TRENDS IN TRENDS IN COMMUNICATIONSCOMMUNICATIONS

An Introductory OverviewAn Introductory OverviewSources various; include Croteau and Hoynes (2006) Sources various; include Croteau and Hoynes (2006) The The Business of MediaBusiness of Media. Thousand Oaks, CA.: Pine Forge Press; . Thousand Oaks, CA.: Pine Forge Press;

and various contributions to Alexander, Owers, Carveth et al. and various contributions to Alexander, Owers, Carveth et al. (Eds) (2003) (Eds) (2003) Media EconomicsMedia Economics. New York: Routledge.. New York: Routledge.

14 Trends: What Storyline?14 Trends: What Storyline?1. Digitization1. Digitization 8. Convergence8. Convergence

2. Deregulation2. Deregulation 9. Branding9. Branding

3. Privatization3. Privatization 10. Synergy10. Synergy

4. Globalization4. Globalization 11. Mergers & Acq11. Mergers & Acq

5. Commercialization5. Commercialization 12. Concentration 12. Concentration

6. Specialization6. Specialization 13. Innovation and 13. Innovation and

CompetitivizationCompetitivization

7. Growth7. Growth 14. Connectivity 14. Connectivity

(1) Growth in Media(1) Growth in Media

Variety of consumption technologies: Proliferation Variety of consumption technologies: Proliferation of of technologies: cd's, technologies: cd's, computers, vcrs, dvds, computers, vcrs, dvds, MP3s, mobiles, 3G/4G mobiles MP3s, mobiles, 3G/4G mobiles

Growing Growing portable, on-demand consumption portable, on-demand consumption opportunitiesopportunities

Financial growth: media advertising up Financial growth: media advertising up $733m to $3.63bn to $150bn (1919-1950-$733m to $3.63bn to $150bn (1919-1950-2007), constant prices2007), constant prices(As % of GDP: 2.5% - 1.9% - 2.0%)(As % of GDP: 2.5% - 1.9% - 2.0%)

Media Growth (2)Media Growth (2)Time SpentTime Spent

Time spent with media: 7hrs 35mins a day in Time spent with media: 7hrs 35mins a day in 2009 for 3-18 years old (10hrs 45mins incl. 2009 for 3-18 years old (10hrs 45mins incl. multi-task time)multi-task time)

http://news.cnet.com/8301-1023_3-http://news.cnet.com/8301-1023_3-10297935-93.html10297935-93.html

http://www.mediainfocenter.org/television/competitive/time_reach.asp

http://www.kff.org/entmedia/upload/http://www.kff.org/entmedia/upload/8010.pdf8010.pdf

Share of Time Spent Per Share of Time Spent Per Day with Major MediaDay with Major Media

Growth (ctd): Print (Growth (ctd): Print (WAN, 2009)WAN, 2009)

1.9 billion people choose to read a newspaper 1.9 billion people choose to read a newspaper every day, or 34 percent of the world every day, or 34 percent of the world population, while 24 percent use the population, while 24 percent use the internet.internet.

Biggest newspaper market is India, with 107 Biggest newspaper market is India, with 107 million daily sales. India, China and Japan million daily sales. India, China and Japan account for more than 60 percent of the account for more than 60 percent of the world’s newspaper sales, with the USA world’s newspaper sales, with the USA taking 14 percent. taking 14 percent.

In sales per 1,000 adult population, Japan In sales per 1,000 adult population, Japan leads the world with 612, Norway with 576, leads the world with 612, Norway with 576, Finland with 482. 91 percent of Japanese Finland with 482. 91 percent of Japanese continue to read a newspaper dailycontinue to read a newspaper daily

Growth (ctd): TVGrowth (ctd): TV

9% of 43m US HH had TV, 1950, rising 9% of 43m US HH had TV, 1950, rising to 98.9% of 114.5m HH in 2009. to 98.9% of 114.5m HH in 2009.

