Rise in Ad Sales Forecast; Networks Seen Benefiting

Despite global uncertainties, the major U.S. broadcasters probably will be the biggest beneficiaries of a steady rise in worldwide ad spending over the next five years, a study to be released this week shows.

The annual five-year entertainment and media forecast by accounting giant PricewaterhouseCoopers concludes that advertisers faced with continued economic and political risk will opt for the widest possible audience. If that happens, it would favor media giants that own networks, such as CBS parent Viacom Inc. or Fox parent News Corp.

“There’s a huge shift toward media with a larger reach,” said Stefanie Kane, a partner in the firm’s media practices group and an editor of the report.

Although some of that broadcast ad spending will come at the expense of cable networks, the study predicts that additional original programming will help attract more ads to cable. In addition, the forecast says, advertising on Spanish-speaking networks will continue to soar.

Overall, PricewaterhouseCoopers predicts that U.S. advertising will rise to $189.2 billion by 2007, a 4.9% compound growth rate from $149 billion in 2002. Broadcast and cable is expected to be $37.4 billion, a 5.7% compound rise from $28.3 billion last year. Spanish-language advertising is expected to grow to $1.5 billion by 2007, a 50% increase, the study says.

Advertising also is expected to get a boost from Olympics and election ads. PricewaterhouseCoopers expects TV and radio advertising to do better than print.

The company expects global advertising to grow at a 4.1% compound rate, to $375 billion from $308 billion, with the U.S. driving growth.

The annual study measures prospects for such industries as film, TV, music, radio, the Internet, video games, publishing and theme parks.

The current review predicts that the entertainment and media business will continue to rebound from the sharp downturn in 2001, although growth will be tempered by near-term softness in the world economy, instability in some regions of the world and a greater piece of the economy being diverted toward defense and security.

By 2007, entertainment and media worldwide will be a $1.4-trillion business, up from $1.1 trillion last year, the study says. About $610.8 billion of the 2007 figure is expected to be in the U.S. Among the strongest growth areas will be in DVD and video game sales, with the film box office proving resilient.

One notable exception will be music, which will continue to be hurt by piracy. But by 2006, the report predicts, licensing of music digitally will be sparking a turnaround there.

The forecast also predicts a rebound in Internet advertising driven by the proliferation of broadband use. The report says that more than 153 million homes worldwide will have broadband by 2007, with broadband growing in the U.S. by 22.3%, to 38.8 million homes.

That development will allow advertisers to create more appealing Internet ads, attracting more traditional retailers to the medium.

The study also expects that increased government spending on defense and security will be a mixed bag for entertainment and media: It will hurt by taking up a larger chunk of the economy, but it probably will trigger inflationary pressure that would allow companies to more easily pass along costs.