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Investment firm Veronis Suhler Stevenson expects the U.S. communications industry to see a compound annual growth rate of 5.2 percent over the next few years to reach $1.455 trillion in revenue by 2016, almost twice the 2.7 percent growth rate over the past five years.
Entertainment media spending, a segment that includes box office and recorded music, will accelerate its growth, while subscription TV will expand more, but see its growth rate slow.
In unveiling its latest annual forecast, Veronis spoke of a “return to spending levels not seen since before [the] global economic downturn.” And the firm said: “While digital has been a growth driver in select pockets of the Industry in the past, the new data show that digital communications and services – encompassing content, technology and user access – has firmly established itself as the driving force of the industry.”
Spending on entertainment and leisure media will increase 4.9 percent to $293.49 billion this year, with strong gains in subscription TV spending expected to offset weaker growth in the entertainment media segment.
Beyond pay TV, digital remains a key growth driver – across various parts of the media and communications industry. In 2006, VSS found that digital-related expenditures represented 16.7 percent of total industry spending. The figure rose to 26.5 percent in 2011 and will expand to 39.3 percent by 2016, it said.
“Digital’s influence is now a constant and significant factor in every sector, segment and sub-segment of the U.S. communications industry,” said John Suhler, co-founder and president of VSS.
The 26th annual edition of the VSS Communications Industry Forecast says that industry spending rose 4.4 percent in 2011 to $1.129 trillion despite a sluggish economy. At the expected growth pace through 2016, the communications industry will remain the fifth-largest industry among 15 economic sectors in 2016, Veronis said.
During the forecast period, the firm expects media segments that saw deep declines during the shift to digital platforms in recent years, such as recorded music and books, to stabilize “as the digital segments of those industries account for the majority of units sold.”
Spending on entertainment media fell 0.8 percent to $83.61 billion in 2011 as slight gains in TV programming and video games were offset by declines in home video, recorded music and box office. Overall spending grew at a compound annual growth rate of 0.2 percent from 2006 to 2011.
Entertainment media spending growth is expected to accelerate to 3.4 percent in 2012 to $86.46 billion “driven by TV programming and box office,” VSS said. Investments in political and Olympics coverage, the release of new video game consoles and the “revitalized” recorded music market will contribute to an even higher compound annual growth rate of 4.4 percent during the forecast period.
Spending on subscription TV increased 7.4 percent in 2011 to $175.23 billion and is expected to increase 6.5 percent to $186.61 billion in 2012 “as consumers add more programming and services to existing subscriptions and major marketers shift advertising from the broadcast networks to more cost-effective cable networks,” VSS said.
From 2006 through 2011, the sector saw spending rise at a 7.3 percent compound annual growth rate. Over the next five years, growth will slow to a 5.8 percent compound rate.
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