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22nd Annual Report: 100 Leading Media Companies

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Media returns, overwhelmingly good in 2000, turned bad for the most part in spring and downright ugly under the summer heat.

The nation's top media companies listed in this 22nd annual report of Advertising Age's 100 Leading Media Companies could hardly have done better than in 2000 when they recorded 12.8% growth in revenue to $183.27 billion.

Ranging from kingpin AOL Time Warner at $24.95 billion to MSNBC at $220 million from media, these companies took advantage of the quadrennial magnets, the Summer Olympics and the presidential election. A dot-com ad-infused economy added to their normal acquisitive-mode in reaching for new revenue heights.

Internet revenues exploded 39.1% to $12.28 billion among these companies; their cable holdings advanced 12.1% in revenue to $55.88 billion, up 12.1%; broadcast TV grew 10.7% to $32.9 billion; magazines pushed 9.1% to $21.27 billion; and radio, 16.2% to $8.84 billion. Big volume media, newspapers, lumbered in at $36.68 billion, up 5.4%.

Then came the dot-com bust and the general economic malaise. Lacking any fallback media event extravaganzas, the Top 100 have been left treading water this year.

National advertising, key prop in the media revenue stream, was down 6.4% to $38 billion through May of this year compared with the corresponding period in 2000 according to data from Taylor Nelson Sofres' CMR. What began as a slow decline in the opening months of 2001 picked up speed by mid-year.

While network TV advertising dropped 2.2% in this period, NBC declined 3.1% in first quarter and then 6% for first half. Walt Disney Co.'s media networks (largely comprising ABC-TV Network and owned-and-operated station group) fell 7.8% in revenue its second fiscal quarter (the calendar year's first), sending its first half revenue down 0.7%. Viacom's TV operations bucked the trend, rising 4% pro forma in first half largely due to higher pricing at CBS TV.

Among the biggest three newspaper companies, first half revenue from Tribune Co.'s publishing unit dropped 8% and fell 6% at Knight Ridder's newspapers operations. Gannett newspaper ad revenue fell 7% in the period. All these tallies are pro forma as if acquisitions and divestitures were on the books two consecutive years.

CLEAR CHANNEL SLIDES

Among the two big radio gatekeepers in 2001, Viacom's combo unit for Infinity radio and umbilically-linked Viacom outdoor was off 4% in first half pro forma revenue. Clear Channel Communications was down 8% in pro forma revenue in first quarter, its latest reported period. Perhaps forecasting where Clear Channel is headed, Radio Advertising Bureau reported first half national radio advertising fell 21%, and local radio, attracting 80% of the industry's 2000 ad revenue, was off 4% from that year-earlier period.

Meanwhile, acquisition activity ensures a sea change among the Top 100 for next year. EchoStar Communications Corp. put a bid on the table worth $30.4 billion for fellow direct broadcast satellite player, DirecTV, a unit of General Motors Corp.-owned Hughes Electronics. That bit of hubris elbowed in on News Corp. as it negotiated a friendly takeover of DirecTV. News Corp. owns a passive 5% of EchoStar.

Primedia will erase Emap USA from the chart next year once its $505 million buyout of the magazine company is completed. Fox Family Worldwide is being bought by Walt Disney Co. for $5.3 billion. Liberty Media no doubt will enter the chart for the first time next year since AT&T Broadband deconsolidated it this month by spinning it off into a separate company. Liberty holds minority interest in 13 Top 100 companies (see media family trees, Pages S-10, S-12).

DISNEY IN THE HUNT?

AT&T Broadband is now in play after Comcast Corp.'s $58 billion bid was rebuffed last month. Media analysts see more suitors showing up, possibly Disney or even Comcast, this time with AOL Time Warner as partner.

This year, acquisitions eliminated five companies from the previous Top 100 list. Time Warner and America Online, both leaders in last year's chart, became one with their $147 billion merger; News Corp. purchased the 50% it didn't own in BHC Communications to eliminate that company as a separate listing; BET Holdings landed at new parent Viacom; and Thomson Corp. exited the list when its newspapers were acquired by Community Newspaper Holdings, Media General, Gannett and MediaNews Group.

Playboy Enterprises and Cumulus Media slipped from the list when their growing revenue streams failed to meet this year's entry point of $220 million, a sizable boost from 1999's $194.1 million.

Racing to take their place were four Internet-oriented companies, MSNBC, CNET Networks, Terra Lycos and Prodigy Communications Corp., the Hispanic station group and TV network Telemundo Holdings, urban radio's Radio One, and cable network E! Networks.

Cable is decidedly the media-of-choice for growth in 2001. Among the top five media categories by volume (network TV, newspapers, magazines, spot TV and cable), only cable recorded a national ad gain (up 4.4%) in the first five months of 2001; network TV declined 2.2%, newspapers fell 9.2%, magazines 3.3%, and spot TV 15.1%, according to CMR.

Unlike newspapers, an industry in which revenue increases rely on ad gains because circulation is declining in their largely mature markets, cable draws healthy revenue from increasingly higher subscription rates and continued geographic expansion in addition to advertising.

AOL Time Warner is an example in case. In the first quarter, its latest quarterly report, cable services and networks grew 8.8% in pro forma revenue. Subscriptions, its largest revenue category, grew 11% due to an increase in the number of subscribers and an increase in subscription rates. Ad revenues were up 5%.

CABLE GAINS

Meanwhile, other cable companies continue to grow in 2001. In first half, Comcast advanced 9% in revenue, and Viacom cable networks charted revenue growth of 7%, both pro forma.

Perhaps the comparison to those prior-year heady ad periods are unfair. Some media companies, indeed, are comparing 2001 returns to 1999 as if 2000 were an aberration. And it may have been.

Clear Channel cautions that comparisons are difficult to make with the prior year because ad rates were higher in 2000 in radio and outdoor due to the increased inventory demand within the ad industry from the rapid growth of the Internet industry.

Others would say "amen" to that.

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