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Eli Noam Professor of Finance and Economics Garrett Professor of Public Policy and Business Responsibility Director, Columbia Institute for Tele-Information Columbia Business School http://cmpf.eui.eu/events/policy-conference.aspx http://www.youtube.com/watch?v=4qOZfV3lI-A&feature=share&list=PLI1SnAY9BlwUad15TCj7VKoG4_hbLG40c
Citation preview
11/27/2012
1
Media Concentration and
Ownership in the Digital Age
Eli Noam
Professor of Finance and
Economics
Garrett Professor of Public Policy
and Business Responsibility
Director, Columbia Institute for
Tele-Information
Columbia Business School
CMPF Policy Conference - EU Competencies
in Respect of Media Pluralism and Media
FreedomFlorence
25 October 2012 1
Outline• I will do two things here:
• 1st, an Empirical analysis of present media structure. And because this is a European event, it will focus on Europe.
• 2nd, I will analyze the trends and what they portend for the future.– I am mindful, however, that in Italy, after last
week, I might go to jail for being wrong about the future.
– But if I go to jail, at least I will be in good company, with most of the world’s macro economists
2
• So let me start with the current structure of media industries.
• This is obviously not just an economic question.
• It is very public issue
3
• But how much of a problem is it, now and soon?
• Here, there are two perspectives.
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1. Media Pessimists
• Dean of the UC Berkeley School of Journalism, Pultizer Prize winning journalist.
• Bagdikian: “5firms…own most of the newspapers, magazines, book publishers, motion picture studios, and radio and television stations in the US.” 6
Ben Bagdikian
7
“3”• Larry Lessig(1998): “within a few years, we will live in a world where just three companies control more than 85 percent of the media.”
2. Media Optimists
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Adam Thierer (Former Pres., Progress and Freedom Foundation)“To the extent that There was ever a ‘Golden Age’ of media ..., we are living in it today…This is not a matter of
a silver lining around a dark cloud. There is no cloud”
9
• So who is right? Both media pessimists and media optimists hold strong belief but marshallfew numbers.
• Now I would never argue that a question such as media ownership and diversity should be governed by empiricism alone.
• But policy need to have some relation to facts and trends.
10
• We—that’s about 70 researchers around the world, cover 30 countries, 13 media industries, and 10-25 years. Thousands of companies.
• What we at Columbia added to the national research teams was the common methodology, so that we could compare.
• It’s the national teams that did the data work.
11
• Our work covers countries that account for
• 80% of world by population x, and 80% by GDP x
• Project supported by the Open Society Institute.
• Guiseppe Richeri here is co-author of the Italy chapter.
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80% of the World by Population
13
80% of the World by GDP
14
Countries of EU Investigated• Belgium
• Finland
• France
• Germany
• Ireland
• Italy
• Netherlands
• Poland
• Portugal
• Spain
• Sweden
• UK
15
Non-EU Countries in Europe Investigated
• Russia
• Turkey
• Switzerland
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13 Media Industries Investigated• 1. Content Media
– 1.1 Print Media• Newspapers
• Magazines
• Books
--1.2 Audiovisual Media• Radio
• Broadcast TV
• Video Channels
• Film
• 2. Platform Media• Wireline Telecom• Wireless Telecom• Cable TV and Satellite
Multichannel Platforms
• 3. Internet Media• ISPs• Search Engines (also in
Content)• Online News Media (also
in Content)
17
• And for these industries, the country teams identified and calculated market shares over 10 and often 20 years, company by company.
• This was quite an unprecedented effort.
• And its value was partly that it was done consistently, across countries, across industries, and across time.
18
19
• Herfindahl-Hirschman Index (HHI)
Antitrust enforcement guidelines classify marketsHHI < 1,000 Unconcentrated Market1,000 < HHI, Moderately Concentrated Market1,800 < HHI, Highly Concentrated Market
Concentration index #1:
∑=
=f
iiSHHI
1
2
So what do we find?• A lot.
• I will focus on Europe.
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• What we find is that media concentration in Europe is high, and that it is higher than population size or income or other variables would predict.
• Let’s first look at the overall average of 8 content media per country, weighted by industry size, and then averaged by geographic region
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• Within the EU, highly concentrated countries are, overall, Portugal, Germany, Spain, and France.
