. Nielsen Company have been working on that problem for years and years. To help with the problem knowing what stations carry the network programs Nielsen introduced an invention called the Automated Measurement of Lineups, a technology that electronically tracked the network feeds to local affiliates. This instrument helps speed up the delivery of audience data. When new people are hired and try to do that, and they don’t do it right, and so they don’t get the right results.

Another example of competition being fostered by the networks was when they induced Gale Metzer of SMART to go into the business (using a people meter). Gail Metzger was a very bright man. He was a top Nielsen man in Nielsen’s research department for many years. He was knowledgeable about all phases of the work. He could no doubt have reproduced the Nielsen system. He had a few ideas that he thought might make the service better. People who wanted to give Nielsen a run for their money backed him. He had great trouble and dropped out having lost many millions of dollars.

Q: Whom do you consider your key competitors in the business?

Many competitors proved to be a difficult problem for Nielsen because nobody could prove which service was the best and most reliable. When broadcasters sent out a signal across the air nobody can determine which measurement gives the right number.

I believe that you would have to include Archibald Crossley and the Cooperative Association of Broadcasting as an early pioneer. Crossley ran a cooperative organization that included the three major elements in the industry, the broadcasters, advertisers and agencies, all of whom had conflicting interests. Consequently, this problem meant that Mr. Crossley’s company took a long time to reach decisions. He was a very smart man and he was good researcher. He had adopted the telephone recall method. He would telephone and ask what you listened to yesterday.

Hooper came along and used the coincidental system. He would telephone and ask what you were listening to now. He was able to get his reports out fast. I don’t think Crossley, because of the organizational form, could adapt quickly enough to what became the preferred method used by Hooper, the coincidental method. He stuck to his old system too long and that gave the business to Hooper.

Hooper was an excellent salesman. He was very creative and his public relations skills were outstanding, much better than Nielsen’s. He was a good businessman but his shortcomings were that he was not a good statistician. He was not trained that way. His research was not as good as our’s, but he had us over the barrel because he could deliver reports faster than we could and at lower prices. He was liked very much by his employees. When we bought the business from him we found that many of the employees spoke highly of him.

Hooper started his company measuring in 30 cities along the seacoast. The government had set up these cities during the First World War when the government took over the manufacturing of naval vessels. The purpose was to measure the cost of living so they could properly pay the workmen in these naval shipyards. For this reason, Hooper had a lot of good data on these particular cities. In fact, later on the U.S. government put out the cost of living index based on what was going on in these 30 cities. It was there that Hooper collected his information because he was able to draw good samples from the known data in the cities.

But, Nielsen had reason to believe these cities were not a true representation of what the public was listening to. We had done a lot of research that brought us to the conclusion that Hooper’s figures were not correct.

As it developed, TV began in the big towns first. That is where TV stations started to broadcast. These towns were where Hooper was measuring: New York, Philadelphia, Boston, and L.A., all of the shipbuilding towns. So, it looked like radio ratings had gone down dramatically and this was not true. There were still a lot of people listening to radio all over the country. Sales of products showed a difference in the purchasing habits of people living in smaller areas and middle-sized towns.

We had a sample of homes all over the country. We had small towns, middle size towns, and large towns. We could see that the ratings were different in different size towns. The major advertisers who had a real interest in getting the truth supported us. But, unfortunately there were not enough of them.

Finally, it became apparent to the industry that Nielsen had been right all along. So they began to switch from Hooper to Nielsen. Nielsen acquired the national radio rating business of C.E. Hooper in 1950. As I said earlier he was an excellent salesman. He was very creative. He would get on the train in Stanford, CT in the morning and by the time he reached the Grand Central Station he had thought of at least one new idea for making trouble for Nielsen. He was always able to think of something that was going to improve the Hooper ratings. If Nielsen said they were going to do something, he would immediately try and top us. He was a very tough competitor. He delivered his reports on time, his work was reliable and his costs were reasonable. People liked him. His shortcomings were that his service was not as accurate as our’s, but it was cheaper and the reports were faster. By the time Nielsen came out with a report everyone knew that Bob Hope got a 24 rating. All of the deals had been done before our reports were available.

