What You Need to Know About Netflix & Nielsen

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Netflix has been excellent at two things: creating binge watchers and not telling other media companies who those people are. Until now. Netflix will now allow long-time TV marketing leader, Nielsen, to monitor, measure and share viewer data.

This move makes a lot of sense for Nielsen, as they strive to retain their place as the go-to source for TV audience data in the face of staggering cord-cutting statistics. eMarketer projects that 22 million U.S. adults will cancel cable or satellite TV services in 2017– up 33 percent from 2016. By 2021, eMarketer predicts that fully 30 percent of American adults won’t have traditional pay TV at all. Of course, even those who continue to subscribe to traditional pay TV often have subscription video on demand (SVOD) in addition to those services.

All of this makes viewing data for streaming services that much more critical, and Netflix is the clear leader with 66 percent of SVOD users. This move positions Nielsen to fight off comScore, the online measurement company that has been making moves to unseat Nielsen as the leader in TV audience measurement (Nielsen is suing comScore right now to stop them from launching a competing product).

Some people are puzzled about the Netflix move, as Nielsen data has primarily been used by TV companies to justify ad rates and by media buyers to plan ad buys. Netflix, of course, contains no advertising opportunities. Nielsen’s answer is that large media companies (A&E Networks, Walt Disney’s ABC, Lionsgate, Comcast’s NBCUniversal, and Time Warner’s Warner Bros. have reportedly signed on so far) want this kind of audience viewing data to give them a full picture of the reach and lifecycle of their licensed content that ends up on SVOD services like Netflix to guide programming decisions and project licensing revenue.

Nielsen also plans to add the other two major SVOD services — Hulu and Amazon Prime Video — sometime next year. Hulu does have advertising opportunities, and Nielsen data would be useful to TV buyers who want to apply consistent viewing data across platforms.

The biggest shortcoming of this move by Nielsen (at least what we know about it so far) is that it is incomplete. As with all Nielsen data, it’s limited to a sample of people who have tracking devices in their homes. Additionally, as Netflix itself has been quick to point out, it does not measure viewership on smartphones, tablets or computers. When you consider that Netflix data suggests nearly 40 percent of subscribers use one of these devices as their primary means of watching the service, that adds up to a pretty big blind spot.

In any event, as TV advertising continues to become more addressable and programmatic, third-party measurement will be key, and it’s natural that Nielsen would be seeking a foothold in the rapidly growing SVOD space. Whether they can fend off competitors and retain their market position remains to be seen.