Answers Study Questions

1. How can we define media economics?

Media Economics is the study of how media industries use scarce resources to produce
content that is distributed among consumers in a society to satisfy various wants and needs.
Economic relationship of media producers to audiences, advertisers and society.

(sources: Albarran p.5, slide 4)

2. Why is media economics of theoretical and practical importance?

The study of media economics provides a context where one can better understand the
behavior of media firms, media markets and consumers. Theoretical basis teaches to
research and analyze different companies and predict their and market behaviors. Practical:
to be able to analyze and operate most efficiently in these companies.

(source: Albarran p.4, 7)

3. What are structural changes in society?

Industrialized society becomes Information society. Digitalization is transforming business

models in ways that enable more cross-border activity, changing how market, economy
operate.

(source: slides 6-7)

4. What is the difference between macro and micro perspective?

Macroeconomics examines the whole economic system and is primarily studied at a national
level.

Macroeconomics deals with:

» Political economics;

» Aggregate production and consumption (GNP);

» Inflation, employment, economic growth indexes.

Microeconomics centers on the activities of specific components of the economic system.

Microeconomics deals with:

» Specific markets;

» Market structure (concentration), conduct and behavior;

» Activities of producers and consumers.

(sources: Albarran p.5, slide 10)

5. What is the difference between media management and media economics?

Media Economics is the study of using finite resources in the most efficient way to produce
valuable commodities and distribute them in the world of infinite, always increasing wants
and needs of consumers and increasing scarcity of resources.

Media Management is a part of Media Economics, which is responsible for

management/controlling the media and its distribution in the respective markets, considering
practical learnings.

Media Management includes evidence based (scientific) decision making process,

application of theories, high influence of practical learnings.

(sources: Albarran, p.4, slide 11)

6. What can be learned from a study of media economics?

We can learn to research and analyze different media companies as well as predict and
understand firm and market behaviours. Media economics help understand which
companies operate efficiently and which companies are leading in their markets.
Furthermore, studying media economics will get you knowledge to analyze media industries.
This is through the usage of both descriptive and analytical methodologies that help
understand the activities of media firms and markets. Media economics also teaches how
market structures affect the operations of companies, how concentrated media markets are
and how external forces (e.g. government, regulation and technological advances) may
affect future market performance.
(Albarran: 6-7)

7. What are the three questions that a society has to address in production?

The important issues of production and consumption:

1) How much of which goods will be produced?
2) How will the goods be produced?
3) Who will consume the goods? (Albarran: 14)

8. What does economic rationality mean?

Economic rationality is the maximization of utility. Economists think that human decisions are
rational and predictable – humans behave in such a way that products/things maximize utility
in their favor and reduce costs. Rational decision making has a tendency to decrease – think
for example about a person in the desert: The person is thirsty and would pay 10€ for a
bottle of water from a vending machine because it provides a high utility (being not thirsty
anymore). The person however would not spend 10€ again on the second bottle, because
the thirst has already been stilled. So, the value for that person has changed and perhaps
the second bottle is only worth 5€ because it doesn’t have the same amount of utility, the
third bottle even less and so on… (Karmasin slides 1: 14;
https://courses.lumenlearning.com/suny-microeconomics/chapter/outcome-economic-
rationality/)
9. What is a market?

A market is where consumers and sellers interact to determine the price and quantity
of goods produced. It consists of a number of sellers that provide similar products to
the same group of buyers. Market activity varies across locations because the
products differ and because there are different groups of sellers and buyers.
The market is a concept where supply and demand meet. The force driving a market
economy are buyers and sellers, working according to their own interests. The fundamental
concepts of a market are supply and demand. Supply is the amount of a product offered by a
producer at a certain price. Demand on the other hand is the quantity of a product/service
that consumer will buy at a certain price. Markets are coordinated by prices and state
intervention. (Albarran: 17-18; 26 and Karmasin slides: 16)

10. What are paradigms of markets?

According to theoretical traditions:

- Efficient use of resources
- Justice(Fairness of distribution of common good)
- Risks and the role of the government
- „CulturesConsequnces“ (Karmasin: 16)

11. What is the difference between a market and an industry?

Meaning – industry represents a large number of companies which manufacture a particular

product or provide a specific service, while the market is the place where supply and
demand meet.

Concept – concept of market and industry significantly differs. In most cases, the market is
created by demand, considering it creates a crucial link between goods and its consumers.
However, manufacturers develop industry.

Technological effect – tech breakthroughs, as well as innovative strategies can completely

change and revolutionize one industry. But, when it comes to market, the only participants
are sellers and buyers, and they are the only ones that react to these changes.

Variety of products – while the market focuses on a vast amount of products, industry
focuses on one single product.

12. How can we apply this to the media industry and to media politics?
13. 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.

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, and can range from a
minor or short-term recession lasting just a few months to a longer-term situation resembling
depression-like characteristics. A recession is particularly hard for markets operating in the
media economy. Job losses usually happen first, causing people without work to restrict their
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. 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 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.

Technology is one of the most disruptive forces in the media economy, primarily because
media markets are technologically dependent f.om 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. 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 ro take three people to shoot
a television news story: the reporter, a camera operator, and a person to handle lighting and
help if needed with audio.

Globalization has many terms, but here we will think of it as a way companies reach
beyond their domestic borders to engage consumers in other nations, thus expanding their
markers. Globalization directly impacts media markets in that more competitors enter the
market. Globalization also occurs when companies acquire other properties in other
countries. Yet another form of globalization occurs when a company establishes multiple
locations in other nations.

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,
regional, involving different countries, national, via a government's own laws and policies; at
the state and local levels, where applicable through various agencies, councils,
commissions, and other regulatory bodies.

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 an aggregate of many different
demographic, ethnic, and lifestyle groups with different needs and interests. 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.

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. In terms of the impact
on media markets, without capital new productions 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.
Labor is the backbone of any business enterprise, and the media economy requires workers
who are able to multitask, make quick decisions under time pressures, and carry many
different sets of job skills. The labor segment of the media economy is constantly changing,
owing to many of the forces already discussed in this section-with technology being the main
driver. Labor is a two-sided 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
area of any business

(Albarran 2010 The Media Economy p.38-41)

14. Do you believe one level (global, national, household, and individual) of the media
economy is more important than another to the media industries? Why or why not?

“The individual level is becoming more important in the media economy. Even in a traditional
nuclear family household there are differences in the way parents use the media in
comparison to their children, and how much time and attention each allocates to the media.
All of us are limited to 168 hours in a week. How we choose to spend our time in media-
related activities represents an economic action that economists refer to as allocation.In the
evolving media economy, the individual is in charge of his/her own media consumption-what
you want, when you want it' and how you wish to access it. This seminal change has
disrupted traditional business models and forced advertisers constantly to re-evaluate their
strategies and marketing practices. Likewise, traditional media have had to evolve and
respond so as not to be totally left out of the picture.These levels of activity are constantly
ongoing in the media economy. At any given moment, media firms are engaging consumers
across all levels, but increasingly it is the individual level where the sea change has taken
place.”

(Albarran 2010 The Media Economy p.4-5)

15. What is a demand curve?

Demand curve is a graphic representation of the relationship between product price and the
quantity of the product demanded. It is drawn with price on the vertical axis of the graph and
quantity demanded on the horizontal axis. With few exceptions, the demand curve is
delineated as sloping downward from left to right because price and quantity demanded are
inversely related (i.e., the lower the price of a product, the higher the demand or number of
sales). This relationship is contingent on certain ceteris paribus (other things equal)
conditions remaining constant. Such conditions include the number of consumers in the
market, consumer tastes or preferences, prices of substitute goods, consumer price
expectations, and personal income. A change in one or more of these conditions causes a
change in demand, which is reflected by a shift in the location of the demand curve. A shift to
the left indicates a decrease in demand, while a movement to the right an increase.

16. Describe the concept of price elasticity!

Price elasticity is a theory related to the branch of microeconomy. We usually refer to the
concept of price elasticity when we talk about the demand. So, how elastic is the demand in
relation to the market price.

Price elasticity of demand then help us to understand how prices vary in an economic
system. So, the price of a good or product is the direct result of supply and demand
functioning in a market (Albarran p. 40 “Chapter 3 - Key Concepts to understand media
economy”).

In order to make it clearer I will report an example. If a good is defined inelastic this means
that the demand won’t change a lot. Gasoline connects to this inelastic aspect. If you double
the price of gasoline, it won’t produce a 50% reduction of the demand, it will still be high.
Instead, if you have an elastic good, the demand for it will change in relation to the increase
or decrease of the price of the good. In this case, luxury goods or food and beverage are
considered elastic elements.
With an elastic demand instead a change in price results in a proportionally greater change
in the quantity demanded, this means that revenues will increase.
With an unit-elastic demand we have a change in price this results proportionally equivalent
a change in demand. In other words, prices can either rise or fall but the quantity demanded
change proportionally the same amount.

We can make a sort of summary of price elasticity. If E>1 this means that the type of
demand is elastic. When we have E=1 the price is unit-elastic. In the end, E<1 this is an
inelastic situation.

