Milestones chapter 9 Media economics and governance
Media are largely run as business enterprises. Trend in the direction because of:
- increasing industrial and economic significance of the entire information and communication sector
- widespread privatization of state telecommunication enterprises and extension of their activities
nationally and internationally.
Media ‘’not just any other business’’
The key to the unusual character of the media institution is that its activities are inextricably both
economic and political as well as being very dependent on continually changing technologies.
These activities involve the production of goods and services which are often both private and public.
The public character of the media devices mainly form the political function of the media in a
democracy, but also form the fact that information, culture and ideas are considered as the collective
property of all. Mass media have grown up historically with a strong and widely shared image as
having an important part to play in public life and being essentially within the public domain.
The media generally have to operate wholly or partly according to the dictates of market economics.
Alternative theoretical perspectives
There is no agreed objective description of the media institution.
One option is to apply an economic/industrial perspective; looking at the distinctive and varying
characteristics of the media as economic enterprise.
An alternative perspective is critical political-economic theory; with reference to processes of
concentration and commercialization.
A third main possibility is to examine media structures according to a public interest in the light of
normative criteria.
The fourth possibility is to look at the media institution from an internal or media professional point.
We can represent the unique position of media as at the center of three main forces: political,
economic and technological - and thereby requiring alternative modes of analysis. (Figure 9.1)
The main questions for theory to answer
A theoretical analysis is only possible if certain general issues or problems are first identified.
At a descriptive level we focus mainly on the questions of differences.
Media are not only businesses, responding to economic forces, but also deeply rooted social and
cultural institutions.
There is also relevant theory concerning the current dynamics of media industries, trends towards:
- expansion
- diversification
- convergence
Mainly on the basis of new technology and new economic opportunities.
Trend towards:
- concentration
- integration
- internationalization of media activity.
The telecommunications system is increasingly a vehicle for distributing content that was originally
broadcast, such as films, music and television. (example of convergence of technology)
The basics of media structure and levels of analysis
The term media system refers to the actual set of mass media in a given national society, despite the
fact that there may be no formal connections between the elements.
Sometimes a media system is linked by a shared political-economic logic.
,Many countries have mixed systems with private and public elements and these may well be
organized according to a set of national media policy principles, leading to a degree of integration.
The media may also be treated as a coherent system by their audiences or by advertisers.
Within the media system, specific different types are to be found based on different medium
technologies. These are often subdivided into different media forms (print media into books,
newspapers and magazines).
Groupings may also be described as media ‘’sectors’’.
There are many differentiating as well as integrating factors (different means of distributions and
organizations).
We need to distinguish another unit of analysis: that of the firm or enterprise. Some media products
can be regarded as belonging to specific genres and finally as particular products.
The main media system components:
- international media - unit medium channel
- media systems - particular genre
- multimedia firm - unit media product (book, film, song)
- circulation/distribution area - media sector
- internet portal (gateway, functions; selection and control)
Some economic principles of media structure
Different media markets and sources of income
According to Picard ‘’A market consist of sellers that provide the same good or service, or closely
substitutable goods or services, to the same group of consumers.’’
Markets can be defined according to; place, people, type of revenue and the nature of the product or
service.
Economic division between:
- consumer market; for media products and services
- advertising market; a service is sold to advertisers in the form of access to the audience
Within the consumer market
- one-off products; products directly sold to consumers
- continuous media services; like cable tv
Other sources of income:
- sponsorship
- product placement and public relations
- public money
- support from private backers
The first victim of advertising on the internet seems to be the newspaper.
The most pressing practical problem has been to obtain some measure of value of audience use in
order to charge advertisers.
Bermejo (2009); measure audience with the concept of a ‘’visit or click’’.
The theoretical problems mentioned relate especially to the implications for the commodification of
content and relations with the audience.
Advertising versus consumer revenue: implications
The difference between the two main sources of revenue – direct product sales and advertising-is still
a useful tool for comparative analysis and for explaining media features and trends.
There are some ‘’advertising revenue only media’’, with no consumer revenue.
The distinction also has a non-economic significance. The higher the dependence on advertising as a
source of revenue, the less independent the content from the interest of the advertisers and business
generally. In the extreme case of media that are totally financed or sponsored by advertising, the
ostensible content is hard to distinguish from advertising itself.
,From the economic perspective operation in different markets raises other considerations:
- question of financing
- different criteria and methods for assessing market performance. (advertising based media are
assessed according to the number and type of consumers reached).
The market performance of media content that is paid for directly by consumers is assessed by the
income received from sales and subscriptions to services.
Media that are heavily dependent on advertising are likely to be more sensitive to the negative
impact of general economic downturns than products directly sold to consumers.
