Looking on the bright side: ad spending will revive after 1991, according to industry forecaster

Folio: The Magazine for Magazine Management, Sept 1, 1990 by Liz Horton

NEW YORK CITY-Consumer and trade magazine publishers face a slow two years as the economy contracts, but advertiser spending on magazines will revive after 1991 as corporate restructuring is completed, according to the 1990 Communications Industry Forecast by Veronis, Suhler & Associates, investment bankers to the communications industry.

The 1992 election/ Olympics year will also pull extra ad dollars into consumer magazines, bringing total spending from advertisers and readers) up an average of 7.5 percent a year over the next five years. Business titles, heavily hit in recent years by restructuring and competition from information services, trade shows and direct mail, will do better than they have been; spending on these magazines will grow at an average of 5.7 percent a year. Consumer magazines

Spending on consumer magazines will continue to grow faster than the GNP over the next five years, but "relative growth is declining compared to the economy," says president and co-CEO John Suhler; while spending on magazines outperformed the economy by 1.2 percent between 1984 and 1989, it will do so by only 0.3 percent over the next five years.

Sluggish economic growth, already generating a plunge in ad dollars, will continue through 1991. The quadrennial spike-the phenomenon in which increased political and Olympics-related advertising pulls ad dollars from the years preceding and following the quadrennial year-will pull ad spending up 9.6 percent in 1992. The completion of restructuring in the economy will boost spending in 1993 and 1994.

Spending cutbacks in the tobacco, alcohol and computer industries brought slow years between 1984 and 1987, but 1988 ad spending in magazines jumped 8.3 percent, primarily because of the quadrennial spike. The decline expected after 1988 did not materialize as companies emerged from restructuring, national advertising revived, and unit circulation increases brought in higher ad revenues.

Circulation spending will continue to grow faster than ad spending on consumer magazines, both because of price increases and increased unit circulation. Over the past five years, prices have increased at an average annual rate of 4.7 percent, while the CPI has risen just 3.6 percent. Over the next five years, prices will rise 5.4 percent a year. Trade titles

Trade magazines "will continue to underperform economic growth," says Suhler, but they have been catching up a bit over the past two years as economic restructuring has wound down. Although the slow economy will limit increases in 1990 and 1991, trade magazines will perk up afterward, with spending on these publications growing an average 5.7 percent a year between 1989 and 1994, up from 3.9 percent annually for 1984 to 1989. Only as they close in on 1994, however, will spending on trade magazines grow at rates approaching GNP growth.

"Trade magazines typically prosper in expanding markets," says the report. Restructuring has meant unbalanced ad spending programs; fewer new technologies, companies and products generating editorial and advertising; and smaller audiences.

"More business publications are down now in pages than in the past 10 to 15 years," says James Boddorf, executive vice president with Veronis.

For many, however, ad price increases mean revenues have not been affected. Because of the close links between the health of trade magazines and the industries they cover, magazines in expanding industries-among them telecommunications, architecture, the home building market, agriculture and oil and gas-will do better than average.