In a lawsuit that could fundamentally remake the television industry, the owners of South Florida's WSVN-Fox 7 Thursday accused Nielsen Media Research of "recklessly, arbitrarily, capriciously'' understating the audience of its shows and asked a federal court to declare the ratings company an illegal monopoly.
Sunbeam Television Corp., which owns WSVN as well as Boston stations affiliated with the NBC and CW networks, filed the suit in U.S. District Court in Miami. It accuses Nielsen of producing "defective, wildly inaccurate ratings data'' that has reduced the station's value by $100 million in the past six months.
The company asked the court to find Nielsen in violation of both federal and state antitrust law, and for damages that were unspecified but likely to be huge: Sunbeam said it's losing $1 million a month
Nielsen ratings, which determine how much advertisers pay for commercials, are the gasoline that fuels the engine of the television, and startled TV executives across the country said they could recall no precedent for the Sunbeam lawsuit. Nor, many of them said, could they quite imagine what their industry would look like if the suit succeeds.
"The industry has spent a lot of time and money to find a mutually agreed upon system for measuring viewers," said one network executive, who didn't want to be quoted by name because he hadn't yet seen the entire 43-page Sunbeam complaint. "Recalibrating all that would be an enormous undertaking, just enormous."
Nielsen, for its part, said that's not going to be necessary. "This case is utterly without merit," a company spokesman said. "The TV ratings we are providing to Miami are more accurate than any previous measurement of this market and our sample is representative of the Miami population.
"We believe that WSVN had other reasons for bringing this case than the ones stated in the complaint and we will be responding to it vigorously."
The lawsuit comes at a time of unprecedented turmoil in the television business, which has been hammered by the recession, squeezed by the Internet, and confused by its own rapidly evolving technology. Measuring audiences has never been harder now that many viewers are watching their television on digital video recorders, computers or even cellphones.
At the heart of the lawsuit is a change in the way Nielsen measures TV audiences that has produced higher ratings for cable channels, lower ones for broadcast stations -- but which critics claim undercounts minority viewers and even the company itself admits has some glitches.
For decades, the company relied on viewers in its sample households to fill out little paper diaries listing what shows they watched throughout the day. But as TV evolved from a world of three broadcast networks to a cable universe offering 300 channels or more, the diaries were less and less practical.
In 1987, Nielsen introduced so-called people meters -- set-top boxes that record what channel is being watched, with each of a household's viewers punching a button to register who is actually watching. At first the people meters were used only for measuring national audiences, but earlier this decade, Nielsen began phasing them in to local markets.
They reached the Miami-Fort Lauderdale market last October -- and the results were disastrous for WSVN. While almost all local broadcast stations have posted lower ratings since the arrival of people meters, WSVN's plummeted by 45 percent in some time slots.
The Nielsen data "erroneously suggest the overnight disappearance of a vast portion of WSVN's audience," the lawsuit says, noting in particular the collapse of ratings for two of its top programs: the 10 p.m. newscast, which lost half its viewers, and the national hit American Idol, which lost 29 percent.
"These results are obviously -- and dramatically -- defective, and yet Nielsen continues to defend its system and refuses to fix it," says the lawsuit, which adds that WSVN nonetheless has no choice but to pay Nielsen about $1 million a year (including a 20 percent increase that accompanied the introduction of the people meters) to subscribe to the ratings because there's no alternative.
"Nielsen's monopoly in the market for television ratings gives it the power to control price, output and quality," the suit says. "As a result of its monopoly, Nielsen is able to charge supracompetitive prices for poor quality services."
The perception of Nielsen as a monopolist bully has been a widespread one in the world of broadcast television since the company's only real competitor, Arbitron, abandoned the TV ratings business in the early 1990s. "I assure you, a lot of station general managers around the country are cheering and throwing their hats in the air right now," one broadcast executive said Thursday after learning of the suit.
But there's less certainty in other parts of the industry. Advertising agencies in particular have been generally favorable to Nielsen's people meters, which they think provide more accurate numbers as well as better demographic breakdowns.
"We definitely believe the old way was not accurate," said Michael Pierre, a vice president at The Halo Group, a New York marketing agency. "People meters were put in place to give TV more accountability, and we think they have."