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167
Chapter 14
Media Economics and the Global Marketplace
CHAPTER OUTLINE
Chapter Opener: Some major media companies, like Comcast and Disney, have long
histories, but newer companies like Google are so rich that they are just as important when
studying media economics. Google has many “moonshot” experimental ventures, including
a self-driving car, and the company created a new parent corporation called Alphabet in
2015.
I. The Transition to an Information Economy
During the transition from a manufacturing-based to an information-based economy,
mass media companies expanded globally and defined the values that dominated
culture in the United States and abroad.
A. How Media Industries Are Structured. Three common organizational structures
characterize the media business: monopoly, oligopoly, and limited competition.
1. Monopoly. A monopoly occurs when a single business dominates an industry.
B. From Regulation to Deregulation. In recent decades, many corporations have
flourished in a probusiness climate that includes government deregulation.
C. The Rise of Media Powerhouses. Deregulation and the uneven enforcement of
antitrust laws have led to more consolidation and less competition.
II. Analyzing the Media Economy. The tremendous power of the mass media raises
questions about the impact of media businesses on American democracy and on other
cultures around the world.
A. How Media Companies Operate. When analyzing media companies, economists
study several factors, such as how they set prices and market their offerings, and
also consider how these companies live up to society’s expectations.
1. Maximizing Profits. Media companies get money from two sources: by selling
B. How the Internet Is Changing the Game. The Internet has provided new revenue
opportunities for old media, but it has also disrupted old business models.
C. Business Trends in Media Industries. A number of other factors besides
consolidation characterize the economics of mass media businesses.
1.
Flexible Markets and the Decline of Labor Unions. Today’s markets are
flexible because consumer and business needs change quickly and
continuously. Answering these needs is expensive, and companies try to lower
costs through cheap labor, often by shifting work overseas.
2. The Wage Gap and Downsizing. Companies have downsized to become
more competitive, and many people today scramble for low-wage jobs.
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D. The Age of Hegemony. There is little public debate about growing media power.
One explanation is that society’s least powerful members are persuaded to accept
the views of the powerful as common sense.
III. Specialization and Global Markets
International trade agreements and improving technology have accelerated the global
spread of media products and cultural messages.
A. The Rise of Specialization and Synergy. As globalization increased, mass media
companies sought specialized markets and promoted different versions of products
across various subsidiaries.
B. Disney: A Postmodern Media Conglomerate. Walt Disney’s niche was creating
children’s cartoons, but they were barely profitable, and by the late 1940s, the
market for them was eroding.
1. Driving to Diversify. With the demise of the cartoon film short, Disney
expanded into documentaries, television, and theme parks.
2. Capturing Synergies. Disney epitomizes the synergistic possibilities of media
consolidation because it creates different versions of media products for
C. The Growth of Global Audiences. International expansion has allowed media
conglomerates some advantages, including secondary markets to earn profits and
to advance and leverage technological innovations.
IV. Social Issues in Media Economics
Consolidation has sparked worries that consumers have lost control and that American
culture is infiltrating every corner of the globe.
A. The Limits of Antitrust Laws. Companies easily avoid antitrust laws, resulting in
fewer voices in the marketplace.
B. The Fallout from a Free Market. There is little public debate about the tightening
oligopoly structure of media.
1. Equating Free Markets with Democracy. Americans are reluctant to criticize
the advertising-supported structure of the media because throughout the Cold
War they saw capitalism as synonymous with democracy.
2. Debating Consumer Choice versus Consumer Control. Consumers have a
choice of media products, but they have little control over what kinds of media
get created and circulated.
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LECTURE TOPICS
1. Explain how the emphasis on mass production and mass consumption led to the
development of mass media outlets, specialized niche markets, and further media
consolidation. Note how niche programming has also made greater accuracy in audience
ratings systems an important issue in the television industry.
2. Describe the climate of deregulation from the late 1970s onward and note the
consequences of deregulation for the media industry. Provide current examples of
LECTURE SPIN-OFFS
The Rise of Media Powerhouses
company works hard to reshape its distribution model to reach new audiences, many dollars
are exchanging hands in the process of moving from nondigital to digital. Rupert Murdoch’s
acquisition of the Wall Street Journal is a good example of a company paying an exorbitant
sum ($5 billion) with the goal of turning old media into new media and hoping that the old
media will become even more profitable online.
Some notable media mergers over the years:
• Broadcast news ownership: In 1986, General Electric purchased NBC for $6.4 billion.
In 1995, Disney bought ABC for $19 billion, Time Warner bought Turner Broadcasting
(including CNN) for $6.5 billion, and News Corp. established Fox News. In 1999,
Viacom purchased CBS for $47.5 billion. In 2000, Time Warner merged with AOL in
the largest media deal ever, worth more than $160 billion. In 2006, Time Warner and
Paramount abandoned WGN and UPN, respectively, and launched a collaborative
network called CW. Two private equity firms, Thomas H. Lee Partners and Bain Capital
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Partners, bought Clear Channel in 2006 for $18.7 billion. A proposed merger between
Time Warner and AT&T—valued at $85 billion—moved closer to completion in 2017.
