Back when Arbitron was spun-off from Ceridian there was widespread speculation that VNU, which owns Nielsen Media Research, would swoop in to buy the radio ratings company just as soon as a one-year tax penalty deadline passed. That milestone was passed long ago and nothing happened. The pot was stirred again this week when VNU sold its directories business for 2.5 billion dollars, saying to wanted to focus on its core businesses. That prompted a Reuters reporter to speculate that VNU might have its eye on Arbitron, although the news service then threw water on its own fire by saying such a deal was unlikely because of antitrust problems. So, is such a merger likely to ever happen?

The antitrust angle appears to us to be overblown. Try calling Nielsen to subscribe to radio ratings in New York - - or Arbitron to subscribe to TV ratings in Los Angeles. You'll probably get a laugh before they hang up the phone. The two companies don't compete with each other. Nielsen offers TV and cable ratings and Arbitron offers radio ratings. The two jointly own Scarborough Research, so they are partners, not competitors, in qualitative data. The only place where Nielsen and Arbitron compete is in bidding for ratings contracts overseas, which doesn't figure into US government antitrust analysis. (OK, they are both trying to get into outdoor advertising measurement, but those operations are mere startups.) So as much as US broadcasters might dislike the idea of one company owning both the major TV ratings company and the major radio ratings company, the antitrust watchdogs aren't likely to raise any objections.

But we don't see any merger coming soon. Arbitron CEO Steve Morris has staked his company's future on the Portable People Meter (PPM). If and when PPM becomes the global gold standard for audience measurement, it will be worth a lot of money to Arbitron shareholders. To sell the company now would be giving away the PPM upside.

On the other hand, Nielsen hasn't yet committed to PPM. It's working with Arbitron on the second US PPM field test in Houston and the two companies are still talking about a joint venture to roll out PPM for real world radio/TV/cable ratings. Until Nielsen CEO Susan Whiting is sure that PPM is going to be the next generation of ratings technology for her company, there's no reason for her to ask her VNU bosses in Amsterdam to buy Arbitron.

The deal that Arbitron and VNU announced this week to jointly explore the possibilities of a new national marketing research service using PPM (9/30/04 RBR Daily Epaper #191) is another step forward for the Arbitron-owned technology, but it's not nearly as important as a ratings deal with Nielsen would be would be.

If and when PPM is deployed by an Arbitron/Nielsen joint venture for US broadcast ratings, the pressure will start building for VNU to dig into its deep pockets and buy out Arbitron's shareholders. After all, the two companies will then have one operation gathering ratings data, but two sales forces selling that data to separate groups of customers. It would then make sense for VNU to want to own the technology that Nielsen needs for its business. And Steve Morris would then be able to get full value for his shareholders - - even if he does have only one logical buyer to whom to sell Arbitron.