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Growth for channels, production predicted.

An unusually optimistic and glowing forecast for the coming five years, is from Veronis, Suhler & Associates, Inc. The investment bankers predicted that the U.S. communications industry will move up to the number five position among the fastest-growing U.S. industries over the coming years, spurred by unprecedented advertising growth and an increase in overall communications spending.

In 1993, the communications industry business level stood at $224 billion. By 1998 it is expected to hit $309 billion. That represents a 6.6 per cent annual growth increase, achieved primarily through television and its various technical innovations, and reflecting the improved economy.

The Veronis, Suhler study said advertising spending overall by 1998 will rise to $326 billion, an increase of 5.1 per cent. In 1993, advertising and promotion on TV, in newspapers and magazines, amounted to $84 billion, which in turn represented a 4.5 per cent rise over the prior year. Television advertising alone went up by 4 per cent in 1993.

The forecast expects network ratings to trend upwards during the coming four years and said, "For the first time in years, the factors leading to improved ratings out-weigh those that suggest a decline. Cable penetration, the principal cause of ratings declines over the past decade, is virtually at an end. Meanwhile, the hours of programming for the Fox network increased. Even if the Fox ratings do not improve, and even if they remain well below those of the other networks, the average Fox program attracts six times the audience of the most popular cable network. The announced launch of new broadcast networks will result in even more programming alternatives available to viewers."

The network forecast is based on the assumptions that network ratings will rise; overall advertising spending will improve; Fox will expand its prime-time schedule; new networks will be launched; and ratings and advertising growth will be higher in even-numbered years.

Network advertising during 1993-98 will rise at a 5.3 per cent compound annual rate, well above the 2.2 per cent rise of the past five years. While network advertising stood at $10.4 billion in 1993, it should hit $13.5 billion by 1998.

In terms of individual stations, the Veronis, Suhler prediction said "the stabilization in the audience of the broadcast networks will help television maintain its audience levels over the next five years. Between 1988 and 1993, the share of the TV audience coralled by TV stations fell from 81.2 per cent to 70.6 per cent, a 10.6 points decline. Over the next five years, as cable penetration slows, and as erosion in the broadcast network audiences ceases, the viewing share of television stations will show little change. It fell over four-tenths of a point to 70.2 per cent in 1998," the report predicted.

In 1980, all television viewing was for broadcast programs. By 1993, that share had fallen to 71 per cent, a loss of 25 share points. This coincided with the rise of VCR penetration. Consumers spent $13 billion renting or purchasing tapes in 1993. Cable penetration of TV households rose to 60 per cent (from a prior 22 per cent) and cable's share of TV was up nearly 30 per cent.

Yet, TV station advertising rose by $10 billion between 1989 and 1993, simply because the stations are able to deliver a mass audience to the advertisers. There are more than 70 basic cable programming services, with the top 12 garnering most of the advertising.

Spending on cable in 1993 was up 6.6 per cent over 1992, rising to $21.8 billion. Subscription spending was up 5.5 per cent to $19.3 billion and advertising, at $2.5 billion, increased 16.2 per cent. The forecast puts the future increase in subscription spending at only 3.6 per cent over the next five years, though advertising is expected to grow at double-digit annual rates. By 1998, it should hit $4 billion.

Producers of TV entertainment programming had $9.3 billion in revenues in 1993, up 5.8 per cent from 1992. Network spending was up 3 per cent and that of television stations in general 4.1 per cent.

Meanwhile, the networks' total spending on entertainment last year was only 38.4 per cent, down one percentage point from '92. "Program distributors generated nearly as much revenue from programs shown on television stations as on the broadcast networks," the study found. They paid $1.9 billion in cash for programming in 1993.

As for theatrical movies, their distributors' revenues grew 8.7 per cent in 1993, one percentage point down from 1992, which is blamed partly on relatively slow growth in revenues from television. "In each category, revenues from foreign sources increased faster than those from domestic sources," the study revealed. Total foreign income was up just over 10 per cent, compared with 7.4 per cent domestic growth. Home video represented the fastest-growing category in 1993, with revenues up more than 10 per cent.
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Title Annotation:Veronis, Suhler & Associates report on US communications industry
Publication:Video Age International
Date:Aug 1, 1994
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