TV-ratings measurement juggernaut Nielsen Media Research is poised to become the dominant player in radio measurement as well, with its bid to acquire Arbitron in a deal valued at $1.3 billion.
The all-cash transaction — which still must be approved by federal regulators — at first seems like a departure for Nielsen, which in the past few years has concentrated its M&A efforts on acquiring small social-media and technology companies like online ad optimizer Vizu, market researcher Marketing Analytics, consumer researcher Neurofocus and, last month, social-media startup Social Guide.
Technology is the chief driver of the latest deal; in particular, Arbitron’s Portable People Meter devices that track out-of-home listening and viewing habits. Accurately measuring the second screen has been a major initiative for both broadcasters and cable content providers. Arbitron has used the PPMs — which subjects wear like pagers, and which detect hidden tones within a station’s or network’s audio stream — to track out-of-home viewing for the 2011 NCAA Men’s Division I Basketball Championship for CBS and Turner Sports. .
Nielsen has had its own people-meter technology for about 25 years, but only for measurement inside the home.
Sanford Bernstein media analyst Todd Juenger wrote in a note to clients last week that Arbitron’s nascent effort in cross-platform measurement, using its audio meter to capture all forms of media consumption, could be “the Trojan Horse that Nielsen is interested in here.”
Nielsen has its own similar efforts underway, but Juenger wrote it is “not inconceivable that some elements of Arbitron’s panel, data capture or intellectual property could be useful to Nielsen’s efforts.”
Nielsen said the acquisition would allow it to further expand its “Watch” segment audience measurement across screens and forms of listening.
“These integrated, innovative capabilities will enable broader measurement of consumer media behavior in more markets around the world,” Nielsen president of global media products and advertiser solutions Steve Hasker said in a statement. “We will also bring local clients greater visibility to empower more precise advertising placement and campaign effectiveness.”
The combination also gives Nielsen added tools in assessing consumer habits. In a statement, Arbitron CEO William Kerr noted that radio reaches more than 92% of all American teens and adults.
“By combining Nielsen’s global capabilities and scale with Arbitron’s unique radio measurement and listening information, advertisers and media clients will have better insights into consumer behavior and the return on marketing investments,” Kerr said in a statement.
The Arbitron deal, at $48 per share, represents a 26% premium to the radio ratings firm’s Dec. 17 closing price. The combined company will have annual revenue of $6 billion and generate about $1.7 billion in cash flow.
Investor reaction — initially strong when the deal was announced Dec. 18, as evidenced by the 24% rise in Arbitron’s share price to $47.03 — cooled a bit, with shares closing at $46.52 per share on Dec. 19.