NBC Reimburses Advertisers After Ratings Shortfall

NBC has reimbursed some advertisers who paid in advance for commercials aired during prime-time shows that didn't live up to ratings projections, the network said Tuesday.

NBC

It's the first time in years a network has compensated advertisers with cash for missing ratings targets, media buyers said. "This happens once in a blue moon," said Brad Adgate, vice president and director of research at New York-based advertising agency Horizon Media Inc.

The reimbursements average about $500,000, according to a person familiar with the situation who wasn't authorized to disclose the figure and requested anonymity.

"This represents a small portion of NBC's business and accommodates the changing needs of our clients' marketing plans," the network said in a statement.

Networks sell about 80% of their advertising time for the fall television season during what is known as the "upfront" in spring. This year marked the first time rates were based on a new Nielsen metric known as "C3," which measures how many viewers watch commercials during the live telecasts plus on digital video recorders in the following three days. For decades, guarantees were based on live ratings data.

If the networks don't deliver the promised number of viewers, they offer free additional ad time from the remaining 20% not sold in advance. But NBC, owned by General Electric , the parent company of CNBC, ran out of inventory, according to MediaWeek, an industry trade publication that first reported the reimbursements.

While NBC registered the biggest ratings decline in fall, it isn't alone.

"The big three networks are falling as viewers continue to have more choices on cable and of course through other digital media sources," Adgate said.

NBC's live ratings plus same-day DVR viewing for the fall season fell to 5.4 from 6.6 last year, according to latest Nielsen data. C3 ratings are reported with at least a three-week lag, meaning the important November data are still pending.

ABC, owned by the Walt Disney , held steady at a 7.2 rating, while CBS, owned by CBS Corp. , slid to 7.2 from 8. Fox, owned by News Corp., gained to 5.4 from 5.1 last year. Neither ABC nor CBS immediately returned calls seeking comment.

The switch to C3 could have contributed to NBC's overestimating its guarantees, although ratings shortfalls aren't uncommon. The networks long argued that Nielsen live ratings didn't reflect the actual number of viewers because of DVRs, which are estimated to be in 20% of the nation's 113 million households.

But early C3 ratings data showed only a slight variation in viewers compared with ratings for live plus same-day DVR viewing.

Network ratings are expected to worsen as the Hollywood writers' strike, now in its sixth week, looks set to extend into 2008. The networks didn't have to change prime-time lineups in the fall season, but would be forced to resort to repeats and non-scripted shows if the strike went into next year.

"None of the networks are going to put their best foot forward in terms of programming," Adgate said. "There is logically going to be a ratings falloff across all the networks if the writers' strike continues."