INDUSTRY SEGMENT PERFORMANCE
Total consumer magazine advertising spending was up a healthy 9.0% to $11.5 billion in 1999, and enjoyed a CAGR of 7.7% from 1994 to 1999. Veronis Suhler predicts the steady growth to continue through 2004 "despite predictions that the Internet will drain significant amounts of advertising." By 2004, spending is forecast to increase to $16.4 billion, driven by publishing creativity and broader product offerings.
Despite slippage in three of the top-four consumer magazine advertising categories, overall consumer magazine advertising jumped by 7.1 percent in 1998, handily outpacing the 4.9 percent rise in nominal GDP. The automobile industry, comprising the largest advertising category, exhibited a 5.7 percent decline, in large part as an outgrowth of the decision by General Motors to shift advertising dollars from magazines to television. That decision, exacerbated by the midyear strike, led General Motors to decrease its magazine pages by 26.1 percent, accounting for much of the slowness in automobile advertising. As a whole, Detroit's Big Three automobile manufacturers purchased 13.1 percent fewer ad pages in 1998 than in 1997. Over the past few years, automobile ads have made up nearly 10 percent of total advertiser pages in consumer magazines. Consequently, the large drop in advertising from the automobile industry significantly affected consumer magazines in 1998.
Because of their increased advertising in other media, the computer, medical, and apparel industries posted declines as well. As with the automobile industry, decreases in advertising by each of these sectors follow periods of sharp rises. While the easing of restrictions upon direct-to-consumer drug advertising was at first responsible for the growth of the pharmaceutical industry's spending on magazine advertising, the further loosening of restrictions in regard to broadcast television accounted for much of the drop in spending on magazines by the medical sector in 1998. Despite this migration to television, the medical industry still spent nearly as much on magazine advertising in 1998 as in 1997. The apparel industry's advertising, however, fell by 5.1 percent in 1998.
Although expenditures by the top-10 categories as a whole rose by only 3.0 percent, four grew at double-digit rates, with both the media and advertising industry and the retail sector posting gains exceeding 15 percent. Advertising outlays by direct-response companies increased by 12.1 percent, while financial advertising expanded by 11.2 percent. Growth in the travel and cosmetic industries was considerably slower. Advertising spending in the public transportation, hotels, and resorts sector rose 6.9 percent, and expenditures by the cosmetics and beauty aids industry went up 6.0 percent.
Margins and return on assets each climbed to five-year highs in 1997. The operating income margin was 12.8%, a 1.8-point gain over 1996, while the operating cash flow margin climbed 1.9 points to 15.8%. Operating income ROA also climbed 1.9 points for the year, to 14.2%, while operating cash flow ROA climbed 2.0 points to 17.6%.
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