Subscriptions Oust Ads as US Media's Top Revenue Stream

03 August 2004

Communications Industry Forecast & Report, the latest annual survey by media-oriented US merchant bank Veronis Suhler Stevenson, charts the advent of a seminal industry landmark.

In 2003 the lion's share of revenues earned by the American media industry came not from advertising but from subscription services.

This, the study concludes, indicates the growing popularity of pay-TV, DVDs and the worldwide web as consumer fodder. Last year, US media creamed $175.8 billion (€146.11bn; £96.68bn) from advertising, an increase of 3.2%; consumer subscription revenues, however, rose by double that percentage to £178.4bn.

James Rutherfurd, evp and managing director at Veronis, notes that US consumers have become increasingly willing to pay for information and entertainment that matches their interests rather than relying on advertising-supported media designed to appeal to a broader audience.

"Consumers are voting with their pocketbooks," he says. "One of the things they seem to want to do is avoid or minimise advertising." Which, if not just a blip on the chart, will cause a few sweaty palms among advertisers and their agencies.

It will also explain the recent decision by WPP Group's Young & Rubicam to create a senior team to peddle new media solutions to the agency's clients [WAMN: 30-Jul-04].

Consumer spending on media services in 2003 accounted for 27.5% of media revenues -- ahead of advertising, speciality marketing and other promotional spending by businesses.

Joe Public's media spending spree has grown at a compound rate of 7.9% a year since 1998, driven by the rising cost of cable and satellite TV and the increased availability of premium services. It also reflects the growth of the video games industry, the rise and rise of DVDs and consumers' [as yet] unsatiated infatuation with the internet.

The Veronis report paints a disturbing picture of a media fixated America -- by 2008 glued to its screens for over 4,000 hours a year and spending an annual average of more than $1,000 on this self-hypnosis.

Orwell got it wrong by just twenty-four years.

Data sourced from: Financial Times; additional content by WARC staff