Optimism for Entertainment and Media

July 29, 2002

As if the economic down cycle and advertising slump weren't enough to damage the entertainment and media industry in the United States, John Rigas, the former chairman of cable giant Adelphia Communications, was arrested on charges of conspiring to commit securities fraud last week, sending chills through the industry. The outlook for the entertainment and media industry, however, remains stable, with a projected growth of 4.8% for 2003. Such optimism arises from expected increases in consumer/end-user spending, which is estimated to grow at a steady, annually compounded rate of 5.9%. Talk of big media deals this year is also causing much activity and buzz within the industry.

Although the advertising recession remains an impediment to growth in entertainment and media, advertising is expected to strengthen as the economy improves. Said Dennis FitzSimons of the Tribune Co., in his address to the PricewaterhouseCoopers executive forum "The Future of Content and Convergence" in Chicago, "All of us know the advertiser supported media business hasn't been that great over the past 18 months. But it is getting better I'm pleased to report. Those of us in the established local media need to keep this slowdown in perspective, because like any other business we're not immune to the economic cycle." Growth patterns will differ across sectors in entertainment and media. According to media investor Mario Gabelli of Gabelli Asset Management, in his interview with the Hollywood Reporter, "Some sectors will lag and some will be ahead of the curve. Those ahead of the curve will be the traditional ones like radio, and publishing will be behind." With an improvement in the Federal Communications Commission regulatory environment and the continued growths of innovative technology like digital distribution and broadband penetration, the entertainment and media industry has a promising future ahead of it.

by Ketaki Sood
Larta Research Economist

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