MEDIA/SOCIETY
Study Guide
Chapter Two: The Economics of the Media Industry
Purpose and Goals
Chapter Two provides an overview of the ways that economic forces shape media organizations
and media products. This analysis of the economics of media is an essential part of a broader
approach that focuses on processes of production. Using both historical examples—for example,
the British and American press in the 19th century—and contemporary developments—including
ownership changes and the economics of "new" media—this chapter shows how the economic
goals and financial relationships help to define the terrain of the media industry and how, in
various ways, economic factors influence decision-making about the content of media products.
Chapter Outline
Changing Patterns of Ownership
Concentration
Conglomeration
Integration
Consequences
Integration and Self-Promotion
The Impact of Conglomeration
The Effects of Concentration
Media Control and Political Power
Media Ownership and Content Diversity
The Homogenization Hypothesis
The Local Newspaper Monopoly
Concentration and Diversity in the Music Industry
Mass Media for Profit (add pg. 153-156)
Prime-Time Profits
Hits, Stars and Decision-Making
Profit and the News Media
The Impact of Advertising
Advertising and the Press in the 19th Century
Advertising and the Contemporary News Media
Advertising, MTV, and the “New” Media
Key Themes
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Media ownership is becoming increasingly concentrated
The relationship between concentrated media ownership and diversity in media content is
industry- and historically-specific
The for-profit nature of most mass media shapes decision-making
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Media work is fraught with uncertainty, particularly about the route to "success;" media
professionals seek formulas that will enhance the likelihood of success and/or decrease
the perceived risk.
Advertising has an impact on the nature of news
Advertising can be a significant influence on new media developments
Key Concepts and Terms
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“Big 3” Networks: the original television networks—ABC, CBS, and NBC
Captive audiences: for example, people in office waiting rooms or children in
classrooms, who can be targeted for programs containing commercials
Closed system: a music industry system wherein major record companies used a limited
number of channels to produce and distribute music
Concentration: the process whereby media companies are owned by fewer and fewer
parent companies
Conglomeration: the process by which media companies have become part of much
larger corporations, which own a collection of other companies that may operate in
highly diverse business areas
Cross-promotion: the ability of media conglomerates to promote products across
different divisions through horizontal integration
Fourth Estate: refers to the press, both in its explicit capacity of advocacy and in its
implicit ability to frame political issues
Hit system: the underlying operating principle for media companies whereby they rely
on small number of big hits to remain economically viable
Homogenization Hypothesis: the contention that ownership concentration and
horizontal integration, which decreases competition, will lead to a homogenous media
products
Horizontal diversity: a measure of diversity in news content, referring to the differences
in content between two newspapers
Horizontal integration: the process by which one company buys different kinds of
media, concentrating ownership across differing types of media
Logic of safety: an attempt by network programmers to minimize the risk of losing
money on TV programs that are ratings losers
Mergers: in corporate business, fusion of two or more corporations by the transfer of all
property to a single corporation
Monopoly: market condition in which there is only one seller of a certain commodity; by
virtue of the long-run control over supply, such a seller is able to exert nearly total
control over prices
Narrowcasting: targeting media products designed for smaller niche markets or audience
segments
Network programmers: television network executives who make decisions about which
programs will air
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Objectivity: is a significant principle of journalistic professionalism, and can refer to
fairness, disinterestedness, factuality, and nonpartisanship, but most often encompasses
all of these qualities
Oligopoly: an intermediate market structure between the extremes of perfect competition
and monopoly
Open system: the major record companies control manufacturing, distribution and
publicity, but draw on semi-autonomous independent producers to make the music
Orwellian: describes the situation, idea, or societal condition that George Orwell
identified as being unfavorable to the welfare of a free-society
Product placement: the placement of real commercial products and services in various
media, where the presence of a particular brand is the result of an economic exchange;
appears in plays, film, television series, music videos, video games and books
Production Perspective
Record firms: major record companies
Record labels: the numerous, smaller, independent labels controlled by a larger record
firm
Search engines: online services that allow users to scan the contents of the Internet to
find Web sites or specific information of interest to them, for instance Google or Yahoo
Spin-offs: a new TV series which contains either characters or theme elements from an
old series
Star principle: the idea that stars can attract audiences and thus secure hits for producers
Synergy: the dynamic where components of a company work together to produce
benefits that would be impossible for a single, separately operated unit of the company
Vertical diversity: a measure of diversity in news content, referring to the range of
actors mentioned and degree of disagreement in articles in a single newspaper
Vertical integration: the process by which one owner acquires all aspects of the
production and distribution of a single type of media
Wire services: organizations established to supply news for a charge to other
organizations in the news trade.
Essay or Discussion Questions
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What is the difference between horizontal and vertical integration? Use examples from
two industries to explain both the different ownership structures, their benefits to media
companies, and the potential consequences.
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What is the political impact, if any, of concentrated corporate ownership of news and
other forms of media?
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What is the relationship between media ownership and diversity in media content?
Compare and contrast this relationship in the news and popular music industries.
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Why was there expanded musical diversity in the 1980s, despite highly concentrated
ownership? What does this suggest about the relationship between ownership
concentration and media diversity?
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What are the consequences of the network television "logic of safety" for the kinds of
programs that appear on prime time television? Why do television executives pursue this
"logic of safety?"
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What are the economic forces that have helped to make the television
"newsmagazine" such a prominent part of the network prime-time schedule?
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Why are “stars” so sought after by media producers? What is it that these starts bring
to media production?
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How did the rise of a commercial press, supported financially by advertising, influence
the development of the British and American press in the nineteenth century? What is
the relationship between news and advertising today?
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What role are advertisements likely to play in the emerging world of cyberspace? What
role do advertisements play on the Internet today?
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