While Nielsen appears to be staving off its biggest competitive threat in decades, the company is taking its lumps in a grinding war of attrition.
Nielsen will ramp up offshoring to India, Mexico, Poland and elsewhere in a move likely to result in more layoffs as new contracts with U.S. TV networks lower revenue for the heavily indebted measurement giant.
While Nielsen appears to be staving off its biggest competitive threat in decades, the company is taking its lumps in a grinding war of attrition. The offshoring effort follows a 9% workforce reduction for Nielsen in September.
Of course, the measurement industry, like much of media and ad tech, has been seeing waves of layoffs. Rival VideoAmp announced a 20% layoff and management shakeup earlier this month following a 10% layoff in September.
Financial pressure also has led to mounting speculation that Nielsen will divest non-core assets. And Nielsen’s new contracts with networks figure into an antitrust counterclaim brought by TVision, which has been embroiled in patent litigation for years with Nielsen. The litigation has weighed heavily on TVision, a company that provides calibration for VideoAmp and iSpot.tv, leading to a 25% workforce reduction last summer.
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In a note to employees obtained by Ad Age, Nielsen CEO Karthik Rao said, “Headwinds across our industry put some pressure on our revenues.” But he added that cost cuts enabled the company to boost earnings by 7% last year, “which is the way our financial performance is ultimately measured.”
Nielsen has been working for months with McKinsey & Co., according to people familiar with the matter, to develop a plan for offshoring much of its workforce. While Rao didn’t identify McKinsey by name, he said Nielsen will invest in “Global Capability Centers” that will “enable us to accelerate business innovation.”
India will be the primary center, but the company also will increase investments in Poland and Mexico, Rao said. Likely other countries will be involved too, according to people familiar with the matter. One industry executive said that while compensation for a data scientist with a master’s degree and one to two years of experience is in the $90,000 to $120,000 range in the U.S., someone with similar credentials can be hired in Ukraine for around $6,000 annually.
India is a market with resources “that will help to quickly grow our company,” Rao said, “particularly in streaming and convergent TV.”
Rao acknowledged that “some of our global workforce will be leaving Nielsen as a result” of a process “expected to take some time.”
One executive close to Nielsen said revenue came in $300 million short last year of what the company originally projected to the private equity ownership group Evergreen Coast Capital Corp., which took the company private in 2022. That deal came with $11 billion in debt, the riskiest $2 billion tranche trading recently at 13% interest. Elliott Investment Management, which backed the debt, is only on the hook for paying 11% interest.
Nielsen’s new contracts number more than 30 in all over the past six months, including one with Fox announced yesterday, according to Rao’s message. Nielsen declined to comment on the terms of the contracts.
According to people familiar with the matter, the deals come at lower annual costs, but with a key sweetener for Nielsen that preserves a fixed annual payment regardless of how much business networks may write using rival currencies from Comscore, iSpot.tv or VideoAmp.
Some have described the deals as “barter,” in that they also give Nielsen access to data from networks or their parents, such as Comcast’s set-top-box data in the case of NBCU, streaming server data, or use of TelevisaUnivision’s Hispanic identity graph. Representatives from Nielsen, Comcast and TelevisaUnivision declined to comment on the contracts.
“The networks got what they wanted,” said one agency executive about the upshot of the competitive threat posed by Nielsen rivals, pointing to lower measurement costs. The agency executive added that the theory that the departure of NBCU executive Kelly Abcarian, an industry leader who had pushed for competition in a TV measurement industry dominated by Nielsen, came at least in part because Comcast already had gotten its new contract. Abcarian declined to comment.
Rao made a point in his note of Nielsen having handled measurement for Comcast’s Peacock NFL playoff games, including the exclusive broadcast of the Kansas City-Miami playoff game earlier this month. He likened it to its streaming measurement Nielsen does for Amazon’s “Thursday Night Football,” a bone of contention last year with networks that claimed Nielsen hadn’t given them an equal chance to integrate their streaming server data.
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Nielsen’s financial pressures also have fueled extensive speculation by investment bankers that the company will divest “non-core” businesses, or those not part of the TV and measurement business, according to three measurement industry executives. Those pieces include such units as NCSolutions, a joint venture with Catalina that tracks the packaged-goods sales impact of TV, digital and other media investments; Scarborough Research, a survey-based insights tracking firm; data integration unit eXelate, and possibly even Gracenote, the heavyweight in metadata linked to the programming catalogs used to track linear and connected TV audiences.
Gracenote is the biggest piece, but also the one that might be hardest to part with. Divesting it, however, could help insulate Nielsen from antitrust allegations, since the company’s refusal to license Gracenote data to TVision is part of the latter company’s antitrust claim. Nielsen similarly ended Gracenote service for VideoAmp last year, though the company portrayed that as a negotiating stance, not a firm refusal, and VideoAmp ultimately found other options, leading users of its data to do likewise.
Nielsen declined to comment on the divestiture speculation.
By the estimate of one measurement industry executive, Nielsen could fetch $2 billion to $2.5 billion by selling all of its non-core assets, including Gracenote, enough to wipe out its highest-interest tranche of bond debt.
New network contracts also figure into the ongoing saga of Nielsen litigation with TVision. They include a clause directly targeting TVision’s attention-tracking business, even though that doesn’t directly compete with Nielsen, according to an antitrust counterclaim TVision has filed in one of the patent lawsuits.
According to TVision’s filings, new Nielsen contracts prohibit networks from sharing TVision attention tracking data alongside Nielsen ratings with buyers unless they pay substantial additional fees to Nielsen. In other words, networks have to pay Nielsen extra to use TVision data, according to the counterclaim.
TVision contends Nielsen’s goal is to drive out of business a company that provides services to its more direct competitors VideoAmp and iSpot. TVision does not offer examples of contracts, which likely won’t come until discovery should its antitrust counterclaim survive Nielsen’s motion to dismiss.
Nielsen, in responses to TVision’s filings, denied any antitrust violations or that it sought to interfere with TVision’s contracts through its dealings with networks. Among other things, Nielsen said TVision hasn’t defined the market in question or shown that Nielsen has a dominant share. In its latest filing earlier this month, Nielsen didn’t deny or acknowledge provisions in new contracts targeting TVision, but argued that even if they existed, they wouldn’t constitute antitrust violations if Nielsen doesn’t directly compete with TVision’s attention measurement.
TVision’s 5,000-household panel helps calibrate data used by VideoAmp and iSpot.tv by providing estimates of how many people and who within households are watching programming. ISpot also owns a substantial minority stake and has exclusive access to some TVision data.
TVision started in the attention measurement business, with technology that tracks when people are watching TV and who they are among opt-in panelists. But it later began providing services to VideoAmp and iSpot, which do compete more directly with Nielsen.
Nielsen has filed four patent lawsuits against TVision since 2021, one of which has been dismissed. TVision received a favorable ruling earlier this month from the Patent Trial and Appeal Board of the U.S. Patent and Trademark Office, which indicates one of the Nielsen patents in dispute is likely to be invalidated in a review later this year.
That ruling may bolster TVision’s contention in its antitrust counterclaim that Nielsen is attempting to drive it out of business by burying it in legal bills with meritless patent lawsuits.
Nielsen has responded by arguing that most of its patent litigation remains active, has merit, and has not been dismissed.
One measurement industry executive estimated TVision’s attention measurement business has revenue of little more than $10 million, so targeting it in network contracts made little sense for Nielsen, a company with well over $3 billion in global revenue, for any reason other than trying to drive the company out of business.
