hi everyone this week we are continuing our discussion on the business of media corporations specifically we'll be covering chapter 13 media economics and the global marketplace in this chapter we're going to be talking about the structure of media industries how they conduct their business we will have a brief overview of some of the legislation that has brought us to the environment the economic environment that we're in today then we'll overview some of the major corporate mergers and discuss the positives and the negatives from those mergers so when we think about the structure of the media industry there are three common economic structures that operate in this industry one is a monopoly and a monopoly is when one firm dominates production and distribution in a particular industry a step away from a monopoly is an oligopoly and that's where not one but a few firms dominate the industry and then the next step away from monopoly would be limited competition and that is where many producers and sellers but only a few products within a particular category um where we have i'm sorry where we have many producers and sellers but only a few products within a particular category so on the next slide i'm going to show you how those three economic structures apply to media products okay so on this slide you can see what some of the media corporations in the media products fall into each category so we have monopoly again that's where one company dominates production and distribution so some examples of that would be a t and t um they dominated the phone business in the 80s um edison in the film business around 1908 remember we talked about thomas edison and the trust microsoft dominated the computer software industry in the 90s and comcast dominates many local kb table tv markets today so those are examples of monopoly then we have examples of oligopoly where it's not just one firm but a few of them so you can see here we just talked about advertising and public relations you can see these are some of the major players in that industry that really dominate the advertising and pr industry so it's not one but it's only a handful and then over here limited competition or monopolistic competition you can see examples of where we see that there are lots of different producers and sellers but they only have a few products to offer so we don't we have a lot of variety in our producers but we don't have a lot of variety in our products an example of that is radio people who have more diverse tastes and music may have a harder time finding a radio station because if it's not like popular it's not one of the popular genres that are normally carried on the business side of media organizations we're going to discuss how media organizations make money and they do so in two different ways they do so via direct payments and via indirect payments so when we think about directly supporting a media organization that is when we purchase a product and the media organization gets the money directly from our accounts so kind of an old school example of that would be a cd or a dvd so if we buy a cd from an artist that's produced by sony music then we are directly giving our money to sony music for that cd a more modern example of that would be up here on the top where you see hulu commercial free option you pay more money for a commercial free option but you're paying that money directly to hulu so your money is coming from the money is coming from your pocket and going directly into hulu's account an indirect payment is where media organizations make money from our attention so it's an indirect payment because we give them our attention and the more viewers they have the more money they can charge for advertising and so they're indirectly getting money from us because we tune in and then that makes them more valuable and they get money through advertisers so direct and indirect payments are the two ways that media organizations collect revenue from us another conversation to have here is the struggle between media organizations and society so obviously media organizations they are corporations that need to make a profit in order to survive and obviously they do that very well but making a profit comes at the expense sometimes of one paying their employees a living wage and two creating content that has a benefit to society so like some of the when we talked about regulating industries earlier in the semester that's kind of what they mean like public type of media corporations are there to ensure that we get the quality content that we need for democracy because they don't rely on profits and media organizations sometimes struggle with that social responsibility to inform us and then their economic responsibility to make a profit so when we think about regulation in terms of economic regulation you have to kind of think about where what was going on historically at the time when some of this legislation was implemented so if you'll remember we talked about some of these huge corporations that really dominated industries like rockefeller and oil cornelius vanderbilt in shipping and railroads and carnegie and steel all of these corporations were monopolies and they wielded a great deal of power because they had so much influence over the market that they could stomp out competitors and and do things that were unethical without being called upon and so on and so forth so some congress had to act in the first piece of legislation that was passed was in 1890 and it was the sherman anti-trust act and this act basically outlawed monopol monopolistic practices so um when company when corporations would do things that would discourage competitors from entering the market or forcing competitors out of the market that was illegal with the sherman antitrust act of 1890 the next big piece of legislation was the clayton antitrust act in 1914 and this basically outlawed corporations from selling their products only to people who promised not to support their competition so it outlawed that practice and then in 1950 we had another piece of legislation that basically limited mergers so any corporate mergers or joint ventures that could potentially reduce competition were outlawed in 1950 so that's some of the major regulation um economically