This document discusses the economics of media ownership and structure. It introduces key concepts like capitalism, market failures, and media concentration. The dominant forms of media ownership have shifted from many small national owners to just a few large multinational conglomerates. This is due to the high-risk nature of media which favors consolidation. The US now dominates global media trade, controlling over half the market. There is debate around how much governments should regulate media markets to promote diversity and local content.

2. Economics of the Mass Media

3. Objectives
• To introduce dominant form of market
organization
• Define key terms
• Why does structure of ownership and
control matter?
• Introduce the idea of ‘economic
censorship’: the propaganda of the market

4. Capitalism
• An economic system in which all or most of the
resources or means of production and
distribution , such as land, inputs, factories,
telecoms are privately owned and operated for
profit
• Since the fall of state socialism in Russia, the dominant
economic form across the world
• Postulates fully competitive markets/perfect
information as inputs and outputs of production

5. Capitalism and
Communication
– Communication IS market culture
– Communication systems provide essential market
infrastructure
– By what economic rules should they play?

6. Assumptions/ Key Ideas of
Capitalism
• Self-interested behavior
• Postulate: though human pursuit of
rational self-interested behavior the
production, consumption and circulation of
goods will be most efficient, provide for all
wants
• Neoliberals/libertarians argue this model
works best with little or no state
intervention

7. The Neo-liberal Thinking
• ‘Invisible hand of market’—through pursuit of self
interest, collective good will be found
• Competition
– Factors: technological capacity,access to large
markets, ability to buy low and sell high: cost price
advantages; promotion/marketing ‘brand’
• Comparative Advantage
– Countries producing goods most cheaply should
specialize/ and trade/ to benefit their economies
overall

8. Capitalism and the Liberal
Ideology
• Roots in libertarian rejection of any State
role in the market
• Today, more sophisticated: State must
establish rules of the market ( enforce
contract law, prevent abuses of corruption,
enforce basic rules) but still minimal

9. Legitimate Role for State
Intervention in Market in
Liberal Ideology
• Historically, to prevent abuse of dominant power
• Prevent unfair trade practices: truth in
advertising, prevent deception
• With rise of nation state, the claim to
sovereignty (or supreme and independent
authority) led to practices of protection against
foreign ownership, ways to favour local
business,regulate airwaves
• Competition Acts
• Or in cases where a public good problem
exists: ( a tendency to natural monopoly,
extreme hazards: Regulation

10. Neo Liberal ( or neo-classical)
Ideology
• Looks at cultural products like any other
• Restricts role of State in regulation
• Looks at maximization of individual
interest
• Advancing aggressive platform for free
trade globally
• Pushing for domestic deregulation

11. Reform Liberal Ideology
• Treats culture as a public good not like a private
one
• Expands role of State in regulation
• Looks at maximization of the public/citizen’s
interests
• Looking for protections in the push to global
trade( a special covenant internationally on
cultural standards)
• Pushing for reregulation: smaller
business/creator entry, restraint of dominant
players

12. Reform Liberal Ideology
• A public good problem of cultural products is
recognized
• Metaphor is not a commodity but a (natural) resource:
like air or water: scarce, but renewable, and common
property
• Cultural/Information/Media Products are more important
than other products: they are either renewable( artistic
creation) or non-renewable( the Buddhist statues ruined
by Taliban)
– The public good arguments:
• ( liberal humanist goal of ideal citizenry/continuity of a
society/political integrity/ creativity of expression/)
• (nation-building) a sense of belonging
• Tied to education/intergenerational social cohesion

13. Reform 2
• State Must thus correct for Market Failure
• Protect a sphere of public expression,
regulate competition law, regulate media
under “social responsibility” model– this
model unequally applied in Canada to print
and electronic media

14. The Underlying Micro-economics
of the Media
• not a commodity like others
• High margin
• Characteristics of the commodity lead to
concentration of ownership, tendency to
market failure for small markets in the global
economy
• Trade dominance of large entertainment
markets ( US, Europe… soon to be China?)

