Intro to Mass Communication Chapter 14 - The Future: Media and Economics in the 2020s

Media Revenue Models

• Advertisements 

• Paid Circulation (direct purchase) 

• Subscriptions 

Independent, Oligopoly, Monopoly

Basic Media Business Models 

Independent

Media business model with one media in one location 

Oligopoly

Media business model where there is control of product or service by a few companies 

Monopoly

Media business model where there is control of product or service by one company 

Vertical Integration

When a company controls all aspects of an industry 

• Raises some ethical issues about the validity of information up and down the line 

• Eliminate middleman and own suppliers (think of Disney as an example) 

Consolidation

Economics will be driven by need of media to merge

Local

Because of consolidation _____ media will struggle to survive

Globalization

____________ of media not only provides information to foreign countries but also creates demand for US products

Homogenization

Adoption of US cultural values in other countries can cause _______________ 

Profit

Marginal costs of media mean that reaching a wider audience creates big ______ margins 

Reduced

Information is not a physical good, so shipping costs are _______

McDonaldization

Best model for the internationalization of mass media with revenue in mind 

• The logic of capitalism + cultural colonialism = cultural hegemony 

Information Economy

An economic model based on selling intangible information rather than products 

Switching Cost

The cost that a user must pay to switch from one technological format to another 

Hegemons of Capitalism

An important part of Gramsci’s theory, it refers to the powerful states or state actors who seek and find control often without resorting to military dominance 

McDonaldization

An economic force that promotes efficiency, calculability, predictability, and control 

Newspapers and Magazines

A history of US media economics for its first 100 years is simply the history of __________ ___ _________

Simple

Economic structure of newspapers and magazines was very ______ 

• Pay for writing, pictures, editing, and production and get revenue from circulation and advertising 

Revenue Model

No company stays in business for too long if it does not have a ________ _____ – how does it make money? - that allows the company to make a profit, or at least break even 

Consumers or Advertising

Media companies employ many different ways to raise revenue for their services, but all boil down to two fundamental ideas 

• The money comes either from __________ or from ___________

Consumers

Traditional book publishers make practically all of their money by selling their products directly to __________ (lie on one end of spectrum) 

Middle-Ground Category

Magazines and newspapers fall into the _______-_______ ________ (online classified advertising has caused print publications to lose much of this important revenue) 

Advertising-Driven Income

Broadcast television is clearest example of ____________-______ ______ (on the other end of spectrum) 

• No subscription fees for channels unless packaged with cable 

• Offering of “free” content increases the potential audience for the network and networks can sell their advertising time at a premium, as opposed to a cable channel with a more limited and likely more narrow viewership 

Independent Companies

Most media and media companies begin as ____________ _________

• Many media remain as independent entities: the family-owned newspaper, the local radio or television station, the independent magazine 

Oligopoly

Many media companies participate in an _________ in which a few firms dominate most of the industry 

• Has historically been the most common business model for American media 

• Radio, music, television, and film are much the same way, dominated by multinational corporations 

Monopolies

Historically the United States has endorsed oligopolies but pushed back against true ___________, the control of a product or service by one company 

Government Guidance

If a national monopoly is allowed to happen, it does so under __________ _________ (like when AT&T was granted a monopoly over early telephone service) 

Andrew Carnegie

(steelmaker who in the 19^th century had a brilliant idea) 

• Instead of just buying materials and manufacturing steel, Carnegie bought up mines, railways, and all other aspects of the steelmaking industry, pioneering a business model that later became known as vertical integration 

Vertically Integrated

Almost all of the major media players in today’s market are part of __________ _________ companies 

Paid Circulation and Advertising

Historically, two revenue models have supported American media – ____ ___________ ___ __________

Information Economy

Modern theory of the ____________ _________ was expressed a few decades ago in the 1998 publication of Information Rules: A Strategic Guide to the Network Economy written by Carl Shapiro (professor at Cal Berkeley) and Hal Varian (chief economist at Google) 

• Fundamental argument they took up: “Technology changes. Economic laws do not” 

“First Copy” Costs

Cost for one newspaper are the reporting, writing, and editing of multiple stories, the photography and arranging for images, the setup and design of each page, the preparation of each page for publication, and the printing 

Secondary Costs

The _________ _____ (producing more copies) are printing – paper, ink, and the cost of running the press 

“Experience Product”

Information is what economists refer to as an “_____________ ________” - a product that requires the customer to experience it in order to judge its value – meaning that consumers must actually buy and experience the product to judge its value 

Product

Problem with information is that the experience is the _______

Branding

How do you know a movie has high-quality acting and an interesting plot before you watch it?

• __________

• Marketers use trailers, press coverage, and other marketing tools to communicate this branding message in the hopes of convincing you to watch the films they are promoting

Switching Costs

When economists consider __________ _____, they take into account the difference between the cost of one technology and the cost of another 

• If the difference is less than the cost it would take to switch – for information, the cost of moving all of the relevant data to the new technology – then it is deemed possible to switch 

Federal Communications Commission (FCC)

Is devoted to regulating the information economy 

• Established by Communications Act of 1934 the FCC is charged with “regulating interstate and international communications” for nearly every medium except for print 

• Attempts to remain a nonpartisan, or at least bipartisan, outlook, with a maximum of three of its five commissioners belonging to the same party 

• As guardian of the public interest, FCC has usually called for more competition among media companies 

• FCC still tries to ensure that monopolies or severe oligopolies do not develop 

• FCC protects consumers’ ability to choose from a wide variety of media products, and the competition among media producers hopefully results in better products for consumers 

