Study Sees U.S. Communications Industry Growing 4.1% in 2011
Veronis Suhler Stevenson projects a 5.5 percent compound annual growth rate from 2010 to 2015 to $1.41 trillion, meaning the industry will outperform economic growth.
NEW YORK - Despite an economic slowdown, U.S. communications industry spending will grow 4.1 percent this year and increase at a 5.5 percent compound annual growth rate from 2010 to 2015 to $1.41 trillion, Veronis Suhler Stevenson projected on Wednesday. That means that the sector will outperform economic growth over the multi-year time frame driven by digital media growth.
However, the latest growth multi-year forecast was weaker than the company's forecast last year for a 6.1 percent CAGR through 2014 to $1.42 trillion.
By the end of 2015, the communications industry will now be the eighth-fastest-growing and fourth-largest U.S. economic component, according to the 25th edition of the VSS Communications Industry Forecast 2011-15.
The company unveiled its annual forecast later than usual "due to the downturn in key economic indicators in the third quarter of 2011, which led VSS to recalibrate its forecasts to include the most current research and analysis through September."
VSS also said it will begin publishing a mid-term forecast update in the first quarter of 2012. Growth over the 2010-2015 period will be driven primarily by "the rapid convergence of computer, Internet and wireless mobile technologies fueling the ongoing transformation of the media landscape and leading to new industries, platforms, channels, and consumer and institutional behaviors," the company said.
Indeed, the VSS forecast says that digital media is having "a strong and long-term impact" on the industry. The only segments expected to register declines over the forecast period are newspaper publishing and local consumer directories.
Segments that have been hurt in recent years by the migration to digital and economic factors are expected to stabilize though during the forecast period, according to the VSS report. Meanwhile, targeted media is projected to be the fastest-growing industry sector in 2011 and over the 2010-2015 time frame, expanding at a CAGR of 7.9 percent to $272.5 billion in 2015, driven by Internet and mobile services, as well as branded entertainment.
The four revenue streams of advertising, marketing services, institutional and consumer end-user spending that VSS tracks will lag GDP growth in 2011, but exceed economic growth over the 2010-2015 period, according to the investment firm. Institutional end-user and advertising revenue will show a strong CAGR of 6.0 percent each over the period. In the institutional end-user segment, TV programming, cable license fees and TV station retransmission fees will grow at a CAGR of 7.5 percent. In advertising, mobile and Internet will drive growth with CAGRs of 42.9 percent and 13.7 percent, respectively.
The traditional consumer ad media space, which includes broadcast TV, consumer magazines and broadcast and satellite radio, among others, will generate growth in the forecast period, even though it will trail GDP, "as brand-related digital products and delivery methods gain a stronger foothold for most traditional media outlets," VSS said.
“While there are instances of declines and decelerated growth - largely in the more traditional segments of the communications industry - there is a convergence taking place, in which everything digital continues to gain greater influence, scope and relative revenue mix, neutralizing the general decline of traditional media,” said John Suhler, co-founder and president of VSS.
Time spent with the Internet increased 6.0 percent in 2010 to 397 hours per person, according to VSS. The growth came from consumers spending more time with social media, among other things. Time spent with mobile media in 2010 jumped 49.7 percent to 77 hours per person amid increased smartphone penetration. Given rapid adoption of tablets, VSS projected a 35.3 percent increase in time spent with wireless media in 2011, reaching 104 hours per person. The segment will post a 19.8 percent CAGR over the forecast period, with consumer purchases of more e-books, music, mobile applications and streaming video driving growth, it said.
Growth in the entertainment and leisure media sector, traditionally the largest part of the total communications business, will amount to a CAGR of 5.6 percent to hit $355.74 billion in 2015 driven by subscription TV gains at a 7.6 percent CAGR to $235.76 billion. VSS predicted that subscribers would add enhanced services, such as cable modems, to their existing packages. Subscription TV will be the largest consumer media segment in 2011.
The CAGR in the traditional consumer ad media sector will be 1.9 percent in the forecast period to hit $160.21 billion in 2015. Advertising revenue growth of 2.5 percent in 2011 to $188.16 billion and a 6.0 percent CAGR to $245.29 billion will also boost results.
Broadcast TV will remain the largest advertising segment, while pure-play mobile advertising spending will be the fastest growing segment, according to VSS.
Within the overall broadcast TV segment, VSS expects total spending will fall 0.6 percent to $47.18 billion in 2011, with the 2010-2015 CAGR hitting 3.9 percent though to reach $57.37 billion in 2015, driven by retransmission fees.