Ratings are used like currency in the marketplace of advertiser-supported TV. When advertisers want a commercial to reach an audience, they need to place it in TV programs which deliver an audience. The more audience a program delivers, the more the commercial time is worth to advertisers. So the amount charged for advertising is usually a negotiated rate per thousand viewers multiplied by the Nielsen Media Research audience estimate (in thousands).
The role of any research organisation is to measure both what is transmitted and what is received. By doing this, they provide the programmers and advertisers with vital feedback on their audience. Provided all the data is accurate, the collected information can serve to capture the right target consumers, and thus eliminating as much ‘waste’ as possible.
The waste is the part of the audience that has received your message, but has no interest in it, or the message does not contain a catch they’re vulnerable to.
Nielsen Media Research also explains why TV shows get cancelled :
“Occasionally some viewers find that a program they watch gets canceled. By estimating the audience, our information helps programmers keep the popular shows on TV, and it also helps them make the difficult decisions to cancel unpopular shows.”
The irony of the mass medium of television is that a program with “only” a few million viewers may be an unpopular program. It may take ten million viewers for a network or nationally syndicated program to be popular enough to be a business success. Every time a program is canceled, a few million viewers feel betrayed. But if programmers tried to keep all programs going, the shows that lose money would eventually put the programmers out of business.”
More about this on the corporate site of Nielsen Media Research.