Addendum to the VS&A Communications Industry Forecast: The Recession Scenario.

NEW YORK--(BUSINESS WIRE)--Oct. 22, 1998--In its just-released Communications Industry Forecast, New York investment bank Veronis, Suhler & Associates predicts that a recession is not imminent (please see today's release "Veronis, Suhler & Associates Holds Steadfast to Projections of Strong Growth for Media Industry").

The VS&A Forecast bases its projection of continued expansion for the U.S. economy on several indicators of underlying economic health, including:

-- Over the past seven years, real GDP expansion has been relatively

steady but moderate compared to the two other extended

expansionary periods since World War II. It shows no present

signs of overheating. In fact, the inflation rate has actually

declined as the current expansion progresses -- in marked

contrast to the years immediately preceding the two most recent

recessions.

-- Since the U.S. exports an average of only 12% of GDP, and far

less to Asian economies, any adverse effects on our own economy

from overseas problems should be limited.

-- Producers are now able to adjust swiftly to market changes and

thus absorb shocks without going through a prolonged adjustment

period.

The reasoning underpinning this forecast of continuing growth for the U.S. economy is set forth in detail in the Forecast Summary.

Why the Communications Industry is Forecast to Expand Should a Recession Begin Soon

The recession of the early 1980s was triggered by an outside event, the second oil embargo of 1979. Over the prior three years (1976-79), profits were strong and advertising grew at a healthy 4.9% rate in real terms. The combination of growing competition and a strong underlying corporate structure helped the communications industry continue to grow, albeit slowly, during the ensuing recession.

The recession of the early 90s, in contrast, was spurred by an economy-wide restructuring that stemmed from a weak corporate profit structure. Advertising spending during the prior three years (1986-89) was relatively weak; it went on to decline during the recession, as did overall communications spending.

Should a recession occur in 1999 (i.e., at least two successive quarters of GDP decline), VS&A expects the communications industry to follow the pattern of the earlier recession of the eighties and expand gradually, outpacing the overall economy. In the event of such a recession, as in the one of 1980-81, a strong underlying corporate structure and a competitive marketplace should sustain spending on advertising.

The current situation is comparable to the early 80s, not the early 90s. The economy is undergoing an external shock -- the Asian financial crisis -- not an internal restructuring. Advertising is also strong, growing at a 4.8% rate in real terms over the last three years -- nearly identical to the growth of advertising in the late 70s and more than double the pace of the late 80s. The evidence indicates that spending on media will continue to grow, even in the event of a recession.

In addition to short-run cyclical developments, advertising is subject to long-term trends, which can often override shorter cyclical downturns. That is why advertising growth outpaced the economy during the recession of the 80s and fell sharply during the recession of the early 90s.

At present, advertising is in the midst of a long-term upward trend. Even if a downturn should occur next year, we believe that the advertising market is well-positioned to override it.

Please call us if you would like to discuss these findings with Arthur Gruen or David Wilkofsky of Wilkofsky Gruen & Associates, which provides economic analysis in connection with Veronis, Suhler & Associates publications.