Digital consumer spend to override print by '14

Report eyes 6.1% annual industry growth to $1.42 tril in '14

NEW YORK -- As the time spent with digital media continues to grow, 2014 will mark the first year when consumers will spend more on Internet and mobile services than on print media, according to an annual forecast from private equity firm Veronis Suhler Stevenson.

Veronis projects that the average consumer will spend $159.59 on Internet and mobile services in 2014, compared with $158.88 to be spent on books, newspapers and magazines.

Veronis' annual "Communications Industry Forecast" expects the overall media and communications industries to grow an average of 6.1% annually to $1.42 trillion in 2014, slightly above projected GDP growth. The gain for 2010 is expected to be 3.5%.

"There will be a longer and slower economic recovery during the expansion period covered by the forecast compared with previous expansions because of the breadth and depth of the recession," said John Suhler, co-founder, president and general partner of Veronis. "Advertising and marketing investments, historically the drivers of Communications growth during recoveries, are expected to be more muted due to the shift away from traditional media outlets to more targeted media."

Entertainment and leisure media spending will remain the largest part of the total communications business, expanding an average of 6.3% each year to $353.9 billion in 2014, driven by rising demand for subscription TV services and digital.

Here are select other highlights from the Veronis report and forecast:

-- Broadcast TV advertising spending is expected to grow 6.6% in 2010 to $40.80 billion and will bring in a 2.4% compound annual growth rate (CAGR) through 2014 "fueled by even-year ad spending gains."

-- Broadcast TV retransmission consent fees are projected to grow 34.4% to $934 million in 2010 and hit a CAGR of 25.1% over the forecast period.

-- Discussing the proposed NBC Universal-Comcast deal, Veronis said it "has the potential not only to make Comcast stronger but also to transform the subscription TV landscape. The joint venture could positively impact the further growth and acceptance of video-on-demand, solidify online-authentication efforts and expand sports offerings by creating a formidable rival to ESPN."

Also, with access to NBC Uni content, VOD windows could shrink and Comcast could add Universal content.

"If Universal reduces its VOD window, other studios would be forced to follow suit," Veronis said.

-- Boxoffice spending is expected to "grow at a solid pace during the forecast period fueled by the 3D movie phenomenon." Spending will grow 6.3% to $11.33 billion in 2010 and post a CAGR of 5.3% through 2014 to $13.81 billion.

"On the downside, studios risk diluting consumer interest in 3D movies if they flood the market with the format, particularly if the quality wanes," Veronis warned. "A raft of inferior 3D movies and rising ticket prices have the potential to turn consumers off of the theater experience."

-- "After seven consecutive years of spending declines, the music industry is expected to rebound in 2012 as digital platforms become the dominant listening option over physical copies," Veronis said.
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