CHAPTER 13 ○ MEDIA ECONOMICS AND THE GLOBAL MARKETPLACE 449
Media Economics
and the Global
Marketplace
In the economic history of electronic—and now
digital—media, one key business strategy for
enterprising technology companies and distribution
services has been to transition into
the content and storytelling business. In the
1920s, RCA, which pioneered commercial radio
technology, started purchasing phonograph
companies and radio stations—both content
creators. Fast-forward to 1987—the Japanese
electronics giant Sony paid $2 billion for CBS
Records (renaming it Sony Music in 1991), and
in 1989 Sony also acquired a major movie studio,
Columbia Pictures, for $3.4 billion. In 2000,
AOL, then the preeminent dial-up Internet company,
also opted to take a chance on content
creation and, for $164 billion, bought Time
Warner—the world’s biggest media company at
the time. However, because AOL underestimated
the growth of broadband and wireless technology
and fell behind in those areas, the merger
went sour and Time Warner’s own executives
eventually took charge and spun off AOL as a
separate company in 2009. To rehabilitate
451
Analyzing the Media
Economy
454
The Transition to an
Information Economy
461
Specialization,
Global Markets,
and Convergence
470
Social Issues in Media
Economics
475
The Media
Marketplace and
Democracy
THE BUSINESS OF MASS MEDIA
450 PART 4 ○ THE BUSINESS OF MASS MEDIA
MEDIA ECONOMICS
itself, AOL got back into the content
game in 2011, buying the popular
Internet newspaper Huffington Post for
$315 million.1
Another technology company looking to
rehabilitate itself with new media content
is Yahoo! While many of its earlier
Internet peers had already moved into
the content business—Google bought
YouTube, Microsoft developed Xbox and
streaming media, Amazon publishes
books and streaming media, and Apple
distributes music and develops app
downloads—Yahoo! (with the exception
of its purchase of Flickr in 2005) had
not offered much more than its own
mostly aggregated content like Yahoo!
Sports and Yahoo! News (Facebook’s
content is provided by its users.) In
2013 Yahoo! bought the fast-growing
Tumblr blog service for $1.1 billion in an
effort to stake a claim in the social media
content business. Given the media
world’s history of other bad mergers,
Yahoo! promised “not to screw it up” and
reassured Tumblr’s mostly young users
that it would not ruin their experience
as it seeks to bring advertising to the
service’s more than 100 million blogs.2
Tumblr, as one of the most popular mobile
apps, will also give Yahoo! content
that is popular on mobile screens.3
Cable TV—for many years just a distributor
of old network reruns and Hollywood
movies—has also gotten into the
business of developing its own content
over the last few years, creating awardwinning
programs like The Sopranos,
Mad Men, Dexter, and The Closer. More
recently, Netflix is another media distributor
entering the content creation
business. Netflix, like cable TV in the
early days, made its mark distributing
old TV shows and Hollywood films—by
sending DVDs through the mail and,
later, by shifting its distribution system
to streaming old TV programs and
movies. In 2013 it premiered House of
Cards, an original one-hour “political
drama” starring Kevin Spacey. Just like
a traditional TV network would, Netflix
ordered twenty-six episodes of its new
TV series.4
The company also ordered
new episodes of the cult comedy series
Arrested Development.
In the end, compelling narratives are
what attract people to media—whether
in the form of books or blogs, magazines
or movies, TV shows or talk radio.
People make sense of their experiences
and articulate their values through
narratives. And so “the story” of media
economics today is—as it has always
been—the telling and selling of stories.
“Google has been spending
a lot of time and some
significant money trying
to help traditional media
businesses stay in business,
in part because Google does
not want its search engines
to crawl across a wasteland
of machine-generated infospam
and amateur content
with limited allure.”
DAVID CARR, NEW YORK TIMES,
2011
CHAPTER 13 ○ MEDIA ECONOMICS AND THE GLOBAL MARKETPLACE 451
THE MEDIATAKEOVERS, MULTIPLE MERGERS,AND CORPORATE CONSOLIDATION
over the last two decades have made our modern world very distinct from that of earlier
generations—at least in economic terms. What’s at the heart of this “Brave New Media World” is
a media landscape that has been forever altered by the emergence of the Internet and a “changing
of the guard” from traditional media giants like News Corp. and Time Warner to new digital
giants like Amazon, Apple, Facebook, Google, and Microsoft. As the Yahoo! and Netflix ventures
demonstrate, the Internet is marked by shifting and unpredictable terrain. In usurping the
classified ads of newspapers and altering distribution for music, movies, and TV programs, the
Internet has forced almost all media businesses to rethink not only the content they provide but
the entire economic structure within which our capitalist media system operates.
In this chapter, we examine the economic impact of business strategies on various media. We will:
• Explore the issues and tensions that are a part of the current media economy
• Examine the rise of the Information Age, distinguished by flexible, specialized, and global
markets
• Investigate the breakdown of economic borders, focusing on media consolidation, corporate
mergers, synergy, deregulation, and the emergence of an economic global village
• Address ethical and social issues in media economics, investigating the limits of antitrust
laws, the concept of consumer control, and the threat of cultural imperialism
• Examine the rise of new digital media conglomerates
• Consider the impact of media consolidation on democracy and on the diversity of the
marketplace
As you read through this chapter, think about the different media you use on a daily basis.
What media products or content did you consume over the past week? Do you know who owns
them? How important is it to know this? Do you consume popular culture or read news from
other countries? Why or why not? For more questions to help you understand the role of media
economics in our lives, see “Questioning the Media” in the Chapter Review.
Analyzing the Media
Economy
Given the sprawling scope of the mass media, the study of their economic conditions poses a
number of complicated questions. For example, does the government need to play a stronger
role in determining who owns the mass media and what kinds of media products are manufactured?
Or should the government step back and let competition and market forces dictate what
happens to mass media industries? Should citizen groups play a larger part in demanding that
media organizations help maintain the quality of social and cultural life? Does the influence of
American popular culture worldwide smother or encourage the growth of democracy and local
cultures? Does the increasing concentration of economic power in the hands of several international
corporations too severely restrict the number of players and voices in the media?
Answers to such questions span the economic and social spectrums. On the one hand,
critics express concerns about the increasing power and reach of large media conglomerates.
On the other hand, many free-market advocates maintain that as long as these structures ensure
efficient operation and generous profits, they measure up as quality media organizations. In
order to probe these issues fully, we need to understand key economic concepts across two
broad areas: media structure and media performance.5
452 PART 4 ○ THE BUSINESS OF MASS MEDIA
MEDIA ECONOMICS
The Structure of the Media Industry
In most media industries, three common structures
characterize the economics of the business: monopoly,
oligopoly, and limited competition.
A monopoly occurs when a single firm dominatesy
production and distribution in a particular industry,
either nationally or locally. For example, at the national
level, AT&T ran a rare government-approved-andregulated
monopoly—the telephone business—for more
than a hundred years until its breakup in the mid-1980s.
In a suit brought by the Justice Department and twenty
states, software giant Microsoft was accused of monopolistic
practices for controlling more than 80 percent of
computer operating systems worldwide and was ordered
to split into two separate companies. Microsoft, however,
appealed and in 2002 agreed to a court settlement that
imposed restrictions only on its business dealings with personal computer makers but left the
company intact.
On the local level, monopoly situations have been more plentiful, occurring in any
city that has only one newspaper or one cable company. While the federal government has
encouraged owner diversity since the 1970s by prohibiting a newspaper from operating
a broadcast or cable company in the same city, many individual local media monopolies
have been purchased by national and international firms. For instance, Cox Communications
has acquired nearly thirty cable monopoly systems—including those in San Diego,
Oklahoma City, and Cleveland—clustered in nineteen states and serving more than six
million customers. Likewise, in the newspaper business, chain operators like Gannett
own hundreds of newspapers, most of which constitute a newspaper monopoly in their
communities.
Media Economics and the Global Marketplace
1920 19301880 1900
Sherman Antitrust Act
Congress passes an act in
1890 that outlaws monopoly
practices and corporate trusts
that fix prices (p. 455).
Clayton Antitrust Act
Congress strengthens antitrust
law in 1914 by prohibiting
companies from selling only to
dealers who agree to reject rival
products (p. 455).
Busting the Big Boys
In 1911, the federal government
uses antimonopoly laws to break
up both American Tobacco Co.
and Rockefeller’s Standard Oil Co.
into smaller firms (p. 455).
Disney Founded in Hollywood
The future media conglomerate
begins as a small animation
studio in 1928 (p. 462).
OPRAH WINFREY has builtY
a remarkable media empire
over the course of her long
career. From book publishing
to filmmaking and television,
where she got her start, Oprah
has established an expansive
sphere of influence. Yet after
launching cable TV network
OWN in 2011, an acronym
named for Winfrey herself,
the modern-day media mogul
has faced multiple challenges,
including lackluster ratings
and employee layoffs.
CHAPTER 13 ○ MEDIA ECONOMICS AND THE GLOBAL MARKETPLACE 453
In an oligopoly, just a few firms dominate an industry. For example, the book-publishing
and feature-film businesses are both oligopolies. Each has five or six major players that control the
majority of the production and distribution in the industry. After the completion of the UniversalEMI
merger in 2012, the production and distribution of the world’s music is now controlled by
just three international corporations—Warner Music (United States), Sony (Japan), and Universal
(France). Usually conducting business only in response to one another, such companies face little
economic competition from small independent firms. Oligopolies often add new ideas and product
lines by purchasing successful independent companies.
Sometimes called monopolistic competition, limited competition characterizes a media
market with many producers and sellers but only a few products within a particular category.6
For instance, hundreds of independently owned radio stations operate in the United States.
Most of these commercial stations, however, feature a limited number of formats—such as country,
classic rock, or contemporary hits. Because commercial broadcast radio is now a difficult
market to enter—requiring an FCC license and major capital investment—most stations play only
one of the few formats that attract sizable audiences. Under these circumstances, fans of blues,
alternative country, or classical music may not be able to find a radio station that matches their
interests. Given the high start-up costs of launching a commercial business in any media industry,
companies offering alternative products are becoming rare in the twenty-first century.
The Performance of Media Organizations
In analyzing the behavior and performance of media companies, economists pay attention
to a number of elements—from how media make money to how they set prices and live up to
society’s expectations. In addition, many corporations now adapt their practices to new Internet
standards. For example, most large regional newspapers from 2009 to 2011 had lost a high
percentage of classified ad revenue to Internet companies and were adjusting to the losses by
downsizing staff; printing on fewer days of the week; and in some cases declaring bankruptcy,
closing down, or moving to an online-only edition.
1950 1970 1990 2010 2020
Celler-Kefauver Act
In 1950, corporate mergers
and joint ventures that
reduce competition are
limited (p. 455).
GATT Established
The General Agreement on Tariffs
and Trade is established in 1947,
opening an era of increasing globalization.
The NAFTA agreement
in 1994 and the WTO in 1995
further encourage trade and the
export of certain jobs (p. 462).
GE Buys NBC
The 1985 merger
sets off a wave of
media consolidation
(p. 457).
