Merchant Bank Augurs US Media Recovery in H2

06 August 2002

US merchant bank Veronis Suhler Stevenson has dusted the cobwebs from its crystal ball to produce its sixteenth annual communications industry forecast, described by the New York Times as ‘widely followed’. [Like horse-racing?]

The report which covers the bank’s area of specialization – the media, communications and information industries – predicts tepid growth in the second half of 2002 and opines that the sector will no longer figure among America’s three fastest-growing sectors.

Veronis also takes a pessimistic view of the speed of recovery, saying it will not match 1991’s move out of recession. That, the bank said, had been fuelled by the technological boom and the rise and rise of the internet. “Tech spending has since cooled dramatically, and there is no equivalent new generator of advertising spending either developing or looming on the horizon.”

At which point the crystal ball switches to long-range frequency, presaging an annual average growth rate of 5.5% for the comms biz over the five years from 2001 – at the same time demoting the sector from third fastest-growing in the period 1996-2001 (6.5% average annual growth rate) to fifth.

But there is some good news. Veronis forecasts 2.9% adspend growth in this calendar year, compared with 2001 when it fell 6.2%. Total comms spend – advertising and promotions combined plus expenditure on media by consumers and businesses – will grow by 4.8% to near $610 billion (€619.94bn; £389.6bn) versus last year’s 0.3% drop.

Noting the recent emergence of indicators “that will prove positive for the communications industry by the year’s end,” Veronis executive vp James P Rutherford revealed: “We then see a return to healthy growth, steady growth, non-internet-inflated – similar to the early to mid-1990s.”

“Advertising accounts for 30% of all communications spending and has a cyclical relationship with the economy,” Rutherford continued. “So as the economy improves, we expect advertising and therefore communications spending to grow in a parallel path.”

Data sourced from: New York Times; additional content by WARC staff