Ad rise, consumer slowdown seen

An improving economy should boost communications industry advertiser spending over the next five years. But maturation of 1980s technologies — which fueled expansion in cable, homevideo and music — will mean a slowdown in consumer spending growth.

Such are the findings of the seventh annual Communications Industry Forecast released today by investment bankers Veronis, Suhler & Associates.

The forecast predicts advertiser spending for television, film, recorded music, radio, business information services and newspaper, book and magazine publishing will grow at a 6.1% compound annual rate over the next five years (more than twice the 2.9% rate of the last five years) and will reach $ 113 billion by 1997.

But total consumer spending, which grew at a 7.8% compound annual rate over the last five years, will slow to 6% compound annual growth over the next five years, reaching $ 155.3 billion by 1997.

“Net-net, advertising’s performance will offset the moderation in consumer spending growth,” said VSA prez John Suhler.

Accordingly, the forecast predicts that communications industry spending by both advertisers and consumers on products and services will grow at a compound rate of 6.1% over the next five years from $ 200 billion in 1992 to $ 268.3 billion.

The four fastest-growing media segments in the last five years in terms of money spent — homevideo, cable, recorded music and book publishing — have also been the fastest growing in terms of time spent by the consumer.

Time spent by the average consumer (per person/per year) watching basic cable rose at an 18.5% compound annual rate, to 367 hours in 1992, and is expected to rise to 378 hours by 1997. Time spent watching prerecorded videos rose at a 9.7% compound annual rate, to 46 hours last year, but will grow at a compound annual rate of just 4.4% to 57 hours by 1997. Time spent listening to recorded music increased 3.1% to 233 hours and will rise 3.4% annually to 275 hours in 1997.

Not all usage increased. Time spent by the average American watching movies in theaters fell from 12 hours in the early 1980s to nine hours in 1991. The forecast expects that level to remain steady over the next five years.

The communications industry has been the fourth fastest-growing industry over the last five years, but, due to strong performances expected in the electronics and education industries, will drop to No. 7 in terms of growth.

Filmed entertainment

Total filmed entertainment spending will grow at a 7.1% rate over the next five years, from $ 26 billion last year to $ 36.6 billion in 1997. That’s slower than the 8.2% growth of the last five years.

“The box office and TV segments of the filmed entertainment industry will enjoy a boost from the improved economy,” Suhler said. “Homevideo, however will see slower growth compared with the double-digit rates of previous years.”

A faster-growing economy should spur better attendance and allow exhibitors to institute aggressive ticket price increases. Accordingly, the forecast projects a 6.4% annual increase in box office spending over the next five years.

As VCR penetration growth slows, homevideo spending growth will also ease. Even so, spending is expected to reach $ 17.5 billion by 1997, up $ 5.5 billion from last year.

Broadcast television

Total advertiser spending on broadcast TV will increase to $ 34 billion in 1997, from $ 25.8 billion last year. That 5.7% compound annual growth is up 2.7% from the previous five years’ annual rate.

The outlook for network TV sion should brighten as cable penetration slows and the economy improves. The forecast predicts webs’ audience share will stabilize as Fox continues to expand its primetime programming schedule and NBC and Fox seek broader demographic appeal.

Ad spending for stations is expected to expand by a 5.9% compound rate to $ 20.9 billion in 1997, from $ 15.6 billion last year.

Cable television

The forecast expects cable advertising to continue to grow at healthy double-digit rates over the next five years. This will be the fastest growing of all communications industry categories. Advertising is projected to grow at an 11.7% compound annual rate over the five-year period, rising to $ 3.8 billion from $ 2.2 billion last year.

However, the forecast points out that the viewership gains achieved over the last five years due to increased penetration will significantly moderate going forward.

Recorded music

Consumer spending on music is predicted to grow at a 7.4% compound annual rate over the five-year period, down from the 10.1% growth achieved since 1987. The maturing compact disc market is largely responsible for the slowdown in growth.

Compact discs will account for $ 8.7 billion of total spending in 1997, growing at a 10.4% rate compared with the 27.3% growth of the previous five years. Spending on cassettes will increase only 0.8% compounded annually, reaching $ 3.2 billion by 1997. Cassette singles, CD singles and musicvideos will rise to $ 950.5 million in 1997 from $ 501.3 million last year.

Total spending on recorded music is expected to reach $ 12.9 billion, an increase of $ 3.9 billion over last year.

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