Look for US communications industry spending to grow to $1 trillion by 2013, says Veronis Suhler Stevenson (VSS) in its annual Communications Industry Forecast, following a 1% decline in 2009. But not every media sector is expected to grow.
What we’ve heard from many broadcasters is that the revenue declines seen over the past year or so have been so dramatic that business has to return to growth after 2009. But VSS Managing Director Jim Rutherfurd doesn’t agree. He told RBR/TVBR that both broadcast television and broadcast radio are expected to see continued revenue shrinkage over the next five years. “Sorry to say, that is true,” he said. “I think we see continued erosion of broadcast TV and broadcast radio even after the recession ends. This is not just a recession story,” Rutherfurd said.
That’s due in part to the permanent contraction of the automotive industry, particularly at the local dealer level, but also because of the growth of media alternatives. To be sure, radio and TV are claiming some of the ad spending on their Internet and mobile platforms, but not enough to offset the decline in their traditional broadcast spot business.
“Local advertising in its entirety, we think will go down more, or at least in the out years, grow less than national advertising, and a chunk of that is due to the auto industry, the auto dealers,” Rutherfurd said. But he also noted other secular changes, such as declining listnership/viewership, with both radio and television continuing to be hit hard by other competition.
VSS projects that after rising 0.6% to $49.08 billion in 2008, overall spending on broadcast TV will decline 9% in 2009 to $44.65 billion and then decline at a Compound Annual Growth Rate (CAGR) of 0.6% over the next five years to $47.6 billion in 2013. During that time, VSS projects that online and mobile revenues for TV will grow at an 18% annual rate and retransmission consent revenues will more than triple to $1.5 billion, but those gains won’t be enough to counter the decline in traditional ad sales.
For radio (including broadcast, satellite, online & etc,), VSS reported a decline of 7.1% in 2008 to $20.28 billion. The drop this year is expected to be 8.9% to $18.48 and the next five years are projected to bring a negative CAGR of 2%. For broadcast radio, that CAGR decline is projected to be 3.8% to take revenues from $17.7 billion in 2008 to $14.5 billion in 2013. Online and mobile are expect to grown 16% a year to $600 million in 2013, but that’s obviously not nearly enough to counter the spot drop.
Satellite radio, which gets most of its revenues from subscriptions, rather than advertising, is projected to continue growing, but at only a CAGR of 6.7%, since Rutherfurd sees it reaching market saturation. That would take Sirius XM revenues (since it is now the only player, post-merger) from $2.3 billion in 2008 to $3.2 billion in 2013.
So, if total US communications industry revenues are expected to rise at a 3.6% CAGR over the next five years to hit a trillion bucks in 2013, where is the growth coming from?
One gaining sector is projected to be subscription television, with a 6.4% CAGR taking it to $199.27 billion in 2013. Rutherfurd said both wired cable and satellite TV are expected to grow revenues 5% annually, while the newer telco TV competitors are expected to grow from $2.4 billion in 2008 to $6.1 billion in 2013. And while broadcast TV advertising is projected to decline, the cable network ad revenue component is expected to enjoy a 6.7% CAGR taking it to $29 billion in 2013.
“The overall communications industry we see growing because within the industry you’ve got your traditional advertising media, like TV, radio, newspapers and consumer magazines – these are all shrinking – have all been hit by a combination of long-term secular decline, which was driven for the most part by the advent of the Internet and other technologies, other competition for eyes and ears, and advertising dollars, but also really accelerated by the recession. And those are obviously significant chunks of the overall industry. But what you’ve got going on underneath that, or beside that, are the elements that are the digital elements – whether it’s subscription television…pure-play Internet advertising and Internet subscription businesses, which are growing, and while the rate of growth may have decreased during the recession from double digits to single digits, we see that after the recession going back to the double digit growth,” Rutherfurd said.
He said there are also a lot of more niche-related media, which are expected to continue to grow. And then there’s a big chunk of the total communications industry which is institutionally focused, which is “not on everybody’s radar screen like consumer media.” He mentioned Bloomberg and Reuters as examples of business-to-business media with information driven subscription business models, as opposed to ad-driven. Those types of companies now account for about 25% of the total communications industry pie – and they are still growing.