Globally, 1964-2004 TV HH increase six-Globally, 1964-2004 TV HH increase six-fold to 1.2 billion (world fold to 1.2 billion (world pop pop : 6 billion): 6 billion)

In 2006, 59% HH had cable; 25% had In 2006, 59% HH had cable; 25% had satellitesatellite

Internet is accessed by two billion Internet is accessed by two billion people worldwide people worldwide

Growth (ctd) Internet:Growth (ctd) Internet:

http://www.internetworldstats.com/stats.htmhttp://www.internetworldstats.com/stats.htm

• Global: 361m Internet users 2000, rising to Global: 361m Internet users 2000, rising to 1.7b users* in 2009, or 25.6% of 6.77bn total 1.7b users* in 2009, or 25.6% of 6.77bn total pop pop

• (User = (User = anyone currently in capacity to use anyone currently in capacity to use the Internet, on basis of access and the Internet, on basis of access and knowledge)knowledge)

• NorthAm: 108m users 2000, rising to 253m in NorthAm: 108m users 2000, rising to 253m in 2009 or 74% of 341 total pop 2009 or 74% of 341 total pop

• Asia: 114m users in 2000, rising to 738m in Asia: 114m users in 2000, rising to 738m in 2009 or 19% of total pop of 3.8bn2009 or 19% of total pop of 3.8bn

2. Mergers and Acquisitions 2. Mergers and Acquisitions (M&A)(M&A)

Bagdikian (2000): Depending on Bagdikian (2000): Depending on measures, major U.S. media are measures, major U.S. media are owned by between 6 and 23 media owned by between 6 and 23 media conglomeratesconglomerates

For biggest 6 traditional media For biggest 6 traditional media companies, 2009companies, 2009

http://www.freepress.net/ownership/chart/main

How does M&A take place?How does M&A take place?

Occurs in 3 major ways: Occurs in 3 major ways: verticallyvertically (company buys company that supplied (company buys company that supplied it, or that it supplies: e.g. TV network buys it, or that it supplies: e.g. TV network buys Hollywood studio)Hollywood studio)horizontallyhorizontally (company acquires second (company acquires second company in same business; e.g. theater chain company in same business; e.g. theater chain buys another theater chain)buys another theater chain)by conglomerationby conglomeration (a company building a (a company building a portfolio of different portfolio of different kinds of businesses): may kinds of businesses): may be be intra-mediaintra-media (media only) or (media only) or extra-mediaextra-media (media plus non-media)(media plus non-media)

What Motivates M&A?What Motivates M&A?

Economic gainEconomic gain Market control and predictabilityMarket control and predictability SynergySynergy Cash flowCash flow Economies of scaleEconomies of scale Cross-subsidization, cross-promotion,Cross-subsidization, cross-promotion, Global market activityGlobal market activity Convergence, Convergence, Create barriers to new competitionCreate barriers to new competition Tax benefitsTax benefits Greed and vanity.Greed and vanity.

What factors are What factors are favorable/unfavorable to M&A?favorable/unfavorable to M&A?

FavorableFavorable Low interest ratesLow interest rates InflationInflation Company valuation, Company valuation, Future expectations of growthFuture expectations of growth Factors affecting rates of return, and availability of Factors affecting rates of return, and availability of

finance.finance.

UnfavorableUnfavorable Convergence slow to happenConvergence slow to happen Huge debt, as result of overpaymentHuge debt, as result of overpayment Organizational conflictsOrganizational conflicts Falling security prices, falling valuationsFalling security prices, falling valuations

(3) Regulation / (3) Regulation / DeregulationDeregulation

Regulation mainly affects “scarce resource” Regulation mainly affects “scarce resource” media (broadcast frequencies; public rights of media (broadcast frequencies; public rights of way in case of cable) or “natural monopoly” way in case of cable) or “natural monopoly” markets (telephony, cable, some newspapers).markets (telephony, cable, some newspapers).

1980s-1990s, incl. 1996 Telecommunications Act, 1980s-1990s, incl. 1996 Telecommunications Act, a period of “deregulation” or of “re-regulation” a period of “deregulation” or of “re-regulation” away from criteria of public interest to criteria of away from criteria of public interest to criteria of competition. competition.

