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Economic aspects of Media Pluralism
Economic aspects of Media Pluralism
Economic aspects of Media Pluralism
Economic aspects of Media Pluralism
Economic aspects of Media Pluralism
Economic aspects of Media Pluralism
Economic aspects of Media Pluralism
Economic aspects of Media Pluralism
Economic aspects of Media Pluralism
Economic aspects of Media Pluralism
Economic aspects of Media Pluralism
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Economic aspects of Media Pluralism

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Media concentration, pluralism and …

Media concentration, pluralism and
diversity in the converging era

Giovanni Gangemi CMPF

Policy Conference
http://cmpf.eui.eu/events/policy-conference.aspx
Florence, EUI (Villa La Fonte )
29/10/2012

Published in: Education
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  • 1. Economic aspects of media pluralism Media concentration, pluralism and diversity in the converging eraGiovanni Gangemi Policy Conference Florence, EUI (Villa La Fonte ) 29/10/2012
  • 2. Media markets tend to concentrationEntry With few contestants, prices can grow up, thus narrowing thebarriers access of new entrants (e.g. the TV sports rights) Dominant firms can keep the prices low (predatory prices),High initial making the market not profitable for potential entrants,costs especially because of the high initial costs For press media marginal costs are low, as additional cost isLow marginal related to just a part of the product (paper, distribution…)costs For broadcasting media the marginal cost is zero, as any new viewer/listener does not have any additional cost.Economies of On the internet, though, more viewers/listeners mean morescale bandwidth, and more costs
  • 3. Media markets tend to concentration Due to high initial costs and to economies of scale, big media firms tend to expand vertically.Vertical In the media markets, vertical integration is a strategicintegration issue as a firm could control both content production and content delivery levels. Low marginal costs and consequent economies of scale make more profitable for a media firm to expand horizontally. Fragmentation increases this tendency, because theHorizontal same product will be available on a cross-media base inintegration order to match the audience, as the latter is more and more spread on different means of communication. (Doyle, 2002)
  • 4. New context and the technological change On the one hand it lowers entry barriers, reducing dominance, withLowering of positive effects on market pluralitybarriers to entry On the other hand it contributes to fragment the audience, dispersing consumers and thus making the market less attractive forProducts new entrants.customization Aggregated consumers have stronger bargaining power, because they constitute an attractive group and so stimulate tighter competition (in particular when customer are well informed) If consumers are homogeneous and aggregated they attractLong tail possible new entrants (and this reduces the incumbent marketeffect power) If consumers are dispersed, fixed costs make entrance into the market unattractive (the entrant will probably deal only with aAudience small proportion of consumers)fragmentation Audience fragmentation in media markets could discourage the access of new entrants
  • 5. Media concentration and ownership debate Is concentration increasing or decreasing in the online media environment? the media sky has never been brighter (Thierer 2005),Optimists more competition than ever (Compaine, 2000) While the number of channels increased dramatically, the ownership of those channels has narrowed to an even smaller few (Lessig, 2004), it is easier to speak, but harder to be heard (Einstein, 2004), five global dimension firms won most of the newspapers, magazines, book publishers, motion picture studios and radio and television station in the UnitedPessimists States (Bagdikian, 2004), more does not necessarily mean different (Murdock, 1982), while there is indubitably greater “numercial diversity”, we are seeing a greater concentration at the level of “source diversity” (Winseck, 2008). Media ownership is increasingly concentrated (Castells, Arsenault 2008) There are fewer and larger companies controlling more and more (McChesney)
  • 6. Dynamic of media concentration u-shape effect If barriers to entry increase and economies of scale decline, in aNoam first moment there is more concentration with less contestants, but then, due to scale economies, there will be more players. If barriers to entry drop, but economies of scale increase, then in a first moment there will be more contestant, attracted by low barriers to entry, but then competition will increase and contestants will decrease The lowering of distribution costs lead firms to allocate moreBaker resources on the first copy of the product, to keep the same profit. The increase of the costs of the first copy creates higher barriers to entry and thus could lead to a reduction of diversity
  • 7. Old and new concerns on media pluralismAs internet develops, traditional media move to the online, and online mediaconglomerates boost their profits, notwithstanding the crisis. Though, all this is rising anew patterns of concerns about pluralism and diversity: There is an unclear definition of relevant markets: what should be measured and how? It is difficult to assess competition between offline and online media (level playing field). Successful online information and content providers are not new but are mainly traditional media outlets moving online (BBC, CNN, FOX…) New content providers are smaller and find hard to compete with traditional players. Successful players are mainly intermediaries and aggregators, with low/no investments in new contents.
  • 8. Tendency to concentration in the online media marketAn further question is the increasing tendency to market concentration in new media(search engines, social networks…): the winner takes all.Some examples of concentration in the online media markets are Google and Yahoo! revenues 2004-2012 Facebook and MySpace 2007-201240.000 4.50035.000 4.00030.000 3.50025.000 3.00020.000 Yahoo! 2.500 Facebook15.000 Google 2.000 MySpace 1.50010.000 1.000 5.000 500 0 0 2004 2005 2006 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011Source: Netmarketshare. Source: eMarketer and data provided by operators.Note: figures include only revenues coming from audiovisual
  • 9. Geographical marketA final concern is about the geographical origin of new players and the role of EUindustry. The balance of trade between US and Europe has mainly taken one direction, due to internal market size, linguistic and cultural factors, general economic wealth New operators emerging from the internet economy are almost exclusively coming from the US. Europe struggles to establish new players able to compete worldwide. The challenge is between local-based and well-established media firms and international globalised organisations, mainly based in the US, operating as content aggregators. Traditional instruments such as quotas or public funding to protect local industries risk to be ineffective in the online media environment
  • 10. The gap between US and EU audiovisual industry increaseEU industry has been deeply affected by the economic crisis, while US firms keep ongrowing in the globalised economy. EU audiovisual firms revenues are flat, while USand Japan companies increased their turnovers. This happens despite public funding(license fee, grants, etc.). Total revenues of the audiovisual industry 2006-2010 250.000 CAGR +4.8% 200.000 US 150.000 EU JP 100.000 CAGR +0.5% BR MX Million € 50.000 CAGR +7.8% Source: European Audiovisual Observatory, Yearbook 2011. Note: figures include only revenues coming from 0 audiovisual activities. They include results from 2006 2007 2008 2009 2010 the 50 leading audiovisual worldwide companies
  • 11. ConclusionA greater diversity on the supply side could not correspond to agreater diversity on the demand side, and could not leadautomatically to more pluralism.There is a need for a clearer definition of relevant markets to betteraddress both pluralism and market competition on media.An excessive fragmentation in the EU media markets and the lack of aunified market risk to make European media outlets too vulnerable inthe globalised economy.It must be understood whether current tools to protect Europeanindustry are still effective or not.

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