Dot-bombs be damned: entertainment biz is surging

The message from media merchant bank and industry forecaster Veronis Suhler is that things will soon get better in the US communications sector. The upbeat message comes despite the bursting of the internet bubble and pressure on consumer and institutional spending. Those sectors such as network television and newspapers, which are currently suffering, are forecast to pick up again in 2002, which in turn will have a positive impact in international markets, where the entertainment sector so often follows the US.

In its latest annual Communications Industry Forecast (CIF), Veronis Suhler predicts an overall industry growth of 5.6% annually between 2001-2005, outpacing the 5% growth rate of the gross domestic product. That gives a spending total of $738bn by 2005.

While acknowledging that his forecasts are more upbeat than those of many other researchers, James Rutherfurd, executive vice president of Veronis Suhler and head of investment banking, said: "The industry as a whole has become much more dynamic than it was a few years ago and is more resilient than the boom or bust of one or two sectors.

"We continue to foresee long-term growth across most segments but at a slower pace, as the economy adjusts to new realities. Remarkably, Americans continue to find new ways to absorb content and information on a daily basis. The ability to multi-task has made most of us highly skilled and selective in how we use the media."

Even for this current year - when communications spending will advance at a slower rate than the nominal GDP for the first time in at least a decade - Veronis Suhler forecasts that consumer spending on media will also rise. The average American is expected to spend around $207 in 2001 on cable & satellite TV (nearly an 8% increase from 2000), $120 per year on home video/DVD (a nearly 10% jump from 2000), and $33 per year on box-office entertainment (a nominal increase of 0.3%).

After hitting 3,472 hours per year for the average American in 2000, media use is forecasted to increase 5% by 2005, reaching 3,650 hours annually, about 10 hours per day per person. Veronis Suhler projects that time spent with the internet and video games will rise faster than other segments during the forecast period of 2001-2005.

The biggest growth sector is expected to be cable and satellite - a fact which may go some way towards explaining the massive corporate battles currently raging in both - which by next year will become the biggest communications sector, overtaking newspapers and entertainment (box-office entertainment, recorded music and interactive entertainment). The sector's rise is spurred by cable providers revving up integrated media promotions and extending channel offerings through digital cable.