Media
Management
7/13/2017
1
The Media
Market Place
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.
3
7/13/2017
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
4
7/13/2017
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
5
7/13/2017
Electronic Media Markets
 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.
6
7/13/2017
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)
7
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)
8
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
9
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
10
Market Structure
monopoly
oligopoly
Number of
firms
One
a few
Product
--
Entry barriers
Yes
monopolistic
perfect
competition competition
many
usually
differentiated
differentiated
Yes
No
many
identical
No
Four Types of Market Structure
• media industry market structure
• monopoly?
cable TV (SO)
• oligopoly?
broadcast network, movie, telecommunication
• monopolistic competition?
magazine, book, radio...
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.
13
Example: Acquisitions
 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)
14
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.
15