Cross-Industry Measures
26
Cross-Industry Measures• The figures above show averages across
industries. But concern with media power often centers on conglomerates that have a market presence in several media industries. Among the various ways to measure and summarize this is a “National Media Power Index.” It is defined as the sum of a country’s major media firms’ “Company Media Power Index.” And that index is the sum of a firm’s market shares in each of the 13 media industries, squared, and weighted by the industry size. 27
• A “Company Power Index” = Sum of company's HHI scores in 13 media industries. It is an indicator for the cross ownership of media ownership. A company with high market shares in several important industries will have a high company power index. A country with several such companies will have a high national media power index.
• “National Media Power Index” = Sum of the “Company Power Index” of the major media companies in a country
28
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Example,
Firm A’s Media Power Index = 202(200/350) + 102(50/350) = 242.85Firm B’s Media Power Index = 52(100/350) = 7.15 The National Media Power Index = 242.85+7.15 = 250
29
Industry revenue
Firm A’s market share
Firm B’s market share
TV 200 20%
Books 100 5%
Film 50 10%
Total Revenue350
• Now we can also calculate the power index for individual companies, across the world.
• We do this by taking their national power index, and aggregate it across countries, accounting for the different size of countries by a weighting.
• So I will aks you then, who is in that antitrust sense the most powerful company in the world???
30
National Media Power Index
31
All Media - National Media Power Index
0
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3000
4000
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7000
8000
2004/5
2008/9
Chart 7
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33
Platform Media - National Media Power Index
0
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4000
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6000
7000
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9000
2004/5
2008/9
Chart 8
34
Content Media - National Media Power Index
0
500
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1500
2000
2500
3000
3500
4000
4500
2004/5
2008/9
Chart 9
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10
• They show a significantly higher Power index in EU Europe than in North America. It is much higher (but decreasing) in Platform Media than in Content Media, where it is increasing. Of European countries, it is especially high in Portugal, Ireland, UK, and Spain, and low in Finland and Sweden.
News Media Concentration
0
1000
2000
3000
4000
5000
6000
2004/05
2008/09
Chart 17
News Media Concentration (Weighted by Usage
as News Source)
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2004/05
2008/09
Chart 19
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News Media
• The issue of media concentration is important in all media industries, but no-where more than for news media, as opposed to entertainment and content-free conduits. We therefore also aggregate news media for each country. These are newspapers, magazines, online news, radio, broadcast TV, and video channels. [Liwei, need to do this for 30 countries, and regional].
• [Findings]
41
• We take this one step further. Because these media contain also non-news elements, especially for TV and video channels, and because the public receives its news information in different proportions from media we weight the news industries according to the share in which they contribute to the news consumption. What are these shares? [Liwei: we need to find how, for the US, people use various news media. About ten years ago, the FCC did that, but online news was not used, and possibly not magazines and video channels.]
42
Importance of Media as a News Source
Sources: 1) “FCC Telephone Study (conducted by Nielsen Media Research), ” Washington, D.C., Federal Communications Commission, p. 87-94.2) Veronis Suhler Stevenson, Communications Industry Forecast & Report, annual, New York, NY
These weights are constructed based on data from a 2007 FCC Telephone Study: We averaged the four categories of news: Breaking news, in-depth information on specific news, national news, and local news.Since consumption varies greatly in different countries between Broadcast TV and Cable and Satellite Channels, we used the respective countries’ revenue composition to allocate the combined 56.1% for Broadcast TV and Cable and Satellite Channels.For Magazines, we used Veronis Suhler Stevenson data on Media Usage (Time Spent). We apply the ratio between newspapers and magazines, 15.8% for Newspapers (from the FCC study), to obtain and estimate 11.6% for Magazines that half of the time spent on magazines is for news contents.
Cable and Satellite Channels
Broadcast TV
Newspapers 15.8%
Online 15.8%
Radio 6.6%
Magazines 5.8%
56.1%
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News Media - National Media Power Index (Weighted
by Usage as News Source)
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2004/5
2008/9
Chart 20
• So we now have seen how media in Europe is highly concentrated,
• Beyond explanations of population, size, or income
47
Media Voices
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Media Voices
• Another way to look at media diversity is to count the ‘voices’. We define voices as a company that has more than 1% of its media market. And where the same company cross-owns media outlets in several media industries, we count it only as one ‘net voice’, not as several.
