Media Economics and the Global Marketplace Chapter 13

Shopped til They Dropped Enron WorldCom Tyco Vivendi Adelphia Communications AOL/Time Warner All mired in scandal

Three Common Structures Monopoly Oligopoly Limited competition

Media Performance Direct payment Indirect payment Economies of scale Consumer buys media products. Indirect payment Products supported by advertisers Of course, you pay later in each advertised product’s cost. Economies of scale Increase production levels to reduce overall cost per unit Economic analyses Early 1990s cutbacks in news divisions jeopardized their role as watchdog.

The Information Economy “Transnational media corporations executed business deals across international terrain.”

Antitrust and Trust Sherman Act, 1890 Clayton Act, 1914 Celler-Kefauver, 1950 Vs. “Big is bad if it stifles competition…but big is good if it produces quality programs.” —Michael Eisner

Media Mergers Disney bought ABC for $19 billion in 1995. Time Warner bought Turner Broadcasting for $7.5 billion in 1995. Time Warner merged with AOL—a $160 billion deal—in 2001. AT&T cable joined Comcast in 2002 in a $72 billion deal.

Flexible Markets and Downsizing “Downsizing” makes companies more productive, competitive, and flexible. Who benefits from downsizing? Who is disadvantaged?

Labor Unions Era of downsizing coincides with decline in workers who belong to labor unions. By 2006, Wal-Mart had successfully fought all organized union attempts to represent its employees in its 3,850 U.S. stores.

Global Markets Specialization Synergy America’s global extension of media occurred because Media became cheap and portable Outsourcing of production to foreign countries

The Disney Example 1920s: Disney elevates the film cartoon. 1950s-60s: Moves into TV and non-cartoon movies Diversifies 1984: Dominates video sales 2006: Merges with Pixar Apple Computer CEO Steve Jobs is now Disney’s largest shareholder. It’s all about Synergy.

Social Issues in Media Economics The limits of antitrust laws Easily subverted since the 1980s Companies diversify among different product lines. Never completely dominate one particular industry Consumer control vs. consumer choice Participating in deciding what is to be offered vs. freedom to choose among the products Consumers and even employees have limited power in deciding what gets created and circulated.

Cultural Imperialism American-made images American-made language American style All saturate the world Questions cultural imperialism raises: What small country can justify building a competing media system if American programming is cheap? How do people feel when they are bombarded with products they can’t afford to buy?

“The top management of the networks…has been trained in advertising, research, or show business. But by the nature of the corporate structure, they also make the final and crucial decisions having to do with news…. Frequently they have neither the time nor the competence to do this.” —Edward R. Murrow