New VSS Forecast Mid-Term Update
Posted: April 12, 2012
New VSS Forecast Mid-Term Update Shows U.S. Communications Industry Grew More Than Expected in 2011; Will Outpace Projected U.S. Economic Growth in 2012
Total Communications Industry Spending Projected to Climb to $1.419 Trillion in 2015;
Overall CAGR Will Be 5.7%
Growth Estimates for Five of Six Industry Sectors Exceed Expectations for 2012
Eleven of 20 Segments Now Forecast to Grow Faster Than GDP This Year
NEW YORK – April 12, 2012 – Driven by an improving economy and stronger-than-expected results across all digital media, total U.S. Communications Industry spending increased 4.2% in 2011 and is on pace to grow at an accelerated 5.6% in 2012, reaching $1.185 trillion and outpacing GDP growth of 4.4%, according to Veronis Suhler Stevenson (VSS), a private equity firm serving the communications, media, information, education, and business services industries in North America and Europe. These findings are included the VSS Forecast Mid-Term Update, a new annual companion publication to the VSS Communications Industry Forecast 2011-15 (www.vssforecast.com), a leading benchmark for spending, usage, growth and trends data since 1987.
The VSS Forecast Mid-Term Update, which provides horizontal perspective and data on the rapidly changing media, entertainment and communications landscape in a challenging economic environment, found that total Communications Industry spending was up from a base of $1.076 trillion in 2010. VSS estimates total spending will reach $1.419 trillion in 2015, representing growth of $343 billion, or 31.8% point to point, and a 5.7% Compound Annual Growth Rate.
Several industry segments are projected to outperform GDP growth of 4.4% in 2012, including Pure-Play Consumer Internet & Mobile Services (18.1%), Public Relations & Word-of-Mouth Marketing (14.6%), Broadcast Television (9.3%), Subscription Television (7.7%), and Branded Entertainment (7.5%).
“While the VSS Forecast Mid-Term Update clearly shows the strong growth momentum of digital media in such segments as Pure-Play Consumer Internet & Mobile Services, and Branded Entertainment, it also highlights the impact of a strengthening economy,” said John Suhler, Co-Founder and President of VSS. “What’s resulted is an increase in spending within the U.S. Communications Industry as both consumers and businesses begin to expand their use of a variety of communications platforms and tools such as mobile devices and tablets. Bottom line: This is the best news for the industry in several years.”
VSS established the VSS Forecast Mid-Term Update to provide a near final spending estimate for the just-past year, as well as the first year of the most-recent VSS Forecast, and an updated estimate of spending for the current year, which is the second year of the five-year period covered in the latest VSS Forecast. The VSS Forecast Mid-Term Update will be released at the end of the first quarter each calendar year.
The VSS Forecast Mid-Term Update tracks, analyzes and forecasts data by six broad Communications Industry Sectors, four major Industry Revenue Streams and 20 key Industry Segments as defined in the VSS Forecast. Industry Sectors include Targeted Media, Business & Professional Information & Services, Entertainment & Leisure Media, Education & Training Media & Services, Traditional Marketing, and Traditional Consumer Advertising Media. Revenue Stream components include Advertising, Marketing Services, Institutional End-User, and Consumer End-User. Within these broad sectors, VSS tracks 20 key Industry Segments and more than 100 subsegments.
Industry Sectors with the Biggest Gains
While growth estimates for five of six Industry Sectors – defined as groups of industry segments sharing characteristics based on primary revenue streams – outpaced expectations for 2011 and 2012, Sectors with the most dramatic changes included Targeted Media and Traditional Marketing.
Spending on Targeted Media in 2012, which includes direct marketing, branded entertainment, outsourced custom content, pure-play consumer internet & mobile services, and business-to-business (B-to-B) media, has been revised upward from the original 7.7% growth projection in the annual VSS Forecast to 8.1% in the VSS Forecast Mid-Term Update. The upward revision was driven by strong performances in all segments except branded entertainment and outsourced custom publishing. VSS adjusted the 2010-2015 CAGR from 7.9% to 8.4%, reaching $278.4 billion to reflect expectations of stronger growth for most digital components within the sector, including e-custom publications, e-media in B-to-B media, and the entire pure-play consumer internet & mobile services segment.
Traditional Marketing, which includes consumer promotions, B-to-B promotions, public relations and word-of-mouth marketing, has been revised upward from 3.1% to 3.8% in 2012, as businesses are expected to continue to increase spending for all three segments, especially B-to-B promotions. VSS raised the 2010-2015 CAGR for Traditional Marketing from 3.6% to 4.2% to reflect anticipated acceleration in spending on Traditional Marketing during the latter part of the forecast period, reaching $86.6 billion.
Spending on Business & Professional Information & Services in 2012, which includes business & professional information (BPI) and business & professional services (BPS), will slightly exceed the original VSS Forecast published last September, climbing from 6.3% to 6.4%. VSS believes institutions will continue to increase spending on Business & Professional Information & Services to provide employees with must-have information, data and workflow tools to increase efficiency and profitability. Improving employment trends are expected to spur higher investment in BPI, particularly in the second half of 2012 and 2013, when leading companies will also increase spending on BPS products and services to meet the demands of growing workforces. Due to these key trends, the 2010-2015 CAGR was raised from 6.5% to 6.8%, with spending reaching $247.2 billion.