15. Nature of Communications Commodity
• Some, like CDs, books, etc. easily a
tangible commodity
• ( commodity: a useful
thing/convenience/anything bought or
sold)
• Some, like plays, TV shows or live
music performances intangible

16. Characteristics of Communications
“Commodity”
• Not tangible/material
– Ie. Not a physical thing or tool
• Novelty
– Consumption is a one time event: nothing
older than yesterday’s news. Ephemeral.
– Short shelf life

17. Characteristics 2
• Not Destroyed in the Act of Consumption
– Renewable: that is, unlike a pizza, not
consumed
• Non Excludable
– Often available over free airwaves

18. Characteristics 3
• Low Marginal Cost
– Cost of a TV show is 1.5 million per episode
– Duplicate costs of same episode low to zero
additional ( or marginal) cost
• Easy reproducible digitally or electronically
• Rapid Taste Change: innovation, or ‘trends’
• Therefore High Risk

19. Risk provides Rationale for
Conglomerates
• High risk forces vertical and horizontal
integration
• “hit rule”: a very small proportion of titles
account for most of the revenues. 80:20 rule
leads to imitation
• Hits cross subsidize losses
• Need to amortize losses across a wider base
• Need to afford $ for big stars
• Big studios produce 1/3 of films/ 80% $

20. Concentration
• The communication business tends ‘naturally’ to
concentration
– Effort to become bigger: control larger markets
– Cross media ownership: mergers and acquisitions
– Ie. Concentration of firms
– But also Concentration of..
• Products
• Media formats
• Markets

21. Trends to Concentration of
Media Ownership in Canada
• Before WW1: 138 dailies with different
owners
• By 1992: only 18 independents remaining–
now even fewer
• Mostly owned by CanWest-Global who
bought Hollinger…42% of dailies
• Hollinger takeover of Southam in 1995 was
appealed by Council of Canadians but failed
in lower courts.

22. Canadian Media
Concentration of O
Bell Canada Enterprises
- February 2000 bought CTV for 2.3 b
- Acquired Globe and Mail
- Also own Expressvu: satellite
- Also own Telco in Ont/Quebec
- Owns Sympatico internet portal

23. Canadian Concentration of O
- Canwest ( Global) bought Southam Inc 2000
- Now owns National Post
- Quebecor owns TVA Videotron
- Rogers owns Maclean Hunter mags
- Electronic players buy out the print
- Made in Canada media moguls: Conrad Black,
Thompson, Seagrams/Vivendi now MNCs ( most
sales off shore)

24. History of Economic
Organization
• Until 1980 predominantly within National
Borders
• Most countries had local ownership rules (
no more than 20 % foreign media control,
and indigenous boards, reporting if publicly
traded companies)
• Entertainment markets begin to globalize
through film, videogames and TV series:
increasing trade in all media sectors

25. US dominance of World Trade
• Controls 75% of world trade in audio
visual media
• If look at top ad agencies, takeovers of
American MNCs, see growing foreign
(non American) share
• Still a dominant market power: after
defense, entertainment is the US
biggest export

26. Ways to Measure Trade
Dominance
• Share of Domestic Markets ( individual
nation basis)
• Share of total world trade

27. US Share of Canadian
Domestic Market
• 80% of books and magazines
consumed in Canada are American
• 66% of viewing time to English TV is to
US
• 97% of movies are US
• Comparison: less than 2% of US TV is
foreign

28. US Share of World Trade
• Estimated in Burnett, Global Jukebox,
1995:
– Broadcast and cable 75%
– Film: 55%
– Video/sound recordings:55%
– Books: 35%
• (caution: difficulty of source checking)

29. Why the Dominance
• US products can recover up to 80% of their costs in their home
market due to size of their market and consumer preference for
US made media
• Thus can afford to sell abroad more cheaply
• Costs of foreign licensing of US product are between 1/6 to
1/10th the cost of original production
• thus there are strong incentives to buy US fare and repackage
it to maximize profits
• There is a huge large market advantage ( and small market
disadvantage) in the ‘block buster’ media and entertainment
market

30. Conclusion:
• As the number of corporate owners drops, more content is
controlled by fewer companies. Oligopoly describes this
condition.
– Journalists find themselves in a conflict of interest situation
in reporting on the malfeasance of their owners
• Societies debate whether the media are public or private goods
every generation– Ideological pendulums shifts
– Should governments regulate competition? How?
• States are concerned about world market dominance of US—
call for fair trade not free trade
• An International Movement led by Canada now is trying to
protect smaller countries against overwhelming US global
dominance