Rentrak-comScore Amps Up Ratings War

Merger to Create Formidable No. 2 to Nielsen in Audience Measurement
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The mad scramble to create a comparable total audience measurement metric for the television industry is intensifying with comScore’s $779 million deal to acquire Rentrak, creating a stronger No. 2 to ratings giant Nielsen and a catalyst the industry desperately needs to monetize viewing outside the traditional TV in the home.

All three companies have been racing to create a total audience measurement metric that can accurately gauge content viewership across multiple platforms including linear TV, online video, SVOD, on demand, mobile and over-the-top. Nielsen is readying the launch of its Total Audience Measurement product later this year, and Rentrak and comScore have each made inroads on that front as well.

With the merger, “the media measurement battle for crossplatform starts in earnest,” Telsey Advisory Group media analyst Tom Eagan wrote in a note to clients, adding that the timing of the deal is critical.

The long-awaited Nielsen Total Audience Measurement product, which offers advertisers a new currency that the ratings company promises will be more holistic, is scheduled to be released in just a few months. The deal also coincides with the pending closure of Rentrak client Charter Communications’s merger with Time Warner Cable. With TWC, Charter could potentially add New York and Los Angeles to Rentrak’s overnight TV ratings, making it more of a national sample.

ComScore has made a name for itself in tracking digital content, and Rentrak, with its set-top box-based data, has carved out a strong niche in video on demand and TV everywhere. Bringing the two companies together will combine two powerful data sets to help address what has become an increasingly pressing problem in the industry.

CROSSPLATFORM CAPABILITY

Television ratings have plummeted over the past few years as consumers have shifted their viewing habits away from appointment-based linear TV to digital video recorders, video on demand, online and mobile video, and over-the-top services.

On a conference call with analysts to discuss the merger, comScore CEO Serge Matta — who will also be CEO of the combined company — didn’t downplay the significance of the deal.

“Together we will define the future of measurement and pave the way for the introduction of a new crossplatform ratings currency,” Matta said on the call.

The two companies will have greatly enhanced scale and expansive information assets, including data from 120 million TV sets and devices, 100,000 movie screens, a global Internet panel of more than 2 million people and 1.8 trillion digital interactions captured every month.

Rentrak vice chairman and CEO Bill Livek, slated to become executive vice chairman and president of the combined entity, said given the shift in viewing habits, the time is ripe for the merger.

“You see in your own families how delayed viewing is changing the world,” Livek said. “That’s what we’re seeing here. We’re building the next iPhone in media measurement.”

Neither Matta nor Livek would elaborate on what their currency would be. But Eagan wrote that whatever it is, it will likely be better than what the two companies would have come up with on their own.

“We don’t yet know what the comScore-Rentrak crossplatform metric would look like, but it would be superior to each of their respective crossplatform services,” Eagan wrote. “What we do know is that the Rentrak VOD viewership data is likely the most robust in the industry, given its sourcing from more than 100 million set-top boxes. Given the increased viewership on VOD, that will play an important role in crossplatform.”

Eagan added that whatever comes to be, it won’t happen overnight.

“Whatever happens, it will not be immediate: A new currency would have to be run in tandem for more than a year to test coordination and redundancy,” Eagan wrote. “That said, 2016 will be exciting for measurement companies.”

Analysts were split on the overall impact of the deal. While Eagan and Wunderlich Securities analyst Matt Harrigan saw the combination as an industry positive, others like Sanford Bernstein media analyst Todd Juenger and Pivotal Research Group analyst Brian Wieser pointed out the combination’s shortcomings.

Juenger wrote in a research note that while com-Score-Rentrak will be more competitive, Nielsen still is the measurement company to beat.

ANALYST SKEPTICISM

“We believe the industry is looking for a better/best measurement solution to its audience crisis,” Juenger wrote. “We don’t believe the industry will find that from comScore-Rentrak — not even close.”

Wieser said there appears to be room enough for both companies to grow, “but not necessarily at Nielsen’s expense.”

“We see the role of third-party measurement becoming increasingly important to large marketers,” Wieser said. “This allows for growth opportunities from different providers such as Rentrak and comScore, who can offer new services within growing markets and new services that are complementary to more mature ones without necessarily taking away from Nielsen.”

The deal is the latest in a series of transactions over the past year that have transformed Rentrak from a small research company that 35 years ago specialized in movie box office and video-on-demand data to a major player in the TV-measurement game.

