Eagan Initiates Media Measurement Coverage

Telsey Advisory Group media analyst Tom Eagan initiated coverage of the media measurement industry Thursday, slapping an “outperform” rating on Nielsen and Rentrak and gauging comScore a “market perform.”

In his 32-page report, Eagan noted that it has been a tough time for broadcast and cable ratings – broadcast viewership has declined in 10 of the past 14 months at a rate below the compound annual growth rate of the sector for the past four years and cable ratings were down 9% in 2014, triple the rate of the previous year. While it appears that ratings decline is accelerating, Eagan wrote that makes it an even more critical time for measurement.

Several companies are trying to fill the traditional TV ratings gap as more and more viewers watch content via SVOD services, digital video recorders and through online and mobile vdevices and Eagan wrote that developing cross platform solutions will be critical to the industry’s continued health.

While Nielsen (price target $53) has been taking it on the chin lately, Eagan sees upside for the measurement giant, following the momentum of several new service launches and expects the company to generate mid-single digit revenue gain through 2016.

“With Nielsen, the Street is concerned that the new measurement services offered by its fast-moving competitors will eat into its market share,” Eagan wrote. “We believe a more likely scenario is that the measurement market will continue to expand.”

With new products like MMX Multi-Platform, MMX Mobile and vCE, Eagan expects comScore (price target $53) to grow 2015 revenue by 14.5%, adding that greater adoption should boost margins from 22.5% in 2014 to 24.3% in 2015.

At Rentrak (price target $70), which nabbed an equity partner in ad giant WPP Group last year, Eagan wrote that more deals may be on the way.

“We would not be surprised to see other investment in or joint ventures with measurement companies as their increased role in the advertising eco-system is better understood,” he wrote.

Eagan a ls anticipates that Rentrak, which he says has sector-leading revenue growth, will continue that trajectory, with sales rising 38.7% through 2016.

While Nielsen’s sheer size gives it the measurement upper hand at the moment, Eagan wrote that Rentrak and comScore could partially mitigate that advantage through a cross-platform joint venture.