Nielsen parent VNU implements workforce reduction.

As Nielsen Media Services prepares to unveil details of a new, ambitious, and far-reaching plan for measuring the future of digital media, new information about the cost-containment plans at parent VNU is coming to light–raising questions about the economic wherewithal to fund, and man, some of Nielsen’s audience measurement plans. The VNU plan, code-named “Project Forward,” calls for nearly $160 million in savings through a combination of cost programs and workforce reductions that could curtail any free-flowing spending by Nielsen. The plan is estimated to include a more than 7 percent reduction in VNU’s workforce, according to an analysis released Wednesday by the equity research team at Merrill Lynch.

The securities firm also recommended that shareholders embrace a recently revised VNU acquisition bid from a group of private equity firms–placing a fair market value of about $10.0 billion on VNU, including a $4.5 billion value on Nielsen Media Research, assuming the cost plan is implemented. VNU’s stake in NetRatings was estimated to be worth $294 million. Merrill Lynch estimated that based on the new offer, the buyout was “90 percent probable.”

In any case, VNU’s operations will face economic constraints over then next year as they implement elements of the new fiscal plan.

“Project Forward could be achieved through a 7.1 percent reduction in the total level of staff at VNU,” wrote lead VNU analyst Toby Reeks, adding that VNU’s media measurement division, which is comprised primarily by Nielsen Media Research, would account for about 24 percent of the cost-savings. VNU’s marketing research operations (primarily ACNielsen) would account for 71 percent, while its business information unit, which publishes magazines such as Adweek, Billboard and The Hollywood Reporter) would account for 5 percent.

The cutbacks come as Nielsen is poised to release details of its so-called “Roadmap to Audience Measurement in the Digital Future”–an ambitious, multi-pronged push to both improve existing means of TV audience measurement, and to extend Nielsen’s reach into new digital platforms, including nonlinear television and the Internet. In a March 1st letter to clients, Nielsen CEO Susan Whiting promised to provide clients with details of the plan “within 90 days. ”

Nielsen executives never said how much the plan would cost to implement, or how much of the cost of funding the expansion would fall on their shoulders, but details of Project Forward suggest it might be significant.

Nielsen already enjoys the best margins within VNU. According to Merrill Lynch’s analysis, VNU’s media research operations currently have margins greater than 28 percent, and are projected to rise to more than 30 percent over the next several years.

Nielsen has indirectly been returning some of its hefty margins back to its customers–agreeing to fund the Council For Research Excellence, a client-controlled research and development task force, with a $2.5 million annual budget to conduct original research.

by Joe Mandese
Courtesy of http://www.mediapost.com