Using census data gleaned from millions of set-top boxes and merging it with demographic, household income and purchasing data, Rentrak has become a key partner for ad buyers looking to target specific audiences. That came to the forefront during the 2008 presidential election, when a U.S. senator from Illinois named Barack Obama used census data from Rentrak to fine-tune his campaign ad-buying strategy.

Last October, Rentrak made two transformational deals with units of ad behemoth WPP: An agreement to purchase the U.S.- based TV assets of its Kantar Media division, as well as a deal with ad buyer GroupM to provide local and national data tools.

Those deals came on the heels of an agreement with Zenith Media, a unit of communications behemoth Publicis Groupe, to test Rentrak data in several markets as the basis for planning and buying local ads for Zenith’s clients.

MEASUREMENT’S HOLY GRAIL

While those deals solidified Rentrak’s relationships with ad agencies and buyers, the comScore merger could bring it closer to one of the more elusive goals in the measurement industry.

Total audience measurement has been a hot-button issue in the content business for years, but the need for a new currency that tracks all forms of viewership has become increasingly important as networks continue to seek other ways to monetize their shows.

That could bode well for cable programmers like Viacom, which have chafed at the inability to measure viewership across platforms. Network owners such as Viacom — whose younger viewers spend the most time viewing content on mobile devices and online — have seen their ratings plunge and have blamed at least part of the decline on the lack of a crossplatform currency. Those networks should welcome deals like comScore-Rentrak, Wunderlich’s Harrigan wrote in a recent note to clients.

And they did.

“This is an important merger because it brings together two leaders in measurement, one from TV and one digital,” said Viacom executive vice president and chief research officer Colleen Fahey-Rush in an e-mail message. “Current measurement is very incomplete, and this union could move the needle in a meaningful way.”

While comScore and Rentrak are working hard on a multiplatform metric, they aren’t alone. Nielsen —which with annual revenue of $6.3 billion is nearly 14 times larger than the combined $457 million comScore-Rentrak — plans to launch its Total Audience Measurement product by the end of the year. Nielsen has taken a different approach, and its data also includes age and demographic breakdowns, which some ad buyers deem critical.

“Nielsen has the only Total Audience Measurement, comparable across all screens,” the company said in a statement. “All of our data is fully representative of the U.S. population, and we deliver truly independent measurement. There are myriad analytics options for the media industry, but Nielsen’s focus is on delivering the actual currency ratings data used for trading billions of dollars in advertising. This requires superior quality, industrial-strength delivery and gold-standard, audited processes and methods.”

Nielsen also has made a few deals itself. Last week, it reached an agreement with CBS under which the broadcaster’s digital service CBS All Access will become the first app and online offering to be certified for Nielsen’s Digital in TV Ratings measurement.

Nielsen’s CBS agreement could be an opportunity for comScore-Rentrak in that it only looks at the first seven days after a show has aired, noted The Diffusion Group analyst Alan Wolk.

“While that should cover a good-sized chunk of the audience, it does leave a gap: viewers who watch that show after that seven-day window has passed,” Wolk wrote. “That’s a golden opportunity for comScore-Rentrak, as they count views as far as 28 days out across all manner of devices.”

Those later viewers could be valuable: 64% of over-the-top TV ads were viewed eight days or more after the show first aired, according to research from ad-tech firm FreeWheel.

Coalition for Innovative Media Measurement CEO and managing director Jane Clarke said in an interview that the road to crossplatform currency doesn’t need to declare winners and losers. She added that ad buyers could use data and metrics from a variety of sources (see Viewpoint).

NEED FOR OPTIONS

“The industry may not want just one number,” Clarke said. “I think they want options. The critical thing is unduplicated reach and frequency, so advertisers can tell if they’re reaching the same person on five platforms or five people on five platforms.”

Key to the development of new measurement is continuing competition, Clarke added.

“If you don’t have competition, neither of them will do anything,” Clarke said. “They’ll just evolve on their own time frame when it meets their needs, and there isn’t any kind of impetus to push things along.”

Moreover, unlike the old days of appointment TV, today’s TV measurement will need data and information from a variety of sources.

“I think the industry is more open to not just having one currency for everything,” Clarke said. “The deals are much more complicated. Sometimes, you have to bring in alternate sources of data anyway. The agencies are used to pulling together all kinds of disparate data.

“It’s not like a race where only one person is going to win and the other person will be out,” she said.

The mad scramble to create a comparable total audience measurement metric for the television industry is intensifying with comScore’s $779 million deal to acquire Rentrak, creating a stronger No. 2 to ratings giant Nielsen and a catalyst the industry desperately needs to monetize viewing outside the traditional TV in the home.

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