21st Annual Report: 100 Leading Media Companies

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AD AGE DATAPLACE: acquisitions, new media encroachment and feisty upstarts have toughened some media companies and consumed others in a relentless and endless evolutionary march.

In the 21st annual report of Advertising Age's 100 Leading Media Companies, nine companies exited the Top 100 chart and all were bought by a top 30 media company where much of the power resides.

The top 30 collected 80% of the 100 Leading Media Companies' collective $158.1 billion media-only revenue in 1999, up 9.5%. Apart from being competitors, these companies are distant if not close relations, so much so that they nearly fall under one family tree. (See media trees on Pages S-6, S-7).

The Top 100 are most generally multimedia companies with some serving as strong players in other industries such as movies, book publishing and record clubs. From all properties, the Top 100 aggregated net revenue of $370 billion in 1999, up 11.3%.

The media category pulling the largest revenue stream among the 100 was cable TV at $49.4 billion, up 12%. Cable arguably faces the most dynamic changes among the group. Cable's big three by total subscribers -- AT&T Broadband and Internet Services, Time Warner and Charter Communications which between them claim 60% of all cable subscribers -- are focused in areas other than winning more basic or pay subscriptions.

AT&T Broadband's primary design behind buying Tele-Communications Inc. and MediaOne was to use the services' cable lines for local phone service; America Online's interest in Time Warner was cable lines that provided quick access to the Internet; Charter's multiple cable buys reflect its interest in developing interactive services.

While cable is courting the Internet, newspapers are finding it a potential threat. Online classified services such as Monster.com are poised to siphon off advertising, although newspaper classifieds haven't suffered much yet.

The federal government's relaxation of regulations against TV duopolies is sure to be a boon among TV broadcasters, although there hasn't been the expected acquisition spree. News Corp. may have started the duopoly rush with its pending $5.35 billion buyout of Chris-Craft Industries giving it duopolies in four cities.

RADIO CLUSTERING

Radio clustering is stimulating ad sales as it fosters common formats within regions and dips deeper into the demographic strata to reach underutilized ethnic markets. Radio was the media bias for new blood on the chart, contributing five of the nine newcomers.

Acquisitions created considerable chart movement, particularly among the new radio contingent. The top 30 acquisitions (closed or pending) by the 100 Leading Media Companies were valued at $477.1 billion. Some 80% of these purchases involved cable companies. The Time Warner-AOL deal claimed 38% of the total.

Meanwhile, ad growth among these media categories is meeting expectations in 1999, and then some.

CABLE CONSOLIDATES

Consolidation in the cable industry in 1999 to date cut the cable contingent of the Top 100 to 28 companies from 33. Cable added BET Holdings and Comedy Central.

Vulcan Ventures, parent of Charter Communications, purchased InterMedia Partners and Bresnan Communications Group, and Comcast Corp. bought Lenfest Group and Prime Cable, all former Top 100 companies.

Network cable advertising is running apace. The medium was up 33.6% in the first five months. Network cable represents 74% of the cable ad pot, although in total revenue, three-quarters of cable's total comes from subscribers services, both basic and pay.

NEWSPAPERS LUMBER

Newspapers continue to be a lumbering media giant, with growth typically smaller than other media. Top 100 companies with newspapers generated 1999 net revenue of $33.7 billion, up 6%. The Newspaper Association of America says first half ad results are setting the pace for full-year ad growth of 5.3% to $48.7 billion.

Threats -- and opportunities -- are challenging newspapers' two lifelines: classifieds and retail. So far any erosion of newspaper classified advertising from online interlopers remains unproven. Classified ads' increase of 6.7% in the first quarter was the largest since second quarter of 1998.

"I would say at this stage the numbers still look solid for newspapers' help-wanted ads," says Brian Shipman, analyst with Prudential Securities. "If you believe the kind of growth characteristics that Monster.com is posting . . . at some point, it's going to come out of newspapers' hides."

Major newspapers are protecting their interests by aggregating classifieds online. Tribune Co. and Knight Ridder are buying CareerPath and merging it into careerbuilder.com, another online aggregator.

