CMM EXAM 3: Media Economics and the Global Marketplace (Ch. 12)

How are the three basic structures of mass media organizations -- monopoly, oligopoly, and limited competition -- different from one another?

A MONOPOLY occurs when a single firm dominates production and distribution in a particular industry, either nationally or locally

(e.g. AT&T at one point had a monopoly on the telephone business; in the newspaper business chain operators like Gannett own hundreds of newspapers)

In an OLIGOPOLY, just a few firms dominate an industry. Such companies face little economic competition from small independent firms. Oligopolies often add new ideas and product lines by purchasing successful independent companies.

(e.g. the production and distribution of the world's music is controlled mainly by 4 international corporations: Warner Music, Sony, Universal, and EMI)

Sometimes called monopolistic competition, LIMITED COMPETITION characterizes a media market with many producers and sellers but only a few products within a particular category. All firms produce similar yet not perfectly substitutable products. The form of imperfect competition that exists when there are many producers or sellers of similar but differentiated goods or services (e.g. hundreds of independently owned radio stations operate in the US but most feature a limited number of formats -- such as country, classic rock, or contemporary hits; most stations only play one of the few formats that attract sizable audiences).

Why are monopolies bad?

bad for innovation and prices for consumers

no competition = prices rise

not motivated to innovate (people can either take what the company offers or leave it)

Why are oligopolies bad (and kind of good)?

diversity between channels not authentic if only 5 companies own them

the companies dictate what we get

conglomerates use synergy (hands in many different parts of industry, not just media: toys, etc.)

SYNERGY: the combination of 2 agents or forces so that their combined effects is greater than the sum of their individual effects

INTELLECTUAL PROPERTY: books to make movies, own magazines, easily put characters on cover at time that movie comes out, theme parks, toys, video games, DVD sets, events (e.g. Comicon)

good: fan culture

bad: not much diversity

What are the differences between direct and indirect payments for media products?

DIRECT PAYMENT involves media products supported primarily by consumers, who pay directly for a book, a CD, a movie, or an internet or cable TV service.

INDIRECT PAYMENT involves media product supported primarily by advertisers, who pay for the quantity or quality of audience members that a particular medium delivers. Over-the-air radio and TV broadcasting, daily newspapers, magazines, and most web sites rely on indirect payments for the majority of their revenue.

Many forms of mass media generate revenue BOTH directly and indirectly, including newspapers, magazines, online services, and cable systems, which charge subscription fees in addition to selling commercial time or space to advertisers.

What are some of society's key expectations of its media organizations?

Economists, media critics, and consumer organizations have asked the mass media to meet certain performance criteria, including

introducing NEW TECHNOLOGIES to the marketplace

making media products and services AVAILABLE TO PEOPLE OF ALL ECONOMIC CLASSES

facilitating FREE EXPRESSION and robust POLITICAL DISCUSSION

acting as PUBLIC WATCHDOGS over wrongdoing

monitoring society in times of CRISIS

playing a positive role in EDUCATION

maintaining the QUALITY of culture

economies of scale principle

the practice of increasing production levels to reduce the cost for each product

What do economists look at when evaluating the media?

program or product costs, price setting, marketing strategies, and regulatory practices

How has the internet influenced traditional media?

It not only offers a portal to view or read OLDER media forms, but also requires virtually all older media companies to ESTABLISH AN ONLINE PRESENCE. It also poses the issue of COPYRIGHT INFRINGEMENT with sites like YouTube.

Why has the federal government emphasized deregulation at a time when so many media companies are growing so large?

Deregulation in the past led to easier mergers, corporate diversifications, and increased tendencies in some sectors toward oligopolies

The deregulation movement favored by administration from Reagan through Clinton to George W. Bush returned media economics to 19th century principles, which suggested that MARKETS CAN TAKE CARE OF THEMSELVES WITH LITTLE GOVERNMENT INTERVENTION

Commercial radio broadcasters used to demand gov't regulation to control technical interference and amateur competition. By the mid-1990's however the original reasons for regulation no longer applied. With new cable channels, DBS, and the internet, BROADCASTING WAS NO LONGER CONSIDERED A SCARCE RESOURCE -- once a major rationale for regulation as well as gov't funding of noncommercial and educational stations.

How have media mergers changed the economics of mass media in terms of the consolidation trend?

CONSOLIDATION TREND

Mass media mergers have have CONSOLIDATED POWER in the hands of a few large companies; big companies purchase smaller ones (e.g. Disney bought ABC, Time Warner bought Turner Broadcasting, etc.)

Until the 1980s, antitrust rules attempted to ensure diversity of ownership among competing businesses. Now media competition has been usurped by media consolidation. Today, the same ANTI-COMPETITIVE mindset exists that once allowed a few utility and railroad companies to control their industries in the days before antitrust laws.

