Film Industry in Modern Blockbusters Discussion

a) Describe how and why continuity is being used by the film industry in modern blockbusters, and what effects this is having, creatively and economically, on movies [worth 5 marks].

b) Then describe how and why serialized storylines became so popular on television, including changes in the television industry and technologies [worth 5 marks].

c) Is television now a superior, more culturally relevant medium than film, leading to more popular, original, creative content, compared to the kinds of blockbuster movies Hollywood keeps turning out? Or is television still the “small screen” compared to the “big” or “silver screen” of the movies, and cinema remains the bigger and better deal in our popular culture? (You can argue both positions, too.) [worth 5 marks].

Note: you do not need to provide an introduction, conclusion, title, or citations and a works cited page (unless you quote or reproduce text from the PowerPoint slides or readings without rewording or paraphrasing, in which case you must provide citations and a works cited page using APA citation style, 6th or 7th edition).

You may use paragraph breakers, headings, bullets, or numbers to separate the different parts of your answer, but point-form replies are discouraged.

Advertising and Audiences
Media Markets
• market
• where sellers and buyers determine equilibrium price of good
• industry
• where group of sellers offer same/similar goods
Media Markets
• core function vs. medium
• content vs. distribution
Media Markets
• media markets → hybrid
• oligopolistic + monopolistic + competitive
• leading firms control 80% of market
• smaller firms compete for 20% of market
Media Markets
• new markets → adjacent to media market
• search
• social networking
• mobile devices
Media Markets
• media sellers compete
• in different industries
• at many different scales
Media Markets
• horizontal integration
• many markets and industries
• vertical integration
• one market and industry
• production → distribution
Multiplatform Media
• before, media seller produced good to deliver to one platform
• today, media sellers → multiplatform media enterprises
• today, media sellers produce content to deliver to many markets,
platforms, devices
Multiplatform Media
• product vs. content
• content sold/resold many times on many platforms/markets
Multiplatform Media
• media consumers consume content on many different
platforms/devices
• both traditional and new media platforms
Multiplatform Media
• business models adopted by multiplatform media enterprises today are
fourfold:
Multiplatform Media
• advertising
Multiplatform Media
• pay-per-use
Multiplatform Media
• subscription
• hybrid-subscription
Audiences and Advertising
• media sellers → dual markets
• both consumer and advertising markets
• sellers → products → audiences
Audiences and Advertising
• sellers → space/time → advertisers
• legacy media → advertising
• newspapers, radio, television
Audiences and Advertising
• advertisers → audience measurement
• third-party firms
• Nielson
• Alstron
• BARB
Audiences and Advertising
• Nielson → dominant in market for ratings measurement
• representative small sample of TV audience → whole audience
“If you have a bowl of soup in which all the ingredients are thoroughly
mixed, you do not have to eat the entire bowl to know how the soup
tastes.”
–TV executive
Means and Method
• diaries
• meters
Means and Method
• ratings → measurements of audiences:
‣ reach: # of audience members available during program period
‣ share: % of audience reach watching program during time period
‣ viewing time: # of hours spent viewing during day, week, etc.
Means and Method
• ratings as currency
• programming decisions
“Finding out whether C.S.I. beats Desperate Housewives is just the
beginning. Change the way you count…and you can change where
the advertising dollars go, which in turn determines what shows are
made and what shows are then renewed.”
–Jon Gertner, journalist
Means and Method
• in 1970s, Nielsen → quantity vs. quality of audience measurements:
• psychographics: personality or psychological traits
• lifestyle measurements: habits or lifestyles
Means and Method
• younger audiences > older audiences
• male audiences > female audiences
• higher income audiences > lower income audiences
Means and Method
• so TV market:
• large, undifferentiated audience → elite demographics
• mass audience → niche audiences
Challenges Today
• ratings → watching vs. not watching
• measured audience = only sample of real audience
• sample may not ≠ total audience
Challenges Today
• audience fragmentation
• harder to measure
Challenges Today
• more channels, platforms, programs
• time-shifting technologies
• # of viewers or readers each medium or
platform 📉
“Over the past few years I’ve been encouraging the TV industry to
embrace the power of data.”
–David Abraham, Channel 4’s chief executive
Ratings and Data
• “Big Data”
• 3 Vs = volume, velocity, variety
• social media metrics
• online activity
• streaming services
Ratings and Data
• automation of audience research
• algorithms
• artificial intelligence
• intermediaries → infomediaries
Ratings and Data
• live events and programming
• sports
• award shows
• social media activity (“buzz”) → data
“…as Big Data continues to make further inroads…networks, producers
and advertisers will feel more inclined to invest in or design
programming that can generate high levels of social media activity.”
–JP Kelly
The promise is great: the blockbuster and the
Hollywood economy
Marco Cucco
UNIVERSITY OF LUGANO, SWITZERLAND
The blockbuster is the audiovisual product which best represents today’s
Hollywood. It is not easy to trace a clear outline of the blockbuster, as it
embraces a wide variety of genres and does not have particular features that
bind its classification (Stringer, 2003). All we can do is identify some main features that are clearly present in this kind of production, by looking at its origins.
The word ‘blockbuster’ has a military origin and was used to indicate the
large-scale bombs used during the Second World War. Later, during the
1950s, the word came into use in the cinematographic field to refer to a product whose distinguishing characteristic was its size. In this case size has two
meanings: on one hand it refers to a major economic investment and on the
other it refers to the amount of the takings.1 This means that the main features
of this new kind of film, born after the Second World War, are high production costs and good returns. Everything revolves around the idea that a big
production gives a better performance at the box office.
The studios’ decision to focus on big productions was based on many factors originating in the period between the end of the 1940s and the beginning
of the 1950s, when Hollywood was experiencing its worst crisis. The causes
of this crisis were migration towards the suburbs where there were no theatres; the baby boom, which reduced cinematographic consumption; the tendency to invest in durables (houses, cars, electrical appliances); the cinema’s
bad reputation because of the scandals in which some actors were involved
and McCarthyism; and the birth of new competing media (the advent of television) and other activities such as sports, gardening, etc.
To tackle this crisis the cinema industry reduced the number of films produced and focused on big and expensive productions. After all, the famous
Media, Culture & Society © 2009 SAGE Publications (Los Angeles, London, New
Delhi and Singapore), Vol. 31(2): 215–230
[ISSN: 0163-4437 DOI: 10.1177/0163443708100315]
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Paramount sentence had broken the vertical integration of the majors in
1948 and allayed the studios’ worry about having to supply theatres with a
good number of films (Neale, 2003). The studios, no longer owning the cinema circuits, were free to focus on a few projects in which they could invest
the money saved by reducing the volume of production. Big productions
requiring the use of the most advanced technology helped differentiate the
product from the supply of competing media such as television and helped
revive the theatre as a privileged place for the film experience and, more
generally, high-quality entertainment. From then on, a large number of
spectacular, mainly epic-historical productions were produced such as The
Ten Commandments, The Bridge on the River Kwai, Ben-Hur, Lawrence of
Arabia, Cleopatra. However, the blockbuster, as we see it today, has more
recent origins, in the mid-1970s. The investment is just as high as in the past
but what is different now is the promotional process, the choice of genre,
the narrative component and the place of consumption. The film that represented the turning point in this sense was Jaws by Steven Spielberg,
released in 1975. Universal boss Lew Wassermann was the man behind this
operation. He is considered the father of the blockbuster genre and of a new
type of collaboration between television and cinema. To promote Jaws, a
two-pronged saturation strategy was used: television advertisements and the
presence of the film in the theatres. For the first time television was used
massively to promote a movie (the film industry occupied most of the
advertising space during prime-time) and for the first time a movie was
released in a large number of theatres on the opening weekend (464 theatres, a record for that period), setting in motion a strategy that is widely
used nowadays. As Douglas Gomery recalls: ‘Jaws was not the first film
sold by and through broadcast television, but its million-dollar success
proved that that strategy was the one that would redefine Hollywood
through saturation advertising’ (1998: 51).
Thomas Schatz underlines how the blockbuster syndrome became manifest in the mid-1970s ‘despite (and in some ways because of)’ the consolidation of some competing media and the advent of new distribution
networks such as pay-tv and home video (2003: 75). Nowadays we can
safely say that blockbusters, and the new economic politics of Hollywood
based on them in general, would not exist without television. Today, television is a fundamental marketing tool, but it is above all thanks to revenues
from secondary markets (pay-tv, home video, broadcasting) that the film
industry can afford to make expensive movies and be sure of a return on
their investment, even in the case of flops.
The advent of television turned the home into the new entertainment centre, changing the forms and places of film consumption (Gomery, 1992).
However, it was only with the advent of television that Hollywood films
became widespread and theatres began to play a strategic and leading role in
the economy of that sector.
Cucco, The promise is great
217
The blockbuster
The first distinctive feature of the blockbuster is the high economic investment involved. According to MPAA (Motion Picture Association of America)
data, the average cost of a movie produced by a major in 2006 was around US
$100.3 million: $65.8 million were negative costs and $34.5 million marketing costs. These numbers refer to the costs of a studio’s yearly slate, which on
average comprises 10 to 20 films. A blockbuster’s costs are much higher, and
can sometimes be enormous. Moreover, in this case marketing costs and negative costs are often the same, moving the break-even point and the mark-up.
