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MEDIA AND D IGITAL

MANAGEMENT
ELI M. NOAM
Media and Digital Management
Eli M. Noam
Media and Digital

Management
Eli M. Noam
Columbia Business School
Columbia University
New York, NY
USA
ISBN 978-3-319-71345-8 ISBN 978-3-319-72000-5 (eBook)

https://doi.org/10.1007/978-3-319-72000-5
Library of Congress Control Number: 2017964229
© The Editor(s) (if applicable) and The Author(s) 2019, corrected publication 2019
This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether
the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of
illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and
transmission or information storage and retrieval, electronic adaptation, computer software, or by simi-
lar or dissimilar methodology now known or hereafter developed.
The use of general descriptive names, registered names, trademarks, service marks, etc. in this publica-
tion does not imply, even in the absence of a specific statement, that such names are exempt from the
relevant protective laws and regulations and therefore free for general use.
The publisher, the authors and the editors are safe to assume that the advice and information in this
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Cover image © Maxim Basinski/Alamy Stock Vector

Cover design by Fatima Jamadar
Printed on acid-free paper
This Palgrave Macmillan imprint is published by the registered company Springer Nature Switzerland AG
The registered company address is: Gewerbestrasse 11, 6330 Cham, Switzerland
V
Contents
I Overview
1 Introduction...................................................................................................................................... 3
1.1 The Need for “Media Management”?........................................................................................... 4
1.2 Approaches to the Study and Teaching of Media Management....................................... 4
1.3 Outline of the Book............................................................................................................................. 5
1.4 Outlook.................................................................................................................................................... 5
2 The Information Environment............................................................................................... 7

2.1 Drivers of Change................................................................................................................................ 8
2.1.1 The Setting.............................................................................................................................................. 8
2.1.2 Technology............................................................................................................................................. 8
2.1.3 People....................................................................................................................................................... 8
2.2 The Microeconomics of the New Media Economy.................................................................. 9
2.2.1 Characteristic #1 of Media and Information: High Fixed Costs,
Low Marginal Costs—Very High Economies of Scale................................................................ 9
2.2.2 Characteristic #2 of Media and Information: Network Effects................................................ 9
2.2.3 Characteristic #3 of Media and Information: Excess Supply................................................... 10
2.2.4 Characteristic #4 of Media and Information: Price Deflation.................................................. 10
2.2.5 Characteristic #5 of Media and Information: Convergence of Technology........................ 11
2.2.6 Characteristic #6 of Media and Information: Importance of Intangible Assets................ 11
2.2.7 Characteristic #7 of Media and Information: The Presence
of Non-Maximizers of Profit............................................................................................................... 11
2.2.8 Characteristic #8 of Media and Information: High Government Involvement.................. 12
2.2.9 Summary of Economic Properties................................................................................................... 12
2.3 Review Materials.................................................................................................................................. 12
2.3.1 Questions for Discussion.................................................................................................................... 13
2.3.2 Quiz........................................................................................................................................................... 13
Quiz Answers.......................................................................................................................................... 16
II Production
3 Production Management in Media and Information............................................. 19
3.1 Media Production................................................................................................................................ 21
3.1.1 Introduction........................................................................................................................................... 21
3.1.2 Content Production............................................................................................................................. 21
3.1.3 Special Characteristics in Content Production............................................................................ 21
3.2 Content Industries.............................................................................................................................. 22
3.2.1 Early Content.......................................................................................................................................... 22
3.2.2 Types of Production............................................................................................................................. 22
3.2.3 Cost Characteristics: Film Versus Theater...................................................................................... 22
3.2.4 History of the Film Production Industry........................................................................................ 23
3.2.5 Production in Other Media Industries............................................................................................ 24
3.2.6 The Global Success of the Hollywood Production Industry.................................................... 26
3.2.7 Case Discussion..................................................................................................................................... 27
3.3 Conventional Arguments for Hollywood’s Success in Production................................... 28
3.3.1 Supposed Advantage: Market Size? Language?......................................................................... 28
VI Contents
3.3.2 2nd Supposed Advantage: Vertical Integration of Content with Distribution?................ 29

3.4 Organizational Success Factors for Content Production...................................................... 30
3.4.1 Organizational Structure.................................................................................................................... 30
3.4.2 Funding and the Reduction of Risk................................................................................................. 32
3.5 Product Development....................................................................................................................... 34
3.5.1 Concept (Style)...................................................................................................................................... 34
3.5.2 Product Selection................................................................................................................................. 35
3.5.3 Product Development......................................................................................................................... 37
3.6 Production Planning.......................................................................................................................... 38
3.6.1 Operational Challenges for Content Production........................................................................ 38
3.6.2 Budgeting............................................................................................................................................... 38
3.6.3 Location and Supply Chain................................................................................................................ 42
3.6.4 Inventory Management...................................................................................................................... 43
3.6.5 Production Scheduling....................................................................................................................... 43
3.7 Production Control............................................................................................................................. 46
3.7.1 Budget Control...................................................................................................................................... 46
3.7.2 Productivity Measurement................................................................................................................ 46
3.8 Revenue Shares of Producers in Media....................................................................................... 48
3.9 Content Production in the Next Generation of Technology............................................... 48
3.10 Case Discussion.................................................................................................................................... 49
3.11 Conclusion: Success Elements for Content Production........................................................ 53
3.12.2 Quiz........................................................................................................................................................... 56
Quiz Answers.......................................................................................................................................... 58
4 Technology Management in Media and Information Firms.............................. 59

4.1 Technology Drivers and Trends...................................................................................................... 61
4.1.1 Case Discussion..................................................................................................................................... 62
4.2 Technology Management................................................................................................................ 62
4.2.1 The Technology Function................................................................................................................... 62
4.2.2 Chief Technology Officer (CTO)........................................................................................................ 63
4.2.3 Key Tasks for the CTO: Technology Assessment.......................................................................... 63
4.2.4 Integration of Technology with Firm Strategy............................................................................. 68
4.2.5 The Placement of R&D: In-House, Acquired, or Co-developed?............................................ 72
4.2.6 The Organizational Structure of R&D Activities.......................................................................... 73
4.2.7 Open Innovation – Community-Based R&D................................................................................. 75
4.2.8 Budgeting for Innovation................................................................................................................... 76
4.2.9 Implementing R&D Alliances............................................................................................................ 77
4.2.10 Knowledge Management................................................................................................................... 77
4.2.11 Standards Strategy............................................................................................................................... 78
4.3 The Six Stages of Media and Communications Technology
Digital Convergence: “The 6 C’s”.................................................................................................... 79
4.3.1 Convergence #1: Computers............................................................................................................. 79
4.3.2 Convergence #2: Computers with Communications Hardware............................................ 82
4.3.3 Convergence #3: Integration with Consumer Electronics....................................................... 84
4.3.4 Convergence #4: Integration with Content.................................................................................. 85
4.3.5 Convergence #5: The Media Cloud................................................................................................. 87
4.3.6 The Next Convergence: Bio-electronics and Human Cognition............................................ 88
4.4 The Next Act for Sony........................................................................................................................ 88
4.4.1 Case Discussion..................................................................................................................................... 88
VII
Contents
4.5 Outlook.................................................................................................................................................... 90
4.6.2 Quiz........................................................................................................................................................... 92
Quiz Answers.......................................................................................................................................... 95
5 Human Resource Management for Media and Information Firms................ 97

5.1 The HRM Function and Its Organization..................................................................................... 98
5.1.1 Introduction........................................................................................................................................... 98
5.1.2 HRM Characteristics in Media, Information, and Digital Industries?.................................... 100
5.2 HRM By the Numbers: “Hard HRM”............................................................................................... 100
5.2.1 The Rate of Return on Investment in Human Capital................................................................ 100
5.2.2 The Internal Labor Markets................................................................................................................ 103
5.2.3 The Use of Finance Theory in Analyzing Compensation.......................................................... 105
5.2.4 Salary Differentials................................................................................................................................ 107
5.3 HRM by Negotiation: “Tough Labor”............................................................................................ 109
5.3.1 The Industrial Workforce.................................................................................................................... 109
5.3.2 The Crafts (Skilled) Media Workforce.............................................................................................. 110
5.3.3 The Creative Workforce....................................................................................................................... 110
5.3.4 Freelancers and Unions in the “New Economy”.......................................................................... 111
5.3.5 Building Relationships with Unions................................................................................................ 112
5.4 HRM by Human Touch: “Soft Control”......................................................................................... 113
5.4.1 Soft Control............................................................................................................................................. 113
5.4.2 Managing and Motivating the Creative Workforce.................................................................... 113
5.4.3 Models of Motivation.......................................................................................................................... 113
5.5 Employment in the Digital Economy........................................................................................... 120
5.6 Conclusion and Outlook................................................................................................................... 122
5.7.2 Quiz........................................................................................................................................................... 123
Quiz Answers.......................................................................................................................................... 126
6 Financing Media, Information, and Communications........................................... 127

6.1 Introduction.......................................................................................................................................... 129
6.1.1 The Finance Function in Companies.............................................................................................. 129
6.1.2 Basic Factors in the Finance of Media and Communications................................................. 129
6.1.3 Case Discussion..................................................................................................................................... 130
6.1.4 An Overview of Funding Sources.................................................................................................... 130
6.2 Internal Funding.................................................................................................................................. 130
6.2.1 Case Discussion..................................................................................................................................... 132
6.3 Debt Financing..................................................................................................................................... 133
6.3.1 Pros and Cons of Debt......................................................................................................................... 133
6.3.2 The Hierarchy of Debt......................................................................................................................... 133
6.3.3 Case Discussion..................................................................................................................................... 134
6.3.4 Short-Term Debt.................................................................................................................................... 134
6.3.5 Long-Term Debt.................................................................................................................................... 134
6.4 Other Types of Debt............................................................................................................................ 135
6.4.1 Vendor and Buyer Financing............................................................................................................. 135
6.4.2 Lease Finance......................................................................................................................................... 137
6.4.3 Government Financing....................................................................................................................... 137
6.4.4 Private Grant Financing...................................................................................................................... 138
VIII Contents
6.4.5 The Impact of Debt Financing on Content................................................................................... 139

6.5 Risk Reduction Strategies................................................................................................................ 139
6.5.1 Risk Reduction Strategy: Diversification........................................................................................ 139
6.5.2 Risk Reduction Strategy: Hedging................................................................................................... 140
6.6 Equity Financing.................................................................................................................................. 140
6.6.1 Types of Equity Arrangements......................................................................................................... 140
6.7 The Ownership of Media and Communications Companies............................................... 151
6.7.1 Individual and Family Ownership of Media.................................................................................. 151
6.7.2 Institutional Investors.......................................................................................................................... 151
6.7.3 Governmental Ownership................................................................................................................. 153
6.8 Capital Structure.................................................................................................................................. 153
6.8.1 Optimal Capital Structure.................................................................................................................. 154
6.8.2 The Lifecycle of Capital Structure.................................................................................................... 157
6.9 Outlook.................................................................................................................................................... 158
6.10.2 Quiz........................................................................................................................................................... 160
Quiz Answers.......................................................................................................................................... 163
7 Intellectual Asset Management........................................................................................... 165

7.1 Intellectual Assets............................................................................................................................... 166
7.1.1 What Are Intellectual Assets?............................................................................................................ 166
7.1.2 History...................................................................................................................................................... 166
7.1.3 How Companies Organize Their Intellectual Property Management.................................. 168
7.2 The Different Types of Intellectual Assets.................................................................................. 169
7.2.1 Trade Secret Protections..................................................................................................................... 169
7.2.2 Contract-Created Intellectual Assets.............................................................................................. 171
7.2.3 Patents...................................................................................................................................................... 172
7.2.4 Trademarks............................................................................................................................................. 173
7.2.5 Copyrights............................................................................................................................................... 175
7.3 The Commercialization of Intellectual Assets.......................................................................... 178
7.3.1 How Important Is an Intellectual Asset?........................................................................................ 178
7.3.2 Aligning Intellectual Assets with Strategy: Intellectual Asset Audits................................... 179
7.3.3 How to Value Intellectual Assets...................................................................................................... 179
7.3.4 Intellectual Asset Management....................................................................................................... 181
7.4 Challenges to Intellectual Assets.................................................................................................. 189
7.4.1 Piracy........................................................................................................................................................ 189
7.4.2 Protection Strategies........................................................................................................................... 190
7.5 Case Conclusion................................................................................................................................... 194
7.5.1 Case Discussion..................................................................................................................................... 194
7.6 Outlook.................................................................................................................................................... 194
7.7.2 Quiz........................................................................................................................................................... 196
Quiz Answers.......................................................................................................................................... 199
8 Managing Law and Regulation............................................................................................. 201

8.1 Introduction: Non-Market Competition..................................................................................... 202
8.1.1 Case Discussion..................................................................................................................................... 202
8.1.2 The Relationship of Government and Media............................................................................... 203
8.2 The Legal and Public Affairs Functions in Media Firms......................................................... 205
8.2.1 General Counsel: Head of Legal Department.............................................................................. 205
IX
Contents
8.2.2 Outside Counsel.................................................................................................................................... 205

8.2.3 Litigation Management...................................................................................................................... 206
8.3 Influencing Government and the Public.................................................................................... 209
8.3.1 Lobbying.................................................................................................................................................. 209
8.3.2 Public Relations Management.......................................................................................................... 212
8.4 The Regulatory Process..................................................................................................................... 215
8.4.1 Self-Regulation...................................................................................................................................... 215
8.4.2 Direct Government Regulation........................................................................................................ 215
8.5 Substantive Media Law..................................................................................................................... 218
8.5.1 Content Restrictions............................................................................................................................ 218
8.5.2 Antitrust and Anti-monopoly Law................................................................................................... 220
8.6 Outlook.................................................................................................................................................... 223
8.6.1 Case Discussion..................................................................................................................................... 223
8.6.2 Looking Ahead...................................................................................................................................... 223
8.7.2 Quiz........................................................................................................................................................... 226
Quiz Answers.......................................................................................................................................... 229
III Marketing
9 Demand and Market Research for Media and Information Products.......... 233
9.1 Why Demand Analysis....................................................................................................................... 234
9.1.1 The Importance and Special Problems of Demand Estimation for Media Industries..... 234
9.1.2 Examples for the Problems in Forecasting Media Demand.................................................... 235
9.1.3 Limits to Audience and Market Research...................................................................................... 236
9.1.4 How Media Companies Organize Their Market Research........................................................ 237
9.1.5 Case Discussion..................................................................................................................................... 238
9.2 Data Collection..................................................................................................................................... 238
9.2.1 The Impact of Collection Methodology........................................................................................ 238
9.2.2 Collecting Data from Users................................................................................................................ 239
9.2.3 Measurement at the Provider (Sell-Side) Level........................................................................... 243
9.3 Analyzing the Data............................................................................................................................. 247
9.3.1 Transforming Data into Information—Audience Metrics........................................................ 247
9.3.2 Transforming Information into Knowledge: Qualitative Analysis......................................... 249
9.3.3 Quantitative Analysis: “Data Mining” —Overviews of Techniques........................................ 250
9.4 Conclusions and Outlook................................................................................................................. 259
9.4.1 Case Discussion..................................................................................................................................... 259
9.4.2 Challenges in Audience and Market Research............................................................................ 260
9.4.3 Conclusion.............................................................................................................................................. 262
9.5.2 Quiz........................................................................................................................................................... 263
Quiz Answers.......................................................................................................................................... 266
10 Marketing of Media and Information............................................................................ 267

