Veronis Suhler Stevenson issued its annual Communications Industry Report yesterday, a report that shows “an industry under duress” but also an industry that is “poised for a recovery.” Most notably the report shows that their number of publicly reporting media companies has plunged 37% over the past two years. Call it a consolidation or a shakeout, but the report says the third consecutive year of communication industry declines was topped by a 20 % dive in overall operating income for 2001.
“The industry snapshot presented in this year’s CIR is not a pretty picture. Across the board, financial numbers were disappointing, and the sheer number of companies tracked has contracted markedly, reflecting the high rate of casualties from the Internet bust,” said James Rutherfurd, executive vice president and head of investment banking at VSS. “On the other hand, we believe some signs are now pointing toward a stabilized recovery of the industry. What the CIR shows is the background to today’s environment: A technology meltdown and an economic recession that worsened following the September 11 terrorist attacks caused the first communications spending decline in decades. This combination of negative trends took a massive toll on the advertising industry, which trickled down into just about every communications sector. In the first half of 2002 we have seen some signs of a turnaround.”
The report says that radio and broadcast TV saw a turnaround at the beginning of this year. Surprisingly, advertising, marketing services and specialty media was one of only a few categories in the report to show growth. A total of 59 companies combined saw a 3.6% gain in revenue in 2001 to $38.1 billion, a 15.1% advance in operating cash flow and a 10.7% increase in adjusted operating income, mainly contributed by growth among marketing services holding companies. The top three companies, according to revenues, were Omnicom Group, Interpublic Group of Companies and WPP Group.
The report was blunt in its assessment of the publishing business. “Hammered by the worst advertising market in a decade,” VSS states, total revenues for the 20 publicly reporting companies in the sector declined 4.7% to $23.7 billion. Lower revenues helped operating cash flow decline 17.6% to $5.6 billion in 2001. Operating income also fell, plunging 25.8% to $3.9 billion while the value of assets slipped a modest 2.8% to $37.7 billion. Consumer magazines didn’t fare much better.
The 16 publicly reporting companies, while posting adjusted revenue gains of 3.0% to $7.5 billion in 2001, operating cash flow declined 10.9% to $927.4 million and companies reported an operating loss of $204.9 million.