Disney Buys ABC
The 1995 deal is approved
despite concerns that ABC
News will pull its punches
in coverage of Disney’s
empire (p. 457).
EchoStar-DirecTV
Merger Blocked
The FCC moves to
block a deal in 2002
that would have
created a Direct Broadcast
Satellite (DBS)
monopoly (p. 472).
AOL Merges with Time
Warner
Time Warner, already
the largest media corporation,
becomes even
larger in 2001 with the
addition of AOL, the
largest Internet service
provider (p. 457).
Yahoo! buys Tumblr
In 2013, Yahoo! stakes
its social media claim
by buying the popular
blogging site (p. 449).
p
AOL buys the Huffington Post
Looking to expand in content
creation, AOL acquires the
Huffington Post for $315 million
in 2011 (p. 457).
“Communities
across America
are suffering
through a crisis
that could leave
a dramatically
diminished version
of democracy in
its wake. . . . In a
nutshell, media
corporations,
after running
journalism into
the ground, have
determined that
news gathering
and reporting are
not profit-making
propositions. So
they’re jumping
ship.”
JOHN NICHOLS AND
ROBERT MCCHESNEY,
THE NATION, 2009
454 PART 4 ○ THE BUSINESS OF MASS MEDIA
MEDIA ECONOMICS
Collecting Revenue
The media collect revenues in two ways: through direct and indirect payments. Direct payment
involves media products supported primarily by consumers, who pay directly for a book, a CD, a
movie, or an Internet or cable TV service. Indirect payment involves media products supported
primarily by advertisers, who pay for the quantity or quality of audience members that a particular
medium delivers. Over-the-air radio and TV broadcasting, daily newspapers, magazines, and
most Web sites rely on indirect payments for the majority of their revenue.
Through direct payments, consumers communicate their preferences immediately. Through
the indirect payments of advertising, “the client is the advertiser, not the viewer or listener or
reader.”7
Advertisers, in turn, seek media channels that persuade customers to acquire new
products or switch brand loyalties. Many forms of mass media, of course, generate revenue both
directly and indirectly, including newspapers, magazines, online services, and cable systems,
which charge subscription fees in addition to selling commercial time or space to advertisers.
Commercial Strategies and Social Expectations
When evaluating the media, economists also look at other elements of the commercial process,
including program or product costs, price setting, marketing strategies, and regulatory practices.
For instance, marketers and media economists determine how high a local newspaper
can raise its weekly price before enough disgruntled readers drop their subscriptions and offset
the profits made from the price increase. Or, as in 1996, critics and government agencies began
reviewing the inflated price of CDs. They demonstrated that the economies of scale principle—
the practice of increasing production levels to reduce the cost for each product—should have
driven down the price of a CD in the same way that the price of videotapes dropped in the
1980s. Yet it wasn’t until October 2003 that any of the major recording companies dropped its
CD prices. At that time, Universal, trying to generate consumer demand in the face of illegal filesharing
of music, cut the recommended retail price of music CDs by a third—to $12.98 each (by
2013 the price had dropped to $9—$13, roughly the same price to download an entire album on
sites like iTunes).
Economists, media critics, and consumer organizations have also asked the mass media to
meet certain performance criteria. Some key expectations of media organizations include introducing
new technologies to the marketplace, making media products and services available to
people of all economic classes, facilitating free expression and robust political discussion, acting
as public watchdogs over wrongdoing, monitoring society in times of crisis, playing a positive
role in education, and maintaining the quality of culture.8
Although media industries live up to some of these expectations better than to others,
economic analyses permit consumers and citizens to examine the instances when the mass
media fall short. For example, when corporate executives trim news budgets or fire news personnel,
or use one reporter to do multiple versions of a story for TV, radio, newspaper, and the
Internet, such decisions ultimately reduce the total number of different news stories that cover
a crucial topic and may jeopardize the role of journalists as watchdogs of society.
The Transition to an Information
Economy
The first half of the twentieth century emphasized mass production, the rise of manufacturing
plants, and the intense rivalry of U.S.-based businesses competing against products from other
nations. By the 1990s, however, car parts for both Japanese- and American-based firms were
“Had anyone in
1975 predicted
that the two oldest
and most famous
corporate producers
and marketers
of American
recorded music
[the RCA and CBS
labels] would end
up in the hands of
German printers
and publishers
[Bertelsmann]
and Japanese
physicists and
electronic engineers
[Sony], the reaction
in the industry
would have been
astonishment.”
BARNET AND
CAVANAGH, GLOBAL
DREAMS, 1994
CHAPTER 13 ○ MEDIA ECONOMICS AND THE GLOBAL MARKETPLACE 455
being manufactured in plants all over the world. The transition to this new cooperative global
economy actually began taking shape back in the 1950s—a period in which the machines that
drove the Industrial Age changed gears for the new Information Age. With offices displacing
factories as major work sites, centralized mass production declined and often gave way to internationalized,
decentralized, and lower-paid service work.
As part of the shift to an information-based economy, various mass media industries began
marketing music, movies, television programs, and computer software on a global level. The
emphasis on mass production shifted to the cultivation of specialized niche markets. In the
1960s, serious national media consolidation began, escalating into the global media mergers
that have continued since the 1980s.
Deregulation Trumps Regulation
During the rise of industry in the nineteenth century, entrepreneurs such as John D. Rockefeller in
oil, Cornelius Vanderbilt in shipping and railroads, and Andrew Carnegie in steel created monopolies
in their respective industries. In 1890, Congress passed the Sherman Antitrust Act, outlawing
the monopoly practices and corporate trusts that often fixed prices to force competitors out of
business. In 1911, the government used this act to break up both the American Tobacco Company
and Rockefeller’s Standard Oil Company, which was divided into thirty smaller competing firms.
In 1914, Congress passed the Clayton Antitrust Act, prohibiting manufacturers from selling
only to dealers and contractors who agreed to reject
the products of business rivals. The Celler-Kefauver Act
of 1950 further strengthened antitrust rules by limiting
any corporate mergers and joint ventures that reduced
competition. Today, these laws are enforced by the
Federal Trade Commission and the antitrust division of
the Department of Justice.
The Escalation of Deregulation
Until the banking, credit, and mortgage crises erupted
in fall 2008, government regulation had often been
denounced as a barrier to the more flexible flow of
capital. Although the administration of President Carter
(1977–81) actually initiated deregulation, under President
Reagan (1981–89) most controls on business were drastically
weakened. Deregulation led to easier mergers,
corporate diversifications, and increased tendencies in
some sectors toward oligopolies (especially in airlines,
energy, communications, and finance).9
This deregulation
and decline of government oversight sometimes led
to severe consequences, such as the collapse of Enron
in 2001, the fraud cases at telecommunications firm
WorldCom and cable company Adelphia in 2005, and
the widespread financial crises that began in 2008 and
set off a worldwide recession.
In the broadcast industry, the Telecommunications
Act of 1996 (under President Clinton) lifted most
restrictions on how many radio and TV stations one
corporation could own. As a result, radio and television
ownership became increasingly consolidated. The
1996 act further welcomed the seven powerful regional
telephone companies, known as Baby Bells (resulting
ANTITRUST REGULATION
During the late 1800s,
John D. Rockefeller Sr.,
considered the richest
businessman in the world,
controlled more than 90
percent of the U.S. oil
refining business. But
antitrust regulations were
used in 1911 to bust
Rockefeller’s powerful
Standard Oil into more than
thirty separate companies.
He later hired PR guru Ivy
Lee to refashion his negative
image as a greedy corporate
mogul.
456 PART 4 ○ THE BUSINESS OF MASS MEDIA
MEDIA ECONOMICS
from the mid-1980s breakup of the AT&T telephone monopoly), into the cable TV business. In
addition, cable operators regained the right to freely raise their rates and were authorized to
compete in the local telephone business. At the time, some economists thought the new competition
would lower consumer prices. Others predicted more mergers and an oligopoly in which
a few mega-corporations would control most of the wires entering a home and dictate pricing.
As it turned out, part of each prediction occurred. The price of basic cable service more than
doubled between 1996 and 2012, from $24.48 to $61.63 per month.10
At the same time, the cost
of a monthly telephone landline increased only about 20 percent, in part because a growing percentage
of households replaced their landlines with mobile phones. Increasingly, companies like
Comcast and AT&T try to corner all of the key communications systems by “bundling” multiple
services—including digital cable television, high-speed Internet, home telephone, and wireless.
Deregulation Continues Today
Since the 1980s, a spirit of deregulation and special exemptions has guided communication legislation.
For example, in 1995, despite complaints from NBC, Rupert Murdoch’s Australian company
News Corp. received a special dispensation from the FCC and Congress allowing the firm to continue
owning and operating the Fox network and a number of local TV stations. The Murdoch decision
ran counter to government decisions made after World War I. At that time, the government
feared outside owners and thus limited foreign investment in U.S. broadcast operations to 20
percent. To make things easier, Murdoch became a U.S. citizen, and in 2004 News Corp. moved its
headquarters to the United States, where the company was doing about 80 percent of its business.
FCC rules were further relaxed in late 2007, when the agency modified the newspaperbroadcast
cross-ownership rule, allowing a company located in a Top 20 market to own one TV
station and one newspaper as long as there were at least eight TV stations in the market. Previously,
a company could not own a newspaper and a broadcast outlet—either a TV or radio
station—in the same market (although if a media company had such cross-ownership prior to
the early 1970s, the FCC usually granted waivers to let it stand). Murdoch had already been
granted a permanent waiver from the FCC to own the New York Post and the New York TV stationt
WNYW. So the FCC actually restructured the cross-ownership rule to accommodate News Corp.
(In 2006, when News Corp. bought the New York–based Wall Street Journal, the FCC declared
that the Journal was a national newspaper, not a local one that fell under the cross-ownership
rule.) In 2011, the FCC voted to allow the same company to own a TV station and a newspaper
in a Top 20 market. But in 2012, the Supreme Court let a lower court ruling stand that blocked
the FCC’s deregulation of cross-ownership, so the rules still exist.
The deregulation movement favored by administrations from Reagan through Clinton to
George W. Bush returned media economics to nineteenth-century principles, which suggested
that markets can take care of themselves with little government intervention. In this context,
one of the ironies in broadcast history is that more than eighty years ago commercial radio
broadcasters demanded government regulation to control technical interference and amateur
competition. By the mid-1990s, however, the original reasons given for regulation no longer
applied. With new cable channels, DBS, and the Internet, broadcasting was no longer considered
a scarce resource—once a major rationale for regulation as well as government funding of
noncommercial and educational stations.
Media Powerhouses: Consolidation,
Partnerships, and Mergers
The antitrust laws of the twentieth century, despite their strength, have been unevenly applied,
especially in terms of the media. When International Telephone & Telegraph (ITT) tried to
acquire ABC in the 1960s, loud protests and government investigations sank the deal. But in the
“Bigisbadifitstifles
competition . . .
but big is good if it
produces quality
programs.”
MICHAEL EISNER,
THEN-CEO,
DISNEY, 1995
“It’s a small world,
after all.”
