Veronis Suhler Stevenson, the venerable media merchant bank, forecasts that communications spending will begin to recover in the second half of this year and continue at an annual rate of 5.5% until 2006.
Veronis Suhler Stevenson's annual Communications Industry Forecast (CIF) describes the worst recession for the US media industry in decades. Recovery, it says, will be driven by the cable, broadcast television and radio sectors.
Meanwhile, filmed entertainment, which has not deviated from a growth course, will continue its progress.
Despite malaise in the first two quarters, the current year will see total communications revenue in the US grow 4.8% from $580bn to $601bn.
That comes after a year in which total spending dropped by 0.3%, in which there was a 6% drop in advertising spending and a 1.7% decrease in marketing services and speciality media services. And it comes after the compound annual growth rate for communications at 6.5% made the media industries the third fastest growth sector between 1996 and 2001.
Current signs of strength include a first quarter uptick for radio and strong "upfront" buying of advertising in the broadcast TV market.
However, other sectors, such as magazines will stay depressed this year.
"We believe that all of these negatives will remain short-term influences and largely will have played themselves out by the end of this year," said James Rutherfurd, executive vice president and head of investment banking at Veronis Suhler Stevenson. "Then we foresee a return to an expansive attitude toward communications spending, though we aren't projecting anywhere near a repeat of the super-heated growth of the late Nineties. We're in uncharted waters both in terms of the explosive growth that occurred through 2000 and the abruptness and severity of the disruptions of the past year."
Significantly, Veronis Suhler Stevenson forecasts that end-user spending (purchases, tickets, licences, subscriptions etc.) by consumers will be the driver of communications industry growth, not advertising or business spending. Consumer spending will grow at 6.5% compared with 4% for advertising.
The CIF shows the US public has found ever more time for media consumption no matter the economic conditions and that it will continue to do so over the next five years.
The average American spent 3,570 hours consuming various forms of media in 2001, up 1.4% on 2000. It will continue at 1.2% per year until it reaches 3,800 at the end of the forecast period. Multi-tasking will also increase.
Among the sector forecasts made in the bank's CIF is the prediction that theatrical box office will grow at an annual compound rate of 7.2% over the next years to reach $11.9bn by 2006. DVD growth will compensate for declining videocassette sales keeping home entertainment on track for 6.4% growth to $31bn in 2006. Recorded music, on the other hand, will continue to leak and lose out to different form of digital piracy. It will drop 1.9% to $13.7bn this year and a further 1.6% a year over the forecast period to $12.8bn in 2006.