Most media companies have skirted monopoly charges by purchasing diverse types of mass media rather than trying to control just one medium (e.g. Disney, rather than trying to dominate one area, provides programming to TV, cable, and movie theaters)

The resulting consolidation of media owners has LIMITED THE NUMBER OF INDEPENDENT VOICES in the market and REDUCED THE NUMBER OF OWNERS WHO MIGHT BE ABLE TO INNOVATE AND CHALLENGE ESTABLISHED ECONOMIC POWERS

How have media mergers changed the economics of mass media in terms of flexible markets and the decline of labor unions?

FLEXIBLE MARKETS AND THE DECLINE OF LABOR UNIONS

a flexible economy has demanded RAPID PRODUCT DEVELOPMENT and EFFICIENT MARKET RESEARCH

companies need to score a few hits to offset investments in failed products

this flexible system FAVORS LARGE COMPANIES WITH GREATER ACCESS TO CAPITAL OVER SMALL BUSINESSES THAT CANNOT EASILY ABSORB THE LOSSES INCURRED FROM FAILED PRODUCTS

flexible markets have also coincided with the decline in the number of workers who belong to labor unions; many jobs have been EXPORTED to avoid the high price of US unionized labor (e.g. making computers, TV sets, etc. in India); as large companies bought small companies across national boundaries, commerce developed rapidly at the GLOBAL LEVEL

How have media mergers changed the economics of mass media in terms of downsizing and the wage gap?

DOWNSIZING AND THE WAGE GAP

phenomena of layoffs in both good times and bad is characteristic of corporate DOWNSIZING, which is supposed to make companies more productive, more competitive, and more flexible

this trend, spurred by government deregulation and a decline in worker production, means that many employees today scramble for jobs

2 SIDE EFFECTS of downsizing: some businesses can no longer compete well because of fewer employees and a decline in innovation

(e.g. emergence of online media has caused newsrooms to downsize, meaning that there are fewer reporters and editors to develop new ideas and innovative techniques to compete with the online onslaught)

CEOS ARE THE BENEFICIARIES OF DOWNSIZING, many of whom had overseen the layoffs

hegemony

the acceptance of the dominant values in a culture by those who are subordinate to those who hold economic and political power

how a ruling class in society maintains its power -- not simply by military or police force, but more by citizens' consent and deference to power

companies and politicians convince consumers that the interests of the powerful are common sense and therefore normal or natural, creating an atmosphere and context in which there is less chance for challenge and criticism

Status quo values and "conventional wisdom" (e.g. hard work and religious beliefs are rewarded with economic success) and political arrangements (e.g. the traditional two-party system serves democracy best) becomes taken for granted as normal and natural ways to organize and see the world

When democratic and republican candidates run for office, the stories they tell about themselves try to connect with Middle American commonsense and "down home" virtues -- such as a photo of Bush in blue jeans clearing brush on his Texas ranch or a video of Obama playing basketball in a small Indiana high school gym. These ties to ordinary commonsense values and experience connect the powerful to the everyday, making their interests and ours seem to be seamless.

The reason that common narratives work is that they identify with a culture's dominant values; "Middle American" values include allegiances to family, honesty, hard work, religion, capitalism, health, democracy, moderation, loyalty, fairness, authenticity, modesty, etc. These kind of Middle American virtues are the ones that our politicians most frequently align themselves with in the political ads that tell their stories. These virtues lie at the heart of powerful American Dream stories that for centuries now have told us that if we work hard and practice such values, we will triumph and be successful.

Hollywood, too, distributes these shared narratives, celebrating characters and heroes who are loyal, honest, and hardworking. Through this process, the media (and the powerful companies that control them) provide the commonsense narratives that keep the economic status quo relatively unchallenged and leave little room for alternatives

Hegemony and the American Dream

big companies control us and prevent people from rising up against them

media gives certain messages

American Dream: come from nothing and rise into something

see these stories everywhere so we think it will happen but most people/businesses/musicians/movies fail or never rise up, mostly doesn't happen to everyone, but we don't see examples of people who don't make it

take it blindly and as common sense because it's repeated in the media

myth to think we can all make it in the same way

hegemony: the people who control the media send us ideas that make certain things sound like common sense

may not reflect in our best interest

we need the news to be a good citizen

might be getting same people telling their opinion in the news through multiples mediums because of big companies

How do GLOBAL and SPECIALIZED markets factor into the new media economy? How are regular workers affected?

global firms have sought greater profits by moving labor to LESS ECONOMICALLY DEVELOPED COUNTRIES that need jobs but have poor health and safety regulations for workers.

