Media Economics and the Global Marketplace Chapter 13

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Storytelling as Business Strategy In the end, compelling narratives are what attract people to media—whether in the form of books or blogs, magazines or movies, TV shows or talk radio.

The Structure of the Media Industry  Three common structures Monopoly  One firm dominates production and distribution in a particular industry. Oligopoly  A few firms dominate an industry. Limited competition  Many producers and sellers, but only a few products within a particular category

The Performance of Media Organizations  Collecting revenue Direct payment Indirect payment  Commercial strategies and social expectations Economies of scale principle Economic analyses let consumers examine instances when mass media fall short.

Deregulation Trumps Regulation  Major regulation legislation Sherman Antitrust Act (1890) Clayton Antitrust Act (1914) Celler-Kefauver Act (1950)  Escalation of deregulation Carter, Reagan weakened controls. Some thought deregulation would lower prices and others predicted mergers—both were right.

Deregulation Trumps Regulation (cont.)  Deregulation continues today. In 1995, News Corp. received a special dispensation allowing it to own and operate the Fox network and a number of local TV stations. In 2007, the newspaper-broadcast cross-ownership rule was relaxed. Deregulation movement has returned media economics to nineteenth-century principles.

Media Powerhouses: Consolidation, Partnerships, and Mergers  Major deals In 1995, Disney bought ABC for $19 billion and Time Warner bought Turner Broadcasting for $7.5 billion. Time Warner merged with AOL—a $106 billion deal—in 2001, only to spin the company off by Comcast purchased a majority stake in NBC Universal in 2009.

Media Powerhouses: Consolidation, Partnerships, and Mergers (cont.)  Until the 1980s, antitrust rules attempted to ensure diversity of ownership among competing businesses. Media competition has been usurped by media consolidation. Most media companies have skirted monopoly charges by purchasing diverse types of mass media.

Business Tendencies in Media Industries  Flexible markets Elastic economy  Expansion of the service sector  Need to serve individual consumer preferences  Relies on cheap labor  Demands rapid product development and efficient market research Decline in the number of workers who belong to labor unions

Business Tendencies in Media Industries (cont.)  Downsizing Supposed to make companies more flexible and profitable Problematic results  Companies unable to compete due to too few employees and a decline in innovation Main beneficiaries have been CEOs.  Significant wage gap

Table 13.1: How Many Workers Can You Hire for the Price of One CEO?

Economics, Hegemony, and Storytelling  Hegemony Acceptance of the dominant values in a culture by those who are subordinate to those who hold economic and political power Must convince consumers and citizens that the interests of the powerful are common sense and thus normal or natural

Economics, Hegemony, and Storytelling (cont.)  Storytelling Used by candidates running for office to espouse their connection to Middle American commonsense and “down home” virtues  Narratives work by identifying with the culture’s dominant values. Hegemony explains why we sometimes support plans that may not be in our best interest.

The Rise of Specialization and Synergy  Specialization Magazine, radio, and cable industries sought specialized markets to counter TV’s mass appeal. By the 1980s, television embraced niche marketing. Young and old viewers sought other specialized forms of media.

The Rise of Specialization and Synergy (cont.)  Synergy The promotion and sale of different versions of a media product across the various subsidiaries of a media conglomerate Default business mode of most media companies today

Disney: A Postmodern Media Conglomerate  The early years Set the standard for popular cartoons and children’s culture  The company diversifies. Expanded into live action and documentaries and embraced TV Started Buena Vista, a distribution company Rereleased movies

Disney: A Postmodern Media Conglomerate (cont.)  Global expansion Death of Walt Disney in 1966 triggered a period of decline. Michael Eisner initiated a turnaround in  Touchstone movie division  Hand-drawn animated hits  Partnered with Pixar Animation Studios, creating computer-animated blockbusters

Disney: A Postmodern Media Conglomerate (cont.) Disney came to epitomize the synergistic possibilities of media consolidation. Continued finding new sources of revenue through the 1990s  Purchased ABC, including ESPN  Launched Broadway musicals  Opened more theme parks  Introduced the Disney Channel to the Middle East and North Africa

Disney: A Postmodern Media Conglomerate (cont.)  Corporate shake-ups Early 2000s brought multiple problems for Disney. Robert Iger replaced Eisner and  Repaired the relationship with Pixar  Landed a distribution deal with DreamWorks studios  Sold Miramax and its radio stations  Became a partner in Hulu.com  Purchased Marvel Entertainment

Global Audiences Expand Media Markets  International expansion has allowed media conglomerates some advantages. As media technologies get cheaper and more profitable, American media proliferate inside and outside national boundaries. Globalism permits companies that lose money on products at home to profit abroad.

The Internet and Convergence Change the Game  Companies struggle in the transition to digital. Traditional broadcast and cable services have challenged sites like YouTube for displaying content without permission. These companies are unsure of how to get people accustomed to free online content to pay.

The Internet and Convergence Change the Game (cont.)  New digital media conglomerates Largest digital media companies  Amazon, Apple, Facebook, Google, and Microsoft  Each has become powerful for a different reason.  Still need to provide compelling narratives to attract people  Digital age favors small, flexible startup companies.

The Limits of Antitrust Laws  Diversification Most media companies diversify, never fully dominating a particular media industry. Promotes oligopolies  Local monopolies Antitrust laws aim to curb national monopolies, not local, and have no teeth globally.

The Fallout from a Free Market  Lack of public debate on the tightening oligopoly structure of international media boils down to two major issues: Reluctance to criticize capitalism Debate over how much control consumers have in the marketplace  Consumer control differs from consumer choice

Cultural Imperialism  Cultural imperialism Refers to American styles dominating the globe Although many indigenous forms of media culture are popular, U.S. dominance in producing and distributing mass media puts a severe burden on countries attempting to produce their own cultural products.

Cultural Imperialism (cont.) Supporters  Creates an arena in which citizens can raise questions  Universal popular culture creates a global village. Critics  Protests can be turned into products and lose their bite.  “Cultural dumping” hampers the development of native cultures.  Causes cultural disconnection

The Media Marketplace and Democracy  Superficial consumer concerns, not broader social issues, dominate the media agenda.  Mass media mergers make public debate over economic issues difficult.  Local groups and consumer movements are working to challenge “Big Media.”