• Music and movies: Seagram (owner of Universal) took over Polygram, creating the
largest company in the recording industry in 1998. French conglomerate Vivendi bought
• Internet: America Online Inc. bought Netscape Communications Corp. for $4.2 billion
in 1998. Yahoo! bought GeoCities for $5.02 billion in 1999. Time Warner merged with
AOL in 2000. There was a proliferation of search engine acquisitions in 2002 and 2003.
Yahoo! bought Inktomi for $235 million in 2002; Overture bought AlltheWeb ($70
million) and AltaVista ($140 million) in 2003; Yahoo! bought Overture for $1.63
billion in 2003; and Microsoft tried to buy Google in 2003, but Google rejected the
offer. Verizon acquired AOL in 2015 for $4.4 billion, and then purchased Yahoo! for
$4.48 billion in 2017.
In 2005, News Corp. acquired MySpace for $580 million and arranged a $900
million advertising deal with Google. Then, in 2006, Google acquired YouTube for
$1.64 billion. Note: Google created and continues to improve on the fastest and most
capable search engine algorithm. By 2003, keyword advertising had become the “killer
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• Newspapers: In 2007, News Corp. acquired the Wall Street Journal for $5 billion;
Thomson acquired Reuters for $17.24 billion.
• Books: Borders, formerly one of two major bookstore chains, went out of business in
2011. Larger stores like Barnes & Noble and smaller bookstores are still losing money
due to competition from online booksellers (particularly Amazon.com) and to an
increase in nonbook retailers such as Target and Sam’s Club.
• In 2006, the FCC ordered its staff to destroy all copies of a draft study concluding that
local media ownership is beneficial to the public. The report was written by two FCC
economists who had analyzed 4,078 news stories broadcast in 1998. According to the
Specialization and Synergy
One of the most entertaining satires of media synergy was displayed in the sitcom 30 Rock,
which revolved around the adventures of Liz Lemon (Tina Fey) producing a variety show
similar to Saturday Night Live while working with GE executive Jack Donaghy (Alec
Baldwin). Much of the humor poked fun at corporate control of media and the constant
Disney: A Postmodern Media Conglomerate
Consider Disney as an example of postmodern media conglomeration:
• In 1995, Disney bought the ABC television network, adding properties like ESPN to its
corporate holdings.
• In 2001, Disney bought Fox Family Network and renamed it ABC Family (rebranded as
FreeForm in 2016).
• In 2006, Disney acquired top animation studio Pixar, which was responsible for Toy
The Growth of Global Audiences
• There was an explosion of cable and digital-television channels across Europe as state
broadcasting monopolies broke up during the late 1980s and early 1990s. American
shows still dominated European prime time in the 1990s; but by the late 1990s,
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Europe’s most popular shows were being produced locally, often with the help of U.S.
companies like Disney.
• Internationally syndicated versions of American shows still remain popular in Europe.
Shows like The Simpsons are dubbed into local languages and fill the fringe hours of
The Limits of Antitrust Laws
A trust is a collection of investments. Antitrust legislation is thus concerned with situations
in which owners/corporations have too many investments concentrated in a certain area,
leading to a noncompetitive monopoly or oligopoly.
The Media Marketplace in a Democratic Society
• The Supreme Court made an important decision with regard to political speech in 1978.
In a 5–4 vote (with William Rehnquist dissenting), it allowed virtually unregulated
amounts of special interest money into political campaigns. This decision has changed
the media environment in unprecedented ways: it has given a huge amount of power to
big media companies, which benefit from political advertising.
• In 2010, also in a five-to-four vote, the U.S. Supreme Court declared in Citizens
United v. Federal Election Commission that the U.S. government cannot ban
political spending by corporations in candidate elections.
• When Michael Eisner was Disney CEO (1984–2005), he said, “We have no obligation
to make history; we have no obligation to make art; we have no obligation to make a
statement; to make money is our only objective.”
• You may want to consider having your students read portions of Aldous Huxley’s Brave
New World and George Orwell’s 1984. Neil Postman summarized the two books’
fictional worldviews in the foreword to his 1984 book, Amusing Ourselves to Death:
What Orwell feared were those who would ban books. What Huxley feared was that
there would be no reason to ban a book, for there would be no one who wanted to
read one. Orwell feared those who would deprive us of information. Huxley feared
those who would give us so much that we would be reduced to passivity and
• Here is an excerpt of a letter Media Essentials author Richard Campbell sent to the
editor of Brill’s Content in 1999, exposing the problems arising from conflicts of
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interest faced by journalists working for big corporations and whose voices are most
likely to be heard:
For a democracy to work best, news media need to be independent of political
parties and corporate decrees. We live in a world where journalists have turned into
TV stars, commanding multimillion-dollar salaries and $20,000 speaker fees. In
such a world, the era of 60 Minutes is ending. The turning point: the 1995 tobacco
MEDIA LITERACY DISCUSSIONS AND EXERCISES
IN BRIEF: WILL THE REAL CONGLOMERATE PLEASE STAND UP?