Deregulation stimulated by technological advance Deregulation stimulated by technological advance incl. digitization (increase in broadband), desire incl. digitization (increase in broadband), desire for M&A, neoliberal philosophiesfor M&A, neoliberal philosophies

(4) Convergence(4) Convergence

Eradication of technological Eradication of technological differences among distribution differences among distribution networks networks

Multiple applications over the same Multiple applications over the same network to different platformsnetwork to different platforms

Content flows through increased Content flows through increased number of distribution networksnumber of distribution networks

Text+voice+video+still+data Text+voice+video+still+data packaged/distributed simultaneouslypackaged/distributed simultaneously

(5) Globalization(5) Globalization

International markets prime source of revenue International markets prime source of revenue growth following saturation of domestic growth following saturation of domestic marketsmarkets

Economies of scale, but pressure to produce Economies of scale, but pressure to produce separate/customized content for different separate/customized content for different marketsmarkets

Enhanced by policies of deregulation and Enhanced by policies of deregulation and liberalization in many countriesliberalization in many countries

Motivated by desire for more revenue, Motivated by desire for more revenue, leveraging of content, cross-subsidization etc.leveraging of content, cross-subsidization etc.

(6) Concentration of Media (6) Concentration of Media MarketsMarkets

Local (e.g. largest four radio owners gained 93% of Local (e.g. largest four radio owners gained 93% of revenues in top 283 markets; one cable provider revenues in top 283 markets; one cable provider in most markets, one dominant fixed-wire local in most markets, one dominant fixed-wire local telephony provider in most markets)telephony provider in most markets)

National (e.g. four major TV networks; two major National (e.g. four major TV networks; two major satellite providers; six largest MSOs provide satellite providers; six largest MSOs provide service to 60% of cable subs; 20 newspaper service to 60% of cable subs; 20 newspaper chains account for 70% of daily circulation; 10 chains account for 70% of daily circulation; 10 largest film distributors owned by 6 largest film distributors owned by 6 conglomerates account for 90% of revenues)conglomerates account for 90% of revenues)

Special Interest (e.g. two major players, Univision Special Interest (e.g. two major players, Univision and Telemundo)and Telemundo)

Corps controlling over 80%Corps controlling over 80%

How is concentration How is concentration measured?measured?

Evaluation of significance of concentration Evaluation of significance of concentration complicated by:complicated by:

What constitutes a “market”What constitutes a “market”

Different assessments as to when market Different assessments as to when market is “dominated” by one or fewis “dominated” by one or few

New technologies may create entirely new New technologies may create entirely new markets; even if concentrated, more markets; even if concentrated, more customer opportunities have been customer opportunities have been createdcreated

(7) Digitization(7) Digitization

All forms of communication progressively more All forms of communication progressively more available for translation into computer language, available for translation into computer language, and delivery over digital systems. This and delivery over digital systems. This enhances convergence, and conglomeration. enhances convergence, and conglomeration.

Digitization creates significant problems of Digitization creates significant problems of transition and coordination between content, transition and coordination between content, distribution and receiver technologiesdistribution and receiver technologies

Long-term consequence: implosion of traditional Long-term consequence: implosion of traditional business models; creation of entirely new onesbusiness models; creation of entirely new ones

Press Business Model Press Business Model ImplodesImplodes

Music Bus Model ImplodesMusic Bus Model Implodes

Decline of Network TVDecline of Network TV

Google Ad RevolutionGoogle Ad Revolution

3 billion searches a day3 billion searches a day

70% of online searches worldwide70% of online searches worldwide

90m unique YouTube visitors, March 2009 90m unique YouTube visitors, March 2009 (66% of all web video traffic)(66% of all web video traffic)

Over $20bn ad revs 2009 (40% of all Over $20bn ad revs 2009 (40% of all advertising online). Matched combined ad advertising online). Matched combined ad revenues of 5 largest TV networksrevenues of 5 largest TV networks

Google News: aggregates 25,000 news sitesGoogle News: aggregates 25,000 news sites

(8) Privatization(8) Privatization

Process of removing media from Process of removing media from government ownership / control and placing government ownership / control and placing (selling) them into private hands; OR of (selling) them into private hands; OR of requiring government owned media to requiring government owned media to become semi-commercial.become semi-commercial.

