Slower Growth May Be Ahead for Media Firms : But Analyst’s Report Says the Industry Will Still Lead Most Other Sectors

NEW YORK —  The communications industry will grow at an average annual rate of 8.8% over the next five years, down from a 9.8% yearly growth pace over the past five, according to a report by an investment banking firm that specializes in media buyouts.

Veronis, Suhler & Associates Inc. said the communications business will generate $251 billion in spending by 1993, up from $164 billion in 1988.

It said the projected growth will place the communications business second only to the anticipated 9.5% annual growth rate in the health and medical services industry among the major segments of the economy.

John Suhler, president of the investment firm, said the main reason for the slower growth in communications from 1988-93 compared to the 1983-88 period is an anticipated slowdown in the expansion of spending in cable television, home video and business information.

The report projected cable spending growth would be 7.7% over the next five years, down from 11.3% in the past five. Home video growth also will slow as that segment of the industry matures, falling to an 11.2% growth pace in the next five years from 52.7% a year in the past five, it said.

Spending on business information services will still be the fastest growing segment of the communications business at 10.5% a year, down from a 12.1% growth pace over the past five years.

None of the projections is adjusted for inflation.

Suhler said that advertising and promotion spending growth should accelerate in the next five years.

The broadcasting business is expected to grow at an 8.7% annual rate from 1988-93, up from 8.2% over the past five years.

Ad spending on the networks should rise at a 6.9% yearly rate over the next five years, up from 6.2% over the past five, while spending at local TV stations should edge up to 9.8% a year, up from 9.7%.

The rate of audience decline for the three major networks is projected to moderate between 1988 and 1993 because of lower growth in cable television and independent stations.

The networks’ share of the prime-time audience fell to about 68% last year, down from 81% in 1983, but Veronis Suhler expects it will dip to only 63% by 1993.

Spending on radio is expected to grow 9% a year in the next five years, up from 8.3% in the past five, the study said.

In the newspaper business, spending is expected to grow at an 8.1% rate in the next five years, including an 8.6% yearly increase in advertising spending and 6.2% annual growth in circulation.

That compares with a 7.7% growth rate overall in the past five years, including 8.6% in advertising and 4.8% in circulation.