Antitrust Legislation

The main tool of the FCC and government employs to keep healthy competition in the information marketplace is __________ _________ 

Sherman Antitrust Act of 1890

The seminal ________ _________ ___ __ ____ helped establish modern US antitrust legislation 

• Outlines many propositions and goals that legislators deemed necessary to foster a competitive marketplace 

Clayton Antitrust Act of 1911

Makes it unlawful for one company to “acquire... the whole or any part of the stock” of another company when the result would encourage the development of a monopoly (one of the acts that refined the Sherman Antitrust Act)

Celler-Kefauver Act of 1950

Made it more difficult for corporations to get around antitrust legislation

Deregulation

1980s, oligopolies and conglomerations got a boost from the government as a wave of ____________ (the removal of legal regulations on an industry) came to Washington with President Ronald Reagan 

• Companies now became increasingly conglomerated leading to even less competition 

Telecommunications Act of 1996

Extension of the _______________ ___ __ ____ – enhancing corporations’ abilities to vertically integrate – was a primary driving factor behind this increased conglomeration 

Section 253

________ ___ of Telecommunications Act 

• No state may prohibit “the ability of any entity to provide any interstate or intrastate telecommunications service” 

• Since state and local governments cannot prohibit any company from entering the marketplace, no checks on the amount of a local market than any one company can reach 

Net Neutrality

Of particular concern in the 2020s is ___ _________ – the principle that broadband internet access service providers should transmit all internet content equally 

Net Neutrality

Government's position on the issue of ___ _________ has shifted several times 

• FCC adopted net neutrality rules in the 2015 Open Internet Order of the Obama administration to prevent broadband providers from blocking or slowing internet traffic to websites and applications 

• Trump administration repealed those rules and restored deregulation 

• Biden administration moved toward restoring some regulation 

Globalization

The media industry is, in many ways, perfect for ___________ – the spread of global trade without regard for traditional political borders 

Multiplied

Benefits of media companies using vertical integration are _________ with globalization 

Globalization Problem

There is a possible problem with this: the media products that spread from culture to culture are from Western countries, particularly the US 

• Portrays things (fast cars, interracial couples, middle-class living, and guns) that are not universally accepted facts of life in other countries and exposes these countries to them 

• Some observers believe that this will contribute to a one-way transmission of ideas and values that result in the displacement of local cultures 

Cultural Imperialism

In today’s world, _________ ____________ is most often used to describe the United States’ role as a cultural superpower throughout the world 

Antonio Gramsci

(Italian philosopher and critic) 

• Originated the idea of “cultural hegemony" to describe the power of one group over another 

• Argued that culture and the media exert such a powerful influence on society that they can actually influence workers to buy into a system that is not economically advantageous to them 

• According to Gramsci’s notion, the hegemons of capitalism – those who control the capital – can assert economic power, while the hegemons of culture can assert cultural power 

• Concept of cultural hegemony is pertinent in the modern day because of concern that rising globalization will permit one culture to so completely assert its power that it drives out all competitors 

“Cultural Hegemony”

Antonio Gramsci originated the idea of “________ ________" to describe the power of one group over another 

McDonaldization

A similar but slightly different concept from cultural imperialism suggests that American tastes and values will crowd out local cultures around the globe 

• Term coined by George Ritzer in his book, The McDonaldization of Society (1993) 

• Concept is rooted in the process of rationalization 

Efficiency, Calculability, Predictability, and Control

With McDonaldization four aspects of the business are taken to the extreme 

• __________ 

• ___________

• ____________

• ________

Applying the concepts of an optimized financial market to cultural and human items like food, McDonaldization enforces general standards and consistency throughout a global industry 

McDonald’s

Is the prime example of this concept of McDonaldization

• Fast food restaurant is somewhat different in every country (Indian restaurants offer pork-free and beef-free menus to accommodate regional religious practices) 

• However, the same fundamental principles apply 

• Branding of company is the same 

• “I’m Lovin’ It” 

• Golden Arches 

• Business model of McDonald’s stays relatively the same from country to country (menu is pretty much the same in any area) 

Western-Style

Some local cultures around the world have taken to ________-_____ business models so greatly that they have created their own hybrid cultures 

• Well-known example is India’s Bollywood films 

American-Style

Instead, local cultures seem to adopt _________-_____ media models, changing their methods to fit the corporate structures rather than just the aesthetics of US media 

Cultural Imperialism

________ __________ refers to the power of the dominant culture to overshadow and even overtake local cultures, a concept derived from the work of Antonio Gramsci on cultural hegemony 

McDonaldization

Is characterized by efficiency, calculability, predictability, and control. These four attributes – more than any specific cultural ideas – are the primary features of globalized American businesses

Media

The future of media is _____

Laws and Regulations

Only ____ ___ ___________ show the momentum of consolidation (changes with every administration) 

Transnational Companies

____________ _________ are designed to create media and content that can be offered worldwide (not designed to support local news media and artists) 

“Subscription Fatigue”

Some analysts predict that the 2020s will see “__________ ______” 

• Analysts looking at most streaming media subscriptions see a very crowded field competing for attention, from videos to music to gaming to fitness 

“Consumption-Based Services”

Alternative goes by the name “__________-_____ _________” 

• Under this model, subscription services will change their pricing models and will start allowing customers to buy or rent specific episodes without requiring them to subscribe to the entire service 

• Will also see hybrid pricing models emerge that blend subscriptions and a la carte services 

Media

Found a way to keep society going 

• _____ provided information, social connection, entertainment, education, and more when people and society needed it most 

• Though they will surely change throughout the 2020s, the _____ will not lose their central cultural role