trying to dissuade some of these monopolistic practices and that obviously applied to the media industry as well um this this really sped up i mean it started obviously in 1890 all of this regulation but deregulation started to speed up with the carter administration and really took on some steam during the reagan administration the goal behind this or the thought or the goals behind deregulation was to encourage competition and people thought that if there was more competition that prices would be lowered and that did happen in both cases so when we try to apply these concepts to the media industry in particular you can see how it was impacted with some of these numbers that were on this slide in 1953 the fcc adopted something called the 777 rule which basically said that corporations were only allowed to own up to seven am stations on the radio seven fm stations on the radio and seven television stations in total so really trying to limit ownership there and the goal there is to make sure that more people can own stations which would bring us more diversity in terms of ownership which would hopefully equate to more diversity in terms of content you can see how that role was whittled away beginning with the reagan administration in 1984 which expanded the rule to owning 12-12-12 and then continuing in 1992 it was expanded again to 20 am stations 20 fm stations and 12 television stations but the real change or the real catalyst that created the most change came under the clinton administration when clint president clinton signed the telecommunications act of 1996 and this completely revolutionized and completely deregulated the media industry and you can see some of the things here that were allowed under the telecommunications act a single company could own an almost unlimited number of radio and tv stations so essentially just wiping out all of the fcc regulations from before telephone companies can now own television and radio stations so that's why we see like companies like att who also are in the media content game heavy players in the media content game cable companies could compete in the local telephone business so we're seeing mergers between telephone companies and cable companies and cable companies could freely raise rates and they did um cape after this piece of legislation went into place cable costs soared they it almost tripled the rise almost tripled that of other the rise in other products so um and that kind of led to where we're at today where cable corporations they kind of um they kind of hurt themselves with that because the prices were became so outrageous and then the internet kind of um coupled with the rise of the internet allowed people to or not allowed but encourage people to do what we call cutting the cord and getting rid of cable and relying on streaming services instead you can see after this legislation was passed through we saw some really major mergers occur in the media industry some of the big ones are here disney bought abc for 19 billion and time warner bought turner broadcasting for seven and a half in 2001 aol acquired time warner 164 billion dollar deal 2009 comcast purchased a majority stake in mbc universals 2011 aol bought the huffington post for 315 million dollars and then they were bought out by verizon in 2015 for 4.4 billion dollars and this these mergers just keep on coming there's they come so rapidly that it's almost hard to keep up with them we've seen many many big deals between media corporations since 2011 and we'll talk more about that in the workshop so the result of all of this deregulation is basically that media consolidation took away from media competent competition so what we're seeing is all of these large corporations that have a lot of money they're buying up all of the competition and so we're seeing more consolidation and less competition and the way that they've been able to get around these anti-trust laws that are in place is that they're not they're producing or they're purchasing i'm sorry diverse types of mass media so they're not purchasing their direct competition but they're purchasing like other forms of media so it's not like a theater company is buying up all the other theater companies but they're buying up dvd companies and they're buying up production companies and so on and so forth one consequence of all of this media consolidation is that we've seen a significant change in the gap in wealth so you can see from this chart in 1965 a media ceo they made more money than all of these people but when we flash forward to 2017 a media ceo makes more money than all of these people on the bottom and so you can see that the gap in wages has increased dramatically because of consolidation when we see things like the chart that was on the previous slide when we see things like um huge disparities in wealth we can ask ourselves well why haven't why haven't the public really been talking about this or rising up against this it's really not fair what is keeping people from discussing all this media consolidation and we have started to more recently but for decades we didn't and the reason for that is a concept called hegemony and it's basically it's basically how a ruling class maintains its power over the working class so the definition of hegemony is the acceptance of the dominant values in a culture by those who are subordinate to those who hold economic and political power so if you remember when we talked about edward bernays last week in the public relations chapter we talked about him and his engineering of consent and remember he said people aren't going to do what we want them to do unless we convince them that it's in their best interest and it's our job as elites to control the masses and to manufacture or engineer their consent so that we can run things and and there won't be chaos that's basically the idea behind hegemony so it's this idea that we must convince consumers and citizens that the interests of the powerful are common sense and thus normal or natural so how does this happen it happens through repetitive storytelling so if you think about like the concept of the american dream we all know what that means it's basically i mean it's more complicated than what i'm saying but it's basically