WASHINGTON — The Federal Trade Commission has signaled that there needs to be “robust competition” for video ratings in the multiplatform video age, competition in a market not yet established that it believed a combined Nielsen and Arbitron would be able to foreclose.
The commission agreed to let audience- measurement firm Nielsen buy rival Arbitron for about $1.26 billion, but not without conditions that require it to cultivate its own competition in the cross-platform ratings space.
The FTC concluded that without the divestiture of that intellectual property, all the members of the video food chain — from advertisers and agencies to programmers — would be forced to pay more for cross-platform audience measurement.
LOOKING AHEAD
“Effective merger enforcement requires that we look carefully at likely competitive effects that may be just around the corner,” FTC chairwoman Edith Ramirez said in announcing the settlement. “In this matter, the evidence provided us with a strong reason to believe that absent a remedy, the deal was likely to harm emerging competition in the area of cross-platform audience measurement.”
The FTC defines that ratings market as “audience-measurement services [that] report the overall unduplicated audience size (i.e. reach) and frequency of exposure for programming content and advertisements across multiple media platforms.”
In order to secure FTC approval, Nielsen agreed to license the Arbitron technology for cross-platform measurement to a third party (most likely ComScore, according to analyst Brian Wieser of Pivotal Research Group) for up to eight years. But it goes beyond just technology. Arbitron and ComScore are currently developing a cross-platform measurement tool for ESPN called Project Blueprint.
The FTC said it wants the third party to get “everything it needs to replicate Arbitron’s participation in a national syndicated cross-platform audience measurement service.” The FTC wants the new buyer to become a legitimate competitor in cross-platform ratings, and Nielsen has to make sure that happens. It must provide technical assistance, ongoing TV and radio ratings data, and cannot prevent the third party from hiring “key” Arbitron employees.
The FTC concluded that the combination of Nielsen and Arbitron, the two most-familiar names in media ratings, would have reduced competition in the new world of video ratings — online or on mobile screens — without the agreed-upon conditions.
The combined company will have to divest Arbitron’s Link Meter technology, but will get to share it on a royalty- free basis with that third party. Link Meter was intended for use in Project Blueprint, the crossplatform ratings system Arbitron is developing with ComScore and ESPN.
For eight years, Nielsen/Arbitron must also license the encoding and portable people meter technology to develop cross-platform measurement services on a royalty-free basis. It must make technical assistance available at cost to its competitor, as well as access to TV and radio data.
Nielsen/Arbitron must also open its books on “key” Arbitron employees for possible poaching by the third party, including providing information on current salary and bonuses and even making those employees available for interviews. And it cannot counter any offer made to woo the employee.
DISSENTING VIEW
But the commission was not unanimous in its decision to prevent the cornering of a market not yet in existence. The vote was 2-1, with Republican Joshua Wright voting against. Republican commissioner Maureen Ohlhausen recused herself.
Wright said it was the wrong decision because there was insufficient evidence that the combination would indeed reduce competition for TV-online ratings.
His issue was with the commission conditioning the deal on predictions about the future market, rather than on existing harms. “[T]here is no commercially available national syndicated cross-platform audience measurement service today,” he said. “The commission thus challenges the proposed transaction based upon what must be acknowledged as a novel theory — that is, that the merger will substantially lessen competition in a market that does not today exist.”
Wieser agreed. “In some ways it is remarkable that the FTC acted to prevent a potential monopoly of a market which does not yet exist,” he said.
TAKEAWAY
The FTC OK’d the merger of ratings rivals Nielsen and Arbitron, but with conditions that will force them to cultivate competitors in cross-platform audience measurement.
