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  7. Critical Issues in Media Economics

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Summary Critical Issues in Media Economics

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  • Critical Issues in Media Economics
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  • Vrije Universiteit Brussel (VUB)

Very complete document with class notes and course material included Grade in first exam session: 16/20

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  • June 20, 2021
  • 119
  • 2020/2021
  • Summary

Subjects

  • economics
  • media economics
  • communication studies

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  • Vrije Universiteit Brussel (VUB)
  • Communication Studies: New Media And Society In Europe
  • Critical Issues in Media Economics
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CRITICAL‌‌ISSUES‌‌IN‌‌ ‌
MEDIA‌‌ECONOMICS‌ ‌
2020-2021‌ ‌
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MASTER‌‌NEW‌‌MEDIA‌‌&‌‌SOCIETY‌‌ ‌ ‌PROF.‌‌BALLON‌ ‌

D.L.Y.‌ ‌
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, ‌

CHAPTER‌‌ONE‌ ‌
INTRODUCTION‌‌TO‌‌MEDIA‌‌ECONOMICS‌ ‌



1.‌‌INTRODUCTION‌ ‌

1.1.‌‌BUSINESS‌‌AND‌‌ECONOMIC‌‌APPROACH‌‌TO‌‌NEW‌‌MEDIA‌‌ECONOMICS‌ ‌


● What‌‌is‌‌New‌‌Media‌‌in‌‌Europe?‌ ‌
○ 1st‌‌wave‌‌‘content‌‌media’‌ ‌
○ 2nd‌ ‌wave/new‌ ‌type‌ ‌of‌ ‌media‌ ‌is‌ ‌‘connectivity‌ ‌media’:‌ ‌companies‌ ‌whose‌ ‌primary‌ ‌business‌ ‌is‌ ‌to‌‌
(inter-)mediate‌‌between‌‌you‌‌and‌‌close‌‌friends‌‌(not‌‌content)‌ ‌
○ 3rd‌‌wave‌‌‘context‌‌media’‌‌as‌‌third‌‌wave‌‌intermediate‌‌between‌‌you‌‌and‌‌the‌‌environment‌‌(e‌ .g.‌‌google‌‌
maps,‌‌uber,‌‌airbnb,‌…
‌ )‌ ‌ ‌

● Is‌‌this‌‌a‌‌market‌‌just‌‌like‌‌any‌‌other‌‌market?‌‌ ‌
○ Every‌‌industry‌‌is‌‌starting‌‌to‌‌behave‌‌like‌‌a‌‌partly‌‌context‌‌media‌‌industry‌ ‌
○ Media‌‌company‌‌and‌‌media‌‌economy,‌‌progressively‌‌started‌‌from‌‌a‌‌small‌‌niche‌‌part‌‌ ‌
○ Differente‌ ‌economic‌‌logic‌‌that‌‌is‌‌relevant‌‌and‌‌specific‌‌to‌‌media‌‌companies‌‌(intermediating,‌‌virtual,‌‌
produce‌‌everything‌‌that‌‌is‌‌symbolic)‌ ‌


