Industry Mulls Impact Of A Nielsen-Arbitron Combination
There was a slowdown in Nielsen’s proposed acquisition of Arbitron last week. After conversations with the Federal Trade Commission (FTC), both companies agreed to give the regulatory body more time to review the matter.
Arbitron has indicated it expected the deal to close as early as March 15. Now, Nielsen will re-file documents with the FTC, the key regulatory unit reviewing the acquisition, as late as March 8.
Does the delay offer any sign that the government will nix the deal? No. Industry-altering deals like this one rarely move through Washington without plenty of bumps. In the end, it’s hard to say the deal won’t get approved.
During the negotiations, both Arbitron and Nielsen had big-time law firms review the regulatory implications and both apparently advised the companies they were on solid ground with anti-trust and other issues. Nielsen also faces a $130-plus million break-up fee if the government blocks the deal
“Arbitron is happening whether we like it or not,” wrote Bernstein analyst Todd Juenger in a report last week.
Nielsen will hold an earnings call Monday and likely face investor questions about the deal's status. But Nielsen executives aren’t likely to say much more than they continue to feel confident approval is coming.
When the deal was announced in December, Nielsen CEO David Calhoun indicated Nielsen views the merger as two different businesses coming together. In other words, no anti-trust implications. He said Arbitron is in radio measurement and Nielsen focuses on TV, “so the overlaps, I mean, frankly, you can barely find any.”
But looking at it from other angles, the deal is more complicated than two companies in unrelated businesses merging operations. The FTC may be appreciating that. A combination would impact the ad industry on multiple levels. And with so many interests involved, there is no consensus in the advertising ecosystem that a combined company would be a plus.
“I don’t think it’s black and white, I think like so many things, it’s multiple shades of gray,” said Jed Meyer, research director at Omnicom’s Annalect and a former Nielsen executive.
It’s not hard to find someone chewing over the $1.26 billion deal going back and forth in a matter of minutes. One script essentially goes: “On the one hand I can’t support a behemoth getting bigger, then again there are some potential benefits, yet trouble could come if …”
The FTC is charged with taking it all into account. Even if it approves the deal, it could negotiate with Nielsen to place conditions on it. Certainly, some in the industry opposed to the deal have some ideas about what they should be.
Media buying entities have concerns that if Nielsen gains control of Arbitron, it might raise prices on them through bundling; slow the pace of innovation in cross-platform measurement; and hurt their growing analytics businesses.
Agencies need the Arbitron ratings to buy and sell radio; it’s the market currency. If Nielsen gains control of the data, what’s to say it won’t sell it in packages with TV and other products, causing agencies to pay more for radio data than they do now? Nielsen’s CEO Calhoun said in December there won’t be any “cross-selling.”
Move to the cross-platform metrics area. Nielsen has been launching a slew of products looking to establish the currency there. But Arbitron has also sought a foothold, using its portable people meter (PPM).
Arbitron has been making the argument that radio is often forgotten in cross-media tracking. Last fall, Arbitron and comScore announced a five-platform project to capture behavior across radio, TV, PCs, smartphones and tablets. ESPN is a principal funder. How committed will Nielsen be to the initiative after an Arbitron acquisition, given its competition with comScore?
“I have to believe that’s kind of going to get squashed if this merger goes through and that kind of makes Nielsen the … de facto cross-measurement provider,” an executive at an agency said.
If multi-media measurement is so crucial, doesn't it make sense to have both Nielsen and Arbitron separately chasing solutions rather than just one of them? Arbitron has done some work with the Coalition for Innovative Media Measurement (CIMM) studying potential measurement tactics across TV, PCs and mobile devices.
Nielsen's Calhoun said pursuing a better cross-platform product isn’t a reason behind the Arbitron deal. Among the principal reasons is trying to help Arbitron clients improve ROI by linking with Nielsen’s data on customer purchases and helping Arbitron expand globally.