10.1 Marketing: General.......................................................................................................................... 270
10.1.1 What Is Marketing?............................................................................................................................ 270
10.1.2 The Marketing Function: Structure and Organization........................................................... 271
10.1.3 How Does the Marketing of Media Products and Services
Differ from Regular Marketing of Other Products?................................................................. 271
X Contents
10.1.4 Limited Attention.............................................................................................................................. 272

10.2 Case Discussion................................................................................................................................. 273
10.3 Product Design.................................................................................................................................. 274
10.3.1 Statistical Tools for Product Design............................................................................................. 274
10.4 Product Positioning......................................................................................................................... 275
10.4.1 Case Discussion.................................................................................................................................. 276
10.4.2 Demand and Audience Analysis................................................................................................... 276
10.4.3 Case Discussion.................................................................................................................................. 277
10.4.4 Competitor Analysis.......................................................................................................................... 277
10.4.5 Branding............................................................................................................................................... 277
10.5 Pricing................................................................................................................................................... 278
10.6 Promotion........................................................................................................................................... 279
10.6.1 Promotion: General........................................................................................................................... 279
10.6.2 Timing................................................................................................................................................... 279
10.6.3 Word of Mouth, Buzz, and Viral Marketing................................................................................ 279
10.6.4 Publicity and Public Relations....................................................................................................... 280
10.6.5 Product Placement............................................................................................................................ 280
10.7 Advertising......................................................................................................................................... 281
10.7.1 Advertising: General......................................................................................................................... 281
10.7.2 Advertising Agencies........................................................................................................................ 281
10.7.3 How Much to Spend on Advertising?......................................................................................... 282
10.7.4 Case Discussion.................................................................................................................................. 284
10.7.5 The Optimal Mix of Marketing Activities.................................................................................... 284
10.7.6 Case Discussion.................................................................................................................................. 285
10.7.7 Allocation Within a Media and Marketing Category.............................................................. 286
10.8 Promotion to Advertisers, Retailers, and Distributors....................................................... 287
10.8.1 Promotion to Advertisers................................................................................................................ 287
10.9 The Impact of the Internet on Marketing................................................................................ 288
10.9.1 Customization, Targeting, and Individualization..................................................................... 289
10.9.2 New Tools for Creating Marketing Impressions....................................................................... 289
10.9.3 New Types of Reach.......................................................................................................................... 290
10.9.4 Tracking Customers.......................................................................................................................... 290
10.9.5 Location-Based Marketing.............................................................................................................. 290
10.9.6 Dynamic Pricing and Auctions...................................................................................................... 290
10.9.7 Social Marketing................................................................................................................................ 290
10.9.8 Payments and Micropayments...................................................................................................... 291
10.9.9 Data Mining and Online Market Research................................................................................. 291
10.9.10 Relationship Building....................................................................................................................... 291
10.9.11 Creating a Marketplace for Online Advertising........................................................................ 291
10.10 The Promotion of Media Products............................................................................................. 291
10.10.1 Film......................................................................................................................................................... 291
10.10.2 TV and Cable Channels.................................................................................................................... 292
10.10.3 Music...................................................................................................................................................... 292
10.10.4 Books..................................................................................................................................................... 292
10.10.5 Newspapers......................................................................................................................................... 293
10.10.6 Magazines............................................................................................................................................ 294
10.10.7 Video Games....................................................................................................................................... 294
10.11 The Marketing of Technology...................................................................................................... 294
10.12 The Regulation of Marketing....................................................................................................... 295
10.12.1 Self-Regulation................................................................................................................................... 295
10.12.2 Government Regulation of Advertising..................................................................................... 296
10.12.3 False Advertising................................................................................................................................ 296
XI
Contents
10.12.4 Privacy Regulation............................................................................................................................. 296

10.13 Analyzing Marketing Performance............................................................................................ 297
10.13.1 Advertising Analysis.......................................................................................................................... 297
10.13.2 Sales Analysis...................................................................................................................................... 297
10.13.3 Marketing Cost Analysis.................................................................................................................. 298
10.13.4 Marketing Audit Tools...................................................................................................................... 298
10.14 Outlook................................................................................................................................................. 298
10.15 Review Materials............................................................................................................................... 299
10.15.1 Questions for Discussion................................................................................................................. 300
10.15.2 Quiz........................................................................................................................................................ 300
Quiz Answers....................................................................................................................................... 303
11 Pricing of Media and Information.................................................................................... 305

11.1 Setting a Price.................................................................................................................................... 307
11.1.1 Introduction........................................................................................................................................ 307
11.1.2 Special Problems in the Pricing of Information Products..................................................... 307
11.2 Pricing Strategies............................................................................................................................. 310
11.2.1 Pricing by Cost.................................................................................................................................... 310
11.2.2 Market-Based Pricing........................................................................................................................ 312
11.2.3 Dynamic Pricing and Peak-Load Pricing..................................................................................... 313
11.2.4 Indexed Pricing................................................................................................................................... 314
11.2.5 Value Pricing........................................................................................................................................ 315
11.3 Measuring Price Sensitivity.......................................................................................................... 317
11.3.1 Econometric Estimation of Price Elasticities and Hedonic Prices....................................... 317
11.4 Strategies to Keep Prices Above Cost....................................................................................... 318
11.4.1 Integrate Information with Hardware......................................................................................... 318
11.4.2 Create a “Lock-in” of Customers.................................................................................................... 318
11.4.3 Bundling............................................................................................................................................... 318
11.4.4 Establish Market Power Through Monopoly............................................................................. 318
11.4.5 Participate in an Oligopoly............................................................................................................. 319
11.5 Price Discrimination........................................................................................................................ 319
11.5.1 Optimal Price Discrimination......................................................................................................... 320
11.5.2 Versioning............................................................................................................................................ 321
11.5.3 Second Degree Price Discrimination........................................................................................... 322
11.5.4 Third Degree Price Discrimination: Differentiation by User Category.............................. 323
11.6 Strategic Pricing................................................................................................................................ 323
11.6.1 Skim (“Premium”) Pricing................................................................................................................ 323
11.6.2 Penetration (“Value”) Pricing.......................................................................................................... 324
11.7 Other Types of Pricing.................................................................................................................... 325
11.7.1 Flat Rate vs Usage-Based Pricing.................................................................................................. 325
11.7.2 Regulated Pricing.............................................................................................................................. 326
11.7.3 Transfer Pricing................................................................................................................................... 326
11.7.4 Protection from Price Variations: Hedging................................................................................ 327
11.8 Legal Aspects of Pricing................................................................................................................. 327
11.8.1 Ethics of Pricing.................................................................................................................................. 327
11.8.2 Legal Constraints............................................................................................................................... 328
11.9 The Futures of Pricing..................................................................................................................... 330
11.9.1 “Free”?.................................................................................................................................................... 330
11.9.2 Micro- and Nano-pricing................................................................................................................. 331
XII Contents
11.10 How Firms Organize Their Pricing Function........................................................................... 332

11.10.1 Setting Pricing Policy........................................................................................................................ 332
11.11 Conclusions......................................................................................................................................... 333
11.11.1 Case Discussion.................................................................................................................................. 333
11.11.2 Conclusions on Pricing..................................................................................................................... 335
11.12.2 Quiz........................................................................................................................................................ 337
Quiz Answers....................................................................................................................................... 340
12 Distribution of Media and Information........................................................................ 341

12.1 Introduction....................................................................................................................................... 344
12.1.1 The Definition of “Distribution”..................................................................................................... 344
12.1.2 The Myths of Media Distribution.................................................................................................. 344
12.1.3 Distribution Networks...................................................................................................................... 345
12.2 The Economic Characteristics of Distribution Networks................................................... 347
12.2.1 Economies of Scale........................................................................................................................... 347
12.2.2 Network Effects.................................................................................................................................. 349
12.2.3 The Role of Government................................................................................................................. 350
12.2.4 Price Deflation.................................................................................................................................... 350
12.2.5 The Vertical Integration of Distribution with Production..................................................... 350
12.3 Network Models................................................................................................................................ 351
12.3.1 Distribution Architecture #1: The Non-sharing Network...................................................... 351
12.3.2 Distribution Architecture #2: The Bus and the Ring............................................................... 352
12.3.3 Distribution Architecture #3: Tree-and-Branch........................................................................ 352
12.3.4 Distribution Architecture #4: The Star......................................................................................... 353
12.3.5 Distribution Architecture #5: The Mesh...................................................................................... 354
12.4 Analytical Tools for Distribution Management..................................................................... 354
12.4.1 The Network Analysis Tools of Sociologists............................................................................... 355
12.4.2 The Network Analysis Tools of Lawyers: Essential Facilities................................................. 355
12.4.3 Network Analysis Tools of Electrical Engineering.................................................................... 355
12.4.4 Network Analysis Tools of Statisticians: Operations Research............................................. 356
12.4.5 Network Analysis Tool of Operations Research: Queuing Theory...................................... 356
12.4.6 Network Management..................................................................................................................... 357
12.5 Wholesale Distribution.................................................................................................................. 358
12.5.1 Film Wholesale Distributors........................................................................................................... 358
12.5.2 Book Distributors............................................................................................................................... 359
12.5.3 Magazine Wholesale Distribution................................................................................................ 361
12.5.4 Music Distributors............................................................................................................................. 361
12.5.5 Consumer Electronics Distribution.............................................................................................. 362
12.5.6 Wholesale Distribution: Trends..................................................................................................... 362
12.6 Retail Distribution: Physical Distribution................................................................................ 363
12.6.1 Film......................................................................................................................................................... 363
12.6.2 Book Retailing..................................................................................................................................... 364
12.6.3 Magazine and Newspaper Retailing............................................................................................ 366
12.6.4 Music Retailing................................................................................................................................... 366
12.7 Online Retail Distribution of Electronic Media..................................................................... 366
12.7.1 Business Models for Online Media Retailing............................................................................. 367
12.7.2 Online Distribution of Film and Video......................................................................................... 369
12.7.3 Online Periodicals Distribution..................................................................................................... 370
12.7.4 Books Online Retail Distribution................................................................................................... 370
XIII
Contents
12.7.5 Direct Electronic Distribution to Users: Streaming Music..................................................... 370

12.7.6 Online Videogame Retail Distribution........................................................................................ 371
12.8 Distribution Channel Strategies................................................................................................. 371
12.8.1 Self-Distribution: Customer-Direct Distribution by Producers........................................... 371
12.8.2 The Selection of Distributors......................................................................................................... 372
12.8.3 The Timing and Sequencing of Distribution Over Various Platforms............................... 372
12.8.4 Retail Distribution: Conclusions on Trends................................................................................ 373
12.9 The Revenue Shares in the Distribution Chain..................................................................... 375
12.10 The Impact of Distribution on Content.................................................................................... 377
12.11 Conclusions......................................................................................................................................... 378
12.11.1 Case Discussion.................................................................................................................................. 378
12.11.2 Overall Conclusions on Distribution............................................................................................ 378
12.12.2 Quiz........................................................................................................................................................ 381
Quiz Answers....................................................................................................................................... 383
IV Feedback Loop
13 Accounting in Media and Information Firms............................................................ 387
13.1 Accounting and Media Accounting........................................................................................... 389
13.1.1 The Function of Accounting in Business.................................................................................... 389
13.1.2 Is Accounting for Media and Technology Special?.................................................................. 391
13.1.3 Case Discussion.................................................................................................................................. 392
13.1.4 The Five Sets of Books...................................................................................................................... 392
13.2 Profit Accounting.............................................................................................................................. 393
13.2.1 How to Depress Accounting Profits............................................................................................. 393
13.2.2 Royalties for Books and Music....................................................................................................... 393
13.2.3 Profit Accounting in Limited Partnerships................................................................................. 394
13.2.4 How Profit Participants Can Protect Themselves..................................................................... 395
13.3 Public Financial Accounting......................................................................................................... 396
13.3.1 Major Financial Documents for Investors.................................................................................. 396
13.3.2 Auditing................................................................................................................................................ 397
13.3.3 Regulation of Accounting............................................................................................................... 397
13.4 Analyzing Financial Statements and Valuation of Media Firms..................................... 398
13.4.1 Ratios and Metrics............................................................................................................................. 398
13.5 The Valuation of Media Properties............................................................................................ 403
13.5.1 Cost Approaches................................................................................................................................ 403
13.5.2 Income Approaches.......................................................................................................................... 403
13.5.3 Multiples Approach........................................................................................................................... 404
13.6 The Balance Sheet............................................................................................................................ 405
13.6.1 Assets..................................................................................................................................................... 406
13.6.2 Depreciation and Amortization of Assets.................................................................................. 406
13.7 Liabilities............................................................................................................................................. 408
13.7.1 Stock Options...................................................................................................................................... 408
13.7.2 Case Discussion.................................................................................................................................. 409
13.8 Income and Profit Statements..................................................................................................... 409
13.8.1 EBITDA and Other Profit Definitions............................................................................................ 410
13.8.2 Case Discussion.................................................................................................................................. 410
13.8.3 The Cash Flow Statement................................................................................................................ 411
13.8.4 Cost and Expenses............................................................................................................................. 411
XIV Contents
13.9 Managerial Accounting.................................................................................................................. 412

13.9.1 Responsibility Center and Profit Centers................................................................................... 413
13.9.2 Overhead and Indirect Cost........................................................................................................... 413
13.9.3 Transfer Pricing................................................................................................................................... 413
13.9.4 Tracking Costs..................................................................................................................................... 414
13.10 Capital Accounting and Budgeting........................................................................................... 415
13.11 Information Technology in Accounting................................................................................... 415
13.11.1 Management Information Systems............................................................................................. 415
13.11.2 Enterprise Resource Planning Systems....................................................................................... 415
13.12 Conclusion........................................................................................................................................... 417
13.12.1 Case Discussion.................................................................................................................................. 417
13.12.2 Conclusions on Accounting in Media.......................................................................................... 417
13.13.2 Quiz........................................................................................................................................................ 419
Quiz Answers....................................................................................................................................... 422
14 Strategy Planning in Media and Information Firms............................................. 423

14.1 Introduction....................................................................................................................................... 425
14.1.1 What Is Different About Strategy Setting in Information Sector Industries?................. 425
14.2 Theories and Tools of Business Strategy................................................................................. 427
14.2.1 Basic Strategy Perspectives............................................................................................................ 427
14.2.2 The Emergence of the Guru Industry.......................................................................................... 432
14.3 The Strategy Process....................................................................................................................... 433
14.3.1 Organization of the Strategy Process.......................................................................................... 433
14.3.2 Who Engages in Strategic Planning?........................................................................................... 434
14.4 The Strategic Plan............................................................................................................................ 436
14.4.1 The Vision and Mission Statement............................................................................................... 436
14.4.2 The External Assessment................................................................................................................. 436
14.4.3 Internal Assessment.......................................................................................................................... 440
14.5 Strategy Options............................................................................................................................... 444
14.5.1 Generic Options................................................................................................................................. 444
14.5.2 How to Select Among Strategies.................................................................................................. 446
14.6 Implementation of Strategy......................................................................................................... 450
14.6.1 Internal Communication................................................................................................................. 450
14.6.2 Budgeting............................................................................................................................................ 451
14.6.3 Monitoring, Control, and Feedback............................................................................................. 451
14.6.4 Implementation of Strategy: Government Relations............................................................. 453
14.7 Outlook................................................................................................................................................. 453
14.7.1 Constraints on Strategy................................................................................................................... 453
14.7.2 Conclusion: Strategic Priorities..................................................................................................... 455
14.8.2 Quiz........................................................................................................................................................ 456
Quiz Answers....................................................................................................................................... 459
15 Concluding Observations...................................................................................................... 461

15.1 The Matrix of Media Management............................................................................................ 462
15.2 Is Management in the Media and Information Sector Different?.................................. 462
15.2.1 Fundamental Factors........................................................................................................................ 462
15.2.2 Personal Motivation.......................................................................................................................... 463
XV
Contents
15.3 Challenges for Media Managers................................................................................................. 463

15.3.1 The Search for a New Media Business Model........................................................................... 463
15.3.2 The Search for a Media Industry Structure................................................................................ 464
15.3.3 The Search for a New Content Model......................................................................................... 464
15.3.4 The Search for New Government Policy and Regulation...................................................... 464
15.3.5 Understanding the Future and Understanding the Past....................................................... 465
15.3.6 Dealing with People.......................................................................................................................... 465
15.3.7 Being Good with Numbers............................................................................................................. 465
15.3.8 Globalization of Media and Information.................................................................................... 465
15.4 Managing in the Media and Information Sector.................................................................. 466
15.4.1 How Organizations Succeed.......................................................................................................... 466
15.4.2 Organizational and Personal Responsibility............................................................................. 466
Correction to: Media and Digital Management...................................................... C1
Supplementary Information
Index...................................................................................................................................................... 469
The copyright year of this book has been revised: The correction is available at
https://doi.org/10.1007/978-3-319-72000-5_16
List of Figures
Figure 2.1 The three legs of media. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Figure 3.1 Universal Studios lot 1936. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Figure 3.2 Networked production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Figure 3.3 Tradeoffs in the development process . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Figure 3.4 Gantt schedule for book production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Figure 3.5 Critical Path Method (CPM). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Figure 3.6 PERT chart example for music video
production (schematic). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Figure 4.1 Bell Labs R&D Facilities in Holmdel and Murray Hill,
NJ in their heyday. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Figure 4.2 R&D project selectivity and success rate . . . . . . . . . . . . . . . . . . . . . . . . . 66
Figure 4.3 Investment horizons in innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Figure 4.4 Dimensions of consumer acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Figure 4.5 Risk-reward diagram of projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Figure 5.1 Example for an HRM Organizational Structure. . . . . . . . . . . . . . . . . . . 99
Figure 5.2 Risk and Employee Selection. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Figure 5.3 Techco Internal Labor Market Map. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
Figure 5.4 Company Employment Pyramid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Figure 5.5 Disney Internal Labor Market Maps by Division . . . . . . . . . . . . . . . . . 105
Figure 5.6 The Composition of Risk of Disney and its Peers. . . . . . . . . . . . . . . . . 106
Figure 5.7 Compensation of Employees Relative to Contribution. . . . . . . . . . 107
Figure 5.8 Disney’s Compensation Profile (Wages in $000) . . . . . . . . . . . . . . . . . 109
Figure 5.9 What Matters Most to IT Technologists. . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Figure 5.10 Maslow’s Hierarchy of Needs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Figure 6.1 Corporate Organizational Chart. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Figure 6.2 The Optimal Leverage Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155
Figure 6.3 Cost of Capital and Optimal Capital Structure . . . . . . . . . . . . . . . . . . . 156
Figure 6.4 Funding Options over the Life Cycle of a Company . . . . . . . . . . . . . 158
Figure 7.1 Hierarchy of intellectual property rights by frequency. . . . . . . . . . 169
Figure 7.2 GE trademarked logo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175
Figure 7.3 Mapping of the Prior-Art interrelationship of patents . . . . . . . . . . . 178
Figure 7.4 Intellectual asset audit map. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179
Figure 7.5 The Flow of Rights and License Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181
Figure 8.1 Organizational Chart of a Corporate Legal and Public
Affairs Function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
Figure 8.2 Decision Tree for Decision to Litigate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207
Figure 8.3 Company Reaction Curve for Optimal Investment
in Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208
Figure 9.1 Collection Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239
Figure 9.2 Comb Analysis: Divergences in Evaluating Product Factors
by Dell and its Retail Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249
Figure 9.3 Organizing and Classifying the Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250
Figure 9.4 Attribute Importance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
Figure 9.5 Anomaly Detection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251
Figure 9.6 Clustering. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252
Figure 9.7 Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252
Figure 9.8 Feature Extraction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253
XVII
List of Figures
Figure 9.9 Econometric Regression Analysis: Magazine

Subscriptions and Income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 254
Figure 9.10 Sampling. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255
Figure 9.11 Stages of Product Penetration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257
Figure 10.1 Coverage of reader segments by major magazine. . . . . . . . . . . . . . . 276
Figure 10.2 The Bass model: diffusion of adoption . . . . . . . . . . . . . . . . . . . . . . . . . . . 277
Figure 10.3 Marketing dashboard. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299
Figure 11.1 Price elasticity of demand h = DQuantity DPrice . . . . . . . . . . . . . . . . . . . . 316

Quantity Price
Figure 11.2 Willingness to Pay. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 320
Figure 12.1 Bertelsmann physical vs electronic distribution . . . . . . . . . . . . . . . . . 347
Figure 12.2 Economics of scale in media industries (schematic). . . . . . . . . . . . . 348
Figure 12.3 Capital intensity and media industry concentration
(Average 30 Countries) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 349
Figure 12.4 Non-sharing model of producers to retailers . . . . . . . . . . . . . . . . . . . . 351
Figure 12.5 Distribution model #2: The Bus or The Ring–Fiber
network ring around Africa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352
Figure 12.6 Distribution model #3: tree-and-branch. . . . . . . . . . . . . . . . . . . . . . . . . . 353
Figure 12.7 Star distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353
Figure 12.8 Multi-star distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353
Figure 12.9 Distribution Model #5: Mesh network. . . . . . . . . . . . . . . . . . . . . . . . . . . . 354
Figure 12.10 Capacity cost, revenues, and net gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356
Figure 12.11 Typical distribution windows from release date, c.2014. . . . . . . . . 373
Figure 13.1 Disney social accounting report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404
Figure 14.1 SWOT analysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 427
Figure 14.2 Appraising Comcast’s resources and capabilities. . . . . . . . . . . . . . . . 430
Figure 14.3 The growth share matrix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 437
Figure 14.4 Radar chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439
Figure 14.5 Decision tree for Comcast . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449
Figure 14.6 Balanced scorecard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452
List of Tables
Table 3.1 Net present value of a film project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Table 3.2 Theater budgets (Subcategories partial). . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Table 3.3 Activities-based cost allocation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Table 3.4 Example for daily cost overview accounting. . . . . . . . . . . . . . . . . . . . . . . . 47
Table 3.5 Film investments, revenues, and ROI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Table 4.1 Ranking and scoring R&D projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Table 4.2 ROI of projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
Table 7.1 Intellectual Asset Value in GE’s Divisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 194
Table 8.1 Cost-Benefit of Investment in Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 208
Table 8.2 Illustration for Cost and Value of Lobbying . . . . . . . . . . . . . . . . . . . . . . . . . 211
Table 9.1 Golden Years Magazine Circulation Reports (Schematic). . . . . . . . . . . 244
Table 9.2 Conjoint Analysis Example: The Importance of Attributes
of MP3 Players (Scale 1–10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257
Table 10.1 World’s largest advertising agencies by revenue (2017) . . . . . . . . . . . 281
Table 10.2 The cost-effectiveness of different marketing activities . . . . . . . . . . . 285
Table 10.3 Cost-Effectiveness of Magazines in Advertising
to Aerobics Users . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286
Table 11.1 Cost characteristics of Encyclopaedia Britannica. . . . . . . . . . . . . . . . . . . . 312
Table 11.2 Price elasticity and price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321
Table 12.1 Global and regional market shares of the music
group majors (2013). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 362
Table 12.2 The revenue shares in the distribution chain . . . . . . . . . . . . . . . . . . . . . . . 376
Table 13.1 Social Accounting Targets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 402
Table 13.2 Example of a balance sheet ($ thousands). . . . . . . . . . . . . . . . . . . . . . . . . . 406
Table 13.3 Disney Incomes (2004) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 411
Table 14.1 Comcast SWOT analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 428
Table 14.2 Appraising Comcast’s resources and capabilities. . . . . . . . . . . . . . . . . . . 431
Table 14.3 Value of Comcast divisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450
1 I
Overview
Contents
Chapter 1 Introduction – 3
Chapter 2 The Information Environment – 7

3 1
Introduction
1.1 The Need for “Media Management”? – 4
1.2 Approaches to the Study and Teaching of Media

Management – 4
1.3 Outline of the Book – 5
1.4 Outlook – 5
© The Author(s) 2019

Eli M. Noam, Media and Digital Management, https://doi.org/10.1007/978-3-319-72000-5_1
4 Chapter 1 · Introduction
1.1 The Need for “Media 1.2 Approaches to the Study

1 Management”? and Teaching of Media
Management
This book is a college-level version of a longer
volume aimed at graduate courses and the pro- Media management has traditionally had a strong
fessional market. The basics are shared because reliance on experience and “gut” feeling. But life-
the subject matter and its significance are the long experience in one segment of this increas-
same. Everybody understands the importance of ingly overlapping environment does not suffice.
the media and information sector. It is a growing Media companies require managers who have an
and dynamic field, encompassing content cre- understanding of a variety of industry segments
ation, distribution platforms and technology and functions. And young entrepreneurs, too,
devices. The information industry sector in 2017 must cover many bases to be effective and to be
accounted for about $1.7 trillion in the USA and taken seriously.
$6 trillion worldwide, about 6% of global gross Media activities are being taught and practiced
domestic product (GDP). As a share of “discre- all over the world. A large number of communica-
tionary income,” the share of the sector is closer tions students end up on the business side of media
to 20%; as a share of “discretionary time,” it is an companies. Basically, the subject matter can be
extraordinary 30%. Per capita media consump- thought of as a two-dimensional matrix. The verti-
tion in the USA is 2100 hours annually, which cal dimension is that of the various industries—
translates to 5.7 hours per day. And it is not only music, film, the Internet and so on.1 The vertical
quantity that counts. Media industries are also a elements tend to be taught or written about by
driver of change, leading in technological inno- sectoral experts in the particular industry “silo.”
vation, testing new organizational practices, and Yet, one of the defining characteristics of the over-
transforming societal institutions and culture. all sector is its increasing convergence.2 The sec-
Thus, there is no dispute over the centrality of ond approach has been to consider the horizontal
the sector in advanced and developing econo- dimension of the matrix, proceeding along disci-
mies and s ocieties. plinary and functional lines, such as marketing,
1 Books: Greco, Albert N., Jim Milliot, and Robert Wharton. The Book Pub- Station Management: The Business of Broadcasting. New York: Hastings
lishing Industry. New York: Routledge, 2013; Compaine, Benjamin M. The House, 1964; Owen, Bruce M., Jack H. Beebe, and Willard G. Manning.
Book Industry in Transition: An Economic Study of Book Distribution and Television Economics. Lexington, MA: Heath, 1974.
Marketing. White Plains, NY: Knowledge Industry Publications, 1978. Telecom: Sherman, Barry L. Telecommunications Management, 3rd
Music: Krasilovsky, M. William et al. This Business of Music, 10th ed. ed. New York: McGraw-Hill, 1997; Gershon, Richard A. Telecommunica-
New York: Billboard Books, 2007. Theater: Langley, Stephen. Theatre Man- tions Management. New York: Routledge, 2001.
agement in America. New York: Drama Book Publishers, 2006. Advertising: Jugenheimer, Donald W. and Larry D. Kelley. Advertising
Magazines: Wharton, John. Managing Magazine Publishing. London: Management. Armonk, NY: M.E. Sharpe, 2009.
Blueprint, 1992; Daly, Charles P., Patrick Henry, and Ellen Ryder. The Websites: Elliott, Geoff. Website Management. Colchester, UK: Lexden
Magazine Publishing Industry. Needham Heights, MA: Allyn & Bacon, Publishing Limited, 2007; Layon, Kristofer. Digital Product Management.
1996; Heinrich, Jürgen. Medienökonomie: Band 1: Mediensystem, Zeitung, Indianapolis, IN: New Riders, 2014; Strauss, Roy and Patrick Hogan.
Zeitschrift, Anzeigenblatt. Opladen: Westdeutscher Verlag, 1994. Developing Effective Websites: A Project Manager’s Guide. Boston: Focal
Newspapers: Herrick, Dennis F. Media Management in the Age of Press, 2013.
Giants: Business Dynamics of Journalism, 2nd ed. Albuquerque: UNM Video Games: Hotho, Sabine and Neil McGregor. Changing the Rules
Press, 2012; Giles, Robert H. Newsroom Management: A Guide to Theory of the Game: Economic, Management and Emerging Issues in the Computer
and Practice. Indianapolis, IN: R.J. Berg, 1987; Rankin, W. Parkman. The Games Industry. New York: Palgrave MacMillan, 2013. Wagner, Marcus,
Practice of Newspaper Management. New York: Praeger, 1986; Mogel, Jaume Valls-Pasola, and Thierry Burger-Helmchen. The Global Manage-
Leonard. The Newspaper: Everything You Need to Know to Make it in the ment of Creativity. New York: Routledge, 2017.
Newspaper Business. Pittsburgh, PA: GATF Press, 2000; Picard, Robert G. 2 Vogel, Harold. Entertainment Industry Economics: A Guide for Financial
and Jeffrey H. Brody. The Newspaper Publishing Industry. Boston: Allyn & Analysis, 10th ed. New York: Cambridge University Press, 2014; Van
Bacon, 1997; Willis, William J. Surviving in the Newspaper Business: News- Tassel, Joan and Lisa Poe-Howfield. Managing Electronic Media: Making,
paper Management in Turbulent Times. New York: Praeger, 1988. Marketing, and Moving Digital Content. Burlington, MA: Focal Press, 2010;
Film: De Vany, Arthur. Hollywood Economics. New York: Routledge, Albarran, Alan B. Management of Electronic and Digital Media. Boston:
2004; Clevé, Bastian. Film Production Management, Waltham, MA: Focal Wadsworth, 2013; Chaturvedi, B.K. Media Management. New Delhi:
Press, 2000; Epstein, Edward J. The Hollywood Economist 2.0: The Hidden Global Vision Publishing House, 2009; Turow, Joseph. Media Today:
Financial Reality Behind the Movies. New York: Melville House, 2012. Mass Communication in a Converging World. New York, Routledge, 2013;
Radio: Reinsch, J. Leonard and Elmo Israel Lewis. Radio Station Man- Lavine, John M. and Daniel B. Wackman. Managing Media Organiza-
agement, 2nd ed. New York: Harper, 1960. tions. New York: Longman, 1988; Pringle, Peter K. and Michael F. Starr.
TV and Cable: Marcus, Norman. Broadcast and Cable Management. Electronic Media Management, 5th ed. Boston: Focal Press, 2006; López,
Englewood Cliffs, NJ: Prentice-Hall, 1986; Quall, Ward L. and Leo A. Mar- Juan Torres. Economía de la Comunicación. Madrid: Gruopo Zero, 1985;
tin. Broadcast Management: Radio + Television. New York: Hastings House, Hollifield, C. Ann, Jan LeBlanc Wicks, George Sylvie, and Wilson Lowery.
1969; Blumenthal, Howard J. and Oliver R. Goodenough. This Business of Media Management: A Casebook Approach, 5th ed. New York: Routledge,
Television, 3rd ed. New York: Billboard Books, 2006; Roe, Yale. Television 2015.
1.4 · Outlook
5 1
financing or human resources across industries.3 it is also an endlessly interesting, fascinating field
Such approach follows the disciplinary specialties that generates great enthusiasm. Creativity meets
of their authors and are thus rarely interdisciplin- management. Imagination meets technology. Arts
ary or holistic across business functions. meet investment. Left brain meets right brain.
Youth meets wealth. Media create the entertain-
ment that forms our fantasies, shapes our styles
1.3 Outline of the Book and sets our role models. It provides our analysis
of the world around us. It is the trendsetter that
It is the goal of this book to overcome the limita- affects our tastes. It represents sweet imagination,
tions of this matrix and apply the major dimensions seductive opportunity, rich possibilities, style,
of a business curriculum—from finance to produc- opportunity, fortune and fame.
tion to marketing to accounting, and more—to the The good news is that for those interested in
entire media and information sector. In the process, the information resource—how to produce it,
communications students benefit from a business- how to distribute it, how to use it—the present is
oriented summary, while more generally oriented the most exciting period, ever. The bad news is
business students are introduced to the media and that it is also a period with the greatest uncer-
information sector. Both approaches afford a look tainty and risk ever. What does it take for success
at the main players and their challengers. in the media business? Creativity, innovation and
The book could be subtitled: Management performance, of course. But that is not enough. It
Study in a Nutshell. It takes most major compo- requires an understanding of technology, money,
nents of a business program, simplifies them, markets, audiences, pricing, global business, eco-
summarizes them, and applies them to the media nomics, managerial accounting, government rela-
and information sector. It covers these tools and tions, and the ability to nurture and lead talent.
approaches in a non-technical way. There are few Our aim in this book is to help those in the media,
equations. There are no prerequisites, though an information and media technology sector to
introductory course in economics would proba- become creative managers and managerial cre-
bly help in terms of mindset. atives. The purpose of this book is to make young
managers in this field more knowledgeable and
less blinded by hype. It aims to make the reader a
1.4 Outlook more effective, more productive and more respon-
sible participant.
This leaves the question: Why be a manager in
the media and information sector? It is a diffi- Acknowledgments The material was tested out at
cult business with an uncertain career path. Yet, several universities, including the Annenberg
School of Communication at the University of
Pennsylvania, but in particular at Columbia
3 Marketing and Distribution: Eastman, Susan Tyler, Douglas Ferguson, and
University. At the Columbia Business School, many
Robert Klein. Eds. Media Promotion & Marketing for Broadcasting, Cable & people contributed their talent and energy. I thank
the Internet. Burlington, MA: Focal Press, 2006; Marich, Robert. Marketing
to Moviegoers. Burlington, MA: Focal Press, 2013; Ulin, Jeffrey C. The Busi-
the School and Dean Glenn Hubbard for summer
ness of Media Distribution: Monetizing Film, TV, and Video Content in an support, and the Columbia Institute of Tele-
Online World. Burlington, MA: Focal Press, 2013.
Strategy: Küng, Lucy. Strategic Management in the Media: Theory and
Information (CITI) for providing the environment
Practice, 2nd ed. Los Angeles: Sage, 2016; Aris, Annet and Jacques Bug- and research structure. Two people, in particular,
hin. Managing Media Companies: Harnessing Creative Value. Chichester:
Wiley, 2012; Chan-Olmsted, Sylvia M. “Issues in Strategic Management.”
deserve special thanks. Jason Buckweitz, Executive
In Handbook of Media Management and Economics. Eds. Alan B. Albar- Director of CITI, held this project together with an
ran, Sylvia M. Chan-Olmsted, and Michael O. Wirth. New York: Lawrence
Erlbaum Associates, 2006.
amazing combination of skills in research, manage-
Economics: Shy, Oz. Economics of Network Industries. Cambridge, UK: ment, technology and law. Many thanks also go to
Cambridge University Press, 2001; Picard, Robert G. Media Economics:
Concepts and Issues. Newbury Park, CA: Sage, 1989; Owen, Bruce M. and
Corey Spencer, Assistant Director of CITI, for
Steven S. Wildman. Video Economics. Cambridge, MA: Harvard University superb administration and assistance on numerous
Press, 1992; Toussaint-Desmoulins, Nadine. L’economie de Medias. Paris:
Press Universitaires de France, 1978; Doyle, Gillian, Understanding Media
levels with a variety of tasks. I am grateful to both
Economics, London: Sage, 2013; Picard, Robert G. The Economics and colleagues for their dedicated and outstanding con-
Financing of Media Companies. New York: Fordham University Press,
2011; Alexander, Alison et al. Eds. Media Economics: Theory and Practice,
tribution to this large project. They were assisted by
3rd ed. Mahwah, NJ: Lawrence Erlbaum Associates, 2004. teams of able young summer college interns and
6 Chapter 1 · Introduction
research associates. Several young professionals (Production, and more); and my professor of
1 contributed during their stays at Columbia: John many years ago, Richard Caves.
Lazcano, Aleksandra Kotlyar, Ana Bizberge, Boris Several outside experts have been helpful in
Nicholson, Inho Lee and John Heywood. reviewing parts of the manuscript and deserve
The book, covering so much ground, draws great thanks. In addition to several anonymous ref-
from numerous sources and authors, and I am erees, they are Harold Vogel (himself a noted author
indebted to them. Over 1600 citations for sources in this field), Scott MacDonald and Devin Brook.
have been used or referenced, but should we have At Palgrave Macmillan, I thank my editor,
inadvertently omitted giving adequate credit to a Shaun Vigil, Editor of Film, Cultural and Media
source or author, my apologies. Several authors Studies, for supporting this major project with
have been particularly important and deserve trust, patience and good judgment. We also thank
special mention. They are Haig Nalbantian (for Glenn Ramirez and Tikoji Rao for their dedicated
the chapter on Human Resource Management); contribution to the editorial process.
Alexander Poltorak (Intellectual Assets); Matthew The greatest thanks of all go to my beloved wife
Stewart (Strategy); Thomas Nagle and his co- Nadine Strossen, champion of free speech and
authors (Pricing); Edward Jay Epstein open media. She inspires me every day.
7 2
The Information
Environment
2.1 D
rivers of Change – 8
2.1.1 The Setting – 8
2.1.2 Technology – 8
2.1.3 People – 8
2.2 he Microeconomics of the New Media

