• by Staff Report , December 19, 2012

Nielsen’s $1.26 billion deal to acquire Arbitron would make the world’s largest supplier of media and marketing research even bigger, giving it not just greater dominance over another medium, but yet another one of Madison Avenue’s so-called market “currencies,” and constricting the supply chain of media ratings that advertisers and agencies use as the basis of hundreds of billions of dollars worth of media buys. The timing of the deal is ironic, coming nearly two decades after Dec. 31, 1993, when Arbitron officially shut down its television ratings business -- making Nielsen the de facto monopoly supplier of television ratings, and putting it in a position to dominate the rest of the advertising food chain for decades to come.

The deal also comes as Nielsen executives claim to have reached the “tipping point” for becoming the ad industry’s trading currency for another key medium -- online -- following an especially rapid and aggressive push to make its Nielsen Online Campaign Ratings service Madison Avenue’s standard for Internet advertising, including essentially giving the service away for free to some of its biggest customers until it achieves a critical mass of penetration among big online advertisers.

In other words, if regulators approve Nielsen’s acquisition of Arbitron, the consolidated company will not simply be a supplier of media audience estimates and consumer marketing insights, but will be the sole supplier of advertising trading currency for three major media: TV, online and radio. "It makes Nielsen the currency for $85 billion in advertising -- $68 billion for TV and $17 billion for radio,” Brad Adgate, senior vice president-director of research at Horizon Media, estimates of just the TV and radio portion of Nielsen’s market position.

Not surprisingly, Nielsen and Arbitron executives were upbeat on the prospects for the deal, which they said was good not just for their shareholders, but also for their employees and their customers, because it will give the combined companies “synergies,” resources and the market position to develop and innovate better research methods and services.

Nielsen CEO David Calhoun said that aside from accelerating Nielsen’s position in radio, the real value was the ability to link Arbitron’s radio audience estimates with Nielsen’s so-called “buy” data about consumer purchasing behavior, and even speculated that a logical new service would come from Arbitron’s integration with Nielsen Catalina.

That would be another ironic full-circle aspect of the merger, since the last big venture Nielsen and Arbitron tried to develop was their ambitious Project Apollo single-source measurement initiative, which was shut down when big marketers declined to pay the hefty price tag associated with sustaining the expensive research initiative.

In fact, Nielsen and Arbitron have been erstwhile partners over the years, even as they have been fierce market competitors, and continue to be 50/50 joint venture partners on the newspaper industry’s Scarborough Research.

They have also butted heads, and on occasion raised antitrust concerns, such as when Nielsen launched its own competitive ad tracking service Monitor-Plus, and made it difficult for some of Arbitron’s clients to license and integrate its TV ratings data with a more established ad-tracking service owned by Arbitron. At that time, a committee of Madison Avenue’s American Association of Advertising Agencies (4As) expressed antitrust concerns, and Arbitron and Nielsen struck a cross-licensing deal ensuring access to Nielsen’s TV ratings for its competitive ad-tracking service.

While allegations of antitrust are frequently raised against Nielsen, only a couple of lawsuits have actually been filed, including one brought by Nielsen TV ratings rival erinMedia, which was subsequently settled privately between the two companies (see Tony Jarvis’ op-ed commentary in today’s edition). But in another antitrust suit brought against Nielsen in Florida by television broadcaster Sunbeam, a judge ruled in Nielsen’s favor, in part, by citing the fact that Arbitron could launch a competing service.

While Arbitron periodically has been seen as a potential Nielsen rival in television over the years since it withdrew from conventional TV ratings, including its development of a portable people meter measurement system, it hasn’t actually mounted a syndicated TV measurement service, and Nielsen executives Tuesday said the most likely application of Arbitron’s PPM technology would be as a means of supplementing Nielsen’s existing TV measurement methods to capture out-of-home television audience exposure.

In fact, Nielsen’s Calhoun was adamant that there was no likely integration between Nielsen’s current “cross-platform” measurement systems and Arbitron’s.