the idea that anyone has the opportunity to work hard and to make a whole lot of money and we know that that does happen for some people but it's really not as simple as that but that's the story or the narrative that is pushed on american citizens time and time again and so when we think about the american dream it's easy to dismiss all of these gaps in wealth because we can say well yeah we see all these people who are making millions and billions of dollars but we could get there too that opportunity is out there for us so why would we want to take something away from them when really we just want to be them so when we think about the storytelling and hegemony that really explains why sometimes people will support things that really aren't in their best interests and that could be something like media consolidation we'll talk more about this in our workshop as well two other concepts that have come out of this consolidation are called specialization and synergy so when we think about specialization it's just marketing um media content to niche audiences or very small narrow audiences and so you can see here that you know before when we had these networks people the content that was created was trying to appeal to the masses or trying to appeal to everyone but then around the 1980s um people realize like the networks themselves realize that there were certain demographics of people that were more likely to spend money and so they were more profitable to advertisers and those are mostly people um middle-aged people middle-class middle-aged people and so television the network television really started to focus on these audiences and so the younger people and the older people um kind of got pushed out and that's where this niche marketing started to come into play in the 1980s we saw specialized content um that started to appear four of these markets that weren't serviced by the network so you see things like the hallmark channel which um traditionally targets older women and then you have nickelodeon which targets children and bet which targets black americans and so we're seeing all these these are called niche programming and that kind of emerged in the 1980s another and it's just picked up and ramped up with um the internet like things like netflix you can watch whatever you want like if you're i don't know like an astronomy geek there's probably something for you out there somewhere and then the second concept is called synergy and that is the promotion and sale of different versions of a media product across various subsidiaries of a media conglomerate okay and so this is the idea when we think about synergy that we're going to take a concept like whether it's a movie or a television show and we're not going to just make money off of viewing the movie it's not going to just be theater tickets we're also going to create all kinds of different products variations of that product and we're going to sell that so you may have a popular film but then you're also going to have it on dvd and you're going to have it on streaming and you're going to see it at mcdonald's and the happy meal and you're going to get toys and so on and so forth so that's synergy and that's really become the dominant business model of most media companies today to find something that's successful and then basically just run it into the ground to get as much profit as you possibly can from it here's a figure that kind of shows you what synergy looks like and so we can say it's a new animated feature by disney and i'm going to use frozen 2 as an example because of its success so first frozen 2 is released in theaters on dvd and on streaming video but it doesn't stop there when we think about synergy we're going to use all of the other corporations or companies that disney owns to promote the film and to sell more products so we're going to promote it in disney stores which obviously is owned by disney we're going to promote it on abc which is owned by disney we're going to promote it on free form which is owned by disney we're going to promote it in all of our disney theme parks also owned by disney and if you think about all of the different things that disney owns which is huge i mean they own so much they're going to promote their film frozen two across all of those things that's synergy so the last thing we're going to discuss is how is this affecting our democracy um and again we're just going to brush this surf or this topic brush the surface of this topic in the lecture and we're really going to dive into this during our workshop so some of the ways that this consolidation can impact democracy is one there are just fewer journalists covering public issues so in order to cut costs and to cut expenses we're going to get rid of the stuff that's not performing well and oftentimes that's local news or different types of news media and so we're seeing fewer journalists covering public issues we're not employing people who specialize in certain topics to go and cover these issues and so kind of a result of that is what we do see in the news is more like these superficial consumer concerns like we're gonna just focus heavily on the stock market and weather and so on and so forth but not the the issues that we really need to talk about in order for us to have a healthy democracy and inform citizens and then another a third thing that has really contributed to all of this is citizens united which obviously was decided by the supreme court it allowed for massive corporate contributions basically saying that corporations when they contribute to political candidates that's political speech and it has to be protected because it is free speech so that's what that court case basically in a nutshell said but the repercussions of that is that now politicians are receiving huge donations from large media corporations they're receiving huge donations from large corporations all across the board and obviously there's a conflict of interest in what politicians might want to do while they're in office if they received a large sum of money from a corporation then they're kind of tied to that corporation in terms of what they can do so we're going to stop there we'll discuss more of this like i said in the workshop which will be next week