T
Economy – 9
2.2.1 haracteristic #1 of Media and Information:
C
High Fixed Costs, Low Marginal Costs—Very
High Economies of Scale – 9
2.2.2 Characteristic #2 of Media and Information:
Network Effects – 9
2.2.3 C
haracteristic #3 of Media and Information:
Excess Supply – 10
Price Deflation – 10
Convergence of Technology – 11
Importance of Intangible Assets – 11
The Presence of Non-Maximizers of Profit – 11
2.2.8 C
haracteristic #8 of Media and Information:
High Government Involvement – 12
2.2.9 Summary of Economic Properties – 12
2.3 R
eview Materials – 12
2.3.1 uestions for Discussion – 13
Q
2.3.2 Quiz – 13
Q
uiz Answers – 16

8 Chapter 2 · The Information Environment
2.1 Drivers of Change 2.1.2 Technology
2.1.1 The Setting The technology driver of the Industrial Revolution

2 was the steam engine. What is the equivalent for
“Media” consists of three segments—distribution the Information Revolution? If we strip down the
platforms, content production, and media devices building blocks of information technology to
(. Fig. 2.1). their basics, the major technological driver is the
As mentioned, in 2017, the US information increased ability to manipulate sub-atomic parti-
industry sector accounted for about $1.7 trillion, cles (electrons and photons). We have progres-
of which content industries represented $400 bil- sively gained the capability to harness these
lion; distribution industries, $1000 billion; and particles for useful applications. The scientific
device industries, $300 billion. Worldwide reve- foundation was that of physics research and
nues for 2017 were $6 trillion. This amounts to experimentation, which was paralleled by an
about 6% of the world gross domestic product. engineering ability to produce means that enabled
Growth has been rapid for a long time. us to control these particles and then to string
Media activities have been around since the these devices together into systems. The prime
dawn of humankind with its cave paintings, danc- example of such a linkage is the Internet. To facil-
ing, and singing. The Industrial Revolution began itate operations and applications, all information
in England during the 1770s. Stripped to its basics, and content is transformed into a code that can be
it was based on technologies that could extend processed by a variety of tools: a process we call
human physical strength. The enabling technologies “digitization.”
was the steam engine, which powered production The swift spread of the technology was made
machinery such as mechanical looms, and trans- economically possible by the rapid drop in the
portation devices such as trains and ships. Gasoline production cost of electronic micro-components.
engines and electrical power followed a century In 2017, processing power and computer memory
later, leading to another spurt in industrialization. (random access memory—RAM) cost less than
The Industrial Revolution was characterized one billionth of the price in 1971. These changes
not only by mass production, rising living stan- follow the pace of “Moore’s Law”: the observation
dards and urbanization, but also by social strife that the capability of computer components is
and environmental decline. doubling every 18 months—i.e. increases at a rate
Today, we are in the midst of another economic of approximately 40%, per year.1 With technology
transformation: the Information Revolution. This accelerating and prices dropping, the applications
time, we are witnessing the extension of human followed suit. In three decades, we have moved
mental strength. New devices enhance our capabil- from the “kilobit” stage of individualized commu-
ity with regard to memory, logical processing, nications (in which the signals of digital 0s and 1s
communication, sensory cognition, storytelling could reach us individually were measured in the
and interaction. thousands), through a “megabit” stage (a thou-
Because brainpower is a more basic character- sandfold increase), and we have now reached the
istic of humans than muscle power, this second “gigabit” stage—yet another thousandfold
revolution is even more fundamental than the first. increase. It is a difference as dramatic as moving
from animal-powered transportation to jet planes.
And it has similarly fundamental impacts.
Content Production
2.1.3 People
People are just as much a major driver of the

Information Revolution as technology. There has
Distribution Devices been a huge increase in the number of information
Platforms
1 Even if this rate slows down, as every exponential process eventually

.. Fig. 2.1 The three legs of media does, we have still a long way to go.
2.2 · The Microeconomics of the New Media Economy
9 2
producers. In one decade, the 1960s, the share of Similarly, media distribution networks are expensive
labor force employed in the “quaternary”, (or to create but cheap to extend to additional users.
information) sector of the economy, working with Thus, average costs per unit become lower
paper and symbols rather than with muscles, went with the quantity produced. The more units that
from one quarter to one half. More information are produced, the lower the average cost per unit.
workers lead to more information products. It has Products that exhibit this property are said to
been observed that 90% of all the scientists who have high economies of scale. We can observe
have ever lived are alive today.2 This is also true for these characteristics for films, TV programs,
most, or even all, information-based occupations, computer software, electronic networks, video-
whether screenwriters, architects, lawyers, games, newspapers and semiconductors.
engineers, MBAs and so forth. Every 30 seconds, a There are several business implications of the
new book is published. Every hour, three new fea- economic property of high fixed costs and low
ture films are produced. In almost any scientific marginal costs. They include:
field, more research articles were written just this 55 The economies of scale lead to the emergence
year than in the entire history of human beings and predominance of large-sized companies
before 1900. In the field of chemistry, within a in media, telecom and the Internet.
span of 32 years (1907–1938), one million chemis- 55 There are incentives for companies to
try articles were written and abstracted. In con- increase their size through mergers and to be
trast, it took less than 1 year for a million such a first-mover in a product in order to gain
articles to be produced in 2010.3 economies of scale early.
55 There are incentives to achieve global rather
than local operations.
2.2 he Microeconomics of the New
T 55 In competition, prices are very low due to the
Media Economy low marginal costs that determine price.
55 In competition, there is a large consumer
Media and information activities are subject to 12 surplus (buyers having to pay less than they
fundamental economic characteristics and prop- would be willing to) because of low prices.
erties. Many of these factors exist in other indus- 55 There is an incentive for companies to
tries, too, but not in the combination seen in the price-discriminate among customers in order
media and information sector. to reduce such consumer surplus.
2.2.1 haracteristic #1 of Media

C 2.2.2 haracteristic #2 of Media
C
and Information: High Fixed and Information: Network
Costs, Low Marginal Costs— Effects
Very High Economies of Scale
The second of the frequent economic properties
The first economic property is the fundamental cost of media is a “network effect.” Individual benefits
structure of media products and services. They usu- from media are often interdependent of those of
ally involve very high “fixed costs,” i.e. costs that other users. Network effects arise when users ben-
remain constant independent of the number of units efit by sharing a resource such as a network, or
produced. At the same time, the “marginal costs” sharing the experience with each other. The value
(the incremental costs required to produce the next to an individual of connecting to a network of
unit) are relatively low. Media content is typically users depends on the number of other people
expensive to produce but cheap to reproduce. already connected to that network. The larger that
network, the more value it provides to its users
and the more valuable it becomes itself. For
Internet and telecom companies or for social
2 Price, Derek John de Solla. See Cloud, Wallace. “Science Newsfront.” Popu-
lar Science 182, no. 3 (Mar 1963): 17.
network providers such as Facebook, the benefits
3 Information production in the Western world has increased since about to users rise with the number of other users on the
CE (Common Era) 1000, with a nadir during the Dark Ages when a
significant part of the information accumulated in the period of
network. On the content side, too, a major benefit
Antiquity was lost. of media consumption is to share the experience
with one’s peers. To most individuals, the value of of information creates a poverty of attention”.7 New
a film, TV show, music recording, or popular media consumption must be mostly supported by
book rises as the experience is shared with many substitution from existing media in terms of time
2 other people. or full attention. Inevitably, this leads to competi-
Network effects have several business implica- tion for “mindshare” and “attention.” Compared
tions. As in the economies of scale—which with 1998, fewer than half of the new products
describe advantages to size on the production make it to the bestsellers lists, reach the top of
side—size is important also on the consumption audience rankings, or win a platinum disc.
side. For certain goods and services, the larger the The business consequence is more competi-
firm’s user base, the more value is provided to tion and greater specialization in media content
users. A song that gets attention on a large social and technology. In addition, a greater product
network gains a cumulative advantage because innovation and marketing effort is necessary.
many more want to be included in the experi- Together, costs rise per product.
ence.4 A firm that captures a relatively large share
of an audience will often experience further
demand growth, and can charge users a higher 2.2.4 haracteristic #4 of Media
C
price. and Information: Price
Deflation
C A major economic property of media has been
and Information: Excess price deflation. In general, when price competi-
Supply tion occurs, in any industry, the price of a good or
service is driven toward its marginal cost.8
We observed that media production has been Marginal cost for many information products and
increasing exponentially. Media consumption, services is near-zero. But that low price, the reve-
however, increases only linearly and slowly. Excess nues do not cover total cost, which also includes
supply is inevitable; it is accelerated by the increased the high fixed cost. The result of price competition
ease of spreading globally through ever-cheaper with low marginal cost has been price deflation in
electronic distribution and the proliferation of information products and services. This is a good
start-
up content providers. The compounded deal for the consumer but a difficult problem for
annual growth rate of media production is about the creators, producers and distributors.9 Price
12.0%, whereas the compounded annual growth deflation toward marginal cost poses a threat to
rate of media time consumption is only 1.2%. Even their long-term viability, since low prices make it
that rate will decline. As mentioned, the average difficult to cover costs and achieve profitability.
American citizen already consumes 2100 hours of And that is, indeed, what has been happening.
media per year—5.75 hours per day.5 Given time Information has become cheaper for many a
for sleep, eating and work, that number will decade. And it is becoming increasingly difficult to
increase only slowly. Thus, the demand gap is charge anything for it. Music and online content is
growing at over 10% each year. increasingly free. Newspaper prices barely cover
This has consequences for both content style the cost of paper and delivery; the content is
and marketing.6 Attention is the scarce resource. thrown in for free. As social media pioneer Stewart
As observed by Herbert A. Simon, the 1978 winner Brand said, “Information wants to be free.” Free in
of the Nobel Prize in Economic Sciences, “a wealth terms of content, but also free in terms of price.
4 Salganik, Michael J., Peter Sheridan Dodds, and Duncan J. Watts.

“Experimental Study of Inequality and Unpredictability in an Artificial
Cultural Market.” Science 31, no. 5762 (February 10, 2006): 854–856; The 7 Simon, Herbert. “Designing Organizations for an Information-Rich
Economist. “The gazillion-dollar question.” April 20, 2006. Last accessed World.” In Martin Greenberger. Computers, Communication, and the Public
on August 2, 2012. 7 http://www.economist.com/node/6794282. Interest (Baltimore: The Johns Hopkins Press, 1971), 37–72.
5 Some of this consumption is while multitasking, e.g. while driving or 8 Strictly speaking, toward its long-run marginal cost, where all inputs are
working. variable.
6 School of Information Management & Systems, University of California, 9 Collis, D. J., P. W. Bane, and S. P. Bradley. “Winners and Losers—Industry
Berkeley. “How Much Information.” 2000. Last accessed on May 14, 2008. Structure in the Converging World of Telecommunications, Computing,
7 http://www2.sims.berkeley.edu/research/projects/how-much-info/ and Entertainment.” In Competing in the Age of Digital Convergence,
summary.html#consumption. edited by D. B. Yoffie. Boston: Harvard Business School Press, 1997.
2.2 · The Microeconomics of the New Media Economy
11 2
Price deflation is one of the fundamental eco- combines the technologies of telecom, computers,
nomic trends of our time. The entire competitive radio transceivers, consumer electronics, informa-
part of the information sector—from music to tion vendors, TV players, video game consoles,
newspapers to telecoms to the Internet to semi- calculators, cameras, music players, flashlights,
conductors and anything in-between—has dictaphones, e-books, navigation devices and more.
become subject to a gigantic price deflation in The implications are that industries and firms
slow motion. that used to fill their separate niches comfortably
This price deflation leads to economic pres- are increasingly facing competition from each
sure, to price wars that squeeze out weaker com- other. It also means that companies can expand
panies, followed by the jacking up of prices, more easily to adjoining markets, which facilitates
volatility of prices, and to instability in the entire the emergence of media conglomerates. These
information sector. Therefore, one main strategy “economies of scope” and “synergies” of operating
for media managers is to avoid such price compe- across multiple markets and products are increas-
tition; rather, they focus on product differentia- ing. Production and distribution across several
tion, price discrimination (differentiation), lines of media business are often more cost-effec-
consumer lock-in strategies, and industry con- tive—all other things equal—than separate activi-
solidation. ties in each segment.
Thus, it has been observed that the economics
of information do not just frequently encounter
imperfectly competitive markets, but that they 2.2.6 haracteristic #6 of Media
C
actually require it.10 Without mechanisms that and Information: Importance
reduce competition such as patents or oligopolistic of Intangible Assets
market structures, the creation of information
such as media content and technological innova- Many media and information activities are not
tion becomes unprofitable. based on physical assets but, rather, on “intangi-
bles,” in particular on “intellectual assets.” There
are multiple characteristics to this kind of capital: it
C is not inherently a scarce resource; it does not
and Information: Convergence deplete with use; it can be shared; and it is hard to
of Technology prevent others from using it. This is true for con-
tent as well as for technology. Coupled with the low
A major factor in the recent evolution of media marginal cost of copying, this invites appropriation
and information is the increasing convergence of by others and makes it difficult for the creator/pro-
such media. Historically, media industries used to ducer/innovator to recoup their effort. Because
be separate from each other. Newspapers, music, this reduces the incentives to create and innovate,
TV, telecom, computers and so on were realms of governments have created special property
their own, each with its own technologies, compa- rights—in particular, patents and copyrights—and
nies, suppliers, distributors and industry culture. are engaged in the protection of these rights.
Starting in the 1970s, integration between sectors Similarly, the distributors of information create
in the technology industry began to occur with protective technological and economic fences
increasing technical overlap of devices, compo- around their intellectual assets.
nents and software. Any content can be digitized—
encoded as a stream of bits, and then processed,
shared, distributed and displayed in similar ways.11 2.2.7 haracteristic #7 of Media
C
In the 1980s, increased integration of technology and Information: The Presence
extended the overlap also to consumer electronics of Non-Maximizers of Profit
and office equipment. For example, a smartphone
Many individuals in the media field derive utility
from the process of creating a product, not from
10 Evans, Philip, and Thomas S. Wurster. Blown to Bits (Boston: Harvard profiting from its sale. They like to perform, to see
Business School Press, 2000), 15–21.
11 Shapiro, Carl. and Hal R. Varian. Information Rules (Boston: Harvard
a play produced, to distribute poetry or a short
Business School Press, 1999), 1–18. story, to publish a scientific paper, or to contribute
code to a collective software development. ment of infrastructure, protection against market

Producing the good is not a chore but a benefit. power and opinion power, protection of intellectual
When this occurs, it is hard to distinguish pro- property and so on. Considering the government’s
2 duction from consumption. In standard economic strong regulatory presence, there is a need for media
analysis, producers follow the incentives of profits firms to be able to manage government relations.
while consumers maximize their “utility.” In
media production, however, creators are often
incentivized to maximize recognition, not profit. 2.2.9 Summary of Economic
This means that they may give the product away; Properties
or, that they will aim to reach only a small seg-
ment of important arbiters of quality, since such We have identified eight factors of the media and
acceptance elevates their status. In either case, information industry which are not unique to
profitability is secondary. Larger media firms media industries, but which, in combination,
operate on more traditional incentives but, never- make its management different, in some ways,
theless, they are affected, since they must compete from management more generally.12
against these non-economic participants, or We can compress these factors into three
incorporate them into their own production and broad categories:
distribution models. 55 Very high advantages to size;
55 High uncertainty and market instability;
55 Public good characteristics.
C
and Information: High These characteristics affect almost every media
Government Involvement and information activity.
Governments are involved in most aspects of the

media and communications sector. A private 2.3 Review Materials
under-investment in the production of certain
categories of useful information leads to govern-
ment taking a role in assuring its creation (intel- Issues Covered
lectual property rights) and supporting non-profit In this chapter, we have covered the following
production (e.g. basic research, funding of uni- issues:
versities, funding of the arts etc.). However, there 55 The factors that make the management
are many other motivations for government of media and information organizations
involvement. Information distribution is consid- different;
ered essential and, hence, the government aims to 55 The technological and human drivers of
make it widely available across geography and the Information Revolution;
income classes, and to protect it against domi- 55 How fixed and marginal costs of media
nance by a private company. For instance, anti- products and services are distributed;
trust and anti-monopoly rules have been 55 How the excess in media supply and
established to limit mergers and price fixing. attention as a scarce resource influence
Regulatory policy also seeks to reduce distributor content style and marketing;
power over content providers. 55 How network effects benefit the con-
The high impact of media companies on politics sumption and production side;
and culture is such that they are always controver- 55 How intangibles assets are protected and
sial, highly visible, regulated and fought over. In con- why they are important;
sequence, there exists strong participation of and 55 Why price deflation impacts the informa-
regulation by government in broadcasting, cable, tion sector;
satellite, telecom, mobile, film, IT and many other
areas. Governments are involved in almost every
aspect of media: in the protection of children and
education, promotion of culture and national iden- 12 Divergence in the cost trends in the value chain; Cumulative and acceler-
ating returns; Non-normal distribution of risk; and Public good
tity, economic growth and innovation, establish- characteristics.
2.3 · Review Materials
13 2
?? 9. Why do media companies incur such
55 How the convergence of technology and high fixed costs of production? Has this
media channels creates the potential for changed in recent years? Have the mar-
synergy; ginal costs of distribution changed?
55 Why many providers of media content
do not follow the traditional economic ?? 10. What are the causes and effects of price
concept of profit maximization; deflation in the media industry? How
55 How the government is involved in the can media firms cope with it?
media and information sector.
2.3.2 Quiz
2.3.1 Questions for Discussion ?? 1. To be profitable in the information busi-
ness usually requires imperfect markets.
?? 1. How should we define the information
A. False.
sector?
B. True.
?? 2. With information becoming a central

?? 2. The economics of information production
part of the economy, should its produc-
has a tendency toward:
tion be left entirely to market forces?
A. Diminishing returns for an initial
What is the role for the non-profit and
period to be followed by increasing
governmental sectors in the distribution
returns.
of information?
B. Diminishing returns throughout.
C. Increasing returns throughout.
?? 3. Extrapolating present trends for
D. Increasing returns for an initial period
20 years, what kind of economies will
to be followed by diminishing returns.
advanced countries have? What kind of
industries and companies will succeed?
?? 3. The basic technology of the Industrial
?? 4. What were the success factors for busi- Revolution can be seen as an extension of:
ness leaders in the Industrial Revolution A. Information processing capabilities.
and what are they for the Information B. Assembly lines.
Revolution? C. The Renaissance.
D. Human physical strength.
?? 5. Information technology progresses at
the rate of Moore’s Law, but business, ?? 4. In terms of basic technology, what is the
personal and societal adjustments are main driver of the Information Revolution?
much slower. What are the implica- A. Disaggregating systems by stringing
tions? segmented devices.
B. Ability to manipulate sub-atomic par-
?? 6. How does managing in the economy ticles.
of things differ from managing in the C. Both of the above.
economy of information? D. None of the above.
?? 7. How does the information revolution ?? 5. Perhaps the last major constraint on
affect the process of globalization? media consumption is:
A. High price of media goods.
?? 8. How has the relationship between B. Ubiquity of media goods.
producers and consumers of media C. Bad programming.
changed in the past decade? D. Limited time for consumption.
?? 6. Which is not a fundamental characteristic ?? 12. What are the segments of the media
of knowledge today? industry?
A. Proliferation. A. Media devices.
2 B. Innovation. B. Distribution platforms.
C. Specialization. C. Content production.
D. Scarcity. D. All of the above.
?? 7. Which is not an obstacle to the transition ?? 13. What makes the Information economy
toward new media? Schumpetarian?
A. Anti-P2P legislation. A. Rapid technological change and cre-
B. Network effects. ative destruction.
C. Garnering the type of advertising reve- B. Increasing returns to scale.
nue that the current mass media attracts. C. Decentralized economic actors.
D. All of them can be obstacles. D. Ease of communication and sym-
metrical information exchange.
?? 8. The shape of the new media establish-
ment seems to be, as such:
?? 14. What causes market failures in the infor-
A. A sphere, with equidistant unlimited
mation sector?
nodes, all with equal power—it signi-
A. High fixed costs and low marginal
fies total decentralization.
costs in a competitive environment
B. A cube, with segments of equal
causes firms to price at a loss.
reach—the symmetry signifies the
B. Asymmetric information leads to
balance between media producer and
adverse selection, so that only the
media consumer.
consumers with the least to pay will
C. A pyramid, with a few mass producers
read newspapers.
at the top and numerous media ven-
C. Government intervention has dis-
ues supporting it at the bottom.
rupted the market mechanism
D. A simple arrow—projected toward an
and is creating significant dead
unknown and unpredictable future.
weight loss.
D. Positive externalities are not recog-
?? 9. All these characteristics make media
nized by consumers of information
management different except for:
products.
A. Difficulty in predicting consumer
preferences.
B. High fixed costs and low marginal costs. ?? 15. Which of the following is not a character-
C. Price deflation and public good char- istic of an intellectual asset?
acteristics of products. A. Does not deplete with use.
D. Mostly scientific management methods. B. Easy to price differentially.
C. Not inherently a scarce resource.
?? 10. Network effects lead to: D. Can be shared.
A. An elastic demand curve.
B. Decentralization. ?? 16. Which of the following is not a conse-
C. Barriers to entry. quence of high fixed cost/low marginal
D. Falling prices. cost characteristics for a media firm?
A. Large “consumer surplus.”
?? 11. What makes the media industry so risky? B. Incentives to piracy.
A. Of products, 10% make most of the C. No incentive to price discriminate
profit. among customers.
B. Price deflation. D. Competitive prices are often unprofit-
C. Market instability. able.
D. All of the above. E. First-mover advantage.
2.3 · Review Materials
15 2
?? 17. Why do governments often take a role in C. Cost-based pricing.
supporting the creation of information? D. Marginal-cost pricing.
A. Solely to have a stronger influence on
the information. ?? 20. Managerial implications of price deflation
B. Information, as a public good, implies in the overall information sector include
under-investments by private parties. which of the following:
C. Information wants to be free. 1. Strong process and product innova-
D. Information, as a public good, implies tion.
over-investments by private parties. 2. Outsourcing of production.
3. Short term sales contracts.
?? 18. Information assets often have a shorter A. 1 and 2.
economic life than tangible ones. Why? B. 1, 2 and 3.
A. High employee turnovers. C. 1 and 3.
B. As a society, we are getting smarter. D. 2 and 3.
C. Exponential growth of information
shortens usefulness period. ?? 21. As the media sector is highly regulated
D. Can be shared easily. by the government, what are the implica-
tions for media managers?
?? 19. What should be a main strategy for media A. Manage government relations as a
managers in terms of pricing? business function.
A. Typically, keep price competition in B. Industry is more volatile.
favor of competition on features and C. Changing of pricing in mass media
quality. requires governmental approval.
B. Typically, avoid price competition in D. Greater flexibility in decision making.
favor of competition on features and
quality.
Quiz Answers vv 11. D
vv 1. A vv 12. D
2
vv 2. C vv 13. A
vv 3. D vv 14. A
vv 4. B vv 15. B
vv 5. D vv 16. C
vv 6. D vv 17. B
vv 7. D vv 18. C
vv 8. C vv 19. B
vv 9. D vv 20. A
vv 10. C vv 21. A
17 II
Production
Contents
Chapter 3 Production Management in Media

and Information – 19
Chapter 4 Technology Management in Media

and Information Firms – 59
Chapter 5 Human Resource Management for Media

and Information Firms – 97
Chapter 6 Financing Media, Information,

and Communications – 127
Chapter 7 Intellectual Asset Management – 165
Chapter 8 Managing Law and Regulation – 201

19 3
Production Management
in Media and Information
3.1 M
edia Production – 21
3.1.1 Introduction – 21
3.1.2 Content Production – 21
3.1.3 Special Characteristics in Content Production – 21
3.2 C
ontent Industries – 22
3.2.1 E arly Content – 22
3.2.2 Types of Production – 22
3.2.3 Cost Characteristics: Film Versus Theater – 22
3.2.4 History of the Film Production Industry – 23
3.2.5 P
roduction in Other Media Industries – 24
3.2.6 The Global Success of the Hollywood Production
Industry – 26
3.2.7 C
ase Discussion – 27
3.3 C
onventional Arguments for Hollywood’s Success
in Production – 28
3.3.1 S upposed Advantage: Market Size? Language? – 28
3.3.2 2nd Supposed Advantage: Vertical Integration
of Content with Distribution? – 29
3.4 O
rganizational Success Factors for Content
Production – 30
3.4.1 rganizational Structure – 30
O
3.4.2 Funding and the Reduction of Risk – 32
3.5 P
roduct Development – 34
3.5.1 oncept (Style) – 34
C
3.5.2 Product Selection – 35
3.5.3 Product Development – 37
3.6 P
roduction Planning – 38
3.6.1 perational Challenges for Content Production – 38
O
3.6.2 Budgeting – 38

