media economics

Media Economics

Rupert Murdoch• Australian• 1953 RM inherited 2 newspapers.• 1970s RM bought San Antonio Express-News & The New York

Post.Founded the Star (gossip tabloid).• 1981 purchases the London Times.• 1980s Buys 20th Century Fox film studios & multiple U.S.

television stations.• Launches Fox network.• Buys TV Guide to promote his network.• Fox: The Simpsons, X-Files American Idol, House.• 1990s Fox News, FX, Fox Business Channel.• 2005 News Corp purchases Shine Group (distributor $580

million).• 2008 MySpaceTV partnered with British ShineReveille

International (DVD distributor) for content. (Elisabeth Murdoch is CEO of Shine Group).

• 2006 Dow Jones & Wall Street Journal purchased by News Corp for $5.6 billion.

• 2011 hacking scandal, closes News of The World (UK paper).• 2012 ethics scandal.

http://www.newscorp.com/

http://www.pbs.org/wgbh/pages/frontline/murdochs-scandal/

Structure of the Media Industry

Three common economic structures of the media industry:

• Monopoly

• Oligopoly

• Limited competition

Monopoly

• Single firm dominates production & distribution or a particular industry.

• AT&T has a government approved monopoly for over 100 years, until the 1980s.

• 2002 Microsoft accused of monopolistic practices for controlling more than 80% of operating systems. Computers coming pre-loaded with Microsoft OS & products.

• LOCAL or worldwide monopolies can occur.

Oligopoly

• Few firms dominate an industry.

• Book publishing & feature film industry are oligopolies.

• 5 or 6 major companies that control the production & distribution of the majority of content.

• MUSIC: Warner Music, Sony, Universal, EMI

How does the media make money?

• Direct payments (consumer buys media product).

• Indirect payments (media product is free to consumer, paid for by advertising).

Economies of Scale Principle

• Increasing production should lead to reduction of cost of product.

How Media Companies are assessed

• Profit• Production costs• Price setting• Market strategies• Introduction of new technologies• New products & services

• Traditional media

• New media

• Free market laissez faire

• Regulated market

Regulation & Deregulation

• Monopolists of the 1800s:

John D. Rockefeller (oil), Cornelius Vanderbilt (shipping & railroads), & Andrew Carnegie (steel).

1890 US congress passed the Sherman Antitrust Act. Outlawing monopolies that made it impossible for new businesses to enter the market.

1914 Clayton Antitrust Act: prohibited manufacturers from selling only to dealers & contractors who agreed to reject competitor’s products.

Regulation & Deregulation

• 1950 Celler-Kefauver Act, limited corporate mergers that affected competition.

• FTC enforces regulation today.• http://www.ftc.gov/

Deregulation

• Until 2008 financial crises, government regulation was seen to encumber business & the economy.

• Business owners celebrate “FREE” market practices (anything goes economics).

Deregulation

• President Jimmy Carter (1977-81) initiated deregulation.

• Ronald Reagan (1981-89) deregulated quite severely.

• Consequences of deregulaiton: 2009 Enron, 2005 fraud WorldCom & Adelphia, 2008 financial crisis.

• BUT BIG PROFITS WERE MADE

Deregulation• 1996 Telecommunications Act (Pres. Clinton) lifted most

restrictions on how many radio & TV stations one corporation could own.

• CONSOLIDATION of radio & TV ownership.• 7 powerful regional telephone companies allowed into TV &

radio.• Cable operators gained the right to freely raise their rates &

compete in local telephone market.• Result: price of expanded basic cable service jumped 122%

from 1995 to 2008 (three times the rate of inflation).• Cost of monthly telephone landline increased by 20%.Introduction of mobile phone offset landlines.Comcast & AT&T try to corner all communications through

“bundling”. Internet, phone, mobile, satellite.

Deregulation Today

• 1995 FCC allowed Murdoch (Australian) many US media outlets.

• WWI government feared foreign ownership of media outlets to be dangerous to national security. Only 20% of market could be owned by foreign investment. Murdoch changed citizenship in 2004 to avoid problems.

Deregulation Today

2007 FCC rules relaxed allowing cross-ownership of newspaper & TV.

• Previously a company could not own a newspaper & a broadcast outlet in the same market.

Media Powerhouses

• 1980s: GE purchased RCA/NBC• 1996 Microsoft partnered with NBC: MSNBC.• 2005 NBC Universal partnered with

MSNBC.com• 1995 Disney acquired ABC ($19 billion).• Time Warner & AOL merged ($106 billion).• 2001 AT&T unites with Comcast• 2009 Comcast purchased NBC Universal

from GE.

Media Powerhouses

• http://www.freepress.net/ownership/chart

• http://www.businessinsider.com/these-6-corporations-control-90-of-the-media-in-america-2012-6

• Shadows of Liberty:

• http://www.youtube.com/user/linktvhttp://shadows.kcetlink.org/Democracy Now on Shadows of Libertyhttp://www.democracynow.org/2013/4/5/shadows_of_liberty_new_film_explores

http://shadowsofliberty.org/

Trends in Media Business Practices

• “Flexibility” new, fleeting rather than traditional.

• Individual consumer preferences

• Cheap labor

• Quick, high-volume sales

• Niche markets

Trends in Media Business Practices

• 80-90% of new ventures fail.

• Dozens of films made 1 or 2 hits.

• Merchandising

• DVD

• Oversea sales

• Downloading digital product

Trends in Media Business Practices

• “Globalized” workforce.

• Outsourcing

• US Labor Unions:

• 1955- 35% of workforce

• 1983- 20%

• 2008- 12% (Canada 30%)

Trends in Media Business Practices

• Downsizing- less workers, more efficient, profitable companies.

• Wage Gap- 2004, 45% of Americans $26K per year.

• 1970 to 1999 workers had a 10% increase in pay. CEO salaries went from 39-times a worker’s salary to 1,000-times a worker’s salary (1970-1999).

Hegemony

• The acceptance of the dominant values in a culture by those who are subordinate to those who hold power.

Antonio Gramsci

The engineering of consent

Hegemony

• “If companies or politicians convinced consumers and citizens that the interests of the powerful were common sense and therefore normal or natural, they also created an atmosphere and context in which there was less chance of challenge of criticism.” Media & Culture, 2011.

The Narrative

• Common sense, “just the way things are,” “down home,”storytelling, myths.

• Symbolically transferred.

Hegemony

Television, film, music, magazines, newspapers, & books reinforce

narratives.

Globalization

• 1947 GATT General Agreement on Tariffs & Trade

• 1995 WTO World Trade Organization NAFTA (1994) North American Free Trade Agreement

• Low-wage jobs in countries with little or no worker’s regulations.

Specialization

• Specialized, niche market media.

• BET

• Seventeen

• AARP

• A&E

• Cartoon Network

Synergy

• Promotion & sale of different versions of a media product across the various subsidiaries of a conglomerate.

• Time Warner HBO “making of” a Warner Brothers movie, reviewed in Time magazine.

Conglomerate• PBS:

http://www.pbs.org/wgbh/pages/frontline/shows/cool/giants/

Equating free market or capitalism with democracy

Consumer choice

&

Consumer control

Media literacy

Consumer literacy

Cultural Imperialism

Media Consolidation & Democracy

• NOW with Bill Moyers

• http://billmoyers.com/topics/media/

• www.Onthemedia.org