Billboard Hot 100 Celebrates 20 Years of Nielsen Data
Billboard Hot 100 Celebrates 20 Years of Nielsen Data

Nielsen Holdings announced Tuesday it has signed an agreement to acquire Arbitron Inc., the media measurement company best known for its radio station ratings.

Nielsen provides information on everything from music sales to consumer confidence in countries around the world. The acquisition of Arbitron will allow Nielsen to vastly improve its current radio measurement service, Nielsen BDS, and bolster the suite of services it offers its clients.

"Arbitron will help Nielsen better solve for unmeasured areas of media consumption, including streaming audio and out-of-home," Nielsen Chief Executive Officer David Calhoun said in a statement. "The high level of engagement with radio and TV among rapidly growing multicultural audiences makes this central to Nielsen's priorities."

Nielsen will pay $48 per share for all of Arbitron's outstanding common stock. The $1.26 billion deal represents a 26% premium over Arbitron's closing price on December 17.

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Arbitron has been a steadily profitable business over the years. Over the trailing four quarters, Arbitron has generated revenue of $445 million and net profit of $43.6 million. Even when the economy sank in the fourth quarter of 2008 and Arbitron's share price fell to $9.90 from $43.98 just months earlier, the company still turned a profit of $37.8 million in 2008 and $42.2 million in 2009.

Not only is Nielsen acquiring a company with the gold standard for radio ratings, it is also getting a unique business model protected by significant barriers to entry. Arbitron makes money two ways: The company charges stations a fee to include their data, which varies by the size of the station or radio company, in its syndicated ratings. It also sells ratings -- as well as custom research -- to advertisers, marketers and other types of clients. Finally, Arbitron's ratings carry weight because the company has built up a great deal of brand trust and familiarity over the decades.

Although both Nielsen and Arbitron rose to prominence before the Internet, both have adjusted their businesses to cover both tradition and online consumer behavior. Nielsen offers a variety of online measurement services. Among its deals were a majority stake in Buzzmetrics in 2006 and the acquisition of advertising measurement company Vizu in July. Arbitron acquired Finland-based mobile analytics company Zokem in 2011.