Media Management 10/10/2017

BCA 516 10/10/2017 The Media Market Place

Electronic Media Markets BCA 516 10/10/2017 Electronic Media Markets Electronic media managers must understand basic market economics and the markets in which they compete for audiences and advertisers. Market: A place where consumers and sellers interact with one another to determine the price and quantity of the goods produced. 10/10/2017

Electronic Media Markets BCA 516 10/10/2017 Electronic Media Markets Dual-Product Markets – While media companies produce one product, they participate in separate goods and services markets. (e.g.) Television program & advertising http://www.youtube.com/watch?v=osJaANwkSoE&feature=related 10/10/2017

Dual-Product Nature of Electronic Media BCA 516 10/10/2017 Dual-Product Nature of Electronic Media Success in selling advertising affects the ability to sell or promote use of the media product: more advertising provides resources that can be used to make the product more attractive to the potential audience Media Product Advertiser Access to Audience Success in selling or promoting use of the media product affects the ability to sell advertising access: larger or better audiences makes a medium more attractive to advertisers 10/10/2017

Electronic Media Markets BCA 516 Electronic Media Markets 10/10/2017 Geographic Markets – Electronic media companies operate in specific geographic markets. (e.g.) Local radio & TV stations Defining a media market involves combining the product and geographic aspects of the market. Identification of a specific market in which a media firm offers some or all of its products to advertisers or consumers. 10/10/2017

Market Structure The structure of a market can be defined in terms of the size and distribution of owners, and the amount of product differentiation, and the number of entry barriers within a market (Pickard, 1989). Concentration in the market: A market is considered concentrated if revenues, or circulation, are controlled by a limited number of companies. (e.g.) HHI (Herfindahl-Hirschman Index)

Market Structure Product Differentiation: Perceived differences among products (e.g.) unique formats, marketing, individual TV program schedule Barriers to entry: Obstacles new sellers must overcome before they can enter a particular market. (e.g.) capital investments (equipment, personnel, and programming resources)

Market Structure Cost Structures: Expenses needed to create products in a market. Total Costs = Fixed Costs + Variable Costs (e.g.) Fixed Costs: Costs needed to produce one unit of a product (e.g.) Variable Costs: Labor Costs Economies of Scale: The decline in average cost that occurs as additional units of a product are created Vertical Integration: A firm controls multiple aspects of the production, distribution, and exhibition of its products

Types of Market Structure Monopoly: A single seller of a product Duopoly: Two sellers of a product Oligopoly: Three or more sellers of a product, which may be either homogeneous or differentiated Monopolistic Competition: Many sellers offer similar products that are not perfect substitutes for one another. Perfect Competition: Multiple sellers & a homogeneous product

monopolistic competition usually differentiated Market Structure monopoly oligopoly monopolistic competition perfect competition Number of firms One a few many Product -- usually differentiated differentiated identical Entry barriers Yes No 11

Four Types of Market Structure media industry market structure monopoly? cable TV (SO) oligopoly? broadcast network, movie, telecommunication monopolistic competition? magazine, book, radio... 12

Strategic Alliance Strategic Alliance: An association designed to provide benefits for each of its members. (e.g.) Mergers & Acquisitions Media organizations use alliances for sharing capital and costs, providing access to new markets, increasing shareholder value, and reducing risk.

Example: Acquisitions Purchase of target firm as a subsidiary business with the intent of enhancing a core competency of the acquirer. (e.g.) acquisitions of Android (mobile software) by Google (2005) (e.g.) acquisitions of Lala.com (music streaming) by Apple (2009) (e.g.) acquisitions of Quattro Wireless (mobile advertising) by Google (2010)

Example: Strategic Alliance (Networks) Apple iphone (mobile application) + Starbucks (coffee) Starbucks. Now served on your iPhone®. We love finding ways to serve you better. Like helping you enjoy your coffee even more. Or making your life a little easier. And with our two free new apps for the iPhone and iPod touch, we've managed to do both.