Nielsen’s Purchase of Arbitron – The Continuing Saga

Back in January 2013, I wrote an article about the pending Nielsen purchase of Arbitron and how that might impact the media business should the acquisition take place. I polled several media executives from a range of companies. Only two would go on the record or would agree to be quoted by name in the article. Such is the sensitivity of this issue that continues even today.

Industry responses to the acquisition continue to span the spectrum from “Barriers to entry have left it (Nielsen) unchallenged, and as a result, it displays the behaviors of a monopoly” and “I feel uncomfortable having one company have so much control over media measurement.  It makes it more difficult for new companies to compete, and eventually drives up costs” to “A Nielsen / Arbitron merger will help grow long-term competition in the space. If this merger isn't approved the broader ad industry will lose and the largest media companies will gain.” 

Back in January, the general consensus was that without vocal opposition by clients the acquisition would clear the anti-trust review. The expectation was that approval would arrive by March or April. It is now August and according to yesterday’s report in the NY Post the FTC has sent out a new round of requests for information. I am not an expert in anti-trust law but it seems to be taking much longer than anyone expected. Nielsen is still very confident that the deal will go through. Industry experts believe that it might require givebacks or division sales.

According to one expert, the recent news is significant. “My opinion is that you have a normal anti-trust process where they evaluate the market and after a time you have an idea of where the issues are. Then the parties reach an agreement and the deal plays out. In this case, the initial filing was on January 4, 2013, and has now been in process for 222 days and counting. That is unusual.”

Another expert surmised, “The FTC obviously wants to know more (about the Nielsen acquisition) which on its face is rather monopolistic. On the other hand, audience measurement is by its nature a monopoly in most countries. The important thing is that innovation by third parties not be discouraged, and that competitors be allowed and encouraged to build businesses in ancillary fields - and perhaps one day be able to challenge Nielsen itself. Something like the consent decree Nielsen signed in the 1960s prohibiting them from taking any action that would harm such companies.”

      The initial opinion of certain analysts was that Arbitron does not directly compete with Nielsen. Where it does compete, the overlap is small and Nielsen can accommodate market concerns in those instances.  “There were obvious things that Nielsen could do to assuage FTC concerns.” But that was back in January. Over six months later there is no resolution. 

      Some believe that the acquisition will be a potential squeeze on competitors like comScore where Nielsen will control so many parts of the measurement business in the market that it will be difficult for current competitors to survive and future competitors to enter the market. So while this is “not a traditional anti-trust case” according to an analyst, “the FTC may want to use the Nielsen / Arbitron acquisition to test a novel theory in this area of law.” Questions to be asked might be: 

     -- What is the evolution in the market? 

         -- What is the future benefit of this acquisition to customers?   

         --  Looking back on prior internal Nielsen discussions on the issue, was Arbitron described as a potential threat? 

          -- Nielsen staggers contracts. Does that, along with their command of huge percentages of client budgets, keep other companies out of the measurement market? 

          -- How and under what circumstances has Nielsen innovated in the past?

So where does that leave us? Currently there are four FTC commissioners (plus one vacant seat) – two Democrats and two Republicans. In order to block a transaction you need a majority of commissioners to vote in favor. So Nielsen is motivated to push the FTC to reach a decision now before the vacant seat is filled (with a third Democrat). 

In agreeing to any possible conditions for the acquisition approval, Nielsen would have to consider the impact against their long term business interests and underlying business model. Is it ultimately worth it to them? I, however, would like to know is if it is worth it to the media clients and industry at large.