'Unique' study predicts traditional media will benefit from boom in internet use

Growth in the use of the internet will stimulate demand for traditional media, according to a new industry forecast released this month.

Communications is set to be the second fastest-growing industry in the US as American citizens will spend more on media than on food by 2003. The forecast figure is $663 billion.

The forecasts - issued by Veronis, Suhler & Associates Inc (VS&A Merchant Bank) - show that far from cannibalising the traditional media, web use will actually stimulate demand from traditional sources including books, recorded music, newspapers, business publishing and the television.

VS&A says its study is unique in 'charting the internet's impact on the half-trillion dollar communications industry'.

VS&A predicts that over the five years from 1998 to 2003 spending on media will rise by 7.5%. The report says that per capita use of the internet jumped from 28 hours per annum in 1997 to 74 in 1998 and is forecast to reach 192 hours by 2003.

The bank predicts the internet will stimulate expansion in the media in America in a number of ways:

* The internet will act as a spur to advertising. Online advertising is set to boom and internet companies themselves are spending money advertising in traditional media.
* The internet is acting as a direct sales channel and online book sales have more than quadrupled to $687 million in 1998 from $163 million in 1997. The bank expects online sales to reach $2.7 billion by 2003.
* The internet is generating more interest in the media as traditional media sources provide value-added services online.
* Americans are saving time when using the internet leaving them more time for leisure. The time spent on traditional media rose by nine hours per person from 1997 to 1998, reversing a three-year trend the report says.

'As we enter the new millennium, Americans are simultaneously mastering the new communications media while increasing their use of the traditional media,' said VS&A executive vice president James P. Rutherfurd.

One of the most obvious trends revealed in the study is the shift away from media that are supported by advertising. Time spent with media that are primarily supported by consumers - such as cable television, recorded music, consumer books, home video and movies and the internet - increased by 43.2%. However, time spent with media primarily supported by advertisers - including broadcast television and radio, daily newspapers and magazines - fell by 10.2%. This trend is likely to continue with a decline in time spent with advertiser-supported media by another 10%.

The bulk of this shift can be accounted for in a move away from broadcast media to cable and other subscription-based video services.

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