A new report by media merchant bank Veronis Suhler Stevenson chronicles the rise of the communications industry as an economic force. But the report also shows the waning influence of trade publications.
"Certainly business magazines got hit worse than any other sector in the media, whether consumer or business," said Jim Rutherfurd, exec VP of VSS. "The business magazine sector really took it on the chin in 2001 and 2002."
The report, "Investment Consideration for the Communications Industry: A Thirty-Year Review of the Communications Industry 1977-2007," contains both historical data and projections. It defines the communications industry broadly, including TV advertising, book publishing, newspapers, public relations and a host of other sectors.
Since 1975, according to the report, the communications industry has far outpaced nominal GDP growth. Total spending in the communications arena grew by 3.3% in 2002 to $608.7 billion. VSS estimates 2003 spending at $642.4 billion, up 5.5% over 2002.
Of course, not every element of the communications industry is burning as brightly as the others. For the period 1975 to 2007, the report projects that total advertising spending will have grown to $231.9 billion from $22.4 billionâa more than tenfold increase.
Over that same time frame, broadcast TV advertising spending is expected to grow to $20.5 billion from $2.3 billion. Cable TV ad spending is expected to reach $16.6 billion in 2007, up from $50 million in 1980. Internet advertising is expected to grow to $8.6 billion in 2007, from $50 million in 1995.
Business pubs not growing
Business magazines are not participating in the growth to the same degree. VSS expects the sectorâs ad revenues to total $11.9 billion in 2007, a more than fivefold increase from $2.1 billion in 1975.
Despite that growth in aggregate revenues, VSS projects business magazines will see their slice of the advertising pie cut almost in half between 1975 and 2007, dipping to 5.1% of total advertising spending from 9.5%.
Business magazines have often seen their revenues go in reverse in the past few years. Although VSS expects business magazine advertising to reach $11.9 billion in 2007, that would be well below the peak year of 2000, when spending hit $13.5 billion. The 2007 projection is most comparable to 1998, when ad revenue in business magazines totaled $11.6 billion. Essentially, VSS is predicting that business magazine ad revenues will have shown no growth between 1998 and 2007.
Rutherfurd, however, pointed out that most of the backpedaling took place in 2001, when business magazine ad revenues declined 19.7%, and 2002, when they fell again by 15.4%. The recession hit businesses much harder than it hit consumers, and as businessesâespecially in the technology sectorâregain profitability and begin capital and marketing spending again, trade publications should benefit. VSS projects that ad spending in business publications will grow 4.4% this year, 6.0% in 2005, 7.4% in 2006 and 8.5% in 2007.
"Getting back to those 1999 levels, business magazines have a much deeper trough to dig out of [than other media]," Rutherfurd said.
Bright spots for b-to-b
Rutherfurd indicated that the predicament for b-to-b media overall isnât as bad as it looks, despite the difficulties on the print side. Among the bright spots are Internet ad spending, which is expected to show compound annual growth of 7.4% between 2002 and 2007; trade shows, which are projected to show compound annual growth of 4.4%; and business information or database services, which are forecast to post compound annual growth of 5.7%.
"Itâs the companies that have magazines, trade shows, [an] Internet presence, and databases that will do well going forward," Rutherfurd said.