The Night(mare) Before Xmas!
Nielsen announced a definitive agreement Tuesday morning to acquire media and marketing research rival Arbitron in a cash and stock deal valued at $48 per Arbitron share. While Arbitron shareholders are no doubt waiting for further details from the Arbitron board as to the many other cash rich research companies they have or are continuing to entertain for a potential takeover, this industry nightmare must be thoroughly appraised.
Before evaluating this proposed acquisition, the U.S. regulators should open the evidence of the erinMedia vs. Nielsen antitrust suit.* Anyone understanding the merits of that case would surely surmise that it would probably stop this take-over cold!
Despite the tremendous efforts of the Media Rating Council (MRC) to assess and potentially accredit media currency research quality, media ratings measurement companies have operated as unregulated monopolies in the U.S., unlike the practice in the rest of the world, where the industry research buyers (media, agencies and advertisers) own, manage and distribute the ratings under the auspices of JICs, or joint industry committees, which are not-for-profit entities.
In the U.S., these unregulated monopolies have continually made restrictive demands of their clients and business partners regarding data availability and access. They have lagged woefully in applying new research technology innovations until they have serious competition, e.g. comScore, Rentrak and Kantar Media in online, spot TV and ad spending measurement respectively.
They have secured egregious pricing and carefully staggered contracts for their data and services — their margins are tremendous, which admittedly has benefited shareholders. It is also acknowledged by many media agency executives that as an unregulated monopoly, Nielsen has consistently favored the TV networks and TV stations needs over the advertisers and their agencies for a very long time.
However, the majority of spot TV markets ratings reports are no longer accredited by MRC. In short, Nielsen has consistently been one of the worst offenders in our media currency monopoly arena. This was recently reflected in a statement by the managing director of a leading European media research company who said of U.S. TV measurement: "How could it be so bad and cost so much?"
In the worldwide media currency measurement arena, JICs have an enviable record of driving measurement innovation, higher quality and full data ownership and access at substantial overall savings, when compared to the U.S. monopoly model. This was underlined by the U.S. OOH industry in establishing "eyes-on" ratings via the TAB (Traffic Audit Bureau), their existing industry measurement association, or JIC as we would call it in Europe, rather than allowing unregulated monopolies to set the currency standards, the approach and access rules on ad ratings data that they were paying for and could own.
The rest of the media world is generally appalled at the media currency measurement arena here in the U.S. Yet many of these companies are global and consequently have the resources and power to drive a more level and competitive playing field in the U.S. We should remember that at one time, Procter & Gamble was so appalled at the relative quality and costs of TV ratings that it took leadership in trying to establish a TV JIC here.
This proposed takeover offers a unique opportunity for the media currency buyers -- the advertisers, the agencies and the media -- as well as existing major media research companies to address a fundamental albeit rhetorical questions: What are the likely consequences to media currency measurement innovation, quality and cost as a result of this take-over?
It also offers the opportunity to move much more rapidly to universal, comparable harmonized ad exposure ratings across all channels! Are these players finally willing to take a real stand?
In the end, as a result of a probable shareholder action and hopefully U.S. regulatory decisions, Arbitron will likely sell to another major research company for considerably more than $48 per share. Based on its early innovation in passive electronic audience measurement across media channels and the exploding importance of harmonized, cross-media measurement its track record and values are clear.
* ErinMedia settled out of court in their $1.5 billion (triple damages) antitrust suit (2005) against Nielsen in April 2008 before the full trial, reportedly due to Frank Maggio’s major investments in the Florida real estate market, which was starting to slide at the time. That's despite the strength of erinMedia’s case, reflected in the judge’s generally “favorable” comments and almost derision of Nielsen’s case for dismissal, following discovery as well as the damages being tripled (from $500 million) as a result of Nielsen’s directly related competitive business actions during the proceedings. Unfortunately for the industry, the evidence was sealed as a result of the settlement.