Negative costs may even be higher than marketing ones as was the case with
Alien (1979), the first one in cinema history. There are two reasons for such
high costs: technology and human resources. Blockbusters make use of
expensive special effects, using advanced technology, with the aim of distinguishing their product from the competition of other films or media. The
choice of genre is conditioned by the decision to focus on the use of special
effects. Indeed, the bigger the screen on which they are shown, the better they
are. Special effects, in fact, yield their performance better if screened on a big
screen, underlining the difference between the enjoyment of the movie at the
theatre or at home on the television. Consequently, since special effects
redeem theatres and cinematographic consumption, projects which involve a
greater use of them should be preferred, and these include science fiction
films, action and adventure movies. These kinds of films are appreciated most
by young people who, since the early 1950s, have been the cinema’s main
customers and are the most willing to move outside the home to find entertainment (Marich, 2005). Furthermore, science fiction and action movies
have the advantage of a lower cultural discount on foreign markets, where it
is easier for them to enter. In contrast, it’s harder to conquer new markets for
those films which focus less on kinematics and more on words, like dramas
and comedies, whose irony is often based on local culture (dialects, usages
and customs, etc.). So the blockbuster was born as a transnational product
(Stringer, 2003), meaning that it is designed for commercial utilization on the
global market. This approach leads to a loss of cultural specificity. As a journalist of The Economist wrote: ‘There is nothing particularly American about
boats crashing into icebergs or asteroids that threaten to obliterate human life’
(cited in Grant and Wood, 2004: 147).
Since the mid-1970s the production of some genres has gradually been
reduced. Musicals, westerns, biblical films, war films, films taken from literature and costume dramas have gone out of fashion, with some exceptions
(Chicago, Unforgiven, Saving Private Ryan, Pride and Prejudice) while the
production of other films (comedies, thrillers, dramatic films) has continued,
remaining in a middling place as regards production costs. Science fiction
films (Star Wars) and adventure films (Jaws) initiated, and then dominated,
the entire production of blockbusters.
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The second reason for such high production costs are human resources’
salaries, especially for the creative staff. These costs do not diminish gradually, but on the contrary rise more than the other costs of a cinematographic
production, whereas the cost of technological resources, initially high, drops
in the short term once the technology has been perfected and a production
system based on economies of scale is achieved. Human resources are difficult to find and highly sought-after, especially those able to pull the public to
the box office because of their image and reputation. Indeed, authors, directors and screenwriters of blockbusters base their decisions on the ability to
pack in the public, rather than on artistic considerations.
In everyday usage the word ‘blockbuster’ is usually used in a derogatory
way, referring to a worthless film that restates something that has already
been seen. That is not completely off the mark, even though there is the risk
of underestimating the strategic complexity of the production and distribution
of these movies. First of all, blockbusters are born from US popular culture
and their target is the mass public, with few artistic-expressive expectations.
They are films which appeal to feelings and primary emotions, with characters and situations able to enthrall emotionally, whose stories give universal
messages. The narrative construction is usually simple, not highly innovative
or revolutionary in content and apolitical.
The second important characteristic of the blockbuster, besides its size, is
the promise of spectacularity (King, 2003; Stringer, 2003) – the promise of
showing something astonishing – that makes them ‘must-see’ films (as they
are often defined). They are films which try to surpass the previous one, to
offer a new visual experience with more and more spacecraft, fighting soldiers, cities in ruins (wow factor). The use of special effects tries to push forward the visible, displayable and imaginable boundary, and the trailer of the
film tries to enter into an agreement with the members of the public, asking
them to watch the film to see to what extent the film-makers have dared to
push their ability. It’s a promise of novelty dictated by conservatism, where
novelty means the use of technology because there is no advancement in the
themes, content and style. While films once used to win prestigious awards,
such as Academy Awards (The Bridge on the River Kwai, Ben-Hur, Lawrence
of Arabia), for their high quality in all aspects, the blockbuster’s quality now
seems to be confined to its technical merits.
This lack of innovation is due to economic considerations which are also
the reasons for the creation and continual production of these films. As mentioned above, a blockbuster is not thought of as an artistic product but as a
commercial one, meant to produce money and cover the expenses of those
films that have not reached the break-even point as well as those projects that
have been stopped during their development, pre-production or filming, thus
producing no income but only costs.2
This phenomenon is known as the ‘best-sellers’ market’ (Doyle, 2002), and
these films are called ‘tent poles’ (King, 2002) because, thanks to their takings,
Cucco, The promise is great
219
they are able to support the economy of an entire studio. It is reckoned that
only two out of ten movies can generate earnings at the end of their life-cycle
in the theatres. However, considering also minor and ancillary markets, this
number rises to five out of ten (Maltby, 1998). This confirms Vogel’s theory:
nowadays the cinema industry has to be able to sustain expenses that will only
be recovered in the long run and this favours the strongest companies on the
market (Vogel, 1998). Additionally, a blockbuster is a product of primary
importance for the conglomerate to which the production company is related.
It can also generate a merchandising business (books, TV programmes, gadgets, etc.) for the branches of the group. The economic importance of a blockbuster for its company means that the uncertainty of the film on the market has
to be minimized.
To avoid risks at the box office, the blockbuster has to appear to the public
with a simple, immediate, easily recognizable identity. The idea of ‘high concept’ presented by Justin Wyatt in his famous book, High Concept: Movies
and Marketing in Hollywood (1994), is closely connected to this point. The
expression ‘high concept’ appeared in the 1970s in the television sector to talk
about stories that had to be summed up in a 30-second advertisement. Later,
it was used with a very similar meaning by the film industry. According to
Wyatt, a high-concept film is a film that can be summarized in just one sentence or image, making its marketing easier.
‘High concept’ can be considered a cinematographic style that appeared in
Hollywood after the Second World War, showing considerable transformations in the classic pattern of films as a result of economic and institutional
changes (the advent and success of television in its different forms; the conglomerates; the changes in marketing and distribution strategies). This style
marked a turning point between 1950s blockbusters and modern ones, starting with the release of Jaws.
The identity of a high-concept movie is simple and easily communicable
since it is designed around the public’s taste and market research. Its fundamental features are the simplification of characters and narration, and a close
relationship between image and sound. As already explained, blockbusters
usually give more importance to special effects than to narration because the
former can intensify the spectacularity.
The additional element introduced with the high-concept theory is the importance of the image, not only as a spectacular attraction but also as the summary
of the film. For instance, Tom Cruise on the motorbike or wearing the American
Air Force uniform in Top Gun, or the playbill of Jaws which allows filmgoers
to anticipate the fear, the contrast between man and nature, the battle between
good and bad. The same is true for the poster of Independence Day, where a
spacecraft hangs over an American city and gives us the idea of an alien threat
(or of another, more general one), of freedom (the title is important in high
concept as well), of the unknown. If there is music too, then that also becomes
an instrument of identification and enhances the film’s appeal, making it work
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better. There are many examples of this: Indiana Jones, Armageddon and
Titanic. All these characteristics of a high-concept film show how the new cinematographic style that appeared in the mid-1970s is mainly focused on the
market and on easy penetration of both domestic and overseas markets. Even
though the identity of these films is simple and direct, this does not cancel out
the promise of spectacularity, and indeed helps to reduce the uncertainty of the
opening weekend.
There is one other frequent element that plays a role in this: the tendency to
produce sequels, prequels and remakes, and to take the subject from known
products, like novels, comics, TV series or plays. In this case we talk about
‘pre-sold identity’ as the subjects are stories or characters that the public already
know and are thus sure to guarantee a certain success for the film. While until
a few years ago it was reckoned that the second instalment took between 50 percent and 70 percent the takings of the original, and the third around 40 percent,
with only a few films bucking this trend (The Godfather Part II, Terminator II),
the numbers registered at the beginning of 2000 seem to reverse these statistics.
The sequels of Harry Potter, The Lord of the Rings, Shrek, Spider-Man and The
Pirates of Caribbean are proving that serialization can generate increasing
earnings, and can create loyalty-building processes that reassure producers and
distributors about a film’s success. These are the best films to advertise, to
increase revenues over a few weeks, and in general to reduce the risks for the
studio that spent so much money on them. And, though their economic impact
is longer-lasting, stars can be considered a high-concept or pre-sold identity as
well; in fact, some names are automatically associated with certain genres.
A final economic feature of a blockbuster lies in its ability to supplement
the earnings from its audiovisual receipts with receipts from merchandising.
These revenues, which can start even before the film is released, are able to
enhance the value of a movie that performs badly at the box office, or simply
enhance its success.
The studio usually has the right to a commission of between 3 percent and
20 percent (Marich, 2005) of the sales. Obviously, not all movies are suitable
for merchandising (like war films) and not all successful films can transmit
their appeal to secondary markets. Furthermore, it is hard to calculate revenues both because of the numerous forms of merchandising (toys,
videogames, clothes, fancy goods …) and because of a general unwillingness
on the part of the majors to provide data about extra revenues.
In the light of the above, it is clear that a blockbuster is a commercial product, targeted at an international market. Media products are characterized by
two properties (artistic-cultural and economic), normally in a dialectical and
ambiguous relationship, but in the case of a blockbuster the latter is more
important. However, the prioritizing of the economic aspect does not diminish the importance and complexity of the blockbuster. As the high-concept
theory demonstrates, behind a simple idea communicated by a blockbuster,
there is a complex marketing strategy aimed at simplifying the message and
Cucco, The promise is great
221
its communication. The second part of this article looks into the blockbuster’s
distribution strategy over recent decades: the simultaneous release of a film in
a large number of theatres on the opening weekend. This strategy is one of the
instruments created to reduce the level of uncertainty for the opening. In addition, we can mention the choice of the release date, the cinematographic
transposition of successful novels/TV series/plays, participation in (or
absence from) festivals, etc. The choice of focusing on the theatre saturation
release strategy is because all the elements that are able to influence the economic performance of a film converge in it, and because use of this strategy,
and its transformation into common practice, represented a revolution in the
three stages of the film industry’s value chain.
The saturation booking strategy
From the origins of the film industry, the classical distribution strategy followed a hierarchical structure: first, the film came out in the most important
theatres in the main towns, then in the secondary ones (where the tickets were
cheaper), moving progressively from the biggest towns to country and suburban areas. This process could last up to a whole year. All this has been
changed by the introduction of new distribution channels and blockbusters:
the first showing increased in importance and running time, whereas the following cycles have been absorbed or eliminated by it.
