Basic Media Economics

 

Relative Economic Importance

Media industries are huge businesses that have a significant impact on the economy

 

·         Media industries generate over $700 billion in revenue annually

·         Media have fairly consistently accounted for about 3% of the GNP since 1929

·         $900+ per capita of direct spending

·         $1,600+ per capita of indirect spending

 

Comparisons to other expenditures

·         Per Capita Expenditures for Various Items

 

PROFIT ORIENTATION

The major media industries are run by large corporations with the goal of producing as large a profit as possible

MEDIA PRODUCTS ARE SIMPLY VEHICLES FOR PROFIT – that is their sole raison d’ệtre

Profit = difference between revenue and expenses

   

The media industry as a whole earns a higher rate of profit than the average of all industries

They do not do this at an even rate

 

Revenue and Expenses

Revenue

Media industries have several streams of revenue

·         From direct costs to the consumer

·         From indirect costs to the consumer = from advertisers

Trend toward an increasing amount of indirect

 

Advertising revenue varies for each industry

·         Books – 0%

·         Magazines – 50%

·         Newspapers – 80%

·         Broadcast media – 100%

 

Expenses (Costs)

Media industries want to reduce expenses in order to increase profits

 

Fixed costs 

Personnel

·         Fungible  

·         "Talent"

Rent, Insurance, etc.

With more units produced the fixed cost can be spread across more units

Variable Costs 

Paper, ink, etc.

 

Competition & Monopoly

Economic game is fraught with conflict since the players all have different interests:

·         those who own the media vehicles

·         employees of media companies

·         audiences

·         advertisers

 

Media corporations compete with one another in all these spheres

 

Media Corporations compete in different markets

·         National/International

·         Niche

o       geography, or

o       audience interest

 

Media industries compete within predominantly monopolistic markets

·         large markets but few firms competing

·         barriers to entry in the market are high

 

Often the products that compete are fairly similar

- role of advertising.

 

Conclusion

Perhaps the greatest degree of media illiteracy exists in the economic realm

In line with the corporate purpose, at the most fundamental level media products are simply vehicles for profit creation