Apparently, no one has been rating the raters.
The Nielsen Company (NYSE: NLSN) is being sued by the largest news network in India for allegedly fixing ratings data in exchange for bribes. In a lawsuit filed late last week in New York court, New Delhi Television Limited (NDTV) accused the ratings giant of manipulating viewership statistics in favor of broadcasters that offered money to ratings officials -- a violation of the Foreign Corrupt Practices Act, which was adopted in 1977 to counter the bribery of foreign officials. The Indian network is now seeking billions of dollars in damages, charging that inaccurate ratings measurements "lead to exponential losses," particularly when, "as in the case of Nielsen, the ratings company has a monopoly on a country's audience measurement ratings."
A Nielsen communications representative did not immediately return a request for comment.
For years, Indian broadcasters have complained about the Television Audience Measurement system, or TAM, which measures TV viewership in India. The system is a 50/50 co-venture between the Nielsen Company and Kantar Media Research. According to the lawsuit, NDTV had been voicing its dissatisfaction with TAM data since 2004. The network claims that, in April of this year, three of its representatives met with two TAM field reps at the Ramada Plaza Hotel in Mumbai, who said that their job was to collect data from TAM meters in households throughout the city. "They said by paying a bribe of $250 to $500 per household per month, the TAM households could be made to watch only those channels which they insisted upon," the lawsuit said.
NDTV also said it presented evidence of data manipulation to top Nielsen executives, who in turn vowed to make changes. However, those promises were empty ones, the network claims. It also charged that persistent cost-cutting measures by Nielsen have made the TAM system prone to easy manipulation. "The primary reason that data could be so easily manipulated in India was due to the persistent refusal of Nielsen and Kantar to provide adequate funds for TAM to increase its sample size and invest in the systems/quality/security procedures," the lawsuit added.
Viewership data in India, according to the suit, is based on a sample of just 8,000 households. The population of Mumbai alone is almost 14 million. By comparison, the number of Nielsen households in the United States is about 20,000, though India has four times the population.
Meanwhile, cost cutting does not appear to be a new hurdle for Nielsen Holdings. On Monday, TheStreet downgraded the company's stock from buy to sell, due to "weak debt management, weak operating cash flow and generally disappointing historical performance in the stock itself."
According to the Hollywood Reporter, which was once owned by Nielsen, the private-equity firms that have been bankrolling the ratings company are said to be seeking an "exit strategy."
Charges of ratings manipulation, if proven to be true, could have serious implications across the entire television industry, where advertising rates are intrinsically tied to audience sizes. Nielsen has long been virtually the only ratings game in town, with a measurement history that dates back to the radio days of the 1930s. Other companies -- such as TiVo, which recently acquired the research company TRA -- have been trying to take Nielsen on through data collected from DVRs. Nielsen has been collecting data from DVR's since 2005.
The full lawsuit against Nielsen can be read on Deadline.com.