VERONIS SEES REBOUND IN MEDIA COMPANIES

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If any doubt remained that media has emerged from its recession, a five-year financial performance review of publicly traded communications companies by Veronis, Suhler & Associates, New York, should put it to rest.

While communications industry margins dipped sharply at the media recession's height in 1991, Veronis President John Suhler is proclaiming "a nearly complete recovery."

Operating cash flow margins, which began the cycle in 1989 at 21.2% and dropped as low as 18.9% in 1991, bounced back to 20.8% in 1993.

The trend holds true for almost all major ad-supported sectors.

TV and radio broadcasting margins, for example, dropped to 16.1% in 1991 from 21.6% in 1989, but last year were now back up to 21.2%. Within the sector, the performance of companies owning stations was relatively stable with margins dropping no more than 3.1 points. TV network company margins, by comparison, dropped from 19.2% in 1989 to 12.1% in 1991 before climbing back to 17% in 1993.

"A few years ago, people were talking about broadcasting as being an obsolete business," Mr. Suhler said. "Now it is looking like a very healthy business."

Margins for most of the major ad-supported media segments also came back. Cable network margins rose to 21.3% in 1993 after dropping to 20.3% in 1991 from 23.5% in 1989. Newspaper publisher margins also bounced back to 19.2% in 1993 from a low of 17.2% in 1991, though they have yet to match 1989's high of 21.4%.

Overall, magazine publishers have returned to pre-recession margins, dropping from 14.8% in 1989 to 12.3% in 1991 and rebounding to 14% in 1993. But the business press continues to lag: margins slipped from 18.2% in 1989 to 11.7% in 1991, inching up to just 12.9% in 1993.

By comparison, consumer magazine publisher margins have regained historical highs. After dropping from 13.8% in 1989 to 11.5% in 1991, they jumped to 13.6% in 1993.

Business publishers, Mr. Suhler said, have been particularly hard hit because they depend on industries that have undergone radical restructurings, usually resulting in consolidation.

As a category, publicly traded ad agencies weathered the recession nicely, with margins dropping from 12.2% in 1989 to 11.4% in 1991 but shooting back to 12.1% in 1993.

Operating cash flow margins for the newest communications industry sector, interactive digital media, bounced around considerably during the recessionary cycle, but are now operating at an historical high of 19.4%. Mr. Suh-ler described it as a small but relatively dynamic category that is drawing strength from momentum in all other media categories.

"I don't care if you are a newspaper, or a magazine publisher, or filmed entertainment, everyone is looking at digital media. Everybody is a player," he said.

While he predicts it will be a strong business, Mr. Suhler is less bullish than some about its potential, estimating eventual penetration of no more than 15% of the U.S. market.

He also contends it will almost always be consumer driven with relatively little advertising revenue. "I think advertising is antithetical. On-demand media says you want what you want, when you want it and you don't want anything to get in the way of it."

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