Nielsen IPO: A Must-See For Those In TV

Nielsen is gearing up to IPO, and I am on the edge of my seat. 

The media-measurement category is red hot. Arbitron (radio ratings) is trading at a three-year high; so is comScore (Internet ratings). The upstart Rentrak (video store and VOD ratings) is at a five-year high, and the creation of the Coalition for Innovative Media Measurement (CIMM) invites forward-looking innovation.

Nielsen is a critically important company in the media world: the bellwether for the industry and as close as you get to a one-stop shop for TV's $70 billion in media planning, buying and validation. And if Facebook is worth $50 billion and Groupon is planning to go public at $15 billion, then Nielsen would appear to be worth the targeted $14.5 billion in enterprise value and then some.

But with the IPO roadshow having just begun and private-equity investors Blackstone, KKR, Carlisle, and TH Lee expecting a 20% IRR since the 2006 LBO (assuming a $21 IPO share price when they go out on January 25), management can expect some tough comments. Let's explore a few of the more predictable ones.

Nielsen is an analog media company in the fast-paced digital world. It has perfected a very imperfect system. Nielsen uses a device called a "peoplemeter" to record television viewership in 20,000 U.S. households, but it has historically had a tough time getting viewers to log in on the peoplemeter. And in 154 of the local markets (out of 210 markets) where panelists fill out diaries (yes, people still really do this), Nielsen recently lost its Media Rating Council (MRC) accreditation

What's one of these rare Nielsen households worth? A little back-of-the-envelope exercise on Nielsen's projected $14.5 billion enterprise value after the IPO, suggests that each Nielsen panelist in the US "TV Watch" division - estimated to be 25% of revenues -- is worth about $200,000. If the Nielsen homes only knew...

But are small panels and diaries statistically actionable in today's world? Those 20,000 U.S. households (200 to 800 in each local market) are meant to represent an audience of more than 116 million households. Yet today, people watch television in countless ways -- broadcast, cable, syndicated, DVR, online, on demand, and, soon via Smart TV apps. What's more, there are hundreds of channels, tens of thousands of programs, and countless brands that advertise on linear television alone.

The reaction of the advertiser? TV dollars are flat.  Internet is on the rise.

Digital media is sexier, because it lets advertisers target and reach the right audience of interested consumers. The Nielsen response? Use the same age/sex demo (e.g., the old "women 18-49") that has been used for the past 50 years.

Of course, Nielsen remains a formidable company. It does a lot, and has been known to gradually innovate when customers demand.  Some of these efforts include: the Project Apollo joint venture with Arbitron to match viewership to purchase data (this project was scuttled three years ago); an IMMI joint venture to monitor cross-media (this project was pulled a year ago); its two-year foray into radio ratings (recently shut down); and the Catalina joint venture to try yet again to match viewership and purchase data. (Nielsen's CEO pegged this last model as the future of media-buying for CPG companies.

Clearly, some of Nielsen's efforts have opened the field for a handful of tech-focused and forward-looking young companies to pick up the slack, including:

·       TiVo's measurement division, which offers a deep dive into DVR to make sense of time-shifting audiences;

·       Rentrak, testing set-top data to shed light on the market for local ratings;

·       Simulmedia, breaking new ground using set-top box data for audience promotion;

·       My company, TRA, which matches tuning data from set-top boxes with consumer-purchasing data to deliver accountability and ROI to advertisers.

Yes, innovation will sprout elsewhere when a market leader has 50 years of legacy business to protect.

Now the IPO is looming and change is in the air.  But if all of the $1.7 billion in IPO proceeds are to be used to retire a portion the company's $8.6 billion in debt, how much can be invested in innovation?

This all begs the question, is today's Nielsen like a railroad colossus of the past? Or is it a fast-moving innovator agile enough to embrace new technologies and business models?

Only time will tell. In the meantime, enjoy the (road)show.

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6 comments about "Nielsen IPO: A Must-See For Those In TV".
  1. Andrew Crowley from ggiyt , January 18, 2011 at 11:59 a.m.

    Soon another fool will be parted from his money. Anyone investing in Nielsen should just flush thier money down the toilet.

  2. Philip Moore from Philip Moore , January 18, 2011 at 12:26 p.m.

    Wow, $200K per household! I was a Nielsen diary household once. Given that I spent about 15 minutes a day trying to remember what I watched (and guessing what the kids watched on the downstairs TV), that means I was creating value at a rate that matched Bill Gates. Amazing!

  3. Robert Marich from MarketingMovies.net , January 18, 2011 at 2:39 p.m.

    Very valuable insights plus a memorable phrase in "perfecting the imperfect." Nielsen has the usual entrenched incumbent problem when an industry is in transition. It's tough to get radical since it is the accepted standard. There are risks abandoning that too soon and also risks in not moving fast enough.

  4. Nicholas Schiavone from Nicholas P. Schiavone, LLC , January 18, 2011 at 4:26 p.m.

    BIG THOUGHTS ON THE FUTURE? NO WAY!

    This particular "TV Board" piece is about as thought-less and small-minded as it gets.

    Is the writer is a detached observer? Hardly.

    This op-ed appears to reek of self-interest and delusions of grandeur with respect to the availability of practical alternatives to the status quo.

    There has not been a single responsible, comprehensive and innovative research alternative proposed for the Nielsen TV Measurement Systems since SRI developed the SMART Lab under a commission from CONTAM well over a decade ago. In fact, we are well on our way to producing a Rip Van Winkle Generation of TV Researchers, if anyone is still interested in this professional discipline.

    Advertising research, if not the advertising industry as a whole, has lost its way to the grand illusions of hi-tech and high finance. It's a "Jerry Maguire" meets "Tron" World. ("Show me the money." meets "On the other side of the screen, it all looks so easy.") So much fiction. So little time.

    Solution? Remember what Jack Welch said to GE Management back in the day: "Face reality as it is, not as it was or as you wish it were."

    As for MediaPost, it ought to develop some new guidelines for "TV Board" so that what seems to be marketing speech and cheap shots at Nielsen are not allowed to masquerade as enlightened thought.

    [Just for the record, this writer served as the last Chairman of CONTAM and worked for a TV Network that partnered in the SMART Initiative.]

  5. Paula Lynn from Who Else Unlimited , January 18, 2011 at 5:13 p.m.

    Shiney dimes Neilsen families. Shiney dimes.

  6. Mark Lieberman from TRA , January 19, 2011 at 9:03 p.m.

    Thanks for your post, Nick. Sorry you read my post as clandestine or disingenuous. My bio discloses that I am Chairman/CEO of TRA, which is among the several Nielsen competitors I mention in this column. We don't see ourselves as a replacement for Nielsen at all, but rather a supplement that fills one of the gaping unmet needs demanded by the marketplace -- if I didn't think we had a great, forward-thinking product, I wouldn't be where I am.

    Having said that, I do believe Nielsen is a very well-run company, the incumbent currency, with long-term agreements leveraging their panel, and worth every bit of the $21/share as compared to Facebook's and Groupon's valuations. And as I imagine you'll agree, I can't think of a more exciting time in the history of TV media research. There's more real innovation and more imaginative solutions coming forward to the market than ever before.