Technology And Secular Shifts in Spending Support Communication Industry Growth

by Jack Loechner, Aug 18, 2010, 8:15 AM

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According to the Veronis Suhler Stevenson Communications Industry Forecast 2004 -2014, The Communications Industry spending is on pace to increase 3.5% in 2010 and post a compound annual growth rate (CAGR) of 6.1% in the 2009-2014 period to $1.416 trillion, driven by a gradual economic recovery, advances in digital technology, and secular trends impacting the entire industry landscape.

John Suhler, Co-Founder, President and General Partner of VSS, says "... the Communications Industry will only slightly outperform nominal GDP over the next five years, with advertising and marketing investments expected to be more muted due to the shift away from traditional media outlets to more targeted media..."

VSS predicts that Communications Industry spending will exceed nominal gross domestic product (GDP) CAGR growth of 5.8%, and retain its position as the fourth-largest industry in 2014, although slipping to ninth place in terms of growth during the forecast period due to continued weakness in traditional advertising and marketing services.

The shift of spending and consumption is reflected by growth in CAGR in the key industry sectors, during the 2009-2014 period, such as:

• Business & Professional Information & Services... 8.2%
• argeted Media... 7.3%
• Entertainment & Leisure Media... 6.3%
•  And, remarkable growth in the Pure-Play Consumer Internet & Mobile Services segment, which is expected to grow at a CAGR of 14.6% from 2009 to 2014.

Unmet societal needs and digital technology are the key drivers, says the report, pushing the Communications Industry into a restructure mode that will see secular shifts in all Industry Sectors and Revenue Streams from traditional to digital platforms. Reflecting the shift to alternative media categories, the VSS Forecast found that 17 of 20 segments tracked in the report will post increases in CAGR between 2009 and 2014, with the largest CAGR growth being seen in Pure-Play Consumer Internet & Mobile Services, which is expected to rise at a 14.6% CAGR and reach $87.79 billion in 2014.

Overall, media usage will remain relatively flat during the 2010-2014 forecast period as consumer and business end-users continue to migrate to digital platforms that have more searchable and often shorter and more focused content when compared with traditional media. Growth will primarily occur in the Business & Professional Information & Services sector, which will post a 8.2% CAGR between 2009 and 2014, reaching $249.00 billion.

The Targeted Media sector will be the second-fastest growing industry sector and experience a 7.3% CAGR increase in the forecast period to reach $265.58 billion, according to the report. Growth will be spurred by the Pure-Play Consumer Internet & Mobile Services segment:

• Branded Entertainment, poised to increase CAGR by 9.2% to $38.16 billion
• Outsourced Custom Publishing, where advertisers are seeking targeted approaches to reaching key audiences, resulting in an 11.2% CAGR gain to reach $6.57 billion in 2014
• Public Relations & Word-of-Mouth Marketing which will register CAGR growth of 9.7% between 2009 and 2004, reaching $8.01 billion
• Business & Professional Services which will see CAGR climb 9.1% to reach $147.12 billion in 2014

An Industry Sector analysis, including Entertainment & Leisure media, Business Information & Services, Targeted Media, Education & Training Media & Services, Marketing Media, and Traditional Consumer Advertising Media offers greater depth and detail on time that consumers and businesses spend with media:

• Business & Professional Information & Services will be the fastest-growing industry sector from 2009 to 2014, posting an 8.2% CAGR between 2009 and 2014 to reach $249.00 billion
• Growth in Education & Training Media & Services will experience a 6.8% CAGR improvement in the forecast period to $311.28 billion
•  The Entertainment & Leisure Media sector is forecast to post CAGR gains of 6.3% over the next five years, reaching $353.87 billion, with 6.3% CAGR growth
• The Targeted Media industry sector will be the second-fastest growing industry sector during the forecast period, driven by double-digit growth in Pure-Play Consumer Internet & Mobile Services and Outsourced Custom Publishing, as well as solid gains in Branded Entertainment
• Marketing Media will be the slowest growing and smallest communications industry sector during the forecast period, increasing at a 1.8% CAGR from 2009 to 2014 to $77.23 billion
•  Traditional Consumer Advertising Media, including Broadcast TV, Newspapers, Consumer Magazines, Broadcast & Satellite Radio, Yellow Pages Directories, and Out-of-Home Media, is expected to grow at a sluggish 2.2% CAGR, totaling $159.30 billion

The availability of new media platforms and technologies will contribute to continued changes in consumers' media use, particularly secular declines in consumer consumption of traditional media platforms. This will prompt brands and agencies to re-evaluate their traditional advertising strategies and tactics.

Suhler concludes that "Institutional communications spending by businesses, government agencies and educational institutions will be the primary driver of the Industry's growth during this period..."

To review the complete report, and view available charts and graphs, please visit here.

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