Soc. 118 Media, Culture & Society

1. Soc. 118Media, Culture & Society Chapter Two: The Economics of the Media Industry

2. OVERVIEW • The Economics of the Media Industry • Changing Patterns of Ownership • Consequences and Effects • Mass Media for Profit • Prime Time TV • News Media • The Impact of Advertising

3. The Economics of the Media Industry • Media products as the result of social processes of production • The production perspective • Broad structural constraints on media • How economic factors: • shape decision making • influence media content • Most critical fact about the media: • Most are a for-profit business • Underlying goal of organizations

4. Changing Patterns of Ownership • Who owns the media? • What is the connection between ownership and media products? • Three interrelated trends • Conglomeration • Concentration • Integration • Effects and Consequences

5. Conglomeration • Media companies have become part of larger corporations • They may have other diverse businesses • Because it is profitable for big business • Attractive properties for investors and buyers • Media has become key segment of U.S. economy • Move from manufacturing to service economies • Media products also major export • Examples • General Electric • Owns NBC • Sony • From hardware to software • Seagrams • Owns Universal

6. Concentration of Ownership • Fewer and fewer corporations own the media • Monopolies, mergers and takeovers • Media companies own vast portfolios of products • Range of media formats and delivery systems • Many media outlets with different names • Owned by same parent company • Small independents bought up by larger companies

7. A small number of multinational companies dominate the industry • Within each sector, a few companies tower above competitors • Books • Bertlesmann (Random House), Pearson (Penguin), News Corp (HarperCollins) • Magazines • AOL Time Warner • Motion pictures • Universal, Paramount, 20th Century Fox, Disney, Warner Bros., Sony • Music • Universal (Vivendi), Sony, Bertlesmann (now merged as Sony BMG), AOL Time Warner, EMI (now Terra Firma) • Television (less concentrated) • Networks: ABC, CBS, NBC, Fox, WB, other cable channels? • Radio • Clear Channel • Newspapers • Gannett, Knight Ridder

9. Concentration of Ownership Video Clip: AOL Time/Warner Merger

10. Integration • Two types of media concentration • Owners perceive these arrangements as efficient and profitable • Vertical integration • One owner acquires all aspects of production and distribution of a single media product • Concentrating ownership within one industry • Horizontal integration • One owner acquires different kinds of media • Concentrating ownership across different types of industries

13. Consequences of Integration • Ownership patterns likely to affect kind of media products are created • Owners likely to prefer products that can create "synergy” • Products that can be exploited by other components of the conglomerate • Vertical integration • Controls all aspects of production and distribution • Limits competition • Horizontal integration • Cross-promotion is driving force behind growth of this ownership trend • Recent examples

14. Consequences of Conglomeration • The media are seen as necessarily profit-making • Increased bottom-line pressure • Greatest concern is in the area of news • Traditionally sheltered from such pressure • News divisions had a public service commitment • Not expected to turn a profit • Takeover of news operations by conglomerates • MBAs have replaced seasoned journalists as company executives • Clashes between news divisions and corporate owners • NBC and the “boundary-less” company • No division between news, entertainment, sales • News programs facing stiff competition for viewers • Results in increased emphasis on entertainment and celebrity • The “Hollywoodization” of news • Print journalism has also been affected • Emphasis on attracting consumers rather than informing citizens • Increasingly colorful, sensationalistic and dramatic

16. Consequences of Concentration • Media Control and Political Power • Can ownership be translated into political influence? • First Amendment protects freedom of the press and protects against government censorship • Corporations (rather than gov’t) own “private ministry of information” • Small number of firms with similar interests • Can owners use media outlets to promote political agendas? • Examples of Bloomberg (Mayor NYC) and Murdoch (News Corp) • Owners can also control information by excluding certain ideas and images • The “corporate voice” has become the norm • Media generated discourse about the American economy • Control and influence cannot be total • But freedom of the press only for those who can afford to own one • Marx: “The ruling ideas are the ideas of the ruling class” • More difficult for alternative voices to emerge

17. Gerald Levine—CEO Time/Warner CNN interview January 2, 2000 “Global media will be and is fast becoming the predominant business of the 21st century. So predominant, in fact, that the media business is now more important than government. It’s more important than education institutions and non-profit organizations. We’re going to need to have these corporations redefined as instruments of public service, and that may be a more efficient way to deal with society’s problems than bureaucratic governments.”

