Authoritative Source of Key Trends, End-User Spending and Media Consumpton Forecasts, and Historical and Projected Expenditures Across 12 Different Media Industry Segments.
Despite Dark Clouds of Slowing Economy and Decrease in Total Ad Spending for 2001, Veronis Suhler Expects Industry to Rebound in 2002; Advertising Spending to Grow at Compound Annual Rate of 5% From 2001-2005, Reaching $225 Billion
Consumer Spending on Media and Information to Rise at a Compound Rate of 5.6% From 2001-2005, Reaching $180 Billion; Institutional Spending to Grow Nearly 7%, Hitting $168 Billion
American Media Consumption Still Growing, Heading To 10 Hours a Day Per Person by 2005
NEW YORK (August 6, 2001) - The Internet bubble may have burst, but that doesn't mean the fizz has gone out of the communications industry, even with serious pressures on consumer and institutional spending affecting most media and information sectors.
Media merchant bank Veronis Suhler has released the 15th annual edition of its Communications Industry Forecast (CIF), projecting a marked spending slowdown in most industry segments this year. However, the firm takes a more optimistic near-term perspective, predicting overall industry growth at an annual rate of 5.6% from 2001-2005, outpacing the 5% growth rate of the Gross Domestic Product and reaching $738 billion in total spending by 2005.
Veronis Suhler reports that both consumer and institutional end-user spending on media and communications will remain strong over the next four years. 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. The firm projects spending to advance at a slightly slower rate in 2001 before rebounding in 2002, then going on to post a better than 5% annual growth rate through 2005, reaching $180.5.
The institutional end-user category includes advertising expenditures on television programming as well as spending in professional, educational and training media, business-to-business communications, and business information services. As projected for consumer spending, institutional end-user spending is expected to slow in 2001 but will rebound even stronger than the consumer side with a nearly 7% annual growth rate from 2001-2005, hitting $168.4 billion in 2005.
The Veronis Suhler CIF is the most comprehensive accounting of consumer and institutional usage and advertising spending trends across the full bandwidth of the communications industry - from traditional media to the latest information-driven technologies. The 2001 CIF reports that consumer media usage will continue to grow, albeit at a more modest pace than previous years.
After hitting 3,472 hours per year for the average American in 2000, media use is forecasted to increase 5% by 2005, reaching 3,650 hours annually, about 10 hours per day per person. Veronis Suhler projects that time spent with the Internet and video games will rise faster than other segments during the forecast period of 2001-2005. Consumer spending on media will also rise in 2001, the average person spending around $207 per year on cable & satellite TV (a nearly 8% increase from 2000), $120 per year on home video/DVD (a nearly 10% jump from 2000), and $33 per year on box-office entertainment (a nominal increase of 0.3%). Veronis Suhler forecasts that annual spending totals per person by 2005 will reach $266 on cable & satellite TV, $132 on home video, and $36 on box office.
Like other industry watchers, Veronis Suhler sees a decline in ad expenditures for 2001, but by a modest margin of 1.1%, as advertisers reduce budgets in the wake of the economic downturn and dot-com shakeout. However, the firm projects that ad spending will bounce back crisply in 2002 and will grow at a compound annual rate of nearly 5% in the forecast period to reach $225 billion in 2005. By that year, Veronis Suhler expects the top three media categories in terms of total spending will be cable & satellite ($98 billion), entertainment ($82. billion), and newspapers ($79 billion).
Communications spending rose 8.5% to $565.6 billion in 2000 and grew at a compound annual rate of 7.9% from 1995-2000, driven by higher expenditures across all four segments of the industry - advertising, marketing services and specialty media, consumer end user and institutional end user.
Industry Hit an Apex as Millennium Came to an End
The communications industry became the second-fastest growing sector of the U.S. economy from 1995-2000, reaping over $565 billion in spending in 2000 and playing a starring role in the extended economic boom of the 1990s. But a slower-growing economy, a marked slowdown in ad expenditures and tamer consumer spending are all conspiring to bring the industry down to earth in the next few years, dropping it to the sixth-fastest growing sector by 2005.
Communications spending will advance at a slower rate than the nominal GDP in 2001 for the first time in at least a decade before rebounding in 2002 and turning in a compound annual growth rate of 5.6% for the forecast period. Communications will remain the seventh-largest sector of the U.S. economy in 2005 with total spending of $738 billion.
Looking at the Big Picture
Although other recent communication forecasts have predicted heavy downturns, particularly in advertising spending, Veronis Suhler is less bearish and views the industry as a multi-faceted tapestry of media and information categories.
"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 multi-task has made most of us highly skilled and selective in how we use the media."
Cable & Satellite TV Surges Ahead
In 2000, cable & satellite television was the third-largest revenue generator in terms of ad spending among communications segments with $63.4 billion. This trailed entertainment's $64.9 billion and newspapers' $65.9 billion. By 2002, cable & satellite will turn the tables becoming the number one communications category in terms of ad spending and overall the largest segment of the communications industry hitting $75.5 billion, while entertainment will reach $72 billion and newspapers $68 billion. The growth of the cable & satellite segment will be spurred by cable providers revving up integrated media promotions and extending channel offerings through digital cable.
Below is a summary of Veronis Suhler communications industry forecast projections across various segments:
Click onThe 2001 Communications Industry Forecast (CIF) Highlights
Note: The 2001 Communications Industry Forecast sells for $1,995. To order, call , ext 8556 (in the U.S.), , or click here to order.
Veronis Suhler www.vss.com, a leading independent merchant bank dedicated to the media, communications and information industries, is celebrating its 20th anniversary in 2001. Since its formation, the firm has acted as a financial advisor across the full spectrum of media industry segments including Broadcasting, Cable & Entertainment, Newspaper Publishing, Consumer Magazines; Business Information Services, Consumer, Professional & Educational Books, Business-to-Business Communications, Specialty Media & Marketing Services, and the Internet.
In addition to the annually-published CIF, which tracks consumer media consumption and spending trends over a 10-year period (1996-2005), Veronis Suhler also publishes the Communications Industry Report, tracking financial performance of all publicly reporting media companies over a five-year period.
VS&A Communications Partners III, L.P., the firm's $1 billion private equity affiliate, is also exclusively dedicated to investments in the media and communications industries.
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