Exclusive: A segment on The O'Reilly Factor last Thursday opened a window into a battle between Fox News Channel and Nielsen, the company that provides audience measurement for all networks. At the heart of the matter, time-shifted audience ratings. Fox News and most other networks use Nielsen's C3 method of measurement when selling advertising. C3 "measures how many viewers watch commercials during the live telecasts plus on digital video recorders in the following three days."

But according to FNC SVP Joel Cheatwood, there are a number of concerns Fox News has had with the method for counting the DVR audience. "We have, for the past 18 months, just begged Nielsen for transparency in how they process their information," Cheatwood tolds TVNewser today. "One of the most widespread complaints is just a total lack of transparency."

Another complaint is the small sample size when it comes to calculating viewership. Nielsen spokesperson Gary Holmes tells TVNewser that 14,000 households make up the national sample for Nielsen. Because "25% of the population has DVR," Holmes estimates that 25% of the Nielsen sample is DVR-capable as well, putting the figure at approximately 3,500 households. "3,500 is an adequate sample size," says Holmes. "3,500 is not too small."

Cheatwood disagrees. The 3,500 sample size equates to approximately 65-100 DVR households watching cable news on a given night, and as few as 8-10 households making up the time-shifted ratings, says Cheatwood. "The sample is so small it just defies any application of credibility," says Cheatwood. "It was one piece of information that confirmed our greatest fears. It just doesn't pass the test at all. First be transparent, secondly, please, so much rides on the information you put out there, please take the time to make it credible."

The transparency issue goes both ways for Nielsen and FNC. Click continued to see both sides, more background on what led to O'Reilly's Thursday segment and see the Factor segment...

Cheatwood says the Media Ratings Council, an unofficial Nielsen watchdog group, sent a joint letter to Fox News and Nielsen in July after Fox News raised the issue to the group. "I've contacted them once a week since then for a response. I was told a week ago that they never received it, so I resent a copy," said Cheatwood.

After O'Reilly's segment Thursday, Fox News received a response from Nielsen at 5:00pmET Friday. "Frankly it was more of the same," said Cheatwood of the letter's contents.

Holmes, the Nielsen spokesperson, tells TVNewser, "There have been a number of communications back and forth when they raised these issues in the summer. We responded during the summer, and then they asked for additional information. We provided them with additional information earlier this month. They continued to ask for additional information and we did send something on Friday."

He also added, "They're an important client. We try to understand what their questions are, we try to answer the questions, and I think we've been as responsive as we could."

Cheatwood says the questions have not been answered. "The exasperating thing about this is it just doesn't add up and yet we're sitting across from the fine folks at Nielsen who say, 'Sure it does, just trust us,'" says Cheatwood. "That's the response we've been given."

Live plus same day (which TVNewser uses in our daily Scoreboard) began in January 2006, and has become accepted throughout the industry as a commonly-used metric. But according to Cheatwood, the small sample size equates to abnormally fluctuating ratings for anything beyond Live only data.

"It is common for there to be fluctuation on news show because it depends on who the guest is, what the events of the day are, what's going on in the news cycle," says Holmes.

Cheatwood sees Holmes' point when it comes to "a program like Larry King, which is very dependent on his guests and bookings. But, he counters, "Shows like The O'Reilly Factor, there's a consistency of product there that is not dependent on guests."

There could be other factors for DVR, though, such as younger viewers who record a program or people on the West Coast who DVR a program that airs earlier in the evening. Cheatwood goes back to size of the sample. "It can be turned on its head if three people decide to DVR the program. It's irresponsible, there's just no other way around it.

"Our business and our livelihood is dependent on measurements from this company and we just don't have confidence that the data we're receiving is always credible. How many networks do you know calling for transparency when they're number one? We're number one in ratings. We really want [the ratings] to be honest."

Below, The O'Reilly Factor segment from Thursday and the Countdown segment from Friday: