2. Media Takeovers, Mergers, and Corporate
Consolidations
• At the heart of the “brave new media world” is a media landscape
that has been forever altered by the emergence of the internet
• Control is shifting from companies like Time Warner and Comcast
to companies like Apple, Google, Facebook, and Netflix
• The internet has forced almost all media business to rethink not
only the content they provide, but the entire economic structure
within which our capitalist media system operates
4. Analyzing the Media Economy
• What role does the government need to play in determining who owns
the mass media?
• Should it be a strong role, or should the government let competition and
market forces dictate what happens?
• Should citizen groups play a larger part in demanding that media
organizations help maintain the quality of social and cultural life?
• Does the influence of American popular culture worldwide smother or
encourage the growth of democracy and local cultures?
• Does the increasing concentration of economic power in the hands of
corporations too severely restrict the number of players and voices in
the media?
5. The Structure of the Media Industry
• Media industries are typically structured in one of three ways:
1. Monopoly
2. Oligopoly (the most common structure)
3. Limited competition (typical of the radio and newspaper
industries)
6. The Performance of Media Organizations
• In analyzing the performance of media organizations, economists
pay attention to a number of elements—from how media make
money to how they set prices and live up to a society’s
expectations
7. Collecting Revenue
• Direct Payment: Media products supported primarily by consumers, who
pay directly for a book, movie, music download, or internet or TV
service
• Indirect Payment: Media products supported primarily by advertisers,
who pay for the quantity or quality of audience members that a
particular medium delivers, such as radio and the internet
• Many forms of mass media generate revenue both directly and indirectly,
including newspapers, magazines, online services, and cable systems
8. Commercial Strategies
• When selling media content, media industry executives look to the
most advantageous balance in the commercial process, including
program or product costs, price setting, marketing strategies, and
regulatory practices
• For example, when corporate executives trim news budgets or fire
news personnel, such decisions ultimately reduce the total
number of distinct news stories that cover a crucial topic and may
jeopardize the role of journalists as watchdogs of society
• Media economic decisions thus affect the society in which we live
9. Price
• How high can the price be raised of a book, movie, video game,
music download, or internet service before people won’t buy it?
• How much can Netflix charge per month before its subscribers
begins to switch to competing services?
10. Length, Frequency, and Tolerance
• How long will people tolerate a commercial break before they
change the channel or click on something else?
• How many seconds should Google allow a commercial to run prior
to a desired YouTube video before a user can “skip the ad?”
11. Data Mining and Privacy
• How much data can media companies such as Google or Facebook
collect on customers before they find it an invasion of privacy?
12. Regulation
• How much advertising of alcohol to underage audiences can a
media company get away with before drawing the attention of
media critics, consumer organizations, and regulatory boards?
14. The Transition to an Information Economy
• The 20th century can be divided in two:
• The first half of the century emphasized mass production, assembly
lines, the rise of manufacturing, and intense rivalry between U.S. based
businesses and businesses from other nations that produced competing
products
• The second half demonstrates a transition to a new cooperative global
economy as the machines that drove the Industrial Age changed gears for
the new Information Age
• Offices slowly displaced factories as major work sites
• The emphasis on mass production slowly shifted to the cultivation of
specialized niche media markets
15. Deregulation Trumps Regulation
• During the rise of industry in the 19th century, entrepreneurs in
the railroad, steel, and tobacco industries created monopolies
• Congress responded by creating the first antitrust law in 1890,
which outlawed monopoly practices and corporate trusts that
fixed prices to force competitors out of business
• Today, the FTC and the antitrust division of the Department of
Justice are responsible for enforcing these laws
16. Deregulation Spurs Formation of Media
Conglomerates
• The corporate regulations introduced between 1890 and 1950
were meant to increase competition between companies and
prevent any one company from having too much control over the
market
• Companies used PR to fight this conception, and pushed the idea
that regulation was bad for business and bad for America
• Under President Reagan, most controls on business were
drastically weakened
• Deregulation led to easier mergers, corporate diversifications, and
increased tendency towards oligopoly
17. Deregulation Spurs Formation of Media
Conglomerates
• Some economists thought the new competition would lower
consumer prices
• Others predicted more mergers and an oligopoly in which a few
megacorporations would control most of the wires entering a
home and thus dictate pricing
• Who was right?
18. Media Powerhouses: Consolidation,
Partnerships, and Mergers
• Despite their strength, the antitrust laws of the 20th century have
been unevenly applied, especially in terms of the media
• Until the 1980s, antitrust rules attempted to ensure diversity of
ownership among competing businesses
• What has occurred consistently, however, is media competition
being usurped by media consolidation
• Most media companies have skirted monopoly charges by
purchasing diverse types of mass media rather than trying to
control just one medium
19. Business Tendencies in Media Industries
• In addition to the consolidation trend, a number of other factors
characterize the economics of mass media businesses
• These are general trends or tendencies that cut across most
business sectors and demonstrate how contemporary global
economies operate
20. Flexible Markets and the Decline of Labor
Unions
• Today’s information culture is characterized by what business
executives call flexibility—a tendency to emphasize “the new, the
fleeting…and the contingent in modern life, rather than the more
solid values implanted” during a time when relatively stable mass
production drove consumption
• The new elastic economy features the expansion of the service
sector—including health care, banking, real estate, fast food,
internet ventures, and software—and the need to serve individual
consumer preferences
• This type of economy has relied on cheap labor, and on quick,
high-volume sales
21. Flexible Markets and the Decline of Labor
Unions
• The era of flexible markets also coincided with the decline in the
number of workers who belong to labor unions
• Labor unions reached their peak in 1954, representing 34.8
percent of U.S. workers
• Many jobs were exported to avoid the high price of unionized U.S.
labor
• As large companies bought up small companies across national
boundaries, commerce developed rapidly at a global level
• Now, union membership is about 11.3 percent of the population
22. Downsizing the Wage Gap
• From the beginning of the recession in December 2007 through
2009, the U.S. lost more than 8.4 million jobs, creating the
highest unemployment contraction since the Great Depression
• As the economy slowly recovered, 95 percent of postrecession
income growth was captured by the top 1 percent—those
Americans with the greatest income
• Media corporations are among those with the highest wage gaps
• The flexible economy is on trend towards more low-paying, part-
time jobs due to corporate downsizing
23. Economics, Hegemony, and Storytelling
• Hegemony: The acceptance of the dominant values in a culture by
those who are subordinate to those who hold economic and
political power
• A ruling class in a society maintains its power not simply by
military or police force, but more commonly by citizens’ consent
and deference to power
• People who are without power do not routinely rise up against
those in power because “the rule of one class over another does
not depend on economic or physical power alone but rather on
persuading the ruled to accept the system of beliefs of the ruling
class and to share their social, cultural, and moral values”
24. Economics, Hegemony, and Storytelling
• Companies and rulers can’t lead people until the people
consented to what those companies or rulers were trying to do
• Companies, rulers, and politicians convinced consumers and voters
that the interests of the powerful were common sense and
therefore normal or natural. This created an atmosphere and
context in which there was less chance for challenge and criticism
• “Common sense” is particularly powerful because it contains no
analytical strategies for criticizing elite or dominant points of view
and therefore certifies class, race, or sexual orientation divisions
or mainstream political views as natural and given
You can’t argue with
common sense
25. Economics, Hegemony, and Storytelling
• It is crucial to understand the central importance of storytelling to
culture
• The narrative—as the dominant symbolic way we make sense of
experience and articulate our values—is often a vehicle for delivering
common sense
• Ideas, values, and beliefs can be carried in our mainstream stories—the
ones we find in daily conversations, newspapers, political ads, books,
magazines, movies, favorite TV shows, and online
• The reason that common narratives work is that they identify with a
culture’s dominant values: family, honesty, hard work, religion,
capitalism, health, democracy, loyalty, fairness, authenticity, modesty…
26. Economics, Hegemony, and Storytelling
• Hegemony helps explain why we occasionally support economic
plans and structures that may not be in our best interest
• Often, the American Dream story is so powerful in our media and
popular culture that many of us believe that we have an equal
chance of becoming rich, and therefore successful and happy
28. The Rise of Specialization and Synergy
• The new globalism coincided with the rise of specialization—niche
marketing of media products
• Synergy: The promotion and sale of different versions of a media
product across the various subsidiaries of a media conglomerate
29. Disney: A Postmodern Media Conglomerate
• The Walt Disney Company is one of the most successful companies
in leveraging its many properties to create synergies
• In 2014, ABC broadcast The Story of Frozen: Making a Disney
Animated Classic
• It was to promote the movie, the soundtrack, and to hype Once
Upon a Time
30. The Early Years
• In 1937, Snow White and the Seven Dwarfs was the first feature-
length cartoon
• The studio gained a reputation for high-quality hand-drawn
cartoons
• Each movie took years to make and demanded the attention of the
entire company
• Disney was one of the first studios to embrace TV
• In 1955, Disneyland opened in California (Disneyworld opened in
1971)
31. Global Expansion
• The death of Walt Disney in 1966 triggered a period of decline for
the studio
• A turnaround began in 1984 following hand-drawn classics like The
Little Mermaid, Beauty and the Beast, The Lion King, Mulan, and
Lilo and Stitch
• Disney also distributed a string of computer-animated blockbusters
from Pixar, including Toy Story, Monsters, Inc., Finding Nemo, and
The Incredibles
• Disney came to epitomize the synergistic possibilities of media
consolidation
32. Disney Today
• The Disney and Pixar merger showed that Disney was ready to
embrace the digital age
• It also became a partner with NBC and Fox in the popular video
site Hulu
• In 2009, Disney purchased Marvel Entertainment, bringing with it
Iron Man, Spider-Man, and X-Men
• In 2012, it purchased Lucasfilm and the rights to Star Wars and
Indiana Jones
33. Global Audiences Expand Media Markets
• International expansion has allowed media conglomerates some
advantages, including secondary markets in which to earn profits
and advance technological innovations
• Greatly facilitated by the internet, media products easily reach
the eyes and ears of the entire world
• Globalism permits companies that lose money on products at
home to profit abroad
• CNN and MTV are available in more than 200 countries
34. The Internet and Convergence Change the
Game
• For much of their history, media companies have been part of
separate industries
• But, the internet and convergence have changed all that
35. The Rise of the New Digital Media
Conglomerates
• The digital turn marks a shift in the media environment, from the
legacy media powerhouses (Time Warner, Disney) to the new
digital media conglomerates (Amazon, Apple, Facebook, Google,
and Microsoft)
• Given how technologically adept these five digital corporations
have proven to be, they still need to provide compelling narratives
to attract people
• It is the content—the narratives—that endures, while the devices
and distribution systems do not
36. The Digital Age Favors Small, Flexible Start-
Up Companies
• All the leading companies of today were once small start-ups that
emerged at important junctures of the digital age
• Today, the juncture in the digital era is the growing importance of
social media and mobile devices
• Successful start-ups take one of two paths:
1. Be acquired by a larger company (YouTube, Instagram)
2. Go it alone and try to get even bigger (Twitter)
38. Social Issues in Media Economics
• Many large media mergers have accompanied stripped-down
regulation, which has virtually suspended most ownership limits on
media industries
• As a result, a number of consumer advocates and citizen groups
have raised questions about deregulation and ownership
consolidation
• Although there are thousands of media products on the market,
only a few companies control the majority of these products
• This represents a dangerous antidemocratic tendency, in which a
handful of media moguls wield a disproportionate amount of
economic control
39. The Limits of Antitrust Laws
• American antitrust laws have been easily subverted since the
1980s, as companies expanded by diversifying holdings and
merging product lines with other big media firms
• These firms have also become among the most active and
powerful lobbyists in Washington D.C. and other political capitals
• This consolidation has limited the number of independent voices
in the market and reduced the number of owners who might
innovate and challenge economic powers, leading to renewed
interest in enforcing antitrust laws
40. Diversification
• Most media companies diversify among media products, never
fully dominating a particular media industry
• The resulting oligopoly results in an economic arrangement which
makes it difficult for outsiders to compete in the marketplace
• Media giants also prefer to deal with each other rather than
outsiders
41. Applying Antitrust Laws Today
• In 2001, a merger between Dish Network (EchoStar) and DirecTV
was denied
• In 2011, AT&T and T-Mobile scrapped a merger deal after pressure
from the Justice Department
• Antitrust laws have no teeth globally
42. The Fallout from a Free Market
• Since the wave of media mergers began with gusto in the 1980s, a
number of consumer critics have pointed to the lack of public
debate surrounding the tightening oligopoly structure of
international media
• Economists and media critics have traced the causes and history of
this issue to two major issues:
1. A reluctance to criticize capitalism
2. The debate over how much control consumers have in the
marketplace
43. Equating Free Markets with Democracy
• In the 1920s and 1930s, commercial radio executives succeeded in
portraying themselves as operating in the public interest while
labelling their noncommercial radio counterparts (education,
labor, religion) as voices of propaganda
• They succeeded in aligning capitalism with democracy
• Throughout the Cold War, it became increasingly difficult to
criticize capitalism
44. Consumer Choice versus Consumer Control
• Capitalism is not structured democratically but arranged
vertically, with powerful corporate leaders at the top and hourly
wage workers at the bottom
• Consumer choice: Options among a range of media products
• Consumer control: Power in deciding what kinds of media get
created and circulated
45. Cultural Imperialism
• The influence of American popular culture has created
considerable debate in international circles
• The notion of freedom that is associated with innovation and
rebellion in American culture has been embraced internationally
• However, American media are shaping the cultures and identities
of other nations
• Cultural Imperialism: American styles in fashion, food, and media
fare dominate the global market
46. Cultural Imperialism
• Defenders of American popular culture argue that because some
aspects of our culture challenge authority, national boundaries,
and outmoded traditions, they create a global village in which
citizens can raise questions
• Critics believe that American cultural imperialism both hampers
the development of native cultures and causes people to abandon
their own rituals to adopt American tastes
• There is also a cultural disconnection for people whose standards
of living are not routinely portrayed in contemporary media
48. The Media Marketplace and Democracy
• The best way to monitor the impact of transnational economies is
through vigorous news attention and lively public discussion
• As consumers, do we care who owns the media as long as most of
us have a broad selection of products?
• Do we care who owns the media as long as multiple voices seem to
exist in the market?
49. The Media Reform Movement
• “’Media Reform’ has become a catch-all phrase to describe the
broad goals of a movement that says consolidated ownership of
broadcast and cable media, chain ownership of newspapers, and
telephone and cable-company colonization of the internet pose a
threat not just to the culture of the Republic, but to democracy
itself”
• One key paradox of the Information Age is that for such economic
discussions to be meaningful and democratic, they must be carried
out in the popular media as well as educational settings
