Media Economics

Overview

Media economics deals with two fields, a macro-level that considers how the economy of a country or society affects the media, and a micro-level that considers the different operations of expenditure and profit in the media business. Undoubtedly, media organizations interact with local, regional, national, and global economic trends, just as any industry or business does. It is in that way that media companies are intricately involved in the global marketplace and how markets rise and fall and change over time.

Markets act on the media industry in terms of competition and control. In media, the cost of production often greatly outweighs the gain of consumption—in news, covering stories costs human resources (to put reporters on the scene) and time (to go in-depth with a story); in film, budgets soar into the millions to give audiences optimal cinematic experiences without any guarantee of high viewership numbers. Therefore, the media industry globally tends to follow a pattern in which large media firms harbor most of the control in the media market—in economies of scale, these firms can produce through major budgets without too much risk of loss because of the low cost to distribute; in economies of scope, these same firms can engage in multi-platform products and distribution to maximize their profits. A risk in having major conglomerations of media platforms is that a small number of voices gain control of the media space. A monopoly structure restricts the diversity of voices disseminated through media. For example, the acquisition of newspapers under one family-owned company across a country can mean that the agenda and aims of the family can infiltrate to widespread areas while eliminating local voices, interests, and concerns. Even more problematic may be the lack of transparency by companies about the extent of their reach in a particular market. One company may own multiple cable television networks, an online platform, and several print publications, but many consumers might not connect these products under one large firm unless they are trained to seek out information on media economics.

Media firms might also act through non-market driven production, as is the case of public broadcasting or some alternative or non-profit journalism. These companies often aim to provide free access to media content for the public. However, although they want their audiences to have unfettered access to content, these organizations must still engage in the media market through corporate sponsorships, listener contributions and memberships, and grants in order to generate revenue that allows the companies to continue to make a product. Public television or public radio will present a different form of advertising; rather than interrupting programming with commercial breaks, acknowledgements will be given during station breaks announcing the name (and sometimes a tagline) for a sponsoring business or foundation. Public broadcasting companies also seek voluntary audience contributions through donations, best exemplified through regularly held telethons or radio fund drives.

When examining media economics at the micro-level, this mostly involves an analysis of the business structure of media groups and how they produce, market, and distribute their products. It is helpful to keep in mind the widespread definition of media—news, film, social media—to understand the different ways that commercialization may influence the form. Two major sources of revenue for media business are advertisements and audiences, which in turn influence the content these businesses produce. In terms of film or television, this may seem obvious with commercial breaks or trailers. In print and online, advertisements are also often set off from main content so that audiences recognize what is the legitimate media product and what is the advertising. However, online the boundaries of ad space do blur. Sponsored content may seep into the main content frame, and many times these ads blend so well with the web interface, consumers find they have inadvertently engaged with or clicked on an advertisement.

Further Insights

Conferring space for advertising in media products requires media houses to forfeit "real estate" in their content in order to provide other businesses with visible and profitable space. The advertising space is usually prominent, in TV and radio commercials or in quarter-, half-, or full-page magazine and newspaper ads. While many of the methods used for paid advertisements may be quite obvious, there are ways in which advertising may be disguised as regular content. In television or film this includes product placement, for example, a can of Coca-Cola visibly placed on a dining table during a scene over a family meal. Social media companies have established ways to try to mask ads so that the users will scroll—a characteristic behavior on social media—through their social media feeds and consume advertisements that look deceptively like regular posts.

Another way in which media organizations consider the profit margins for their product is through consumption. Thus, for newspapers and magazine companies, this often refers to the number of subscriptions they have sold of their product. However, for television, radio, and social media, consumption may not be commoditized through subscription costs but rather by selling the actual audience. Market-based research is a ubiquitous field tapped by all kinds of goods and services companies. Businesses want to know what their consumers want and how their consumers behave. Therefore, through market-based research, these companies try to track their customers desires and activities. Technology has enabled an easier way for companies to access this information. Previously, media companies might engage in survey research, distributing questionnaires through massive postal campaigns in the hopes of responses. This information they could sell to other companies for market research. Major digital companies like Facebook, Amazon, or Google can garner information from their consumers' account behavior and package it in easily accessible and sellable forms to other companies seeking information about specific demographics. The media consumer has always been a target for companies to gain information about, and new boundaries of technology make the audience the prime commodity to sell in the media economy rather than ad revenue or subscriptions.

