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Communications and media companies have been growing at a rate faster than the economy, and that will go on even if the stock market's recent wild ride turns ugly, according to the authors of the 15th annual edition of Veronis, Suhler & Associates' "Communications Industry Report."

Revenues of publicly owned media companies rose 12.3% to $195.7 billion in 1996, the third consecutive year of double-digit growth, according to the report The communications sector has shown a compound annual growth rate of 7% during the last five years, compared with 5.1% for the U.S. gross domestic product.


The industry study also notes that revenue growth has been accelerating, thanks to an expanding economy, from 10.1% in 1994 to 12.1% in 1995 and to 12.3% last year. At the same time, GDP growth slowed from 4.7% in 1995 to 4.4% in 1996.

Advertising is hypercyclical; it expands faster than a growing economy and contracts more slowly in a downturn, said John Suhler, president and co-CEO of Veronis Suhler. A combination of technological and audience change is increasing spending on new communications media, while companies focused on sales growth are boosting budgets for advertising, trade shows and other tools to generate sales, he said.

Not surprisingly, growth in Internet-related services led all segments of the communications sector, with 124.5% revenue growth in 1996, thanks to the explosion in Internet communications, said Mr. Suhler.


Out-of-home media grew by 70.4%, through a combination of internal growth and acquisitions among outdoor companies. Healthcare information services saw 36.4% revenue growth, and radio broadcasters saw a 36.2% increase, reflecting a wave of consolidation in that segment, he said.

Despite the stock market activity last week, the U.S. economy is still doing fine and the fundamentals for healthy communications companies-such as low inflation and strong consumer spending-are still present, Mr. Suhler said.

If history is any indication, said Veronis Suhler, any effect from drastic stock market swings won't be long lasting. For example, the media most closely tied to Wall Street's fortunes-financial publications, business news networks and business information providers-recovered quickly and did well after the last stock market drop, said Mr. Suhler.


Arthur Gruen, one of the study's authors, noted that the crash of 1987 had little impact on the U.S. economy, which did not slide into recession until mid-1990. Today, he said, the economic fundamentals are even stronger than they were then, so there should be no economic impact.

One area that could be affected is initial public offerings and consolidation among media companies, said Mr. Suhler. The liquidity of public markets created capital for expansion and acquisitions during the bull market, so a contraction

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