US Media And Communications On Target For Good Recovery
The media and communications industry in the US remains on track for recovery over the next four years, despite a small set-back resulting from the war in Iraq and the outbreak of the Sars virus.
US communications spend grew by 3.3% to $608.7 billion in 2002, driven primarily by an 8.2% rise in consumer expenditure on media such as cable and satellite television, filmed entertainment and video games. VSS says that all four macro segments of the industry – advertising; marketing services and specialty media; consumer end user and institutional end user – will outperform GDP growth in the 2002-2007 forecast period.
“Despite two difficult economic years and a momentary scare after the Iraq invasion and the Sars outbreak in Asia, we expect a gradual broad-based media recovery to be on track throughout the forecast period ending 2007,” said James Rutherfurd, executive vice president and managing director of VSS.
“Fears that these socio-political events would stifle the emerging recovery were largely unfounded and by the end of the second quarter of 2003, it is clear that the communications recovery is on track and gaining strength with major upside potential from upcoming trends and events such as the presidential election and Olympic coverage in 2004 and continued growth in entertainment media,” he says.
Advertising and marketing services Expenditures on advertising rebounded in 2002, fueled by growth in broadcast television and radio throughout the year, according to the report.
Adspend was bolstered by several other categories that began to show an upturn in Q4 2002, following two years of recession brought on by an economic downturn, a weak technology market and dramatic corporate cutbacks. Total expenditures inched up 1.6% to $305.6 billion in 2002, after falling 5.7% in 2001.
Television and radio were the key drivers of last year’s adspend growth, recovering quickly from the 2001 downturn. TV rose by 6.9% and radio by 6.3% across the full year. Another strong sector was box-office advertising, which jumped by 22.4% year on year.
VSS forecasts that 2003 total advertising will rise by 3.8% to $177.6 billion. Across the 2002-2007 period, a compound annual growth rate of 6.3% is predicted.
“The advertising recovery is expected to be slower than the one that followed the 1991 recession,” says Rutherfurd. “The chief reason is that the industry in 1991 benefited from technological advances that spawned new industries in which advertisers purchased space and consumers bought subscriptions. The additional dollars generated by these new media and markets had not existed before, which, in turn, bolstered the media recovery in the early 1990s.”
| US Communications Industry Expenditure Growth Forecasts | ||
| 2002 Growth | 2002-2007 CAGR | |
| Broadcast television | 7.6% | 4.5% |
| Cable & satellite television | 10.2% | 7.5% |
| Radio broadcasting | 6.4% | 9.4% |
| Entertainment | 6.0% | 7.3% |
| Consumer internet | 21.5% | 11.4% |
| Newspapers | 0.1% | 5.6% |
| Consumer books | 5.2% | 2.8% |
| Consumer magazines | 0.0% | 4.2% |
| Business-to-business media | -8.7% | 4.8% |
| Professional & educational | -7.6% | 5.4% |
| Business information services | 1.9% | 5.7% |
| Source: Veronis Suhler Stevenson, August 2003 | ||
Consumer-supported media takes market share from ad-supported media The VSS report also picks out a worrying trend for the advertising industry: An increasing use of consumer-funded media at the expense of advertising-funded media.
Between 1997 and 2007, media supported by consumers gained almost 10 points from advertising-funded media. By 2002, time spent with advertising-supported media accounted for 57.8% of the total, with consumer-supported content taking the remaining 42.2%.
The company predicts that this trend towards non-advertising-led media will continue, with the amount of time spent on consumer-supported media – such as pay-per-view televisionand DVDs – increasing by 13.8% by 2007. Ad-funded media, by comparison, will rise by just 3.4% over the same period.