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Will a new Nielsen emerge after selling to private equity?

Will a new Nielsen emerge after selling to private equity?

Nielsen Holdings agreed on Tuesday to be acquired by a private equity group that includes Elliott Investment Management and Brookfield Asset Management for a sum of $28 per share, or $16bn including the assumption of debt.

The media measurement company has been on the hot seat in recent months – broadcasters have been testing alternative measurement services as Nielsen has been repeatedly criticised for their poor performance in measuring audiences in a rapidly changing industry.

Notably, last September the Media Rating Council suspended Nielsen’s accreditation for national TV rankings.

Complaints led to NBCUniversal and WarnerMedia striking deals with iSpot.TV in January to help measure unduplicated audiences across their various media properties, with other similar moves across the industry following.

And, in a further escalation, Nielsen was sued last week by three media companies owned by Byron Allen – Weather Group, Entertainment Studio Networks, and CF Entertainment – over alleged fraudulent misrepresentation of ratings.

For its part, Nielsen has been developing Nielsen ONE, a new cross-media measurement service that “will provide reach and frequency metrics across linear programming, streaming, connected TV (CTV), and digital channels”.

Media and marketing mentor and board advisor Terry Kent, who knows Nielsen well having been an executive of its former parent company VNU, pondered to The Media Leader what the private equity consortium might have been weighing when seeking the acquisition:

“The core ratings business is highly profitable – but in my opinion not sustainable. Perhaps [they] will find a way to cut costs, sell off non-strategic assets, and buy (instead of build) new technology to help future-proof Nielsen.”

‘The big guns are slowing down’

Media, martech and tech analyst Ian Whittaker believes that the measurement space presents a real opportunity for private-equity investors. “Particularly with the streamers heading more in the advertising direction, that opens up new market opportunities,” Whittaker said.

“There is also the data side,” he added. “These research firms hold a lot of data, etc. which is also likely to be monetisable, especially with walled gardens proliferating (which also offers up more business opportunities).”

Whittaker also noted that there were good reasons for Nielsen to want to go private, as the move will help abate shareholder demands, allowing the company to look longer term without worrying as much about quarterly results.

However, Kent warns that despite the potential in going private, risks nevertheless persist for Nielsen depending on where the private equity group intends to take the company.

“The big guns are slowing down and are surrounded by smaller but more fleet-of-foot competitors,” Kent said. “The opportunity for Nielsen is to reduce stress from shareholder financial pressure and to build a war chest for acquisition and innovation. The risk is if the pressure remains, and Nielsen’s profits are milked for short term gains.”

He added: “Nielsen can’t grow new future products without diverting resources away from their highly profitable legacy ones; but to remain relevant they must do just that. Now, one solution is to buy away your problems through acquisition. Perhaps a PE firm is the best bet for Nielsen after all.”

Nielsen Holdings had previously held out after receiving a lower offer of $15bn from the same consortium of investors, with one of its largest shareholders, WindAcre, stating that it “[viewed] Nielsen’s intrinsic value to be significantly higher than the values proposed by the consortium”.

The extra billion appears to have changed their minds.

As to the question of whether the acquisition could help spur along solutions to Nielsen’s current measurement issues, Whittaker and Kent are both skeptical.

“It may help but it’s not guaranteed. I don’t think the other firms will back off, especially given the growing importance of measurement,” said Whittaker.

“Nielsen’s industry pressure comes and goes in cycles – every 5 years or so a consortium arises who challenges Nielsen by funding alternatives. It is the burden of any monopoly or market leader to show why their service is worth the price if it does not remain relevant,” added Kent.

Media fragmentation has ‘held Nielsen hostage’

This is not the first time Nielsen has been acquired. In 1984, Dun & Bradstreet Corporation bought the company, and it was purchased again by Dutch publisher VNU in 1999-2000.

Kent recalls both acquisitions, which he saw firsthand:

“I was a young executive at D&B when they first acquired Nielsen in 1984. 12 years later D&B CEO Bob Weisman split the company into TV ratings (Nielsen Media Research) and consumer shopper tracking (ACNielsen).

“He believed the cultures of the two companies were drastically different and that they would perform better if separated – and so he did.”

When Kent later joined VNU, he was part of the US team of executives seeking to invest in information services.

“Eventually the strategic focus was in media/marketing information. We were convinced if VNU wanted to be a market leader, they needed to consider Nielsen Media.

“We acquired Nielsen [Media Research] for $2.5bn. Soon after, in 2000, VNU acquired ACNielsen with the thought of putting the companies back together.”

Kent left VNU/Nielsen in 2001.

He reminisces: “The 25+ years from the mid-80’s to the mid-2000’s was a golden period for Nielsen. They were the market leader in broadcast audience measurement. They were the currency.

“However, times were simpler then. There were not as many networks or channels to measure; the internet was not considered a true medium to measure and of course there was no such thing as streaming media, or social media. There was no cross-media to measure.

“It is this fragmentation of media and the shift towards digital that has held Nielsen hostage. In 2011 Nielsen IPO’d and had to deal with shareholders not willing to sacrifice the short-term profits of legacy products for long term gains in innovation.

“Hopefully, those handcuffs come off under new ownership and a new Nielsen will emerge. Even if that happens they will have to learn to play well with others. There are just too many players in the sandbox to ignore.”

Jack Benjamin is US reporter for The Media Leader. Having recently rebranded, we will be formally launching in the US very soon…

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