week 10
HOWARD COMMUNITY COLLEGE, TVRD129 – INTRODUCTION TO MASS MEDIA
Media Economics and the Global Marketplace – chapter 11
In the economic history of electronic — and now digital — media, one key business strategy has been to
transition from technology and distribution into selling content. Today we see this story unfold in new ways with
AOL acquiring the Huffington Post, cable TV producing award-winning programs, and Google buying YouTube.
I. Analyzing the Media Economy
The increasing power and reach of large media conglomerates raise questions about balancing unlimited freemarket growth against some government controls.
A. The Structure of the Media Industry. Three common organizational structures characterize the
media business — monopoly, oligopoly, and limited competition.
B. The Performance of Media Organizations. Economists analyze how media make money, set prices,
and live up to society’s expectations.
1. Collecting Revenue. Direct payment involves media products supported primarily by
consumers, who pay directly for a book or a CD. Indirect payment involves media products
supported primarily by advertisers.
2. Commercial Strategies and Social Expectations. Economists look at other elements of the
commercial process, including program or product costs, price setting, marketing strategies,
and regulatory practices.
C. The Internet Changes the Game. “Old media” all have Web sites that offer online versions of their
product or Web services that enhance their original media form, allowing new opportunities for ad
revenue.
II. The Transition to an Information Economy
The 1950s marked a transition from the Industrial Age to the Information Age.
A. Deregulation Trumps Regulation. Regulation of industry began in 1890 with the Sherman Antitrust
Act, which sought to break up monopolies in the coal, railroad, and steel industries.
1. The Escalation of Deregulation. Deregulation started with the Carter administration,
accelerated during the Reagan era, got a significant boost when President Clinton signed the
Telecommunications Act of 1996, and continued with decisions and actions by the FCC under
the George W. Bush administration.
2. Deregulation Continues Today. With these moves toward deregulation in the twenty- first
century, media economics is returning to nineteeth-century principles.
B. Media Powerhouses: Consolidation, Partnerships, and Mergers. Despite the strong antitrust laws,
these rules have been unevenly and curiously applied.
C. Business Tendencies in Media Industries. A number of other factors characterize the economics of
mass media businesses.
1. Flexible Markets and the Decline of Labor Unions. Though 80 to 90 percent of media
products fail, larger companies are able to absorb losses with one or two major successes while
also exporting jobs to other countries to avoid the high price of U.S. unionized labor.
2. Downsizing and the Wage Gap. CEOs earn huge salaries, sometimes by overseeing huge
layoffs.
D. Economics, Hegemony, and Storytelling. To understand why our society doesn’t par- ticipate in
much public discussion about wealth disparity and salary gaps, it is helpful to understand the concept
of hegemony.
ANTHONY J. HOOS, Adjunct Faculty | [email protected]
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week 10
HOWARD COMMUNITY COLLEGE, TVRD129 – INTRODUCTION TO MASS MEDIA
III. Specialization and Global Markets
In today’s complex economic environment and as global firms seek greater profits, companies have sought to
move labor to less economically developed countries.
A. The Rise of Specialization and Synergy. Beyond specialization, though, what really distinguishes
current media economics is the extension of synergy to international levels.
B. Disney: A Postmodern Media Conglomerate. Disney epitomizes the synergistic possibilities of media
consolidation.
1. The Early Years. After Walt Disney’s first cartoon company, Laugh-O-Gram, went bankrupt
in 1922, Disney moved to Hollywood and found his niche.
2. The Company Diversifies. With the demise of the cartoon film short, Disney expanded into
documentaries, television, theme parks, and, beginning with Snow White, animated films.
3. Global Expansion. In 1984, a new management team, led by Michael Eisner, rein- vented
live-action cartoons for adults as well as children and explored the synergistic possibilities of
media consolidation.
4. Corporate Shake-ups and Disney Today. The cartoon pioneer experienced multiple shocks of
a recession, failed films and Internet ventures, and declining theme park attendance during the
2000s.
C. Global Audiences Expand Media Markets. International expansion has allowed media conglomerates
some advantages, including secondary markets to earn profits and advance technological innovations.
IV. Social Issues in Media Economics
Stripped-down regulations have virtually suspended most ownership limits on media industries.
A. The Limits of Antitrust Laws. Media conglomerates subvert antitrust laws by exploiting weaknesses.
1. Diversification. Most media companies diversify among different media products, never
fully dominating a particular media industry.
2. Local Monopolies. Because antitrust laws aim to curb national monopolies, most media
monopolies today operate locally.
B. The Fallout from a Free Market. Consumer critics have pointed to the lack of public debate
surrounding the tightening oligopoly structure of international media.
1. Equating Free Markets with Democracy. In the 1920s and 1930s, commercial radio
executives succeeded in portraying themselves as operating in the public interest while labeling
their noncommercial radio counterparts mere voices of propaganda.
2. Consumer Choice vs. Consumer Control. Consumer choice is not the same as consumer
control over what kinds of media get created and circulated.
C. Cultural Imperialism. American popular culture often overwhelms the traditions of indigenous
cultures.
V. The Media Marketplace and Democracy
In our society, superficial consumer concerns, stock market quotes, and profit aspirations receive more
attention than the broader social issues that affect media’s role in a democracy.
A. The Effects of Media Consolidation on Democracy. Merged and multinational media corporations
will continue to control more aspects of production and distribution — including news operations.
B. The Media Reform Movement. Local groups and consumer movements are trying to address media
issues that affect individual and community life.
ANTHONY J. HOOS, Adjunct Faculty | [email protected]
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