(Sources Albarran p. 40 “Chapter 3” + Notes during the lecture)

17. Try to specify the price elasticity of media types in your country (educated
guesses)

18. What does the concept of cross- price elasticity say?

The concept of cross-price elasticity reports how the demand for the product changes if it
increases the price.
Media products by their nature offer a great deal of substitutability, this means that it
facilitates a cross-elasticity of demand.
So, cross-elasticity of demand raises concern for media companies and advertisers looking
and competing for our attention.

During the lecture I have reported an example that might help understanding this aspect. If
NYT increases the price of the copy; the amount of copies from another newspaper WSP,
can actually grow more, but this happens only if they are in the same market.
Summing up, there are comparable goods and products that can be substituted for one
another.

(Sources Albarran p. 41 “Chapter 3” + Notes from the lecture)

19. How can it be applied to media markets?

Media are economy of scale industry, the average cost decline significantly with the output.
The more people see much better it is because the lower average cost gets.

When supply and demand meet there is the creation of the price. Bigger is better because
the average cost decline. Media companies have then the tendance to grow.

When you have a given demand and elasticity they will meet. It creates equilibrium. So, the
higher is the price the lower is the demand.

- Strong reaction: elastic

- Not strong reaction: inelastic

20. What are economies of scale?

Economy of scale is the relation that exists between the increment of the production scale
and the diminishing of the unit cost of the product.
In the graph we faced during the lecture, we see that economies of scales are composed of
Total Costs (are in relation with the average costs, so, the total costs related to the output)
that are equal to fixed costs plus the variable costs.
Media can be defined as an economy of scale industry, this means that the average cost
declines significantly with the output produced by a firm. In simpler words, more people buy
a newspaper the better it is for the company which produces them because the lower the
average cost will get. This is then the base principle of economies of scale, if you generate
more money by selling your product then your average cost will be lower.

21. What are marginal costs?

Marginal costs are the costs for producing an additional unit of a good (for example:
the costs to produce an additional copy of your daily newspaper). With the marginal
costs you can calculate the optimal amount for the production for maximizing the
profit. So we are on the supply curve (=production side).

Mathematically: First derivation of the total costs by quantity

 (source: slides p.23)

22. Is the media industry an economies of scale industry?

Media industry is an economies of scale industry. This means that the average costs
decrease significantly with additional units of a product sold (for example: the more
circulation of the newspaper, the lower the average costs; depending on capacity
limits).

(source: slides p.25 || Albarran 2002 p. 31)

23. What are possible consequences?

One Consequence is a higher efficiency of the business because of higher profits.
Because of the fact that an additional copy of a media product has quite less (nearly
zero) marginal costs we generate a lot of additional profit through that additional unit
sold.

Further, we can find a lot of mergers and acquisitions in the media industry. There
are large media conglomerates and networks enabling economies of scale and
placing their product copies on different geographical areas and different channels.

Moreover, large players can offer products to lower prices.

Another example is product bundling (f.e. Software industry)

(sources: Diehl & Karmasin 2013 p. 12/16 yy || Albarran 2002 p. 31/83)

24. How can we define a market?

A market is where consumers and sellers interact with one another to determine the
price and quantity of the goods produced. It consists of a number of sellers that
provide a similar product or service to the same group of buyers or consumers.
Market activity varies across of different locations because individual products differ
and there are different groups of buyers and sellers. To distinguish between industry
and market we have to keep in mind that a market is an interrelated group of buyers
and sellers, whereas an industry is only the sellers in the particular market or across
several markets.
MEDIA SPECIFIC: Dual market - media good & advertising market ; operating in a
across a range of good/services and geographic market

(sources: Albarren 2002 p. 26-28)

25. How can we define market structures?

The market structure can be defined as description and examination of the economic
characteristics of a market. Some characteristics are the concentration of buyer and
sellers, the product differentiation, barriers to entry, cost structures and vertical
integration. So in the end you will find out if there is a high concentrated market
structure (monoploy, oligopoly) or a perfect competition.
 (sources: slides p.36/37 || Albarran 2002 29-37)

26. Define the relationship of Market structure, conduct and performance?

As we stated before, market structure – is the market structure that can be defined as
description and examination of the economic characteristics of a market. Some
characteristics are the concentration of buyer and sellers, the product differentiation, barriers
to entry, cost structures and vertical integration. So in the end you will find out if there is a
high concentrated market structure (monopoly, oligopoly) or a perfect competition.

Market conduct – refers to the policies and behaviors exhibited by sellers and buyers in a
market. Market conduct centers around 5 specific areas: 1. Pricing policies or behaviors, 2.
Product strategy and advertising, 3. Research and innovation, 4. Plant investment and 5.
Legal tactics. Of special interest is how these different types of behaviors appear to be
coordinated among firms in certain types of market structure.

Market performance – involves analyzing the ability of individual firms in a market to

achieve goals based on different performance criteria. Market performance is usually
evaluated from a societal perspective, rather than from the level of the firm. Policy-makers
can examine the economic efficiency of a particular industry through performance criteria
and, if necessary, initiate structural or conduct solutions to remedy problems. In this sense,
performance is examined from a macroeconomic orientation. A number of variables are
considered in evaluating market performance. They include efficiency, equity and progress.

And now about the relationship between these terms: Market structure affects the market
conduct of individual firms and is concerned with 5 specific areas, mentioned above (1.
Pricing policies or behaviors, 2. Product strategy and advertising, 3. Research and
innovation, 4. Plant investment and 5. Legal tactics). The conduct of firms in a market
likewise affects the performance of the market. Market performance is evaluated most often
from a macro perspective with respect to different performance variables, including
efficiency, equity and progress.

(Source: Albarran 2002 37-40)

27. What is the difference between market conduct and market performance?
Market conduct is determined by policies and behaviors by sellers and buyers in the market:
product pricing, strategy & advertising, research & innovation, plant investment and legal
tactics. Market performance in its turn involves analysis of reaching all abovementioned
goals. In other words, market conduct is highlighting the points of firms’ development and
market performance is how well that points can be reached.

28. How does market structure influence market performance?

As market performance is examined from a macroeconomic orientation, it inevitably depends

on a country’s market structure. Variables, which are considered in evaluating market
performance, depend on the external market structure. Some of them: efficiency - how a firm
can maximize its wealth, equity - how wealth it distributed among producers and consumers,
progress - the ability of a firm in a market to increase output over time. Market structure
determines which markets firms can access at low cost and which consumers are interested
in products. Thus, criteria which the market structure defines crucially influence the market
performance: its positioning, goals, etc. by dictating market rules, creating borders.

(Source: Albarran 2002 37-40)

29. Give an example!

Giving an example, automotive sphere is highly competitive and can be considered as

monopolistic competition. This type of competition exists in a market, where there are a lot of
competitors, barriers to enter are lower than in oligopoly. Thus, brands, which now are the
part of Volkswagen Group had to merge in a competitive auto business in order to increase
their efficiency in the market.

30. What are prototypical market structures?

Monopoly – a type of structure in which only a single seller of a product exists and thus
dominated the market. Generally, a monopolistic structure assumes there is no clear
substitute for the product: a buyer must purchase the good from the monopolistic or avoid
consumption of the good altogether.

Oligopoly – differs from a monopoly in that this type of structure features more than one
seller of a product. Products offered by the sellers may be either homogeneous (alike) or
heterogeneous (differentiated). Typically, a market dominated by a few firms is considered
an oligopoly, and earn firm commands a similar share. Firms in an oligopoly are mutually
interdependent, with the actions of the leading firms affecting the other firms in the market.
Monopolistic competition – a third type of market structure, monopolistic competition,
exists when there are many sellers offering products that are similar, but not perfect,
substitutes for one another. Barriers to entry are lower than those found in an oligopoly.
Each firm attempts to differentiate its products in the minds of the consumer through various
methods including advertising, promotion, location, service and quality.

Unlike in the oligopoly, price varies in this type of market structure, with price decisions set
by both the market and the individual firms.

Perfect competition – many sellers offer the same product, and no single firm or group of
firms dominates the market. With no barriers to entry, the characteristics of the market
economy dominate in a perfectly competitive market structure. Firm decides how much of
the good to produce, as it has no control over price.

(Source: Albarran 2002 32-37)

31. Describe the supply and demand situation for oligopoly, monopoly and perfect
competition?

- in a monopoly there is a single seller of a product that thus dominates the market. In a
monopoly structure, there is no clear substitute for the product. The buyer must either buy
from the monopolist or not buy the product at all. Monopolists are price setters because they
can set the price to maximize profit. A monopolist can show power by restricting production
of output (if desired). The demand is generally perceived as inelastic.

- oligopoly is a market dominated by a few firms that all hold a similar share. They may offer
products that are alike or differentiated. In an oligopoly, the leader normally sets the price
and the others follow that. Or sometimes they are discussing and setting predefined prices
of a product (forbidden). The demand curve is inelastic due to a small number of sellers and
the lack of substitutes.

- in a perfect competition scenario, many sellers offer the same products and no single firm
dominates the market. There are no barriers to entry. Individual firms are the price takers
and the market sets the price for the product. Prices are naturally constrained downward.
Firms can only make the decision of how much to produce. The demand and supply curves
are straight. (Albarran: 33-35)

32. What are effects (of the media structure) on profits and welfare?

Profits and welfare: if people (the consumers) are at a company’s mercy (e.g. because it
holds a monopoly), the company can ‘basically do whatever it wants’. Because of this,
monopolies are prohibited in many states. If there is a position of monopoly, the company
basically doesn’t even have to look after the consumers. The more diverse/diversified and
balanced a market is (for example: the customer base is stable but perhaps more limited) -
the more interests are being fulfilled by the company and the more welfare oriented the
company turns.

33. What does this mean for the media market?

In the media industry, there are higher profits without competition. Ideally, companies want
to reach the largest audience. This is due to the media industry being an economy of scale
(this means that the average cost declines with the output. The more output, the cheaper it
gets) This creates a tendency of media markets to concentrate on several levels: horizontally
(companies merge on the same level), diagonally (companies producing different media
types merge) or vertically (different steps of production are being incorporated into the same
company)

The media has a built in tendency to concentrate, in order to reach the largest audience ->
larger audience, larger output. This is why companies merge and the industry concentrates.

With a monopoly or an oligopoly, there is a tendency to charge higher prices because the
demand cannot move somewhere else. The audience is large, the price is high. This
generally leads to a mainstreaming of content: less pluralistic offers, more of the same with
an orientation towards the largest possible audience.

34. How useful are traditional labels of monopoly, oligopoly, monopolistic

competition, and perfect competition in analyzing media markets in the 21st
Century?

Differentiating between monopoly, oligpoly and monopolistic competition can be useful when
looking at different media industries. The perfect competition structure can be put aside first
and foremost, as a true market structure of perfect competition does not exist. Knowing
which industry fits into which market structure can be helpful for example when determening
the barriers of entry and the field of competitors – whether it will rather easy or difficult to join
and who who the main competitiors are in the field.

For example: Newspapers in most markets fall under monopoly. TV networkds, the
recording industry and motion picture studios are part of oligopolies. Magazines for example
compete in a monopolistic competition. (Albarran: 36)

35. Define media markets!

Media market are composed by a wide array of elements. We can mention that they divide
mainly in two branches: the non electronic media print markets and the electronic media
markets.
In the first ones we can say that they are composed by newspapers, books and magazines.
The second ones instead are composed by film, television, radio, music, video and computer
games and internet.

Nowadays with this digital disruption the media market structure has redefined also to new
horizons with the development of the digital sector. So, the media market can be defined as
we saw in the paragraph before non electronic print markets; they can be summarised in
legacy media. Meaning that are starting to get old and outclassed by the digital disruption, as
we mentioned before. And we have the electronic market that we can connect them to the
development of technology, so, new devices in order to interact with different sectors.

Media companies are extending their branches very widely in this century, when we refer for
instance at OTT (over the top) companies like Google, Facebook, Amazon, Apple and so
forth that are constantly expanding in the media market composing environment.

Moreover, media markets have this multidimensional competition due to the fact of plenty of
media products. To this aspect we can connect media enterprises so they sell their services
not only in one but in two business markets at the same time.

(Wirtz - Media and Internet Management p. 28-30 for further details)

36. Characterize the media markets in Europe and the US!

It would be short-sighted to mention a difference between media markets in Europe and in
the US.

According to what has been explained in the different lectures is possible to mention that in
these days the borders of media markets are generally blurring. No matter if they are
European or from USA.

The causes can be several, see the aspect of convergence, so, that many electronic devices
(see mobile phone) contain a wide array of functions. With a mobile phone you can buy an
accessory that you want, you can telephone to a friend, you can remain connected with
many people at the same time and you can also read the news and remain updated on what
is happening in the world.

In order to be clearer and explain in detail what I mean with the importance of convergence
and of internet developments I will report under the picture that reports the activities that
happen in 60 second in the internet.

All these elements bring to a very important change in some sectors, including in particular
the media markets.

For instance, we can mention that media markets are driven to a new technological
environment. Everything is and will continue being more digitally friendly. At a general
glance, we can than state that the traditional media markets, composed by the legacy media,
television, radio, new papers are in constant decreasing. The media markets are shifting to a
digital device environment. This happens then in the European environment and in the USA
environment. So, there is not a clear and determined border, as mentioned before everything
is blurred. According to what I have studied one of the main elements can actually be
convergence. I want to enclose an image that explains that there are actually no borders for
the media markets in the EU and US.

37. What are differences and consequences?

The main difference is mainly focused on the legacy media and the rising of the digital ones.
Is possible to state that currently traditional media are facing a difficult stage of a loss of
profit due to the strong rise of the digital disruption process.

So, these over-the-top (Google, Amazon, FB, WeChat and so on) companies are creating a
cleavage with the old media. Digital media industry has a high power and lot of revenues, in
the digital branch the big firms have the 75% of the internet advertising.

Now, is possible to say that legacy media are losing ground because of this digital
supremacy. For instance, the old media cannot base anymore lot of revenues on the
advertising area. They are now extending it to a process of digitalisation, in this case I refer
to news papers which offer also the digital edition. Moreover, they use the subscribing
method to rack up more revenues.

38. What are different types of media concentration?

There are different types of media concentration, they are horizontal, vertical, diagonal and
multimedia. When we talk about horizontal it is like two companies on the same level. The
term multimedia indicates the aspect across media sectors.

Media industries are built in concentration because the average cost declines with the output
and the higher the output the lower the average cost is. The output is generated when
competitors buy and there is and investment in marketing so that you can enlarge the output.

39. Give Examples of integrated Media Corporations!

Integrated media corporations are multi-media companies that that offer a wide array of
contents, product and services.

An example of media corporation can be related to the new companies. For instance, we
can see Alphabet, the holding that contains inside Google and other firms.

Another interesting example of an integrated media company can be Tencent Holding that
has WeChat a communication platform that you can send messages, post photos, share
music, interact with other users sharing “likes” and also do payment methods.

We have generally seen that are firms which include many different other services all in one.
In my opinion is possible to mention also convergence element, so a media firm that extend
the roots in different branches.

40. What are possible problems in defining media concentration?

Media concentration is difficult to measure and when it comes down in the empirical
evidence is not easy. Media products technically are priceless because they are connected
to an economy of scale.
So as mentioned before, one of the causes in defining a correct media concentration
is the aspect related to the economy of scales that they are never constant, but they
change in relation to the selling process. How the global and final output is, if with a
positive or negative number.

41. What are reasons for media concentration?

Media concentration is a result of one media related company buying another
company for control of their resources in order to increase revenues and viewership.
As information and entertainment become a major part of our culture, media
companies have been creating ways to become more efficient in reaching viewers
and turning a profit. Successful media companies usually buy out other companies to
make them more powerful, profitable, and able to reach a larger viewing audience.
So, when the larger scale media companies buy out the smaller-scaled or local
companies they become more powerful within the market. As they continue to
eliminate their business competition through buyouts or forcing them out (because
they lack the resources or finances) the companies left dominate the media industry
and create a media oligopoly.
To sum up, two main reasons for media concentration are tendency for economies of
scale industry and getting higher profits without competition.

42. Why is media concentration a problem?

Critics of media concentration say it threatens 'broad choice' of media, facilitates
censorship. The increasing concentration of control of information is a major threat to
a nation’s desire to give its citizens a “broad choice” of media. Critics of
centralization argue also that it facilitates censorship. Some point to Internet
censorship in China as one example, noting in particular how Google has
cooperated with the government there to block access to some Web sites. Others
worry that as the media become increasingly corporate and for-profit, other forms of
self-censorship, such as covering only the news that brings in large audiences, will
follow. Such negative effects also are lack of competition and diversity as well as
biased political views. Media integrity refers to the ability of a media outlet to serve
the public interest and democratic process, making it resilient to institutional
corruption within the media system, economy of influence, conflicting dependence
and political clientelism. Media integrity is especially endangered in the case when
there are clientelist relations between the owners of the media and political centres
of power. Such a situation enables excessive instrumentalization of the media for
particular political interests, which is subversive for the democratic role of the media.

To sum up, main important problems of media concentration are:

● Commercially driven, ultra-powerful mass market media is primarily loyal to

sponsors, i.e. advertisers and government rather than to the public interest.
● Only a few companies representing the interests of a minority elite control the
public airwaves.
● Healthy, market-based competition is absent, leading to slower innovation and
increased prices.

43. How does horizontal and vertical integration relate to competition and
concentration?
Horizontal and vertical integration represents a form of strategy employed by a
media enterprise to determine how to create a competitive advantage in the
marketplace. Both concepts are easy to understand, but such decisions on
integration are usually made by larger firms and conglomerates.

When a company decides to enter into different markets, it is engaging in horizontal

integration. If a firm produced only one product or was active in only one market, this
would represent a single-dimensional activity. When companies expand into other
related or non-related markets, they are engaging in horizontal integration-meaning
they draw revenues (and losses) across business segments. Some segments may
perform well, while others may not. A horizontal strategy is widely believed to help
ride out fluctuations in the business cycle.

Vertical integration is identified as a firm's effort to control all aspects of creation,

production, distribution, and exhibition, which form the media value chain. By being
in control of all of these areas, the company could theoretically leverage their assets
in the widest possible way, and engage in a number of cross-marketing and cross-
promotional efforts in order to capture more revenues at the various stages of the
value chain and, ideally, increase market share.

(Albarran 2010 The Media Economy p.29-30)

● A horizontal acquisition is a business strategy where one company takes over

another that operates at the same level in an industry.
● Horizontal integrations help companies expand in size, diversify product
offerings, reduce competition, and expand into new markets.
● Companies that seek to strengthen their positions in the market and enhance
their production or distribution stage use horizontal integration.
● Companies that opt for horizontal integration benefit from reduced competition
in their industry, increasing the synergy between two companies (including
marketing resources), and reducing some production costs.
● With horizontal integration there are increased market share, reduced
competition, synergistic efforts (combined marketing efforts, technology, etc.),
economies of scales and economies of scope creation, creation of a
monopoly, high level of scrutiny from government agencies.
● Vertical integration involves the acquisition of business operations within the
same production vertical.
● Vertical integrations can help boost profit and allow companies more
immediate access to consumers.
● On the one hand, vertical integration can lead to more efficient use of
resources; on the other hand, by limiting competition, lead to less efficient
allocation of resources. Forward integration can secure a sales market, but
also close it to competitors.
44. What, if any, are the problems caused by increasing levels of media
concentration?

● high level of corruption

● lobbying the interests of a narrow group of people close to power
● low level of competition between market participants
● reduced media freedom
● distortion of the information field
● establishment of a monopoly price dictate on the information market
● lack of transparency in the information market and an increase in the amount
of trade secrets
● censorship growth
● (also look at question 42, which is very similar)

45. What are possible reasons for media regulation?

● The management of what is arguably the key economic resource in the

emerging `information society', with a very high dependence on all forms of
communication.
● The protection of public order and support for instruments of government and
justice.
● The protection of individual and sectional rights and interests that might be
harmed by unrestricted use of public means of communication.
● The promotion of the efficiency and development of the communication
system, by way of technical standardization, innovation, connectivity and
universal provision.
● The promotion of access, freedom to communicate, diversity and universal
provision as well as securing communicative and cultural ends chosen by the
people for themselves.
● Maintaining conditions for effective operation of free markets in media
services, especially competition and access, protection of consumers,
stimulating innovation and expansion.

46. Which aspects of media products are there?

In comparison to “normal” goods, media products are more complex and differ
in a lot of aspects because of the revenue structure on the dual product
market. Wirtz distinguishes media products to the following specifications:

● · Media products as combined products – Revenues are generated

through sales and advertising revenues. The advertising market is dependent
on the audience market (advertising/recipients spiral). And both markets have
to be combined in one product consisting of content and advertisement.
● · Media products as public goods – On the one hand media goods are
non-exclusivity (f.e. TV, but it depends on medium), that means that no
recipient can be prevented from using a public good. On the other hand media
 goods are non-rivalry in consumption that means that consumption by an
individual does not limit the consumption by other recipients.
● · Media products as services – intangible service at the time of production
(f.e. a performance of a musician). But these services are in most cases
stored on a carrier medium and then we call these refined services.
● · Media products as meritoric goods – are characterized by a lower
demand as socially desired. Consumers have a low willingness to pay. Official
authorities have to subsidize to adjust demand and provide in that way a
diversity of opinion and a diversity of information.
● · Quality of media products – It is quite hard to determine the quality of a
product before consuming it. Media products are mostly experienced goods,
meaning f.e. that you can say after reading a book or watching a film, if the
quality was good or not. Moreover, media products are creative produced
products where the management has only little influence and standardisation
is difficult.
●

(sources: slide set 1 p.49 || Wirtz 2020 p. 27 ff)

47. What does it imply for concentration control?

One of the dominant questions in regulating media markets since the 1950s –
Now, has changed into a question how we can safeguard pluralism and
freedom and quality of democracy. So, what does it imply? In my
understanding, the consequences of concentration and deregulation must be
understood from decision makers and “market watchers”. The overall aim is to
maintain a quality in democracy. In my opinion the government plays a big
rule at this topic. An independent regulation control authority can help to
maintain pluralism and freedom. Of course, regulations are the framework for
concentration control.

(sources: slide set 1 p.48 || lecture notes)

48. What role does advertising play in the media economy?

As media economy has to deal with a dual market with recipients on the one
and advertisers on the other hand, it is quite important but also difficult to
satisfy both sides. Especially as the advertisement sector is (one of) the main
investors in the media industry. If you look at legacy media it is a circle of
profitability. On the one hand you can improve your content (f.e. quality,
offers) that will increase the audience and because of this you will be more
attractive for advertisers. Advertisers get access to your audience through
 ads. In that case you will earn more advertisement revenues and you can
even invest this additional money in your content. So, to sum up – advertising
is one major refinancing sources of media companies. But there is a
significant changing aspect: As the last year’s show, a tendency of advertising
revenue shifts from legacy media to IT and social media (facebook, google
etc.). Because of this a main revenue source is decreasing and media
companies have to deal with that problem which can be essential for the
media companies future.

(sources: slide set 2 p.45 || own thoughts)

49. How vital is advertising to the support of the media industries?

As already mentioned in question 48 – advertising revenues are a major
income source for media companies. In most media companies it is the
primary form of revenue. We can observe that the advertising market has
changed due to digitalization. Digital advertising has grown significantly and
shifted from legacy media to IT companies such as facebook, google and co.
So the money is in a way shifting form the media industry (narrow view) to the
IT industry. Therefore a lot of revenue is missing. We can see this effect,
because a lot of media enterprises are forced to cut costs and eliminate jobs
(f.e. ORF in Austria). A way to escape this problem is to become a multi-
platform enterprise or even change the whole business model.

(question 48 || own thoughts)

50. How can Management be defined?

The process of coordinating and taking measures to achieve desired goals
within a company. Including tasks such as leading, planning, moderating,
organizing, staffing, marketing, and controlling and to satisfy the aims of all
various stakeholders. You can distinguish between strategic management
(long term perspective) and Management it self (short term perspective). The
focus at Management in a short term perspective is to realize the strategies
which are developed in strategic management and to implement the USP’s.
The distinction between strategic and (operational) Management should be
clear because you can be highly effective just in that moment but move in the
wrong direction with your strategy. Management can also be seen no isolated
from the environment. Adaptation to environmental changes and an ear to the
environment is essential to survive and also one of the most important things
in management.
 (source: slide set 2 p.2 / p.3)

51. What is the difference between strategic management and management?

The difference:

Strategic Management is responsible for defining the effective strategy and what is more
important – the direction of development. Questions need to be asked: Where are we
headed? Are we headed to the right direction? How efficient are we headed?

It is important to consider:

· Long term perspective

· Goals, principles, philosophy, culture

· The type of business the firm is in

· Core USP, core Processes

Management is defining short term perspective, realization of strategies, implementation of

USP, marketing, controlling, etc.

(Notes from the lecture, presentation “Strategies….”, slide 2, 15)

52. What are the basic ideas behind the „St. Gallener“ Management Model?
Processes in the organization are connected to each other. There are Inner dependencies
between processes but at the same time processes do not need to be seen in isolation.

On one level there are the categories of environmental spheres, stakeholder groups and
interaction topics that relate to the social and ecological environment. On the other level
there are the categories elements of order, processes and development modes, which relate
to the internal view of the organization.

With the development of the first SGMM, Hans Ulrich introduced the term “empty space
framework for something meaningful”. The St. Gallen model thus shows itself as a design
framework for managers to recognize their own company as holistic and to identify and solve
problems from it. In addition, the vacancy framework should offer sufficient flexibility to
implement additional methods and approaches.

The model assumes that management primarily means mastering complexity. It is based
accordingly on testing systems, cybernetic discoveries and concepts. It describes
organizational systems along six dimensions: environmental spheres, structuring forces,
stakeholders, processes, interaction issues and modes of development (Rüegg-Sturm,
2005). The New St. Gallen Management Model views the organization as a whole. It thus
serves as an effective framework for structuring organizational communication.

· Environmental Spheres: Environmental spheres refer to relevant reference spaces

in the environment of the company.
· Stakeholders: Stakeholders refer to all groups and individuals who are somehow
affected by the value or damage created by companies. [6] The value added for
these stakeholders is the purpose of a company.
· Interaction topics: "Interaction issues are the objects of the exchange relationships
between stakeholders and companies around which the company communicates
with its stakeholders". These are norms and values , concerns and interests as well
as resources .
· Process Perspective: The most important process categories of the new St. Gallen
Management Model. The St. Gallen Management Model understands an enterprise
as a system of processes. Processes are routine processes that shape the
everyday life of a company.
o Management processes: Management processes encompass all basic tasks related to
the "design, direction (steering) and development of purpose-oriented socio-technical
organizations". A distinction is made between normative orientation processes,
strategic development processes and operational management processes.
o Business Processes: Business processes embody the core activities of a business,
which are geared directly to customer value. They include the customer processes
(brand management processes, customer acquisition processes and customer loyalty
processes), the service creation processes and the performance innovation processes.
o Support processes: This is where in-house services for an effective completion of
business processes are accomplished. These include, for example, processes of
educational work ( learning processes ) and personnel work (continuing education
programs).
· Ordering moments: Everyday life, which takes place in the form of processes, calls
for a coherent orientation and meaning.
· Development Modes: Development modes describe the various types of
development of a company. The continuous, ongoing improvement of the existing is
referred to as optimization , while the discontinuous, only spiky creation of
something completely new is represented by renewal.

(Presentation “Strategies….”, slide 3, Isabell’s recording, the Internet)

53. How can Media Management be defined?

Media Management consists of (1) the ability to supervise and motivate employees and (2)
the ability to operate facilities and resources in a cost-effective (profitable) manner. Sherman
(1995)
Media Management – the changing nature of the communication industries preludes the
adoption of a universal theory of electronic media management. The complex day-to-day
challenges associated with managing a radio, television, cable, or telecommunications
facility make identifying or suggesting a central theory impossible. Albarran (2010)

(Presentation “Strategies….”, slide 4-7)

54. What are specifics of Media Management?

Media Management Specifics:

• High First-Copy-Costs/Economies of Scale

• High fixed costs for content and marketing

• Indirect „Prices“

• Specific Value Chain

• Globalization and Digitalization

• Democratic Responsibility and social privileges

Dual Market Situation

1.Audience Market

Goal: accepted content, reputable brands high circulation, market share,

possible sale revenues

2. Advertisement Market

Goal: high adv.revenues, access to relevant target groups (mostly 14-

49,well off)

(Presentation “Strategies….”, slide 6)

55. Characterize selected media under market/cost/operational perspectives?

The Internet and e-commerce

Market perspective –

· It speeds up communication and information flows and can be used by firms to

provide staff, suppliers and prospective customers with access to information about
products, processes and services;
 · provides a potentially lucrative

forum for buying and selling: for example the online retailing of books, CDs and travel
services.

Cost perspective –

· Lower costs / higher efficiency in various ways.

· With digital technology, the cost of producing marginally differentiated media

products can be much reduced. Digitization has therefore increased the economies
available to content creators as they seek to expand their markets.

Operational perspective –

· The Internet is also widely used for non-commercial activities such as research and
exchanging personal e-mail.

· Can be exploited across different distribution platforms and in different formats

much more easily.

· Digital technology allows for greater amounts of data or more layers of content to
be packed into a product, paving the way for a more sophisticated array of multimedia
and interactive goods and services.

(Doyle, Gillian: Understanding Media Economics. Sage, London 2009, p. 142-147)

56. What are key differences?

57. Describe the generic value chains of media firms

Firstly, the value chain can be separated into the producer’s part and the distribution part of
the value cain. Concerning the producer’s value chain, the producer can either offer acquired
content (bought from somebody else) or create own content. Acquired content has to be
selected, organized and packaged. Created content has to be further processed. In the next
step, the content is transformed into a distributable form. This leads to the distribution part –
distribution is the next step, directly followed by marketing, advertising and promotion.
(Karmasin Slides 2: 9)

58. Give an overview of Media Markets under management aspects

According to Wirtz, media markets must firstly be separated into non-electronic and
electronic media. This definition allows for media markets to be distinguished by the type of
media and the possibilities and limitations that each type of media bring along. So in the
non-electronic market there are newspapers, magazines and books for example, in the
electronic market there are films, TV content, radio, music, video games and the internet.
When talking about media related markets, the recipients cannot be generally grouped.
Rather they must be viewed according to the media’s structure – they can be readers, an
audience,listeners and also users. Users refer to video gaming and internet markets –
however internet markets especially encompass all formerly mentioned consumers also
(next to users, they can potentially be readers, listeners and an audience).
Media markets must also be looked at under the problem of locality and globalization. A
media product is (normally) to be produced and then distributed in a certain market (the
production can take place somewhere else of course). An Austrian newspaper clearly aims
at Austria as its geographical market. This local distinction however is becoming very
unclear – especially due to internet distribution. A US-American newspaper published online
might as well be read in any other part of the world, effectively making the entire world’s
population that media company’s audience. In this same breath it is also important to
consider language however, as media products (such as films or video games) for worldwide
distribution must be translated and perhaps some content must even be altered for
international distribution.

Managers must also consider the refinancing situation of the media company. This is
especially difficult for legacy media in modern times, as advertisers more and more drift
towards online intermediaries rather than for example classic newspapers. Newspapers
(next to their sales revenue) depend on advertisers that pay them to gain access to the
newspapers audience however – and this income is steadily getting smaller. Legacy media
industries therefore have to search for different forms of refinancing (for example premium
content offerings, subsidies or freemium models).

59. Describe a reference model for Media Management

The entire context of the media management model has to be differentiated and viewed on
3 levels: the global environment, the market and the media company.

The global environment describes the framework, boundaries and trends which influence
both the media company as well as the media markets. The following 5 areas can be
differentiated:
- Politics and law
- Technology
- Society
- Economy
- Ecology

All these factors are important for the development of media and for the management of a
media company.

The second level, the market, can be called the immediate setting. It can be described by all
relevant actors:
- Customers
- Suppliers
- Competitors
- Cooperation partner

The market can be viewed and described the following way: who are rivals and direct
competitors. Is there a threat through new competitors. Are there replacement products and
are they relevant. Who are the suppliers. How do customers react.

The media company itself can be described by 3 systems:

- Incentive System: It is at the core, describing the transformation of input factors to the
output. It is the process of the creation of value added products. First is the acquisition, then
production, then marketing – followed by financial processes.

- Management System: in order to make the incentive process successful, the management
system is needed. Its components are planning, controlling, information management, HR
and organization.
- Target System: All activities aim towards fulfilling certain goals. For example, the goal of a
TV broadcaster mightbe to produce TV programs with the underlying goal of economic
profitability. (explanation taken from the original source: Gläser S. 46)

60. What are business area strategies?

For different media, companies can find strategies of differentiation for the product itself and
also the audiences, for example:

- A radio station might offer different music programs, different broadcast time and length
and languages. The audiences might be differentiated by general and demographic listeners
and where they listen.

- A magazine might offer general or specialized content, a larger or smaller production size,
different release frequencies and concerning the audience might target a general or interest
audience in a certain geographic area

- A newspaper might focus on broader coverage or on more news, its presentation tone
(easier to understand, more in depth research etc.) its usage of photos and so on. The
audience might be differentiated between the broad mass or a specialized group (e.g. a
group with certain political views and so on), the local area or a statewide release and how
the product can be bought (subscription, single copy, both and so on)

- For Television, the program can be very varied or very specialized (on Music, Sports,
Lifestyle, Cultural and so on), when certain programs air and what counter programs are
offered. Consumers might be targeted because of the specific program or geographic
location for example.

Functional strategies for existing and new products include (in the example of an online
newspaper):

Existing product and existing market: market penetration; (test users: gain new users in
existing target groups. Double users: strengthen reader-journal bond, buying print and
online)

Existing product in new market: market development. (Reaching new target groups in the
web; gaining new target groups for the original medium)

New product in existing market: Product development (versioning – media specific edit of
content, double user – compound of cross-media offers)

New Product in new markets: Diversification, product innovation;

(Karmasin Slides 2: 26-28)

61. What are the basical choices?

All choices mean that one alternative is selected over another. Selecting among alternatives
involves three ideas central to economics: scarcity, choice, and opportunity cost. Scarcity is
the condition of having to choose among alternatives. A scarce good is one for which the
choice of one alternative use of the good requires that another be given up. It is within the
context of scarcity that economists define what is perhaps the most important concept in all
of economics, the concept of opportunity cost. Opportunity cost is the value of the best
alternative forgone in making any choice.

There are some basic questions faced by every society. How they are answered depends
largely on the type of economic system the country has. The questions are: What to
produce? How to produce? For whom to produce?

62. Define assets, core assets, core competencies

● An asset is a resource with economic value that an individual, corporation, or country

owns or controls with the expectation that it will provide a future benefit. Assets are
reported on a company's balance sheet and are bought or created to increase a
firm's value or benefit the firm's operations. An asset can be thought of as something
that, in the future, can generate cash flow, reduce expenses, or improve sales,
regardless of whether it's manufacturing equipment or a patent. Example – cash,
investments, inventory, office equipment, machinery, real estate, company-owned
vehicles
● Core assets include all assets including essential, important, or valuable property
without which a company cannot carry on with its normal operations and remain
 profitable. Core assets are required to help the company generate revenue. Example
– employees, its brand, networks, customers base
● The core competencies definition is a resource or capability that gives a firm
competitive advantage. Core competencies are the business functions or operational
activities that a company does best. They are also the resources and capabilities that
allow the company to achieve profitability. Example – content creation, content
sourcing, product development, promotion, cross-medial utilization, technology etc.

Assets are tangible and intangible resources that form the basis for the activities and the
competitiveness of an enterprise. Core assets concern company-specific assets that were
accumulated in-house or were at least refined and that have a special intrinsic value for an
enterprise’s value creation process. They are relatively scarce and do not lend themselves to
imitation or substitution by the competition. Core assets form the basis for a lasting
competitive advantage. Core competencies are a special form of competencies. They are
relatively scarce and do not lend themselves to imitation or substitution by the competition.
Core competencies make a significant contribution to the perceived customer benefits of an
end product and provide enterprises with a lasting competitive advantage

Wirtz (2011), p. 65.

63. What are functional strategies?

According to Gareth R. Jones, “Functional strategy is a plan of action to strengthen an

organization’s Functional and organizational resources, as well as its coordination abilities,
in order to create core competencies.” This strategy refers to single function operation and
the activities involved in it. This is an operating level of strategies. The decisions taken at this
level are referred as tactical decisions. The main purpose of functional strategy is to achieve
the corporate and business level objective in specific functional area by the optimum
allocation of the resources available to maximize the profitability. Most common functional
strategies used in management are: financial strategy, marketing strategy, production
strategy, human resources strategy (personnel strategy) and research and development
strategy.

64. What are the basical choices? (see 61, it’s the same)

65. Describe product and audience differentiation strategies for selected media
66. Describe distribution system choices and rules

With the term distribution system we can say that media companies are not any more limited
to a single distribution platform but they operate as entities in which they can offer content in
many different platforms at the same time (Albarran p. 69 - Chapter 5 “Multi-Platform Media
Enterprises”).

Examining the question from an Albarran point of view I would also mention that the internet
has become the primary content distribution platform for media companies. We can say that
users have then several possibilities of connecting to the internet, form the desktop, laptop,
mobile phones and so forth.

To this wide distribution scenario we can state that distribution platforms reach the user in
many ways giving to him a lot of advantages of connectivity, the negative aspect is that
media companies need to maintain a high cost development due to this vastity of platforms
(Albarran p.71 - ibidem).
Multi-platform content distribution will continue to expand and evolve in the 21st century -
this will also represent an important developing aspect in the media economy (Albarran
p.83). .

67. What are production strategy choices?

The companies can expand themselves in many ways, they can concentrate in internal
investment resources and also by the development and production of new products and
services.

Looking at the perspective from a “media eye” is possible to mention advertising as the
primary source of revenues (Albarran p. 61). These days many of the advertising revenues
are made form the digital environment, the big firms OTT companies own over 75% of digital
advertising revenues.

Other ways of a possible correct production strategy it can be a creation of new system and
horizons, like the pay per view system, the subscription mode that many SVoD platforms are
using these days (Netflix etc). These are other ways of an effective production strategy that
can provide revenues not only form the advertising perspective but also these methods.

68. What are marketing strategy choices?

Very briefly according to Albarran and what we have tackled through the lecture, there are
multiple marketing strategy choices, and they can be: advertising, promotion, increase of the
awareness, different strategies to persuade the consumer in order they can make allocation
decisions.

Is possible to mention in this case the vertical integration (Albarran) that is when the firm put
some effort to control the aspects of distribution, and exhibition that are related in the media
value chain. Still related to this aspect there is the possibility of leveraging the companies
advantages by the engagement of a cross-marketing and cross-promotional efforts in order
to rack up as much revenues as possible (Albarran p. 46 – Chapter 3 “Key concepts to
understand media economy”).

69. What does it mean to say the mass media operate in a dual product market?

According to Albarran it is possible to say that media markets are traditionally defined as a
dual product market because the product or the good is usually available in two distinct
markets: the advertising one and the consumer one.

Moreover, media markets have also been defined for their geographical location.

In the 21st century the paradigms changed again, meaning that now the structure of media
markets exists across most areas of the media economy, for instance they are represented
by a small set of firms that resemble an oligopoly that controls the 70% and 90% of a market
and joint to this there is also a number of smaller firms reassembling a monopolistic
competition for the rest of the market so, 10% and 30%.

Source Albarran – Chapter 4 “Evolving markets in the media economy” p. 51

70. What does it imply for Media Management?

With the term media management, we can say that is the process of taking decisions in
management by the professionalization of the field. So, this involves practical learning and
experiences joined to organisation processing. It is a new part of the developing media field.
Media management focuses on media corporations, organisations, leadership, motivation,
financial goals and also journalistic, political ones. It has a very broad engagement of lot of
elements as we can see.

I will now report some definitions of the terminology media management according to
Sherman and Albarran:

Sherman “Media management consists of the ability to supervise and motivate employees
and the ability to operate facilities and resources in a cost-effective (profitable) manner”.

Albarran “The changing nature of the communication industries preludes the adoption of a
universal theory of electronic media management. The complex day-to-day challenges
associated with managing a radio, television, cable, or telecommunications facility make
identifying or suggesting a central theory impossible”.

71. Describe different forms of revenues?

There are a lot of potential revenue sources at media enterprises. Wirtz divides them
into:
· State: fees, and others (subsidies, tax adcatanges etc.)
· Right management: Rights and licences
· Recipient market:
media access (a hardware device, encryption card etc.)
media usage (transaction dependent: price per movie; price per minute) &
(transaction independent -> subscriptions)
Others: archive services; merchandising
· Advertising market: Advertisements (space); Sale of user data,

(source: Wirtz 2020 p.65 ff || slide set 2 p.31)

72. Describe the cost and revenue situation of selected media!

 For example, Newspaper & magazine:
Revenue structure: 38% sales // 62% advertising
Cost structure: 42% first copy costs // 48% production and distribution

For example, Free TV:

Revenue structure: 14% others // 86% advertising
Cost structure: 78% first copy costs // 12% distribution

We can see that the advertising revenue source (excl. books) play one very major
role in the revenue structure of media companies. Moreover, we can observe that
there are high first copy costs and also distribution is another important cost factor.
The media industry is an economie of scales industry, meaning first high copy costs
and decreasing average costs by every additional unit sold. So, every additional unit
decreases the average costs.

(source: Albarran 2010 p.42 || Wirtz 2020 p.112 || lecture notes)

73. Give examples of Advertiser-Supported Media Products

 (source: Albarran 2010 p.53)

74. What are the management consequences?

The decision makers have be adaptive to environmental changes and optimize the
dual marketing situation. There are four possible strategies:
1. Optimization on revenues on both markets (Quality Newspaper, special
target group)
2. Optimizing of advertising revenues-content is free (private broadcasters,
free tv)
3. Optimizing of sales revenues and merchandising (books)

It is important to know how I can optimize both markets and to find out where should I
focus on. Adapting the business model to revenue changes and other environmental
changes are essential. Of course, managers must look on both markets the recipient
market and the advertising market.

(source: slide set 2 p.32)

75. CPT-CPM? What does it mean?

Cost Per Thousand/Cost Per Mille (CPT/CPM) = cost per 1000/per mille)

It is a benchmark for Marketing Industries and media bookings. The advertising

money in the market is allocated via a relation between price and number of people
reached. So we can say it is the “Price” in advertising markets. -> CPT/CPM says
how much costs I have for reaching 1000 persons in a specific target group via a
certain medium.
The larger the audience the more you can charge for an ad.
 If you have a very very specific audience you can even charge more, but then it
should be a very interesting target group (niche segment. F.e. rich people etc.)

Keep in mind that advertising depends on day time -> because f.e. in TV you will
reach more people in the evening than on the morning.

(source: slide set 2 p.33)

76. What are the management consequences?

The duplicate of question 74 😊 Here’s what I can add:

The very survival of businesses depends on their management. Ineffective management

leads to disastrous consequences. As all processes should be managed, it is important for
managers to state borders and rules and operate within these frameworks, encouraging
employees to do the same. Otherwise, internal, external environments, including partners
and stakeholders will suffer.

77. Discuss the circles of profitability in broadcasting

Circle of profitability in broadcasting are consisted of:

● 1) Increased profits
● 2) Improved programme budget
● 3) Increased audience
● 4) More subscribers/Increased revenue

When a new channel is launched, the only way to build up an audience is to invest in
programming. However, programming is expensive. At the same time, the audience for a
new channel will be low, which implies that little or no revenue can be earned in the early
stages. To avoid getting into a vicious circle of low programme budgets

and deteriorating audiences, a new channel must sustain its investment in programme
quality regardless of the fact that audiences and revenues will not, initially, cover these
costs.

It is only by sustaining its investment in programming that a broadcaster can hope to break
into a ‘virtuous’ circle of improving audiences and higher programme budgets. It may take
four or five years or even longer before a new channel has built up its revenue base to the
point where it begins to break even (Brown, 1999: 14). But once a sufficient number of
viewers or subscribers have been attracted to cover fixed operating costs, the broadcaster
can start to make considerable profits.
(Presentation “Strategies….”, slide 44, Doyle, Gillian: Understanding Media Economics.
Sage, London 2009, p. 61)

78. What is the vicious circle of profitability in broadcasting?

A vicious cycle of profitability is when a bad situation feeds on itself to make business
situation worse. A feedback loop exists that reinforces the poor results.

The same negative feedback loop can also run in reverse however, to create a virtuous
circle, where a good event feeds on itself to improve business further. It is a positive
feedback loop. A virtuous circle can be small operating over days or it can drive a whole
company’s strategy for decades.

Virtuous and Vicious Circles are everywhere in business, under different names:

Virtuous circles – Self-Fulfilling Prophesy, Snowball effect,

Vicious circles – Doom Loop, Slippery Slope, Death Spiral, Domino Theory, “Thin end of the
wedge”.