VSS expects 2012 growth for the Education & Training Media & Services sector to climb from 5.2% to 5.3%. The increase is being driven by increased spending on outsourced corporate training. VSS believes a slight change to state adoption cycles in the K-12 instructional media industry, combined with increasing college enrollment, will help drive the sector during the forecast period. The 2010-2015 CAGR has been revised upward from 5.2% to 5.4% to reflect these factors, reaching $293.0 billion.
Entertainment & Leisure Media, which includes subscription television, entertainment media (TV programming, home video, videogames, recorded music, box office) and consumer book publishing, is the only industry sector to be downgraded in the VSS Forecast Mid-Term Update for 2012. VSS found that while there will be gains in box office and branded digital platforms, such as online and mobile videogames, it will not be enough to help offset prolonged weak results in the printed book market. As a result, the growth rate of 5.8% forecast for the sector in 2012 was trimmed to 5.7%. The 2010-2015 CAGR was also cut from 5.6% to a 5.5%, reaching $353.9 billion, as strong growth in videogames, driven by the release of new console hardware dursp;
About the VSS Forecast and the VSS Forecast Mid-Term Update
Available on an individual and site license subscription basis, the VSS Forecast, VSS Forecast Mid Term Update, and the VSS Historical Spending Database, are the only sources to track, analyze and forecast spending, usage and trends in six Industry Sectors — Targeted Media, Traditional Marketing, Entertainment and Leisure, Traditional Consumer Advertising Media, Business & Professional Information & Services, and Education & Training Media & Services – and four Revenue Streams – Advertising, Marketing Services, Consumer End-User, and Institutional End-User Spending. With 20 segments and 100 sub-segments of the U.S. Communications Industry covered, these reports provide actionable strategic intelligence to executives and owners with stakes in the media, communications and business services industries since 1987. VSS Forecast research is the essential source of econometric data and operating drivers for understanding the factors that influence the historical and future spending patterns of the Communications Industry.
Available solely in digital format, the VSS Forecast takes a 10-year view of the U.S. media industry and includes a five-year historical record of actual spending patterns and metrics and a five-year forecast of spending. After 25 years, it has emerged as an authoritativesource ofcomprehensive spending, usage and trend data across theCommunic
ations Industry. (www.vssforecast.com).
The VSS Forecast Mid-Term Update, a companion digital subscription publication to the VSS Forecast, was first published in 2009. It provides updated projections for the most-recent and current calendar years, as well as the five-year CAGR, for the six Industry Sectors, four Revenue Streams and 20 individual segments, as well as the key economic indicators driving the U.S. economy. It is released after the first quarter of each calendar year.
About PQ Media
PQ Media (www.pqmedia.com), a leading provider of media econometrics and pioneer of emerging media research, partners with Veronis Suhler Stevenson on the VSS Forecast. PQ Media has collaborated with VSS since 2003 on the research and development of the VSS Forecast and licenses its Alternative Media Research Series data to VSS for use in the Forecast, including econometrics covering digital out-of-home media, product placement, word-of-mouth marketing and event marketing, among others. PQ Media is a research consultancy that provides actionable strategic intelligence through a variety of consulting services and research reports to leading media companies, financial institutions, management consultants, media agencies and brands. The firm’s experience, knowledge and insights have influenced strategic plans, investment parameters and tactical approaches for clients since 2003.
ing the forecast period and a faster-than-expected stabilization in the recorded music industry, will help mitigate the projected deeper declines in print consumer books.
VSS did not change the projected 2.6% growth rate for 2012 spending on Traditional Consumer Advertising Media, which includes broadcast television, newspaper publishing, consumer magazine publishing, broadcast & satellite radio, local consumer directories, and out-of-home media. While the ad market in the first half of 2012 is expected to remain sluggish, record-breaking political and Olympics advertising will drive growth for the remainder of the year. The 2010-2015 CAGR was also left untouched at 1.9%, with spending reaching $160.4 billion because although the projected decline in print advertising will be deeper than initially expected, it will be offset by increases in internet and mobile advertising offerings of branded traditional media.
Industry Segment Performance Index
Of the 20 Industry Segments as defined by VSS, 11 are projected in the VSS Forecast Mid-Term Update to outperform GDP growth in 2012. Only three segments – Consumer Book Publishing, Newspaper Publishing and Local Consumer Directories – were downgraded in the mid-year review.
About Veronis Suhler Stevenson
Veronis Suhler Stevenson is a private equity and debt capital fund management company dedicated to investing in the information, education, media, communications and business services industries in North America and Europe. VSS provides capital for buyouts, recapitalizations, growth financings and strategic acquisitions to companies and management teams with a goal to build companies both organically and through a focused add-on acquisition program. To date, VSS equity and debt funds have invested in 68 platform companies, which have in turn completed over 320 add-on acquisitions resulting in a portfolio with realized and unrealized enterprise values totaling over $14 billion. The company’s website is www.vss.com.