Communications Chapter 14 Homework Disney Bought Fox Family Network And Renamed Abc Family Rebranded Freeform 2016

Unlock access to all the studying documents.

View Full Document

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.

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.

168

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.

169

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

170

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

171

• 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,

172

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

173

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?

174

• 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

175

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

176