Double Digit Nielsen Sales Gains Bolster Parent VNU's First Half

First half financial results released early this morning by its Dutch-based parent reveal just how critical Nielsen Media Research's cash flow has become to VNU, a media company that has seen its publishing assets languish during a slow print advertising recovery. It also suggests that much of the company's future relies on Nielsen's expansion plans - including the controversial roll out of its local people meters, as well as the creation of audience measurement systems for new advertising markets. That disclosure is likely to further antagonize Nielsen customers who already believe the research company has been taking advantage of its virtual monopolistic market control.

"I'm very excited about the strong top-line growth we achieved in our marketing and media information segments - a clear indication that our information and services are in great demand," Rob van den Bergh, chairman-CEO of VNU, gushes in the company's first-half earnings report. The statement refers to both Nielsen Media Research (media information) and ACNielsen (marketing information), the two units that accounted for much of VNU's cash flow during what has been a trying six-months in terms of overall corporate earnings. During the half, VNU's revenues actually declined 5 percent, despite strong gains from the Nielsen units.

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VNU's media research sales were a bright spot, growing 7 percent during the half to more than half a billion dollars ($559 million), the company said, "largely driven by the excellent performance of Nielsen Media Research in the United States." The company said that Nielsen's "organic growth" was 11 percent during the half. Operating income from VNU's media research sales rose 6 percent to $125 million.

And despite heavy investment spending related to the rollout of local people meters and the introduction of new products, as well as unfavorable U.S. currency exchange rates, VNU said the operating margin for its media research group actually rose to 22.3 percent during the first half of 2004 vs. 20.9 percent during the first half of 2003.

Van den Bergh said Nielsen "remains on track" to expand its local people meter serve, "despite public debate," and implied the media research unit would continue to introduce new products serving "all advertising growth areas." During the half, Nielsen added services measuring outdoor media, videogames, product placement and sports sponsorships.

The strength of its research sales offset relatively weak results for VNU's Business Information units, trade publications like the Adweek group that once were key financial contributors. VNU said overall revenues declined 2 percent during the first half, due mainly to an 8 percent decrease in U.S. advertising revenues.

While he said "advertising for our trade magazines remains soft," Van den Bergh noted, "there are early signs of a recovery within the Adweek group and the travel group in the U.S. and at Intermediair in Europe. The Hollywood Reporter continued to perform well."

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