1.2.‌‌CRITICAL‌‌ISSUES‌‌IN‌‌MEDIA‌‌ECONOMICS‌ ‌


● Convergence:‌‌bellheads‌‌vs.‌‌netheads?‌‌ ‌
○ Picture‌‌1‌‌-‌‌Link‌‌infrastructure‌‌and‌‌power‌ ‌
■ Who‌‌most‌‌powerful‌‌companies‌‌in‌‌layered‌‌business‌‌of‌‌media‌‌ ‌
■ Layered:‌‌infrastructure‌‌to‌‌bring‌‌it‌‌to‌‌the‌‌people‌‌ ‌
■ Picture:‌‌death‌‌of‌‌telecommunications‌‌ ‌
● Doomed‌‌because‌‌internet‌‌was‌‌coming,‌‌business‌‌model‌‌of‌‌telecommunications‌‌was‌‌
going‌‌down‌ ‌
○ Picture‌‌2‌‌-‌‌Net‌‌neutrality‌‌debate‌ ‌
■ Internet‌‌and‌‌evil‌‌corporate‌‌guy,‌‌bell‌‌(=‌‌telecom),‌‌telecom‌‌companies‌‌killing‌‌the‌‌internet‌‌ ‌
■ Who‌‌will‌‌kill‌‌whom?‌‌Both‌‌in‌‌business‌‌right‌‌now,‌‌coexistence‌‌ ‌
■ Conflicting,‌ ‌different‌ ‌logic‌ ‌behind‌ ‌telecom‌ ‌business‌ ‌and‌ ‌dominant‌ ‌business‌ ‌model‌ ‌of‌‌
internet‌ ‌
○ Picture‌‌3‌‌-‌‌Actual,‌‌media‌‌sector‌‌( journalists,‌‌people‌‌producing‌‌content)‌ ‌
■ Another‌‌sector‌‌as‌‌victim‌‌and‌‌what‌‌about‌‌content?‌‌ ‌
○ Will‌‌influence‌‌the‌‌way‌‌we‌‌consume‌‌media‌‌ ‌

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● Monopolies‌‌vs.‌‌Legoland?‌‌Or‌‌Platform‌‌Competition?‌‌ ‌
○ At‌‌the‌‌beginning:‌‌wanting‌‌to‌‌fight‌‌Microsoft‌ ‌
■ Considered‌‌to‌‌be‌‌the‌‌most‌‌powerful‌‌platform‌‌company‌‌ ‌
○ New‌‌narrative‌‌of‌‌internet‌‌as‌‌generator‌‌of‌‌creativity,‌‌small‌‌company‌‌(start‌‌from‌‌their‌‌living‌‌room)‌‌ ‌
■ First‌‌Belgian‌‌Unicorn‌‌'Colibra’‌‌started‌‌at‌‌the‌‌VUB‌‌only‌‌a‌‌couple‌‌of‌‌years‌‌ago‌‌with‌‌students‌‌of‌‌
⇒
computer‌‌sciences‌‌ ‌‌1‌‌billion‌‌dollar‌‌valuation‌ ‌
■ Anyone‌‌can‌‌make‌‌it‌‌and‌‌no‌‌evil‌‌giant‌‌can‌‌resist‌‌this,‌‌they‌‌can‌‌lose‌‌their‌‌relevance‌ ‌
○ Maybe‌‌truth‌‌in‌‌between‌ ‌
■ ⇒
Giant‌‌companies‌‌aren’t‌‌going‌‌away,‌‌but‌‌there‌‌are‌‌new‌‌ones‌‌ ‌‌found‌‌a‌‌way‌‌to‌‌coexist‌‌with‌‌
all‌‌the‌‌smaller‌‌companies‌‌ ‌
■ ⇒
Open‌‌up‌‌for‌‌app‌‌developers‌‌ ‌‌can‌‌exist‌‌as‌‌smaller‌‌parts‌‌in‌‌a‌‌bigger‌‌platform‌ ‌
○ ⇒
Outcome‌‌of‌‌struggle‌‌will‌‌influence‌‌our‌‌future‌‌ ‌‌model‌‌that‌‌is‌‌being‌‌introduced‌‌is‌‌‘truth‌‌in‌‌between’‌‌ ‌
○ ⇒
What‌‌type‌‌of‌‌model‌‌will‌‌be‌‌implemented?‌‌ ‌‌What‌‌type‌‌of‌‌market‌‌structure‌‌we‌‌will‌‌get‌ ‌
○ Worried‌‌about‌‌free‌‌competition‌‌and‌‌fear‌‌power‌‌of‌‌the‌‌companies‌‌to‌‌regulate‌‌more‌‌than‌‌government‌‌ ‌
○ Is‌‌public‌‌intervention‌‌justified,‌‌necessary,‌‌harmful?‌‌ ‌
■ Anti‌‌apple:‌‌apple‌‌should‌‌drop‌‌the‌‌30%‌‌tax‌‌on‌‌apps‌‌in‌‌the‌‌app‌‌store‌‌ ‌
■ Before‌ ‌apple:‌ ‌when‌ ‌you‌ ‌wanted‌ ‌something‌ ‌on‌ ‌the‌ ‌telecom‌ ‌network,‌ ‌app‌ ‌on‌ ‌network,‌‌
network‌‌operator‌‌would‌‌take‌‌50-60%‌‌ ‌
■ In‌‌fact‌‌30%‌‌model‌‌Steve‌‌Jobs‌‌adopted‌‌when‌‌the‌‌app‌‌store‌‌started,‌‌was‌‌reversal‌‌of‌‌what‌‌he‌‌
⇒
first‌‌had‌‌in‌‌mind‌‌(60-70%)‌‌ ‌‌seen‌‌as‌‌motor‌‌for‌‌the‌‌success‌‌of‌‌the‌‌whole‌‌app‌‌economy‌‌ ‌
■ Now‌‌app‌‌providers‌‌don’t‌‌need‌‌Apple‌‌anymore‌‌and‌‌want‌‌to‌‌make‌‌a‌‌coalition‌‌to‌‌reduce‌‌the‌‌
⇒
30%‌‌ ‌‌abuse‌‌of‌‌some‌‌type‌‌of‌‌monopoly?‌ ‌

