According to its annual Communications Industry Report, the industry shrank 37% to 353 public companies in 2001 from 560 companies in 1999 due to bankruptcies, mergers and failed initial public offerings. The Internet sector was the main culprit, down to 36 public companies from 112 in 1999.
Total revenue for all publicly held communications companies last year rose 2.5% to $261.7 billion while operating income dropped 20.1% to $15.8 billion. Ten of the 12 industry segments tracked in the study posted operating losses or declines in income; only consumer book publishing and advertising and marketing services grew their bottom lines. Business-to-business media was the worst-performing sector, with revenues down 10.5% and operating income down 58%.
Broadcast TV was hit hard by the drop in ad revenue and showed declining revenue and operating income-down 2% and 19.7%, respectively-for the first time since Veronis' first report in 1984.
Cable and satellite TV also fared poorly, due to high spending on acquisitions and infrastructure to grow subscriber levels. While revenue grew 16.6%, the sector showed a $1.1 billion operating loss.
The advertising and marketing-services sector grew revenue by 3.6% and adjusted operating income by 10.7%. The relatively better performance of marketing services over traditional advertising provided some upside amid the economic downturn, while the thinning out of the e-marketer field-via bankruptcies and acquisitions-reduced losses in that sector.
The picture appears to be brightening in 2002, according to Veronis Suhler's analysis, which notes consumer spending on entertainment-such as movie tickets and video games-grew in 2001 as consumers sought escape from the year's grim events.
Additionally, the report notes signs of an ad-spending turnaround in the first half of 2002, with radio posting an upswing during the first quarter and TV up in the second quarter. Last month, Veronis' annual Communications Industry Forecast report projected advertising will bounce back in the second half to close the year up 2.9% over 2001, with marketing-services revenue growing 4.4%.