The Media Business: Consolidation, Globalization, and the Long Tail Revised for ed6. 7/7/16 Chapter 3

Wild Ponies: Making it in the music business without a recording contract Doug & Telisha Williams perform as the band Wild Ponies. Indie musicians can make a middle-class living by engaging with listeners. Kevin Kelly’s Theory of 1,000 True Fans Digital technology puts creative media power in hands of individuals.

Development of Private Ownership 1638: First printing press in North American colonies 1690: First newspaper published in colonies 1830s: Penny Press begins 1840s: Telegraph industry owned privately, not by government 1930s: Growth of national news

Big Media Consumers have many more ways to consume media now than they did 40 years ago. Old media expanded while new media come into existence. Limited number of giant media conglomerates, but also new big players. But today, bigger isn’t always better.

Legacy Conglomerates Disney News Corp. & 21st Century Fox Time Warner Viacom & CBS Bertelsmann All are multinational businesses

Disney 2015 Revenue: $52.5 billion Major player in broadcast TV, cable, movies, theme parks Home of Mickey Mouse, Pixar, Marvel & Lucasfilm Pioneer in new media distribution and media convergence; among the first to offer content through Apple's iTunes. Master of merchandising and product tie-ins But has to deal with declining audiences for money- maker ESPN

News Corp. & 21st Century Fox Fiscal Year 2015 Sales: $8.6 billion Newspapers, Information services, Books 21st Century Fox Fiscal Year 2015 Sales: $29 billion Cable, Broadcast, Film, Satellite properties, includes Fox News

News Corp. & 21st Century Fox Both companies controlled by Rupert Murdoch and family. Good at handling changing media environment. Gives consumers what they want. Big player on global level.

Time Warner 2008 Sales: $47 billion, but lost $13.4 billion 2015 Sales: $28.1 billion, but profits of $3.8 billion Lower Sales but higher profitability – Why? Improved profitability by selling off AOL and Time Warner Cable.

Time Warner Major player in film, television, cable, publishing, and online content. Home of Scooby Doo, Harry Potter, Batman. Most recently made magazine division independent company. Lessons of company downsizing: 1. Bigger isn’t always better. 2. Concentrate your strengths on what you do best.

Viacom & CBS Combined revenues: $27 billion (2015) Major player in broadcast television, cable, and movies. Home of MTV Networks (MTV, VH1, Nickelodeon), CBS, CW, and Paramount. CBS owned Viacom; then Viacom owned CBS; now separate companies for financial reasons.

Bertelsmann 2015 Sales: $21 billion Major player in publishing; also magazines and European broadcasting Adapting to changing music business Privately-held German company

Big Media: The New Players New companies for new media Remember – there are no mainstream media

The New Players Comcast/NBC Universal Alphabet/Google Apple

Comcast / NBC Universal Comcast had 2015 Sales of $74.5 billion – 25% bigger than Disney. Major player in cable services, internet, phone services, cable networks, movies, and broadcast TV NBC Universal’s biggest value is for cable channels.

Alphabet/Google 2015 revenue of $74.9 billion – Bigger than all the legacy media companies. Big asset is search, major source of revenue is highly targeted online advertising Automated aggregator of news

Apple 2015 Total revenue of $234 billion $155 billion from mobile phones (iPhone) $23 billion from iPads $30 billion from music and video sales $25 billion from conventional computer product Apple has redefined how we consume and use media

Long Tail Media vs. Big Media (Short Head Media) Long Tail Portion of a distribution curve where a limited number of people are interested in buying a lot of different products. Short Head Portion of a distribution curve where a large number of people are interested in buying a limited number of products.

Long Tail vs. Short Head

Characteristics of the Short Head Relatively fewer goods and services offered Large potential market Place for big, popular media products—hit movies, TV shows, music

Characteristics of the Long Tail High number of goods; more niche goods than hits Low cost of reaching markets Ease of finding niche products

Characteristics of the Long Tail Flattening of the demand curve for mainstream hits; choice lowers demand for hits. Size of collective market; collection of niche products can be as big as hits. Tailoring to personal tastes; consumers want content that fits their own wants and needs.

Consequences of the Long Tail Democratization of the means of production Democratization of the means of distribution Greatly reduced cost of connecting suppliers and consumers Relatively small number of consumers demanding a large number of goods and services, often tailored specifically to their needs

Who Controls the Media? Owners Advertisers Government Special Interest Groups News Sources Audiences