TRENDS IN COMMUNICATIONS

1. An Introductory Overview Sources various; include Croteau and Hoynes (2006) The Business of Media. Thousand Oaks, CA.: Pine Forge Press; and various contributions to Alexander, Owers, Carveth et al. (Eds) (2003) Media Economics. New York: Routledge. TRENDS IN COMMUNICATIONS

2. 1. Digitization 8. Convergence 2. Deregulation 9. Branding 3. Privatization 10. Synergy 4. Globalization 11. Mergers & Acq 5. Commercialization 12. Concentration 6. Specialization 13. Innovation and Competitivization 7. Growth 14. Connectivity 14 Trends: What Storyline?

3. (1) Growth in Media Variety of consumption technologies: Proliferation of technologies: cd's, computers, vcrs, dvds, MP3s, mobiles, 3G/4G mobiles Growing portable, on-demand consumption opportunities Financial growth: media advertising up $733m to $3.63bn to $150bn (1919-1950-2007), constant prices (As % of GDP: 2.5% - 1.9% - 2.0%)

4. Media Growth (2)Time Spent Time spent with media: 7hrs 35mins a day in 2009 for 3-18 years old (10hrs 45mins incl. multi-task time) http://news.cnet.com/8301-1023_3-10297935-93.html http://www.mediainfocenter.org/television/competitive/time_reach.asp http://www.kff.org/entmedia/upload/8010.pdf

5. Share of Time Spent Per Day with Major Media

6. Growth (ctd): Print (WAN, 2009) 1.9 billion people choose to read a newspaper every day, or 34 percent of the world population, while 24 percent use the internet. Biggest newspaper market is India, with 107 million daily sales. India, China and Japan account for more than 60 percent of the world’s newspaper sales, with the USA taking 14 percent. In sales per 1,000 adult population, Japan leads the world with 612, Norway with 576, Finland with 482. 91 percent of Japanese continue to read a newspaper daily

7. Growth (ctd): TV 9% of 43m US HH had TV, 1950, rising to 98.9% of 114.5m HH in 2009. Globally, 1964-2004 TV HH increase six-fold to 1.2 billion (world pop : 6 billion) In 2006, 59% HH had cable; 25% had satellite Internet is accessed by two billion people worldwide

8. Growth (ctd) Internet:http://www.internetworldstats.com/stats.htm Global: 361m Internet users 2000, rising to 1.7b users* in 2009, or 25.6% of 6.77bn total pop (User = anyone currently in capacity to use the Internet, on basis of access and knowledge) NorthAm: 108m users 2000, rising to 253m in 2009 or 74% of 341 total pop Asia: 114m users in 2000, rising to 738m in 2009 or 19% of total pop of 3.8bn

9. 2. Mergers and Acquisitions (M&A) Bagdikian (2000): Depending on measures, major U.S. media are owned by between 6 and 23 media conglomerates For biggest 6 traditional media companies, 2009 http://www.freepress.net/ownership/chart/main

10. How does M&A take place? Occurs in 3 major ways: vertically (company buys company that supplied it, or that it supplies: e.g. TV network buys Hollywood studio) horizontally (company acquires second company in same business; e.g. theater chain buys another theater chain) by conglomeration (a company building a portfolio of different kinds of businesses): may be intra-media (media only) or extra-media (media plus non-media)

11. What Motivates M&A? Economic gain Market control and predictability Synergy Cash flow Economies of scale Cross-subsidization, cross-promotion, Global market activity Convergence, Create barriers to new competition Tax benefits Greed and vanity.

12. What factors are favorable/unfavorable to M&A? Favorable Low interest rates Inflation Company valuation, Future expectations of growth Factors affecting rates of return, and availability of finance. Unfavorable Convergence slow to happen Huge debt, as result of overpayment Organizational conflicts Falling security prices, falling valuations

13. (3) Regulation / Deregulation Regulation mainly affects “scarce resource” media (broadcast frequencies; public rights of way in case of cable) or “natural monopoly” markets (telephony, cable, some newspapers). 1980s-1990s, incl. 1996 Telecommunications Act, a period of “deregulation” or of “re-regulation” away from criteria of public interest to criteria of competition. Deregulation stimulated by technological advance incl. digitization (increase in broadband), desire for M&A, neoliberal philosophies

14. (4) Convergence Eradication of technological differences among distribution networks Multiple applications over the same network to different platforms Content flows through increased number of distribution networks Text+voice+video+still+data packaged/distributed simultaneously

15. (5) Globalization International markets prime source of revenue growth following saturation of domestic markets Economies of scale, but pressure to produce separate/customized content for different markets Enhanced by policies of deregulation and liberalization in many countries Motivated by desire for more revenue, leveraging of content, cross-subsidization etc.