The typical strategy used with a blockbuster is the saturation booking strategy: to screen a film in the largest number of cinemas during the opening
weekend. The reasons are many and are rooted in recent cinema history, especially in 1975 when Jaws taught the film industry three lessons: (a) the central
role of advertising in order to guarantee the success of the film; (b) television’s
capacity to advertise a film to viewers and make them want to see it; (c) the
importance of the opening weekend, considered to be the most critical moment
in the life-cycle of a product. As the producer Robert Evans put it, a film ‘is
like a parachute jump; if it doesn’t open, you are dead’ (in De Vany, 2004: 48).
The strategic role of the opening weekend
The maximization of revenues and of the number of opening weekend theatres
is a trend that is changing the economy of the cinema. Figures on this are striking. The 65 best box office films on the opening weekend3 shows a predominance of films produced since 2000: 59 compared to 6 from the 1990s (The
Lost World: Jurassic Park, is the first of these, holding 24th position).
The list of films with the widest release on the opening weekend confirms
what has already been said.4 In this case, the conclusions are even more
extreme. The first 137 movies on the list were produced after 2000. The first
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Media, Culture & Society 31(2)
FIGURE 1
Widest release on the opening weekend per year (1980–2007)
Pirates of Caribbean 3
Shrek 2
Madagascar
Pirates of the Caribbean
X-Men 2
Shrek
Spider-Man
Mission: Impossible II
Godzilla
The Mummy
The Lost World : Jurassic…
Batman Forever
Mission: Impossible
Star Trek: Generations
Batman Returns
The Addams Family
Another 48Hrs
Teenage Mutant Ninja…
Ghostbusters II
Mr Crocodile Dundee II
Cobra
Beverly Hills Cop II
Rocky IV
Beverly Hills Cop
ET
Superman III
Superman II
The Empire Strikes Back
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07
Source: Author’s processing of Box Office Mojo data
movie from the previous decade is Wild Wild West (138th). Moreover, four out
of the first ten films were distributed in 2007 (Pirates of the Caribbean: At
World’s End, Harry Potter and the Order of the Phoenix, Spider-Man 3, Shrek
the Third), in first, second, third and eighth place.
Considering the widest released movies every year between 1980 and
2007, it is clear that the number of screens on the opening weekend has more
than tripled, increasing from 1268 (The Empire Strikes Back) to 4362 (Pirates
of Caribbean: At World’s End) (see Figure 1).
The majors focus their efforts and economy on the opening weekend for
many interconnected reasons. A detailed analysis of each reason is given below.
To concentrate advertising costs and optimize effects
The use of television to promote films has caused a rise in marketing costs,
making it impossible for a film to take a year to reach every cinema (first, second and third run) throughout the country as it used to. In the case of a blockbuster, 80 percent of the advertising investment is spent in the week before the
release of the film in the theatres (Vogel, 1998). Moreover, films are screened
in the largest number of theatres during the first weeks. In this way the
demand and curiosity created by the advertising campaign are satisfied in the
shortest possible time and when they are at their height.
Cucco, The promise is great
223
Young people above all are influenced by advertising and are also the
blockbuster’s preferred target. In fact, if they are interested in a film they are
likely to go and see it immediately while adults usually wait for some weeks
and go to the cinema only after reading or hearing good reviews. In any case,
demand is at its height during the opening weekend so the distributor has to
guarantee a vast coverage of the domestic market in order to let the film reach
every filmgoer before interest in the film wanes.
Analysis of the revenue of films that took in most during the opening weekend clearly shows that after the first week the revenue curve starts to dip, usually dropping by 40 percent compared to the first week.
Analysis of the costs of the majors affiliated with the MPAA between 1985
and 2005 shows that marketing costs have increased more than production
costs (+104.5 percent compared to +64.8 percent; see Table 2). This demonstrates that the new distribution strategies increased the concentration of
advertising in that period but did not reduce it in terms of quantity.
To avoid a qualitative debate
The movie is considered an experiential commodity: it is impossible to know
its quality and benefit before its consumption. This characteristic makes viewers careful: they wait for their friends’ opinions or for a qualitative index
(reviews, awards, receipts) before deciding whether to go to the theatre or not.
The expectation of quality can be a risk as far as revenues are concerned, especially when speaking about blockbusters. This is why these films have been
widely released on the opening weekend for almost 30 years now. By showing
the film in many theatres at the same time, the number of people who watch a
movie without reading reviews or hearing opinions beforehand increases. As
De Vany put it, these movies depend on the so-called ‘uninformative information cascade’. Moreover, they are usually defined hit and run as they earn a lot
of money when they come out in theatres but disappear from programming in
a few weeks. According to De Vany (2004), this distribution strategy makes
spectators go to watch a movie because they are influenced by advertisements
or because they want to emulate other people’s behaviour. There is no exchange
of information on the product’s quality because neither the critics nor the spectators have seen the movie beforehand. The effect does not last long. The cascade becomes informative when people start to talk about the movie; that is
when word-of-mouth begins. And the takings may also fall (De Vany, 2004).
Blockbusters rely on this strategy for two reasons: their budget is so high
that they cannot risk word-of-mouth advertising. Second, they are the movies
that are least loved by the critics, and those most likely to be attacked on the
grounds of their quality. So it is a distributor’s business to anticipate negative
opinions as to the quality of the movie and to encourage emulative behaviour
where box-office data turn into an important index of movies that are worth
77,073,388
$130
$150
$125
$100
$200
$110
$30
$115
***
$150
$125
UK/USA
USA
UK/USA
UK/USA/D
USA
USA
USA
USA
USA
UK/USA
Source: Author’s processing of Box Office Mojo data
USA
88,156,227
85,558,731
83,848,082
80,027,814
77,211,321
77,108,414
$258
$225
$160
$139
$300
$113
$70
$210
$150
USA
USA
USA
USA
USA
USA
USA
USA
UK/USA
Spider-Man 3
Pirates of Caribbean 2
Shrek the Third
Spider-Man
Pirates of Caribbean 3
Star Wars: Episode III
Shrek 2
X-Men: The Last Stand
Harry Potter and the
Goblet of Fire
Harry Potter and the
Prisoner of Azkaban
The Matrix Reloaded
Harry Potter and the
Sorcerer’s Stone
Harry Potter and the
Chamber of Secrets
Spider-Man 2
X2: X-Men United
The Passion of the Christ
Star Wars: Episode II
I Am Legend
Harry Potter and the
Order of the Phoenix
The Da Vinci Code
88,357,488
91,774,413
90,294,621
93,687,367
151,116,516
135,634,554
121,629,270
114,844,116
114,732,820
108,435,841
108,037,878
102,750,665
102,685,961
Negative costs
Nation
Title
Box office
in the opening
weekend
35.4%
23.6%
39.8%
22.6%
26.5%
***
26.4%
33.7%
32.6%
28.4%
37.5%
44.9%
32.0%
37.7%
28.4%
37.1%
28.5%
24.5%
43.8%
35.4%
% total box
office in the
opening weekend
TABLE 1
Biggest all-time box office on the opening weekend (US$ millions)
13
22
21
22
24
***
22
24
26
/
25
16
22
12
15
19
22
21
18
20
Weeks in
movie theatres
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Media, Culture & Society 31(2)
Cucco, The promise is great
225
seeing. In this way quality becomes irrelevant (Lewis, 2003) and is no longer
an economic threat.
While reviews are not a particularly serious threat, because some studies have
demonstrated that their effects on revenues are fairly limited (Eliashberg and
Shugan, 1997) and that they are directed at adults who are not the blockbuster’s
main target, word-of-mouth is a different matter. The danger of this lies in its
unpredictability and ungovernability. These are elements which contrast with
Hollywood politics, devoted to minimizing factors of uncertainty that may jeopardize the performance of a movie. In the last ten years the relationship between
majors and word-of-mouth has become increasingly complicated because of the
diffusion of forums, blogs and chat-rooms. This trend has increased the free
exchange of opinions that inevitably touches the cinematographic sector. Just a
short time (even only a few hours) after a film is screened, comments and
reviews are available on the internet. This lets the distributor know the viewers’
first reactions, and he can consequently modify the communication campaign, if
necessary. However, he can also decide to join the argument, to turn it around
and pull potential movie-goers to the cinema. For instance, The Da Vinci Code
devised a clever policy to accentuate (and limit) the debate surrounding the film.
Sony’s marketing office called in theology experts for an online debate on the
book and film. It was allegedly a website for the free exchange of thoughts about
the film but in actual fact it was run by Sony’s marketing office.
To maximize the cost of transfer rights
Movie theatres have always played a central role in the cinema’s economy
and their importance has grown with the advent of television and related secondary markets. Their irreplaceable function continues despite some difficulties: the fact that home video receipts surpassed box-office revenues starting
in the mid-1980s (Wasser, 2008); and the growing phenomenon of online
piracy, able to anticipate films, which has made some experts sceptical that
traditional distribution of films will continue to exist in the future. Moreover,
the selling price to the secondary distribution channels depends on box-office
receipts in the first weeks. The bigger the success of the first night, the higher
the price in secondary markets. Movies that manage to maximize their presence at the beginning of the life-cycle, like the ones released with the saturation booking strategy, will command the highest prices.
The same price mechanism is sometimes used in the transfer of cinematographic rights to foreign markets.
To maximize the star and pre-sold identity effect
Often the most expensive budget item in a production is a famous star in the
cast. Some recent data (Hollywood Reporter, November 2006) revealed the
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Media, Culture & Society 31(2)
highest fees paid to actors: the male record is held by Jim Carrey with $25
million while Nicole Kidman holds the female record with $17 million. The
figures are very high, especially if compared to the average production costs
of a major film ($65.8 million in 2006). Creative resources have always been
the most expensive. In fact, they can add something extra that gives artistic
value to the movie. However, from an economic point of view, the star has
two fundamental functions: to guarantee the movie access to the market and
guarantee that the public will be attracted to the cinema. This is possible
because stars have turned into brand products (Bakker, 2005), able to take
advantage of their fame with the public. Still, the star component has a big
limit: its power to attract ends after the opening weekend.
