Driven by a somewhat improved economy, and stronger-than-expected results across digital media, total U.S. communications industry spending increased 4.2% in 2011 and is on pace to grow at an accelerated 5.6% in 2012, to reach $1.185 trillion. That will outpace gross domestic product growth (GDP) by 4.4%, according to Veronis Suhler Stevenson (VSS), a private equity firm serving the communications, media, information, education, and business services industries in North America and Europe.
VSS in its VSS Forecast Mid-Term Update projects that several industry segments are projected to outperform GDP growth of 4.4% in 2012, including Pure-Play Consumer Internet & Mobile Services (18.1%), Public Relations & Word-of-Mouth Marketing (14.6%), Broadcast Television (9.3%), Subscription Television (7.7%), and Branded Entertainment (7.5%).
“While the VSS Forecast Mid-Term Update clearly shows the strong growth momentum of digital media in such segments as Pure-Play Consumer Internet & Mobile Services, and Branded Entertainment, it also highlights the impact of a strengthening economy,” said John Suhler, Co-Founder and President of VSS. “What’s resulted is an increase in spending within the U.S. Communications Industry as both consumers and businesses begin to expand their use of a variety of communications platforms and tools such as mobile devices and tablets. Bottom line: This is the best news for the industry in several years.”
Industry Sectors with the Biggest Gains
While growth estimates for five of six Industry Sectors – defined as groups of industry segments sharing characteristics based on primary revenue streams – outpaced expectations for 2011 and 2012, Sectors with the most dramatic changes included Targeted Media and Traditional Marketing.
Spending on Targeted Media in 2012, which includes direct marketing, branded entertainment, outsourced custom content, pure-play consumer internet & mobile services, and business-to-business (B-to-B) media, has been revised upward from the original 7.7% growth projection in the annual VSS Forecast to 8.1% in the VSS Forecast Mid-Term Update. The upward revision was driven by strong performances in all segments except branded entertainment and outsourced custom publishing. VSS adjusted the 2010-2015 CAGR from 7.9% to 8.4%, reaching $278.4 billion to reflect expectations of stronger growth for most digital components within the sector, including e-custom publications, e-media in B-to-B media, and the entire pure-play consumer internet & mobile services segment.
Traditional Marketing, which includes consumer promotions, B-to-B promotions, public relations and word-of-mouth marketing, has been revised upward from 3.1% to 3.8% in 2012, as businesses are expected to continue to increase spending for all three segments, especially B-to-B promotions. VSS raised the 2010-2015 CAGR for Traditional Marketing from 3.6% to 4.2% to reflect anticipated acceleration in spending on Traditional Marketing during the latter part of the forecast period, reaching $86.6 billion.
Entertainment & Leisure Media, which includes subscription television, entertainment media (TV programming, home video, videogames, recorded music, box office) and consumer book publishing, is the only industry sector to be downgraded in the VSS Forecast Mid-Term Update for 2012. VSS found that while there will be gains in box office and branded digital platforms, such as online and mobile videogames, it will not be enough to help offset prolonged weak results in the printed book market. As a result, the growth rate of 5.8% forecast for the sector in 2012 was trimmed to 5.7%. The 2010-2015 CAGR was also cut from 5.6% to a 5.5%, reaching $353.9 billion, as strong growth in videogames, driven by the release of new console hardware during the forecast period and a faster-than-expected stabilization in the recorded music industry, will help mitigate the projected deeper declines in print consumer books.
VSS did not change the projected 2.6% growth rate for 2012 spending on Traditional Consumer Advertising Media, which includes broadcast television, newspaper publishing, consumer magazine publishing, broadcast & satellite radio, local consumer directories, and out-of-home media. While the ad market in the first half of 2012 is expected to remain sluggish, record-breaking political and Olympics advertising will drive growth for the remainder of the year. The 2010-2015 CAGR was also left untouched at 1.9%, with spending reaching $160.4 billion because although the projected decline in print advertising will be deeper than initially expected, it will be offset by increases in internet and mobile advertising offerings of branded traditional media.