Amid Media Market Correction, Analyst Ups Nielsen To 'Outperform,' Cites Changing 'Tone'

At a time when Wall Street investors appear to be turning their backs on many of its biggest customers, a leading analyst has boosted Nielsen’s stock to an “outperform” rating largely because it will benefit from the same forces that seem to be challenging its top clients.

“In the vein of ‘when your customers aren’t doing well, you’re not doing well,’ we can see some level of negative read-through, but it seems overdone to us,” BMO Capital Markets’ Dan Salmon writes in an equities research report sent to investors this morning.

In the report, Salmon makes the opposite case: That even though big TV-centric companies are being battered on Wall Street and Madison Avenue and might otherwise look to “contain costs in legacy businesses,” Nielsen likely will be immune from such cuts.

“We’ve also never known the media companies to not be strict negotiators with their vendors like Nielsen, which of course, remains an essential one as the currency for the majority of their advertising dollars,” Salmon explains, adding: “More importantly, Nielsen will be launching a product -- Digital Content Ratings -- that will help shed light on the shift of TV viewing to internet platforms, the root cause of the anxiety around media companies’ subscriber base and affiliate fee growth.”



From an investor’s point of view, Salmon says the rollout of DAR, and other aspects of Nielsen’s “total audience” strategy (including the imminent arrival of its Digital Content Ratings), make Nielsen not just immune from the market forces hobbling big media companies, but actually more valuable.

In fact, Salmon reminds investors that Nielsen “is, after all, an information services business, not a media company” -- and that should benefit shareholders “if uncertainty continues.” In other words, the worse things get for Nielsen’s customers, the better the market position is for Nielsen.

In terms of Nielsen’s competitive position in the annuity information services marketplace supplying big media companies and agencies, Salmon says he has also recently upgraded his view of Nielsen as the dominant solution vis a vis companies like comScore, Rentrak, Kantar and others, noting:

“More qualitatively, there seems to be a broadly held view that Nielsen is better addressing the needs of a changing media landscape. This was not the case as recently as 6-12 months ago, but as more customers begin to use the new products, the tone is changing.”
8 comments about "Amid Media Market Correction, Analyst Ups Nielsen To 'Outperform,' Cites Changing 'Tone'".
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  1. Craig Jaffe from Baruch College, Zicklin School of Business, August 11, 2015 at 12:34 p.m.

    There were fewer meaningful transactions using Nielsen data between networks and marketers it is believed as TV advertising declined, pointing to diminishing demand for Nielsen data and related services. Recent industry developments suggest this trend will continue. In its financials, television-based measurement services in the U.S. market are not broken out separately, presenting difficulties in assessing the health of service. 

  2. Ed Papazian from Media Dynamics Inc, August 11, 2015 at 1:30 p.m.

    Craig, if anything, subscribers to Nielsen's national rating service will be using it more, not less, as they explore new ways to find the audiences that they want---new channel and daypart/program type mixes, for example. Also, as ratings fragment, this mens it takes more spots to obtain the desired number of GRPs, hence more spots to evaluate and monitor in the post buy accounting/ GRP guarantee phase.

  3. Craig Jaffe from Baruch College, Zicklin School of Business, August 12, 2015 at 9:09 p.m.

    Thanks Ed. But to clarify, I made sure not to state that there were fewer transaction using Nielsen data. But rather that there were likely fewer "meaningful" transactions using Nielsen data. Nielsen has been trying its best to promote itself and appears to have high hopes by phasing in some new services related to Digital in 4Q. But I don't suggest drinking the Kool-Aid just yet. Recently, Nielsen was hit with double-digit declines amongst some of its legacy services specifically in its Watch business. Nielsen's decline was during the most recent three-month and six-month periods ending June 30th, 2015 versus comparable year-ago periods. You bring up excellent points however regarding the possibility that there may be increased interest in exploring new ways to plumb national ratings. But the significant volume of dollars that advertisers are moving out of TV and into Digital seem to suggest otherwise. The migration of ad dollars out of TV implies less interest in TV, not more. 

  4. Ed Papazian from Media Dynamics Inc, August 13, 2015 at 7:37 a.m.

    Craig, not to make this a big issue, but the amount of dollars that is being moved out of "TV" is only 1-2% of total TV spending per year. While that's not a positive development, it's not necessarily "significant". Nor is it a certainty that the flow of dollars to digital will become a tidal wave---especially once TV advertisers discover that thanks to viewability issues, high CPM pricing and built in reach ceilings---caused by ad blockers----that digital in its current form may be a way to augment their TV campaigns, not replace them.

  5. Craig Jaffe from Baruch College, Zicklin School of Business, August 13, 2015 at 11:20 a.m.

    I realize this can be a slippery slope as the layperson expression "significant" can depend on a number of factors, such as definition of terms, what numbers are being assessed, what measurement periods are chosen for analysis, and so on. Based on an analysis by SMI of ad spending from Oct2014-Jun2015, advertisers spent $31.9 billion on TV. Of that, SMI states that $1.5 billion flowed out of TV into digital, or 4.7%. The question now becomes, will ad spending on TV pick up without drainage from digital so that the numbers fall in line with your quote of 1-2%? I suppose time will tell. With the mass of accounts up for review, it muddies the waters for prognostication even more.

  6. Ed Papazian from Media Dynamics Inc, August 13, 2015 at 1:22 p.m.

    Craig, again, not to beat this to death as we both agree that there is some TV money going into digital, I was referring to all TV, including local, not just nationally-placed TV. Also, as far as I know, SMI has no way to determine where moneys that were spent on any given medium came from so it is merely making an estimate. When spending suddenly increases during presidential political campaigns or when unusual events like the Olympics appear, this is often "new" money. When spending appears to drop the next year, it can look like these "new" dollars flowed into digital when this was not the case. In this regard, year to year trending can be a bit misleading and a better way to look at it would involve a long term analysis. I wish we had better data, but we don't.

  7. Craig Jaffe from Baruch College, Zicklin School of Business, August 13, 2015 at 2:28 p.m.

    Just trying to address your points, Ed. Hope the following clarifies. Objectively, the TV numbers I gave account for national, local, and syndication -- all TV as defined by SMI, I believe. SMI's advertising expenditure data appear to be more accurate than those reported elsewhere (i.e. Nielsen estimates, Kantar estimates, etc), and are based on actual booking data from major agencies not estimates. However, there is some extrapolation since SMI does not have compliance with 100% of the total agency market (I think it is reported at 80%) and therefore digital's growth is reported as an estimate. SMI's analysis also made a distinction by reporting dollars flowing out of TV, as a separate set of numbers from digital's “organic” growth. That means in addition to the ad dollars that were shifted out of TV into digital, SMI reports that digital also had organic growth as well. By "organic," I believe this means it was not at the expense of TV or any other media segment’s budget. As far as I know, SMI appears to have a way to determine flow. In the spirit of learning, if you believe there are more accurate numbers out there or if there is anything that was left out, I'm happy to learn about it.

  8. Ed Papazian from Media Dynamics Inc, August 13, 2015 at 2:41 p.m.

    Thanks for the added explanation, Craig. Yes, it seems that SMI is extrapolating and included only spending by national advertisers. As for how they deduced where the money comes from, who knows? In any event, it will be interesting to see how it all plays out but, unlike some posters, I don't forsee the cataclysmic end of "linear TV" that some are predicting----and, obviously, hoping for.

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