Electronic Media Management 1

Characteristics of Media Products Experience Goods a product or service where product characteristics, such as quality or price are difficult to observe in advance. consumers must experience a good to value it information is an experience good every time  WSJ, drama, movie, music... overcome with browsing (headlines newsstand, previews at the movie) and branding 2

Characteristics of Media Products Public Goods non-rivaled & non-excludable consumption of the good by one individual does not reduce availability of the good for consumption by others no one can be excluded from using the good economists have argued that they may lead to instances of market failure, where uncoordinated markets are unable to provide these goods in desired quantities. These issues are known as public goods problems. 3

Private goods Common goods Club goods Public goods Excludable Non-excludable Rivalrous Non- rivalrous Classification of Goods

Characteristics of Media Products Dual Goods mainly made up of two supplementary products geared toward two different markets (content for the audience and the time dedicated by the audience for the advertisers) media as “a bridge between advertisers and audiences” 5

Characteristics of Media Products Cultural Goods media content media as a mirror of society (culture) export and import of media products (e.g.) Hollywood movie, K-pop 6

Characteristics of Media Industry Social/cultural impact  more regulation Economies of scale: cost advantages that firms obtain due to size or scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output. the more you produce, the lower your cost - newspaper, programs, movie.... no natural limits to make additional copy fixed costs of production are large, but the variable costs of reproduction are small 7

Economies of Scale As quantity of production increases from Q to Q2, the average cost of each unit decreases from C to C1. 8

Characteristics of Media Industry Window effect move to different outlet continuously - theatre  hotel & airline market  video/DVD  premium TV  basic cable  free TV Synergy : > 2 Vertical integration –an attempt by one company to simultaneously control several related aspects of the media business, each part helping the other. –(e.g.) movie production - distribution – exhibition –(e.g.) Time Warner owns magazines, America Online, HBO, Warner Brothers movies, CNN and other cable networks 9

Any questions? 10