Commercialization of Media Pertemuan Matakuliah: O0394 – Teknik Reportase dan News Caster Tahun: 2010

Learning Objectives This part will discuss how the media makes economic efforts to gain profits and how it should transform their organization/ work system in order to survive and compete. This session will discuss the rules and regulations the media must obey when the media is making money. 3

The Economic Efforts of Media (1/5) How the media make money?  Direct sales: the money obtained when consumers pay lump sums to purchase tangible products and the money would go to the retailer. For example: when consumers buy a notebook from a retail shop. 4

The Economic Efforts of Media (2/5)  Rentals: direct payment that is made when consumers borrow a tangible product;  Subscription: payments that are made for a continuing service. For example: newspaper, magazines, cable companies; 5

The Economic Efforts of Media (3/5)  Usage fees: an amount of payment for intangible products (services) For example: movies, theatres, or long-distance call;  Advertising: the main economic base for most newspaper, magazines, television, and radio stations. 6

The Economic Efforts of Media (4/5)  Syndication: the rental or licensing of content to media outlets, rather than the consumers. For example: television cartoon or re-run of old television series;  Copyright royalty fees: payment as compensation of media content for the use of an original idea. 7

The Economic Efforts of Media (5/5) For example: songwriters that receive royalty fees from radio stations, cellular phones providers, and from retail sales of their recording;  Subsidies: an amount of money provided for communication media that society consider desirable but not of the commercial interests. 8

How the Money Goes… 9

Media Ownership Patterns (1/6) The competition among television stations are becoming more severe. The producers must spend extra costs to release attractive new products should the competition exist. 10

Media Ownership Patterns (2/6) There are certain aspects that make the television production are obliged to make as much profits as they could: Taxes Operating costs (wages, promotion, etc) Paybacks to investors 11

Media Ownership Patterns (3/6) For that reason, the economics of media industry may lead to ownership patterns that, in some way, are not in the interest of consumers. There are 4 (four) media ownership patterns that could describe the media economic performance. 12

Media Ownership Patterns (4/6)  Monopoly when a company dominates the industry;  Oligopoly is when a few companies dominate the industry; 13

Media Ownership Patterns (5/6)  Duopoly is when two companies dominate the industry  Competition is when few companies may run their programs and do promotion to gain profits without any barriers. 14

Media Ownership Patterns (6/6) 15

Is Money the Only Motive?  Most privately owned media companies is driven to make program and regulations that will increase their profits;  But public service media (not-for-profit organization) still carries out valued program to the community like education, cultural arts or government information. 16

On Becoming competitive (1/7) The Commercialization of Media A Broadcasting magazine stated: “In this country, where production capacity exceeds consumer demand, advertising has become more than an economic force - it is an influence on our quality of life.” (Herbert I Schiller) 17

On Becoming competitive (2/7) The television advertising expenditures of US companies, No.CompaniesCosts ($ million) 1Procter & Gamble Bristol-Myers93.6 3General Foods93.3 4Colgate-Palmolive67.1 5Lever Brothers58.0

On Becoming competitive (3/7) Other than advertising, the media companies also try to produce the content/ program that that is suitable/ fitted with the marketeer’s order. Due to the mass production and time concern in production activities, sometimes the programs they produce are of the low quality which provide such a low moral values to the community. 19

On Becoming competitive (4/7) An American TV writer stated: “TV is not an art form or a cultural channel, it is an advertising medium. … They (television programs) are not supposed to be any good. They are supposed to make money… (and) in fact, ‘quality’ may be not merely irrelevant but a distraction.” 20

On Becoming competitive (5/7) From Mass Markets to Market Segments Another way of becoming a competitive media company is to narrowcast the business. It is to target smaller and more specific audience segments with more specialized content (Owen & Wildman, 1992). 21

On Becoming competitive (6/7) Four important aspects that help the media to narrowcast their business: The information technology; The advertisers’ preference that value smaller audiences; 22

On Becoming competitive (7/7) Sophisticated research techniques and databases; Audiences & the creative developers that are more interested in more specialized (segmented) media and consumer products. 23

Closing The end of this discussion will lead the students to understand how the stiff competition among media companies would force the companies to transform their organization in order to fulfill the demand that will later on bring more profits to the media companies. 24