MANY WORKERS CANNOT EVEN AFFORD THE STEREO EQUIPMENT AND TV SETS THEY ARE MAKING FOR US AND EUROPEAN MARKETS

The continuous outsourcing of many US jobs and the breakdown of global economic borders accompanied this transformation. Global cooperation fostered transnational media corporations and BUSINESS DEALS ACROSS INTERNATIONAL TERRAIN

MAGAZINE, RADIO AND CABLE INDUSTRIES SOUGHT SPECIALIZED MARKETS IN BOTH THE US AND OVERSEAS (e.g. Seventeen and AARP magazine have niche markets, cable channels such as Nickelodeon and the Cartoon Network serve the under-18 market, A&E and Lifetime address viewers over age 50 and female, cable channel BET targets young African Americans)

EXTENSION OF SYNERGY TO INTERNATIONAL LEVELS (the promotion and sale of different version of a media product across the various subsidiaries of a media conglomerate)

Using Disney as an example, what is the role of SYNERGY in the current climate of media mergers?

EXTENSION OF SYNERGY TO INTERNATIONAL LEVELS (the promotion and sale of different version of a media product across the various subsidiaries of a media conglomerate)

e.g. Time Warner HBO cable special about the "making of" a Warner Brothers movie reviewed in Time Magazine

e.g. Global companies like Sony buying up popular culture (movie studios and record labels) to play on its various electronic products

International expansion has allowed media conglomerates some advantages, including SECONDARY MARKETS TO EARN PROFITS AND ADVANCE TECHNOLOGICAL INNOVATIONS

AS MEDIA TECHNOLOGIES GET CHEAPER AND MORE PROFITABLE, AMERICAN MEDIA PROLIFERATE BOTH INSIDE AND OUTSIDE NATIONAL BOUNDARIES

GLOBALISM PERMITS COMPANIES THAT LOSE MONEY AT HOME TO PROFIT ABROAD

SATELLITE TRANSMISSION HAS MADE NORTH AMERICAN AND EUROPEAN TV AVAILABLE AT THE GLOBAL LEVEL

THE SWAPPING OF MUSIC, TV SHOWS, AND MOVIES ON THE INTERNET HAS EXPANDED THE GLOBAL FLOW OF POPULAR CULTURE EVEN FURTHER

Disney can produce an animated feature for both theatrical release and DVD distribution

With its ABC network, it can place a carton version of the movie on ABC's Saturday morning special

A book version can be released through Disney's publishing arm, Hyperion, and "the making of" versions can appear on cable's Disney Channel or ABC Family, as well as Disney Adventures, the company's popular children's magazine

Characters can become attractions at Disney's theme parks, which themselves have spawned Hollywood movies such as the Pirates of the Caribbean franchise

Some Disney films have had upwards of 17,000 licensed products, from clothing to toys to dog-food bowls

Through its purchase of ABC, also purchased ESPN and expanded the brand with additional ESPN channels, radio, magazine, websites, and a sports-themed ESPN chain

Launched version of Beauty and the Beast and The Lion King as successful broadway musicals

opened theme parks in Japan and China, TV in China and Russia, Disney stores and a magazine in China, Disneyland Resort Paris

Disney has a 24 hour premium cable channel to 23 countries in the Middle East and North Africa

works with Pixar and DreamWorks studios

Disney made its movies and TV programs available on iTunes and Hulu

purchased Marvel Entertainment

What are the differences between freedom of consumer choice and consumer control?

CONSUMER CONTROL: power in deciding what kinds of media get created and circulated

CONSUMER CHOICE: options among a range of media products

MOST PEOPLE OF ECONOMICALLY DEVELOPED NATIONS HAVE CONSUMER CHOICE, BUT NOT MANY HAVE CONSUMER CONTROL

one promising development concerns the role of independent and and alternative producers, writers, and publishers. Despite the movement toward economic consolidation, the fringes of media industries still offer a diversity of opinions, ideas, and alternative products.

What is cultural imperialism, and what does it have to do with the United States?