Another major competitor was Albert E Sindlinger. Mr. Sindlinger had developed a system in Philadelphia that was based on a meter (known as Radox) and set out to compete with Nielsen. This was a very sad story. A man by the name of Ralph Bard Sr. who lived in Chicago and had been Secretary of the Navy called on my father. He was considering investing in Sindlinger’s operation and asked my father for his opinion of the company. My father wrote him a letter concluding that Sindlinger’s device would not be a success. In short, in my father’s opinion, this would not prove to be a good business. Unfortunately, Ralph Bard came to the wrong conclusion. He thought that Mr. Nielsen was trying to prevent him from going into competition because he was afraid that Sindlinger was going to offer a better service than Nielsen. This wasn’t true at all. My father was an absolutely honest person. He would tell you what he thought even if it was unpopular.

Unfortunately, a number of wealthy people invested in Sindlinger, especially many people in Philadelphia. Sindlinger brought a suit against Nielsen for $2.5 million claiming that Nielsen had disparaged their service telling people like Bard that Sindlinger’s service was unlikely to be successful.

This was a very serious matter because we did not have $2.5 million to put up should we lose the suit. Fortunately, during the trial, it was proven that Sindlinger had never made a profit from the very beginning. In fact, his system did not work. It used an electronic mechanical system. The meter was supposed to report accurately and quickly on a market such as Philadelphia. Unfortunately for him, the device did not supply the appropriate data and it did not work. In short, many of the shortcomings my father had pointed out were true and that was the end of the suit. We had established that we had not hurt Sindlinger at all and he never had a business in the first place. [2]

In my opinion, the best competitor we ever had was the American Research Bureau (ARB), later known as Arbitron. There were always two markets for audience research, one being the national and the other being the local. In the local market, the American Research Bureau was our competitor. We entered local TV media audience measurement in 1954.

ARB was a very good company. The head of the company, Mr. James Seiler knew how to run it. He was a low-key professional type fellow who understood the broadcast business very well and the relationship between the buyers and the sellers. He would have a good idea and then employ it. Then Nielsen would try it. Sometimes Seiler’s new idea was good and other times not. We would adopt his good ideas and he would adopt ours. Sometimes he would have a little more business and sometimes we would. It all depended on who had the best ideas.

Jim Seiler was a very skillful competitor. He had a meeting of his associates at a retreat in the Pocono Mountains. When the conference ended, he had three new ideas. We quickly analyzed them and concluded that one of them was good. The other two did not amount to anything. Shortly after the meeting, we began to lose a lot of our clients. We could not understand why our clients were switching from our service to ARB. I contacted a couple of my friends from college who worked for advertising agencies. They told me that the reason our clients were switching to Seiler was because he had cut the price of his service dramatically to advertising agencies.

When the major agencies began buying time based upon ARB’s report it was very difficult for us to sell against him. Once we found out the real cause of why they were switching we did the same thing and eventually got our clients back. During the interval before we were able to regain our clients, our losses were very, very heavy. There were those in the company who thought we should get out of the local ratings business and concentrate on the national service. We convened our Board and took a vote. Eight of our top executives were for getting out of the business and two were for staying in. Because it was a family business I had enough votes to carry this position. We stayed in and eventually became number one in this business.[3]

One of the crosses the Nielsen Company had to bare was that we worked for both buyer and seller in the ratings business. It was very difficult, not unlike being the baseball umpire. Not all the people on the sales side agreed with our methods. They generally wanted higher ratings. We were setting the standard for how to measure the audience. Sometimes we were very unpopular with people who got low ratings so they decided from time to time we should have a competitor.

