Economics of the Communication Industries
COMM 570, Fall 2008
Thursday 2:00-4:50pm, in KER305
Instructor: François Bar ( fbar@usc.edu, KER209, 213.743.1789)
Office Hours: by appointment
This course explores the economics of the communication industries. The first part is a survey of the
economic organization and characteristics of traditional communication sectors (newspaper publishing,
film, broadcast-TV and cable-TV, telephony). The second part deals in greater detail with specific, crosssector economic issues related to networks, media technologies, and digital convergence.
Assignments and grading
1) Students must sign up to make a short presentation and lead a discussion in one the 7 classes focused
on an industry (weeks 3-9). They will identify a few additional readings for the class, to support their
presentations. Possible presentation topics include:
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case study of one of the firms belonging to the sector under study
analysis of a salient economic issue in the sector
a look at similarities and differences between the US and another country/region in this industry
this is not an exhaustive list...
2) A research paper, to be presented in class during one of the last 5 weeks of the semester, due at the
end of the semester.
Timeline:
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by week 4: submit a 1-paragraph description of the topic
by week 9: submit a 2-page synopsis
paper presentations to be scheduled during weeks 10-14
final paper due during finals week
Grading
Presentation: 20%
Participation: 20%
Research Paper: 60%
Required readings
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Books:
1
o
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Compaine, Benjamin M., Douglas Gomery, Douglas Gomery Who Owns the Media?:
Competition and Concentration in the Mass Media, Lawrence Elbaum, 2000 ISBN
0805829369
o [OPTIONAL:] Alexander, A., J. Owers and R. Carveth (1998) Media Economics: Theory
and Practice, Mahwah, NJ: Lawrence Erlbaum Associates, ISBN 0805845801
o Shapiro, C. & Varian, H. (1998). Information rules: A strategic guide to the network
economy. Cambridge, MA: Harvard Business School Publishing
ISBN :087584863X.
On-line readings: pointers included in the syllabus
Keep up with the Communication Industries business news. A minimal way to do that is to read
the Monday business section of The New York Times: . These articles are available on the
CyberTimes site at http://www.nytimes.com/yr/mo/day/cyber/ .
Academic Integrity:
The University is committed to maintaining the highest standards of ethical conduct in all academic
pursuits. Any student found responsible for plagiarism, fabrication, cheating on examinations, or
purchasing papers, or other assignments, will receive a failing grade in the course and may be dismissed
as a major in communication. See section 11 of Scampus and the relevant sections of the Student
Judicial Affairs and Community Standards at: http://www.usc.edu/student-affairs/SJACS/students.html.
Students with Disabilities and Academic Accommodations:
Students requesting academic accommodations based on a disability are required to register with
Disability Services and Programs (DSP) each semester. A letter of verification for approved
accommodations can be obtained from DSP when adequate documentation in filed. Please be sure the
letter is delivered to Professor Bar as early in the semester as possible. DSP is open Monday-Friday,
8:30-5:00. The office is in Student Union 301 and their phone number is (213) 740-0776. For additional
information, see the Web page of the Disabilities Services Program at: http://www.usc.edu/studentaffairs/asn/DSP
Schedule
Week 1
Course overview
Week 2
Introduction
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Information Rules, Chap 1 "The Information Economy"
skim WOTM Chap 8: "Who Owns the Media Companies?" by Ben Compaine
Browse through several articles from the following three surveys at Economist.com:
- "Among the Audience -- Survey: New Media" (Aug 2006)
- "Your television is ringing -- Survey: Convergence" (Oct 2006)
- "A world of Connections -- Survey: Telecoms" (Apr 2007)
2
Week 3
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Newspapers
WOTM: Chapter 1: The Newspaper Industry, by Ben Compaine
For data on the newspaper industry, see Newspapers by the Numbers (Newspapers Association
of America)
Endangered Species - stories on the demise of the independent U.S. newspaper. By two-time
Pulitzer Prize winner James V. Risser for AJR NewsLink.