3.6.3 L ocation and Supply Chain – 42
3.6.4 Inventory Management – 43
3.6.5 Production Scheduling – 43
3.7 P
roduction Control – 46
3.7.1 udget Control – 46
B
3.7.2 Productivity Measurement – 46
3.8 R
evenue Shares of Producers in Media – 48
3.9 ontent Production in the Next Generation

C
of Technology – 48
3.10 Case Discussion – 49
3.11 onclusion: Success Elements for Content

C
Production – 53
3.12 Review Materials – 55

3.12.1 Questions for Discussion – 55
3.12.2 Quiz – 56
Quiz Answers – 58
3.1 · Media Production
21 3
3.1 Media Production 3.1.3 Special Characteristics
in Content Production
3.1.1 Introduction
The basic stages of content production are similar
The media sector has three legs: content, distribu- to those of production more generally. Typically,
tion and devices. In this chapter, we will address production requires the following steps:
content, its production and, specifically, the fol- 55 Market analysis;
lowing questions: 55 Concept creation;
55 What are the ingredients of successful con- 55 Selection;
tent production? 55 Funding;
55 How is content production being organized 55 Product design;
on an industrial scale? 55 Development;
55 What management tools can be applied to 55 Production planning;
media production? 55 Procurement and deployment of inputs;
55 Production and assembly;
When it comes to media content—movies, TV 55 Post-production improvements and quality
shows, music, books, newspapers—it seems that control;
everybody is an expert. It has surrounded us 55 Preparation for distribution.
since birth individually and infused our culture
collectively. Media content is not merely art and Each of these steps also exists for content pro-
entertainment. It is also a worldwide role model, duction. However, there are indeed differences,
a trendsetter and moodsetter. Media content as we discussed in 7 Chap. 2 The Information
exerts influence on our values, our attitudes, Environment. These include:
our politics and our lifestyles. It is the subject of 55 An unusually high level of uncertainty about
intense public fascination and scrutiny. It is also the commercial success of content products.
an industry and, for the USA, among the largest 55 Extremely high fixed production costs and
export businesses. low reproduction costs. They require signifi-
Creativity is thought of as an individual activ- cant upfront capital to make the initial prod-
ity, but it has become an organized business and uct. This means unusually high economies of
social activity. Film, theater, opera and software scale, which are further increased by network
development are all the result of highly organized effects: the users of a product partially increase
collaboration and teamwork. Creative content is the value of that product to other users.
being created on an industrial scale—the “Dream 55 There often exist content producers who do
Factory.” It is a complex process. not aim to maximize profit, which affects the
nature of competition.
55 Media content often has public good charac-
3.1.2 Content Production teristics: its value goes beyond the immedi-
ate benefits to the producers, and it is often
Production management aims at a smooth and impractical to exclude non-payers from
continuous flow of production. It must allo- enjoying the content.
cate resources to different activities. It aims to
increase productivity. And it must have a system We will discuss, in particular, the film industry,
in place to measure and evaluate performance. as it has always been the most commercialized of
Production activities in companies are often content media, with dynamics that has often fore-
headed by the Chief Operations Officer (COO). told those of other media. In order to understand
The responsibilities of production management the success factors for content production, we will
include: purchasing, inventories, and supply explore why one particular content production
chain; process engineering; production schedul- center—Hollywood—has been so successful, for
ing and capacity planning; subcontracting; and so long, in so many countries and, potentially,
locational choices. A sub-set is project manage- now the Internet. This is despite the fact that
ment, which tends to be more limited in scope Hollywood is a high-cost producer and that it has
and time. usually lacked a long-term strategic vision (e.g. it
22 Chapter 3 · Production Management in Media and Information
initially totally missed the significance of broad- shows. But the economics were unfavorable—they
cast TV, cable TV, home video and the Internet). were relatively expensive events to produce, and
Also, Hollywood’s success is despite the fact that the limited potential for automation and mass
many major international markets have only been production meant it was difficult to expand per-
partly open, with many of them imposing import formances to larger audiences. The “craft”-style
quotas for almost a century.1 content production was ready to be replaced by a
3 Yet, none of this seems to have made a dif- mass production model in the same way that print
ference. Hollywood productions have remained technology had industrialized the book medium
predominant around the world throughout after the sixteenth century. For music, this technol-
that time, despite countless efforts to support ogy emerged after 1877 with the Edison phono-
national production and to restrict Hollywood. graph; for moving visual imagery, film technology
In 1920, the Hollywood studios accounted for made a big splash after 1895.
over 70% of the world’s movie revenues. In 2016,
they still maintain about the same market share,
67.7.2 During this time, pretty much the same 3.2.2 Types of Production
six firms (Universal, Paramount, Disney, Warner
Bros., Columbia, 20th Century Fox) dominated Production is generally done in one of two basic
and produced the majority of films. (MGM and ways: as a “job shop” or as a “flow shop.” A job
RKO dropped out; Disney joined.) Not even shop means a specialized craft production. This
Houston’s oil companies, New York’s Wall Street approach creates special and highly varied prod-
and London’s City financial clusters, or Detroit’s ucts and uses general tools. In the media field,
automotive industry maintained such long-term examples for job shop productions are plays,
global dominance. What does this tell us about music events and books. Job shop productions
the elements for success in content production? typically require a relatively limited upfront capi-
tal investment to cover the relatively small upfront
overheads, but they have relatively high variable
3.2 Content Industries costs of production for the individual item.
In contrast, a “flow shop” is a process of mass
3.2.1 Early Content production that requires specialized resources.
Flow jobs tend to be industrial productions, i.e.
The production of what we now call “media content” on a larger scale and repetitive. They are charac-
goes back to the early days of humanity, when indi- terized by high fixed costs but low marginal costs.
viduals and groups performed for their community They are less flexible than a job shop production
or overlords. Over time, this became organized and and require larger capital investment. Examples of
institutionalized—theater in ancient Greece, gladi- flow shop productions are newspapers and maga-
atorial spectacles in Imperial Rome, playhouses in zines in content creation, and telecommunica-
Elizabethan London, opera stages in Italy. Some tions services in distribution.
performers were individual content providers, such In media and technology, there are typically
as bards, troubadours and minstrels. They provided two stages of production. The first is the produc-
entertainment and news. Others were teams orga- tion of the “first copy”, which has job shop/craft
nized as content companies that produced and per- characteristics; the second is the making of repro-
formed spectacles, plays and music events. ductions and their distribution, which have flow
In nineteenth-century America and Europe, shop/industrial characteristics.
popular entertainment was provided by theater,
opera, circus and various kinds of burlesque
3.2.3 ost Characteristics: Film
C
Versus Theater
1 For example, import quotas and restrictions were set in Germany and
France in 1921.
2 Tartaglione, Nancy. “2016 Intl Box Office Sees Projected 3.7% Drop Amid The basic economic advantage of film over the-
Currency Shifts & China Dips—Studio Chart.” Deadline Hollywood. Last
updated January 5, 2017. 7 http://deadline.com/2017/01/highest-
ater is that its distribution cost per viewer is only
grossing-movie-studios-of-2016-international-box-office-1201878861/. 1% or less of the cost to distribute a similar item
3.2 · Content Industries
23 3
of content via live theater. This low cost facili- 3.2.4 History of the Film
tates distribution to audiences of many millions. Production Industry
However, to make millions of people want to see
a particular film rather than any of its rivals, one In the 1820s and 1830s, Nicéphore Niépce and
needs to create a highly attractive product. This Louis Daguerre, in France, and William Fox
requires a higher upfront production costs for Talbot, in England, invented the process of pho-
the film than is spent on a theatrical show.3 These tography, using glass plates. In the 1880s, George
costs can then be spread over the larger audience. Eastman of the USA created celluloid film that
Thus, content production costs for Hollywood could be rolled up, and he introduced cheap
films (the fixed costs) have risen, over time, to Kodak cameras. In 1891, Thomas Edison’s labora-
the remarkable figure of approximately $10,000/ tory invented the Kinetoscope, where the viewer
second—500 times higher than for a typical com- stared into a box to see moving images. However,
mercial theater production. Edison’s peep-show style display could only be
Thus, film shifts costs away from the variable viewed individually, or by small groups using a
costs of distribution to the fixed costs of con- bank of consoles. In contrast, the brothers Louis
tent production. The cheaper the distribution, and Auguste Lumière of Lyon, France, projected
the more elaborate the content production can their moving images onto a screen, facilitating
become, since it is spread across more users. It is mass audiences. Their first film clip was L’Arrivée
one of the economic characteristics of an industry d’un train à la Ciotat (1895). Its first showing was
with high fixed costs and low marginal costs that in Paris in 1895 and can be counted as the begin-
it has high economies of scale—large providers ning of the film medium as popular entertain-
have cost advantages over small ones (provided ment.
they produce reasonably efficiently). Almost immediately, new types of content
The same cost dynamics apply to a compari- began to emerge; film moved beyond novelty to
son of printed books with hand-written manu- a medium of considerable creativity. Already in
scripts. A printing press reduces incremental 1902, A Trip to the Moon, a science fiction film,
cost, but increases upfront investment in fixed was produced in France with new special effects.
costs. It is also the case for recorded music vs. Physical comedy emerged, and the antics of
live music, or for off-the-shelf packaged software comedians such as Charlie Chaplin were distrib-
vs. customized programs. It is the economics of uted worldwide. The first Western film, The Great
industrial mass production vs. those of artisan Train Robbery, was created, as was the first sexu-
production. ally suggestive film, The Gay Shoe Clerk. These
However, it is also a double-edged sword. and other productions could venture into content
Production with higher fixed costs and lower mar- that theater could not accomplish technically or
ginal costs is more profitable when the number of financially—special effects and genuine outdoor
tickets or copies sold is large. Conversely, it can scenes.
also lead to a much higher loss when the number The fundamental economics of the film
of tickets sold is low. It is the higher-risk strategy. medium led also to imitation, piracy and to
To deal with this downside, risk reduction there- attempts to monopolize markets. In 1908, in a
fore becomes a central management task in the bid to control the industry, the so-called “Edison
content production of mass-market media. Cartel” pooled the patents of the industry lead-
A second management consequence is that a ers Edison, Pathé, Vitagraph, Eastman Kodak,
high-fixed cost, low marginal cost industry with and Biograph, as well as the financial resources
its high economies of scale means a more con- of J.P. Morgan. The cartel possessed patents, the-
centrated industry structure, composed of a few aters, money, lawyers and connections. Yet, it was
large firms. These dimension of content produc- unable to suppress independent film entrepre-
tion will now be discussed, with the film industry, neurs. These emerged from the popular entertain-
which has pioneered many of the business models ment industry (such as vaudeville) that catered
of media, as the main example. to working-class audiences, or from retail and
merchandizing trades. These pioneers established
3 For theater, these upfront production costs include expenses up to the
the film companies that continue to exist into the
opening show, after which the costs are those of reproduction. twenty-first century.
century. In the USA, the structure of the book

industry, after a period of fragmentation and
easy entry, stabilized in the 1920s and centered
on a handful of major publishing companies sur-
rounded by thousands of small firms. The large
publishers were McGraw-Hill, Random House,
3 Simon & Schuster, Little Brown, HarperCollins,
and MacMillan, and were mostly located in
New York.
The book industry has fairly high marginal
costs and moderate fixed costs; its economies of
scale are therefore moderate. This has contrib-
.. Fig. 3.1 Universal Studios lot 1936 uted to an industry with numerous small pub-
lishers (about 3000), and to a huge number of
As the industry grew, the studios organized individual products, most of them with a small
factory-like production facilities and employed production run. Combined with the rising sup-
actors, directors, craftsmen, crews and equipment ply of authors, the number of titles published
that could be used for many projects (. Fig. 3.1).4 has grown strongly. Publishers need to make
They moved into flow-type production, creating numerous managerial decisions beyond the
hundreds of films each year. The MGM studio in editorial ones and are the central node in book
Culver City could shoot six different films at the production. They select authors and manuscripts;
same time. Feature films could be shot in less than improve the product; oversee printing and manu-
a week.5 The legendary Cecil B. DeMille at times facturing in-house or outsourced, and determine
directed and produced two films simultaneously. the quantity; they market the book, set prices,
Today, the six major Hollywood film studios secure copyrights and license subsidiary rights;
that dominate the film business are fairly simi- they manage the distribution channels; and col-
lar in size, with market shares of about 10–15%, lect sales proceeds and distribute them to claim-
depending on the success of a particular season. ants such as authors.6
3.2.5.2 Newspapers and Magazines

3.2.5 Production in Other In the richer countries, newspaper penetration
Media Industries used to be high but it has been steadily declining.
In the USA, 78% of the adult population read a
3.2.5.1 Books daily paper in 1970. That number dropped to
After the emergence of print technology in the 51.6% by 2005, 33.7% by 20147, 8, 9 and 28% in
fifteenth century, early printers at first also func- 2016.10 Some countries have a newspaper system
tioned as publishers by selecting and commis-
sioning content. Printing centers emerged, such
as Venice and Amsterdam. In the early eighteenth
century, publishing separated from printing and 6 Bailey, Herbert S. The Art and Science of Book Publishing. Athens, OH:
became a profession in its own right. Publishers Ohio University Press, 1990.
7 Newspaper Association of America. “Newspaper Readership & Audience
such as Weidmann (Leipzig) and Longmans by Age and Gender.” NAA.org. Last updated March 18, 2013. 7 http://
(London) have continued into the twenty-first www.naa.org/Trends-and-Numbers/Readership/Age-and-Gender.aspx.
8 Newspaper Association of America. “Daily Readership Trend – Total
Adults (1988–2005).” Newspaper Association of America. (1988–2005).
Last updated October 2005. 7 http://www.naa.org/marketscope/pdfs/
Daily_National_Top50_1998-2005.pdf.
9 Pew Research Journalism Project. “Newspaper Readership by Age.” Pew
4 The Studio Tour. “Universal Studio 1936 Aerial.” Last accessed July 18, Research Center. Last updated July 2014. 7 http://www.journalism.org/
2017. 7 http://www.thestudiotour.com/ush/frontlot/images/1936_aer- media-indicators/newspaper-readership-by-age/.
ial.jpg. 10 Edmonds, Rick. “Newspaper declines accelerate, latest Pew Research
5 Epstein, Edward Jay. The Big Picture, The New Logic of Money and Power in finds, other sectors healthier.” Poynter. Last updated June 15, 2016.
Hollywood. New York: E.J.E. Publication, Ltd., 2005. This highly informa- 7 http://www.poynter.org/2016/newspaper-declines-accelerate-latest-
tive book was a frequent source for factual information for this book. pew-research-finds-other-sectors-healthier/416657/.
25 3
based on large, nationwide newspapers; examples delivery systems than newspapers.13 Magazines
are Japan and the UK. Other countries have a sys- rapidly adapt to changing interests and activi-
tem of local/regional papers, for example, the USA ties in society; as a result, the industry has faced
and Germany. The newspapers distributed in the a less steep decline than daily newspapers. The
USA nationally are The Wall Street Journal, USA major magazine groups tend to publish dozens
Today, and The New York Times. Aside from such of different titles, with economies realized in
presence, in most US cities newspapers operate the physical production and distribution more
in a near-monopolistic local market structure. In than in content production. In the USA, these
2014, only 20 American cities were served by two groups are Advance Publications, Meredith, and
or more separately owned competing local dailies. Hearst, each with about 7–9%. Internationally,
The city population needed for the general assur- aside from the Government of China and the
ance of a single local paper in the year 2000 was three US groups mentioned, the largest groups
above 100,000 whereas, in 1980, this figure had are the commercial publishers Abril and Globo
been only half that number. To sustain more than (both in Brazil), Bauer, Axel Springer, Burda, and
one daily local newspaper required, on average, a Bertelsmann (Germany), Lagardere (France),
population of more than one million, double the Sanoma (Finland) and Bonnier (Sweden).
figure in 1980.11
In many countries, the market share of the 3.2.5.3 Music
top newspaper publishing company is quite high: The recorded music industry is internationally
Mexico (O.E.M. 49.4%); Turkey (Dogan 63%); concentrated and integrated with other media.
Australia (News Corp. 58%); Chile (Mercurio Three major music groups own large numbers
55%); Ireland (INM 52%); South Africa (Naspers of specialized and national labels worldwide,
36%); Argentina (Clarin 45%); France (Amaury each with its own character and specialties. The
30%); and the UK (News Corp. 35%).12 In the Universal Music Group, owned by the French
USA, the largest newspaper company is Gannett, company Vivendi, has a global market share
with a market share of 12% in 2016. of 33.5%, Sony (Japan) holds 22.6% and the
Given the historically central role of news- Warner Music Group (USA) 17.1%. For a tra-
papers in political and commercial communica- ditional music CD, the production activities
tions, there has been a great deal of concern about (artist, songwriter, composer, copyright, pro-
the decline of newspapers. The continued trend ducer, recording, manufacturing, and allocated
toward local market newspaper monopoly, the overheads and profit) account for about 53% of
mergers of newspaper groups, shrinking circula- overall revenue. Distribution accounts for 37%.
tions and the emergence of the Internet as an effec- For online music, production gets about 44% of
tive delivery platform of free news and targeted revenues.14
advertising have raised worldwide alarms about
the future viability of newspapers. Newspapers 3.2.5.4 Television Content
firms responded by further consolidation, using Much TV content has a short half-life, especially
technology to streamline production and distri- news and sports events. “Disposable television”
bution processes, and the cutting of editorial costs includes talk shows, award galas, and so on.
(and often quality). But, in particular, newspapers However, a short economic life has advantages,
“repurposed” their content in new electronic ways too, since it attracts less piracy. Other major
to compete for consumer attention and advertiser parts of TV entertainment content are serials and
support.
Magazines do not include up-to-the min-
ute news and are able to rely on more leisurely
13 Compaine, Benjamin M. and Douglas Gomery. Who Owns The Media? 3rd
ed. Mahwah, NJ: Lawrence Erlbaum Associates, Inc., 2000, 147–193.
14 For online music, the retailer—such as Apple iStore—takes about 30%;
11 Noam, Eli. Media Ownership and Concentration in America. New York: the distributor (for encoding, submission and so on) 8%; the producer/
Oxford University Press, 2009, 142. label 28% (the latter includes marketing 11%, production 10%, admin-
12 Noam, Eli. Who Owns the World’s Media? New York: Oxford University istration/overheads 5%, and profit 2%); advertising intermediaries 16%;
Press, 2016 the artist 10%; songwriter and composer 6%.
“made- for-
TV” films. These have increasingly 3.2.6 he Global Success of the
T
become part of subsequent distribution over the Hollywood Production
Internet. Industry
The world’s largest producers of TV content are
state-owned broadcast entities (such as in China, We now return to a discussion of the film indus-
Egypt and Russia), and national public service
3 broadcasters such as BBC (UK), RAI (Italy), NHK
try. For several centuries, the flow of culture—
books, theater and music—flowed largely in one
(Japan), and ARD and ZDF (Germany). Large direction: out of Europe to the colonies and the
commercial TV producers are Globo (Brazil); rest of the world. Then, however, the direction
Televisa (Mexico); NTV, TV Asahi, Fuji, TBS of the flow reversed for the youthful medium of
(Japan); SBS (Korea); Bertelsmann (Germany) film. Starting in 1910, American films accounted
and Fininvest (Berlusconi, Italy). In the USA, for over half of the box office in Europe, exceeding
the largest TV content producers in 2013 were domestic products even in France, Germany and
Disney (29.0%), Viacom/CBS (20.1%), Universal the UK, and this percentage grew in the 1920s. In
(Comcast, 16.3%), 21st Century Fox (Murdoch, response, protective import quotas and restric-
7.8%), Time Warner (10.7%) and Sony (4.5%). tions on the repatriation of box office earnings
Almost all these companies not only produce, but were speedily established in the major European
also operate broadcast and cable channels. Market countries. In effect, this was an early regulatory
shares vary from year to year based on the success measure against cultural globalization—which,
of particular shows. until then, had been acceptable in music and lit-
erature. Content protectionism serves three func-
3.2.5.5 Video Games
tions: to shelter a country’s national culture and
Video games, though distributed by game pub- identity, to support the influential cultural pro-
lishers, are actually written by different types of duction sector and its workforce, and to help proj-
developers: in-house teams of the publishers, ect a country’s visibility worldwide. The measures
independents who may self-publish and self- employed were direct governmental subsidies,
distribute, and third-party contractors. When import quotas, screen and broadcast quotas, and
self-developing, the distribution forms hire pro- tax breaks. Many of these policies have persisted in
grammers, game designers, artists, sound engi- one form or another for almost a century. Even so,
neers, producers and testers. of the top 40 grossing films worldwide in almost
Major games cost easily $10 million and more every year almost all were Hollywood produc-
to produce, plus $10 million to market. Game tions. In most countries, audiences prefer domes-
platforms are subject to a five-year hardware cycle tically produced films. Imported Hollywood films
of technology generations, and game companies follow behind as the second most popular and, as
must redesign most of their game software on they are more numerous, they thus dominate. The
the same schedule to conform to the enhanced key problem is that films from third countries—
technological capabilities of the new-generation including films from neighboring countries—are
platforms. much less popular outside their own country. In
The video game industry has moved to eco- 2004, only 8% of film revenue in Europe was from
nomics similar to those of Hollywood. This European films shown outside their own national
includes high budgets and a reliance on block- market in other European countries.16
busters.15 The industry introduced in-game What, then, are the reasons for Hollywood’s
advertisements similar to TV commercials. success as a content production center? The
answers may help to identify the main success fac-
tors for content production more generally.
15 Nussenbaum, Evelyn. “News and Analysis; Video Game Makers Go Hol-

lywood. Uh-Oh.” New York Times. August 22, 2004. Last accessed April 16 European Audiovisual Observatory. Focus 2004 – World Film Market
11, 2017. 7 http://www.nytimes.com/2004/08/22/business/news-and- Trends. Cannes: Marché du Film, 2004. Last accessed August 7, 2012.
analysis-video-game-makers-go-hollywood-uh-oh.html. 7 http://www.obs.coe.int/online_publication/reports/focus2004.pdf.
27 3
3.2.7 Case Discussion
Canal Plus and the Hollywood Advantage
France is the birthplace of film gifted writers and critics centered closest advisor, chief of staff,
and is also a significant market for around the journal Cahiers du Cin- regular golfing partner, campaign
the medium. In 2016, 209 million ema, including Francois Truffault, finance director and the executor
tickets were sold; 34.5% of admis- Jean-Luc Godard, Eric Rohmer and of his will. Rousselet became head
sions were for French films, while Jacques Rivette, and attacked this of the largest French advertis-
53.6% were for American films, tradition. Starting in the late 1950s, ing and media company, Havas,
an increasing number over 2011 they began to make their own which then received from the
when it was 48%;17 and 211 French movies. government a monopoly license to
films were released,18 which made The result was a major renais- transmit pay-TV in France, as Canal
France the largest film producer in sance in French filmmaking. Plus. Being the state-licensed
Europe. 120 first-time directors made monopolist of pay-TV, Canal
Canal Plus (or Canal+) is the full-length films in the years Plus was able to charge prices
major French film distribution and 1958–1964. Governmental or pub- that would have failed in more
production company, a subsidiary lic-service TV usually supported competitive markets. In 2014, it
of the multi-media firm Vivendi. It these films. This era is known as charged almost $53 per month.
has its own production arm (Stu- the French New Wave—Nouvelle In contrast, HBO or Showtime in
dioCanal) and distribution chan- Vague. Other French filmmakers the USA charge $11–$17. In return
nels in France, Europe and Africa. in those years included Claude for its profitable exclusivity20 in
Chabrol, Jean Renoir and Alain pay-TV, Canal Plus had to agree to
Cinema in France Resnais.19 Soon, however, the New allocate 10% of its revenues to the
To understand the present and Wave crested. Financial success production of French films. This
future of Canal Plus, one must was less frequent, and younger revenue source became the major
understand its past. For several audiences did not follow the funder of French cinema.
decades, French film had been a 1960s generation in enthusiasm.
relatively weak exporter. In other By the late 1970s, French film had Vivendi—The Parent Company
cultural markets, French cultural declined again. Vivendi is the largest European
products have been highly suc- To deal with this decline, media company. Its origin is the
cessful around the world. Paris is the French government created French municipal water utility
the capital of fashion and cuisine; a financial support mechanism. Compagnie Generale Des Eau,
its books are read worldwide. In Its most notable element was created by edict of Napoleon III in
popular French music, dance music through the creation of the new 1853. Eventually, water distribu-
group Daft Punk has become highly pay-TV channel Canal Plus in the tion led to waste management,
successful. Its album Random mid-1980s. Previously, under construction, energy, cable TV dis-
Access Memories, released in 2013, conservative French presidents tribution and mobile telecom. The
sold half a million copies and was de Gaulle and Pompidou, French media part was renamed “Vivendi.”
number one in the Billboard album TV was totally owned and con- Its president, Jean-Marie Messier,
chart. Another famous French trolled by the government, for was a highly entrepreneurial leader
musician is the rock star Johnny which it was the mouthpiece. who admired the American media
Hallyday, who has sold more than De Gaulle’s influence rested on CEO model. He made the company
100 million albums worldwide. his direct TV addresses to the a major vehicle of growth.
For decades, many of the nation. A new socialist president, Vivendi diversified by buy-
major French films were elaborate Francois Mitterand, himself long ing the second French cellular
productions of classic novels of a victim of such state TV, opened telecom operator, the videogame
French culture. This “cinema of the medium, and created the first companies Activision and Blizzard
quality” was supported by gov- pay-TV channel, Canal Plus. But, Games, and Canal Plus. It then
ernment funds. Critics covered it staying within the paradigm of acquired the major Hollywood
gently. Outside of France, it left state control, it was guided by studio and music companies
no mark. A dissident group of Andre Rousselet, the President’s Universal Pictures and Universal
17 Centre National du Cinema et De L’Image Animee. “Theater Admis-

sions—Estimates for February 2017.” Last modified March 3, 2017. 19 Grant, Barry Keith. Schirmer Encyclopedia of Film. Detroit: Schirmer Refer-
7 http://www.cnc.fr/web/en/theater-admissions. ence, 2007, 235.
18 The Numbers. “Movies Produced by France and Released in 2016.” 20 Canal Plus briefly got competition for terrestrial pay-TV, 30 years later,
Accessed April 11, 2017. 7 http://www.the-numbers.com/France/mov- when the French government licensed SelecTV, which, however, went
ies/year/2016. bankrupt after a short time.
Music in 2000. Eventually, how- Vivendi became a classic verti- Canal Plus has a stake in two-
ever, Vivendi over-extended itself cally integrated multi-national mass thirds of French film production
and faced huge debt obligations media and telecommunication and is the prime provider of original
and insolvency. The losses in 2001 company with activities in music, cable TV content in France. It is
stood at $11.2 billion. Messier was television, film, publishing, telecom- Europe’s largest film distributor (over
fired, and Vivendi sold off some munications, the Internet and video pay-TV) and film producer, and it
3 of its acquisitions, including most games.21 Its market share in the film wants to export worldwide, includ-
of Universal Pictures. Messier was market in France is 26.8%, far ahead ing to the USA. The question is, how
charged with securities violations of others, including Hollywood firms this might be done? How can Canal
and, a decade later, was slapped whose combined share was about Plus become a global content pro-
on the wrist to pay a fine of 50%. In 2016, Canal Plus accounted ducer? What kind of content should
€150,000. for 23% of Vivendi’s profits.22 Canal Plus produce, and how?
3.3 Conventional Arguments it is clearly by far the most influential and global
for Hollywood’s Success language, and is spoken by an economically afflu-
in Production ent slice of the world’s population.
But is market size, even when weighted by
3.3.1 Supposed Advantage: income, determinative of production success? If
Market Size? Language? it were, this would relegate small countries into
permanent roles as importers. However, such
Many explanations have been offered for “two-stage” thinking, in which exports are only
Hollywood’s enduring success as a center for con- a subsequent second step after domestic success,
tent production. The most frequent reasons given makes no sense for a business firm. With such
are the large scale of the market, as well as politi- economic logic, there would be no major industry
cal and economic power; superior access to talent; of making watches in Switzerland, chocolate in
and vertical integration of production and distri- Belgium, software in Israel and Ireland, or video
bution. These factors will now be discussed, as games or consumer electronics in Korea. All these
they are relevant to all types of content industries. countries are relatively small. None possesses
The conventional argument for content suc- unique natural resources. But they are major
cess is that a large domestic market must exist exporters of their products despite (or, perhaps,
before exporting the content worldwide. Thus, because of) their limited national markets. In the
the US population is about 318 million, whereas modern economy, producers must plan from the
the French population, for example, is only 66 beginning to sell in a world market, rather than
million. A 2013 compilation finds that English only domestically.
as a first and second language was understood That it can be profitable for media compa-
by 840 million people. For French, the number nies from small or medium-sized countries to
was 486 million; for Spanish, 430 million; for become large in global terms can be seen by the
Portuguese, 310 million; and for Arabic, 620 mil- world’s largest commercial book publishers. In
lion. It is highest for Mandarin at 1036 million 2009, these had been #1 Bertelsmann (Germany);
and Hindi/Urdu at 850 million.23 Thus, English #2 Lagardère/Hachette (France); #3 Fininvest/
by sheer numbers is not a radical outlier, though Mondadori (Italy); #4 Planeta (Spain); followed by
a US company (Harper Collins) as #5, controlled
by the long-time Australian Rupert Murdoch’s
News Corp. All of these companies made a sub-
21 Vivendi. “Vivendi in Brief.” Last accessed April 12, 2017. 7 http://www.
vivendi.com/en/vivendi-en/.
stantial part of their business outside their home
22 Vivendi. Vivendi 2016 Annual Report. Last accessed April 12, 2017. base.
7 http://www.vivendi.com/wp-content/uploads/2017/02/20170223_
Financial_Report_and_Consolidated_Financial_Statements_FY_2016.
But an exports orientation also has an impact
pdf. on content. If export revenues rise in importance,
23 Simons, Gary F. and Charles D. Fennig. Eds. Ethnologue: Languages of
the World, 20th ed. Dallas, TX: SIL International, 2017. Online version:
the incentives for content in terms of themes and
7 http://www.ethnologue.com. style will be more global and less local. Therefore,
3.3 · Conventional Arguments for Hollywood’s Success in Production
29 3
content that aims at export will most likely shed integration for media. The first, backward inte-
some of its domestic distinctions in favor of a gration, is when a distribution company such as
wider global appeal. “Mid-Atlantic” or “mid- a TV network produces its own inputs such as
Pacific” content emerges. An extreme example, TV shows. By doing so, the company controls
in the late 1960s, was the highly successful films the costs and quality of inputs. The other kind of
out of Italy known as “Spaghetti Westerns,” which vertical tie-in, forward integration, is when pro-
emulated American cowboy films. Given the duction firms control distribution channels. This
worldwide popularity of the genre at the time, ensures distribution, markets and supply, while
these Italian-made films were hits everywhere. also helping to create product synergy. Examples
But they were not particularly Italian in con- are when a music company or book publisher
tent. Similarly, television content, for worldwide operates its own distribution through retail stores
success, becomes export-oriented. Endemol, a or “media clubs.”
Netherlands-based firm, developed TV formats The major distribution companies handle
that were then widely franchised, such as “Big products created by their own affiliated produc-
Brother” and “Fear Factor.” There are few ele- tion companies, but they also distribute content
ments in it that are distinctively Dutch or Western produced by independent and foreign producers,
European. and even by competitors. This is true for film, TV,
The same dynamics affect American content. music, or videogames. It is also the case, in some
Not all content is equally exportable. Films with instances, for book, newspapers and magazine
action, adventure, physical comedy and special publishing.
effects generally travel well to other countries. What are the business reasons for the vertical
In contrast, comedy films are more difficult to integration of production and distribution?
translate in terms of language and subtext. Social 55 Vertical integration is advantageous to a con-
controversies such as race themes do not export tent producing company in order to control
well, either. In consequence, the tastes of foreign the release of its products and their prices
audiences affect American film themes and cast- through a “release sequence” of different out-
ing. In the casting of films, an increasingly multi- lets, different timings, coordinated planning
national set of performers is chosen for their and different prices.
marketing appeal. 55 The cross-marketing of multiple products and
A large domestic market helps content pro- a cross-platform distribution are facilitated,
duction. But it can be overcome by a firm that thereby reducing transaction costs.
“thinks globally” in its content production strat- 55 To a distributor, it is advantageous to have
egy rather than locally, and on a scale that goes assured access to products it controls, and
beyond its domestic position. It must not think of to favor those products over those of others.
exports as an aftermarket but as the market. This, Attractive content may be scarce, and supe-
however, means a reduction of the national char- rior access to it provides a distributor with
acter of the content in order to appeal to a wider market power.
audience, through themes, styles and costs. (There 55 Through vertical integration, market power
will, of course, be a few exceptions in which the can be extended from one stage of the value
very “foreign-ness” of content is its attraction.) chain to another, e.g. from distribution to
production, and used to foreclose markets to
competitors.
3.3.2 nd Supposed Advantage:
2 55 Rivals can be subjected to a vertical “price
Vertical Integration of Content squeeze” in which the wholesale market price
with Distribution? for their product is kept low by their rival’s
domination of wholesale distribution. The
Many people believe that the success of content vertically integrated rival then shifts its profit
producers requires that they control distribu- to the wholesale sector from the production
tion channels, which gives them advantages over sector. The same can be done by a company
competitors. There are two major kinds of vertical that dominates retail.
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Lady Geneviva!
GENEVIVA.
No—
The harlot, loves the harlot. You can tell me
So much of him. What, with him every day!—
All through the golden summer and no rain,
All through the autumn and its violence!
Did he fall sick of fever?
MARCOMIR.
I have known
So little of the seasons. Day and night
I prayed that God would keep you chaste. No prayer
Of mine was ever answered.
CARLOMAN.
[to Marcomir] Dare you pray