They induced James Seiler — I think “induced” is the right word, who had a very good business measuring local markets, to challenge Nielsen in the national or network marketplace using the Arbitron method.

He got support from the major networks that put up the money. As the company went in more markets, they were not able to obtain more customers. The losses for the company and for the networks that were putting up the funds became too burdensome. The networks and others who encouraged him to enter the business were unwilling to finance him anymore. [4]

Seiler was forced to sell out to a company called the Committee for Economic and Industrial Research (CEIR) run by a Dr. Robinson. He bought Seller’s business when Seiler ran out of money in his effort to compete with Nielsen. Seiler was a very brilliant man. I thought he was our smartest competitor. In my opinion Seiler was not being given due credit. He was making virtually all the profits for CEIR. However, Dr. Robinson did not properly recognize his work. For example, Robinson never elected Seiler to be a vice president of the company nor did he ever mention his contributions in the company’s annual report. At one point Seiler finally confronted Robinson for not recognizing his contributions. Robinson promptly fired him and Nielsen got rid of a tough competitor. Seiler knew how to run the local ratings business. In fact, Seiler had changed the method used by advertisers to pay for media research. This was a very big contribution for it solved the problem of how to get paid properly for his and our research work.

Robinson had developed a service bureau business using very large computers which at that time could do work more efficiently than the smaller ones. He expanded his own business from market to market. However, CEIR business was beginning to decline because small computers were becoming more efficient so the incentive to farm work out to CEIR diminished. CEIR sold the business to the Control Data operation.

My father tired of all the criticism of the business which he had worked so hard to build, turned it over to me and devoted the rest of his business life, especially to retail audit business, trying to make it work in foreign countries.

Q: Could you explain further how Seiler changed the nature of paying for media research?

When my father started the ratings business, he thought the beneficiary of the reports was the advertiser. At the beginning he sold reports only to advertisers. The nature of the contract that Nielsen signed with the advertiser permitted them to share the reports with their advertising agency so that the agency could make a proper analysis. Unfortunately the agency also had other clients. They were tempted to show our reports to their clients even though this was in violation of our contract. This practice, of course, killed any chance we had for a sale to others since they were getting the information free from the agency. Agencies also, contrary to the contract, used the report to solicit new accounts. We debated long and hard on whether to sell our reports to agencies. The basic problem was the media would sell time to any agency for 15% less than to an advertiser. This custom grew out of the newspaper business and was referred to as the commission system. Because of the nature of this system, the advertiser had no interest in setting up their own market research department to do this work because it would cost them 15% more so they turned the work over to their agencies. After great debate, we decided to sell our services to the agencies.

Unfortunately, this policy did not work out well because the agencies had the data but broadcasters did not. The broadcasters began to complain to Nielsen that they needed our reports in order to negotiate with the agencies. The broadcasters’ salesmen were on the street every day and began to give away Nielsen reports even though they were not supposed to do it. They were supposed to use our reports in soliciting business from agencies that were Nielsen clients.

Getting paid for our work proved to be a very tough problem. We called this our divulgence problem. It was indeed a very thorny problem that took years to solve – meanwhile the company ran up big losses, while doing a good job but not getting paid for it. Jim Seiler solved this problem. His solution was to reduce the price dramatically to the agencies particularly to the five largest agencies that were doing most of the buying of broadcast time. He then dramatically increased the price to broadcasters, so, in effect, it was that the broadcasters began paying for most of the rating reports. It was a good thing because Nielsen also began to benefit as we copied Seiler’s system and that helped us very much. I don’t think Arbitron made any money in the TV ratings business. His company’s profits came from rating radio programs.

 

Q: Why do broadcasters induce others to challenge Nielsen?

