Total communications industry spending in the US is set to increase 3.5% this year and post a compound annual growth rate (CAGR) of 6.1% in the 2009 to 2014 period to $1.4 trillion, driven by a gradual economic recovery, advances in digital technology and secular trends affecting the entire industry landscape (see chart ).
The shift of spending and consumption is reflected by growth not only in key industry sectors such as business and professional information and services; targeted media; education and training media and services; and entertainment and leisure media, which are poised to register CAGRs of 8.2%, 7.3%, 6.8% and 6.3%, respectively, from 2009 to 2014, but also remarkable growth in the pure-play consumer internet and mobile services segment, which is expected to grow at a CAGR of 14.6% over the same period, according to the VSS Forecast.
Communications industry revenues will exceed nominal gross domestic product CAGR growth of 5.8%, and this sector will retain its position as the fourth-largest industry in 2014, although slipping to ninth place in terms of growth during the forecast period due to continued weakness in traditional advertising and marketing services.
Advertising and marketing investments, historically the drivers of communications growth during recoveries, are expected to be more muted due to the shift away from traditional media outlets to more targeted media.
The long-standing mass media model of one-to-many is being challenged by the growing influence of a new model that leverages the ability to target the individual and multiple niche audiences, as well as empowers the individual and niche audiences to select among sources of content.
Unmet societal needs and digital technology are the key drivers, pushing the communications industry into a reset-and-restructure mode that will see secular shifts in all industry sectors and revenue streams from traditional to digital platforms.
Reflecting the shift to alternative media categories, the VSS Forecast found that 17 of 20 segments tracked in the report will post increases in CAGR between 2009 and 2014, with the largest CAGR growth being seen in pure-play consumer internet and mobile services, which is expected to rise at a 14.6% CAGR and reach $87.8bn in 2014.
Overall, media usage will remain relatively flat from 2010 to 2014 as consumer and business end-users continue to migrate to digital platforms that have more searchable and often shorter and more focused content compared with traditional media.
Growth will primarily occur in the business and professional information and services sector, which will post an 8.2% CAGR between 2009 and 2014, reaching $249bn. Increases will be a result of publishers/vendors and users continuing to expand their online and mobile products and services through application suites incorporating databases, software solutions and outsourced processing services to drive increased productivity.
This shift to alternative digital media will also be influenced by consumers and business end-users taking more command over what information and entertainment they want to consume through wireless devices, such as computer tablets, eBooks, and third and fourth-generation mobile phones.
Media operators will benefit from offering must-have products, particularly those that allow them to stay connected with friends and family, such as broadband internet access and mobile phones. Online social networking functionality and interactivity will continue to rise, and marketing strategies that allow brands to connect emotionally with captive audiences through favoured entertainment content will continue to receive a growing share of marketing budgets.
Thus, not surprisingly, the targeted media sector will be the second-fastest growing industry sector and experience a 7.3% CAGR increase in the 2009 to 2014 period to reach $265.6bn, according to VSS.
Growth will be spurred not only by the pure-play consumer internet and mobile services segment, but also by two of the other four segments within the sector, including branded entertainment, which is poised to increase CAGR by 9.2% to $38.2bn, and outsourced custom publishing, where advertisers are seeking targeted approaches to reaching key audiences, resulting in an 11.2% CAGR gain to reach $6.6bn in 2014.
For traditional consumer advertising media, which includes broadcast TV, newspapers, consumer magazines, broadcast and satellite radio, yellow pages directories and out-of-home media, growth in the 2009 to 2014 period is expected to be sluggish at around 2.2% CAGR, totalling $159.3bn.
The availability of new media platforms and technologies will contribute to continued changes in consumers’ media use, particularly secular declines in consumer consumption of traditional media platforms.