49
Media Voices – All Media
0
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20
30
40
50
60
70
80
90
2004/05
2008/09
Chart 13
• Here, we find a significantly higher number (40% higher) of such “Net Voices” in North America than in Europe. (Chart xx). A different picture emerges, however, when we take country size into account and look at “net voices” per capita.
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• Now, the European average is over twice as high as the North American and just about any region. The reason is that…
Voices Per Capita
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2004/5
2008/9
Chart 15
Countries with a high count of voices per capita tend to be relatively small countries that maintain nevertheless a fairly rich assortment of media voices. Europe has many such countries, such as Finland, Sweden, Ireland, and Portugal. It’s the combination of contentious politics, diverse population, entrepreneurship, and small population.
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Internet Media
57
Do the new internet media make a difference to media concentration, in the way its enthusiasts believe? Not really. The core internet media are actually more concentrated than the old legacy media. The problem are fundamental economics of scale and network effects. There are dominant players in their respective niches—Amazon.com, Ebay, Microsoft, Google, Facebook, Twitter, YouTube, Apple i-store, and on. They all have high market shares, either in their national markets or globally. [Liwei: get non-US and also EU examples]
58
These are the industries that were believed to be wide open and competitive, which would open things up for the rest. But they exhibit strong concentration trends. The underlying economic factors, are easy to describe: High fixed cost and low marginal cost on the supply side, and high network effects on the demand side. This creates very high advantages to scale.
59
Finding: The Internet Media Are Rapidly
Rising in Concentration
60
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• We measured this concentration for ISPs, Search Engines, and Online News.
61
For ISPs, concentration is very high. In most countries, over 3000.In the US, it is lower nationally. But locally, it is largely a duopoly of the telecom company, and the cable company. Satellite broadband is slow and expensive, and mobile phone is also relatively slow and expensive, once it is used for significant data downloads. [EN add after LiweiInternet regional]
64
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For Search Engines, concentration is enormously high in most countries, usually due to Google’s market share.
65
• For Online News Media, regional data show Europe.
• Chart X below shows that the concentration of online news is often lower than of print newspapers. But in many cases it is actually higher. This is the case in the US, Germany, Japan, Spain, China, and Brazil.
66
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69
Finding : There is a Convergence of Concentration
Across countries
• Low concentration countries show rising concentration
• High concentration countries show declining concentration
70
0
2000
4000
6000
8000
10000
12000
1990 2000 2009
HHI
Year
Average HHI (Wireless Telecommunications)
America
Asia
Europe
Middle East/Africa
71
0
2000
4000
6000
8000
10000
12000
1990 2000 2009
HHI
Year
Average HHI (Wireline Communications)
Non-OECD
OECD
72
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0
500
1000
1500
2000
2500
1990 2000 2009
HHI
Year
Average HHI (Daily Newspapers)
America
Asia
Europe
Middle East/Africa
73
0
2000
4000
6000
8000
10000
12000
1990 2000 2009
HHI
Year
Average HHI (TV Broadcasting)
America
Asia
Europe
Middle East/Africa
74
0
2000
4000
6000
8000
10000
12000
1990 2000 2009
HHI
Year
Average HHI (Internet Service Providers)
America
Asia
Europe
Middle East/Africa
75
0
2000
4000
6000
8000
10000
12000
1990 2000 2009
HHI
Year
Average HHI (Internet Service Providers)
Non-OECD
OECD
76
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0
1000
2000
3000
4000
5000
6000
7000
8000
1990 2000 2009
HHI
Year
Average HHI (Search Engines)
America
Asia
Europe
Middle East/Africa
77
• So what does this mean?• It means that basically we are, for a good
number of important media industries, observing common trends in different parts of the world. And emerging common industry structures.
• Apparently, relative regardless of national economic particularities, of national regulatory particularities, of historic particularities
78
79
Finding : Globally, content media are much lower in concentration than distribution media, and the gap is declining
80
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• Concentration in distribution high and rising
• HHI over 4,500. That’s a structure with the top firm of over 60%!
