Today
An introduction to Media Economics
•  Introduction - reading list, lectures, and seminars.
•  Media economics - relevance, rationale, and research.
•  Key concepts – definitions, uses, and discussions.
MEVIT 4300/3300
Gunn Sara Enli, Associate professor
Department of Media and Communication [email protected]
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Institutt for medier og kommunikasjon (IMK) Lectures
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Institutt for medier og kommunikasjon (IMK) Seminars
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Institutt for medier og kommunikasjon (IMK) 1
Media Economics
The research field
§ A new way to talk about the media – A
new conceptual framework
§ Media as products in a market – TV,
radio, newspapers, books.
§ Media economics is a field with a fairly
short history; established in the 1980s
Economics & Media Studies
The media as…
§ A product sold on a market
§ An intellectual property
§ International trade
Economics:
The Economist's Dictionary of Economics:
"The study of the production, distribution and consumption of wealth (goods and services) in human
society”.
Hoskins et al. (2004):
“Economics is the science that studies how the economy allocates scarce resources, with alternative
uses, between unlimited competing wants”.
§ Business strategy
§ Pricing policies
§ Competition industrial concentration
Media Economics:
Picard (1989:7, in Doyle 2002.2):
“How the media operators meet the information and entertainment wants and needs of the audience, the
advertisers, and society, with available resources”.
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Institutt for medier og kommunikasjon (IMK) Characteristics of Media Economics
Key Concepts in Media Economics
u  ‘Dual Markets’:
Economics of Scale
Economics of Scope
Ø Initial costs / Marginal costs
Ø Modify media products to various
markets.
-  Audience market (content; entertainment/information)
-  Advertising market (ratings, circulation, niches)
Ø Marginal reproduction costs
Ø 100 viewers = 1 mill viewers.
Ø More profit in large markets.
Ø Multi-product production.
Ø Profit from various markets.
u  ‘Public good’
-  Consumption does not reduce value of the product.
-  Information is difficult to sell normally (‘market failure’)
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Institutt for medier og kommunikasjon (IMK) Discuss in pairs (3-5 min.)
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Institutt for medier og kommunikasjon (IMK) Media Production
Ø  The media has a hybrid function between commercial products
and public goods.
Ø  Reduce Costs (economics of scale):
Ø  Discuss to what degree economic logics influence (1) the
production, (2) the distribution, (3) the consumption of media.
-  Entertainment: imported programs, mass produced series etc.
-  Information: reduce staff, less original reporting, recycle stories.
Ø Increase income (economics of scope):
-  Information: increase sales price, more advertisements etc.
-  Entertainment: product placement, spin-off products, format export etc.
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Influence on
production: USA 1950s:
Quiz Show
Scandals
Transition
from
sponsorship
to advertising
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Institutt for medier og kommunikasjon (IMK) Media Consumption
Media Distribution
Ø Reduce Costs:
-  Online news replaces print newspapers
-  Fewer editions are circulated
-  Vertical and horizontal expansion
Ø  Increase income:
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Income from distributors
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Mergers and expansion
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Institutt for medier og kommunikasjon (IMK) ’The Vertical Supply Chain’
Ø  Media firms make their earnings from refining raw material;
production, packaging, distribution.
Ø  The value chain demonstrates what kind of added values that are
introduced on each stage in the chain.
Ø  The key goal is to create added value, to make customers willing to
buy the products.
Ø  Vertical expansion? Examples?
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Institutt for medier og kommunikasjon (IMK) Expansion Strategies
Economic Theory: A Model of Market Structures
Horizontal expansion
–  Expand in the same market. – e.g. newspaper buys another paper - Goal: ec of scale
Diagonal expansion
–  Diversify to new markets – e.g. newspaper buys radio station – Goal: ec of scale +
scope
Vertical expansion
–  Integration of value chain – e.g. cable company buys TV-station – Goal: control the
value chain + bottlenecks
Transnational expansion
–  Expansion into international markets – e.g. Norwegian media firm buys newspapers in
Baltic – Goal: ec of scale + scope + growth
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Summary – Key concepts
Next Lecture
ü  ‘Dual markets’ – ‘Public goods’ – Intellectual property
Monday 11 Feb - Jens Barland
Talk on recent developments in Scandinavian media markets.
ü  Initial costs / Marginal costs
ü  Economies of scale / Economies of scope
Prepare:
ü  Vertical supply chain
Read: Understanding Media Economics (G. Doyle).
-  ….But don’t forget to check out industry news:
ü  Expansion strategies
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http://www.guardian.co.uk/media
ü  Market concentration
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http://www.nytimes.com/pages/business/media/index.html
- 
http://www.kampanje.com
ü  Public policies (market intervention)
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