THEME SONG,
DISNEY THEME PARKS
CHAPTER 13 ○ MEDIA ECONOMICS AND THE GLOBAL MARKETPLACE 457
mid-1980s, as the Justice Department broke up AT&T’s century-old monopoly—creating telephone
competition—the government at the same time was also authorizing a number of mass media
mergers that consolidated power in the hands of a few large companies. For example, when
General Electric purchased RCA/NBC in the 1980s, the FTC, the FCC, and the Justice Department
found few problems. Then, in 1996, computer giant Microsoft partnered with NBC to create a CNN
alternative, MSNBC: a twenty-four-hour news channel available on both cable and the Internet.
In 1995, Disney acquired ABC for $19 billion. To ensure its rank as the world’s largest media
conglomerate, Time Warner countered and bought Turner Broadcasting in 1995 for $7.5 billion.
In 2001, AOL acquired Time Warner for $106 billion—the largest media merger in history at the
time. For a time the company was called AOL Time Warner. However, when the online giant
saw its subscription service decline in the face of new high-speed broadband services from
cable firms, the company went back to the Time Warner name and spun off AOL in 2009. Time
Warner’s failed venture in the volatile world of the Internet proved disastrous. The companies
together were valued at $350 billion in 2000 but only at $50 billion in 2010. After suffering
losses of over $700 million in 2010, AOL in 2011 bought the Huffington Post, a popular news and
analysis Web site, for $315 million in an attempt to reverse its decline.
Also in 2001, the federal government approved a $72 billion deal uniting AT&T’s cable division
with Comcast, creating a cable company twice the size of its nearest competitor. (AT&T quickly
left the merger, selling its cable holdings to Comcast for $47 billion late in 2001.) In 2009, Comcast
struck a deal with GE to purchase a majority stake in NBC Universal, stirring up antitrust
complaints from some consumer groups. In 2010, Congress began hearings on whether uniting
a major cable company and a major broadcasting network under a single owner would decrease
healthy competition between cable and broadcast TV and would hurt consumers. In 2011, the FCC
approved the deal. In 2012, Comcast, as NBC’s new owner, bought out Microsoft’s share of MSNBC.
Until the 1980s, antitrust rules attempted to ensure diversity of ownership among competing
businesses. Sometimes this happened, as in the breakup of AT&T, and sometimes it did not,
as in the cases of local newspaper and cable monopolies and the mergers listed above. What has
MEDIA PARTNERSHIPS
like the one between
NBC and Microsoft, which
resulted in the creation of
MSNBC, are one of the ways
media conglomerates work
together to consolidate
power. Here Rachel Maddow
prepares for her political talk
show on MSNBC.
458 PART 4 ○ THE BUSINESS OF MASS MEDIA
MEDIA ECONOMICS
occurred consistently, though, is that media competition has been usurped by media consolidation.
Today, the same anticompetitive mind-set exists that once allowed a few utility and
railroad companies to control their industries in the days before antitrust laws.
Most media companies have skirted monopoly charges by purchasing diverse types of mass
media rather than trying to control just one medium. For example, Disney, rather than trying
to dominate one area, provides programming to TV, cable, and movie theaters. In 1995, then–
Disney CEO Michael Eisner defended the company’s practices, arguing that as long as large
companies remain dedicated to quality—and as long as Disney did not try to buy the phone lines
and TV cables running into homes—such mergers benefit America.
But Eisner’s position raises questions: How is the quality of cultural products determined?
If companies cannot make money on quality products, what happens? If ABC News cannot
make a substantial profit, should Disney’s managers cut back their national or international
news staff? What are the potential effects of such layoffs on the public mission of news media
and consequently on our political system? How should the government and citizens respond?
Business Tendencies in Media Industries
In addition to the consolidation trend, a number of other factors characterize the economics of
mass media businesses. These are general trends or tendencies that cut across most business
sectors and demonstrate how contemporary global economies operate.
Flexible Markets and the Decline of Labor Unions
Today’s information culture is characterized by what business executives call flexibility—a
tendency to emphasize “the new, the fleeting . . . and the contingent in modern life, rather than
the more solid values implanted” during Henry Ford’s day, when relatively stable mass production
drove mass consumption.11
The new elastic economy features the expansion of the service
sector (most notably in health care, banking, real estate, fast food, Internet ventures, and computer
software) and the need to serve individual consumer preferences. This type of economy
has relied on cheap labor—sometimes exploiting poor workers in sweatshops—and on quick,
high-volume sales to offset the costs of making so many niche products for specialized markets.
Given that 80 to 90 percent of new consumer and media products typically fail, a flexible
economy has demanded rapid product development and efficient market research. Companies
need to score a few hits to offset investments in failed products. For instance, during the
peak summer movie season, studios premiere dozens of new feature films, such as Iron Man 3,
Man of Steel, and World War Z in 2013. A few are hits but many more miss, and studios hope toZ
recoup their losses via merchandising tie-ins and DVD rentals and sales. Similarly, TV networks
introduce scores of new programs each year but quickly replace those that fail to attract a large
audience or the “right” kind of affluent viewers. This flexible media system, of course, heavily
favors large companies with greater access to capital over small businesses that cannot easily
absorb the losses incurred from failed products.
The era of flexible markets also coincided with the decline in the number of workers who
belong to labor unions. Having made strong gains on behalf of workers after World War II, labor
unions, at their peak in 1955, represented 35 percent of U.S. workers. Then, manufacturers and
other large industries began to look for ways to cut the rising cost of labor. With the shift to an
information economy, many jobs, such as making computers, CD players, TV sets, VCRs, and
DVDs, were exported to avoid the high price of U.S. unionized labor. (Today, in fact, many of the
technical and customer support services for these kinds of product lines are outsourced to nations
like India.) As large companies bought up small companies across national boundaries, commerce
developed rapidly at the global level. According to the U.S. Department of Labor, union membership
fell to 20.1 percent in 1983 and 11.8 percent in 2011, the lowest rate in more than seventy years.
“In antitrust, as in
many other areas
involving economic
regulation, there is
a general perception
today that
businesses have
slipped the traces
of public control
and that unregulated
market
forces will not
ensure a just, or
even efficient,
economy.”
HARRY FIRST,
DIRECTOR, TRADE
REGULATION
PROGRAM, NYU, 2008
CHAPTER 13 ○ MEDIA ECONOMICS AND THE GLOBAL MARKETPLACE 459
Downsizing and the Wage Gap
With the apparent advantage to large companies in this flexible age, who is disadvantaged?
From the beginning of the recession in December 2007 through 2009, the United States lost
more than 8.4 million jobs (affecting 6.1 percent of all employers), creating the highest unemployment
contraction since the Great Depression.12
This phenomenon of layoffs—in both good
times and bad—is characteristic of corporate “downsizing,” which is supposed to make companies
more flexible (in terms of their commitment to their workforce) and more profitable.
This trend, spurred by government deregulation and a decline in worker protections,
means that many employees today scramble for jobs, often working two or three part-time
positions. Increasingly, the available positions have substandard pay. In 2011, the National
Employment Law Project reported “more than one in four private sector jobs (26 percent) were
low-wage positions paying less than $10 per hour.”13
This translates to a salary of about $20,000
a year or less. And, the “flexible” economy keeps moving in that direction. The U.S. Bureau
of Labor Statistics estimated in 2012 that 70 percent of the leading growth occupations for the
next decade are low-wage ones.14
In the news media, the emergence of online news sites, blogs,
and other ventures (e.g., the Huffington Post or Politico) has led to the “downsizing” of traditional
newsrooms—95 of the top 100 newspapers cut staff between 2006 and 2010. Layoffs and
buyouts in newsrooms mean there are fewer reporters and editors to develop new ideas and innovative
techniques to compete with the online news vendors, although in some cases the new
online media have created opportunities for displaced news workers.
The main beneficiaries of downsizing, especially in the 1990s, had been corporate CEOs—many
of whom had overseen the layoffs. The 2008 Nobel economist and New York Times columnist Paul
Krugman reported on the growing gap between CEOs and average workers, stating that back in
1950 corporate CEOs earned about twenty-five times the average worker’s pay. Between 1970 and
2000, however, “the average annual salary in America, expressed in 1998 dollars (that is, adjusted
for inflation), rose from $32,522 in 1970 to $35,864 in 1999. . . . Over the same period, however . . .
the average real annual compensation of the top 100 CEOs went from $1.3 million—39 times the
pay of an average worker—to $37.5 million, more than 1,000 times the pay of ordinary workers.”15
The major economic recessions of the 2000s have lessened the wage gap between CEOs and the
average worker, but the gap was still significant enough to be an issue that spurred the Occupy
Wall Street protests in 2011. Even as most big businesses had recovered from the recession and
experienced record profits by 2011, their low-wage workers’ wages still suffered. For example, at
the top fifty low-wage employers, including Target, McDonald’s, Panera, Macy’s, and Abercrombie
& Fitch, the highest paid executives earned an average of $9.4 million a year. At that rate,
they earned about $4,520 an hour, an amount it would take more than six hundred minimum
wage employees to earn in the same time period.16
(See Table 13.1, “How Many Workers Can You
Hire for the Price of One CEO?”)
Economics, Hegemony, and Storytelling
To understand why our society hasn’t (until recently) participated in much public discussion
about wealth disparity and salary gaps, it is helpful to understand the concept of hegemony. The
word hegemony has roots in ancient Greek, but in the 1920s and 1930s Italian philosopher andy
activist Antonio Gramsci worked out a modern understanding of hegemony: how a ruling class
in a society maintains its power—not simply by military or police force but more commonly by
citizens’ consent and deference to power. He explained that people who are without power—the
disenfranchised, the poor, the disaffected, the unemployed, exploited workers—do not routinely
rise up against those in power because “the rule of one class over another does not depend on
economic or physical power alone but rather on persuading the ruled to accept the system of
beliefs of the ruling class and to share their social, cultural, and moral values.”17
Hegemony,
460 PART 4 ○ THE BUSINESS OF MASS MEDIA
MEDIA ECONOMICS
then, is the acceptance of the dominant values in a culture by those who are subordinate to
those who hold economic and political power.
How then does this process actually work in our society? How do lobbyists, the rich, and
our powerful two-party political system convince regular citizens that they should go along
with the status quo? Edward Bernays, one of the founders of modern public relations (see
Chapter 12), wrote in his 1947 article “The Engineering of Consent” that companies and rulers
couldn’t lead people—or get them to do what the ruling class wanted—until the people consented
to what those companies or rulers were trying to do, whether it was convincing the public
to support women smoking cigarettes or to go to war. To pull this off, Bernays would convert
a client’s goals into “common sense”; that is, he tried to convince consumers and citizens that
his clients’ interests were the “natural” or normal way things worked.
So if companies or politicians convinced consumers and voters that the interests of the
powerful were common sense and therefore normal or natural, they also created an atmosphere
and context in which there was less chance for challenge and criticism. Common sense, after all,
repels self-scrutiny (“that’s just plain common sense—end of discussion”). In this case, status quo
values and “conventional wisdom” (e.g., hard work and religious belief are rewarded with economic
success) and political arrangements (e.g., the traditional two-party system serves democracy
best) become taken for granted as normal and natural ways to organize and see the world.