In U.S. privatization has affected In U.S. privatization has affected broadcasting structure, attitudes to PBS broadcasting structure, attitudes to PBS funding, satellite systems, Internet funding, satellite systems, Internet development. development.

Privatization enhances globalization Privatization enhances globalization

(9) Commercialization: (9) Commercialization: InfotainmentInfotainment

The process whereby increasingly, over time, The process whereby increasingly, over time, more and more aspects of media activity, more and more aspects of media activity, including news and information, are including news and information, are determined by “bottom-line” mentality on determined by “bottom-line” mentality on behalf of owners and shareholders. behalf of owners and shareholders. Examples include “dumbing down” of Examples include “dumbing down” of television news; product placement in television news; product placement in Hollywood movies; intensification of sex and Hollywood movies; intensification of sex and violence; reduction in political coverage on violence; reduction in political coverage on television news; increase in number of television news; increase in number of advertisements per hour of entertainment. advertisements per hour of entertainment.

(10) Branding(10) Branding

Strategies to increase extent to Strategies to increase extent to which corporate identities acquire which corporate identities acquire household or consumer recognition. household or consumer recognition.

Branding aids marketing, stimulates Branding aids marketing, stimulates M&A activity to extend brand name M&A activity to extend brand name over wider range of products or over wider range of products or services. services.

(11) Synergy(11) Synergy

Combining resources, talents, archives Combining resources, talents, archives etc., in ways that create a “whole that etc., in ways that create a “whole that is richer than the sum of individual is richer than the sum of individual parts”.parts”.

Quest for synergy drives much M&A Quest for synergy drives much M&A activity and accounts for many activity and accounts for many strategic strategic alliancesalliances

Examples:Examples: iPhone use of AT&T as carrieriPhone use of AT&T as carrier

(12) Specialization(12) Specialization

““Narrowcasting,” “customization,” Narrowcasting,” “customization,” “localization.” “localization.”

Targeting small, specialized audiences.Targeting small, specialized audiences. Often based on advertising economics.Often based on advertising economics. Specialist media typically owned by Specialist media typically owned by

larger conglomerates.larger conglomerates. Opportunities facilitated by new Opportunities facilitated by new

technologies (cable channels, websites) technologies (cable channels, websites)

Ad Advantages of Ad Advantages of SpecailizationSpecailization

If advertiser can reach 100 people for $100 If advertiser can reach 100 people for $100 and every one of those 100 people buys his and every one of those 100 people buys his $10 product, that is better than spending $10 product, that is better than spending $100 to reach 10,000 people of whom only $100 to reach 10,000 people of whom only 50 end up buying the product. In the first 50 end up buying the product. In the first case he earns $900; in the second case he case he earns $900; in the second case he earns $400. earns $400.

Examples: a cigar manufacturer who Examples: a cigar manufacturer who advertises in cigar magazine rather than LA advertises in cigar magazine rather than LA Times.Times.

(13) “Competitivazation:”(13) “Competitivazation:”

Process typically triggered by (a) new Process typically triggered by (a) new regulationsregulations that reduce restrictions on that reduce restrictions on ownership or (b) new ownership or (b) new technologiestechnologies that that create entirely new markets (e.g. cell create entirely new markets (e.g. cell phones).phones).

These attract new entrants into given These attract new entrants into given markets, creating (the appearance of) great markets, creating (the appearance of) great competition.competition.

But, almost immediately, competition is But, almost immediately, competition is followed by M&A activity until one or a small followed by M&A activity until one or a small number of companies dominate the marketnumber of companies dominate the market

(14) (14) Connectivity/CompatibilityConnectivity/Compatibility

Growing pressure on media producers Growing pressure on media producers to determine to determine proprietaryproprietary or or universalityuniversality strategies, relating to strategies, relating to connectivity between:connectivity between:

(1) distribution and reception (1) distribution and reception technologiestechnologies(2) different reception technologies(2) different reception technologies(3) software formats, content, and (3) software formats, content, and reception technologiesreception technologies