16. (6) Concentration of Media Markets Local (e.g. largest four radio owners gained 93% of revenues in top 283 markets; one cable provider in most markets, one dominant fixed-wire local telephony provider in most markets) National (e.g. four major TV networks; two major satellite providers; six largest MSOs provide service to 60% of cable subs; 20 newspaper chains account for 70% of daily circulation; 10 largest film distributors owned by 6 conglomerates account for 90% of revenues) Special Interest (e.g. two major players, Univision and Telemundo)

17. Corps controlling over 80%

18. How is concentration measured? Evaluation of significance of concentration complicated by: What constitutes a “market” Different assessments as to when market is “dominated” by one or few New technologies may create entirely new markets; even if concentrated, more customer opportunities have been created

19. (7) Digitization All forms of communication progressively more available for translation into computer language, and delivery over digital systems. This enhances convergence, and conglomeration. Digitization creates significant problems of transition and coordination between content, distribution and receiver technologies Long-term consequence: implosion of traditional business models; creation of entirely new ones

20. Press Business Model Implodes

21. Music Bus Model Implodes

22. Decline of Network TV

23. Google Ad Revolution 3 billion searches a day 70% of online searches worldwide 90m unique YouTube visitors, March 2009 (66% of all web video traffic) Over $20bn ad revs 2009 (40% of all advertising online). Matched combined ad revenues of 5 largest TV networks Google News: aggregates 25,000 news sites

24. (8) Privatization Process of removing media from government ownership / control and placing (selling) them into private hands; OR of requiring government owned media to become semi-commercial. In U.S. privatization has affected broadcasting structure, attitudes to PBS funding, satellite systems, Internet development. Privatization enhances globalization

25. (9) Commercialization: Infotainment The process whereby increasingly, over time, more and more aspects of media activity, including news and information, are determined by “bottom-line” mentality on behalf of owners and shareholders. Examples include “dumbing down” of television news; product placement in Hollywood movies; intensification of sex and violence; reduction in political coverage on television news; increase in number of advertisements per hour of entertainment.

26. (10) Branding Strategies to increase extent to which corporate identities acquire household or consumer recognition. Branding aids marketing, stimulates M&A activity to extend brand name over wider range of products or services.

27. (11) Synergy Combining resources, talents, archives etc., in ways that create a “whole that is richer than the sum of individual parts”. Quest for synergy drives much M&A activity and accounts for many strategic alliances Examples:iPhone use of AT&T as carrier

28. (12) Specialization “Narrowcasting,” “customization,” “localization.” Targeting small, specialized audiences. Often based on advertising economics. Specialist media typically owned by larger conglomerates. Opportunities facilitated by new technologies (cable channels, websites)

29. Ad Advantages of Specailization If advertiser can reach 100 people for $100 and every one of those 100 people buys his $10 product, that is better than spending $100 to reach 10,000 people of whom only 50 end up buying the product. In the first case he earns $900; in the second case he earns $400. Examples: a cigar manufacturer who advertises in cigar magazine rather than LA Times.

30. (13) “Competitivazation:” Process typically triggered by (a) new regulations that reduce restrictions on ownership or (b) new technologies that create entirely new markets (e.g. cell phones). These attract new entrants into given markets, creating (the appearance of) great competition. But, almost immediately, competition is followed by M&A activity until one or a small number of companies dominate the market

31. (14) Connectivity/Compatibility Growing pressure on media producers to determine proprietary or universality strategies, relating to connectivity between: (1) distribution and reception technologies (2) different reception technologies (3) software formats, content, and reception technologies