81 82
Concentration Trends (World)
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
~2000 ~2004 ~2008
Content Media Platform Media
Note: ~2000 number do not reflect data for all 30 countries,
since data is not available for some countries for early years
Chart 41
83
Concentration Trends (EU)
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
~2000 ~2004 ~2008
Content Media Platform Media
Note: ~2000 number do not reflect data for all 30 countries,
since data is not available for some countries for early years
Chart 42
• The trends for Content Media is somewhat rising concentration, while it is declining for Platform Media.
• However, EU Platform Media are much more highly concentrated (~3,500) than Content Media (~1,900).
11/27/2012
22
Finding : Concentration Trends Come in Cycles,
on an inclining axis
85
• This work is still in progress. • In the US, the share of top 5 media firms in
overall Mass Media more than doubled 1988- 2004 from 12.5% to 28.4%). But then it fell. To 21.5%. There have been major de-mergers and spin-offs.
• But Recently, the US government approved the acquisition by Comcast of NBC. And now, based on that, the share of the top 5 companies is up again, to 23.2%
86
87
CONCENTRATION TRENDS, WITH CONTINUOUSLY RISING SCALE ECONOMIES AND DECLINING ENTRY
BARRIERS
Time
A
B
C
DC’
E
Schematic
ConcentrationTrend
Con
cent
rati
on
88
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23
Concentration Trend: Impact of Scale Economies and Entry Barriers
Scale Economies
Rising Declining
Entry Barriers
Rising Higher ConcentrationInverted-U Concentration
Trend
Decli- ningU-shaped Concentration
TrendLower Concentration
89
• This would describe a cyclical concentration trend of up-and-down. However, this is not quite the end of the story. Even within the cycles there can be a trend. This trend is based on the economies of scale. When these economies grow, they lead to relatively larger firms within an industry, that is, to a higher concentration level. This can be seen in the next figure. It shows the oscillations in concentration that one could expect in an environment in which entry barriers steadily decline while economies of scale steadily rise.
90
Finding: The Mass Media Sector’s Concentration
Trend is converging with that of ICT.
91
CONVERGENCE OF CONCENTRATION OF OVERALL INFORMATION SECTOR AND
MASS MEDIA SECTOR
Time
Con
cent
rati
on Information Sector
Mass Media Sector
A
B
C
D
92
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24
• This convergence tendency suggests that the mass media sector, from a relatively lower level of concentration, will move to a higher level that is more similar to that of the overall information sector.
93
• The fundamental problem is that the underlying economics of the media sector are those of high fixed costs, low marginal costs,
94
• Media equilibrium structure likely to assume oligopoly structure
• Fundamental economic reasons:–High fixed costs–Low marginal cost–Competition–Leads to over-investment, price
deflation, failure, consolidation to achieve price stability
95
And these fundamental economics are quite powerful, and show themselves globally, so they are not just due to some particularly greedy empire builder, or a pliant and complacent regulator. If one does not like that equilibrium then the conclusion has to be that of some form of regulation.
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97
• And this is just the beginning.
• Because the entire nature of media will be shifting.
98
• The TV of the future is not just more of the same.
• Not just a widening of old TV to today’s multi-channel TV.
99 http://media-2.web.britannica.com/eb-media/31/71331-004-CDC77097.jpg
1st Generation Television: Broadcasting
100
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3rd Generation of TV: Widening-- More TV Options
10
Are You Ready?
101
• But the trends are pushing on, for a century or more, exponential trends, secular trends– In tranmission speeds achieved by engineers x
– In the cost per unit of infromation distribution x
– In the cost per unit of content x
102
Speed (Kbps) Trends
103
P(D): Price of Distribution per Mbit/capita (Individualized Channels)
104
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Price of Media Content per Gbit/cap of information P(B)
105105
• Deepening:–Greater “Richness” of content
106
• Richness means a greater sensory impact of media
• More bits/second
• If we look at the history of media for centuries, it is a history of continuous decline in the price per bits delivered to the user.
