VSS revises forecast for Media and Communications Industry.

Veronis Suhler Stevenson (VSS) announced the launch of a special Mid-Term Forecast presenting a timely 2009 interim update to VSS’s annual five-year Communications Industry Forecast 2008-2012 and the digital version VSS MediaResearchNet 2.0.

According to VSS, overall media spend is forecasted to decline by 0.4% in 2009, after an increase of 2.3% in 2008. This compares to previously projected growth of 5.4% and 4.9% for 2008 and 2009 respectively. This is the industry’s lowest growth rate — and only second decline – since VSS started collecting comprehensive data on the industry thirty years ago. The continued negative outlook for economic activity, coupled with secular shifts and cyclical trends underway in the media and communications industry, are expected to limit the sector’s overall growth in 2009.

An authoritative voice on and the only provider of comprehensive spending, usage and trend data across all four sectors, 20 industry segments, and over 100 sub-segments of the media industry, VSS developed the Mid-Term Forecast in response to the unprecedented economic downturn. In preparation for the Mid-Term Forecast the VSS research team reviewed hundreds of primary and secondary sources for up to date data and trends through mid February 2009.

“We believe this mid-term forecast will present investors with a helpful guidepost in a challenging economic environment,” said James Rutherfurd, Executive Vice President and Managing Director at VSS. “The media, information and education industries have been negatively impacted by the economic downturn. However, as a whole these industries (which comprise the communications industry) have performed better than many other sectors of the US economy, and we are confident that over the medium and long term, the communications industry will regain momentum. The Communications industry has outgrown GDP growth in all of the periods of economic expansion studied since the Second World War.”

Some media segments impacted more than others

According to VSS’s Mid-Term Forecast, leading the downward trend are the Newspaper Publishing segment estimated to contract by 16.2% in 2009 (vs. -13.5% in 2008), followed by Broadcast Television projected to decline by 9% in 2009 (vs. -0.5% in 2008). Consumer Magazine Publishing is expected to decrease by 8.5 % (vs. -6.8% in 2008), closely followed by Broadcast & Satellite Radio projected to drop by 7.2% this year (vs. -5.8% in 2008).

Overview of Contracting Segments

Generally, the Communications industry segments that will decline in 2009 are traditional media segments that have seen an increase in competitive alternatives which offer stronger proof-of-performance and ROI metrics at lower price points.

o Marketing services, including segments such as direct marketing, promotions and branded entertainment, will decline 1.3% dropping to the second largest communications sector in 2009.

o Advertising spending will drop 7.4% in 2009, the first two-year decline in 75 years as it also declined in 2008. Steep reductions in traditional advertising spend such as newspapers, television, and consumer magazines are being driven by fragmentation of target consumers and brand strategies which are increasingly focused across multiple venues and platforms.
The original 2008 forecast – i.e., that only three of the 20 individual segments of communications spending would register declines in 2008 (broadcast & satellite radio, consumer magazines and newspapers) — was revised to include five other segments, with an additional two segments also declining in 2009.

“The unprecedented changes in our financial markets beginning in mid September have had a profound impact on most industries and the communications industry has not been spared,” commented John Suhler, Co-Founder and General Partner of VSS. The downturn in our economy resulting from the financial markets collapse has added pressure to the secular trends already present and has accelerated the down pressure on the traditional segments of the consumer advertising and marketing services sectors. However, the newer or what we have labeled the alternative segments of both sectors continue to experience positive growth in ’08 and ’09 and the end user sectors, both consumer and institutional, representing the majority of spending in the communications industry, have been revised to show slower but positive growth, also in both years,” Suhler added.

Overview of Growth Segments

Communications segments that will drive growth are those supported by institutional and consumer end-users seeking necessary data and information for business or learning, or digital access, content and entertainment.

* The Pure-Play Internet & Mobile Services segment is still growing albeit the growth rate is slowing down considerably. Previously expected to grow by 15.5% in 2009, VSS now projects an increase of only 9.1% for 2009, down from 11.6% in 2008.

* Mobile content and videogames will continue to be in demand and record double-digit growth (34.2% and 19.5% respectively), however at significantly lower percentages than originally predicted.

* While reflecting a downward growth revision of several percentage points, with a 2009 growth rate of 5.1%. It will emerge as the largest sector for the first time since VSS began tracking communications spending.

* Various alternative communications segments included in both consumer and institutional end-user sectors — such as branded entertainment, digital out-of-home, and professional business information services — are also growing faster than other communications segments as well as the broader economy.

For more information at http://www.vss.com