$475K A Month Bill Dispute Causes Weather Channel To Sue Neilsen

After filing for a preliminary injunction (and losing) to fight a rate hike from $42K a month to $475K from Nielsen in 2020, CF Entertainment, the Byron Allen-owned media company which has a number of cable channels, including Weather Channel, is back in court with a $1 billion lawsuit against Nielsen.

I have written many times about the issues many media companies have had with data coming out from Nielsen, which used to be considered the gold standard in TV viewership numbers. However, their accuracy continues to be questioned more and more since the pandemic began. This is due in part to the difficulty getting more people on their ratings panel, and getting workers to go out and service the set-top boxes of both new and existing panelists.

But there are other issues as well. People are watching more and more video content on streaming platforms which can be difficult to track. In addition, advertisers are more interested in who is watching the commercials rather than the programs themselves. With ad skipping technologies, many people zip through the commercial pods. Without access to data from everyone’s set-top box, tracking the number of people that are watching is challenging.

Media companies in the past have complained loudly to Nielsen, and some owners of cable networks have been trying out alternative platforms. However, historically It has been almost unheard of to think about suing Nielsen Media Research, but that’s just what billionaire Byron Allen has done.

Mr. Allen owns myriad cable networks, some of which you have probably never heard of, with the largest being Weather Channel, under the corporate banner CF Entertainment. CF on March 16, 2022 filed suit against Nielsen claiming that it concealed a flaw in its system which doesn’t allow it to reliably rate smaller networks.

According to the lawsuit, the company reached an agreement in 2017 to provide ratings services for $41,667/month, but in 2018 after they bought the Weather Channel, the fee jumped to $475K/Month. The company objected and presumably tried to renegotiate the contract, but ended up paying the $475K/month “over its objection.” The pleadings from the 2020 lawsuit says that “After years of discord, CF Entertainment finally had enough and sued for breach of contract, claiming that it is entitled to pay the lower amount.”

CF Entertainment had asked the United States District Court For The Northern District Of Illinois Eastern Division to issue a preliminary injunction to prevent Nielsen from suspending its services if CF Entertainment paid the lower rate of $42K/month. The court denied that in July of 2020. In that case, CF Entertainment called Nielsen a heavy-handed bully that puts other companies in a stranglehold, using its market power to extract predatory pricing.

The problem was, although the 2017 contract ran for five years it had a provision that the parties agreed to include additional charges if there was an “increase or change in the level or nature of the programming or other activities provided” by CF Entertainment.

And, in fact, the company had already agreed to several amendments to the contract, raising fees from $25K to $40K per month and then, following the Weather Channel acquisition, the two parties agreed to a six-month agreement at $475K/month so they would have six months to negotiate a new agreement. That never happened.

In the fall of 2019, CF Entertainment notified Nielsen that it refused to pay the exorbitant fee of $475K per month. Nielsen called their bluff and terminated all ratings services for The Weather Channel, saying they would reinstate them if CF Entertainment went on a month-to-month contract at $475K/month.

However, in the spring of 2020, CF Entertainment had rung up a balance of $2.375 million, and Nielsen once again said it was going to terminate services. CF Entertainment then filed suit on April 17, 2020 and the same day wired the past due balance to Nielsen. At the end of the day the judge said CF Entertainment had not demonstrated a likelihood of success on the merits or demonstrated that it would suffer irreparable harm absent the injunction, and it chose not to issue the preliminary injunction.

Flash forward to 2022 and CF Entertainment and several related companies on March 16, 2022 filed a new lawsuit against The Nielsen Company (US), LLC in the Circuit Court of Cook County, Illinois claiming fraud, and it has its guns blazing

“Under the law, Nielsen was required to be upfront and honest with Plaintiffs, but, as alleged herein, Nielsen chose otherwise based on cheapness and greed,” says the lawsuit which points out that Nielsen submitted formal notice to the independent oversight organization Media Ratings Council (MRC) that it was taking a “hiatus” from oversight just before they were set to meet to discuss Nielsen’s panel system. They were likely hoping the MRC would drop the issue of examining the accuracy of Nielsen’s methodology.

However, the move backfired, and the MRC stripped Nielsen of its accreditation for both local and national TV measurement in August of 2021. In the lawsuit from CF Networks, they claim that as of April 21 over 79% of all cable network individual half hour ratings had a sample error of over 50%. The sample error is likely to be even larger for small to mid-sized networks.

Weather Channel claims that in 2021 the sample error was over 50% for most of its timeslots and that, “more often than not, Nielsen could not report data for the Weather Channel that had a minimum degree of reliability.”

Nielsen may choose to settle this lawsuit as the data and claims in this pleading call into question the outlook for future revenues for the company, given the many holes CF Entertainment has poked in the Nielsen ratings methodology.

As I pointed out in my March 16 story, the $15 billion price tag that a number of private equity companies are rumored to be prepared to offer to take parent company Nielsen Holdings, PLC private seems very steep at 10.1x trailing cash flow and 9.7x 2022 cash flow based on company guidance.

Nielsen is fighting off quite a bit of bad press and it seems like settling the lawsuit would be prudent before private equity companies get soured on all of the bad press.