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COMMUNICATIONS INDUSTRY EXPECTED TO GROW 8.8 PERCENT PER YEAR OVER NEXT 5

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The communications industry will grow at an average annual rate of 8.8 percent over the next five years, down from a 9.8 percent yearly growth pace over the past five years, according to a report by an investment banking firm that specializes in media buyouts.

Veronis, Suhler & Associates Inc. said the communications business will generate $251 billion in spending by 1993, up from $164 billion in 1988.It said the projected growth pace will place the communications business second only to the anticipated 9.5 percent annual growth rate in the health and medical services industry among the major segments of the economy.

John Suhler, president of Veronis Suhler, said the main reasons for the slower growth in communications from 1988-93 compared with the 1983-88 period is an anticipated slowdown in the expansion of spending in cable television, home video and business information.

Growth in cable television, for instance, should moderate over the next five years because most households already have access to cable service and basic cable service rate increases are expected to moderate, it said.

It put cable spending growth at 7.7 percent over the next five years, down from 11.3 percent in the past five.

Home video growth will also slow as that segment of the industry begins to mature, falling to an 11.2 percent growth pace in the next five years from 52.7 percent a year in the past five, it said.

Spending on business information services will still be the fastest-growing segment of the comunications business at 10.5 percent a year, but that is down from a 12.1 percent growth pace over the past five years.

None of the projections is adjusted for inflation.

In the newspaper business, spending is expected to grow at an 8.1 percent rate in the next five years, including an 8.6 percent yearly increase in advertising spending and 6.2 percent annual growth in circulation.

That compares with a 7.7 percent growth rate overall in the past five years, including 8.6 percent in advertising and 4.8 percent in circulation.

The forecasters said they expect the economy will grow at a 7.5 percent annual rate including inflation over the next five years, compared with 7.4 percent over the past five years.

Suhler said that advertising and promotion spending growth should accelerate in the next five years after slowing in the 1983-88 period when "the nation's economic focus shifted from expansion to cost control."

"Such trends run in cycles, and as this one runs its course over the next five years, higher spending on advertising and promotion will benefit the advertising-supported segments of the communications industry," he said.

The broadcasting business is expected to grow at an 8.7 percent annual rate from 1988-93, up from 8.2 percent over the past five years.

Ad spending on the networks should rise at a 6.9 percent yearly rate over the next five years, up from 6.2 percent over the past five, while spending at local TV stations should edge up to 9.8 percent a year, up from 9.7 percent.

The rate of audience decline for the three major networks is projected to moderate between 1988 and 1993 because of lower growth in cable television and independent stations.

The networks' share of the prime time audience fell to about 68 percent last year, down from 81 percent in 1983, but Veronis Suhler expects it will dip to only 63 percent by 1993.

Spending on radio is expected to grow 9 percent a year in the next five years, up from 8.3 percent in the past five, the study said.

Projections for annual growth over the next five years in other segments of the industry include:

-9.9 percent in filmed entertainment including home video, down from 17.5 percent in the past five years.

-9.8 percent in book publishing, up from 8.9 percent.

-7.4 percent in recorded music, down from 10.4 percent.

-7.3 percent in magazine publishing, down from 7.4 percent.