Nielsen would set the standard–we were going to do it right. We would do the job which we felt accurately reflected what was going on and the company had the money to do that. Because we invested profits from our other businesses, we could carry the losses so when customers from time to time threatened us, we didn’t change the service to favor this or that channel, we said, “fine, go ahead.” They never got very far because people trusted the Nielsen Company to do the job right and could see through the proposed change in the service and how it would benefit someone else. There were many times when many people, principally those working for the major broadcast networks, were interested not so much in analyzing the data and finding what programs the public desires, but were just interested in getting a larger audience size. In this case, they would be able to sell advertisers better than magazines or newspapers. They were intelligent, able to always think of some way to change Nielsen’s method to their advantage.

Q: What role did patents play in helping your business?

The role of patents was greatly overestimated in the success of the company. Nobody was interested in these machines except us. It was our niche. We had to set up a laboratory to solve various practical problems. For example, one of the problems was that our service was too slow. It took 11 weeks after the broadcast before this service could produce the reports and was also quite expensive. The effort in the lab was to find better methods. Our reports were just too slow. Our competitor, C.E. Hooper got their ratings out much faster with a lower cost. Each time we would find a better method, we would get a patent. The company had well over 100 patents. But as a practical matter it did not really help us. The US patent office would sell a copy of our patent to anybody that wants it for $25.

For example, our competitor Arbitron offered a service based on meters. We asked them for a machine so we could see if they infringed on our patents. They refused to give us one of their machines to determine whether or not they were using any of our patents. At that time Control Data that had a very bad reputation for violating patents and then suing the holder for restraint of trade owned them. For years, they operated with instruments we thought must be using our patents. We could not prove they were violating them, however, as they refused to supply us one of their meters.

Many years later, the Broadcast Ratings Council (BRC) was set up to audit ratings services to see if researchers were doing what they said they were. There were six companies in the business at that time. Nielsen was the only one that was actually performing faithfully what they claimed in their literature and sales material. It was then that it came to light that Arbitron was violating Nielsen’s patents. This was in the 1960’s. Control Data decided to turn the matter over to the FTC claiming that Nielsen had a monopoly. We offered Arbitron a license if they would pay us 5% – a reasonable royalty for using our patent. The result was that we had to give them a royalty free license for ten years.

Q: Why did your company leave radio measurement?

When a scientist in the AT&T laboratory invented the transistor, it became possible to make small portable radios. The Nielsen system only measured “in home listening.” In effect, we could not measure the audience using portables. Furthermore government subsidies to the highway system enabled people to move to the suburbs. Listening in automobiles gradually increased. The better roads to the suburbs allowed auto listening to grow. We tried to solve this problem by developing an Audimeter to be placed in the trunk of a car. However, there were other shortcomings to our service.

We held a meeting in New York with all of our clients where we proposed improved systems. We planned to use diaries to measure “out of home listening” combined with meters in cars to measure listening in automobiles. We offered three different services. Some were more expensive than others and some, for example, had larger samples. It became pretty clear in the course of the meeting that there was very little interest in paying the added cost for the improved Nielsen service. So that night my father and I, riding back to Chicago on the train, decided we would get out of the radio business as no one seemed to appreciate our work–at least they didn’t want to pay for it. We asked ourselves why should we subsidize it–that’s when we quit. In short, we discontinued our radio audience business measurement service for lack of financial support from the industry for an improved service.

Q: Why did you pick Dunedin, Florida as your production headquarters?

We realized we had a tough competitor in Arbitron run by James Seiler. We had great respect for his work. We knew that broadcasters were in a hurry to get the ratings. There was an advantage to produce work faster than a competitor. Our production center was then in Chicago. There were occasions in the winter then the O’Hare airport was closed. This would give Arbitron an advantage because they were operating out of the Washington airports in Bethesda, Maryland, which didn’t have the snow problem.

We were trying to figure out how to get our reports out faster, so we mailed postcards to a selected number of airports to see which ones delivered the mail fastest and most reliably. We found that Tampa, Florida, was the best. They never closed the airport. Their on-time deliveries were the best. So we looked around for a little town near Tampa and we picked Dunedin. Moving to Dunedin was a good decision because it gave us a two-day jump over ARB in delivering reports. This was important to customers.