The influence of American popular culture has created considerable debate in international circles. On the one hand, THE NOTION OF FREEDOM THAT IS ASSOCIATED WITH INNOVATION AND REBELLION IN AMERICAN CULTURE HAS BEEN EMBRACED INTERNATIONALLY. The global spread of and access to media have made it harder for political leaders to secretly repress dissident groups because police and state activity (such as the torture of illegally detained citizens) can now be documented digitally and easily dispatched by satellite, the internet, and cell phones around the world

supporters also argue that a universal popular culture creates a GLOBAL VILLAGE and fosters communication across national boundaries

On the other hand, AMERICAN MEDIA ARE SHAPING THE CULTURES AND IDENTITIES OF OTHER NATIONS. American styles in fashion and food, as well as media fare, dominate the global market -- a process known as CULTURAL IMPERIALISM

US dominance in producing and distributing mass media puts a severe burden on on countries attempting to produce their own cultural products

Critics argue that American cultural imperialism both HAMPERS THE DEVELOPMENT of native cultures and negatively influences teens, who abandon their own rituals to adopt American tastes (e.g. women in India wanting to have lighter skin)

The exportation of US entertainment media is sometimes viewed as CULTURAL DUMPING because it discourages the development of original local products and value systems

The greatest concern regarding a global village is the CULTURAL DISCONNECTION for people whose standards of living are not routinely portrayed in contemporary media. A lot of people cannot afford products advertised on American, Japanese, and European TV. Yet more and more of the world's populations are able to glimpse consumer abundance and middle-class values through TV, magazines, and the internet.

Why is there a lack of public debate surrounding the tightening oligopoly structure of international media?

A RELUCTANCE TO CRITICIZE CAPITALISM (this would attack free markets, which would also attack democracy; capitalism is associated with democracy even though capitalism is arranged vertically with powerful people at the top and minimum wage workers at the bottom instead of horizontal in which each individual has an equal opportunity to have his or her voice heard and counted)

DEBATE OVER HOW MUCH CONTROL CONSUMERS HAVE IN THE MARKETPLACE

What do critics and activists fear most about the concentration of media ownership? How do media managers and executives respond to these fears?

THE IMPACT OF MERGERS ON NEWS OPERATIONS, PARTICULARLY THE INFLUENCE OF LARGE CORPORATIONS ON THEIR NEWS SUBSIDIARIES. THESE COMPANIES HAVE THE CAPACITY TO USE MAJOR NEWS ORGANIZATIONS TO PROMOTE THEIR PRODUCTS AND DETERMINE NATIONAL COVERAGE

What are some promising signs regarding the relationship between media economics and democracy?

In some places,LOCAL GROUPS AND CONSUMER MOVEMENTS ARE TRYING TO ADDRESS MEDIA ISSUES THAT AFFECT INDIVIDUAL AND COMMUNITY LIFE. Such movements -- like the National Conference for Media Reform -- are usually united by geographic ties, common political backgrounds, or shared concerns about the state of the media. The internet has also made it possible to for media reform groups to form globally, uniting around such issues as contesting censorship or monitoring the activities of multinational corporations. The movement was also largely responsible for the success of preserving "network neutrality," which prevents internet service providers from censoring or penalizing particular websites and online services.

Jeff Bezos

founder of Amazon

bought the Washington Post

least bad choice the Post has in this newspaper economy

previous owner hadn't steer them wrong before

digital age made Bezo a millionaire, but posed issues for the newspaper economy

Bezo's sees opportunities for reinvention in relation to the internet: optimistic

he does have a passion for the printed word

has predicted that there won't be print newspapers in 20 years

let people experiment and grow their business digitally

Bezos has loyalty, straightforward, gives people the resources to do impressive things

Bezos is a little bit of a relief

George Carlin "American Dream" video

we don't really have choice, media owners and politicians control us

they don't want critical thinkers, want obedient workers

want us accept lower pay etc.

tell you what to believe, think, buy

the rich and powerful don't care about regular, hardworking citizens

"it's called the American Dream because you have to be asleep to believe it" -- many of us are ignorant because we buy into the idea of the American Dream

major companies and rich people control our daily existence

hegemony and the media: controlling info and what we learn about the world

no confidence that system is going to change (pessimistic)

media commodities

tangible products

content (iTunes, Amazon, Netflix)

audience (super bowl commercials, "buying" the audience, audience is a commodity, buying and selling to us and we get exploited

commodities

something that can be bought or sold

ideas and concepts can be commodities, even though not tangible

markets

1. place where people go to buy or sell goods and services

2. an assemblage of such persons (people who buy and sell)

3. abstract assemblage of such persons whose transactions involve a single commodity

commodities sold at markets

corporations

bigger companies

liability: when you incorporate you become a legal entity

equivalent of SSNs: tax ID #s

if corporation sued, the people who work for the corporation are protected

stock holders

our media today is dominated by corporations

industries

corporations work with industries

the aggregate of productive activity in a particular activity in a particular field

media industries, broadly

film industry, more specifically

conglomerate

combination of corporations operating under a single parent company

e.g. News Corp. owns Fox

cross-promotion happens because all owned by the same parent

dominate media industry but own other things (synergy)

the big five

DISNEY

TIME WARNER

NATIONAL AMUSEMENTS

NEWS CORP.

COMCAST