"There's nothing to integrate. The cross-platform discussion gets quite confused. There's really no client I know that is looking for radio/TV cross-platform integration,” Calhoun said in response to a securities analyst's question -- although one of Nielsen’s biggest clients, ESPN, has already begun working with Arbitron and Nielsen online measurement rival comScore to develop a cross-platform measurement service that would measure five media, including radio, TV and various digital platforms. It was unclear Tuesday what would become of that service.

Most of the focus from Nielsen and Arbitron executives Tuesday was on the value the merger would create for shareholders, some synergies that would be achieved by combining the two companies, Arbitron’s ability to tap into Nielsen’s global sales and marketing organization to export its radio services worldwide, integration, and of course, marketplace dominance.

After it was noted that Arbitron was the sole currency for radio advertising buys in the U.S., Nielsen’s Calhoun exclaimed: “We like their market position.” While the reaction from many Nielsen customers was muted Tuesday as they were trying to assess the implications of that market position, some expressed concern.

“Competition is good. It gives you better service and affordable pricing,” said Horizon’s Adgate.

Group M's Lyle Schwartz was circumspect regarding the deal. "What it means is that there is going be a greater consolidation in the research community among vendors,” said Schwartz, who is managing partner of marketplace analytics for GroupM, the largest buyer of media in the world. “I like competition. I like diversity. I don't think consolidation is in the best interests of our clients."

Schwartz said he was especially concerned about the implications the merger would have on projects such as Arbitron’s collaboration with comScore. "I'd like to know where that is going," he said.

While most media suppliers declined to comment, the merger got a thumbs up from radio giant Clear Channel Media + Entertainment, which stated: “We think it’s a step in the right direction that Nielsen recognizes that Radio, TV and digital are the three critical media to marketers, and that this combination has the potential to offer broader insights and better measurement across multiple platforms.”

The major ad industry trade groups, meanwhile, have taken a wait-and-see position pending regulatory review and the disclosure of more facts about the proposed merger.

“Nielsen has announced a plan to acquire Arbitron, but not the details of the proposed transaction,” the 4As said in a statement, after consulting with its outside legal counsel. “An acquisition of the size announced will be many months in the making, including review by appropriate governmental authorities who will have authority to require modifications, so it is impossible at this point to know what the proposed deal will mean for those companies or for the industry. The 4A's will continue to monitor the situation as more information becomes available, and, if necessary, will act to prevent adverse consequences on 4A's members, their advertiser clients, or the industry as a whole.”

“I think that’s a fair representation,” concurred ANA President-CEO Bob Liodice. “Obviously, the first question that comes out of this is whether it elevates any antitrust concerns. And that’s still to be determined, because the other question is who is going to review this, the [Federal Trade Commission] or the Department of Justice?”

“When you look at this, we’re essentially bringing the monopoly of television ratings together with the monopoly of radio ratings,” he continued. “I’m not sure that the bringing together of two monopolies affects the research. And we’re not sure that it elevates pricing concerns at this time. That’s still to be determined.”

Liodice noted that the “existing landscape has been there for many, many years,” and yet no significant new competitor has managed to enter either the radio or the television advertising currency marketplace to rival either Aribitron or Nielsen, and that it’s not clear that bringing the two companies together would alter that marketplace dynamic in any significant way.

Moreover, Liodice noted that technology and the availability of more sophisticated data sources may reduce the barrier to entry for new suppliers seeking to innovate the way that media are measured, bought and sold.

In fact, the ANA, 4As and other trade associations have their own initiative, 3MS, which is designed to spark the development of far more enhanced research methods and systems that would make advertising and media even more accountable than their current state of the art.

Another innovation the ANA has been championing is so-called “brand commercial ratings,” and it is holding a conference on that subject on Jan. 22, 2013, and Liodice said it would be “interesting to see” what Nielsen, Arbitron or any of their competitors have to say about that.

Joe Mandese, Wayne Friedman, Steve McClellan, Erik Sass and David Goetzl contributed to this report.