Media Economics and the Global

Marketplace

Chapter 13

“With their sights set on becoming the world’s top media empire, Murdoch and News Corp. have advanced a business strategy that aims to make its content a centerpiece in American popular culture—especially its movies, music, and TV programs.”

Structures in the Media Industry

Monopoly A single firm dominates production and distribution in a particular industry,

either nationally or locally AT&T ran a government-approved and -regulated monopoly—the

telephone business—for more than a hundred years

Oligopoly A few firms dominate an industry

Production, distribution of music controlled by four large companies: Time Warner (U.S.), Sony/BMG (Japan/Germany), Universal-Vivendi (France), and EMI (Great Britain)

Limited competition A media market with many producers and sellers but only a few

products within a particular category The hundreds of independent radio stations have few formats to

maintain commercial viability.

Media Performance Direct payment

Consumer buys media products. Indirect payment

Products supported by advertisers Of course, you pay later in each advertised

product’s cost. Economies of scale

Increase production levels to reduce overall cost per unit

Economic analyses Cutbacks in news divisions jeopardized their role

as watchdog.

The Internet Changes Media Companies

Media companies have traditionally been part of usually discrete or separate industries.

Internet has changed that. Offers a portal to view or read older media forms Requires virtually all older media companies to establish an

online presence Ease of putting up and locating information on the

Internet can be problematic. Ex. Google’s YouTube sued for providing easy access to

video content from Viacom, owner of MTV and Comedy Central

The Information Economy

Major shift to an information-based economy emphasized information distribution and retrieval as well as transnational economic cooperation.

Transnational media corporations executed business deals across international terrain.

Global companies took over high-profile brand-name industries.

Government Regulates Business

Sherman Act, 1890 Outlawed the monopoly practices and corporate trusts that

often fixed prices to force competitors out of business

Clayton Act, 1914 Prohibited manufacturers from selling only to dealers and

contractors who agreed to reject the products of business rivals

Celler-Kefauver, 1950 Further strengthened antitrust rules by limiting any

corporate mergers and joint ventures that reduced competition

The Escalation of Deregulation Until the banking crisis of fall 2008, government

regulation had often been denounced as a barrier to the more flexible flow of capital. Ronald Reagan’s administration greatly weakened

business regulation. In the broadcast industry, the Telecommunications

Act of 1996 (under President Clinton) lifted most restrictions on how many radio and TV stations one corporation could own.

2007: The U.S. Senate passed a bill that allowed telephone companies like AT&T to enter the cable market Potential reemergence of old AT&T monopoly

Media Mergers

Disney bought ABC for $19 billion in 1995. Time Warner bought Turner Broadcasting for

$7.5 billion in 1995. Time Warner merged with AOL—a $106

billion deal—in 2001. AT&T cable joined Comcast in 2001 in a $72

billion deal. AT&T would quickly leave the merger, selling its

cable holdings to Comcast for $47 billion late in 2001.

What Time Warner OwnsBooks/Magazines• DC Comics• MAD Magazine• Time Inc.– Entertainment Weekly– Essence– FORTUNE– Golf– InStyle– Money– People / People en

Español– Real Simple– Sports Illustrated– This Old House– Time• Southern ProgressCorporation– Coastal Living– Cooking Light– Health– Southern Living

Internet• AOL– Mapquest– Moviefone– Netscape– AIM– Winamp– CompuServe– Weblogs, Inc.– TMZ.com

Television/Cable• HBO– HBO– Cinemax• Turner Broadcasting System– Cartoon Network– CNN– TBS– TCM– TNT

• Time Warner Cable– Road Runner– Digital Phone– Time Warner Cable• Local Channels (9)– News 8 Austin, Austin, Tx.– News 10 Now-Syracuse,Syracuse, N.Y.– NY1 News New York, N.Y.• Warner Bros. TelevisionGroup– Warner Bros. Television– Warner Bros. Animation– The CW Network

Movies• Warner Bros. Pictures• Warner IndependentPictures• Warner Bros. HomeEntertainment Group• Warner Bros. TheatreVentures

Flexible Markets and Downsizing

“Downsizing” makes companies more productive, competitive, and flexible.

Who benefits from downsizing? Who is disadvantaged?

Labor Unions

Era of downsizing coincides with decline in workers who belong to labor unions.

With the shift to an information economy, many jobs, such as making computers, CD players, TV sets, VCRs, and DVDs, were exported to avoid the high price of U.S. unionized labor.

Economics, Hegemony, and Storytelling

Hegemony: the acceptance of the dominant values in a culture by those who are subordinate to those who hold economic and political power

Companies and politicians convinced consumers and citizens that the interests of the powerful were common sense and therefore normal or natural. Created an atmosphere and context in which

there was less chance for challenge and criticism

Global Markets

Specialization Magazine, radio, and cable industries sought specialized

markets both in the U.S. and overseas, in part to counter television’s mass appeal.

By the 1980s even television embraced niche marketing, targeting affluent eighteen- to thirty-four-year-old viewers

Young and old viewers who didn’t fall into that category sought other specialized forms of media.

Synergy The promotion and sale of different versions of a media

product across the various subsidiaries of a media conglomerate

The Disney Example

1920s: Disney elevates the film cartoon. 1950s–60s: Moves into TV and non-

cartoon movies Diversifies

1984: Dominates video sales 2006: Merges with Pixar

Apple Computer CEO Steve Jobs is now Disney’s largest shareholder.

It’s all about synergy.

Social Issues in Media Economics

The limits of antitrust laws Easily subverted since the 1980s Companies diversify among different product lines.

Never completely dominate one particular industry

Consumer control vs. consumer choice Participating in deciding what is to be offered vs. freedom

to choose among the products Consumers and even employees have limited power in

deciding what gets created and circulated.

Cultural Imperialism

American-made images American-made language American style

All saturate the world

Questions cultural imperialism raises: What small country can justify building a

competing media system if American programming is cheap?

How do people feel when they are bombarded with products they can’t afford to buy?

“The top management of the networks…has been trained in advertising, research, or show business. But by the nature of the

corporate structure, they also make the final and crucial decisions having to do

with news…. Frequently they have neither the time nor the competence to do this.”

—Edward R. Murrow

Media Economics and Democracy