Who killed the newspaper?, The Economist, Aug 24th 2006
More media, less news, The Economist, Aug 24th 2006
Optional reading:
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Week 4
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Simon Latcovich and Howard Smith, Pricing, Sunk Costs, and Market Structure Online: Evidence
from Book Retailing, Oxf Rev Econ Policy 2001 17: 217-234
Picard, R. & Brody, J. (1997). The newspaper publishing industry. Boston: Allyn and Bacon.,
chapter 1: "The nature and scope of the industry." (pp. 1-31).
Picard, R. & Brody, J. (1997). The newspaper publishing industry. Boston: Allyn and Bacon.,
chapter 2: "The roles of newspapers as products and institutions." (pp. 32-59).
Lacy, S., & Simon, T. (1993). The economics and regulation of United States newspapers.
Norwood, NJ: Ablex, chapter 8: "Newspaper economics and antitrust" (pp. 215-236).
Movies
WOTM: , Chapter 6: "The Hollywood Film Industry: Theatrical Exhibition, Pay-TV and Home
Video", by Douglas Gomery
Wildman, S. (1995). "Trade liberalization and policy for media industries." Canadian Journal of
Communication 20, pp. 367-388.
Optional reading:
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Week 5
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Vogel, H. (1994). Entertainment industry economics. Cambridge: Cambridge University Press,
chapter 2: "Movie macroeconomics" (pp. 27-60). and chapter 3: "Making and marketing movies"
(pp. 61-86).
Garnham, N. (1990). Capitalism and communication. London: Sage, chapter 11: "The economics
of the US motion picture industry" (pp. 169-209).
Cassidy, J. (1997). Chaos in Hollywood. The New Yorker, March 31, 1997
Television
WOTM, Chap 4: The Television Industries: Broadcast, Cable and Satellite, by Douglas Gomery
Optional Reading
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Litman, R. "The Economics of Television Networks: New Dimensions and New Alliances", in
Alexander et al. (1998). Media economics, chapter 7 (pp. 131-150)
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Garnham, N. & Locksley, G. (1991). The economics of broadcasting. In Blumler, J. & Nossiter, T.
(eds.), Broadcasting finance in transition. New York: Oxford University Press, pp. 8-22.
Walker, J. & Ferguson, D. (1998). The broadcast television industry. Boston: Allyn & Bacon.,
chapter 2: "A history of broadcast television." (pp. 12-41).
Walker, J. & Ferguson, D. (1998). The broadcast television industry. Boston: Allyn & Bacon.,
chapter 3: "The economics of broadcast television." (pp. 42-63).
Carroll, S. & Howard, H., "The Economics of the cable industry" in Alexander et al. (1998). Media
economics, chapter 8 (pp. 151-174)
Owen, B. & Wildman, S. (1992). Video economics. Cambridge, MA: Harvard University Press,
chapter 6: "Cable television" (pp. 211-259).
Vogel, H. (1994). Entertainment industry economics. Cambridge: Cambridge University Press,
chapter 7: "Cable" (pp. 177-196).
Crandall, R. W. (1997). Competition and regulation in the US video market. Telecommunications
Policy, 21, 649-660.
Week 6
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Music and Radio
WOTM, Chap 5: "The Radio Broadcasting and the Music Industry", by Douglas Gomery
Love, Courtney, "Courtney Love does the math", Salon, June 14, 2000.
Gregory Staple & Kevin Werbach, "The End of Spectrum Scarcity: New technologies and
regulatory reform will bring a bandwidth bonanza", IEEE Spectrum, March 2004
Optional Reading
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Radio Deregulation: Has It Served Citizens and Musicians? (2002)
http://www.futureofmusic.org/research/radiostudy.cfm
The State of the News Media 2004: Radio
http://www.stateofthenewsmedia.org/narrative_radio_intro.asp
FCC Media Bureau, Audio Division: http://www.fcc.gov/mb/audio/
Week 7 & 8
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Telecommunications
Sirbu, M. (1992). Telecommunications technology and infrastructure. Annual Review of the
Institute for Information Studies, pp. 155-180.
