Study predicts boom in homevid purchasing

NEW YORK — The trend toward home viewing of films will accelerate in the U.S. over the next five years, according to research conducted by Veronis, Suhler & Associates, a New York investment banking firm.

Homevideo spending, lifted by “explosive” growth in purchases as opposed to rentals, will grow at a 9% compound annual rate during the next five years to $23.5 billion in 2001 from $15.2 billion in 1996, according to Veronis, Suhler’s annual U.S. communications industry forecast.

During this same period, spending at the box office will increase by an average of only 1% annually to $6.3 billion in 2001 from $5.9 billion in 1996.

“Growth in homevideo viewing has been fueled since 1984 by the continued expansion of VCR household penetration, combined with a large increase in spending per household,” said Jim Rosenfield, a managing director at Veronis, Suhler and a former president of CBS. “As that growth moderates, the rising popularity of video movies as a purchase item will take up the slack.”

Veronis, Suhler is projecting that spending by broadcast television and cable networks on filmed entertainment production will increase at a 7% annual rate over the next five years, to $15.6 billion in 2001 from $11.25 billion last year. Total spending on filmed entertainment from all sources — box office, homevideo and television/cable networks — will reach $45.4 billion by the year 2001, a compound annual increase of 7%.

Despite the industry’s perception of virtually unlimited potential for Hollywood exports, the Veronis, Suhler report is more restrained in its outlook for the growth of U.S. film sales in foreign markets. “Expansion in locally based entertainment industries has led to heightened competition for U.S. products,” said the survey. “Nevertheless, U.S. entertainment remains highly valued overseas, and despite the slowdown in share growth and the high costs of international distribution, exports rose at a 7.5% compound annual rate over the 1991-96 period.”

The report estimates that foreign revenue for film distributors will expand at about the same rate over the next five years.

As was the case last year, Veronis, Suhler identified interactive digital media as the fastest growing segment in the communications industry over the next five years, with projected compound annual growth of 17%.

Broadcast television is expected to be the industry’s slowest-growing segment with compound annual growth of 5%. Total advertiser spending on broadcast television will increase to $44 billion in 2001, according to Veronis, Suhler, from $34.4 billion in 1996.

Recorded music is losing momentum, according to the report. This segment of the communications industry is expected to increase at a compound annual rate of 6% from 1996 to 2001, compared with 10% annual growth during the trailing five-year period.

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