After the first screening, when the qualitative characteristics of the movie are
uncovered, the economic performance of the film in theatres and secondary
markets becomes more precarious, laying the future life-cycle of the film on the
line. In order to avoid such a risk, distributors have chosen to concentrate consumption on the opening weekend, maximizing the star-effect at the box office.
The pre-sold identity effect can attract viewers to the theatres as well. The
pre-sold identity concept is extremely wide-ranging so we will only consider
the phenomena of sequel, prequel and remake. Of the 65 movies that earned
most on the opening weekend, there are 29 sequels, 3 prequels and 3 remakes,
for a total of 35 titles. Also considering the movies that have had the widest
release each year since 1980 (Figure 1) sequels, prequels or remakes are
numerous (19 out of 26 movies) and represent the key moments in the growth
of the wide-release approach. There are many advantages to producing presold identity movies. First of all, they are not completely new products as
there has been a precedent that has made some characters familiar to the public. When the decision to produce such a film is taken, it means that the first
instalment was a success and it is likely to be seen by a part of the same public. From a point of view of production costs, the screenplay costs of sequels
can be reduced by 25 percent (Perretti and Negro, 2003) because settings,
costumes and equipment can be salvaged from the previous instalments. One
budget item that could increase is actors’ fees, because they can ask for a rise
or a percentage of the takings due to the success of the earlier films or their
own irreplaceability on the set.
To reduce the danger of competition
In such a precarious system, where only a few movies support the economy
of an entire studio, it is unthinkable that the most important movies of the season’s production should come out on the same day as a competitor’s major
movie. Sharing the audience would damage both studios. This is why distribution majors have always reached an agreement on the release of their most
important movies. It is a matter of agreement between sister companies that
Cucco, The promise is great
227
TABLE 2
Negative and marketing costs 1985–2005 (US$ millions)
1985 1995 Variation 2005 Variation Variation 1985–2005
Negative costs $16.8 $36.4
Marketing costs $6.5 $17.7
116.6%
172.3%
$60
$36.2
64.8%
104.5%
275.1%
456.9%
Source: Author’s processing of MPAA data
has the advantage of consolidating the oligopoly within the sector and of raising barriers for possible competitors who cannot afford the advertising costs
and the costs for copies needed to launch the movie on a wide scale. These
costs are only within the reach of a major. So, during its opening weekend,
the major movie is the subject of public and media attention and it does not
have to share this attention with others. However, this attention will fall off
the next weekend, moving to other productions. In fact, it is important to
know that the favourite period for the release of blockbusters starts on
Memorial Day weekend (28 May) and ends on Labor Day (the first Monday
of September). In other words, blockbusters tend to come out in summer
when the networks’ competition is weaker, people are more willing to go out
and youngsters have more spare time. However, this period has to be shared
with competitors so it is reckoned that a blockbuster usually only has two
weekends to maximize its income; also because in August people are more
likely to go on holiday somewhere. Opening at the beginning of summer is
also functional in relation to film sales on the DVD market: as a matter of fact,
if a movie comes out around June–July, it will be available in shops for
Christmas when DVD sales are at their peak.
To exploit the potential of multiplex cinemas
The life-cycle of a movie has been shortened by the wide opening weekend
release pattern and by the concentration of advertising in the weeks immediately before the first screening. In fact, now a movie takes six to eight weeks
to spread all over the country, while before it used to take almost a year.
Considering again the list of movies that earned most during their opening
weekend, their average run in movie theatres is 20 weeks (see Table 1).
These data confirm the logic of the windowing system: in the United States
a movie is available on the home video market six months after it opens in the
theatres. The explanation for this phenomenon is the development of multiplex
cinemas that allow perfect management of the movie during its life-cycle.
When a film begins to lose viewers, it can be progressively moved to smaller
theatres, keeping the movie in the portfolio and rationalizing the use of the
spaces in relation to demand. It is difficult to establish whether this strategy is
a cause or a consequence of the choice of concentrating takings on the first
228
Media, Culture & Society 31(2)
weekend; however, multiplex cinemas appeared before the development of this
distribution strategy. Consequently, it is possible that distributors have found
in these new cinemas a tool suited to their purpose.
To maximize distributors’ receipts
Distributors and exhibitors share the takings according to percentages that
change over the weeks. During the first two weeks of screening, the percentage due to the distributor is usually 90 percent but falls to 70 percent and to
lower percentages over the following weeks. So the concentration of revenue
on the first weekend brings a higher remuneration for the distributor.
Conclusions
For the last 30 years, the blockbuster has been denoted by measures that simplify its communication and marketing. Moreover, the blockbuster manages
to propose a kind of film where the promise of novelty and greatness lies in
the use of advanced technology able to offer exciting special effects; in this
way the risks linked to original and against-the-mainstream choices, and to
pioneering decisions, have been avoided. It is a simple and clear promise
which is always kept. Proof of this is the high receipts of each new blockbuster on secondary markets. However, release processes are extremely complex and are aimed at minimizing the uncertainty of the first night of
screening. During this study we discovered that maximization of the theatres
on the opening weekend is the best tool to reach this goal, as it allows: (a)
concentration of advertising costs and maximization of effects; (b) avoidance
of a debate over quality; (c) maximization of transfer rights costs; (d) maximization of the star-effect and pre-sold identity; (e) reduction of the danger of
competition; (f) use of the potential of multiplex cinemas; (g) maximization
of distributors’ revenues.
This strategy, which has now become common practice, has introduced
radical changes into the three stages of the film industry’s chain of value. In
production, movies based on known stories and characters (with a pre-sold
identity) have increased. In distribution, the opening weekend has become the
central moment of the life-cycle: the movie theatre is crucial to test people’s
reactions and establish the commercial value of the film in terms of economic
performance and transfer of rights. Finally, the practice is characterized by
publicity that invades the cinemas at the beginning and then disappears in a
few weeks, leaving space for new big productions of competitors. The shortening of the life-cycle of blockbusters in the theatres and the diffusion of multiplexes guarantee exhibitors a wide slate. Still, this tendency to maximize the
audience on the opening weekend hinders exhibitors as regards contracts, but
Cucco, The promise is great
229
favours the distributor, who is the leading player in the film industry, both
strategically and economically.
Notes
1. The word ‘blockbuster’ is often used also in the presence of just one of these two
characteristics: very expensive but unsuccessful movies, or cheaper but successful
ones. Given that in the latter case a movie can be defined as a blockbuster only after
having seen the takings, in this study the word ‘blockbuster’ will be used only in the
presence of the two features together (high costs and revenues), or only the former one
(total investments) because, without considering market performance, the producer’s
intention to make a blockbuster holds steady.
2. It is estimated that each year a major production company receives about 10,000
proposals of subjects, novels and screenplays to be made into films. But only between
70 and 100 of them enter the development phase and only 12 or 15 will turn into
movies. The revenues from these films will also contribute to recovering the development costs of projects that have been interrupted (Dale, 1997).
3. List taken from www.boxofficemojo.com (consulted April 2008).
4. List taken from www.boxofficemojo.com (consulted April 2008).
References
Bakker, G. (2005) ‘Stars and Stories: How Films became Branded Products’,
pp. 48–85 in J. Sedgwick and M. Pokorny (eds) An Economic History of Film.
London: Routledge.
Dale, M. (1997) The Movie Game: The Film Business in Britain, Europe and
America. London: British Library.
De Vany, A. (2004) Hollywood Economics: How Extreme Uncertainty Shapes the
Film Industry. London: Routledge.
Doyle, G. (2002) Understanding Media Economics. London: SAGE.
Eliashberg, J. and S.M. Shugan (1997) ‘Film Critics: Influencers or Predictors?’,
Journal of Marketing 61(2): 68–78.
Gomery, D. (1992) Shared Pleasures: A History of Movie Presentation in the United
States. Madison, WI: University of Wisconsin Press.
Gomery, D. (1998) ‘Hollywood Corporate Business Practice and Periodizing
Contemporary Film History’, pp. 47–57 in S. Neale and M. Smith (eds)
Contemporary Hollywood Cinema. London: Routledge.
Grant, P.S. and C. Wood (2004) Blockbusters and Trade Wars: Popular Culture in a
Globalized World. Vancouver: Douglas and McInytre.
King, G. (2002) New Hollywood Cinema: An Introduction. London: I.B. Tauris.
King, J. (2003) ‘Spectacle, Narrative, and Spectacular Hollywood Blockbuster’,
pp. 114–27 in J. Stringer (ed.) Movie Blockbuster. London: Routledge.
Lewis, J. (2003) ‘Following the Money in America’s Sunniest Company Town: Some
Notes on the Political Economy of the Hollywood Blockbuster’, pp. 61–71 in
J. Stringer (eds) Movie Blockbuster. London: Routledge.
Maltby, R. (1998) ‘Nobody Knows Everything: Post-classical Historiographies and
Consolidated Entertainment’, pp. 21–44 in S. Neale and M. Smith (eds)
Contemporary Hollywood Cinema. London: Routledge.
Marich, R. (2005) Marketing to Moviegoers: A Handbook of Strategies Used by
Major Studios and Independents. Burlingtom: Focal Press.
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Neale, S. (2003) ‘Hollywood Blockbusters: Historical Dimension’, pp. 47–60 in
J. Stringer (eds) Movie Blockbuster. London: Routledge.
Perretti, F. and G. Negro (2003) Economia del cinema. Milan: Etas.
Schatz, T. (2003) ‘The New Hollywood’, pp. 15–44 in J. Stringer (ed.) Movie
Blockbuster. London: Routledge.
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London: Routledge.
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Analysis, 4th edn. Cambridge: Cambridge University Press.
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Industry. Oxford: Blackwell.
Wyatt, J. (1994) High Concept: Movies and Marketing in Hollywood. Austin, TX:
University of Texas Press.