It is a key component of systems thinking – reinforcing loops. Business environment includes

hundreds of virtuous circles and vicious circles – operating at economy, industry, company,
strategic, department, teams or even within an individual’s head. They operate on cycles of
decades, years, months, or even days.

Harnessing even one virtuous circle can form the foundation of a successful strategy.

(Presentation “Strategies….”, slide 45, the Internet)

79. Is it true for print products as well?

Because most newspaper costs are fixed, the opportunity to make savings if and when
circulation falls is relatively limited (Picard, 1998: 122–3). This de-linkage between costs and
revenues means that newspaper publishers, like broadcasters, are prone to vicious
and virtuous circles of profitability. For example, a newspaper title that responds to a
decline in circulation by paring back on dedicated journalistic staff and relying more heavily
on news agencies as an inexpensive source of stories will run the risk of further declines in
readership and more losses in sales and advertising income (Greenslade, 2001: 4-5).

(Doyle, Gillian: Understanding Media Economics. Sage, London 2009, p. 125)

80. Describe the strengths and weaknesses of selected media for advertisers

The strengths and weaknesses of Social Media for advertisers:

Strengths:
§ Having enough campaign funds
§ Having formal-looking social media brand pages
§ Large and highly engaged fan base or followers who are focused
§ Presence on leading social media networks related to your industry. This is the
platform your target audience spends a lot of their time on
§ Providing contagious and compelling content
§ High volume and velocity of conversations, comments, likes and shares on the main
sites.

Weaknesses:
§ Having very few fans or followers
§ Inactivity on social media sites
§ Not enough advertising funds
§ No or fewer comments from viewers
§ Getting too many negative comments
§ Few likes and shares
§ Reduced fan engagement

Opportunities:
§ Having no or few competitors
§ Having influential people as page fans
§ Forming partnership with influential social media personalities
§ Latest social media platforms and trends
§ Rise in the number of internet users
§ A breaking news which will help start an engagement
§ Connecting business page to company website
§ High-quality digital products which can sold

Threats:
§ Having too many competitors
§ Getting negative comments
§ Very high number of dislikes on social sites
§ Aggressive campaign by competitors
81. What is multi valorisation?

Multi valorisation means the exploitation/usage of content through multiple and different
channels/media types. It refers to value being creating from an original media product, which
is then repurposed on different media platforms (Some examples: a book may further turn
into a series or a movie adaptation, a video game might turn into a cartoon etc.)

Companies so to speak exploit multiple usages of the same media content - it’s a form of
content convergence. Multiple streams of revenue are created.

"Valorisation, in short, can be done by transforming knowledge and technology into

something tangible. Newly developed technology and knowledge will be used for the benefit
of society."

82. Give an Example!

A very well known example of multi valorisation is the Harry Potter franchise. Content which
originally started out as a book received further value for the company by repurposing the
content in forms of movies, video games and even non-media types of usages such as
merchandising products (like clothing, every-day equipment etc.)

83. What are factors affecting the sustainability of media companies?

- Production Forces (availability of materials, capital costs, labor costs, energy costs, taxes,
distribution costs)
- Technological Forces (availability of technology, user adoption of technology)
- Market Forces (consumer demand, advertiser demand, demographic and psychographic
changes, competition)
- Social Forces (environmental demands, political/legal demands, cultural/social demands)
- Managerial Forces (organizational effectiveness, productivity, financial control, innovation,
responsiveness to change)

84. How can we define competitive advantages?

Competitive advantages consist of a firm’s core assets (employees, its brand, networks,
customers base) and its core competencies (content creation, content sourcing, product
development, promotion, cross-medial utilization, technology and so on)

Assets: tangible and intangible resources that form the basis for the activities and
competitiveness of a company. Core assets concern company-specific assets that were
accumulated in-house or were at least refined and that have a special intrinsic value for
an enterprise’s value creation process. Core competencies are a special form of
competencies.

Competencies form the foundation for action in an enterprise and facilitate the service
creation process in which assets and core assets are combined into marketable services.
Core competencies make a significant contribution to the perceived customer benefits
of an end product and provide enterprises with a lasting competitive advantage.

Both core assets and core competencies are relatively scarce and do not lend
themselves to imitation or substitution by the competition.
(Slides 2: 17-20)
85. How is the process of finding competitive advantages?

Through external analysis, the assets and core competencies that are strategically important
for the future must be predicted. Developmental scenarios for the future procurement,
advertisements, competition and the recipient market can be included – from these, valuable
core assets and core competencies can be derived. Example: in the future it will be
important to market content in a multimedia fashion via various channels. A comparison
between the current asset/competence profile with the profile which is relevant for the future
(which has been created in the former step) identifies the areas where action has to be
taken. To have a competitive advantage, a company needs to have access to competencies
that are necessary for the future and it should ensure those through development and
expansion of current assets and competences. Assets and competence areas that are not
part of the core areas of a company on the other hand can be dropped.

First step: actual situation identification (value added chain analysis; identifying core assets
and competencies that are valuable, rare, not acquirable and not imitable)

Second step: creation of a target profile (market analysis; development of future scenarios ->
derivation of relevant future assets and core competencies)

Third step: Comparison of actual situation and the target profile

Fourth step: The need for action becomes evident – action to foster relevant core assets and
core competencies can happen in different ways: fast build up by intensified investment and
learning processes, maintenance and upgrading, access via cooperation or additional
purchases. (Wirtz: 67-68)

86. What are elements of a business model according to Wirtz?

strategic components, customer and market components, value creation components

87. What are business models in the media industry?
A company's business model is an important representation of how a company does
business. Despite the size of the business or the industry in which a business operates, a
business model details how an organization creates and delivers products or services,
specific business processes, infrastructure, customer acquisition strategies, and the
intended customer base. Business models come in a variety of forms:
· Advertiser-supported business model – embedded commercials, banner ads, click-
through advertising
· Subscriptions business model – annual, monthly, or weekly payments to receive
premium content
· Pay-per-use business model – user pays only for content obtained. Can be used for
music and videos (iTunes) or for archival content from newspapers, magazines, or broadcast
sites

88. Give Examples of basic information you need to understand media industries and
firms

Industry-Level Data:
How many companies operate in the field?
What is the total turnover (revenue) produced in the industry?
What amount comes from advertising?
What amount comes from viewers, listeners, and readers?
What amount comes from other sources?
How has turnover changed?
What is the media industry‘s share of total advertising?
How has that share of advertising changed?
What is the industry‘s share of total consumer expenditures for media?
How has that share of expenditures changed?
How many people are employed in the industry?
How has employment in the industry changed?
What is the value of imports and exports of products in the industry?
Who are the main customers of firms in the industry?
What social or economic changes are altering their purchasing and use choices?
Company-Level Data:
What are the firm‘s turnover (revenue) and sources?
What is the company‘s share of the audience market?
What is the firm‘s share of the advertising market?
What is the company‘s operating margin?
What is the company‘s net income before depreciation?
What is the firm‘s net income before extraordinary items?
What is the firm‘s equity ratio?
What is the company‘s quick ratio?
What is the turnover per employee?
What is the value added per employee?
How much capital investment has been made?
What are the assets of the firm?
What is its share price?
What are the dividends it has paid to investors?
How have these indicators changed?

(Karamsin: 46-47 slides / Picard, Robert G.: The Economics and Financing of Media
Companies. Fordham University Press, 2002, p. 238f)

89. Why is digitalisation a challenge for media management?

· Digitalisation affects all sectors and company sizes. The digital transformation firstly
affected the TIME sectors (telecommunications, information technology, media, and
entertainment)
· Digitalisation generates disruptive competition
· Digital distribution is simply not as profitable as traditional broadcasting. “This means that
media companies need to get better at understanding their audiences,” says Tony Emerson,
Microsoft’s managing director for Worldwide Media and Cable. “By having access to the
critical information about who is watching what show and when, they can better target shows
and charge more money for every impression made.”
· The ability to handle all international payment types, methods and currency in a secure
environment is a necessity for the majority of media companies
· The ability for broadcasters and media companies to have the flexibility and agility they
need to attract and retain fickle viewers who have ever-increasing media options at their
fingertips.
· Decline of traditional revenue streams (e.g. voice calls, packaged software, printed or
publicly broadcasted content).
· New customer needs (e.g. data driven communications, cloud computing, internet of
the things, social media, personalized information and entertainment).
· Capital expenditure and Operating Expenses efficiencies (e.g. network sharing,
downsizing, cost cutting).
· Regulatory compliance (e.g. fair competition, data protection, transparency).

90. What is the TIMES Industry?

Telecoms, Information Technology, Media, Entertainment and Security sector is an industry

grouping that includes the majority of companies focused on new technologies and provides
integrated services, for example, Media, E-Commerce-Service, M- Commerce, TK-Services,
Software Navigation/Browser and Handhelds

91. What is the value chain in the TIMES industry?

In this case we have the emerge of something as a time integration. Everything is brought
together to one face for the customer. For instance, telecommunication, information
technology, media, entertainment, security are all part of integrated TIMES corporation.