Retail advertising, up a sluggish 0.5% in first quarter 2000, is teetering on change. The numbers are down not only because retail, newspaper's top ad category, is struggling, but retail is caught between differentiating price (its traditional use of the medium) and the need to build image to reflect changing consumer shopping habits. Retail's walk-in traffic has slowed prompting retailers to begin to experiment in branding stores to build stronger identity and attract more local customers. That could mean a shift to image ads more suitable to other media.

The lead newspaper acquisition affecting the Top 100 chart was Times Mirror Corp.'s purchase by Tribune Co. Also, the DeYoung family, owner of Chronicle Publishing, liquidated its media holdings, including the San Francisco Chronicle, sold to Hearst Corp. Central Newspapers, repository of metro papers in Phoenix and Indianapolis, went to Gannett Co.

A new entry at No. 74 is Community Newspaper Holdings. It is buying a slew of papers from Thomson Corp., currently dissolving its U.S. newspaper segment. Other Top 100 companies are also picking off Thomson papers.

MAGAZINES MEET PROJECTIONS

Twenty of the 100 Leading Media Companies contributed magazine revenues of $20.1 billion, up 6.7%, a count including net advertising and circulation.

Gross ad revenue from consumer magazines hit $11.4 billion in 1999, up 8.7%, and through the first five months of 2000, ad revenue has registered 15.6% growth, according to Publishers Information Bureau, which monitors 254 magazines.

But what to do about autos? The transportation and travel category, dominated by autos, was off 3.4% in the first five-months. It was the only major category to decline. Magazine's top ad category, business & technology, countered with 33% growth in the period.

One magazine-oriented company entered the Top 100, Playboy Enterprises. It was buttressed by a 127% growth in its online segment. TV Guide Inc. was bought by Gemstar International this July, creating Gemstar-TV Guide International.

OLYMPIAN GAINS ON TV

Broadcast TV revenues of $27.8 billion, up 4.5%, were generated by 36 of the Top 100.

Television Bureau of Advertising this month pushed its 2000 forecast for national spot up two points to 12%-14%, keeping local TV at 7%-9%. Network TV projections from other quarters are for 12% growth.

CMR data in the first five months put spot TV growth at 14.8%, giving meat to TVB's reassessment. Reasons for the revision were the ability of affiliates to reclaim viewers from cable with innovative programming such as CBS' "Survivor" and ABC's "Who Wants To Be a Millionaire" and strength in early and late newscasts, says Harold Simpson, TVB VP-research. Summer Olympics and the presidential election also are factors. Political ads will add $600 million to TV this year.

TiVo and ReplayTV, two systems that record TV programming in set-top boxes, threaten to restructure the financial underpinnings of the industry by turning TV into a targeted market rather than a mass market. Major networks have hedged their bets by investing in the systems.

RADIO SIGNALS NEW GROWTH

Government fiat and a strong economy have encouraged a dynamic market for mergers and acquisitions in radio and turned radio companies public to reap the benefits of using stock rather than debt to pay for acquisitions.

Radio hit $7.7 billion in net revenue, up 9.7%, spread through 23 companies among the 100 with radio in 1999. New radio entries were Entercom Communications Corp., Cumulus Media, Hispanic Broadcasting, Citadel Communications Corp., and Church of Jesus Christ of Latter-Day Saints.

In 1999, radio gross ad sales jumped 15% to $17.6 billion, says Radio Advertising Bureau. It also reports a 15% growth pace through May of this year.

"Radio is a retail machine; if the economy is in good shape radio thrives," says Mike Agozino, president of Katz Radio, who cited other growth factors, dot-coms and industry consolidation, the latter "producing more quality owners and quality programming across a broader range of stations."

Radio is set for a whole new experience in subscriber listening from two start-up satellite-radio operators XM Satellite Radio and Sirius Satellite Radio. Both will begin delivering digital-quality music, sports and information to subscribers in their cars early next year. Most music channels will be commercial-free, with spots sold on other channels.

Jon Fine contributed to this article.

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