To argue that a particular view or value is common sense is often an effective strategy for
stopping conversation and debate. Yet common sense is socially and symbolically constructed
and shifts over time. For example, it was once common sense that the world was flat and that
people who were not property-owning white males shouldn’t be allowed to vote. Common
sense is particularly powerful because it contains no analytical strategies for criticizing elite or
dominant points of view and therefore certifies class, race, or sexual orientation divisions or
mainstream political views as natural and given.
To buy uncritically into concepts presented as common sense inadvertently serves to
maintain such concepts as natural, shutting down discussions about the ways in which economic
divisions or political hierarchies are not natural and given. So when Democratic andt
Republican candidates run for office, the stories they tell about themselves espouse their connection
to Middle American common sense and “down home” virtues—for example, a photo
of Mitt Romney eating a Subway sandwich or a video of Barack Obama playing basketball in
a small Indiana high school gym. These ties to ordinary commonsense values and experience
connect the powerful to the everyday, making their interests and ours seem to be seamless.
To understand how hegemony works as a process, let’s examine how common sense is
practically and symbolically transmitted. Here it is crucial to understand the central importance
TABLE 13.1
HOW MANY WORKERS
CAN YOU HIRE FOR THE
PRICE OF ONE CEO?
Source: Douglas McIntyre, “How
Many Workers Can You Hire for
the Price of One CEO?”, July 7,
2010, http://www.dailyfinance
.com/story/how-many-workers
-can-you-hire-for-the-price-of-one
-ceo/19540733/.
The Walt Disney Company $29 million $10/hour; $26,000/year 1,115 employees
(Disneyland Hotel housekeeper)
Cablevision $15–17 million $13/hour; $33,800/year 505 employees
(customer service representative)
Time Warner Cable $15.9 million $20/hour; $52,000/year 423 employees
(cable installer)
Starbucks $9.9 million $9/hour; $23,400/year 423 employees
(entry-level barista)
Walmart $8.5 million $9.75/hour; $25,350/year 335 employees
(starting sales associate)
Nike $7.3 million $9/hour; $23,400/year 311 employees
(starting sales associate, NY)
CEO Compensation Entry-Level Compensation
Company (annual) (per hour/annual) One CEO =
CHAPTER 13 ○ MEDIA ECONOMICS AND THE GLOBAL MARKETPLACE 461
of storytelling to culture. The narrative—as the dominant
symbolic way we make sense of experience and
articulate our values—is often a vehicle for delivering
“common sense.” Therefore, ideas, values, and
beliefs can be carried in our mainstream stories, the
stories we tell and find in daily conversations, in the
local paper, in political ads, on the evening news, or
in books, magazines, movies, favorite TV shows, and
online. The narrative, then, is the normal and familiar
structure that aids in converting ideas, values,
and beliefs to common sense—normalizing them
into “just the way things are.”
The reason that common narratives “work” is
that they identify with a culture’s dominant values;
“Middle American” virtues include allegiances to
family, honesty, hard work, religion, capitalism,
health, democracy, moderation, loyalty, fairness,
authenticity, modesty, and so forth. These kinds
of Middle American virtues are the ones that our
politicians most frequently align themselves with in
the political ads that tell their stories. These virtues lie at the heart of powerful American Dream
stories that for centuries now have told us that if we work hard and practice such values, we
will triumph and be successful. Hollywood, too, distributes these shared narratives, celebrating
characters and heroes who are loyal, honest, and hardworking. Through this process, the media
(and the powerful companies that control them) provide the commonsense narratives that keep
the economic status quo relatively unchallenged and leave little room for alternatives.
In the end, hegemony helps explain why we occasionally support economic plans and structures
that may not be in our best interest. We may do this out of altruism, as when wealthy people
or companies favor higher taxes because of a sense of obligation to support those who are less
fortunate. But more often, the American Dream story is so powerful in our media and popular
culture that many of us believe that we have an equal chance of becoming rich and therefore successful
and happy. So why do anything to disturb the economic structures that the dream is built
upon? In fact, in many versions of our American Dream story—from Hollywood films to political
ads—the government often plays the role of villain, seeking to raise our taxes or undermine rugged
individualism and hard work. Pitted against the government in these stories, the protagonist
is the “little guy” at odds with burdensome regulation and bureaucratic oversight. However,
many of these stories are produced and distributed by large media corporations and political
leaders who rely on the rest of us to consent to the American Dream narrative to keep their privileged
place in the status quo and reinforce this “commonsense” story as the way the world works.
AMERICAN DREAM
STORIES are distributed
through our media. This is
especially true of early television
shows in the 1950s
and 1960s like The Donna
Reed Show, which idealized
the American nuclear family
as central to the American
Dream.
Specialization, Global Markets,
and Convergence
In today’s complex and often turbulent economic environment, global firms have sought
greater profits by moving labor to less economically developed countries that need jobs
but have poor health and safety regulations for workers. The continuous outsourcing of
462 PART 4 ○ THE BUSINESS OF MASS MEDIA
MEDIA ECONOMICS
many U.S. jobs and the breakdown of global economic borders accompanied this transformation.
Bolstered by the passage of GATT (General Agreement on Tariffs and Trade)
in 1947, the signing of NAFTA (North American Free Trade Agreement) in 1994, and the
formation of the WTO (World Trade Organization, which succeeded GATT in 1995), global
cooperation fostered transnational media corporations and business deals across international
terrain.
But in many cases this global expansion by U.S. companies ran counter to America’s earlytwentieth-century
vision of itself. Henry Ford, for example, followed his wife’s suggestion to
lower prices so workers could afford Ford cars. In many countries today, however, most workers
cannot even afford the stereo equipment and TV sets they are making primarily for U.S. and
European markets.
The Rise of Specialization and Synergy
The new globalism coincided with the rise of specialization. The magazine, radio, and cable
industries sought specialized markets both in the United States and overseas, in part to counter
television’s mass appeal. By the 1980s, however, even television—confronted with the growing
popularity of home video and cable—began niche marketing, targeting affluent eighteen- to
thirty-four-year-old viewers, whose buying habits are not as stable or predictable as those of
older consumers. Younger and older audiences, abandoned by the networks, were sought
by other media outlets and advertisers. Magazines such as Seventeen and AARP The Magazine
now flourish. Cable channels such as Nickelodeon and the Cartoon Network serve the undereighteen
market, while A&E and Lifetime address viewers over age fifty and female; in addition,
cable channel BET targets young African Americans, helping to define them as a consumer
group. (See “Case Study: Minority and Female Media Ownership: Why Does It Matter?”
on pages 464–465.)
Beyond specialization, though, what really distinguishes current media economics is the
extension of synergy to international levels.y Synergy typically refers to the promotion and sale
of different versions of a media product across the various subsidiaries of a media conglomerate
(e.g., a Time Warner HBO cable special about “the making of” a Warner Brothers movie
reviewed in Time magazine). However, it also refers to global companies like Sony buying up
popular culture—in this case, movie studios and record labels—to play on its various electronic
products. Today, synergy is the default business mode of most media companies.
Disney: A Postmodern Media Conglomerate
To understand the contemporary story of media economics and synergy, we need only examine
the transformation of Disney from a struggling cartoon creator to one of the world’s largest
media conglomerates.
The Early Years
After Walt Disney’s first cartoon company, Laugh-O-Gram, went bankrupt in 1922, Disney
moved to Hollywood and found his niche. He created Mickey Mouse (originally named Mortimer)
for the first sound cartoons in the late 1920s and developed the first feature-length
cartoon, Snow White and the Seven Dwarfs, completed in 1937.
For much of the twentieth century, the Disney company set the standard for popular
cartoons and children’s culture. The Silly Symphonies series (1929–39) established the studio’s
reputation for high-quality hand-drawn cartoons. Although Disney remained a minor studio,
Fantasia and Pinocchio—the two top-grossing films of 1940—each made more than $40 million.
Nonetheless, the studio barely broke even because cartoon projects took time—four years for
Snow White—and commanded the company’s entire attention.
CHAPTER 13 ○ MEDIA ECONOMICS AND THE GLOBAL MARKETPLACE 463
Around the time of the demise of the cartoon film short in movie theaters, Disney expanded
into other areas, with its first nature documentary short, Seal Island (1949); its first liveaction
feature, Treasure Island (1950); and its first feature documentary, The Living Desert (1953).t
Disney was also among the first film studios to embrace television, launching a long-running
prime-time show in 1954. Then, in 1955, Disneyland opened in Southern California. Eventually,
Disney’s theme parks would produce the bulk of the studio’s revenues. (Walt Disney World in
Orlando, Florida, began operation in 1971.)
In 1953, Disney started Buena Vista, a distribution company. This was the first step in making
the studio into a major player. The company also began exploiting the power of its early
cartoon features. Snow White, for example, was successfully rereleased in theaters to new generations
of children before eventually going to videocassette and much later to DVD.
Global Expansion
The death of Walt Disney in 1966 triggered a period of decline for the studio. But in 1984 a new
management team, led by Michael Eisner, initiated a turnaround. The newly created Touchstone
movie division reinvented the live-action cartoon for adults as well as for children in
Who Framed Roger Rabbit (1988). A string of hand-drawn animated hits followed, including The
Little Mermaid (1989), Beauty and the Beast (1991), The Lion King (1994), Mulan (1998), and Lilo
+ Stitch (2002). In a partnership with Pixar Animation Studios, Disney also distributed a string
of computer-animated blockbusters, including Toy Story (1995), Monsters, Inc. (2001), Finding
Nemo (2003), The Incredibles (2004), Up (2009), and Toy Story 3 (2010).
Disney also came to epitomize the synergistic possibilities of media consolidation. It can
produce an animated feature for both theatrical release and DVD distribution. With its ABC
network (purchased in 1995), it can promote Disney movies and television shows on programs
like Good Morning America. A book version can be released through Disney’s publishing arm,
Hyperion, and “the-making-of” versions can appear on cable’s Disney Channel or ABC Family.
Characters can become attractions at Disney’s theme parks, which themselves have spawned
Hollywood movies such as the lucrative Pirates of the Caribbean franchise.
Throughout the 1990s, Disney continued to find new sources of revenue in both entertainment
and distribution. Through its purchase of ABC, Disney also became the owner of the cable
sports channels ESPN and ESPN2, and later expanded the brand with ESPNews, ESPN Classic,
and ESPNU channels; ESPN The Magazine; ESPN Radio; and ESPN.com. In New York City, Disney
renovated several theaters and launched versions of Beauty and the Beast, The Lion King, andgg
Spider-Man as successful Broadway musicals.
Building on the international
appeal of its cartoon features,
Disney extended its global reach
by opening Tokyo Disney Resort in
1983 and Disneyland Paris in 1991.
On the home front, a proposed
historical park in Virginia, Disney’s
America, suffered defeat at the
hands of citizens who raised concerns
about Disney misinterpreting
or romanticizing American history.
In 1995, shortly after the company
purchased ABC, the news division
was criticized for running a flattering
profile about Disney on ABC’s
evening news program.