According and trying to give an explanation and interpretation of the graph down below we
can say again that all these elements, like content production, aggregation, connection
networking, add value service and navigation/source are all integrated services that then go
and connect directly to customers.

92. Why is security so important?

93. What are determinants of convergence?

Before saying the cause of convergence here is a definition of convergence:

Convergence = “complex, multi-layered interactions between ‘traditional’ (or ‘old’)

communication cultures and emerging (‘new’) online, mobile media” Allan, 2010: xiivf.)

Nowadays convergence is part of our lives. Every element bonds together in order to make
this concept clearer, I report an example from “Media Convergence Book” which says that
telephone is a great element of convergence. For instance, we can take pictures, videos,
listen to FM-Radio, download apps, send messages, read newspapers and look at the
internet (Source “Media and Convergence Management” - Chapter 2- “Business Modelling
and Convergence” p. 10).

The main theme is that all elements actually bond in one single device and move toward this
technological wave.

Other elements that cause convergence are the technological innovations, market
deregulation, the change of the user preferences.

Technological innovations are responsible for the digitalization, a higher broadcast capacity,
and new intelligent network structures.

The market deregulation creates convergence in a way of new competitors in the industry, a
cross-sectoral competition and a continuous deregulation.

With the element of the shifting of the user preference we can state that there is a creation of
individualization of the customer relations and systemic solutions.

94. Describe the four levels of convergence according to Wirtz!

According to Wirtz the four levels of convergence are 4: sector convergence,

supplier/company convergence, business segment convergence and product convergence.

With sector convergence we have a growing number of companies within the involved
sectors that leads to a convergence of these sectors. Is also a worldwide phenomenon and
can be said to have a global significance.

Analysing the second element of convergence there is the supplier/company convergence

which forces the firms to reassess their position within the value chain. There is also the
reconfiguration of the value chain that leads to the alignment of the company barrier.

The third element of convergence is business segment convergence, in this case there is the
product convergence that affects various business units of a company or business units of
different companies. There are chances and risks through coordination and cooperation.

The last element is product convergence and here we have the convergence of a content
through the standardization of the formats and distribution channels. Also, elements of
convergence of end devices through integration of functionality are presented.

(Is possible to find all the information on “Slide 7” of MCM convergence PPT + p. 52 Wirz
“Media and Internet Management”)

95. Describe the information and knowledge content industries cluster

96. Why OFC? What does it imply?
OFC – One face to the customer

You find this effect specially in the TIMES industry, where integrated TIMES-
corporations (content production, aggregation, connection networks, added value
services and navigation search) are offered as a single integrated service with one
face to the customer. That does not mean that the companies behind this process
are one and the same, but in the most cases the customer does not care about the
companies behind. -> you have one entry point f.e. you are listening to music via
itunes and you pay it. It does not mean that the paying service or the music label is
owned by apple.
As short explan. You can say: one service provider – one brand – one billing service

(source: slide set 3 p.5 // p.9)

97. Give Examples of multiple platforms!

For example, the Austrian public broadcaster ORF distributes information via the
following platforms:
· Analog Radio: available via analog and shortwave radio
· Internet: ORF programmes are available via internet – video and radio on
demand platforms. News website.
· Podcasts: The radio channels FM4, Ö3 etc. podcasts are available on the
orf radiothek and also on spotify and other platforms.
· TV: ORF distributes via satellite, cable (third party) and terrestrial.
· Social Media: ORF shares news and content via Facebook
· Mobile devices: You can download the ORF apps (Tvthek, Sport etc.)
(source: slide set 3 p.10//11 || own example)

98. Compare Mass Media and Consumer Media

Mass media is characterised through:
· Control of distribution (media owner decides)
· Linear experience (terrestrial)
· Limited choices
· Limited advertiser options
· Oligopoly power (few media enterprises)
· Impersonal

Consumer media is characterised through:

· Control of access and choice (streaming)
· Non-linear experience (via internet)
· Expanded choices
· Many advertisers options (target specific marketing)
 · Unlimited competitors
· Personal and interactive (platforms, user generated content)

Nowadays we can observe a shift from mass media to consumer media, where the
consumers have the control of the content and the choice. Consumer media is also
more an interactive and personalized media, especially social media platforms are
very interactive and you will find in a way more public opinions and discussion.

(source: slide set 3 p.14)

99. What is the difference between traditional and social media?

Traditional media such as Tv, radio, print and radio are institutional controlled from
media outlets. In comparison social media are based on platforms where consumer
can control the content or contribute to the other user generated content. Forms are
podcasts, vlogs, forums, wikis etc.
The role of journalism has changed from gatekeeper (traditional) to gate watcher
(social media).
You can distinguish between legacy media (traditional, mainstream media) and social
media. In Mainstream you think about access, production, consistency,
professionalism and at social media you see aspects such as self-exposure,
relationships, annotation, conversation. Also the revenue streams are different.
Social media is free (advertising financed) – you pay this service via ability to ads
and via your data.
One thing to keep in mind!! – this forms don’t exclude each other – f.e. people see
smth. On facebook and then watch tv about a happening etc.
A rational way is convergence by watching tv and using social media together. It
blurs together but it does not become one.

(source: slide set p.12 / p.3 || lecture notes)

100. Describe the „long tail“!

Products with long-term incremental value are representing the “long tail” according
to Anderson (2006) -> Especially media products have the unique feature that they
can be reused over and over. TV programs, music and movies can be recycled again
and again, unlike other conventional products such as an barrel of oil, which when
they are consumed they are gone. The long tail resembles a demand curve that
follows a long downward trajectory, suggesting that over time a popular movie, book,
will still be in demand long after it has obtained any sort of “hit” status, and it will be
sought by smaller, niche buyers. The internet, thanks to its ability to access servers,
with stored content, enhances long tail activity in regard to demand for media
content.
 (source: Albarran 2010 p. 38)

101. Give examples of New Business Models for Media Platforms

(Presentation “Digitalization and TIMES….”, slide 28)

Netflix – Subscription – monthly payments to receive premium content

iTunes – Pay-per-use

YouTube – Advertiser-supported – embedded commercials, banner ads, click-through

advertising

Podcasts – Pay-per-use, Subscription, Advertiser-supported

Wikipedia.com – Revenues from donations

Ebay.com – Revenues through sales commissions, listing fees and banner advertising

102. What is Freemium?

Freemium is a model where consumers subsidize other consumers. A free account gives
limited access to the content, the premium account gets the user full access (in the example
of web content). The ones having the premium account (smaller group) subsidize those with
the free account (larger group). Another example could be giving away book samples (slides
3: 29).

103. What are the four tendencies in the future development of convergence?

Several future opportunities for implementation of convergence principles are the global
scientific and technical system, realizing sustainable society, advancing human capabilities,
and conflict resolution.

(Mihail C. Roco - Principles of convergence in nature and society and their application: from
nanoscale, digits, and logic steps to global progress)
104. Discuss the connection between convergence and innovation!

With convergence we mean that elements do not exclude each other’s. The decisive idea
beside convergence is that nothing is exclusive because many elements blur together.

Technology changed our life, and it is central in our daily routine, is expanding the
boundaries of our social environment and also the market structure. Technology will
continue enlarging especially in the media entertainment and information, bringing more
modern devices, and increasing the utility of the digital media role. More people will get
information thanks to more sophisticated media devices, and this will strongly impact on the
media market economy. The passage from an analogue signal to a digital one with the
diffusion of the internet started enlarging and blurring the boundaries of media markets.

Is possible to affirm that the technological aspect impacted the media economy to a big
change. The traditional media and communication market, focused on a single business
model, which was the advertising one. Due to technology the traditional business model
changed, bringing new arrays of choices and option for the consumers creating a
fragmentation and declining of the traditional media market. In this century, all this new
digital companies (Netflix, Amazon, Apple, Microsoft and so forth) impacted in the media
economy offering new technological aspects that make struggle the more traditional media
firms (Albarran).

105. What are economic, managerial and democratic implications of this

process?

??? - hmm maybe:

One development is the emerging of the times industry through unbundling and rebundling
and it is at least for the media industry (broader sense) how can content contribute to added
value, how can content be one driver, and can content drive also the use of broadband (5G).
-> very true for entertainment but is it also true for other media content?

If we take a look on social media, interaction and perzionalisation indicate a shift from
content regime from institutional control to user control. This is a challenge for legacy media
as well.

- Content -> several challenges; intellectual property rights copyright – not all
countries apply the same standard on copyright; a lot of piracy.

journalism as a profession in contrast to user generated content – are people still want to
pay for news, is it necessary to have journalists in society?;

what is the USP of journalism – can we create brands from legacy media to new
environments;
 - Refinancing -> paywall, pay per view, crowd financing public sponsoring; a lot of
experiments in the industry; market failure is the rule in media market and not the
exception (economies of scale, concentration etc.);

The market will not take care about quality and independent journalism; -> !!! HOW DO I
MONETARIZE MY CONTENT

- How do I safeguard structural innovation and organizational innovation ->

Management has to Make shure that we have a culture of permanent innovation,
rethinking -> one form would be Matrix Organization f.e. newsroom