In 1981, Nielsen developed a system that allowed the used of the household phone line for transmission of survey data. This was an important development as it reduced the cost of the telephone connection between the sample homes and Nielsen’s production center in Florida.

Q: What do you think is important in understanding the ratings business?

The problem in broadcast research field was not so much competition because everyone has competition rather than in the nature of the business. The first problem for anyone wanting to go into business is that they have to measure all programs. Broadcasters are interested in selling all of their programs. Anyone attempting to render a ratings service must measure, not just the programs of their clients, but a all programs. In this respect, the business differs from most businesses where it is possible to produce only the number of units that can be sold thus balancing costs with revenue. It is not like making a product such as for stores where you could make as many shoes as you can sell. This was a terrible handicap. You had to start with few clients and hope you could gradually acquire enough to break even. The belief was that once you crossed the break-even point you could then have a decent profit.

This placed a terrible financial burden on the ratings company and proved to be the Achilles’ heel of many companies who have tried. The business requires a very large up-front cost, which cannot be recovered from the small number of initial clients. Only over time can more financial support be obtained. My father struggled for 17 years losing money on the ratings. At the same time, we strove for improvements to speed up the reports and lower the costs. Because we had other profitable services it was able to persevere unlike many other smaller companies who litter the landscape of broadcast ratings like so many corpses.

Another cross that Nielsen had to bare was that it worked for both the buyer and the seller in the ratings business. The three major elements in the industry- broadcasters, advertisers, and agencies–had conflicting interests; therefore in pleasing one, the others were not pleased.   Not all the people on the sales side were satisfied with the results, and some in the industry were so dissatisfied they would encourage competition.   However, the industry seemed to send out mixed messages whether they desired more than one competitor in each marketplace. In those areas, where two companies were competing head to head, it was obvious that program ratings would vary from one service to another because the results were derived from samples. This being the case, the salesman would always quote the higher numbers and it was confusing to know which service produced the best results. In these cases, some felt that one company was sufficient. It was like a water company laying down pipe down the street past your house. Two pipes doing the same thing were unnecessary. They just added to the cost and cut the number of buyers so the price would have to be 2-3 times as high.

Another problem was how to charge for the service. Ratings companies serve both the buyers and sellers of broadcast time and determine the capital value of substantial investments. For many years, the Nielsen Company considered the primary beneficiary of the service to be the advertiser. Consequently, many problems to be solved were posed by the advertiser who was expected to pay for the service.   Many companies used the reports without paying for them. James Seiler figured out how to solve this problem. He found a better method by loading most of the costs on the broadcaster who he demonstrated would pay his price since rating reports were required in order to establish the size and character of the audience sold.

Another key issue for the meter is determining what program is being played on hundreds of station and cable operator’s outlets.   Several hundred broadcasters broadcast twenty-four hours a day. Nielsen’s service needed to determine what program a station was playing since the meter was simply a time measurement. Programs change all the time, for example, the ballgame runs over, a newsbreak cuts into a program schedule, In other words the schedule is constantly in flux. To help with the problem of know what stations carry the network programs, Nielsen introduced the Automated Measurement of Lineups, a technology which electronically tracks the networks feeds to local stations.

Another issue was speed of reports. We were always working to speed up the delivery of audience data. In 1977, we introduced a meter with increase memory that had the ability to monitor 16 different attachments and scan viewing every 2.7 seconds. In 1980, we developed a Piggy Back Home Unit which allowed the use of household phone lines for data transmission reducing the cost of the telephone connection between sample homes and Nielsen’s production center in Florida.

Q: One area we have not discusses is the Harris Hearings. Could you discuss the impact of the Harris Hearings?