● Data‌‌as‌‌Currency?‌‌Or‌‌privacy‌‌as‌‌Human‌‌Right?‌ ‌
○ Revenue‌‌model‌‌is‌‌selling‌‌your‌‌data‌‌to‌‌advertisers‌‌ ‌
○ Economic‌‌question:‌‌what‌‌will‌‌be‌‌the‌‌dominant‌‌revenue‌‌model‌‌in‌‌the‌‌future?‌‌ ‌
○ Should‌‌we‌‌regard‌‌data‌‌as‌‌currency?‌‌ ‌
○ Is‌ ‌Privacy‌ ‌under‌ ‌threat,‌ ‌dead‌ ‌(move‌ ‌on,‌ ‌it’s‌ ‌not‌ ‌existing‌ ‌anymore),‌ ‌economically‌ ‌harmful‌ ‌(goes‌‌
against‌‌free‌‌enterprise)?‌‌ ‌
○ Critical‌‌for‌‌society,‌‌but‌‌also‌‌for‌‌us‌‌trying‌‌to‌‌take‌‌a‌‌critical‌‌view‌‌on‌‌this‌‌ ‌


1.3.‌‌MEDIA‌‌+‌‌ECONOMICS‌‌=‌‌MEDIA-ECONOMICS?‌ ‌


Media‌‌ ‌ ● Main‌‌Characteristics‌ ‌
○ Means‌‌to‌‌distribute‌‌information‌‌and‌‌knowledge‌ ‌
○ Addresses‌‌groups‌‌of‌‌people‌‌(mass‌‌media‌‌-‌‌niche‌‌media)‌ ‌
● Main‌‌Objectives‌ ‌
○ To‌‌provide‌‌factual‌‌information,‌‌opinions,‌‌entertainment‌ ‌
● Main‌‌Values‌‌(typically‌‌economics‌‌is‌‌not‌‌so‌‌good‌‌at‌‌this)‌ ‌
○ Reliability‌‌(quality)‌‌and‌‌diversity‌ ‌

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○ Innovation‌‌and‌‌competitive‌‌strength‌‌ ‌
● Main‌‌Questions‌‌ ‌
○ Public‌‌vs.‌‌private‌‌media;‌‌national‌‌vs.‌‌international‌‌content;‌‌ICT‌‌and‌‌media‌ ‌
● Main‌‌Scope‌‌ ‌
○ In‌‌scope:‌‌radio,‌‌TV‌‌broadcasting,‌‌newspapers,‌‌periodicals‌ ‌
○ Partly‌‌in‌‌scope:‌‌rest‌‌of‌‌cultural‌‌industry‌‌(e‌ .g.‌‌film,‌‌music,‌‌games‌)‌ ‌
○ Out‌‌of‌‌scope:‌‌one-on-one‌‌(two-way)‌‌communication‌ ‌
○ This‌‌will‌‌change‌‌dramatically‌‌with‌‌new‌‌media/ICT‌ ‌