Marco Cucco is completing a PhD thesis on the political economy of cinema
at the Faculty of Communication Sciences of the University of Lugano, where
he works as a teaching assistant. He also coordinates a Masters in Media
Management. Address: Faculty of Communication Sciences, University of
Lugano, Via Giuseppe Buffi 13, 6904 Lugano, Switzerland. [email:
marco.cucco@lu.unisi.ch]
The Media Economy
Second Edition
Alan B. Albarran
This edition published 2017
by Routledge
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© 2017 Taylor & Francis
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registered trademarks, and are used only for identification and explanation
without intent to infringe.
First edition published by Routledge 2010
Library of Congress Cataloging in Publication Data
Names: Albarran, Alan B., author.
Title: The media economy / Alan B. Albarran.
Description: Second edition. | Abingdon, Oxon ; New York, NY :
Routledge, 2017. | Series: Media management and economics series |
Includes bibliographical references.
Identifiers: LCCN 2016009856| ISBN 9781138886094 (hardback) |
ISBN 9781138886087 (pbk.) | ISBN 9781315715094 (ebk.)
Subjects: LCSH: Mass media—Economic aspects.
Classification: LCC P96.E25 A483 2017 | DDC 338.4/730223—dc23
LC record available at https://lccn.loc.gov/2016009856
ISBN: 978-1-138-88609-4 (hbk)
ISBN: 978-1-138-88608-7 (pbk)
ISBN: 978-1-315-71509-4 (ebk)
Typeset in Sabon Std
by Swales & Willis Ltd, Exeter, Devon, UK
CHAPTER 4
Evolving Markets in the Media Economy
In this chapter you will learn:
• how to define a market in the media economy;
• traditional approaches used to define media markets, including
the theory of the firm;
• why media markets are constantly evolving across all levels of
the media economy;
• the different forces impacting markets found in the media economy.
Building on the previous chapters regarding economic theories and concepts used in understanding the media economy, this chapter focuses on
defining the market itself, and how markets are continuing to evolve
across the media economy in the 21st century. The classical definition
of a “market” in economic terms refers to the location where suppliers
and buyers interact to determine the price of goods. Picture this type of
activity held centuries ago, when merchants and farmers would bring
their goods for sale to a town marketplace and would negotiate with
potential buyers wanting to purchase goods in a physical, face-to-face
environment.
Today this type of market activity still exists through venues like the
commodity and financial exchanges on Wall Street and other economic
centers around the globe, but there are also countless market activities
occurring in many different locations, at many different times and places
across business and industry. The market in the media economy is the
aggregate of many supply and demand situations involving advertising, content, technology, and other media-related firms. In the media
economy, market activity takes place from business to business, between
consumers and business, and even from consumers to consumers
52
EVOLVING MARKETS IN THE MEDIA ECONOMY
(see Table 4.1). Transactions and market acquisitions can occur in physical
settings or via cyberspace with digital-based transactions (e-commerce).
DEFINING THE MEDIA MARKET
Traditionally, the field of media economics has defined a media market
as consisting of both a product dimension and a geographical dimension (Picard, 1989). The product could be a newspaper, motion picture,
sound recording, television program, podcast, or any other media-related
product. The geographical dimension reflects the location where the
products are offered, which can range from a local media product (e.g.,
a newspaper, or broadcast of a local radio or TV station) to the national
or the global market for media products (e.g., movies, network television
programs, and sound recordings).
According to Picard (1989), a unique aspect of the media industries
is the ability to offer the product in two separate but related markets:
typically the market for audiences and the market for advertisers. This is
referred to as the “dual” product market. Not every industry is engaged
in the sale of advertising, but most media products are advertisersupported (see Table 4.2). Yet another unique trait of the media economy
is the ability to reuse media products over and over, and to sell them to
different audiences and different advertisers. This repurposing of media
products has been enhanced by the development of digitally based content, which has made products more accessible but also more prone to
piracy and theft.
Table 4.1 Examples of Market Activity in the Media Economy
TYPE OF MARKET
EXAMPLES OF MARKET ACTIVITY
Business to Business (B2B)
Advertising in traditional and online
media, mergers and acquisitions, direct
investment, credit, partnerships, joint
ventures
Purchase of any content (books, music,
magazines, newspapers, movie tickets,
applications, etc.) either as subscriptions,
single copies, or individual use; any area
that involves direct consumer purchases
from a media company
eBay, Amazon consumer storefronts,
Craigslist, social networks
Business to Consumer (B2C)
Consumer to Consumer (C2C)
Source: Compiled by author.
EVOLVING MARKETS IN THE MEDIA ECONOMY
Table 4.2 Examples of Advertiser-Supported Media Products
MEDIUM
PRODUCTS
Electronic media
Broadcast radio and television stations
and networks; syndicated programs; cable,
satellite, and IPTV subscriptions
Newspapers; magazines
Product placement; merchandise tie-ins
Search; display advertising; insertial
advertising; social advertising
Streaming video; messaging; smartphones;
social networks; podcasts
Print
Motion pictures
Internet
New media/digital platforms
Source: Compiled by author.
TRADITIONAL APPROACHES TO DEFINING THE MARKET
While economists, financial analysts, scholars, and students have an
interest in defining media markets, regulators and policymakers also play
an important role in how markets are defined, as they want to promote
competition and limit anti-competitive behavior. This is typically a public
policy goal in countries operating with a mixed economy. By establishing regulatory guidelines, policymakers seek to maximize a competitive
market system whereby consumers benefit (i.e., favorable social policy)
and concentration is limited.
Historically, media markets have been defined by analyzing the specific product and geographical dimensions, assessing trends and patterns,
and determining the extent of market competition and concentration.
Such an analysis also enabled the field to identify media markets according to their market structure—a theorized construct defining market
activity primarily along a continuum ranging from a monopoly to perfect
competition, sometimes referred to as “the theory of the firm” (Gomery,
1989). Let’s briefly define these labels for markets:
• Monopoly. A monopoly occurs when there is only one seller
of a product. It is assumed there is no close substitute for the
product. The monopolist sets the price in the market since there
are no competitors.
• Duopoly. A duopoly simply means there are two competitors
in the market space, and the firms split the market. Pricing is
relatively similar and is set by the firms. Duopoly firms are very
interdependent, meaning the actions of one firm impact the
other firm.
53
54
EVOLVING MARKETS IN THE MEDIA ECONOMY
• Oligopoly. An oligopoly consists of a small number of sellers
that dominate the market, typically between three and ten
competitors. Products tend to be homogeneous, and pricing is set
by the leader and other firms follow suit, but usually there are not
huge variances in pricing. In an oligopoly, firms are considered
interdependent or related to one another in terms of business
practices and market behavior, as each firm controls a defined
share of the market, and each firm wants to hold on to its share.
• Monopolistic competition. In this type of structure there are
many sellers or suppliers of products that are similar, but not
ideal substitutes for one another. In a monopolistic competition
structure, the firms engage in product differentiation to slightly
distinguish their products from one another. Because of
stronger competition in this type of structure, price is set by a
combination of market forces and the firms themselves.
• Perfect competition. Here there are numerous suppliers offering
the same product, one of which is easily substituted for another.
No single seller has influence over another; therefore the market
sets the price.
Figure 4.1 illustrates how the primary media industries would be
aligned along a continuum of market structure labels. The problem with
this approach is that the media industries are constantly redefining
themselves, making it challenging to categorize a media industry into
a single market structure. Monopolistic markets have tended to decline
due to a combination of technological, regulatory, and globalization
forces (all discussed in more detail in later chapters). With the exception of websites, there are no examples of perfect competition across the
media economy.
Another challenge with this approach to market structure is that the
focus is only on the internal market, or what is referred to as withinindustry activity (Albarran & Dimmick, 1996). If we apply a strict definition,
Figure 4.1 Media Industries Representing Traditional Market Structure
Source: Author’s compilation.
EVOLVING MARKETS IN THE MEDIA ECONOMY
such as English-language broadcast network TV in the US, this market consists of only a few firms: ABC, CBS, NBC, Fox, CW, and MyTV. This
approach would be fine if these firms participated only in the single
broadcast network television market, but we know they are engaged in
distributing content across platforms other than just broadcast. In fact,
most media firms seek to maximize their market share horizontally, or
across industries.
Media companies now participate in several markets simultaneously.
For example, the Walt Disney Company, known simply as Disney to
most consumers, is one of the largest media companies in the world,
led by Robert Iger, its chief executive officer. Figure 4.2 depicts the
major segments or markets in which Disney is engaged. And, within
these individual markets, the company is engaged in a number of other
sub-markets.
In the media networks segment (illustrated in Figure 4.3), the company lists ownership of two major divisions: the Disney/ABC Television
Group, and the ESPN Group. Within the Disney/ABC division are the
ABC TV network (including the owned and operated broadcast stations),
ABC Family, and Disney Channels Worldwide, which handles international distribution of the many Disney content products. The ESPN
division consists of the ESPN channels: ESPN, ESPN2, ESPNU, ESPN
News, and ESPN Classic. Even within these divisions there are additional
smaller segments, such as Disney’s radio ownership, its equity interests
in Hulu, and the A&E Television network. Further, the ESPN division
has the ESPN radio network, the ESPN magazine, and a host of digitalrelated platforms and apps geared around ESPN.
Clearly, the media networks segment for Disney is much more than
just “networks.” So how can we define the specific market the company is engaged in, when in fact Disney is engaged in multiple markets?
Further, how could regulators begin to define what market or markets
Disney should be assigned?
Figure 4.2 Walt Disney Company Market Segments (2015)
Source: The Walt Disney Company (n.d.-a).
55
56
EVOLVING MARKETS IN THE MEDIA ECONOMY
Figure 4.3 Breakdown of Disney Media Networks Segment
Source: The Walt Disney Company (n.d.-b).
Labelling markets using the terms monopoly, oligopoly, monopolistic competition, and perfect competition served the field of media
economics well for its first 50 years of inquiry (circa 1948–1998), but
these terms now offer little utility. In today’s media economy these
labels no longer reflect the full range of market activities undertaken
by media firms, especially those that own a portfolio of media-related
brands and products. What is needed is a better way to define media
markets.
