Media Economics and the Global Marketplace

1. Media Economics and the Global Marketplace Chapter 13

2. “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.”

3. 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.

4. 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.

5. 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

6. 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.

7. 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

8. 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

9. 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.

10. What Time Warner Owns • 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. Television Group – Warner Bros. Television – Warner Bros. Animation – The CW Network Movies • Warner Bros. Pictures • Warner Independent Pictures • Warner Bros. Home Entertainment Group • Warner Bros. Theatre Ventures 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 Books/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 Progress Corporation – Coastal Living – Cooking Light – Health – Southern Living

11. Flexible Markets and Downsizing • “Downsizing” makes companies more productive, competitive, and flexible. • Who benefits from downsizing? Who is disadvantaged?

12. 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.

13. 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

14. 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

15. 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.

16. 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.

17. 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?

18. “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