DISNEY HAD BEEN
DISTRIBUTING PIXAR’S
MOVIES for over ten
years when it purchased
the computer animation
company in 2006.
Disney-Pixar puts out a
new animated feature
roughly every year. Like its
predecessors, Monsters
University (2013) wasy
accompanied by a largescale
marketing and
merchandising campaign,
with monster toys and
goods available in stores
nationwide.
T
he giant merger in 2010
between “Big Network” (NBC)
and “Big Cable” (Comcast)
signaled a key economic strategy for
traditional media industries in the age
of the Internet. By claiming that “Big
Internet” companies like Google and
Amazon (especially as they move into
content development) pose enough
of a threat to old media, traditional
media companies pushed for the
dissolution of remaining ownership
restrictions. However, the big NBCComcast
merger also brought to the
forefront concerns about diminishing
diversity in media ownership. Since
the Telecommunications Act of 1996,
which made it easier for big media
companies to consolidate, minority
and female media owners have declined
precipitously. For example, the
nonpartisan media activist group Free
Press found that by 2013, “racial or
ethnic minorities currently own 43, or
3.2 percent of all the U.S. full-power
commercial broadcast television sta-
tions.”1
Critics fear that large media
conglomerations and more consolidation
will mean even less diversity in
media ownership.
Back in the 1970s, the FCC enacted
rules that prohibited a single
company from owning more than
seven AM radio stations, seven FM
radio stations, and seven TV stations
(called “the 7-7-7 rule”). These
restrictions were first put in place to
encourage diverse and alternative
owners—and, therefore, diverse and
alternative viewpoints. However, the
rules were relaxed throughout the
1980s, and when almost all ownership
restrictions were lifted in 1996,
big media companies often bought up
smaller radio and TV stations formerly
controlled by minority and female
owners. For example, by 2013, radio
behemoth Clear Channel owned 840
radio stations, Cumulus owned 525,
and CBS controlled 126.
In a country in which women constitute
slightly more than 50 percent
of the population, blacks are about
13 percent of the population, and
Hispanics/Latinos are more than
16 percent of the population, television
and radio broadcasting ownership
diversity in the United States is
poor by any measure (see pie charts).
Minority and Female Media Ownership:
Why Does It Matter?
CASE
STUDY
Source for all chart data: Federal Communications Commission, “Report on Ownership
of Commercial Broadcast Stations,” DA 12-1667, November 14, 2012.
* “Joint female/male” cases are those in which a female and male each control a
50-percent interest in the station.
** “No majority interest” cases are those in which no party owns 50 percent (a
majority) or more controlling interest in a station.
Majority Ownership of Full-Power
Commercial TV Stations (by Gender)
No Majority
Interest
28.0%**
Male
64.8%
Female
6.8%
Joint
Female/Male
0.5%*
Majority Ownership of Full-Power
Commercial TV Stations (by Race)
No Majority
Interest
28.4%**
White
69.4%
Asian
0.4%
Black
0.7%
Native Hawaiian/Pacific Islander
0.1%
American Indian or Alaska Native
0.9%
Two or More Races
0.1%
Total 2.2%
The Free Press, in its formal response
to the FCC’s 2012 report on
ownership, argued that “the level of
female and minority ownership in the
broadcast marketplace is disproportionately
and embarrassingly low,”
with “a nearly 20 percent decline in
the level of minority ownership since
2006.”2
The group criticized the FCC
for not taking its obligations to serve
the public interest seriously by not
fully studying the impact that relaxed
ownership rules have on minority and
female broadcast station ownership.
(In its own calculations, the
Free Press found even lower levels of
diversity in station ownership.) They
contended that large chains have
enormous power in the marketplace
and ultimately harm minority and
female ownership:
As markets become more concentrated,
artificial economies
of scale are created. This drives
away potential new entrants in
favor of existing large chains.
Concentration also has the effect
of diminishing the ability of existing
smaller station groups and singlestation
owners to compete for
both advertising and programming
contracts. These effects combine
to create immense pressure for
smaller owners to sell their stations.
And this destructive cycle
disproportionately impacts women
and minority owners, as they are far
more likely to own just a single station
in comparison to their whitemale
and corporate counterparts.
Current female and minority owners
are driven out of markets; and
discrimination in access to deals,
capital and equity, combined with
the higher barriers to entry created
by consolidation, shut out new
female and minority owners.3
The only means at the FCC’s disposal
to prevent further erosion of
diversity in media are limitations
on station ownership, according to
the United States Court of Appeals,
which ruled in 2011 that the “Commission
had failed to consider the
effect on minority ownership of the
repeal” of ownership restrictions.4
The point of diversity in ownership
is to increase the variety of voices
in the public sphere, which the FCC
is required to do as part of its mission
in the public interest. Yet, there
is continuing pressure applied to the
FCC and Congress by large media
conglomerates (such as News Corp.
and the Tribune Co.) that want to grow
even larger, so battle over ownership
deregulation continues to be an issue
worthy of close public attention.
Majority Ownership of Commercial
FM Radio Stations (by Gender)
No Majority
Interest
16.6%**
Male
76.5%
Female
5.8%
Joint
Female/Male
1.2%*
Majority Ownership of Commercial
FM Radio Stations (by Race)
No Majority
Interest
16.9%**
White
79.6%
Asian
0.8%
Black
1.7%
Native Hawaiian/Pacific Islander
0.4%
American Indian or Alaska Native
0.5%
Two or More Races
0.1%
Total 3.5%
466 PART 4 ○ THE BUSINESS OF MASS MEDIA
MEDIA ECONOMICS
Despite criticism, little slowed Disney’s global expansion. Orbit—a Saudi-owned satellite
relay station based in Rome—introduced Disney’s twenty-four-hour premium cable channel
to twenty-three countries in the Middle East and North Africa in 1997. Disney opened more
venues in Asia, with Hong Kong Disneyland Resort in 2005 and Shanghai Disney Resort,
which broke ground in 2011. Disney exemplifies the formula for becoming a “great media
conglomerate” as defined by the book Global Dreams: “Companies able to use visuals to sell
sound, movies to sell books, or software to sell hardware would become the winners in the
new global commercial order.”18
Corporate Shake-Ups and Disney Today
Even as Disney grew into the world’s No. 2 media conglomerate in the early 2000s, the cartoon
pioneer experienced the multiple shocks of a recession, failed films and Internet ventures, and
declining theme park attendance.
In 2004, Eisner and Disney refused to distribute Michael Moore’s controversial Iraq war
documentary Fahrenheit 9/11, which Miramax had financed. Eisner’s decision was a financial
blunder; the movie cost $7 million to make and went on to earn $119 million in U.S. theaters. By
2005, Disney had fallen to No. 5 among movie studios in U.S. box office sales—down from No. 1
in 2003. A divided and unhappy board of directors forced Eisner out in 2005 after twenty-one
years as CEO.19
In 2006, new CEO Robert Iger merged Disney and Pixar and made Pixar and
Apple Computer founder and CEO Steve Jobs a Disney board member. In 2009, Disney also
signed a long-term deal to distribute movies from Steven Spielberg’s DreamWorks Studios. But
in 2010, Disney, still reeling from the economic recession, sold Miramax for $660 million to an
investor group.
The Pixar deal showed that Disney was ready to embrace the digital age. In an effort to
focus on television, movies, and its online initiatives, Disney sold its twenty-two radio stations
and the ABC Radio Network to Citadel Broadcasting for $2.7 billion in 2007. Disney also
made its movies and TV programs available at Apple’s iTunes store and announced it would
become a partner with NBC and Fox in the popular video site Hulu.com. In 2009, Disney
purchased Marvel Entertainment for $4 billion, bringing Iron Man, Spider-Man, and X-Men
into the Disney family; in 2012, they purchased Lucasfilm and with it the rights to the Star
Wars and Indiana Jones movies and characters. This means that Disney now has access to
whole casts of “new” characters—not just for TV programs, feature films, and animated movies
but also for its multiple theme parks.
Global Audiences Expand Media Markets
As Disney’s story shows, international expansion has allowed media conglomerates some advantages,
including secondary markets to earn profits and advance technological innovations.
First, as media technologies get cheaper and more portable (think Walkman to iPod), American
media proliferate both inside and outside national boundaries. Today, greatly facilitated by the
Internet, media products easily reach the eyes and ears of the world. Second, this globalism
permits companies that lose money on products at home to profit abroad. Roughly 80 percent
of U.S. movies, for instance, do not earn back their costs in U.S. theaters and depend on foreign
circulation and home video to make up for losses.
The same is true for the television industry. Consider the 1990s phenomenon Baywatch,
which went into first-run syndication in 1991 after being canceled by NBC. The program’s producers
claimed that by the late 1990s, Baywatch, a show about the adventures of scantily clad lifeguards
who make beaches safer for everyone, was the most-watched program in the world, with
more than a billion viewers. The dialogue in the series, like that of action movies, was limited and
fairly simple, which made it easy and inexpensive to translate the program into other languages.
“To the French
mind, Disney
represents the
arrowhead of
American cultural
assault.”
ANTHONY LANE,
NEW YORKER, 2006
CHAPTER 13 ○ MEDIA ECONOMICS AND THE GLOBAL MARKETPLACE 467
In addition, satellite transmission has made North
American and European TV available at the global
level. Cable services such as CNN and MTV quickly took
their national acts to the international stage, and by the
twenty-first century CNN and MTV were available in more
than two hundred countries. Today, of course, the swapping
and streaming of music, TV shows, and movies on
the Internet (both legally and illegally) have expanded the
global flow of popular culture even further. (See “Media
Literacy and the Critical Process: Cultural Imperialism
and Movies” on page 468 about the dominance of the
American movie industry.)
The Internet and Convergence
Change the Game
For much of their history, media companies have been part of usually discrete or separate
industries—that is, the newspaper business stood apart from book publishing, which was different
from radio, which was different from the film industry. But the Internet and convergence has
changed that—not only by offering a portal to view or read older media forms but also by requiring
virtually all older media companies to establish an online presence. Today newspapers,
magazines, book publishers, music companies, radio and TV stations, and film studios all have
Web sites that offer online versions of their product or Web services that enhance their original
media form.
