Spending on Media to Rise at Slower Rate, Report Says

Advertisers and consumers will increase their spending on media ranging from newspapers and television to the movies at a slower pace during the next five years than in the past five, a new report says.

The anticipated slowdown stems mainly from expectations that the recent explosive growth in spending on cable television, filmed entertainment and recorded music will taper off.

The media investment firm Veronis, Suhler & Associates said in a report for release today that communications industry spending will rise at a compound annual rate of 6.8% through 1995, compared to 8.1% from 1985-90.

Overall spending is expected to rise to $262.8 billion in 1995 from $188.8 billion in 1990, the firm said in its fifth annual forecast.

That includes 6.1% annual growth in spending by advertisers to $112.2 billion by 1995, up from 5.7% growth in the past five years. Spending by media consumers such as those buying recorded music, cable service or magazines is expected to grow 7.4% a year to $150.7 billion in 1995, slower than the 10.2% increase in the past five years.

A major reason for slower overall growth is more subdued spending increases in some media that benefited in recent years from technological innovations.

Cable TV spending increased at a 13.2% pace in the past five years, for instance, partly because cable was new to some parts of the country.

But cable spending growth is expected to slow to an 8.2% rate over the next five years, mainly because there are fewer potential new subscribers.

The film and music businesses should also see much slower spending growth, the report said, because the novelty is gone from technology that helped fuel recent expansion such as the videocassette recorder and compact disc.

The proliferation of VCRs, for instance, led to 32.7% annual growth in spending on home videos from 1985-90, the report said. Home video spending is forecast to grow 9.2% a year in the next five.

Media Spending in the 1990s

Media spending is expected to reach $262.8 billion by 1995, up 6.8% from $188.8 billion in 1990. Here’s a look at some industry groups:

(in Billions of dollars)

1990 1995 TV* $26 $34 Radio* 9 12 Cable TV 15 22 Filmed entertainment 26 38 Recorded music 8 10 Newspaper publishing 44 58 Book publishing 19 27 Magazine publishing 20 27 Business information services 23 34

* all networks and stations

Source: Veronis, Suhler & Associates