• So the user keeps consuming more and more bits because they become more affordable
107
• And the number of seconds available for media consumption does not increase by much – there are only so many hours one can spend on media
• Therefore, the cheaper bits mean that more of them will be consumed per second – more bit per second
• And this means richer media.
108
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Bit Richness of Different Media per Secon’
109109
• Thus, the consumption of bits per time unit of media use has risen, by this calculation, by a 5.38% compound annual growth rate. This relationship is confirmed by the directly measured empirical trend, as shown in Graph 4 which exhibits a compound growth rate of 8%.
110
Next Generation TV• 4K and 8K resolution
• 3D
• 2-way interactivity
• Multi-lateral interactivity
• Person to computer interactivity
• Personalization
• Multi-platform
• Asynchronous
• Immersion111
Flat Screens �Big Screens � Greater Requirement for Sharpness of Pix
112112
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3D-TV
113
Person-to person interactivity: Interactive Games
114114
115
Person-to-Computer Video Interactivity
Google’s “Project Glass” 2012
• Person-Computer Video Interaction
116
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Immersion Technology:Avatars and Virtual Worlds
117117
•Put these together and you can have “immersion.”
118
• In Gladiator, Russell Crowe’s face was digitally superimposed on others’ bodies.
http://ffmedia.ign.com/filmforce/image/article/569/569303/gladiator_crowe_tiger_1101791020-000.jpg
119119 120
• If they can use Crowe’s face, why not yours?
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• Put all of these elements together
• This enables TV as an immersive, participatory, personalized, experience
121
Participatory Experience – Film
122http://www.collider.com/uploads/imageGallery/Three_Hundred_300/300_movie_image_s.jpg
Participatory Sports – Experience
123
Content Model: Adult Applications
124
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D. Content Model: Interactive and Immersive Marketing
Test Drive Car
125
F. Content Model: Travelogue
126
• To produce such content is difficult.
• It requires creativity, many programmers, lots of alpha and beta testing, and many new versions
• There are basically two models to create it. 127127
• One model: the community model, in which modules of media creation and play modules will be created by decentralized peers, collaborating loosely with each other.
128
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• But for Premium content there will complex, large suppliers
• a richer content means a more expensive content. This is a continuation of trends.
129
• Terminator 2 (1992): $2.5 computer animators
• Terminator 3, $20 million computer graphics.
http://us.movies
1.yimg.co
m/movies.yahoo.co
m/images/
hv/allposters/60/180
0022060p
.jpg
130130
• In 1977 the credits for the original Star Wars listed 143 technicians;
• in 2003 the CG sequel, Attack of the Clones, listed 572 technicians.
• Avatar: over 800 computer graphic artists, $50 million spent on special effects.
131131
• Such expensive content exhibits strong economies of scale on the content production side, and network externalities on the demand side.
132132
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• Both favor content providers with –big budgets
–can diversify risk
–can distribute over other platforms
–Can distribute globally
–With ability to coordinate specialized inputs
133133
• Now obviously not all of video will be like that.
• Linear will be around, but will be shrinking
• Immersive content will be the frontier of technical and cultural creativity
• There will be a lot of individualization that is automatic.
134
• And this new TV will have lots of new and old problems.
• Privacy. Child protection. National culture. Access.
• But perhaps the most important new or newish issue is interoperability x
135
Issue: Interoperability
136
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• There are numerous interoperation and coordination issues in such a system
137
• An interoperability is required of content types, of users, of devices, of networks, of prioritization of traffic or software, of operating systems, of payment systems, of IPRs
• All of these are necessary in multi-player, multi-lateral tv
138
Take for example 3D-TV
• 3D video requires coordination– producers, filmmakers, tv networks, tv sets.
• This has been quite a challenge already.
• If you don’t get it right, everybody gets a headache and never comes back.
• Now add an interactive dimension to it
139
• In the absence of clear interoperation principles, these things will emerge inside of end-to-end integrator firms. Like apple
• Create certainty and confidence.