EVOLVING MARKETS IN THE MEDIA ECONOMY
In reality, what has happened is that many media markets have evolved
to represent a more common structure, especially in those countries
where the media industries have become concentrated. A hybrid type
of market structure now exists, combining elements of an oligopoly
market with a monopolistic competitive structure. In this type of
structure, there are the leading firms that usually control as much
as 80% of the market, and a group of smaller firms fighting for the
remaining share. We find this structure present in markets like motion
pictures, sound recordings, network television, and book publishing,
to mention a few.
Albarran and Dimmick (1996) were among the first to recognize
this evolving structure. A follow-up study (Albarran, 2003) found that
most media markets in the US were highly concentrated, and the media
EVOLVING MARKETS IN THE MEDIA ECONOMY
and communications sector as a whole was very concentrated. Sheth and
Sisodia (2002) also describe this same type of structure in their analysis
of markets and industries using what the authors describe as “the rule of
three.” The rule of three posits that, in any industry, there are three leaders who dominate market share, and the remaining firms compete for the
remainder of the market. In essence, Sheth and Sisodia (2002) describe a
hybrid structure as depicted in Figure 4.4.
Still another way to look at media markets would be to identify
them by their core function rather than by focusing on the name of the
medium. For decades, media economists have described a media value
chain (see Figure 4.5) that could serve as a starting point for such an
analysis. The terms content and distribution are particularly relevant. For
example, content can be broken down as needed into specific areas such
as film and television content, audio (music) content, publishing, and
user-generated content. Likewise, distribution can be broken down, considering such areas as broadcasting (networks, stations), pay television
(cable, satellite, IPTV), or streaming (services such as Netflix, Amazon
Prime Video, and Hulu).
We have seen new markets emerge that intersect with the media
industries that may not necessarily involve core functions like content
creation or distribution, but are nevertheless important in understanding
how markets have evolved and are interrelated. Here are a few examples of these new markets whose functions intersect with the activities of
many media companies:
Figure 4.4 Hybrid Market Structure
Source: Author’s rendition. In this example, the top three firms forming the oligopoly side of the hybrid market
control about 80% of the market. All of the other firms, symbolized by the four smaller columns,
compete for the remaining 20% share of the market in the monopolistic competition segment of the
market.
57
58
EVOLVING MARKETS IN THE MEDIA ECONOMY
Figure 4.5 Traditional Media Value Chain
Source: Author’s rendition.
• Search. This is the primary activity that takes place when a
person connects to the Internet. Users go to the Internet for a
variety of motivations, but we know that seeking information
is one of the primary uses. An entire industry has developed
around “search,” led by market leaders Google, Yahoo!, and
Microsoft’s Bing. Most of the advertising spent online is invested
in the “search” arena. These search functions often intersect with
media companies and media content, identifying potential links
to images, video, and audio files.
• Social networking. Social networking is another area where
market lines are blurred. Social media websites like Facebook,
Instagram, Pinterest, LinkedIn, and Twitter have been successful
at building huge audience bases, and allow the user to share
information with their own network of contacts and friends, and
to expand their network through access to their friends’ networks.
While business and industry were initially slow to recognize
the potential of social networking, it is now a critical strategic
component for every type of business enterprise (see Albarran,
2013; Li & Bernoff, 2008; Shirky, 2008). Most companies
operating in the media economy already have a presence across
numerous social networks, aimed at connecting users, building
brands, and collecting feedback on their products and services.
• User-generated content. Websites like YouTube, Vimeo, Vine,
Wikipedia, Craigslist, Pinterest, Instagram, and literally millions
of blogs allow users to share content with their friends and social
networks, regardless of whether they created the content or it
was inspired by another source. The traditional media industries
initially fought against video services like YouTube, arguing that
the site infringed on their copyrights by using programs without
the owner’s permission. By 2009, many media companies had
reached settlements with the company. Recognizing YouTube’s
EVOLVING MARKETS IN THE MEDIA ECONOMY
unique success (see Burgess & Green, 2009), many media
companies negotiated rights for access to their content,
realizing the site offered opportunities to reach new audience
members and extend their reach.
Wikipedia and other “wiki” sites allow audience members to create
new content in the form of online encyclopedia entries, and also edit and
enhance existing entries (Tapscott & Williams, 2008). Wikis promote collaboration among users and, while users can post inaccurate or even bogus
information, wikis continue to grow in terms of popularity and utility.
New markets have also emerged related to technology in the form
of hardware which serves as both a reception technology and a content
playback device. Here are a few of the more promising hardware markets
that now vie for the time and attention of audiences and consumers:
• Smartphones. Smartphones continue to be updated and widely
adopted on a global basis. Smartphones are really handheld
computers that provide connectivity for mobile users. Apple,
Samsung, Huawaei, and Xiaomi are among the global leaders.
Smartphones integrate many tools for the user and thousands
of applications for every topic imaginable. Today every media
company has a mobile strategy, and recognizes this is another
evolving market in which firms must be active in order to engage
audiences.
• Tablets. Next to smartphones, tablets have become another
important mobile device, allowing users to connect to the
Internet, to read, watch movies and TV programs, play games,
and use applications to serve their individual needs. For many
consumers tablets are becoming an alternative to a laptop
computer. Apple, Amazon, Dell, Samsung, and other vendors
compete in the tablet market. Tablet sales have fallen, in part
due to the larger smartphones or “phablets” that have emerged
as alternatives to a tablet.
• Video game consoles. Video game consoles, which initially only
played games, have evolved into devices that blend content and
distribution functions. The market remains dominated by three
players (Sony, Nintendo, and Microsoft), and the consoles are
constantly being redesigned to offer new features and options for
users. Video game consoles will continue to add features as new
models are introduced, giving media companies another path to
consumers, and consumers another path to the Internet.
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OTHER FORCES IMPACTING MARKETS
While markets are transforming across the media economy, it is not just
internal forces that are causing markets to evolve. Markets are also continually impacted by external forces. Among these forces are economic
conditions, technology, globalization, regulation, social aspects, access to
capital, and the labor market. While these topics were briefly introduced
in Chapter 1, here we focus on how these forces impact markets across
the media economy. Several of these forces will be expanded on later in
individual chapters, providing more context and detail.
Economic Conditions
Economic conditions refer to the environment in which the markets are
operating at any given time. Typically, economies move throughout various stages identified as recession, expansion, and stability. In a recession,
economic activity curtails; this can range from a minor or short-term
recession lasting just a few months to a longer-term situation displaying
depression-like characteristics (unemployment in excess of 30%, significant reduction in GDP, high inflation, etc.). Recessions can occur for
many reasons. In the United States, the depression that hit in 1929 was
the result of instability in the financial markets, resulting in a huge loss
for the stock market and many businesses and banks failing. In 2008 the
US would enter into the second-worst economic recession in history as
the stock market lost nearly 60% of its value, also owing to problems
in the financial sector. In Mexico and many Latin American countries,
recessions have been caused by the devaluation of the local currency
by the local governments in an effort to prevent runaway inflation and
a total economic collapse. Japan, which represents one of the world’s
largest GDPs, came close to a financial collapse during the early 1990s.
Since 2010, we have seen several European countries struggle with recessions and servicing debt. Greece has been the most challenged, eventually
facing the prospect of exiting from the Eurozone in 2015 until a compromise was worked out with the European Central Bank (ECB) and the
International Monetary Fund (IMF).
A recession is particularly hard for markets operating in the media
economy. Job losses usually happen first, causing people without work to
restrict discretionary spending. This in turn impacts businesses, as their
sales suffer. Advertising typically contracts in a downward economic
cycle, as businesses try to cut expenses and boost revenues. As advertising declines, this results in many media enterprises being forced to cut
costs. This will lead media companies to eliminate jobs as well. Markets
also experience declines in capital expenditures (discussed in Chapter 10)
EVOLVING MARKETS IN THE MEDIA ECONOMY
and other expenses, resulting in slower economic activity and furthering
a recessionary environment. A severe recession means consumers may cut
discretionary spending involving media products (e.g., subscriptions to
cable or satellite, direct purchases, rentals).
History tells us that the downward cycle will at some point hit bottom and eventually begin an upward movement as the economy starts to
grow once again. As the movement picks up momentum and accelerates,
this part of the cycle is referred to as an expansion of an economy. In an
expansion everything seems to move perfectly in sync: capital is flush;
companies are investing in capital expenditures, technology, and personnel; jobs are plentiful; competition is strong; interest rates are usually
low; and economic indicators such as GDP show growth and potential
for further expansion along with robust financial market activity.
Expansion in the media economy can be realized in several different
ways. Firms can expand either through mergers or acquisitions or via
internal investment in research and development and production of new
products and services. Mergers and acquisitions are likely to grow in
an expansion environment. Advertising, the primary source of revenues,
grows and is able to capture higher prices in negotiations for time and
space. Innovation is widespread, and consumers spend money on new
technologies, content products, digital platforms, and electronic commerce. An expansion varies in terms of size and time, meaning there is no
exact percentage of growth which signals an expansion, nor is there an
average time as to how long an expansion will last. When an expansion
follows a recession, it may or may not recapture all of the value and GDP
lost in that recession.
There are periods of time in the economic cycle when the markets
are neither expanding nor declining; this is referred to as stability. In a
stable market, “average” market activity takes over, thus replacing what
can seem like a frenetic cycle during an expansion. Markets are the first
to recognize when stability begins to happen, as revenues typically peak,
investment activity slows, and other economic indicators begin to flatten.
Stability can occur when markets are moving in a slow expansion, or
even towards a slow decline, without going into a full recession.
Media markets in a stable environment experience advertising inventory and prices for advertising keeping pace with moderate growth, but
not as quickly as in a full expansion. Merger and acquisition activity
is present, but often slows down. Employment usually peaks as well.
