If Nielsen decides to bulk up its investor relations department, it might consider adding J.P Morgan analyst Michael Meltz.
In a new report, he lays out a powerful case for investing in the company that Nielsen executives might have trouble topping his bullishness. Among Meltz’s reasons are the current Viacom flare-up will amount to little more than a PR bump and challenges from set-top-box data providers should be immaterial.
If that isn’t enough, here’s the topper: as media consumption increasingly migrates to new platforms, Nielsen is well-positioned to be a pacesetter. (Whether Nielsen can be a leader in new-media metrics may be investors’ principal concern about the future of the company’s measurement operations.)
Meltz doesn't just go all theoretical in his research. He suggests a way to bolster your portfolio, projecting Nielsen’s stock will rise to $35 a share – a 25% gain.
In a high-profile move, Viacom has recently placed some of the blame on Nielsen for lower ratings at Nickelodeon, costing it in ad dollars. Nielsen stands by its tabulations and the matter is under review by a third party.
Meltz doesn’t believe Nielsen is guilty. “To date, Nielsen hasn’t announced any errors in its Nickelodeon ratings and we don’t expect it to do so,” he writes. He even goes on to praise Nielsen for transparency, for being forthcoming in the past when it does make miscalculations.
He suggests Nick might want to look in the mirror with its lower ratings, citing “tired content” as one of the potential culprits.
Going forward, any investors worried that Nielsen might lose market dominance in TV ratings can actually take comfort in the Viacom matter, Meltz writes. The Nick issue “illustrates that Nielsen’s services are so important to clients that it often garners outsized criticism … regarding data accuracy and methodologies.”
Viacom has cited set-top-box (STB) data as reason to believe Nielsen’s Nick ratings are off, but Meltz dismissed the potential of an STB data provider such as Rentrak to usher in much change in TV currency. “Inertia” exists where so many stakeholders rely on Nielsen that any one of them would have trouble just walking away, Meltz says.
What if Nielsen concedes errors with Nick? Would Viacom have “legal remedies”?
Meltz doesn’t believe so since Nielsen contracts “generally only stipulate” that it provide data on schedule.
And what chance does Nielsen have in maintaining its primacy as more media consumption migrates to new venues? A pretty good one.
“Our hunch is that as advertising further fragments to new distribution platforms in coming years, Nielsen could become even more important in assessing viewership and content monetization,” Meltz writes. (He does note that if there is a major misstep is discovered with the Nick numbers, that could impact Nielsen in new arenas.)
Even if Viacom were to chuck Nielsen temporarily out of spite -- which would never happen -- would it matter?
J.P. Morgan estimates Viacom accounts for about 1% of the company’s revenues, and Meltz doesn’t anticipate any “direct financial hit” from any errors with Nick.
Overall, he seems to echo Viacom CEO Philippe Dauman’s recent comments that “as of now, however imperfect Nielsen is, it’s the only game in town.”
That seems like a pretty good investment.