Commentary

Some Communications Segments Forecast Up, Traditional Down

According to Veronis Suhler Stevenson (VSS), revising the forecast downward in response to the current economic downturn, overall media spend is forecasted to decline by 0.4% in 2009, after an increase of 2.3% in 2008. The revised forecast is down from a previous estimate of 5.4% growth for the year. The figure for 2009 represents the lowest industry growth rate, and only the second decline, in the three decades that Veronis has been collecting data, the company reported.

The hardest-hit media segments, according to the new forecast, are newspaper publishing, projected to decline by 16% (following a 13.5% decline in 2008), and broadcast television, forecast to be off by 9% (following a decline of 0.5%). Consumer magazine publishing, projected to decrease 8.5%, and broadcast and satellite radio, down 7.2%, are also among the segments facing the steepest declines. Advertising spending is projected to fall off by 7.4% in 2009, Veronis reported.

James Rutherfurd, Executive Vice President and Managing Director at VSS, notes that "... this mid-term forecast will present investors with a helpful guidepost in a challenging environment... (though) the media, information and education industries have been negatively impacted.. as a whole... the communications industry has performed better than many other sectors of the US economy... (this) industry has outgrown GDP growth in all of the periods of economic expansion studied since the Second World War."

 According to the VSS Mid-Term Forecast, leading the downward trend are:

  • Newspaper Publishing segment estimated to contract by 16.2% in 2009 (vs, -13.5% in 2008)
  • Broadcast Television projected to decline by 9% in 2009 (vs. -0.5% in 2008). 
  • Consumer Magazine Publishing is expected to decrease by 8.5 % (vs. -6.8% in 2008)
  • Broadcast & Satellite Radio projected to drop by 7.2% this year (vs. -5.8% in 2008). 

The Communications industry segments that will decline in 2009, says the report, are traditional media segments that have seen an increase in competitive alternatives which offer stronger proof-of-performance and ROI metrics at lower price points.

  • Marketing services, including segments such as direct marketing, promotions and branded entertainment, will decline 1.3% dropping to the second largest communications sector in 2009.
  • Advertising spending will drop 7.4% in 2009, the first two-year decline in 75 years as it also declined in 2008. Steep reductions in traditional advertising spend such as newspapers, television, and consumer magazines are being driven by fragmentation of target consumers and brand strategies which are increasingly focused across multiple venues and platforms.
  • The original 2008 forecast, that only three of the 20 individual segments of communications spending would register declines in 2008 (broadcast & satellite radio, consumer magazines and newspapers), was revised to include five other segments, with an additional two segments also declining in 2009.

 John Suhler, Co-Founder and General Partner of VSS, says "... (though) the downturn in our economy... has added pressure to the secular trends already present and has accelerated the down pressure on the traditional... consumer advertising and marketing services sectors... the newer... alternative segments of both sectors continue to experience positive growth in '08 and '09 and the end user sectors, both consumer and institutional... have been revised to show slower but positive growth, also in both years... "

Communications segments that will drive growth are those supported by institutional and consumer end-users seeking necessary data and information, says the report:

  • The Pure-Play Internet & Mobile Services segment is still growing albeit the growth rate is slowing down considerably. Previously expected to grow by 15.5% in 2009, VSS now projects an increase of only 9.1% for 2009, down from 11.6% in 2008
  • Mobile content and videogames will continue to be in demand and record double-digit growth (34.2% and 19.5% respectively), however at significantly lower percentages than originally predicted
  • The institutional end-user sector, in particular the professional & business information segment, will remain the fastest growing of the four communications sectors in 2009
  • Various alternative communications segments included in both consumer and institutional end-user sectors, such as branded entertainment, digital out-of-home, and professional business information services, are also growing faster than other communications segments and the broader economy.

For more about The 2009 VSS Mid-Term Forecast, please visit Veronis Suhler Stevenson here.

 

 

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