New content products and services may be withheld from the market,
as firms prefer to wait until the business cycle is more favorable towards
long-term growth.
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Technology
Technology is one of the most disruptive forces in the media economy,
primarily because media markets are technologically dependent from all
positions on the traditional media value chain: production, distribution,
and exhibition. Media firms demand the latest technology, and are constantly updating both their physical hardware and the software needed to
keep pace. Consumers are technologically oriented, with younger demographic segments among the savviest users, who require the latest tools
and toys in the form of smartphones, Mp3 players, netbook computers,
and other devices.
Technology offers positive and negative consequences. During the
second half of the 20th century, technology alone resulted in the loss of
many jobs as media companies transitioned from an analog to a digital
environment. Everything from robotic cameras in television studios to
word processing in newspaper publishing resulted in the loss of personnel and changing skill sets for many jobs. It used to take three people
to shoot a television news story: the reporter, a camera operator, and
a person to handle lighting and help with audio if needed. Now, all of
this is done by one person working in the field with nothing more than
a small video camera, and a mobile phone or a laptop to distribute the
story back to their virtual newsroom. So, while technology has eliminated many jobs, it has also raised the bar for employees, who need to
have multiple technical skills, the ability to multitask in moving between
different applications, and also the ability to write, shoot, edit, and
produce content.
Technology can be expensive to maintain and to replace, but while
this represents expenditures for media firms it also creates opportunities
for manufacturers, suppliers, and innovators of new technology to sell
their products and services. As the media are technologically intensive
industries, sweeping changes such as the transition to digital television,
the introduction of smartphones, and the development of high-definition
television spur interest, awareness, and ultimately greater use and consumption among consumers. More discussion of technology and its
impact on the media economy is presented in Chapters 5 and 6.
Globalization
Globalization encompasses many terms, but here we think of it as a way companies reach beyond their domestic borders to engage consumers in other
nations, thus expanding their markets (Friedman, 2005). Globalization
directly impacts media markets in that more competitors enter the market. In the media sector, globalization has traditionally revolved around
EVOLVING MARKETS IN THE MEDIA ECONOMY
selling content, a practice that began first with Hollywood films and later
television programming. The United States is the largest exporter of media
content in the world, raising many concerns about American influence
abroad and the notion of “cultural imperialism” (Jayakar & Waterman,
2000). Content from the United Kingdom is also widely exported, especially content created by the British Broadcasting Corporation (BBC). India
produces more feature films than any other country, but few are exported.
Latin American television content is widely shared across Central and
South America.
Globalization also occurs when companies acquire other properties
in other countries. News Corporation was first an Australian newspaper
company, acquiring newspapers in the United Kingdom and the United
States, and later purchasing a group of television stations that would eventually become the Fox TV Network. Sony entered the film industry by
acquiring first Columbia TriStar and later MGM. In 2015, Japanese-based
Nikkei announced the acquisition of the Financial Times from Pearson.
Yet another form of globalization occurs when a company establishes multiple locations in other nations. Nielsen, which specializes in
various types of audience research services, operates in over 100 countries throughout the world. Disney operates theme parks in several global
cities, with a separate base in Latin America. The global leader in book
publishing, Bertelsmann, also has operations around the world through
its various publishing entities. Globalization is discussed in more detail
in Chapter 7.
Regulation
Regulation is a central aspect of any government, establishing law and
policy as needed to regulate markets and positively influence economic
activity. Regulation takes place at various levels across the media economy, meaning policy initiatives can be global in nature (such as with
the World Trade Organization and the IMF); regional, involving different countries (exhibited by the creation of trade blocs like the European
Union, the North American Free Trade Agreement [NAFTA], and AsiaPacific Economic Cooperation [APEC]); national, via a government’s
own laws and policies; or at the state and local levels, where applicable,
through various agencies, councils, commissions, and other regulatory
bodies (see, for example, King & King, 2009).
Any general regulatory action that impacts business activities (e.g.,
taxation, labor laws, interest rates, monetary policy) also affects media
markets. However, there is a combination of regulatory activity that
takes place among the typical executive–legislative–judicial branches of a
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government that function in tandem with a number of agencies operating
at the nation-state or local levels, and all influence media markets.
Using the United States as an example, the executive branch represented by the President and Cabinet appoints individuals to agencies such
as the Federal Communications Commission (FCC) and the Federal Trade
Commission (FTC) with the advice and consent of the Senate. The legislative branch, through Congress, can propose new laws and regulations that
can alter media markets, such as the sweeping 1996 Telecommunications
Act, which liberalized ownership requirements and eased barriers to
media industries competing with one another. The judicial branch is
tied to the various court systems in the country, and interprets laws and
challenges to laws, assessing their constitutionality, especially those that
may someway impose restrictions on the rights guaranteed by the First
Amendment of the U.S. Constitution.
In addition to the regulatory activities of the three branches of government and a host of other agencies, there are other influences on the
regulatory process. In any democracy, regulation is directly influenced
by the people, who vote for their leaders and government representatives. Citizen groups and watchdog agencies have a history of influencing
regulation of media markets. Critics play another role of influence in the
regulatory process. Finally, the media industries themselves engage in
their own self-regulation by enacting guidelines to try to limit government
intrusion with new regulation or policy efforts.
Internationally, there are many different policies concerning media
companies, not all of which are favorable. Tensions in many parts of the
world have resulted in the closing of media properties and harsh government policies negatively impacting operations. Two examples are among
several countries in the Arab world, and in Venezuela (see A guttering
flame, 2015; Minaya, 2015). Censorship remains an issue in many countries, including China (Lin & Birkitt, 2014). A closer look at regulation
as a force impacting the media economy is presented in Chapter 8.
Social Aspects
Social aspects refer to the consumers and audiences that use the actual
media products. Social aspects have taken on a much more important role
in the 21st century, as the audience can no longer be thought of as a mass
entity, but is an aggregate of many different demographic, ethnic, and
lifestyle groups with different needs and interests (Parrillo, 2009). The
audience is constantly transforming (Napoli, 2003). The baby boomer
generation is graying; American society, along with many other nations,
is becoming much more ethnically diverse and multicultural; people are
EVOLVING MARKETS IN THE MEDIA ECONOMY
living longer and working longer; younger people are more technologically savvy and prefer to access content differently than adults.
Given all the outlets available for entertainment and information in a
digitally delivered media world, audience fragmentation is at an all-time
high. Audience members are more empowered than at any other time in
media history. Audience members no longer just consume content—they
also make content in a multitude of ways, whether through blogging,
podcasting, uploading videos, or social networking, to name just a few
options. Social aspects are yet another force driving the transformation
process. More on social aspects is offered in Chapter 9.
Access to Capital
Money, or capital, is a key driver in any business or industry, and
companies must have access to capital in order to conduct business.
The economic crisis of 2008–2009 clearly demonstrated the vital role
capital and credit play in the business world. We could easily observe
the consequences as economies fell into severe recessions and capital
became restricted, choking off money needed for business to meet payroll, acquire capital investments, and other needs. A global financial
crisis was averted only by many of the G-20 nations taking unprecedented steps to lower their interest rates and engage in quantitative
easing (the buying of their own government bonds), to flood their
respective markets with working capital and encourage more loans and
economic activity. However, these actions did not work in every nation,
as evidenced by economic chaos in Greece, Spain, Portugal, Ireland, and
Italy after 2010.
In terms of the impact on media markets, without capital, new productions (whether movies, TV programs, or new “albums”) were put on
hold; advertisers greatly reduced buying time, which in turn forced media
companies to engage in massive expense cuts and job layoffs; promotion
and marketing budgets were slashed; and virtually no mergers or acquisitions were even discussed.
Access to working capital is a must for any industry, especially those
operating in the media economy. Chapter 10 provides an expanded look
at this subject, along with a discussion of valuation and investment.
Labor
Labor is the backbone of any business enterprise, and the media economy
requires workers with technical and creative skills who are able to multitask and make quick decisions under time pressures, and who carry many
different sets of job skills. The labor segment of the media economy is
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constantly changing, owing to many of the forces already discussed in
this section—with technology being the main driver.
The media economy remains a strong area for various craft guilds and
unions, which wield their power and influence to negotiate wage scales
and other concessions to benefit their members. While unions and guilds
are not present in all parts of the world, they are very evident in countries with production of high-quality media products (e.g., the United
Kingdom, the United States, Germany, France, Spain, etc.). Education
also influences the labor market through preparation for careers and continuing learning opportunities.
Labor is a double-edged sword for management, in that labor is
needed to help a media enterprise achieve its goals and objectives, but
at the same time labor is the most expensive part of any business. An
expanded view of labor in the media economy is presented in Chapter 11.
SUMMARY
This chapter has discussed the role of the market in the media economy,
beginning with how markets are defined in regard to economic activity.
Markets in the media economy represent an aggregate of many supply and demand situations involving such areas as advertising, content,
technology, and other media firms. Market activity occurs between businesses, between consumers and businesses, and between consumers and
other consumers.
Media markets have traditionally been defined as dual-product markets because the product or good is usually made available to two distinct
markets: advertisers and consumers. Media markets have also been
defined by their geographical location. These product and geographical dimensions have been used for decades by policymakers, scholars,
and students to understand market behavior. Labels of traditional types
of market structure (e.g., monopoly, duopoly, oligopoly, monopolistic
competition, perfect competition) were used from economics to classify
media markets.
However, these approaches have limited utility in the 21st century
owing to the transformation and evolution of markets in the media economy because, in reality, market activity occurs simultaneously across
multiple levels and can be observed both within and across media industries. The chapter argues that a hybrid structure of media markets exists
across most areas of the media economy, represented by a small set of
firms resembling an oligopoly that controls anywhere from 70 to 90%
of a market, with a number of smaller firms resembling a monopolistic
competition structure fighting for the remaining 10–30% share.