Another concern on the agency side looks to be Nielsen possibly impacting the software providers that offer data processing and enable transactions. Could a larger Nielsen have providers such as Mediaocean deemphasizing other companies' data in their systems? An agency would want an opportunity to evaluate as much information as possible on the same platform.
Media agencies also have growing analytics businesses, where they try to develop a secret sauce to help guide clients. Nielsen is also in the business. For agencies, access to Nielsen and Arbitron data is crucial to offer their insight. Agencies don’t want Nielsen to curtail their ability to buy the data as needed – so not in a bundle – at a rational price.
Back on the innovation front, Arbitron has given no indication it plans to challenge Nielsen in TV measurement. But Arbitron has used the PPM technology for an out-of-home TV measurement service and to track TV with the cross-platform initiatives. It collects data on viewing from all the major networks, save one, and up to 70 cable channels.
Potentially, if it stayed separate, it could continue to develop TV products that, if not direct challengers to Nielsen, could bring welcome advancements. With the acquisition, Nielsen will benefit from adding the out-of-home product, but will it look to find ways to exploit the PPM as much as Arbitron would?
In 2006, Nielsen declined to pick up an option to join Arbitron in deploying the PPM in a venture to jointly measure TV and radio in local markets.
It’s not easy to get industry executives -- both supporting and opposing the Nielsen-Arbitron merger -- to speak for attribution. Or at all. Much of it could be because so many are working with Nielsen on various projects and don’t want to alienate a partner.
GroupM occupies an interesting spot. It has worked with Nielsen on Cross-Platform Campaign Ratings. At the same time, its parent WPP owns Kantar, which competes with Nielsen.
Stacey Schulman, the Chief Research Officer at TVB, sees a potential benefit in a larger Nielsen. When she was at Turner working on a March Madness measurement project, there was plenty of data available through Nielsen, but the company had to go to Arbitron to get the figures on out-of-home TV viewing. At least in that case, a firm with all the needed data could have made things easier.
TVB is the trade group for local stations, a business that might have reason to be more concerned about a Nielsen-Arbitron combination than national networks. If Nielsen offers a system for a particular market making it easy to compare radio and TV, that could pique advertiser interest in radio. Perhaps that's why Clear Channel has come out in favor of the deal.
“If Nielsen resources and expertise can help Arbitron possibly put out a better product, then God bless,” said Gary Carr, a senior vice president ay TargetCast tcm.
Nielsen's Calhoun said in December capturing radio consumption “allows us to now analyze and understand consumers for another two full hours a day, which is a very big deal.” Nielsen can also ramp up Arbitron’s initiatives to measure streaming radio.
Similarly, Adam Shlachter, a senior vice president at Digitas, supports the Arbitron deal partly because of the chance to get a more holistic view of consumer behavior. “The combination of audio and video is interesting because you can start to look at a day in the life of how people are consuming media at home, on the commute, at work and on the way back,” he said. (Digitas has done work with Nielsen.)
Steve Lanzano, head of TVB, said he isn't concerned: “Advertisers I talk to really don’t look at radio as a big competitor in local TV.”
Perhaps understandably, since it is in the throes of working with the government in the regulatory process, a station-group executive said Nielsen has been “very coy” about post-merger plans for local markets. In December, Calhoun mentioned opportunities to develop single-source products with local radio, marrying the ratings with Nielsen's consumer purchase data.
Not everyone is concerned a bulked-up Nielsen would leave little room for competition. Both Digitas' Shlachter and TVB's Lanzano listed multiple companies that can still grab market share in the various businesses where Nielsen operates.
Dave Boylan, the general manager of the ABC affiliate in Miami, has long been a Nielsen critic, suggesting the company works to muscle out potential competition. So, a deal allowing it to get that much bigger -- such as Arbitron -- hasn't gained favor with him.
When the deal was announced, he said he would have much rather woken up to hear that Arbitron planned to reenter the TV space. Asked why there hasn’t been more outcry from opponents of the Arbitron deal, he said in part: “I think because from the outside it looks like it’s just a transaction about radio and it doesn’t affect TV.”
It's hard to argue with that.