Potter, Introduction to Media Literacy 1e 1
Introduction to Media Literacy, 1st edition
W. James Potter
Chapter 4: Mass Media Industries: The Economic Game
Lecture Notes
Learning Objectives:
1. Apply the game metaphor to organize your knowledge about media economics.
2. Identify the role of advertising in the mass media economic game.
Outline:
I. The media game
A. The players consist of consumers, advertisers, media companies, and employees.
i. Consumers have two resources: their money and their time.
ii. Advertisers exchange money for time and space on media to display their
messages.
iii. Media companies use money, messages, and audiences to compete in
multiple markets simultaneously.
iv. Employees of media companies bring their time, skills, and talent to the
game.
B. The goal for all four types of players is to maximize the value of the exchange for
themselves.
C. Advertising is the engine that drives the growth of the media industries.
i. Advertising is important to our economy.
a. Since people no longer make their own food and clothing, they
need to purchase these items.
b. Due to a high level of employment, people have the resources to
buy food and clothing.
ii. Advertising allows new products to enter markets.
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II. Media industries’ strategies
A. Maximizing profits
i. Increasing revenue streams is a strategy to increase overall revenue and
profits.
a. The goal is to generate revenue from the same audience through
multiple means.
ii. Minimizing expenses is a strategy to increase profits.
a. Personnel are a major expense for media companies.
b. Economies of scale exist when marginal costs are lower than
average costs.
a. The bigger the scale of a business, the more the costs will
go down because of a demand for products and efficiency
of production.
b. Because broadcast media only have fixed costs, they are
motivated to have large audiences.
c. Economies of scope are achieved through multiproduct production.
B. Constructing audiences
i. Attracting people to niche audiences allows companies to conduct long-
tail marketing.
ii. Conditioning audiences is a tactic used by media companies to ensure that
audiences will make a habit of consuming the same media.
C. Reducing risk
i. All businesses face risk, but there are high risks in the media industries.
a. Ninety percent of new businesses fail.
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b. Approximately, 2% of films each year account for 80% of box
office profits.
ii. Media businesses reduce risk through something called a marketing
concept.
III. Increasing media literacy
A. Are you a net winner or a net loser in the economic game?
i. What are the expenditures you have for consuming media?
ii. Are you generally satisfied with the media you consume?