Companies Struggle in the Transition to Digital
However, putting up and locating information on the Internet can be problematic. Traditional
broadcast and cable services have challenged sites like Google’s YouTube for displaying
content that appears online without permission. In 2007, Viacom, owner of MTV and Comedy
Central, sued Google and YouTube for $1 billion for the unauthorized posting of more than
150,000 video clips—including episodes of SpongeBob SquarePants, South Park, The Daily Show
with Jon Stewart, and MTV Unplugged. For its part, Google said YouTube has lived up to the
requirements of the 1998 Digital Millennium Copyright Act, noting that “the federal law was
intended to protect companies like YouTube as long as they responded properly to content
owners’ claims of infringement.”20
In response, Viacom noted that Google/YouTube had done
“little or nothing” to stop copyright infringement. Viacom’s lawyers argued that copyright
violations appeared to be central to the Google/YouTube business model: “The availability
on the YouTube site of a vast library of the copyrighted works of plaintiffs and others is the
cornerstone of [the] defendants’ business plan.”21
But in June 2010, a New York federal judge
threw out the lawsuit, marking a victory for Google’s popular YouTube site. The judge said
that under copyright law it would not be fair to hold Web sites liable for merely hosting videos
from content providers like Viacom that might be illegally posted, particularly if sites like
YouTube promptly take down the videos after being notified. In 2012, though, a federal appeals
court overturned the decision, arguing that “a reasonable jury could find that YouTube
had actual knowledge or awareness of specific infringing activity on its website.” YouTube
responded that the lawsuit “is a dispute over a tiny percentage of videos long ago removed
from YouTube.” The court’s decision meant the lawsuit cases were revived and could again be
tried in court.22
As the Google/YouTube case demonstrates, the Internet’s ability to disrupt old business
models continues to present challenges for traditional media companies that, like Viacom,
HBO GO
Acclaimed HBO original
programming, including the
Golden Globe-nominated
series The Newsroom and
a variety of movies are
available online through the
company’s HBO Go online
service—but only to those
who already subscribe to the
premium channel through
their cable company.
468 PART 4 ○ THE BUSINESS OF MASS MEDIA
MEDIA ECONOMICS
are still uncertain whether this type of Internet exposure actually works as a form of promotion
for their content, drawing in new viewers and readers. In addition, these companies
are unsure of how to take the next step—getting people who are accustomed to free online
content to pay. Some categories of media content do better than others. For example, a
2012 Nielsen survey found that “tablet owners aren’t opposed to paying for the media they
really want.” In the United States, 62 percent of tablet owners had paid for downloading
music, while 58 percent paid for books, 51 percent for movies, 41 percent for TV shows
and magazines, 27 percent for streaming radio, 22 percent for sports, and only 19 percent
for news.23
The Rise of the New Digital Media Conglomerates
The digital turn marks a shift in the media environment from the legacy media powerhouses
like Time Warner and Disney to the new digital media conglomerates. Five companies reign
larger than others in digital media: Amazon, Apple, Facebook, Google, and Microsoft. Each has
Cultural Imperialism and Movies
In the 1920s, the U.S. film industry became the leader
of the worldwide film business. The images and stories of
American films are well known in nearly every corner of the
earth. But with major film production centers in places like
India, China, Hong Kong, Japan, South Korea, Mexico, the
United Kingdom, Germany, France, Russia, and Nigeria, how
much do U.S. films dominate international markets today?
Conversely, how often do international films get much
attention in the United States?
1 
DESCRIPTION. Using
international box office revenue
listings (www.boxofficemojo.com/intl
is a good place to start), compare the
recent weekly box office rankings of
the United States to those of five other
countries. (Your sample could extend
across several continents or focus on
a specific region, like Southeast Asia.)
Limit yourself to the top ten or fifteen
films in box office rank. Note where each
film is produced (some films are joint
productions of studios from two or more
countries), and put your results in a
table for comparison.
2 
ANALYSIS. What patterns
emerged in each country’s box
office rankings? What percentage of films
came from the United States? What percentage
of films were domestic productions
in each country? What percentage
of films came from countries other than
the United States? In the United States,
what percentage of top films originated
with studios from other countries?
3 
INTERPRETATION. So what
do your discoveries mean? Can
Media Literacy and
the Critical Process
you make an argument for or against
the existence of cultural imperialism
by the United States? Are there
film industries from other countries
that dominate movie theaters in their
region of the world? How would you
critique the reverse of cultural imperialism,
wherein international films
from other countries rarely break
into the Top 10 box office list? Does
this happen in any countries you
sampled?
4 
EVALUATION. Given your
interpretation, is cultural
dominance by one country a good thing
or a bad thing? Consider the potential
advantages of creating a “global village”
of shared popular culture versus
the potential disadvantages of cultural
imperialism. Also, is there any potential
harm in a country’s box office Top 10
list being filled by domestic productions
and rarely having international films
featured?
5 
ENGAGEMENT. Contact
your local movie theater (or the
headquarters of the chain that owns
it). Ask them how they decide which
films to screen. If they don’t show many
international films, ask them why not.
Be ready to provide a list of three to
five international films released in the
United States (see the full list of current
U.S. releases at www.boxofficemojo
.com) that haven’t yet been screened in
your theater.
CHAPTER 13 ○ MEDIA ECONOMICS AND THE GLOBAL MARKETPLACE 469
become powerful for different reasons. Amazon’s entrée is that it has grown into the largest
e-commerce site in the world. In recent years, Amazon has begun shifting from delivering
physical products (e.g., bound books) to distributing digital products (e.g., e-books and downloadable
music, movies, television shows, and more), on its digital devices (Kindles). Apple’s
strength has been creating the technology and the infrastructure to bring any media content
to users’ fingertips. When many traditional media companies didn’t have the means to distribute
content online easily, Apple developed the shiny devices (the iPod, iPhone, and iPad) and
easy-to-use systems (the iTunes store) to do it, immediately transforming the media industries.
Today, Apple has a hand in every media industry, as it offers the premiere platforms of the
digital turn. In 2012, Apple became the most valuable company in the world, with shares worth
$625.3 billion.
Facebook’s strength has been its ability to become central to communication and social
media. As Facebook’s number of users surpassed one billion worldwide in 2012, the company
still struggled to fully leverage those users (and the massive amounts of data they share about
themselves) into advertising sales, particularly as its users move to accessing Facebook via
mobile phones. Unlike the other four digital companies, Facebook lacks hardware devices to
access the Internet and digital media. Google, which draws its huge numbers of users through
its search function, has much more successfully translated those users (and the information
provided by their search terms) into an advertising business worth more than $42 billion a year.
Google is also moving into the same digital media distribution business that Apple and Amazon
offer, via its Android phone operating system, Nexus 7 tablet, and Chromebook. Microsoft, one
of the wealthiest digital companies in the world, is making the transition from being the top
software company (a business that is slowly in decline) to competing in the digital media world
with its Bing search engine and devices like its successful Xbox game console and its new Surface
tablet. Microsoft also owns Yammer, a business social network, and holds a small ownership
share in Facebook.
Given how technologically adept these five digital corporations have proven to be, they still
need to provide compelling narratives to attract people (to repeat a point from the beginning of
the chapter). All five companies are weak in this regard, as they rely on other companies’ media
narratives (e.g., the sounds, images, words, and pictures) or the stories that their own users
provide (as in Facebook posts or YouTube videos). The history of mass communication suggests
that it is the content—the narratives—that are enduring, while the devices and distribution
systems are not.
The Digital Age Favors Small, Flexible Start-Up Companies
All of the leading digital companies of today were once small start-ups that emerged at
important junctures of the digital age. The earliest, Microsoft and Apple, were established
in the mid-1970s, with the rise of the personal computer. Amazon began in 1995 with the
popularization of the Web and the beginnings of e-commerce. Google was established in
1998, as search engines became the best way of navigating the Web. And Facebook, starting
in 2004, proved to be the best social media site to emerge in the 2000s. For each success
story, though, hundreds of other firms failed or flamed out quickly (e.g., MySpace).
Today, the juncture in the digital era is the growing importance of social media and
mobile devices. Like in the earlier periods, the strategy for start-up companies is to find a
niche market, connect with consumers, and then get big fast, swallowing up or overwhelming
competitors. Instagram, Foursquare, Twitter, and Zynga are recent examples of this. The
successful start-ups then take two paths—either be acquired by a larger company (e.g., Google
buying YouTube, Facebook buying Instagram) or go it alone and try to get even bigger (e.g.,
Twitter). Either way, success might not last long, especially in an age when people’s interests
can move on very quickly.
470 PART 4 ○ THE BUSINESS OF MASS MEDIA
MEDIA ECONOMICS
As the Disney-ABC merger demonstrates, recent years have brought a surplus of billion-dollar
takeovers and mergers, including those between Time Inc. and Warner Communication, Time
Warner and Turner, AOL and Time Warner, UPN and WB, Comcast and NBC Universal, Sirius and
XM, Universal Music Group and EMI, and Yahoo! and Tumblr. This mergermania has accompanied
stripped-down regulation, which has virtually suspended most ownership limits on media
industries. As a result, a number of consumer advocates and citizen groups have raised questions
about deregulation and ownership consolidation. Still, the 2008 financial crisis saw many of these
megamedia firms overleveraged—that is, not making enough from stock investments to offset the
debt they took on to add more companies to their empires. So in 2009, the New York Times Company
tried to sell the Boston Globe, and Time Warner set AOL adrift. The divestment has continued:
The Washington Post Company sold Newsweek, Disney unloaded Miramax, and News Corp.
spun off its newspaper and publishing divisions.
One longtime critic of media mergers, Ben Bagdikian, author of The Media Monopoly, has
argued that although there are abundant products in the market—thousands of daily and weekly
newspapers, radio and television stations, magazines, and book publishers—only a limited
number of companies are in charge of those products.24
Bagdikian and others fear that this
represents a dangerous antidemocratic tendency in which a handful of media moguls wield
a disproportionate amount of economic control. (See “Case Study—From Fifty to a Few: The
Most Dominant Media Corporations” on page 471.) The News Corp. phone hacking scandal that
came to light in 2011 in the United Kingdom illustrates media power gone awry, with corruption
involving top company executives, police, and government officials.
The Limits of Antitrust Laws
Although meant to ensure multiple voices and owners, American antitrust laws have been easily
subverted since the 1980s as companies expanded by diversifying holdings, merging product
lines with other big media firms, and forming
local monopolies, especially in newspapers
and cable. The resulting consolidation of media
owners has limited the number of independent
voices in the market and reduced the number
of owners who might be able to innovate and
challenge established economic powers.
Diversification
Most media companies diversify among different
media products (such as television stations
and film studios), never fully dominating a
particular media industry. Time Warner, for example,
spreads its holdings among its television
programming, film, publishing, cable channels,
and Internet divisions. However, the media
giant really competes with only a few other big
companies like Disney, Viacom, and News Corp.
DEMONSTRATORS donned
Murdoch masks in protest
following revelations about
News Corp. employees
hacking cell phones and
bribing police. The offending
publication, News of the
World, was consequently
shuttered in 2011, after
168 years in print.
Social Issues in Media
Economics
W
hen Ben Bagdikian wrote the
first edition of The Media
Monopoly, published in
1983, he warned of the chilling control
wielded by the fifty elite corporations
that owned most of the U.S. mass
media. By the publication of the book’s
seventh edition in 2004, the number of
corporations controlling most of America’s
daily newspapers, magazines,
radio, television, books, and movies had
dropped from fifty to five. Today, most
of the leading corporations have a high
profile in the United States, particularly
through ownership of television
networks: Time Warner (CW), Disney
(ABC), News Corp. (Fox), CBS Corporation
(CBS and CW), and Comcast/NBC
Universal (NBC).
The creep of consolidation over the
past few decades requires us to think
differently about how we experience
the mass media on a daily basis.
Potential conflicts of interest abound.