While media conglomerations and large firms dominate the media economy, deregulation has opened the doors for smaller actors to take part in the system (Wirtz, Pistoia & Mory, 2013). This can be seen globally in independent presses and alternative news sources gaining significant audiences to maintain a profit margin to continue producing content. Although these groups or businesses do not inflict major influence on the media economy overall, they still have viable business models that allow them to operate. With technology, these small companies can more easily and economically reach audiences and take advantage of structures like online ad space to further maximize their profits.

In a different vein, technology also fueled new modes of distribution of content, especially seen in television products. Online television and film distributors like Hulu and Netflix changed the way that consumers received content. Online viewing seemed to cut out the space of commercials and advertisements, so consumers turned to these platforms to enjoy their content and avoid the bombardment of advertising. With this change, these platforms found new means to use the consumer for profit. Through subscriptions for different tiers of access, audiences could opt out of advertising by contributing more financially to the media company through a premium package of the media product. As online viewing increased in popularity, media producers reacted to the change and embarked on business relations independent from many of the established media companies in the film and television industry. Instead, the media distributors entered the production market and offered media producers new space to experiment with content. Because of the unknown and rapidly changing framework online, these distributors like Hulu and Netflix could bypass many legal restrictions placed on television and broadcasting and offer more independent and unregulated arenas for creative media content.

Media firms must contend with various factors beyond just the economic market to generate a product and turn a profit. In terms of freedom of speech and copyright laws, governments have placed limitations on the way that media products can be distributed or utilized for advertising platforms. This is evident through the laws surrounding election advertisements on television, for example. To restrict unbridled access to audiences, especially by candidates with unlimited campaign funds, laws exist in the United States, for example, to limit the amount of time allotted to political candidates and requires that television stations engage in bipartisan advertising so as not to saturate their broadcasts with only one candidate. Another major area that has been restricted in advertising targets is the child demographic. What types of commercials can be displayed during children's programming has been heavily regulated because of the idea that children are not able to as easily discern programming from advertising; this inability to distinguish advertisements is seen as a risk to manipulation by corporations. Online platforms are increasingly met with pressure to more clearly articulate the use of any data content collected through their websites, although online media quickly leapfrog existing legal structures with new challenges to data privacy and regulation.

Issues

As media firms have struggled in ever-changing economies to maintain ownership, the media economy has experienced a conglomeration of industries in which a few firms control the various major media platforms. Media companies commonly own cable television channels, magazine and newspaper publications, and online social media platforms, all under the umbrella of a single company or firm. In the United States, a major shake up to the structure of media ownership occurred with the acquisition of The Washington Post by Amazon founder Jeff Bezos. During a time when newspapers and magazines were contending with print and digital formats, Bezos's purchase of The Washington Post caused uproar because Bezos did not have any prior experience running a media platform. Rather, he was seen as a market capitalist well-versed in consumerism and competitive pricing, and critics feared a new form of media production that would infiltrate journalism and news with product placement and advertising in a way never before experienced, although advertising in media had already found stealthy ways to penetrate an audience.

Prior to the Amazon media takeover scare, in print media, readers experienced a rise in what is termed "native advertising." Through native advertising, companies could buy space in magazines and newspapers to sponsor content that might favorably review their products or discuss a pertinent issue with which the product or service happens to align. Reporters would then be commissioned to write a piece that somehow featured the company. As this became a more common practice in publishing, critics pushed for transparency in this type of ad-generated content. Newspapers and magazines responded by tagging articles as "sponsored content," but these tags tended to be small or unnoticeable to most readers. Even online, sponsored content may only include an endnote expressing the author's paid connection to an informant in the article. This has been highly criticized in the generation of opinion and editorial pieces in newspapers in which columnists hawk a product or service for advertising fees.

While many users of online media may be unaware of the sponsored content they consume, an even more fraught issue in the media economy arises in online advertising. The use of audience information from social media and other sites invites invasive ways to gather demographics about individual users. The rise of "big data" collected through individuals' social media behaviors, such as Facebook "likes" or YouTube views, or their search history tracked on Internet search engines like Google or Bing can be packaged and sold to companies. Online media companies guarantee "anonymity" in the collection of this data, but anonymity online has proven to be a near impossibility. IP addresses can easily link a person to a computer and to particular searches and online behaviors. When IP addresses are stored along with other identifying information, such as mailing addresses or financial information, consumers' privacy and data security are at risk. It is impossible for online companies to guarantee protection of this data, as hackers have proven their abilities to overcome online security protocols. Furthermore, the collection of online information is also seen as a tempting database of information for governments to use to track their citizens and target certain demographics with added surveillance, as China has done through social media apps. Thus, while media economics may seem to be a unique field engaging in an infinite supply of renewable products unlike other industries, media economics also introduces myriad problems to contend with when engaging with content that go beyond media consumption.

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