• But will easily lead to end to end control, even into the production side
140
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Google Cloud
141
Netflix Cloud
http://www.afterdawn.com/news/article.cfm/2009/10/23/netflix_watch_instantly_is_going_international_in_2010142
The NBC (Comcast)—Fox (News Corp.)—ABC (Disney) Cloud
http://www.jeffooi.com/2007Q3/hulu.gif
143143 144
The BBC Cloud
Patalong, Frank (2007). BBC to Broadcast via Youtube. Retrieved from: http://www.spiegel.de/international/0,1518,469586,00.html
144
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Next Generation TV: “Cloud-TV”
• The TV system as “a cloud of clouds”
145Eli M. Noam, Production
146
• The structure of media firms will be affected
• What will be emerging is a two-tier system of integrator firms and specialist firms
146
The Future Structure of Media Industries• 1. specialized providers of specialized media modules
• 2. Integrator firms147147
• The major firms then are mainly coordinators, integrators of the specialist firms, and the branders of the final products. This will be the organizational model for media firms of the future.
Eli M. Noam, Production
148148
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Which firms might be such integrators?
• Multiple skills hard to assemble and manage
• Of today’s media giants, which might have many of these skills?–Disney? Viacom? TW? GE? Bertelsmann?
Vivendi? Sony? Verizon? DT? BBC? Google?
149149
Integrator Expertise Required in
• CE• Distrib N/Ws ( telecom, cable, sat,
BB)• Content prod and selection• Marketing• Portals and e-commerce• Payment systems
150150
151
• So to conclude, the future Generation of TV media will not be just more of the same TV, but also a very different system of TV
• And that system will be tech-intensive
152
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• They will have high scale economies
• And they will probably be regulated much more like telecom companies than like traditional media or tv companies.
• Regulations like access, non-discrimination, univerality, tax, plus new tasks like assuring IPRs, child protection, consumer protection, etc.
153
• So this will affect media structure in very fundamnetal ways
• It will affect politics
• It will affect culture
154
Our research has already shown interrelations
155
The Relation of Politics
andMedia
Concentration156
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40
R² = 0,7272
0
20
40
60
80
100
120
0 1000 2000 3000 4000 5000 6000 7000 8000 9000
Go
vern
men
t E
ffec
tive
nes
s
HHI (TV broadcasting)
TV Concentration and Government
Effectiveness
Bad
Good
157
R² = 0,496
6
6,5
7
7,5
8
8,5
9
9,5
10
0 1000 2000 3000 4000 5000 6000 7000 8000 9000
Dem
ocr
acy
Ind
ex
HHI (TV broadcasting)
TV Concentration and Democracy
Bad
Good
158
R2 = 0.4754
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
0 1000 2000 3000 4000 5000 6000 7000 8000
ISP HHI
Fre
edo
m In
dex
ISP Concentration and Freedom Index
Bad
Good
159
R² = 0,7437
0
10
20
30
40
50
60
0 1000 2000 3000 4000 5000 6000 7000 8000 9000
Fre
edo
m H
ou
se In
dex
HHI (TV broadcasting)
TV Concentration and Freedom
Bad
Good
160
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41
R² = 0,6649
0
20
40
60
80
100
120
0 1000 2000 3000 4000 5000 6000 7000 8000 9000
Reg
ula
tory
Qu
alit
y
HHI (TV broadcasting)
TV Concentration and Regulatory Quality
Bad
Good
161
R² = 0,6625
0
1
2
3
4
5
6
7
8
9
10
0 1000 2000 3000 4000 5000 6000 7000 8000 9000
Co
rru
pti
on
Ind
exHHI (TV broadcasting)
TV Concentration and Control of
Corruption
Bad
Good
162
R² = 0,4819
0
10
20
30
40
50
60
0 1000 2000 3000 4000 5000 6000 7000 8000 9000
Hap
py
Pla
net
Ind
ex
HHI (TV broadcasting)
TV Concentration and Happiness
Bad
Good
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11/27/2012
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• And the problem is, that the underlying economics result in equilibria which we do not like
• And these fundamental economics are quite powerful, and show themselves globally, so they are not just due to some particularly greedy empire builder, or a pliant and complacent regulator, or a legally corrupt legislature.
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• And what’s more, this will get worse, inevitably.
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• Whatever we do, we should think about it soon, before it is too late.
• Before the realities on the ground have become too entrenched.
• So we have started at Columbia to design some principles for the next generation of TV, for that Cloud TV.
• And we invite all of you to join us.
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Thank you!End of Talk
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