Communications Industry Will Rebound In 2002, Says Veronis Suhler

Despite dotcom fallout and a widespread spending slowdown in 2001, Veronis Suhler have an optimistic outlook for the future predicting an annual overall industry growth rate of 5.6% for the period 2001-2005. By 2005, Veronis predicts that the market will be worth $738 billion, outpacing GDP growth forecasts of 5%.

Consumer spending on media and communications is set to grow slightly in 2001 then, after the rebound in 2002, spending will grow ahead of the 5% industry-wide forecast. The consumer market includes spending on cable & satellite services, box office admissions, home video/DVD rentals and sales, recorded music, newspapers, books, magazines, video games and Internet access.

Meanwhile business spending in this area (which includes advertising expenditures on television programming as well as spending in professional, educational and training media, business-to-business communications, and business information services) will grow at 7% from 2001-2005 reaching $168.4 billion in 2005.

Average American media consumption in 2000 was 3,472 hours per person. This figure is predicted to increase by 5% by 2005 meaning that the average American will spend 10 hours per day consuming media of one sort or another. Internet and video games are predicted to grow fastest in this sector although spending on video/DVD (10%) and cable & satellite (8%) are also forecast to grow rapidly.

In keeping with other analysts, Veronis Suhler forecasts a reduction (-1.1%) in marketing spend for 2001 during this period of economic downturn. However, it predicts that spending will rise again in 2002 and will enjoy a CAGR of 5% in the period to 2005. By this time the three largest categories, in terms of spending, in the media sector to be cable & satellite ($98 billion), entertainment ($82 billion) and newspapers ($79 billion).

Principally it is cable and satellite which Veronis predicts will surge ahead over coming years. In 2000, it was the third largest revenue earner in terms of ad spending, trailing entertainment and newspapers. By 2005 it is forecast to be number one, generating revenues of $75.5 billion annually.

“Our forecast takes a broad perspective of the communications industry, combining traditional consumer-oriented segments such as magazines, newspapers, books, and TV with professional and business-to-business segments such as business magazines, educational and training media and business information services,” said James Rutherfurd, executive vice president of Veronis Suhler and head of investment banking at the firm. “The industry as a whole has become much more dynamic than it was a few years ago and is more resilient than the boom or bust of one or two sectors.

“America became so accustomed to aggressive, unprecedented growth over the past five to seven years, which far outpaced GDP growth, that the recent slowdown has generated considerable doom and gloom reaction,” Mr. Rutherfurd added. “In fact, we continue to foresee long-term growth across most segments but at a slower pace, as the economy adjusts to new realities. Remarkably, Americans continue to find new ways to absorb content and information on a daily basis. The ability to multitask has made most of us highly skilled and selective in how we use the media.”

	1999	2000	2001	2002	2003	2004	2005
Total marketing spend							$738b
Consumer media and communications spending							$180.5b
Institutional media and communications spending							$168.4b
Spending on cable & satellite per year (per person)			$207				$266
Spending on home video/DVD per year (per person)			$120				$132
Spending on box office ents per year (per person)			$33				$36
Total advertising spend							$225b
Total cable & satellite revenue		$63.4b		$75.5b			$98b
Total entertainment revenue		$64.9b		$72b			$82b
Total newspaper revenue		$65.9b		$68b			$79b
Total communications sector revenue		$565b					$738b
Cable & satellite ad spending		$13.8b					$23.8b
Entertainment spending (box office, recorded music and interactive ent)		$7.5b					$8.8b
Broadcast TV ad spending	$40b	$44.4b	$43.3b
Consumer internet access	$9.4b	$11.6b					$18.4b
Internet ad spending							$9.9b
Total internet spending							$28.3b
Radio national spot expenditure							$5.2b
Radio local spot expenditure							$20.3b
Radio ad spending							$26.5b
Consumer magazines revenue							$25.5b
Trade show and exhibitions spending (B2B)			$8.8b				$11.3b
Total B2B communications spending		$18.2b
Advertising, marketing services & speciality media spending		$305.5b
Advertising spending		$177b
Total business information services spending		$47.5b	$50.1b				$65.7b
End user business information services spending			$15.5b

Source: Veronis Suhler, August 2001