Actor Edward Norton is trying to change how the TV industry measures viewership

Key Points
  • Norton joined with poet Daniel Nadler and Facebook investor Jim Breyer in starting and financing EDO.
  • The company is bringing advanced data analytics to the movie and TV industry to make them efficient in a world increasingly controlled by Netflix and Amazon.
Edward Norton in a panel discussion at the Clinton Global Initiative Annual Meeting, in New York City on September 29, 2015; The panel also included Sean Parker, Chairman, The Parker Foundation and J. Craig Venter, Co-Founder, CEO, and Chairman, Human Logevity, Inc. -
Adam Jeffery | CNBC

During Edward Norton's long acting career, the Golden Globe Award winner has enjoyed a side gig backing tech start-ups like Uber, data analytics firm Kensho and crowdfunding site CrowdRise. He started way back in 2000 as founding investor of wastewater treatment company Baswood.

It doesn't take long in start-up land to learn that data science and analytics are being applied to every industry, and quickly. Norton is now working to bring some of that power to his own business.

For his latest endeavor, Norton has teamed with poet Daniel Nadler and one of Facebook's first investors on a project designed to measure in real time the effectiveness of TV ads. The company is called EDO, which stands for Entertainment Data Oracle, and its technology is already being used by ESPN, Turner, CNBC owner NBCUniversal and Paramount, providing insights into which ads viewers like or what parts of movies audiences love.

Media companies can use that data to fund shows and films that have a greater chance of financial success.

"I saw firsthand in my work in making, marketing and distributing movies that TV advertising was a huge part of marketing budgets, yet the only measurement of whether that was effective was a very simplistic measure of exposure that's not even very reliable in today's world," Norton said in an interview. "We felt like EDO could bring the kind of rigorous data-driven and actionable analytics that digital advertising has had for years to the huge budgets on TV. If we did that, we felt like we'd be able to help the efficiency of the entire media ecosystem for creators and consumers."

EDO raised $12 million last month in a round led by Breyer Capital, whose founder, Jim Breyer, made a fortune from an early bet on Facebook.

'Legacy media companies were getting disrupted'

But it was the relationship between Norton and Nadler that got EDO off the ground. While both men are known in the arts, they met through Kensho, which Nadler founded in 2012 and sold to S&P Global for $550 million this year. Kensho's analytics tools are used in the financial and health-care industries as well as in national security.

Norton and Nadler had been thinking about how Kensho's machine learning and predictive analytics could work in other areas. Norton pointed to the film and television industries, specifically TV advertising, which lacked these advanced data science capabilities. The two decided to start EDO, which uses separate technologies from Kensho.

"We had seen that the legacy media companies were getting disrupted by Netflix and Amazon, who were using organic data capabilities as significant advantages," Norton said. "At the same time, networks were facing the assertion by Google and Facebook that digital advertising was more effective, and none of the legacy measurement players were really helping them challenge that with sophisticated data."

In addition to approaching Breyer and getting the investor's support, Norton and Nadler brought on Kevin Krim, the former head of CNBC's digital operations, as CEO, and former Nielsen/NRG executive Derek McLay as president. They also hired fresh graduates from Harvard.

EDO's insights are based on information on about 47 million ads that have aired, as well as TV data from Kantar Media and Nielsen/Gracenote and its own data sets. It uses the information to predict consumer intent through online behaviors.

"Most of the emerging technology data science is focused on Twitter data," Nadler said. "While that data is actually quite illuminating in other fields where economics are involved, where purchasing decisions are involved and where stock markets are involved, it's not the right data set" for us, he said.

Like pretty much everyone in film and television, Norton is somewhat obsessed with Netflix. He refers back to the company's claim that it develops and buys shows based on audience insights. It jumped into original content with "House of Cards," a show executives predicted would be a hit because subscribers already liked director David Fincher, actor Kevin Spacey and the original British series.

Netflix suspends production on 'House of Cards' sixth season
Netflix suspends production on 'House of Cards' sixth season

EDO is trying to help level the playing field. For example, Warner Bros. is using EDO to do the majority of its test screenings, Norton said. He thinks the results of that process led the studio to back his film "Motherless Brooklyn," which he is directing and starring in for release next year.

"It was thrilling because, as a filmmaker, it gave me the best insights into an audience's interaction with a film that I've ever gotten … by far," he said.

EDO's screening division digitizes the questionnaires that test audiences receive after screenings. In addition to making surveys that can be read by computers, the studios can also include more questions this way because they don't have to worry about annoying people with large stacks of paper. According to Deadline, EDO digital test screenings can include five to six more pages of questions than usual and still get a 100 percent completion rate.

EDO isn't setting out to supplant the types of analytics that advertisers get from Google and Facebook. Rather, it's seeking to provide the TV and film industry with additional layers of data, focused on capturing what their most important consumers and customers are telling them in the moment.

Krim said that in talking with major movie marketers, he was presented with an "interesting conundrum." The executives would tell him that they need to be spending money on TV "because that's where my audience shows up," he said.

"But all the intelligence is concentrated on the bottom of the funnel around the digital marketing strategy," Krim said.