Veronis Suhler Stevenson

The segments where advertising will decline most rapidly in 2009 are newspapers (down 18.7 percent, to $35.5 billion); consumer magazines (down 14.8 percent, to $11 billion); radio (down 11.7 percent, to $15.8 billion); and broadcast television (down 10.1 percent, to $43.0 billion). A few sectors to increase their advertising dollars this year are mobile (up 18.1 percent, to $1.3 billion) and the Internet (up 9.2 percent, to $23.8 billion).

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    ADVERTISING

    A Look Ahead at the Money in the Communications Industry

    by STEPHANIE CLIFFORD

    August 3, 2009

    http://www.nytimes.com/2009/08/04/business/media/04adco.html

    IN 2009, communications spending is likely to show a 1 percent decline for the year, the first notable decline in at least four decades. In five years, advertising spending in magazines will finally have rebounded after five years of decline — but at $9.8 billion, it will still be nowhere near the $12.9 billion it was in 2008. And by 2013, the video game market will be almost the size of the shrinking newspaper industry.

    At least those are some of the predictions in the Communications Industry Forecast from the private equity firm Veronis Suhler Stevenson, scheduled for release on Tuesday.

    Veronis Suhler invests in information, education and media, and those fields are what it measured in the forecast, the 23rd annual version. The company looks at the total spending on communications, including advertising, spending from consumers or businesses and items like retransmission fees for television. It includes traditional and new media along with information providers to businesses (like Lexis-Nexis), trade shows and education and training information, making its analysis broader than most other media reports.

    In 2008, total communications spending actually increased 2.3 percent, to $882.6 billion, but that was the sector’s slowest growth rate since 2001.

    Advertising, as is clear by now, is contracting. Spending dropped 2.9 percent in 2008, to $210 billion. For 2009, Veronis Suhler expects advertising to end up declining 7.6 percent, with a 1 percent decline to follow in 2010. Advertising will again grow in 2011, the firm projects.

    The segments where advertising will decline most rapidly in 2009, according to the firm’s estimates, are newspapers (down 18.7 percent, to $35.5 billion); consumer magazines (down 14.8 percent, to $11 billion); radio (down 11.7 percent, to $15.8 billion); and broadcast television (down 10.1 percent, to $43.0 billion). Veronis Suhler expects a few sectors to increase their advertising dollars this year, including mobile (up 18.1 percent, to $1.3 billion) and the Internet (up 9.2 percent, to $23.8 billion).

    Still, advertising is a decreasingly important part of the communications sector, compared with the other overall categories Veronis Suhler looks at — marketing services, consumer and products and information sold to businesses.

    “What’s really stark is that advertising, which not so long ago was the biggest part of the overall pie, is now the smallest part of the pie and is shrinking at a pretty good clip,” said James P. Rutherfurd, executive vice president and managing director of the firm.

    Even assuming an economic recovery over the next five years, “newspapers, consumer magazines, TV and radio are shrinking and will not, in that period of time, get back to what they saw before,” he said.

    John S. Suhler, the firm’s co-founder, president and general partner, said that while the declines for print media were severe, it was not a death sentence.

    “Will there arguably be, maybe, fewer of them? Possibly,” he said. “Will some markets only be served by an online news service? Possibly. But these businesses are going to be around for many, many years to come, if not decades or multiple decades. It’s just their growth prospects are diminished.”

    Despite all the bad news about the media industry, it is expected to be the third-fastest-growing economic sector over the next five years, after mining and construction. Almost none of that growth is forecast to come from shrinking traditional media, however. Instead, it will be drawn from areas like word-of-mouth marketing and public relations (with a 9.2 percent compound annual growth rate from 2008 through 2013), branded entertainment (9.3 percent) and the Internet and mobile devices (10.2 percent).

    The institutional category, under which Veronis Suhler puts business information services like Bloomberg and software or text providers to schools, became the largest part of the media world in 2007. It will be the fastest-growing sector through 2013, Veronis Suhler estimates.

    In the report, Veronis Suhler breaks down the expected performance of the elements of each area of marketing and communications. Some of the fastest-growing ones are creative strategies that have lately gained favor among marketers. They include paid product placement, with a compound annual growth rate from 2008 to 2013 of 17.6 percent; e-mail marketing and in-game advertisements (both 18.5 percent); mobile advertising outside of texting (33 percent); paid interactive television gaming (38.7 percent); mobile advertising and content tied to broadcast television (35.5 percent); mobile gaming and advertising (46.2 percent); and Internet and mobile home video downloads (34.4 percent).

    An interesting shift occurred in 2008, the report said. For the first time, consumers spent more time with media they paid for, like books or cable television, than with primarily ad-supported media, like newspapers and magazines.

    “It’s not that people aren’t willing to pay for content, because they are paying for video games, fantasy sports information, music downloads,” Mr. Rutherfurd said. “There’s just some content they’re not willing to pay for.”

    Over all, consumer media use in 2008 was flat from 2007, at 3,545 hours per person for the year. Though people spent less time with broadcast TV, radio, print media and out-of-home media (like billboards or bus shelter ads), they spent more time online, with mobile media, and paid television like cable, premium channels and video on demand.

    Hollywood will have troubles ahead, the report suggested. DVD sales, a profit engine for the industry, declined 5.8 percent in 2008, and they are expected to shrink to $ 19.5 billion by 2013, well below 2008’s level of $24 billion. On the positive side, box-office ticket sales, which were up 1.7 percent in 2008, are expected to grow 8.3 percent this year. While they will dip and rise over the next few years, the overall trend is positive, with admissions expected to grow to $10.4 billion in 2013, up from $9.8 billion in 2008.

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