TRENDS IN COMMUNICATIONS

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TRENDS IN COMMUNICATIONS

• An Introductory Overview
• Sources various include Croteau and Hoynes
  (2006) The Business of Media. Thousand Oaks, CA.
  Pine Forge Press and various contributions to
  Alexander, Owers, Carveth et al. (Eds) (2003)
  Media Economics. New York Routledge.

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14 Trends What Storyline?

• 1. Digitization 8. Convergence
• 2. Deregulation 9. Branding
• 3. Privatization 10. Synergy
• 4. Globalization 11. Mergers Acq
• 5. Commercialization 12. Concentration
• 6. Specialization 13. Innovation and
  Competitivization
• 7. Growth 14. Connectivity

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(1) Growth in Media

• Variety of consumption technologies
  Proliferation of technologies cd's, computers,
  vcrs, dvds, MP3s, mobiles, 3G/4G mobiles
• Growing portable, on-demand consumption
  opportunities
• Financial growth media advertising up 733m to
  3.63bn to 150bn (1919-1950-2007), constant
  prices
• (As of GDP 2.5 - 1.9 - 2.0)

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Media Growth (2)Time Spent

• Time spent with media 7hrs 35mins a day in 2009
  for 3-18 years old (10hrs 45mins incl. multi-task
  time)
• http//news.cnet.com/8301-1023_3-10297935-93.html
• http//www.mediainfocenter.org/television/competit
  ive/time_reach.asp
• http//www.kff.org/entmedia/upload/8010.pdf

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Share of Time Spent Per Day with Major Media
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Growth (ctd) Print (WAN, 2009)

• 1.9 billion people choose to read a newspaper
  every day, or 34 percent of the world population,
  while 24 percent use the internet.
• Biggest newspaper market is India, with 107
  million daily sales. India, China and Japan
  account for more than 60 percent of the worlds
  newspaper sales, with the USA taking 14 percent.
• In sales per 1,000 adult population, Japan leads
  the world with 612, Norway with 576, Finland with
  482. 91 percent of Japanese continue to read a
  newspaper daily

7
Growth (ctd) TV

• 9 of 43m US HH had TV, 1950, rising to 98.9 of
  114.5m HH in 2009.
• Globally, 1964-2004 TV HH increase six-fold to
  1.2 billion (world pop 6 billion)
• In 2006, 59 HH had cable 25 had satellite
• Internet is accessed by two billion people
  worldwide

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Growth (ctd) Internethttp//www.internetworlds
tats.com/stats.htm

• Global 361m Internet users 2000, rising to 1.7b
  users in 2009, or 25.6 of 6.77bn total pop
• (User anyone currently in capacity to use the
  Internet, on basis of access and knowledge)
• NorthAm 108m users 2000, rising to 253m in 2009
  or 74 of 341 total pop
• Asia 114m users in 2000, rising to 738m in 2009
  or 19 of total pop of 3.8bn

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2. Mergers and Acquisitions (MA)

• Bagdikian (2000) Depending on measures, major
  U.S. media are owned by between 6 and 23 media
  conglomerates
• For biggest 6 traditional media companies, 2009
• http//www.freepress.net/ownership/chart/main

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How does MA take place?

• Occurs in 3 major ways
• vertically (company buys company that supplied
  it, or that it supplies e.g. TV network buys
  Hollywood studio)
• horizontally (company acquires second
• company in same business e.g. theater chain
  buys another theater chain)
• by conglomeration (a company building a
  portfolio of different kinds of businesses) may
  be intra-media (media only) or extra-media (media
  plus non-media)

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What Motivates MA?

• Economic gain
• Market control and predictability
• Synergy
• Cash flow
• Economies of scale
• Cross-subsidization, cross-promotion,
• Global market activity
• Convergence,
• Create barriers to new competition
• Tax benefits
• Greed and vanity.

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What factors are favorable/unfavorable to MA?

• Favorable
• Low interest rates
• Inflation
• Company valuation,
• Future expectations of growth
• Factors affecting rates of return, and
  availability of finance.
• Unfavorable
• Convergence slow to happen
• Huge debt, as result of overpayment
• Organizational conflicts
• Falling security prices, falling valuations

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(3) Regulation / Deregulation

• Regulation mainly affects scarce resource media
  (broadcast frequencies public rights of way in
  case of cable) or natural monopoly markets
  (telephony, cable, some newspapers).
• 1980s-1990s, incl. 1996 Telecommunications Act, a
  period of deregulation or of re-regulation
  away from criteria of public interest to criteria
  of competition.
• Deregulation stimulated by technological advance
  incl. digitization (increase in broadband),
  desire for MA, neoliberal philosophies

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(4) Convergence

• Eradication of technological differences among
  distribution networks
• Multiple applications over the same network to
  different platforms
• Content flows through increased number of
  distribution networks
• Textvoicevideostilldata packaged/distributed
  simultaneously

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(5) Globalization

• International markets prime source of revenue
  growth following saturation of domestic markets
• Economies of scale, but pressure to produce
  separate/customized content for different markets
• Enhanced by policies of deregulation and
  liberalization in many countries
• Motivated by desire for more revenue, leveraging
  of content, cross-subsidization etc.