Media market reach and diversity
The difference between the two revenue markets interacts with other features of the media market.
The social composition of the audience reached is important because of differences in purchasing
power and in type of goods advertised.
Homogeneous audiences are more cost-effective than heterogeneous.
The relationship between the pursuit of mass markets and homogeneity of audience is muss less
clear in the case of the Internet. A major innovation of the Internet as an advertising medium is its
capacity to accurately identify and reach many dispersed markets for particular products and
services, based on data obtained from online.
Competition for revenue
Competition for a single revenue source results in imitative uniformity. Tunstall suggests this is the
reason for the perceived low-taste quality of American television which is financed almost entirely
form mass consumer advertising. This kind of large undifferentiated market maximizes the power of
the powerful. The competition of different media for the same advertising income can encourage
diversity. The degree and kind of competition are important modifying variables.
Media cost structure
One of the peculiarities of traditional mass media as compared with some other economic
enterprises is the potential imbalance between the fixed costs and the variable costs of production.
The higher the ratio of fixed to variable costs, the more vulnerable a business is to changing market
environment, and traditional mass media typically have a high ratio, with heavy capital investments
which have to be recoupled later by sales and advertising.
It is in the nature of the typical media product that is has a very high first copy cost. -> pressure
towards agglomeration and separation of production from distribution.
High fixed costs also erect a high barrier to would-be new entrants into the media business.
The production cost of high value content that competes for high popularity in international markets
such as films and games will continue to be under upward pressure. The division between fixed and
variable costs is less relevant to new developments.
(Box 9.3 main conclusions)
Ownership and control
Fundamental to an understanding of media structures is the question of ownership and how the
powers of ownership are exercised.
The content of the media always reflects the interest of those who finance them.
It’s not just ownership that counts, who actually pays for the media product?
Most owners just want profit, and most media are financed from different sources.
- private investors, advertisers, consumers, various public and private subsidy givers and
governments.
Most media belong to one of three categories of ownership: commercial companies, private non-
profit bodies and the public sector. For media owners it will be relevant whether a company is public
or private, a large media chain or conglomerate or a small-independent. And whether or not a media
, enterprise as owned by a so-called media tycoon or mogul; wanting to take personal interest in
editorial policy.
The effects of ownership
For mass communication theory, it is nearly always the ultimate publication decision that matters
most. Liberal theory rests on the assumption that ownership can be effectively separated from
control and editorial decisions. In some situations, and countries there are intermediary institutional
arrangement designed to safeguard the integrity of editorial policy and the freedom of journalists.
The existence of checks and balances cannot, however, obscure several facts of life for media
operation. It is also a fact that most private media have a vested interest in the capitalist system and
are inclined to give support to its most obvious defenders. The conventional wisdom of liberal theory
suggests that the best or only solution to such problems lies in multiplicity of private ownership. The
ideal situation would be one in which many small or medium companies compete with each other for
the interest of the public by offering a wide range of ideas, information and types of culture.
The position of being in power of ownership underestimates the fundamental tension between
market criteria of size and profit and social-cultural criteria of quality and influence.
Key propositions about ownership and control Box 9.4
Competition and concentration
Most social theory concerned with the public interest places a value on diversity, and there is also an
economic dimension involved: that of monopoly versus competition. Free competition would lead to
monopoly points criticism. There are three main aspects: intermedia competition, intermedium
competition and interfirm competition. Intermedia competition depends chiefly on whether products
can be substituted for another and on whether advertising can be substituted from one medium to
another. There always appears to be some niche in which a particular medium has an advantage. All
media types also seem to be able to offer some distinctive advantages to advertisers.
Horizontal versus vertical concentration
In general, because units of the same medium sector are more readily substitutable than hose
between media, the focus of attention is often directed at intramedium competition. Concentration
has most tended to develop.
Media concentration can be horizontal or vertical:
- vertical concentration refers to a pattern of ownership which extend through different stages of
production and distribution or geographically.
There is also a trend towards disaggregation; especially the separation of production activity from
distribution. –> Internet
- horizontal concentration refers to mergers within the same market.
Diversity if often protected by public policies against cross-media ownership.
Other types of concentration effect
Distinction by type of concentration to the level of which it occurs:
De Ridder distinguished between publisher/concern, editorial and audience level.
- the first refers to increased powers of owners or of television stations. In any case there is a separate
question as to whether editorial concentration, as measured by number of independent titles, rises
or falls in line with publisher concentration.
- the degree of editorial independence is often hard to assess.
- the third issue – of audience concentration – refers to the concentration of audience market share,
which also needs to be separately assessed. The reason for concern about concentration turn on
these two points:
A large number of independent newspapers titles does not itself set limits to media power or ensure
much real choice. Audience concentration can be achieved without ownership.
