Media's tempered growth mirrors that of the economy: GDP last year recorded its most tepid growth (2%) since 2002 amid signs the economy was heading into recession.
Media's biggest winner is no surprise: digital, with revenue up 10.8%. Cable-network growth was close behind, at 10.6%. The biggest loser: newspapers, down 6.8%.
2008 Special Report:
Time Warner still on top
Time Warner topped the list with net U.S. media revenue of $35.6 billion. Time Warner, which has held the No. 1 spot each year since 1995, collected 11.9% of Media 100 revenue -- nearly one of every eight dollars spent by advertisers and consumers on products and services from the top 100.
Time Warner is likely to lose its position as the nation's largest media company. The company is preparing to spin off its biggest operating segment, Time Warner Cable, as a wholly separate company. Time Warner minus its cable systems had 2007 net U.S. media revenue of about $21 billion. That would make it the second-largest U.S. media firm, behind Comcast Corp. ($26.9 billion).
Ad Age has published the 100 Leading Media Companies report since 1981. In that first report, the top 100 had U.S. media revenue of $29.5 billion, one-tenth the revenue of this year's Media 100.
The Media 100 offers a bottom-up view of media by tallying revenue from an array of products and services. This includes traditional media, internet services, cable providers and movies. Revenue sources include advertising, subscriptions, sales of movie tickets and DVDs, and fees from TV production/licensing.
Cable systems and satellite services accounted for a record 31% of 2007 U.S. media revenue. Three cable/satellite companies rank among the top 10 media firms: Comcast, DirecTV Group and Dish Network Corp. Time Warner Cable should be in the top 10 in next year's ranking.
Cable systems' massive scale and strong growth can distort media-industry gains. Factor out cable systems and satellite, and Media 100 revenue last year grew just 2.4% (vs. 4.6% when cable systems/satellite are included).
Coming in behind cable systems and satellite, cable networks scored as the Media 100's second-largest revenue source (13.4%), ahead of broadcast TV networks and stations (10.6%).
Newspapers ranked fourth, accounting for 10.4% of media revenue. Just 20 years ago, newspapers brought in 35.9% of Media 100 revenue. Ad Age has expanded its definition of media since then to include movies/home entertainment (DVDs) and TV production and licensing. Excluding those added categories, newspapers last year accounted for 11.5% of Media 100 revenue -- far below the 35.9% share 20 years ago.
In Ad Age's 1988 report (for 1987 revenue), newspapers were the biggest source of media revenue for 37 of the top 100 companies. In that report, newspaper publishers accounted for four of the 10 largest U.S. media companies.
Rapid newspaper decline
In the new ranking, just 22 of the Media 100 count on newspapers as their biggest media revenue source. The nation's top newspaper publisher, Gannett Co., ranks No. 14 in the Media 100. (Twenty years ago, it ranked No. 4.)
Newspaper revenue for the Media 100 last year plunged $2.3 billion. By contrast, the top digital player, Google, saw net U.S. media revenue jump 47% or $1.9 billion, vaulting it into 12th place in the Media 100.
|Source: Ad Age 100 Leading Media Companies reports|
This report's digital-revenue growth (10.8%) would have been higher were it not for a sharp revenue decline at Time Warner's AOL. Subscription revenue at AOL has plunged as customers ditch the dial-up internet service.
Time Warner early this year began separating the two sides of AOL: a shrinking dial-up access service and a growing ad-focused web operation. Time Warner has said that move "should enhance the operational focus and strategic options available for each of these businesses."
Media 100 digital-revenue breakouts aren't all-inclusive; many companies report digital revenue as part of their mainstay divisions (newspapers or network TV, for example).
On the media deals front, mergers-and-acquisition activity has slowed dramatically this year as credit and capital markets have tightened.
There have been only five announced U.S. media acquisitions valued above $250 million so far this year. The biggest deal: Landmark Communications' $3.5 billion sale of the Weather Channel to a consortium of General Electric Co.'s NBC Universal and private-equity players Blackstone Group and Bain Capital.
In contrast, there were 14 announced media acquisitions above $250 million by this time last year. Deals included Sam Zell's acquisition of Tribune Co.; the merger of Sirius Satellite Radio and XM Satellite Radio Holdings; and News Corp.'s purchase of Dow Jones & Co.
As with Time Warner's pending cable spinoff, a number of Media 100 players have sold or spun off assets to create smaller and more focused enterprises -- a turnabout from the bigger-is-better mantra in vogue early this decade.
Walt Disney Co. last year sold its ABC radio stations and radio network to Citadel Broadcasting Corp. The New York Times Co. last year sold its TV stations to a start-up, Local TV LLC; News Corp. in July sold eight of its TV stations to the same venture.
E.W. Scripps Co. in July split into two companies. Scripps Networks Interactive focuses on growing lifestyle cable networks (including HGTV) and websites; E.W. Scripps operates local TV stations and a declining newspaper operation.
Belo Corp. in February spun off its shrinking newspaper unit so Belo could focus on local TV stations.
Barry Diller in August divided IAC/InterActiveCorp into five companies, leaving IAC as an internet conglomerate with a grab bag of online offerings.
Clear Channel Communications, the No. 1 radio company, sold its TV stations in March. It also has unloaded many small-market radio stations.
Clear Channel itself was acquired in July by private-equity firms Bain Capital and Thomas H. Lee Partners, ending a drawn-out takeover play dating to November 2006.
Among other private-equity media deals in 2007, an investor group including Madison Dearborn Partners, Providence Equity Partners, Texas Pacific Group, Saban Capital Group and Thomas H. Lee in March bought Univision Communications, a Spanish-language media firm; Ripplewood Holdings in March bought Reader's Digest Association, a publisher and direct marketer; and Hellman & Friedman in October acquired Catalina Marketing Corp., a point-of-sale marketing company.
In all, 16 companies in the Media 100 are backed by private equity. But given the weakened state of capital markets, private equity going forward may no longer be the biggest deal in media.