Media economics Some features of a business based on selling information

The impact of commodity features Media provide two commodities—content and audience – The first is marketed to consumers and the second to advertisers – The nature of information and the technology used to distribute it are crucial to understanding media industries

Information as a commodity Information has value either through its consumption (entertainment) or its use in future actions (stock market tips, political information, weather) – Most media content is entertainment-oriented Much of ‘news’ is actually entertainment content – The entertainment value of information is usually greatest during its first consumption Once you know the ending, you are less likely to watch a movie

Information and technology Through most of history, information was tied to its original technology of distribution – Books – Newspapers – Phonograph records – Movies More recently, the ability to alienate the information from the original medium of distribution has risen sharply – VCRs – Cassette decks – iPods

Information and technology Contemporary technology has vastly reduced the costs of copying the information from a medium – Digitization

Distribution systems In the past, information had to be distributed mechanically – Printing – Film – Photographs Once the telegraph, wireless and then broadcasting systems were developed it became possible to distribute content without the necessity of distributing a physical medium along with it – Internet

Fixed v. variable costs Fixed costs are those that must be borne before a single item of the commodity can be produced – Plant and equipment Variable costs change with the volume of the commodity produced – Newsprint – Distribution costs – Labor (beyond some minimum) Media exhibit high fixed costs and low variable costs – “First copy costs)

Creativity/change/diversity Media content is expected to exhibit diversity and change—part of its value – The news is only valuable if it changes from one day to the next – However, such variability is expensive—a brand new product from day to day costs a great deal to produce – Therefore, an ironic situation arises—the industrialized production of diverse, changeable product

Supply and demand The higher the price, the lower the demand and the higher the supply According to traditional market economics, the point at which aggregate demand and industrial supply cross is the ideal level of social production of the good – The greatest happiness for the largest number

Why advertising? Both technology and the ‘public goods’ features of media make advertising a reasonable choice Media draw together audiences Attention is a valuable commodity for marketers trying to sell their wares

What funding sources are there? Government subsidy – NEA User fees – Copyright issues Advertising Patronage Self-funding (advocacy)