Communications Industry Spending to Beat GDP Growth in 2012

Thanks largely to better-than-expected spending in the digital sector, the overall U.S. communications industry is projected to grow another 5.6 percent in 2012, reaching almost $1.2 trillion and beating GDP's 4.4 percent growth, says a new report from private equity firm Veronis Suhler Stevenson.

The report, called the VSS Forecast Mid-Term Update, is a companion piece to VSS's annual Communications Industry Forecast and finalizes spending data from the just-past year and updates the first-year data from the previous annual Forecast—in this case, the 2011-2015 study. Going forward, the Mid-Term report will be released at the end of the first quarter each year.

Digital spending has lifted all boats among the six sectors VSS tracks. In 2011, communications industry spending actually grew 4.2 percent, just beating last year's forecast of 4.1 percent for the year. As mentioned, 2012 is expecting 5.6 percent growth, and by 2015 VSS is now predicting that total spending will reach $1.419 trillion at a 5.7 percent CAGR, slightly better than the 5.5 percent CAGR from last September's 2011-2015 report.

The boost digital spending has given the industry is significant if only because it's had to work pretty hard to do so, especially for sectors that are tied to more traditional revenue channels. In fact, the more aligned a segment is with digital the better its forecast.

"If you're not playing in that game to be able to take advantage of the enormous audience expansion potential of digital and mobile devices, then you've got an arm tied behind your back and you have a delivery diseconomy in terms of print product inefficiencies compared to content delivery digitally," says VSS co-founder and general partner John Suhler. (Disclosure: Access Intelligence, Folio:'s parent company, is a portfolio company of VSS.)

The Pure-Play Consumer Internet & Mobile services category, for example is expected to grow 18.1 percent from 2011 to 2012. Consumer Magazine Publishing, however, is expected to remain flat at .8 percent growth for the same period.

Exploding the consumer category out a bit more broadly to VSS's Traditional Consumer Advertising Media sector—which includes broadcast television, newspaper publishing, consumer magazine publishing, broadcast & satellite radio, local consumer directories and out-of-home media—the 2010-2015 CAGR was kept at 1.9 percent because of  a deeper than expected decline in print advertising that digital spending will help offset, but not cure.

The b-to-b side of the equation is looking much better. The Targeted Media sector, which includes direct marketing, branded entertainment, outsourced custom content, pure-play consumer Internet & mobile services and b-to-b media has been revised upward from 7.7 percent growth in 2012 to 8.1 percent. The 2010-2015 CAGR has also been upgraded from 7.9 percent to 8.4 percent, reaching $278.4 billion, thanks to digital, including e-custom publications and b-to-b e-media and the pure-play consumer Internet & mobile services segment.

By itself, b-to-b media is expected to grow 5.5 percent in the 2011-2012 period. "Over the next five years it's going to be 6 and change," adds Suhler. "And that compares to GDP of about 4.8 percent over the five years. That assumes the rate of decline lessens for print and also as print becomes a smaller portion of the total mix, and that the more positive elements of live events and digital continue to grow."

While the consumer magazine category is a fraction of GDP growth, at least it's positive. Suhler notes that consumer magazines, from 2005 to 2010, were at a negative CAGR of 2.6 percent, that has essentially bottomed out and VSS is forecasting a modest CAGR of 1.5 percent. "The reason we're thinking that's going to improve is we still think at the end of the day the content matters. All the consumer publishers are hard at it to find and experiment with mobile and digital platforms. What they have to their benefit is rich content."

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