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The outlook for the communications business remains rosy, according to Veronis, Suhler & Associates' annual forecast, with the industry's growth rate expected to outpace that of the gross domestic product.

The report predicts the communications industry will grow at a 7.6% compound rate between 1996 and 2001, reaching $419.6 billion. That's up from a projected growth rate in last year's report of 7% for the 1995-2000 period, and higher than the 5.6% growth rate forecast for the GDP.

The industry's outlook is "quite exceptional," said Hal Greenberg, managing director at Veronis Suhler.


Consumer online ad spending will lead the growth, with a 65.7% compound annual rate, according to the report, reaching $2.5 billion by 2001. Also expected to be on a fast-growth track is subscription video-a category including cable TV, direct-broadcast satellite and payper-view. Subscription video ad sales are expected to grow at a 17.1% rate, hitting $14.9 billion by 2001.

"The trend is toward those media that afford consumers a high degree of control, whether through interactivity or greater choice of product," said John Suhler, president of Veronis Suhler. "People are spending more time online, playing videogames, listening to recorded music and watching videocassettes, all of which are taking time from broadcast television and radio."

In part because of that trend, network TV ad growth is expected to drop to a 4.9% rate from the 7.4% annual increase of the last five years. Network advertising in 2001 is expected to total $17.3 billion.

Cable ad spending is expected to slacken somewhat, but growth will remain in the double digits. National cable advertising will grow at a compound annual rate of 17.2%, compared to an average rate of 20.6% over the last three years.


Radio ad spending is expected to grow at a 9.1% compound annual rate, compared to the 7% growth rate for 1995-2000, reaching $19 billion by 2001.

A projected shift in retail advertising-from ailing department stores to entertainment outlets, consumer electronics shops and others-will fuel a healthy increase in ad spending overall for newspapers.

In 2001, ad spending in newspapers is expected to total $72.3 billion, compared to $53.2 billion in 1996. Compound growth over the 1996-2001 period will average 6.3%; the annual increase of the last five years was 4.5%.

Circulation for dailies is expected to stabilize, with circulation spending increasing at a 3.1% compound rate, up from 2.8% over the last five years.

Consumer magazines will continue to see a shift in advertiser categories. Double-digit gains in the computer; publishing and media; drugs and remedies; and business and consumer services categories should help offset declines in liquor, food and direct response.

Advertising in consumer magazines is expected to grow at a 7.9% compound annual rate, up from 6.7% over the 1991-96 period, reaching $13.2 billion in 2001.

Other highlights of the forecast:

In 2001, consumers are expected to spend over $1 billion on consumer online services, compared to $675 million in 1991.

Circulation spending for business magazines is expected to rise by only 2% compounded annually over the next five years. Paid circulation is shrinking as the advertising market improves and publishers distribute more copies on a controlled basis to qualified readers.

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