Hearings conducted by Congressman Oren Harris were the most trying experience of my long career. My father spent many years of his life developing an improved system to measure the size of broadcast audiences. When our work was attacked by the Harris Committee, my father hold me he was too old to defend the company. It was up to me. Despite my best efforts, together with those of many of my able associates, the Company’s reputation was damaged. Unfortunately, the hearings created a totally false impression of the reliability of the Nielsen Ratings System and the integrity of the Company itself.

Looking back, I believe this resulted from the rules that the Committee established to conduct the Hearings. These rules set by Chairman Harris denied us the opportunity to properly defend our work. For example, when a charge was made concerning the quality of our field work, we were denied the right to cross-examine the ex Nielsen field men who supplied misleading information preventing our pointing out that they has been discharged by the company for the poor work they described. We were not permitted to present witnesses in our defense who could have easily refuted the Committee’s false and misleading charges. We were denied the right to be assisted by our legal counsel. Meanwhile, the Committee’s investigators were never sworn to give truthful information–they distorted the facts without fear of consequences.

This was all accomplished by the procedure the Committee followed from day to day. A charge would be made against us, for example, pointing out that our sample in one town was smaller than it was represented to be. While true, this was but one of over one hundred cities measuring by us. We were not permitted to show that the Committee has selected an atypical case—when the great majority of samples were, in fact, the size represented.

When we asked for an opportunity to answer a charge, Chairman Harris would inform us that they had dealt with that issue yesterday. Today they were moving on to another subject. They followed a pre-established script. And so it went form one charge to another—all intended to damage our reputation. In short, this Committee operated in a manner that would not be permitted in a court of law. They justified one-sided behavior by contending that we were not on trial and that the purpose of the hearing was solely to gather information to assist the government in developing possible regulatory rules.

In fact, these hearings left the impression with many of Nielsen’s client and prospects, principally in overseas countries where a charge was made by the government of wrong doing is not made unless there is a high probability of guilt.

Our competitors used the Committee’s charges against our other services totally unrelated to our Broadcast Research business. Our company had no prior experience with Washington and its way. Fortunately, we received some excellent advise from our Senator Charles Percy who was the first to learn what was going to happen. He telephoned by wife, alerting her that there was a plan to destroy A.C. Nielsen company’s reputation and so open up the ratings field to more competition. I was working in Australia at the time. Sen. Percy urged my wife to have me come home immediately and defend the company.

The charges made against us were ridiculous. I went to see Senator Everett Dirkson from my state of Illinois and asked him for his advice. He said from what you tell me they are out to ruin your business. Can you think of anything bad to say about the Congressman? He will only stop attacking you if he thinks by doing so he will lose votes.

Together with the company public relations officer, my grade school buddy, I drew up an advertisement which was run in the Washington Post, New York Times, and Wall Street Journal. It listed the Committee’s charges in one column and the facts in opposing column. We showed it to my father. He was worried and so got our out lawyer to check it. The ad listed the charge and then the truth. As a result, the trade press such as Advertising Age became interested and came to Nielsen’s defense. Shortly after the ad ran, Harris, who was in charge of a number of Congressional oversight operations, directed a number of regulatory agencies to investigate Nielsen. Within a week, the IRS, the Justice Department, the Labor Department, the FTC, and the FCC had visited Nielsen.

As the hearings progressed, we began to suspect that the Committee itself was corrupt. Our suspicions were aroused when we were asked to supply the names and addresses of our sample homes, our most carefully guarded secrets. Anyone possessing this information could easily rig the ratings. We pointed this out to the Committee. They claimed that the information was needed in order for them to visit our sample homes to observe our system of data collection. Our sample had more than 1000 homes. We countered with an offer to provide them with the addresses of as many homes as they wanted to visit—after which we would remove these homes from the sample replacing them with other homes—at our expense. Our offer was refused. Instead we were told that the Committee would compel us to turn over the names of our entire sample under subpoena power.

