Media Economics Study Guide

MEDIA ECONOMICS
Theory
• Set of guiding principles • Explains behavior • Help us understand why things happen • Predicts behavior • Help us anticipate future actions, events • Two theories to understand media economics • Classic economic theory • Media Economics • Critical/cultural theory • Political economy
Media Economics • Media Economics o Focus on economic forces

o How they shape media institutions o Production o Distribution
Media Economics • Assumption … • Media companies strive for efficiency • Maximize profits • “Economies of scale” • As production increases o Costs decrease o profits increase
Media Economics • Economies of scale • Electronic media • “Marginal costs”

• Initial production cost of first copy o High • Incremental cost of each additional copy o Low
Media Economics • Monopoly
Market dominated by one company

• Oligopoly
Market dominated by few companies

• Duopoly Market dominated by two companies
Media Economics
“Limited competition”
Monopolistic competition
Market with many producers, sellers

Quantity
Limited differentiation of products within a category
Quality
“Barriers to entry” • Methods o Lower production/ distribution costs • Economies of scale • Force competition out of market o Slash price • Buy out competition o Purchase or mergers
Types of revenues (profits)
Direct payment • Products directly supported by customers

Indirect payment • Products supported primarily by advertisers

Combination • Direct and indirect payments

Media Theory • Classical economic theory o Media Economics • Critical/cultural o Political economy
Political Economy • Forces of class domination • How elites maintain power relations & dominance over