This instructive exercise is for large classes. Pick a media conglomerate, such as Viacom,
but don’t tell your students which one you’ve chosen. Assign the name of a different
conglomerate subsidiary (e.g., CBS, MTV) to each student and instruct students to stand up
and say the name, one at a time, and remain standing. Once everyone has read their
subsidiary names, reveal that each one operates under the same conglomerate umbrella.
—Developed by Mark Neuzil, University of Saint Thomas
IN BRIEF: DISNEY’S CULTURE OF MARKETING SYNERGY
Pre-Exercise Question: To what extent were you immersed in Disney culture?
Consider modern Disney animated movies. Possible films include The Little Mermaid
(1989), Aladdin (1992), The Lion King (1994), Toy Story (1995), The Hunchback of Notre
IN DEPTH: UNDERSTANDING MONOPOLIES
This project is intended to help students get to know the small number of media
corporations that control so much of American and global culture and help them understand
1. Description.
• Describe the company’s history: When and how did it get so big?
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• Find out where the company is headquartered, where its many divisions are located,
and where its products are distributed to get a general idea of the company’s global
expansiveness.
• Note the company’s latest revenue data and current standing among competitors.
• Describe the credentials of the company’s current chair and CEO and, if relevant,
the previous chair or CEO.
• List all the company’s many subsidiaries.
2. Analysis. Isolate a few patterns among your many findings. For example, what are some
successes or failures of this company in leveraging its potential synergies? Or focus on
the company’s news media holdings. How does this media giant use its news media
divisions to its advantage?
3. Interpretation. What do these patterns mean? First discuss them from an investor’s
perspective. Then discuss them from a citizen’s perspective. Are these interests the
same or different?
4. Evaluation. Is this company good for democracy? Does it enable multiple points of
CLASSROOM MEDIA RESOURCES
VIDEOS/DVDS/CDS
Ammo for the Info-Warrior 2 (2005, 90+ minutes). A series of nine five- to ten-minute news
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Freedom of Expression (2007, 61 minutes). This documentary explores the battles being
waged in courts, classrooms, museums, film studios, and the Internet over control of our
Information Superhighway Robbery: The Crisis of the Cultural Environment (1997, 40
minutes). George Gerbner evaluates and indicts the Internet as a medium for corporate
control.
KPFA On the Air (2000, 60 minutes). KPFA began broadcasting in April 1949 and soon
became a beacon of open-ended discourse in the McCarthy period of the 1950s. This
documentary provides rich food for thought about the potential for alternative visions of
media and their relationships to community.
Manufacturing Consent: Noam Chomsky and the Media (1993, 167 minutes). World-
renowned linguist, intellectual, and political activist Noam Chomsky offers a probing
analysis of the mass media. Funny, provocative, and accessible.
Mickey Mouse Monopoly: Disney, Childhood, and Corporate Power (2001, 52 minutes).
This video/DVD insightfully analyzes Disney’s cultural pedagogy, examines its
Rich Media, Poor Democracy (2003, 30 minutes). Adapted from Robert McChesney’s book
of the same title, this video demonstrates how journalism has been compromised by the
corporate bosses of conglomerates such as Disney, Sony, Viacom, News Corp., and
WEB SITES
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FURTHER READING
Albarran, Alan B. The Media Economy. 2nd ed. New York: Routledge, 2017.
Anderson, Brian C., and Adam D. Thierer. A Manifesto for Media Freedom. New York:
Encounter, 2008.
Bagdikian, Ben. The New Media Monopoly. Boston: Beacon, 2004.
Collins, Ronald. Dictating Content: How Advertising Pressure Can Corrupt a Free Press.
Washington, DC: Center for the Study of Commercialism, 1992.
Compaine, Benjamin M., and Douglas Gomery. Who Owns the Media? 3rd ed. Mahwah,
NJ: Lawrence Erlbaum, 2000.
Croteau, David, and William Hoynes. The Business of Media: Corporate Media and the
Public Interest. 2nd ed. Thousand Oaks, CA: Pine Forge, 2006.
Greider, William. Who Will Tell People: the Betrayal of American Democracy. New York:
Simon & Schuster, 1993.
Herman, Edward S., and Noam Chomsky. Manufacturing Consent: the Political Economy
of the Mass Media. New York: Pantheon Books, 2003.
Klaehn, Jeffery, ed. The Political Economy of Media and Power. New York: Peter Lang,