For example, should we trust how NBC
News covers Comcast or how ABC
News covers Disney? Should we be
wary if Time magazine hypes a Warner
Brothers film? More important, what
actions can we take to ensure that
the mass media function not just as
successful businesses for stockholders
but also as a necessary part of our
democracy?
To help you get a better understanding
of how our media landscape is
changing, look at the table below
that lists the Top 10 media companies
for 1980, 1997, and 2012.
What patterns do you notice? How
does this reflect larger trends in the
media? For example, seven of the
major companies in 1980 were mostly
print businesses, but what about
in 2012? Most of the large media
companies have been profiled here
and in Chapters 2 to 10 (illustrating
their principal holdings). While the
subsidiaries of these companies often
change, the charts demonstrate the
wide reach of today’s large conglomerations.
To get a better understanding
of how the largest media corporations
relate to one another and the larger
world, see the folded insert at the
beginning of the book.
From Fifty to a Few: The Most Dominant
Media Corporations
CASE
STUDY
1980 1997 2012
TOP 10 U.S. MEDIA COMPANIES, 1980, 1997, 2012*
Revenue in Revenue in Revenue in
Rank Company $billions Rank Company $billions Rank Company $billions
1 ABC $2.2  1 Time Warner $11.8  1 Comcast Corp. $45.0
2 CBS Inc. 2.0  2 Walt Disney Co. 6.6  2 DirecTV Group 22.3
3 RCA Corp. 1.5  3 Tele-Communications Inc. 6.0  3 Walt Disney Co. 21.5
4 Time Inc. 1.3  4 NBC TV 5.2  4 Time Warner 19.9
(General Electric Co.)
5 S. I. Newhouse 1.3  5 CBS Corp. 4.3  5 Time Warner Cable 18.1
& Sons
6 Gannett Co. 1.2  6 Gannett Co. 4.2  6 News Corp. 17.3
7 Times Mirror Co. 1.1  7 News Corp. 4.0  7 DISH Network 13.0
  8 Hearst Corp. 1.1  8 Advance Publications 3.4  8 Cox Enterprises 12.0
9 Knight-Ridder 1.1  9 Cox Enterprises 3.1 9 Google 11.9
Newspapers
10 Tribune Co. 1.0 10 Knight-Ridder 2.9 10 CBS Corp. 11.4
Sources: Ad Age’s 100 Leading Media Companies, December 7, 1981; “100 Companies by Media Revenue,” Advertising Age,
August 18, 1997; “Media 100,” Advertising Age, December 31, 2012.
*Note: The revenue in $billions is based on total net U.S. media revenue and does not include nonmedia and international revenue.
472 PART 4 ○ THE BUSINESS OF MASS MEDIA
MEDIA ECONOMICS
Such diversification promotes oligopolies in which a few behemoth companies control most
media production and distribution. This kind of economic arrangement makes it difficult for
products offered outside an oligopoly to compete in the marketplace. For instance, in broadcast
TV, the few networks that control prime time—all of them now owned by or in league with film
studios—offer programs that are selected from known production companies that the networks
either contract with regularly or own outright. Thus, even with a very good program or series
idea, an independent production company—especially one that operates outside Los Angeles or
New York—has a very difficult time entering the national TV market. The film giants even prefer
buying from each other before dealing with independents. So, for example, in 2009 CBS sold
syndication rights for its popular crime show The Mentalist to the TNT cable channel for over $2t
million per episode. And for years, CBS’s Without a Trace and NBC’se Law and Order were bothr
running in syndication on cable’s TNT channel, owned by Time Warner, which also co-owns the
CW network with CBS.
Local Monopolies
Because antitrust laws aim to curb national monopolies, most media monopolies today operate
locally. For instance, although Gannett owns ninety daily newspapers, it controls less than 10 percent
of daily U.S. newspaper circulation. Nonetheless, almost all Gannett papers are monopolies—that
is, they are the only papers in their respective towns. Virtually every cable company has been
granted monopoly status in its local community; these firms alone often decide which channels
are made available and what rates are charged.
Furthermore, antitrust laws have no teeth globally. Although international copyright laws
offer some protection to musicians and writers, no international antitrust rules exist to prohibit
transnational companies from buying up as many media companies as they can afford.
Still, as legal scholar Harry First points out, antitrust concerns are “alive and well and living in
Europe.”25
For example, when Sony and Bertelsmann’s BMG unit joined their music businesses,
only the European Union (EU) raised questions about the merger on behalf of the independent
labels and musicians worried about the oligopoly structure of the music business. The EU has
frequently reviewed the merger, starting in 2004, but decided in late 2008 to withdraw its
opposition.
Occasionally, independent voices raise issues that aid the Justice Department and the FTC
in their antitrust cases. For example, when EchoStar (now the DISH Network) proposed to
purchase DirecTV in 2001, a number of rural, consumer, and Latino organizations spoke out
against the merger for several reasons. Latino organizations opposed the merger because in
many U.S. markets, Direct Broadcast Satellite (DBS) service offers the only available Spanishlanguage
television programming. The merger would have left the United States with just one
major DBS company and created a virtual monopoly for EchoStar, which had fewer Spanishlanguage
offerings than DirecTV. In 2002, the FCC declined to approve the merger, saying it
would not serve the public interest, convenience, and necessity.
In 2011, AT&T moved to acquire T-Mobile, another wireless telecom giant (with more than
thirty-three million customers), for $39 billion. The Justice Department opposed the merger on
antitrust grounds (media watchdog groups said it would have left the country with just three
major mobile phone companies, giving consumers far fewer options), leading AT&T to eventually
scrap the deal.
The Fallout from a Free Market
Since the wave of media mergers began with gusto in the 1980s, a number of consumer critics
have pointed to the lack of public debate surrounding the tightening oligopoly structure of
international media. Economists and media critics have traced the causes and history of this
VideoCentral
Mass Communication
bedfordstmartins.com
/mediaculture
The Impact of Media
Ownership
Media critics and professionals
debate the pros and cons
of media conglomerates.
Discussion: This video
argues that it is the drive for
bottom-line profits that leads
to conglomerates. What
solution(s) might you suggest
to make the media system
work better?
CHAPTER 13 ○ MEDIA ECONOMICS AND THE GLOBAL MARKETPLACE 473
void to two major issues: a reluctance to criticize capitalism and the debate over how much
control consumers have in the marketplace.
Equating Free Markets with Democracy
In the 1920s and 1930s, commercial radio executives, many of whom befriended FCC members,
succeeded in portraying themselves as operating in the public interest while labeling their noncommercial
radio counterparts in education, labor, or religion as mere voices of propaganda. In
these early debates, corporate interests succeeded in aligning the political ideas of democracy,
misleadingly, with the economic structures of capitalism.
Throughout the Cold War period in the 1950s and 1960s, it became increasingly difficult
to criticize capitalism, which had become a synonym for democracy in many circles. In this
context, any criticism of capitalism became an attack on the free marketplace. This, in turn,
appeared to be a criticism of free speech because the business community often sees its right
to operate in a free marketplace as an extension of its right to buy commercial speech in the
form of advertising. As longtime CBS chief William Paley told a group of educators in 1937: “He
who attacks the fundamentals of the American system” of commercial broadcasting “attacks
democracy itself.”26
Broadcast historian Robert McChesney, discussing the rise of commercial radio during the
1930s, has noted that leaders like Paley “equated capitalism with the free and equal marketplace,
the free and equal marketplace with democracy, and democracy with ‘Americanism.’”27
The collapse of the former Soviet Union’s communist economy in the 1990s is often portrayed
as a triumph for democracy. As we now realize, however, it was primarily a victory for capitalism
and free-market economies.
Consumer Choice vs. Consumer Control
As many economists point out, capitalism is not structured democratically but arranged
vertically, with powerful corporate leaders at the top and hourly wage workers at the
bottom. But democracy, in principle, is built on a more horizontal model in which each
individual has an equal opportunity to have his or her voice heard and vote counted. In
discussing free markets, economists distinguish between similar types of consumer power:
consumer control over marketplace goods and freedom of consumer choice: “The former
requires that consumers participate in deciding what is to be offered; the latter is satisfied
if [consumers are] free to select among the options chosen for them by producers.”28
Most
Americans and the citizens of other economically developed nations clearly have consumer
choice: options among a range of media products. Yet consumers and even media employees
have limited consumer control: power in deciding what kinds of media get created and
circulated.
One promising development concerns the role of independent and alternative producers,
artists, writers, and publishers. Despite the movement toward economic consolidation,
the fringes of media industries still offer a diversity of opinions, ideas, and alternative
products. In fact, when independent companies become even marginally popular, they are
often pursued by large companies that seek to make them subsidiaries. For example, alternative
music often taps into social concerns that are not normally discussed in the recording
industry’s corporate boardrooms. Moreover, business leaders “at the top” depend on
independent ideas “from below” to generate new product lines. A number of transnational
corporations encourage the development of local artists—talented individuals who might
have the capacity to transcend the regional or national level and become the next global
phenomenon.
“[AOLTime Warner]
turned into one of
the biggest corporate
disasters
in U.S. history:
America Online’s
business collapsed,
synergies failed
to materialize, the
company missed its
financial targets,
and the stock price
plunged.”
WALL STREET
JOURNAL, 2003
“What they were
really looking forward
to was creating
the biggest
shopping mall in
the world.”
BEN BAGDIKIAN,
AUTHOR OF THE MEDIA
MONOPOLY, ON THE
AOL–TIME WARNER
MERGER, 2000
474 PART 4 ○ THE BUSINESS OF MASS MEDIA
MEDIA ECONOMICS
Cultural Imperialism
The influence of American popular culture has created considerable
debate in international circles. On the one hand,
the notion of freedom that is associated with innovation and
rebellion in American culture has been embraced internationally.
The global spread of and access to media have made it
harder for political leaders to secretly repress dissident groups
because police and state activity (such as the torture of illegally
detained citizens) can now be documented digitally and easily
dispatched by satellite, the Internet, and cell phones around
the world.
On the other hand, American media are shaping the cultures
and identities of other nations. American styles in fashion
and food, as well as media fare, dominate the global market—a
process known as cultural imperialism. Today, many international
observers contend that the idea of consumer control or
input is even more remote in countries inundated by American
movies, music, television, and images of beauty. For example,
consumer product giant Unilever sells Dove soap with its
“Campaign for Real Beauty” in the United States, but markets
Fair & Lovely products—a skin-lightening line—to poor women
in India.
Although many indigenous forms of media culture—such as
Brazil’s telenovela (a TV soap opera), Jamaica’s reggae, and Japan’s
anime—are extremely popular, U.S. dominance in producing
and distributing mass media puts a severe burden on countries
attempting to produce their own cultural products. For example,
American TV producers have generally recouped their production
costs by the time their TV shows are exported. This enables American distributors to offer these
programs to other countries at bargain rates, undercutting local production companies that are
trying to create original programs.