18. Consequences of Concentration • Media Ownership and Content Diversity • Theory that competition leads to diversity • Concentration and horizontal integration can lead to homogenization • Absence of competition • Research on relationship between competition and diversity shows conflicting evidence • Case studies of newspapers and popular music

19. Case Study in Content Diversity:The Local Newspaper Monopoly • Fewer cities with 2 or more daily newspapers • Fear that monopoly (or joint-ownership/quasi-monopoly) papers will be less diverse than competing papers • Competition should lead to greater diversity • Vertical diversity: range of actors mentioned and degree of disagreement within a single paper • Horizontal diversity: differences in content between two papers • All newspapers lack in diversity • Competitive papers must attract same advertisers and audiences • Papers minimize costs and produce lowest-common-denominator product with broadest appeal

20. Case Study in Content Diversity:The Music Industry • Competition leads to innovation and diversity in music • Measured by: • # of different songs • # of new and established artists in top 10 than competing papers • Diversity increases when concentration decreases • Dramatic shift occurred between 1940-50s and 1960s • Opening of market through shift from national to local radio • Increased oligopoly in 1990s • Diversity did not decrease • Change in system of production within industry • Shift from “closed” to “open” system • Record companies control manufacturing, distribution, promotion • But use independent producers to maintain vitality of music • Higher ratio of record labels to record firms

21. MASS MEDIA FOR PROFIT:The Case of Prime-Time TV • Programming decisions made with profits in mind • Need to have hit shows to attract large audiences • To charge premium rates for advertising time on those shows • Failure is the norm in network TV • Only small # of shows are a success • Hit shows provide large profits to make up for failures • May represent only 10% of programming • Search for the formula for success • Programming strategies: • “The Logic of Safety” • “Nothing Succeeds Like Success” • “Newsmagazine” and “Reality TV” programs

22. Programming Strategies:“The Logic of Safety” • Executives are never sure what audiences will watch • Or why some shows succeed and others don’t • Efforts to minimize the risk of losing money on programs • “Risky” programs • Those that seem unlikely to attract mass audience or major advertiser • General tendency to avoid controversy • Even when it might bring high ratings

23. Programming Strategies • “Nothing Succeeds Like Success” • Spin-offs • Examples: (See link) • Copy-cats • Examples: • Newsmagazine Programs • Audience size and ratings are down from past decades • Cost of production for dramas and sitcoms is up • Incentive to produce programs in-house • Less expensive to use existing news resources and “found footage” • Reality TV • Modest production budgets • “Unscripted” and no star salaries

24. Hits, Stars and Decision-Making • Fame and stardom are key resources in media industry • The business of celebrity • The “hit-system” or “star principle” • If hits are the goal, then producers want to find new or existing stars who can attract a large audience • Producers decide which products and people have best chance for success • Stars are an agreed upon currency for assessing projects • Heavy promotion and favorable scheduling of shows • Commitment to stars and their reputations • “Brought to you by” the writers, producers, directors of … • To reduce risk and uncertainty about what succeeds

25. Profit and the News Media • News outlets now need to increase profits • Lowering the cost of gathering and producing the news • Decrease # of journalists (especially investigative reporting) • Use larger % of wire service reports (Associated Press, Reuters) • Use video PR segments and press releases • Focus on preplanned events • Rely on a small # of elites and institutions • Close foreign bureaus • Increasing revenues • Create light, entertaining programs • Avoid controversy and present news in upbeat, reassuring manner • Focus on personality-oriented journalism • Highlight intrigue, titillation and scandal

26. The Impact of Advertising • Media rely on advertising base • Television, radio, magazines, newspapers • Companies pay to place ads for their products • Media are in the business of “delivering audiences to advertisers” • How ratings are tied to advertising rates • Neilsen and other audience research • Advertisers are buying audiences • Indifferent to content or programming • Something to hang ads on • Growth in advertising in new realms • Movie previews • Product placement • Captive audiences • Waiting rooms • Channel One in classrooms

27. The Impact of Advertising • Advertising and the News Media • News usually depict advertisers’ products and interests in favorable light • Unconscious self-censorship on the part of journalists • “Lifestyle” sections focus on consumption • News should maintain a tone that keeps a “buying mood” • Financial incentive to produce news that appeals to upscale audience • Advertising and MTV • Music videos are themselves advertising • Cable TV allowed for new programming • Music industry provided videos to MTV at no charge • Music videos are determined by promotional demands • Result of marketing rather than artistic decisions • Advertising and “New” Media • Internet advertising • Focus on search engines and other high traffic sites • Cable TV and “narrowcasting” • Niche markets fragment audiences