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(6) Concentration of Media Markets

• Local (e.g. largest four radio owners gained 93
  of revenues in top 283 markets one cable
  provider in most markets, one dominant fixed-wire
  local telephony provider in most markets)
• National (e.g. four major TV networks two major
  satellite providers six largest MSOs provide
  service to 60 of cable subs 20 newspaper chains
  account for 70 of daily circulation 10 largest
  film distributors owned by 6 conglomerates
  account for 90 of revenues)
• Special Interest (e.g. two major players,
  Univision and Telemundo)

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Corps controlling over 80
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How is concentration measured?

• Evaluation of significance of concentration
  complicated by
• What constitutes a market
• Different assessments as to when market is
  dominated by one or few
• New technologies may create entirely new markets
  even if concentrated, more customer opportunities
  have been created

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(7) Digitization

• All forms of communication progressively more
  available for translation into computer language,
  and delivery over digital systems. This enhances
  convergence, and conglomeration.
• Digitization creates significant problems of
  transition and coordination between content,
  distribution and receiver technologies
• Long-term consequence implosion of traditional
  business models creation of entirely new ones

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Press Business Model Implodes
21
Music Bus Model Implodes
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Decline of Network TV
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Google Ad Revolution

• 3 billion searches a day
• 70 of online searches worldwide
• 90m unique YouTube visitors, March 2009 (66 of
  all web video traffic)
• Over 20bn ad revs 2009 (40 of all advertising
  online). Matched combined ad revenues of 5
  largest TV networks
• Google News aggregates 25,000 news sites

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(8) Privatization

• Process of removing media from government
  ownership / control and placing (selling) them
  into private hands OR of requiring government
  owned media to become semi-commercial.
• In U.S. privatization has affected broadcasting
  structure, attitudes to PBS funding, satellite
  systems, Internet development.
• Privatization enhances globalization

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(9) Commercialization Infotainment

• The process whereby increasingly, over time, more
  and more aspects of media activity, including
  news and information, are determined by
  bottom-line mentality on behalf of owners and
  shareholders. Examples include dumbing down of
  television news product placement in Hollywood
  movies intensification of sex and violence
  reduction in political coverage on television
  news increase in number of advertisements per
  hour of entertainment.

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(10) Branding

• Strategies to increase extent to which corporate
  identities acquire household or consumer
  recognition.
• Branding aids marketing, stimulates MA activity
  to extend brand name over wider range of products
  or services.

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(11) Synergy

• Combining resources, talents, archives etc., in
  ways that create a whole that is richer than the
  sum of individual parts.
• Quest for synergy drives much MA activity and
  accounts for many strategic alliances
• Examples iPhone use of ATT as carrier

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(12) Specialization

• Narrowcasting, customization, localization.
  
• Targeting small, specialized audiences.
• Often based on advertising economics.
• Specialist media typically owned by larger
  conglomerates.
• Opportunities facilitated by new technologies
  (cable channels, websites)

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Ad Advantages of Specailization

• If advertiser can reach 100 people for 100 and
  every one of those 100 people buys his 10
  product, that is better than spending 100 to
  reach 10,000 people of whom only 50 end up buying
  the product. In the first case he earns 900 in
  the second case he earns 400.
• Examples a cigar manufacturer who advertises in
  cigar magazine rather than LA Times.

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(13) Competitivazation

• Process typically triggered by (a) new
  regulations that reduce restrictions on ownership
  or (b) new technologies that create entirely new
  markets (e.g. cell phones).
• These attract new entrants into given markets,
  creating (the appearance of) great competition.
• But, almost immediately, competition is followed
  by MA activity until one or a small number of
  companies dominate the market

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(14) Connectivity/Compatibility

• Growing pressure on media producers to determine
  proprietary or universality strategies, relating
  to connectivity between
• (1) distribution and reception technologies
• (2) different reception technologies
• (3) software formats, content, and reception
  technologies