Economides, "US Telecommunications Today", April 1999 [PDF]
Hundt, Reed and Rita Koselka, "Weathering telecom’s dark and stormy night", McKinsey
Quarterly, 2001.
Robert Crandall, "A Somewhat Better Connection", Regulation, SUmmer 2002, pp. 22-28 [PDF]
Michael Powell, Statement on Competition Issues in the Telecommunications Industry, Before
the Committee on Commerce, Science and Transportation, United States Senate. (1/14/03)
[PDF]
Optional Reading:
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Huber, P. (1992), The geodesic network II. Washington, DC: The Geodesic Company, pp. 1.11.44.
4
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Crandall, R. (1989). The role of the U.S. local operating companies. In Crandall, R., & Flamm, K.
(eds.), Changing the rules: Technological change, international competition, and regulation in
communications. Washington, D.C.: The Brookings Institution, pp. 114-146.
Collins, R., & Murroni, C. (1996). New media, new policies. London: Polity Press, Appendix 1:
"The telecommunications sector: Economic and technological background" (pp. 190-198).
Week 9
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Internet
WOTM, Chap 7: "The Internet and Online", by Ben Compaine
"What Is The Internet (And What Makes It Work)", Robert E. Kahn and Vinton G. Cerf
(December, 1999)
Odlyzko, Andrew, Content is Not King First Monday, volume 6, number 2 (February 2001)
Optional Reading:
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Martin Cave and Robin Mason , The Economics of the Internet: Infrastructure and Regulation,
Oxf Rev Econ Policy 2001 17: 188-201.
Paul A. David, The Evolving Accidental Information Super-Highway, Oxf Rev Econ Policy 2001 17:
159-187
MacKie-Mason, J., & Varian, H. (1997). Economic FAQs about the Internet. In McKnight, L, &
Bailey, J. (eds.), Internet economics. Cambridge, MA: MIT Press, pp. 27-62.
MacKie-Mason, J., & Varian, H. (1996). Some economics of the Internet. In Sichel, W., &
Alexander, D. (eds.), Networks, infrastructure, and the new task for regulation. Ann Arbor, MI:
The University of Michigan Press, pp. 107-136.
Kevin Werbach, "Digital Tornado: The Internet and Telecommunications Policy", March 1997,
OPP working paper #29, Federal Communication Commission.
"The Economics of Online Media", in Alexander et al. (1998). Media economics, chapter 13 (pp.
247-274) [*]
Hallgren, M., & McAdams, A. (1997). The economic efficiency of Internet public goods. In
McKnight, L, & Bailey, J. (eds.), Internet economics. Cambridge, MA: MIT Press, pp. 455.478
Week 10
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Information Rules, chapter 2: "Pricing information" and chapter 3: "Versioning information"
Jeff Howe, "Licensed to Bill", Wired, Oct 2001
Week 11
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Network Economics and Network Externalities
Information Rules, chapter 7: "Networks and positive feedback"
Week 12
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Information Pricing
Standards and Interconnection
Information Rules, chapter 8: "Cooperation and compatibility"
Optional Reading:
5
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Katz, M., & Shapiro, C. (1985). Network externalities, competition and compatibility. The
American Economic Review 75(3), pp. 424-440.
Owen, B. & Wildman, S. (1992). Video economics. Cambridge, MA: Harvard University Press,
chapter 5: "Network economics" (pp. 151-210)
Week 13
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Innovation and Path-Dependence
Information Rules, chapter 5: "Recognizing lock-in", and chapter 6: "Managing lock-in"
Arthur, B. (1996). Increasing returns and the new world of business. Harvard Business Review,
July-August, pp. 100-109.
Optional reading:
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Arthur, B. (1987). Competing technologies: An overview. CEPR Publication No. 98.
Rosenberg, N. (1994). Exploring the black box. Cambridge: Cambridge University Press, chapter
1: "Path-dependent aspects of technological change" (pp. 9-23).
Week 14
No class (thanksgiving)
Week 15
Wrap-up and Conclusion
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