EVOLVING MARKETS IN THE MEDIA ECONOMY
The chapter also argues for markets to be defined using their core
functions, such as content and distribution, to provide additional analysis. Suggestions for other functions and classifications were offered in
the chapter, including search, social networks, user-generated content,
smartphones, and video game consoles.
The chapter concluded with a discussion on external forces impacting
markets in the media economy, including economic conditions, technology, globalization, regulation, social aspects, access to capital, and the
labor market. Media markets, like markets in other areas of business
activity, will continue to evolve and transform. Students, scholars, media
professionals, and policymakers all have a vested role in following the
evolution and transformation of media markets, to fully understand how
markets function in the media economy.
DISCUSSION QUESTIONS
1. Why are media-related markets more challenging to define in the
21st century? How would you define a market?
2. How useful are the traditional labels of monopoly, oligopoly,
monopolistic competition, and perfect competition in analyzing
media markets in the 21st century? How can our definition of
market structure be improved? What other labels should be
considered?
3. The chapter points out that in many segments of the media
economy a hybrid structure exists. What are the two
components that make up this hybrid structure?
4. Economic conditions, technology, globalization, regulation,
social aspects, access to capital, and the labor market all impact
markets. Briefly explain how each of these forces impacts media
markets. From your perspective, is one area more of a force than
others? If so, which one and why?
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CHAPTER 5
Multiplatform Media Enterprises
In this chapter you will learn:
• why media firms must be thought of as enterprises delivering
content to multiple platforms in the media economy;
• many of the platforms media firms are using to attract audiences
and advertisers;
• how consumers have evolved as multiplatform users;
• strategies and business models used by multiplatform media
enterprises;
• how four media enterprises are engaged in multiplatform
distribution using case study analysis.
In the 21st century, media companies have transformed themselves into
multiplatform media enterprises. For decades, media content was delivered almost exclusively to a single platform—such as newspapers, TV
and radio broadcasts, movies, or magazines. The adoption of digital
technology and new reception devices enabled content to be shared
across many different platforms. Media companies now distribute
content to multiple distribution platforms and devices. The term “enterprise” is used here to illustrate the concept that media companies operate
as entities with the ability to offer content on many different platforms
simultaneously.
The shift towards media companies transitioning to multiplatform
enterprises was driven by technology, discussed more fully as a force
impacting the media economy in Chapter 6. Multiplatform media enterprises can choose from a wide variety of distribution platforms, including
traditional platforms as well as many new distribution options. A television station, as a multiplatform media enterprise, broadcasts its programs
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over the air, makes content available for streaming via mobile phones
and applications, and uses a variety of social media platforms such as
Facebook, Twitter, Instagram, Pinterest, and others to engage audiences
and advertisers. A radio station as a multiplatform media enterprise
broadcasts programming on AM, FM, or HD channels, and also streams
via the Internet, offers a variety of podcasts, and uses social media to
share information, gather research, and build audiences. A book publisher as a multiplatform media enterprise may print titles in hard and
soft covers, and reproduce the content as audio books and e-books for
electronic book readers.
This chapter begins with a discussion of the main distribution platforms used by media enterprises to deliver content. Other sections examine
the consumer as a multiplatform user, and strategies and business models
used in delivering content via multiple platforms. The chapter concludes
with a series of short case studies illustrating the multiplatform efforts of
a variety of media enterprises.
PRIMARY DISTRIBUTION PLATFORMS
This section examines the many distribution platforms available for
media companies to use to reach consumers, as of 2015. Of course,
not all of these platforms are available in every country, so this list
reflects those available in the US, but many other nations have these
platforms in some version or another. Table 5.1 provides a list of
these platforms.
As seen in Table 5.1, there are many paths available to deliver video
and audio entertainment and information, from the standpoint both of
distribution options and of reception technologies. Let’s examine some
of these distribution platforms in a bit more detail:
Table 5.1 Multiple Platforms to Reach Consumers
HDTV
Broadcast TV
Video on demand
Streaming TV
Broadband
DVRs
DVD/Blu-ray
Websites
Wi-Fi
Game consoles
Mobile phones
Blogs
Social media
Tablets
Messaging (MMS)
Broadcast radio
Source: Compiled by the author from various sources.
Satellite radio
Internet radio
HD radio
Mp3 players
Podcasts
RSS feeds
Wearable devices
MULTIPLATFORM MEDIA ENTERPRISES
• The Internet has become the primary content distribution
platform for many media industries. Whether it is video or audio
content, social media, text, images, or podcasts, the Internet is
the backbone for delivering most content. Users have a variety of
ways to connect to the Internet, ranging from desktop and laptop
computers to mobile phones and tablets. When the Internet
emerged as a mass medium in the 1990s, traditional media
companies as well as Internet-only companies began building
their online presence in order to reach audiences via the web.
• Streaming also uses the Internet as its backbone, and most of us
use streaming in two different ways. Content can be streamed
“live” as it happens (e.g. for TV or radio station broadcasting
or other live events) or it can be accessed via the cloud through
servers linked to the Internet. Netflix and Hulu were among
the earliest streaming platforms in the US and now have many
competitors, such as iTunes, Amazon Video, and Vudu. Streaming
of stored content is a form of video on demand (VOD), additional
content offered by cable, satellite, and IPTV providers to deliver
movies and other programs to subscribers. Most consumers now
tend to use the term “streaming” rather than VOD.
• Mobile platforms deliver content to smartphones, tablets, and
other devices using various applications users can download for
free or for a small fee. Mobile video will continue to grow as
more advertising shifts to digital platforms; one industry study
estimates that mobile video revenues may reach $4.4 billion by
2018 (Hoelzel, 2014).
• Social media sites are widely used as both primary and alternate
platforms for media content products. Of course, mainstays such
as Facebook, Twitter, Instagram, Pinterest, and YouTube are
essential to any social media strategy, but new players are always
entering the market, which increases the options available to
media companies.
There are other platforms available to reach audiences, as listed in
Table 5.1. The good news for media companies is that there are more
platforms than ever to reach audiences. The bad news for media companies is the expense of developing, maintaining, and managing so many
platforms, along with the added challenge of trying to monetize revenues
from these individual platforms.
Monetization is used here to mean, in its simplest form, obtaining
revenues from individual digital platforms. There are many ways this
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can be accomplished, from the sale of advertising to sponsored messages
and links that appear on sites such as Facebook and Twitter, and video
interstitial advertisements. While marketing dollars have been shifting
for some time to digital platforms, the revenue has not mirrored use by
consumers. Monetization of digital platforms is an ongoing challenge for
all content providers.
THE MULTIPLATFORM CONSUMER
Just as media companies have transitioned to multiplatform enterprises,
consumers are multiplatform users depending on when, where, and how
they want to engage media content. It seems that every month new data
is introduced by research firms and industry sources showing the latest figures on media consumption. Rather than offering data that would
quickly be out of date, let’s instead focus on what we do know about the
contemporary multiplatform consumer. This information also provides
a bit of a preview to a more detailed discussion in Chapter 9 regarding
social aspects of the media economy.
The following bullet points are based on aggregate research found
across the US, but these general trends apply to many other countries.
• Most consumers use a blend of traditional and new media
platforms. For example, people still watch broadcast television,
but they are also just as likely to watch programs that are
streamed from an online service, or recorded on a DVR.
• Millions of people still listen to broadcast radio while in a car,
but they may also use Pandora, Spotify, Apple Music, or their
own music library to listen to music away from an automobile.
• Smartphones are increasingly used to consume content. Newer
phones with larger screens are very popular for watching video,
playing games, and reading.
• Many consumers, especially younger ones, engage in social
media while watching television, listening to music, or other
activities. Interactivity with social media platforms is driven by
smartphones, less so by desktop/laptop computers.
• Newspapers, magazines, and books are just as likely to be read
online as they are in a physical format. Some consumers prefer
the traditional format; others are happy with e-reading.
As consumers continue to refine and expand their use of multiple
platforms, they take more control of their consumption of media content.
While this is great for the consumer, it is a challenge for media companies
MULTIPLATFORM MEDIA ENTERPRISES
as the audience fragments into smaller and smaller segments with many
options available. Further, advertisers struggle with determining the best
platforms to use to reach audiences in this fragmented, time-shifting,
multiplatform environment.
STRATEGIES AND BUSINESS MODELS OF MULTIPLATFORM
MEDIA ENTERPRISES
Changing audience consumption patterns, along with the rise of additional paths to access content, have forced media companies to distribute
content across different platforms. In rethinking media companies as
multiplatform media enterprises, media firms must understand their
audiences’ needs and wants in order to deliver a better experience for
consumers. Media enterprises also want to maximize the profits that can
be generated from their content assets.
To become a multiplatform media enterprise and stay competitive
in a media marketplace where audiences demand cross-media content,
some media companies engage in strategic alliances to help with distribution. A strategic alliance is “a business relationship in which two or
more companies, working to achieve a collective advantage, attempt to
integrate operational functions, share risks, and align corporate cultures”
(Chan-Olmsted, 1998, p. 34). One area of the media economy where alliances are commonplace is in the distribution of video to consumers using
cloud-based storage.
Strategic Alliances for Distribution Platforms
Allying with companies that provide cloud-based video management services via web portals, niche websites, and Internet service providers is one
example of a widely adopted alliance strategy among traditional media
companies. For example, Hulu began as a joint venture between NBC and
News Corporation, and has become one of the most popular streaming
websites in the US and an emerging international presence in other nations.
A number of companies have formed alliances with YouTube, one
of the primary video-sharing sites with billions of subscribers worldwide,
to distribute content via multiple platforms. Companies offer “official”
branded YouTube channels featuring full episodes of programs as well
as video clips from their original programming on YouTube. YouTube
has also given rise to a whole generation of new online personalities
with millions of followers. Examples include Swedish gamer Felix Arvid
Ulf Kjellberg (a.k.a. PewDiePie), Tyler Oakley, Bethany Mota, Michelle
Phan, Ryan Higa, and brothers Hank and John Green (see Elinzano,
20…