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Report: Traditional Media Thriving Despite Internet

Is the Internet in the process of cannibalizing traditional media?

No, according to the 13th annual Communications Industry Forecast just released by media industry merchant bank Veronis, Suhler & Associates. The report concludes that by 2003, Americans will spend just under 10 hours per day consuming various forms of media -- almost a half an hour more per day than in 1998.

And the Internet, while accounting for just 5.4 percent of the total, is projected to stimulate media use and spending in a wide range of categories, from books and recorded music to television and business publishing.

Over the five-year forecast period 1998-2003, Veronis, Suhler projects overall spending on media to rise at a compound annual growth rate (CAGR) of 7.5 percent. Consumer media spending will grow at the fastest rate, 8.2 percent, from $118.2 billion in 1998 to $174.9 billion in 2003.

Advertiser spending will rise at the rate of 7.6 percent to $215.6 billion in 2003, the report says. Spending on specialty media (consumer and B-to-B promotion, outdoor advertising, direct mail and sponsorships) grows 7.2 annually to $149.3 billion.

Total U.S. spending on media will reach $663.3 billion by 2003, up from $461.3 billion in 1998. The 7.5% CAGR will make communications the second fastest-growing industry (behind telecommunications) among the U.S. top 12.

By 2003, Americans will spend more on media than on food, as communications moves up one notch past food to become the sixth largest industry in the U.S., says the report.

The Internet has become a significant advertising medium in its own right, accounting for $1.9 billion in 1998, up 111.9 percent from 1998, and forecast to reach $8.2 billion by 2003, says the report.

Moreover, Internet companies are themselves becoming important advertisers in traditional media, helping buoy the overall advertising market.

Per capita use of the Internet jumped from 28 hours per annum in 1997 to 74 in 1998 and is forecast to reach 192 hours by 2003.

While this total is small compared to the 1,610 hours per year Americans will spend watching television or the 992 hours to be spent listening to radio, the Internet will stimulate overall media consumption in multiple, mutually- reinforcing ways, says the report.

Interestingly, the 74 hours spent online by the average American saved a significant amount of time previously spent shopping, talking on the telephone, and searching for information, leaving more time available for leisure activities including traditional media usage.

The time spent on traditional media rose by nine hours per person from 1997 to 1998, reversing a three-year trend.

Veronis, Suhler forecasts that the time saved via Internet usage will grow rapidly over the next five years, freeing up additional hours to be spent on media consumption.

By 2003, the average person will spend an additional 43 hours annually using traditional media.

"As we enter the new millennium, Americans are simultaneously mastering the new communications media while increasing their use of the traditional media," said James P. Rutherfurd, executive vice president at Veronis, Suhler. "As communications media evolve, so has our ability to be engaged on many levels at once."

A full copy of the Communications Industry Forecast can be purchased from Veronis, Suhler & Associates for $1,495.