Our worst fears proved correct. I received a phone call from the General Counsel of NBC advising me that a woman in California had offered to sell NBC a list of 100 Nielsen sample homes for $100,000.   A meeting was arranged where the offer was made. The wife of one of the principle investigators, Rex Sparger, rented the car in which the woman arrived. We determined this from the car license. Possessed with this information, my lawyer and I called on Congressman Harris. He refused to see us sending his administrative assistant instead. We were later advised that he called in Sparger who claimed to be innocent.

About the same time, Sparger appeared on media, stating that he was planning to write a book titled, “How to Rig TV Ratings for Fun and Profits.” However, we found a woman bank clerk who helped to “pin Sparger to the wall” by indicating that Sparger had been cashing checks for $5000 and converting the money to travel checks. At a court hearing, Nielsen requested that the checks be produced. The bank found a check payable to Rex Sparger signed by Charles Lowe, Carol Channing’s husband. Nielsen concluded that Lowe had paid Sparger to rig the ratings in a way that would increase the size of the audience to Carol Channing’s TV show.

A contract between General Foods and Carol Charming provided that her compensation would be determined by the size of her audience. When the check was shown to the newspapers, Sparger and the Committed ended the Harris hearing investigations. After that all the regulators withdrew their attacks.

When all this information, including Sparger’s checks, was released to the press, the Harris committee and its methods, such as going through our Company dumpsters, taping our telephones, and having our mail turned over to them was discredited. The Committee principle investigator, Rex Sparger, who leveled the many charges against Nielsen, according to Nielsen, was put under court order never to publish anything about A.C. Nielsen without first submitting it to Nielsen for approved by Nielsen

Two other points need to be made. First I appealed for help from several of the country’s most respected broadcasters. They assured me that they knew that our service was wound and that I could count on their continued business. However, since the FCC had the power to withdraw their valuable licensee, they could not speak up for me.

Second, it is our belief some of the major magazine, such as Look and Life, were behind the attack although I have no proof.   Nielsen ratings had revealed for the first time that it was cheaper to buy TV advertising than an ad in Life, Look, or McCalls. Magazine advertising was losing their business. They were advising their client to use circulation data rather than Nielsen figures.

It is our belief that our principle competitor, ARB, furnished the committee with information harmful to it in exchange for assurances that they would be given in what amounted to a slap on the wrist.

One result of the Harris Hearing was that Congress set up a watchdog group in 1963 to oversee the methods of the various ratings companies. Originally known as the Broadcast Ratings Council, it became the Electronic Media Ratings Council in 1972 but is now known as the Media Ratings Council. Its purpose was to check up and find out whether specifications for the service that the researcher advertised were, in fact, being carried out. The BRC, a combination of broadcasters and advertisers, was self-regulatory body, rather than a government agency. I had a lot of negotiations with them. They wanted to set the standards. And I did not believe that was correct because the MRC was a combination of a lot of broadcasters and a lot of advertisers. We felt that each research company should set its own standards. We wouldn’t cooperate unless they did do this. They could pick CPAs to audit to see if researchers were doing what they said they were. Our opposition was based on unsatisfactory experiences with the Advertising Research Foundation.   Buyers of researcher’s services were not all similarly situated since some had deeper pockets with substantial economic interests, such as the networks, while others, such as individual stations owners and smaller advertisers were not able to afford more comprehensive and therefore expensive services.

It was agreed that each researcher would set it own standards. A respected firm of Certified Public Accountants would visit the researcher unannounced to check up and determine whether the researcher was carried out the specifications claimed. After the audit, four of the six companies dropped out, among them Trendex, and Videodex. These companies were found guilty of a number of suspicious activities such as overstating the number of callbacks, and clustering samples rather than having them spread out. They saved money by having five houses in four blocks to increase the size of their sample. In their cooperation rates, they only counted people who agreed to cooperate, not those who refused. Through the help of the BRC audits, Nielsen discovered that Arbitron, the owned by Control Data, has been using its metered patents.. At the Hearing, we offered to license its patents to ARB but because Nielsen was cited a monopoly, Nielsen was required to give them a royalty free license for ten years.