Media‌‌economics‌‌ ‌ ● Applies‌‌economics‌‌to‌‌media…‌‌but‌‌what‌‌kind‌‌of‌‌economics?‌ ‌
● Neoclassical‌‌economics‌‌and‌‌the‌‌Perfect‌‌Competition‌‌model‌‌ ‌
○ Production,‌‌distribution‌‌and‌‌consumption‌‌of‌‌scarce‌‌goods‌ ‌
○ Supply‌‌and‌‌demand‌‌meet‌‌each‌‌other‌‌in‌‌market‌ ‌
○ Quantity‌‌and‌‌price‌‌are‌‌set‌‌at‌‌‘equilibrium’‌‌ ‌
○ Market‌‌structures‌‌range‌‌between‌‌perfect‌‌competition‌‌and‌‌monopoly‌ ‌
○ Policy‌‌intervention‌‌(only)‌‌justified‌‌when‌‌there‌‌is‌‌market‌‌failure‌ ‌
● So,‌‌media-economics‌‌is‌‌simply‌‌applying‌‌Economics‌‌to‌‌media?‌‌ ‌
○ Production,‌‌distribution‌‌and‌‌consumption‌‌of‌‌scarce‌‌information‌‌and‌‌opinions?‌ ‌
○ Information‌‌supply‌‌and‌‌information‌‌demand‌‌meet‌‌in‌‌the‌‌media‌‌market?‌ ‌
○ Media‌‌quantities‌‌and‌‌prices‌‌set‌‌at‌‌equilibrium?‌ ‌
○ We‌‌strive‌‌for‌‌perfect‌‌competition‌‌in‌‌the‌‌media‌‌markets?‌ ‌
○ Policy‌‌only‌‌intervenes‌‌when‌‌there‌‌is‌‌market‌‌failure?‌ ‌


2.1.‌‌WHY‌‌MEDIA‌‌ECONOMICS?‌ ‌


● Why‌‌is‌‌there‌‌no‌‌course‌‌on‌‌Washing‌‌Powder‌‌Economics,‌‌while‌‌there‌‌is‌‌a‌‌course‌‌on‌‌Media‌‌Economics?‌ ‌
○ Media‌‌and‌‌cultural‌‌goods‌‌have‌‌specific,‌‌divergent‌‌economic‌‌characteristics‌‌ ‌
○ Media‌‌economics‌‌is‌‌not‌‌just‌‌about‌‌the‌‌‘material’‌‌layer‌‌of‌‌society,‌‌but‌‌also‌‌about‌‌the‌‌‘symbolic’‌‌one‌‌ ‌
■ Virtual,‌‌symbolic‌‌side‌‌of‌‌economy‌‌is‌‌growing‌‌strongly‌ ‌
■ There‌‌is‌‌a‌‌specific‌‌public‌‌interest‌‌in‌‌the‌‌outcome‌‌of‌‌economic‌‌processes‌‌in‌‌the‌‌media‌‌sector‌‌
(i.e.‌‌because‌‌of‌‌huge‌‌‘external‌‌effects’)‌ ‌

● What‌‌is‌‌so‌‌different?‌ ‌
○ Specific‌‌characteristics‌‌of‌‌the‌‌media‌‌good‌‌itself‌ ‌
○ Specific‌‌characteristics‌‌of‌‌the‌‌supply‌‌and‌‌demand‌‌side‌ ‌
○ Specific‌‌industry‌‌and‌‌market‌‌structures‌ ‌
○ Specific‌‌interests‌ ‌
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