PRINCIPLES OF MEDIA ECONOMICS

 Buyers and sellers =  Producers and consumers (for media)  Buyers and sellers =  Producers and consumers (for media)

“ECONOMIC PROBLEM” 1.How much (which goods) to produce 2.How to produce them 3.Who will consume them  Labor 1.How much (which goods) to produce 2.How to produce them 3.Who will consume them  Labor

Types of economies  Command  Market  Mixed  Which is US?  Laissez-fair  Non-interference by gov. (“invisible hand”)  Command  Market  Mixed  Which is US?  Laissez-fair  Non-interference by gov. (“invisible hand”)

Supply & Demand  Supply  Amount of product a producer will offer at a certain price  Demand  Quantity of product or service consumers will purchase at given price  Supply  Amount of product a producer will offer at a certain price  Demand  Quantity of product or service consumers will purchase at given price

Demand Curve  Changes that supply and price cause on consumer demand

Demand for Media Products 1.Demand for media content 2.Demand by advertisers for access to consumers 3.Demand for media outlets 1.Demand for media content 2.Demand by advertisers for access to consumers 3.Demand for media outlets

Equilibrium  Balance point at which supply = demand  Goal of the market economy  Balance point at which supply = demand  Goal of the market economy

Economic concepts  Maximize profits/minimize costs  Production costs:  fixed (plant, staff)  variable (raw materials, line personnel)  Larger volume usually generates “economies of scale”  Maximize profits/minimize costs  Production costs:  fixed (plant, staff)  variable (raw materials, line personnel)  Larger volume usually generates “economies of scale”

Economies of Scale  Decline in average cost of product as additional units are produced

Elements of Media Businesses  Organization  Production  Distribution  Marketing/promotion  Accounting and information systems  Financial decisions (e.g. rate of return calculations; primary and secondary markets.  Organization  Production  Distribution  Marketing/promotion  Accounting and information systems  Financial decisions (e.g. rate of return calculations; primary and secondary markets.

Media: a growth market  Share of consumer media expenditure tending to increase;  Growth economy stimulates media consumption;  More time available to consume media;  Media can be consumed while doing other things  Share of consumer media expenditure tending to increase;  Growth economy stimulates media consumption;  More time available to consume media;  Media can be consumed while doing other things

 New media delivery systems encourage consumption;  Media attract investments from large corps.;  Deregulation leads to increased investment  New media delivery systems encourage consumption;  Media attract investments from large corps.;  Deregulation leads to increased investment

Sources of media revenue  Advertising (display, classified)  Client subscriptions  Government subsidies  Sponsorship  “Hit” fees, Transaction fees,  Product sales  Advertising (display, classified)  Client subscriptions  Government subsidies  Sponsorship  “Hit” fees, Transaction fees,  Product sales