The Media Ratings Council has proved helpful to ratings in that it helped to deter criticism that they were unscientific and unreliable. Another results of the Hearings was that the Advertising Research Council agreed to extend membership to market researchers with Arthur C. Nielsen, Jr. selected to be the first representative and board member. In the long run, it was a good thing for us. It was tough at the time. But we came out ahead in the long run.

Acknowledgments:

I conducted this interview with Arthur Nielsen, Jr. in August of 2001, at his office in Northbrook, Illinois. At this time, I was contemplating writing a history of each of the ratings pioneers, Archibald Crossley (founder of the first ratings companies, the Cooperative Analysis of Broadcasting in 1929), Claude E. Hooper (founder of the key currency during the Golden Age of Radio during the 30’s and Forties), Arthur C, Nielsen (founder of the key TV network currency) and James Seiler (founder of the American Research Bureau later Arbitron), who served as a key competitor to Nielsen and later currency in radio ratings. Unfortunately, the book never came to fruition although I did manage to conduct extensive research on Arthur C. Nielsen and James Seiler. I published much of the information on Seiler in an article in the Journal of Radio Studies (Winter 2004). However, my interview with Mr. Nielsen lay on the proverbial cutting room floor until recently when I determined due to its merit to publish it as an independent piece.

This is not the first time I had met with Mr. Nielsen as I had conducted an earlier interview with him in 1984 when I was researching my dissertation, The Definition of the Audience in History of Television Audience Research (University of Wisconsin, 1985), which later became a published book entitled Chains of Gold: Marketing the Ratings and Rating the Markets (Scarecrow Press, 1990). Later Mr. Nielsen was kind enough to send out copies of this book to many of his colleagues in the ratings industry for comments. He then provided me with these comments that proved very useful. He and I worked together as I sent him typed copies of my taped interview for his perusal and he provided fruitful feedback. Mr. Nielsen passed away in 2012 so while he will not get to see publication which I regret but I am hoping this publication will give others will get a chance to see his perspective on the business he helped to develop. I dedicate this interview to his memory.

[1] The Mailable Meter contained a small magazine mailed at regular intervals. Each time a new cartridge was inserted, a quarter was discharged. Each magazine contained a roll of 16-millimeter film capable of recording minute-by minute listening for over four receivers for two-week periods.

[2] Albert E. Sindlinger, was president of Sindlinger and Company, Inc., a market research firm, accused Nielsen of seeking “completedomination not only of measuring audiences for broadcasting but for magazines and newspapers as well.” Sindlinger said he filed a civil suit against Nielsen in 1950, charging the company with attempts to create a monopoly. The suit was settled out of court. Sindlinger believed that Nielsen settled out of court because he (Sindlinger) in 1948 had uncovered a document written by A.C. Nielsen Sr. and Rahmel outlining the “master plan” for “domination” of the audience measuring industry.

[3] Actually, there were at least two good ideas: another idea that Nielsen copied from ARB was the development of exclusive marketing areas that the American Research Bureau called Areas of Dominant Influence (ADIs). ADIs divided the radio and TV markets into exclusive marketing areas with estimates of viewing spilling in from other markets and spilling out to other markets. This exclusive marketing’s areas became a standardized geographic area for buyers and sellers of TV time, allowing TV coverage areas to sell audience beyond the former Metro area, used by newspapers and magazines.

[4] Arbitron was originally the name given to the first instantaneous ratings meter service, developed by the American Research Bureau, under James Seiler. This service provided overnight feedback on how programming rated on the networks the night before. Later, the name of the company Seiler founded, the American Research Bureau, was changed to Arbitron, due to fears that the viewers/listeners might perceive it as an arm of U.S. Government.

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