Consumer Entertainment Spending Outlook Positive
09/17/98
Business Wire
(Copyright (c) 1998, Business Wire)
SAN FRANCISCO--(BUSINESS WIRE)--Sept. 17, 1998--
Advertising Spending Not Recession-proof But Could Get a Boost in Millennium Year, NationsBanc Montgomery Securities
Analysts Tell Investors
As the millennium approaches, consumer spending on entertainment could grow at a faster clip than overall advertising spending, as media companies find creative new ways to extract more value from their relationships with consumers, according to two media and entertainment analysts for NationsBanc Montgomery Securities.
Consumer entertainment spending should grow to more than $200 billion by 2000, an 8.1 percent compound annual growth rate from 1997 levels of approximately $150 billion, according to John Tinker and Gordon Hodge, media and entertainment analysts for NationsBanc Montgomery Securities.
Tinker and Hodge made their remarks at the 28th Annual NationsBanc Montgomery Securities Investment Conference, which is running this week in San Francisco. The conference, which is the firm's largest to date, features 245 companies with a combined market capitalization of $1.6 trillion making presentations to more than 1,900 portfolio managers. These managers represent 280 different institutions with a combined $3.5 trillion in assets under management.
In 1997, U.S. consumers spent about $600 per capita on entertainment, but Tinker forecast that the figure would rise to $641 per capita in 1998 and $732 per capita in 2000. The areas of fastest growth in consumer entertainment spending are digital cable, cable Internet access and digital video disks (DVD) - though all are growing off of very small revenue bases.
Media companies are becoming more savvy in generating revenues from their relationships with consumers, Tinker told investors. For instance, companies like Time Warner, Inc. and Walt Disney Co. are doing a better job leveraging hit movies with ancillary revenue streams, such as merchandise and video sales. Meanwhile, the major TV networks are realizing the value of owning the prime time shows that they air - in the prime time schedule, 42 percent of the shows are being produced by the networks, a dramatic increase from the past. By owning the shows directly, the networks stand to generate income from syndication if a show turns out to be a hit.
Growth in advertising spending normally tracks the growth of the Gross Domestic Product (GDP), Hodge said, but he predicted that it could rise faster than GDP over the next two years. He said that in 1999 and 2000, millennium-related media events could drive advertising higher, followed by the Olympics and a presidential election in 2000.
Among major television and media companies, Tinker and Hodge recommended that investors buy CBS Corporation, Comcast Corporation(1), Liberty Media Corporation(1), Time Warner, Inc., USA Networks, Inc.(1), Viacom, Inc., Shop At Home, Inc.(1), Clear Channel Communications, Inc.(1), Heftel Broadcasting(1) and Univision Communications(1). The analysts also recommended Outdoor Systems, Inc.(1), the largest player in outdoor advertising.
Tinker qualified the ratings, however. He told investors that if the U.S. heads into a recession, some media companies could suffer.
NationsBanc Montgomery Securities LLC (NMS), a subsidiary of NationsBank Corporation, is a full-service investment bank and brokerage firm with approximately $900 million of regulatory capital. The company provides research, trading and issuance in the equity and fixed-income markets (high yield, emerging markets, high grade and mortgage-backed markets). Other services include M&A advisory, financial buyer coverage, loan syndications, global investment banking, real estate finance, mortgage finance, money markets and the primary dealer.
Through NationsBank, NMS clients can also access products and services that include senior bank debt, bridge financing, real estate banking, treasury management, trade finance and risk management (derivatives products and foreign exchange).
NMS is a registered broker-dealer with the Securities and Exchange Commission and is a member of the National Association of Securities Dealers and the New York Stock Exchange. NMS employs more than 2,700 investment professionals.
(1) NationsBanc Montgomery Securities LLC currently maintains a
market in this security. NationsBanc Montgomery Securities LLC
was manager or co-manager of a public offering and/or has
performed investment banking or other services for this company
in the last three years.
CONTACT: NationsBanc Montgomery Securities Jennifer A. Smith, 415/913-5968 jasmith@montgomery.com
16:06 EDT SEPTEMBER 17, 1998
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