Defenders of American popular culture argue that because some aspects of our culture
challenge authority, national boundaries, and outmoded traditions, they create an arena in
which citizens can raise questions. Supporters also argue that a universal popular culture
creates a global village and fosters communication across national boundaries.e
Critics, however, believe that although American popular culture often contains
protests against social wrongs, such protests “can be turned into consumer products
and lose their bite. Protest itself becomes something to sell.”29
The harshest critics have
also argued that American cultural imperialism both hampers the development of native
cultures and negatively influences teenagers, who abandon their own rituals to adopt
American tastes. The exportation of U.S. entertainment media is sometimes viewed as
“cultural dumping” because it discourages the development of original local products and
value systems.
Perhaps the greatest concern regarding a global village is the cultural disconnection for
people whose standards of living are not routinely portrayed in contemporary media. About
two-thirds of the world’s population cannot afford most of the products advertised on American,
Japanese, and European television. Yet more and more of the world’s populations are able to
glimpse consumer abundance and middle-class values through television, magazines, and the
Internet.
CULTURAL IMPERIALISM
Ever since Hollywood gained
an edge in film production
and distribution during World
War I, U.S. movies have
dominated the box office
in Europe, in some years
accounting for more than
80 percent of the revenues
taken in by European
theaters. Hollywood’s
reach has since extended
throughout the world,
including previously difficult
markets such as China.
CHAPTER 13 ○ MEDIA ECONOMICS AND THE GLOBAL MARKETPLACE 475
As early as the 1950s, media managers feared political fallout—“the revolution of rising
expectations”—in that ads and products would raise the hopes of poor people but not keep pace
with their actual living conditions.30
Furthermore, the conspicuousness of consumer culture
makes it difficult for many of us to imagine other ways of living that are not heavily dependent
on the mass media and brand-name products.
The Media Marketplace
and Democracy
In the midst of today’s major global transformations of economies, cultures, and societies, the
best way to monitor the impact of transnational economies is through vigorous news attention
and lively public discussion. Clearly, however, this process is hampered. Starting in the 1990s,
for example, news organizations, concerned about the bottom line, severely cut back the number
of reporters assigned to cover international developments. This occurred—especially after
9/11—just as global news became more critical than ever to an informed citizenry.
We live in a society in which often-superficial or surface consumer concerns, stock market
quotes, and profit aspirations, rather than broader social issues, increasingly dominate the media
agenda. In response, critics have posed some key questions: As consumers, do we care who
owns the media as long as most of us have a broad selection of products? Do we care who owns
the media as long as multiple voices seem to exist in the market?
The Effects of Media Consolidation on Democracy
Merged and multinational media corporations will continue to control more aspects of production
and distribution. Of pressing concern is the impact of mergers on news operations, particularly
the influence of large corporations on their news subsidiaries. These companies have
the capacity to use major news resources to promote their products and determine national
coverage.
Because of the growing consolidation of mass media, it has become increasingly difficult
to sustain a public debate on economic issues. From a democratic perspective, the relationship
of our mass media system to politics has
been highly dysfunctional. Politicians in
Washington, D.C., have regularly accepted
millions of dollars in contributions from
large media conglomerates and their lobbying
groups to finance their campaigns.
This changed in 2008 when the Obama
campaign raised much of its financing
from small donors. Still, corporations got
a big boost from the Supreme Court in
early 2010 in the Citizens United case. In a
five-to-four vote, the court “ruled that the
government may not ban political spending
by corporations in candidate elections.”31
Justice Anthony Kennedy, writing for the
THE PRESIDENTAND
COFOUNDER of Free
Press, a national nonpartisan
organization dedicated
to media reform, Robert
McChesney is one of the
foremost scholars of media
economics in the United
States. He is also the host of
Media Matters, a radio call-in
show that discusses the
relationship between politics
and media. Notable guests
on the show have included
Seymour Hersh, Amy
Goodman, Gore Vidal, and
Lawrence Lessig. McChesney
(left) most recently published
The Death and Life of
American Journalism (2010)
with John Nichols (right).
476 PART 4 ○ THE BUSINESS OF MASS MEDIA
MEDIA ECONOMICS
majority, said, “If the First Amendment has any force, it prohibits Congress from fining or
jailing citizens, or associations of citizens, for simply engaging in political speech.” The ruling
overturned two decades of precedents that had limited direct corporate spending on campaigns,
including the Bipartisan Campaign Reform Act of 2002 (often called McCain-Feingold
after the senators who sponsored the bill), which placed restrictions on buying TV and radio
campaign ads.
As unfettered corporate political contributions count as “political speech,” some corporations
are experiencing backlash (or praise) once their customers discover their political positions.
For example, in 2012 fast-food outlet Chick-fil-A’s charitable foundation “was revealed
to be funneling millions to groups that oppose gay marriage and, until recently, promoted gay
‘cure’ therapies,” resulting in a firestorm of criticism, but also a wave of support from others,
the Daily Beast reported. In the same year, Amazon founder and CEO Jeff Bezos and his wifet
donated $2.5 million of their own money to support a same-sex marriage referendum in Washington
State, gaining praise and criticism from some Amazon customers.32
Politicians have often turned to local television stations, spending record amounts during
each election period to get their political ads on the air. In 2004, spending on the federal
elections in the United States totaled $4.14 billion, with a large portion of that going to local
broadcasters for commercials for congressional candidates, and (in swing states like Ohio,
Iowa, and Florida) for presidential candidates. In 2008, spending on federal elections topped
$5.28 billion. And, in 2012, it surpassed $6.28 billion.33
But, although local television stations
have been happy to get part of the ever-increasing bounty of political ad money, the actual
content of their news broadcasts has become less and less substantial, particularly when it
comes to covering politics.
The Pew Research Center’s Project for Excellence in Journalism reported that from 2005
to 2013, the amount of airtime given to weather, traffic, and sports on local news broadcasts
expanded from 32 percent to 40 percent. Meanwhile, over that same time period, the
amount of time spent on politics and government stories slipped from 7 percent to 3 percent.
The study’s authors noted “For some time, television consultants have been advising local
television stations that viewers aren’t interested in politics and government, and it appears
that advice is being taken.”34
Although television consultants might conclude that local viewers aren’t interested in
politics and government, political consultants are only increasing the onslaught of political
television ads every campaign season. Thus, there is little news content to provide a counterpoint
to all of the allegations that might be hurled in the barrage of political ads.
The Media Reform Movement
Robert McChesney and John Nichols described the state of concern about the gathering
consolidation of mainstream media power: “‘Media Reform’ has become a catch-all phrase
to describe the broad goals of a movement that says consolidated ownership of broadcast
and cable media, chain ownership of newspapers, and telephone and cable-company
colonization of the Internet pose a threat not just to the culture of the Republic but to
democracy itself.”35
While our current era has spawned numerous grassroots organizations
that challenge media to do a better job for the sake of democracy, there has not been a
large outcry from the general public for the kinds of concerns described by McChesney and
Nichols. There is a reason for that. One key paradox of the Information Age is that for such
economic discussions to be meaningful and democratic, they must be carried out in the
popular media as well as in educational settings. Yet public debates and disclosures about
the structure and ownership of the media are often not in the best economic interests of
media owners.
“The top management
of the networks,
with a few
notable exceptions,
has been
trained in advertising,
research, or
show business. But
by the nature of the
corporate structure,
they also
make the final and
crucial decisions
having to do with
news and public
affairs. Frequently
they have neither
the time nor the
competence to do
this.”
EDWARD R. MURROW,
BROADCAST NEWS
PIONEER, 1958
CHAPTER 13 ○ MEDIA ECONOMICS AND THE GLOBAL MARKETPLACE 477
Still, in some places, local groups and consumer movements are trying to address media
issues that affect individual and community life. Such movements—like the National Conference
for Media Reform—are usually united by geographic ties, common political backgrounds,
or shared concerns about the state of the media. The Internet has also made it possible for
media reform groups to form globally, uniting around such issues as contesting censorship
or monitoring the activities of multinational corporations. The movement was also largely
responsible for the success of preserving “network neutrality,” which prevents Internet
service providers from censoring or penalizing particular Web sites and online services (see
Chapter 2).
With this reform victory, and the 2008–09 economic crisis, perhaps we are more ready than
ever to question some of the hierarchical and undemocratic arrangements of what McChesney,
Nichols, and other reform critics call “Big Media.” Even in the face of so many media mergers,
the general public today seems open to such examinations, which might improve the global
economy, improve worker conditions, and also serve the public good. By better understanding
media economics, we can make a contribution to critiquing media organizations and evaluating
their impact on democracy.
478 PART 4 ○ THE BUSINESS OF MASS MEDIA
monopoly, 452
oligopoly, 453
limited competition, 453
direct payment, 454
indirect payment, 454
economies of scale, 454
hegemony, 459
synergy, 462
cultural imperialism, 474
During the 2000 presidential election, two marginal candidates,
Pat Buchanan on the Right, and Ralph Nader on the
Left, shared a common view that both major party candidates
largely ignored. Buchanan and Nader warned of the
increasing power of corporations to influence the economy
and our democracy. In fact, between 2000 and 2012,
total spending on lobbying in the nation’s capital grew from
$1.57 billion to more than $3 billion.36
(See Chapter 12 for
more on lobbyists.)
These warnings generally have gone unnoticed and
unreported by mainstream media, whose reporters, editors,
and pundits often work for the giant media corporations
that not only are well represented by Washington lobbyists
but also give millions of dollars in campaign contributions to
the major parties to influence legislation that governs media
ownership and commercial speech.
Fast-forward to 2012. As politicians spoke of transparency
and truth-telling, their campaign funding process
had few of those characteristics. In the aftermath of the
U.S. Supreme Court’s Citizens United (2010) decision,
new Super PACS (Political Action Committees) formed
that can channel unlimited funds into political races as
long as they don’t officially “coordinate” with the political
campaigns. With his own Super PAC (named “Americans
for a Better Tomorrow, Tomorrow”) comedian Stephen
Colbert has satirized the lax standards of Super PAC
rules that enable hundreds of millions of dollars to be
channeled into politics while obscuring disclosure of the
contributors’ identities. By December 2012, Super
PACs had spent more than $644 million on the 2012
election cycle (mostly in negative attack ads), with the
majority of contributions coming from a few dozen elite
ultra-wealthy donors. For example, Las Vegas casino
magnate Sheldon Adelson and his wife donated in excess
of $54 million to candidates and Super PACs in the 2012
election cycle.37
The huge influx of money was a boon for
media advertising profits.
What both Buchanan and Nader argued in 2000 was
that corporate influence is a bipartisan concern that we
share in common and that all of us in a democracy need to
be vigilant about how powerful and influential corporations
become. This is especially true for the media companies
that report the news and distribute many of our cultural
stories. As media-literate consumers, we need to demand
that the media serve as watchdogs over the economy and
our democratic values. And when they fall down on the
job, we need to demand accountability (through alternative
media channels or the Internet), especially from those
mainstream media—radio, television, and cable—that are
licensed to operate in the public interest.
COMMON THREADS
CHAPTER
REVIEW
One of the Common Threads discussed in Chapter 1 is about the commercial nature of the mass media. In thinking
about media ownership regulations, it is important to consider how the media wield their influence.
KEYTERMS
The definitions for the terms listed below can be found in the glossary at the end of the book.
The page numbers listed with the terms indicate where the term is highlighted in the chapter.