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Despite a 6.3 percent boost primarily from the Winter Olympics in 1998, network advertising's growth rate continued to rise in 1999, with spending up 6.6 percent.
The growth rate in 1999 was comparable to the 6.7 percent growth rate achieved in 1995, the last year that followed a Winter Olympics. However, the growth rate in 1995 slowed down from 7.2 percent in 1994, while the growth rate in 1999 represented an improvement over 1998. In addition to automotive and telecommunications companies, highly capitalized dot.coms vying for consumer mind share have driven growth in the network advertising market. But the impact of advertising is not likely to last as the investment money starts to run out and dot.coms shift their focus to profitability. To make more efficient use of their advertising budgets, dot.coms are already moving toward more targeted media.
Source: Veronis Suhler Communications Industry Forecast


Broadcast Networks Advertising growth in 1998 was comparable to that of 1994 when there was a Winter Olympics and a congressional election.
Advertising on broadcast networks and television stations rose 6.6 percent in 1998-6.7 percent for the broadcast networks and 6.5 percent for television stations. The growth rate for the broadcast networks was comparable to 1994, the only other year with a Winter Olympics but no Summer Olympics. For television stations, however, growth was below previous non-Presidential congressional election years (except for the recession year of 1990). Audience erosion continued in 1998 but at a more moderate rate, and further declines are anticipated but again at a less severe pace than in the past. Broadcast television's larger reach in contrast with cable helps it retain advertising despite shrinking audiences. The question remains, however, whether advertisers will continue to view and fund the traditional broadcast networks as mass-distribution venues. At the local level, moreover, television stations are facing growing competition from consolidated radio/billboard companies.

We project broadcast television advertising to grow at a 5.3 percent compound annual rate over the 1998-2003 period, down from the 7.0 percent annual increase of the last five years when there were three years of Olympic/political spending compared with only two going forward. Broadcast advertising is estimated to rise from $37 billion in 1998 to $47.9 billion in 2003.
Source: Veronis Suhler Communications Industry Forecast


Among television networks and television station broadcasters, revenues for publicly reporting companies rose by 13.0% in 1997, just below the 15.7% increase of Olympic Year 1996.
Acquisitions, continuing strong in 1997 in the wake of 1996's Telecommunications Act, were the principal driver of revenue growth. The value of television stations acquired by publicly reporting companies was $6.6 billion in 1997, following $12.4 billion in 1996.

Revenues of television station broadcasters increased 19.4% in 1997, the largest gain in the last five years and the fourth consecutive double-digit increase. Active acquirers of television stations, including Paxson Communications, Sinclair Broadcast Group, Gannett, Gray Communications Systems, Hearst, Tribune, Allbritton Communications, Granite Broadcasting, A.H. Belo, and Chris-Craft, fueled the revenue growth.

Television network revenues rose by 10.8% in 1997, principally due to CBS's acquisition of Infinity Broadcasting -- a purchase that swelled CBS's revenues by $1.2 billion and accounted for 57% of overall revenue growth among the networks. CBS's TV network revenue growth was also strong -- 8.0%, on the strength of a steady ratings performance in a strong advertising market. Revenues for News Corporation (Fox) broadcast grew 13.8% in 1997 on the strength of the network's strong ratings among young viewers, the group most valued by advertisers.
Source: Veronis Suhler Stevenson Communications Industry Report


Audience Share for Broadcast TV to Drop Below 50% by 2002 -- Ad Spending Will Continue to Grow
Combined network share of the prime-time audience is forecast to drop to 48% by 2002, following a 1997 decline of 4%, from 60% to 56%. Network audience share also dropped 4% in 1995.

Notwithstanding the shrinkage in audience share, advertising spending on broadcast TV will grow at a healthy compound annual rate of 6.0% over the five-year forecast period, rising to $17.7 billion in 2002 from $13.3 billion in 1997. The emergence of new advertising categories is expected to pick up the slack from declining categories, led by prescription drugs, which contributed $1.4 billion to network advertising in 1996 and 1997. Other emerging categories include consumer services, entertainment, and computer/office equipment.

Increased competition from cable will drive down ratings for television stations -- but as with networks, advertising growth for stations will remain strong, expanding at a 6.1% CAR to $46.6 billion by 2002. Though stations will face resistance to ad rate increases, their reach advantage over cable will continue to propel spending.
Source: Veronis Suhler Communications Industry Forecast

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