Principles of Electronic Media
William R. Davie and James R. Upshaw
Chapter Six – The Industry
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Copyright © 2006 Allyn and Bacon
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Principles of Electronic Media
Chapter Six – The Industry
Civilization and profits go hand in hand.
Calvin Coolidge
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Principles of Electronic Media
Chapter Six – The Industry
¤ Fundamentals
¤ Two Roles
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Service
Profit
¤ Commercial Broadcasting
¤
¤
Is a Business
Offers Extensive Choices
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A Dual Role
¤
“Note this basic fact: In the U.S. system, local
stations are the only true broadcasters. To win a
government license to transmit programming
“over the air,” a station must have a local address
and a specific audience to serve. This audience
usually is considered to be everyone within a
clearly defined geographic area that the
station’s radio waves can reach” (p. 116).
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Dual Role
¤
“Because these invisible waves are
considered to belong to the American
people, all of us are, at least in spirit,
consumers with a special stake in the
broadcast industry. Laws and regulations
have long required that local broadcasters
perform public service” (p. 117).
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Dual Role
¤
“The FCC once required that stations air
substantial programming intended mainly as
public service, not as advertising vehicles. But
government pressure to maintain this practice
slacked off in recent decades. Unprofitable
programs, such as public-affairs shows digging
into important public issues, have mostly
withered away from commercial programming”
(p. 117).
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Dual Role
¤
“Most important, perhaps, the system does
not interfere with profit making. Unlike
broadcasters in most countries, U.S.
broadcasters were permitted to take a
sharp turn toward private enterprise from
the beginning” (p. 119).
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Principles of Electronic Media
Chapter Six – The Industry
Principle #1
In commercial broadcasting, public service
must support business objectives by promoting
or otherwise benefiting the company.
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Principles of Electronic Media
Chapter Six – The Industry
¤ The Industry
¤ Business Dynamics
¤ Explosion of Choices
¤
¤
¤
¤
Cable
Satellites
Computers
Internet
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Principles of Electronic Media
Chapter Six – The Industry
Principle #2
The industry rests on a three-legged stool of
economic factors: broadcaster, audience, and
advertiser.
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Principles of Electronic Media
Chapter Six – The Industry
Levels of Operation - Corporations
¤ Corporate Objectives
¤ Government’s Role
¤ Shareholder Interests
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Corporate Objectives
¤
“Today, companies known as station groups
have acquired many local outlets and oversee
their operations from whole time zones away.
The older networks and some of the newer ones
are members of much larger corporations, some
of them conglomerates – that is, having interests
in many businesses besides broadcasting. The
policies and practices found at all of these levels
ultimately must satisfy stockholders who pour
their investment dollars into the companies” (p.
121).
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Corporate Objectives
¤
“This sort of financial weight tends to
alarm critics who contend that placing
great media power in just a few hands is
certain to reduce the variety of voices in
today’s culture. Others argue that
powerful companies actually produce a
wider variety of programming than smaller
companies can” (p. 122/123).
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Government Limits
¤
“By the late 1990s, under the 1996
Telecommunications Act, one person
could buy eight radio stations in a single
town and could own as many stations
nationally as that person could afford” (p.
123).
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Government Limits
¤
“Ownership restrictions are intended to
prevent monopolies and to encourage
diversity. However, some corporations
that own electronic media insist that if
they can’t expand their control,
competitors will engulf them and deny
their services to consumers” (p. 123).
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Shareholder Influence
¤
“Except when someone starts and runs a small
company using his or her own savings, media
businesses need massive and continuous
investment. Advertising revenue alone won’t
cover all corporate obligations and keep a
business growing. Instead companies sell stock
to investors, use the proceeds to create and
market programs, make profits, pay dividends to
the investors, and thus keep attracting new
investors” (p. 124).
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Shareholder Influence
¤
“Electronic media are based on fairly simple
scientific principles but require expensive
facilities and constant upgrading. […] People
willing to buy shares of stock, putting capital
into a growing corporation, are crucial allies. In
return, they receive voting power over corporate
policy. Those with the most stock can become
company directors, helping to make the biggest
strategic decisions” (p. 125).
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Shareholder Influence
¤
¤
Conflicts of Interest: (e.g. Disney)
“However, among those on the corporation’s
megapayroll are the journalists of ABC News.
They’ve been employees of the corporation since
it acquired ABC in 1996. Some observers had
misgivings about Mickey Mouse’s entertainment
empire buying a major news operation; they
were concerned that corporate profit goals might
influence journalistic performance” (p. 125).
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Principles of Electronic Media
Chapter Six – The Industry
Principle #3
U.S. commercial electronic media will oppose
efforts to regulate them.
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Principles of Electronic Media
Chapter Six – The Industry
Principle #4
The urge to consolidate ownership is fundamental
to broadcasting, as it is to many other industries.
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Principles of Electronic Media
Chapter Six – The Industry
Levels of Operation – Networks
¤ Effects of Regulation
¤ Changing with the Times – A New Age
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Regulation’s Toll
¤
¤
1970s
The financial interest and syndication
rules: “The first rule prohibited networks
from acquiring financial stakes in
programs produced by others. The second
rule barred networks from selling
programs to local stations” (p. 126).
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Regulation’s Toll
¤
“Another tether on the networks was the
prime-time access rule, which limited
network programming to three hours a
night during the four-hour prime-time
period. Like the syndication rule, this
encouraged stations to create shows or buy
them elsewhere” (p. 126).
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Regulation’s Toll
¤
“These government limits substantially
broke the big networks’ choke-hold on
what Americans could watch, helping to
diversity TV content. The limits also
badly damaged network profitability.
Soon new networks and cable TV grabbed
viewers from the Big Three” (p. 126).
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Regulation’s Toll
¤
“Within a couple of years in the mid1980s, ABC, CBS, and NBC were sold to
or merged with richer companies” (p.
127).
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The New Age of Networks
¤
“The networks had not lost all of their financial
strength or their resilience, however… For
instance, NCB, which had become NBC
Universal made $2 billion in profit in 2003. On
the other hand, the old networks know they no
longer rule alone and have branched out widely.
They’ve acquired Internet outlets, formed
alliances, and generally reinvented themselves to
compete with new rivals” (p. 127).
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Principles of Electronic Media
Chapter Six – The Industry
Principle #5
Consolidation increases broadcasting’s dependence
on approval from Wall Street investors.
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Principles of Electronic Media
Chapter Six – The Industry
Levels of Operation – Station Groups
¤
Trading Stations
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Why Growth?
¤ Larger Group
¤ Levels and Geographic Regions
¤ Negotiate Programming
¤
Interest in Localism
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Station Groups
¤
“Between 1994 and 1998, the number of
owners of full-power commercial TV
stations spiraled from 658 down to 425 – a
drop of more than one-third. Radio
stations have become especially ripe
targets for consolidation of ownership” (p.
128).
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Station Groups
¤
“After many years when no one was permitted to
own more than 40 stations, the 1996
Telecommunications Act repealed national
ownership limits. Buyers were allowed to hold
as many as eight stations in a local market.
Within the next year, the total number of owners
of U.S. radio stations dropped almost 12 percent
as stations groups new and old bought up all they
could” (p. 128).
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Motives for Growth
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Efficiency: reduces the cost of doing
business.
Increased appeal for advertisers in terms
of multiple layers of market exposure.
Better cooperation in times of catastrophe.
Programming negotiations.
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What Happened to
Localism?
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“One major objection to electronic-media
consolidation is that it reduces the
diversity of programming and thus denies
viewers and listeners access to many
points of view”
LCD vs. the “niche market”
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What Happened to
Localism?
¤
“However, opponents of consolidation
insist that content diversity will wither if
too much power falls into too few hands”
(p. 130).
¤ -”When you talk about more voices, are you
talking about more voices by one
ventriloquist?” (Byron Dorgan, Sen. North
Dakota).
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Principles of Electronic Media
Chapter Six – The Industry
Levels of Operation – Production
Companies
¤
Pioneering TV
¤ Independents
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Production Companies
¤
“Although megacorporation own some
production studios today, the traditional
mode, responsible for most TV
programming over the past half century, is
to contract with an independent production
firm” (p. 130).
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Principles of Electronic Media
Chapter Six – The Industry
Principle #6
Because of its technologies, broadcasting
generally is more capital intensive than labor
intensive.
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Principles of Electronic Media
Chapter Six – The Industry
Locally
¤
Radio
¤ Who Manages and How?
¤ Who Works?
¤
Television
¤ Managerial Functions
¤ The Rank and File
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Radio and Television Roles
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Programming
Advertising Sales
Business Affairs
Engineering
Human Resources
News
Production
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Principles of Electronic Media
Chapter Six – The Industry
Into the Future
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New Paths to New Audiences
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New Prospects
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New Markets
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HDTV
Customizable Media Products
Cable
Satellite
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