That this should be or that? The only prayer
That is not futile in impiety
Is like a plunge beneath a river’s flow
To feel the strength and pureness of the life
That courses through the world.
GENEVIVA.
Ah, yes, to bathe,
And then to rise up clean.
[to Marcomir] The very moment
He spoke of youth, virginity and love
I prayed: I am alive. O Marcomir,
And there are other words of fellowship,
Of joy and youth-time. Let us hold him dear
Because he has delivered us; together
Let us give thanks, give courage each to each
Unenvious; let us talk of him once more,
Though with a difference—I will not use
Your comradeship profanely as I did,
To set you up against him in caprice,
Then leave you wild and empty. He has much
To pardon; you have more.
MARCOMIR.
No, no!
CARLOMAN.
Ah, no—
Not pardon. Where’s the need? We mortal men
Are brought to riot, brought to abstinence
That we may grow on either ready soil
The mustard-seed of pleasure, that is filled
With wings and sunny leaves. As time goes by
We shall have true relations each with each,
And with clean hearts receive the usufruct
Of what is best, and growing better still
In every soul among us.
[leading her up to Marcomir]
Geneviva,
His kiss will free your penitence, and teach you
He never could regret the past, because
It made to-day.
MARCOMIR.
[kissing her] Now, and beyond, beyond

Your friend—and lover.
I have prayed, like you,
The difficult is possible as once.
O life, O Geneviva, I were doomed
Indeed, if I should dare to rob myself
Of all the joy it is to be with you;
That were to die forever. What, reject
The gift you have for me, because for him
You have a different gift! But take my passion,
As I shall learn to take your friendship—each
Accepting what the other has to give,
All will be well between us.
[Enter Pepin.]
PEPIN.
Holy brothers,
At last I join you. Come, this is unseemly ...
A pleasant dame—but not within my palace
Shall you be tempted to forsake your vows.
[to Geneviva.]
Go, get your lovers on the highway; here
You bring disgrace.
(to Carloman in a low voice) A courtesan.
CARLOMAN.
My wife.
PEPIN.
Thor! are you crazy?
CARLOMAN.
And I trusted you,

I left her in your charge. Where is my child?
PEPIN.
Dead in the cloister half a year ago ...

That was no fault of mine. As for your wife—
CARLOMAN.
[to Marcomir] Take Lady Geneviva to her rooms,

Her rooms within the palace.
[to Geneviva, as she goes from him] So our boy
Is dead! Can you forgive me?
[He shudders and bows his head. Exeunt Marcomir and Geneviva.]
PEPIN.
On my oath,
I could not be her keeper, Carloman.
CARLOMAN.
No, that is no man’s office. Of herself

She was what she has been, and each of us
Should say no word against her to our shame,
Nor any word to one another more
Than what we just have said. These fearful things
Should be within a fosse below all speech;
While we live sound above them and forget.
I come to you....
PEPIN.
The same, magnanimous,

My brother, as of old.
[laying his hand on Carloman’s shoulder]
What bones!
CARLOMAN.
Ah, yes.
I have not flesh as full of life as yours;
Why, your mere touch can warm one like the sun.
PEPIN.
Six years ago! You come as if the dead

Could rise and make a visit.
CARLOMAN.
[gasping] Pepin, hush!

I have been dead, and yet I am no ghost;
You strike me through with anguish.
PEPIN.
But you suffer

Unnecessary pain. I give you welcome
With all my heart; yet you yourself must know
Your presence in the place where once you ruled
Is—well, unlooked for.
CARLOMAN.
[vehemently] Brother, I can prove

I am no spectre, outcast from the fortunes
Of breathing men,—that I too have a part
Once more in worldly business. I am come....
PEPIN.
[close to him]
What are you come for?
CARLOMAN.
I am come to live,
To share again your counsels.
PEPIN.
You are come

For what?
CARLOMAN.
Once more to think of France, and act

As you and I determine.
PEPIN.
Willingly
I hear advice; but now the throne is mine
Decision rests with me and not with you,
Who have been shut away from everything
But prayers and convent-policy. Forgive,
We are no longer equals—you a Saint,
I a mere statesman. But you have not said
One word about the cloister.
CARLOMAN.
Do we waste
Much talk on vaults, we men who are alive?
PEPIN.
And yet you chose it!
CARLOMAN.
Now I choose again.
PEPIN.
You cannot. Are you mad? Who sent you here?
CARLOMAN.
Astolph the Lombard.
PEPIN.
Humph! What prelate gave

Authority to him? He could not use
Your services by force.
CARLOMAN.
I left the convent

At his request alone, in opposition
To bishop Damiani. I am free!
I proved it, acting freely.
PEPIN.
Whew!—this Astolph ...?
CARLOMAN.
Would save you from alliance with the Pope,

Alliance with a foreign tyranny,
Opposed to human life and thwarting it.
Astolph is on your borders, and a King
Is more your natural fellow than this Pope,
Who seizes on the natural power of Kings,
Confusing his tiara with their crowns.
I speak the truth, for Zacharias travels
In haste to put his yoke on France and you.
Before he can arrive ...
PEPIN.
The Pope is here.
CARLOMAN.
Impossible!
PEPIN.
He reached us yesterday.
CARLOMAN.
Pepin, you are in league with him?
PEPIN.
I am.
CARLOMAN.
As you are wise and manly, break your promise;

It injures France, the freedom-loving plains
The aweless stock we come of. Will you give
The future of your people to a priest,
You who profess the tonsure round my head
Disables for a crown?
PEPIN.
I, break my treaty,
And ruin my whole scheme!
CARLOMAN.
The Pope is gray,
And Astolph young and sound in force as you.
Which is the deadlier foe?
PEPIN.
The Pope and I

Are age and youth together. Carloman,
I love you still; you take me at the heart
Now that your face is glowing: I must speak,
For either you are mad, or have forgotten
How deeds are judged here in the actual world.
You are a monk, a runaway, and worse—
A heretic blasphemer, one who tempts
Both to rebellion and to perjury,
Yourself as disobedient as forsworn.
You must go back and bear your punishment
Without the least delay; for you are lost
If Zacharias find you here.
CARLOMAN.
Go back!
Go back!
PEPIN.
You are a danger to yourself

Remaining, and a danger to my throne.
All I have said is true. Have you not broken
Your vow?
CARLOMAN.
I have.
PEPIN.
And are you not a rebel?
CARLOMAN.
I am, I am, because I am alive—

And not a slave who sleeps through Time, unable
To share its agitation. What, go back!
You might as well dismiss me to the womb
From which I was delivered.
PEPIN.
Of yourself
You left the world.
CARLOMAN.
[trembling] O Pepin, the same mother,

Gave us our lives, and we had worked and thought
And breathed in common till I went away—
PEPIN.
We cannot any more. Why will you fix

A look so obstinate and hot?
By heaven, you are a fool. I cannot change
Myself, nor you, nor what has come to pass
I soon shall hate you, wish that you were dead.
CARLOMAN.
How horrible! I never will go back;
But I can live without my brother’s love,
For ties are not existence.
PEPIN.
Will you raise

Divisions in my kingdom?
CARLOMAN.
I must live.
[Enter Pope Zacharias, Boniface and a number of Churchmen and

nobles.]
PEPIN.
[to Zacharias.]
There stands my brother and your enemy.
ZACHARIAS.
Who?—Carloman? You wrong him. But what mission

Has brought him to the palace?
PEPIN.
He has left
His convent, and is here to plead the cause
Of Astolph, the arch-heretic.
ZACHARIAS.
My son,
Defend yourself.
CARLOMAN.
[putting his hands over his brow as if in confusion]
But I can never say

What he could comprehend. How strange to feel
So slow, as if I walked without the light,
Deep in a valley.
[Boniface touches him] Ah!
BONIFACE.
You do not listen!

Beloved, the Pope is speaking.
CARLOMAN.
[to Boniface] But you know

What drove you forth to wander foreign lands,
With joy in every limb and faculty:
That drove me from the convent.
BONIFACE.
As a monk
I left the English cloister, with a blessing
From him who ruled me. Is it as a monk,
Oh, is it—that we see you in our midst?
CARLOMAN.
No, no, enfranchised!
[suddenly standing forth] Hear me! The I am
Has sent me to you and has given me power
To rend your idols, for you have not known
The God I worship. He is just to-day—
Not dreaming of the future,—in itself,
Breath after breath divine! Oh, He becomes!
He cannot be of yesterday, for youth
Could not then walk beside Him, and the young
Must walk with God: and He is most alive
Wherever life is of each living thing.
To-morrow and to-morrow—those to-days
Of unborn generations; the I am
To none of them a memory or a hope,
To each the thirst, the wine-cup and the wine,
The craving, the satiety—my God!
O Holy Father, you who sway the world
Through Him, must not deny Him.
ZACHARIAS.
I deny!
God does not alter; you have changed to Him
Who is Eternal.
CARLOMAN.
Yes, in change, and free

As we are free who move within His life,
And shape ourselves by what is moulding Earth
And men and ages. In my cell I lost
The motion of His presence. I was dead.
ZACHARIAS.
No, you are dead to what you dare blaspheme,
To what the cloister holds, if any place
Can hold it, the immutability
Of God’s inherent nature, while without
His words are trying men by chance and change
And manifold desires. You left His works
Behind, you chose Himself: your oath was taken
To His deep heart; and now you would forswear
That oath, you cannot. No one who blasphemes
The light of God shall see the light of day:
For him the darkness and for him the grave.
I am no more your father, but your judge,
Who represents the God you have disowned,
Insulted and forgotten. He requites—
And you shall answer to the uttermost.
CARLOMAN.
I can.
ZACHARIAS.
You still persist in carnal thoughts,

Confounding Deity with things that pass?
CARLOMAN.
God is the Movement, if He is the Life

Of all—I live in Him.
ZACHARIAS.
You left the convent

Against command?
CARLOMAN.
Against command of men.
ZACHARIAS.
And leagued with Astolph?
CARLOMAN.
In fast brotherhood.
ZACHARIAS.
You hear his full confession. O apostate

In vain, weep at your sentence.
PEPIN.
Holy Father,
I pray you send him back, but spare his life—
Spare him, if I have power with you.
ZACHARIAS.
His doom
Is but his choice made permanent on earth.
[to Carloman] O fallen from blessedness of will, become
The friend of heretics, the false of word
To everlasting Truth, you are condemned
Life-long to be a prisoner in your cell,
Life-long to watch the scourge and crucifix.
You chose them, as the God whom you abjure
Chose them, forever; you have lapsed and they
Become tormentors, till they force contrition
At last and save you.
CARLOMAN.
[with a low, panting moan] Prison!
ZACHARIAS.
At Vienne,
There till you die the prison you have made
Of an eternal vow shall compass you.
CARLOMAN.
Think what it is—by God Himself, remember

What you would do to me. The very dead
Rise ... Everything must have escape to live,
And I shall still be living.
[He throws both arms over his face, then suddenly removing them, makes a
frenzied movement closer to the Pope.]
Let me die
Here, now! It is most impious, horrible
To bury me, full to the lips with life.
Sharpness-of-death, give that, but not to feel
The prison walls close on an energy
Beating its claim to worlds.
ZACHARIAS.
What I have spoken

Is and remains irrevocable.
BONIFACE.
[gently to Carloman] Yield,—

Yield to a God Who compasses you round
With love so strong it binds you.
CARLOMAN.
And is hell—
But I reject such love.
O Pepin, listen!
I see so far! Your pact with Rome undoes
Long centuries, and yields your country up
To spiritless restriction, and a future
Entombed alive, as mine will be, in night.
Simply renounce your promise, bid your soldiers
Seize the old man who numbs us. You and I
Could set to music that would never end
The forces of our people.
PEPIN.
You are crazy
Or worse, and I disown you.
[to Zacharias] On his head
Let fall what curse you will.
ZACHARIAS.
Then he shall see

The sacred pact between us re-confirmed.
[to Monks]
Fetch Chilperic! [Exeunt Monks.]
And meanwhile bring fetters in
To bind this renegade.
[moving up to the royal board that crosses the hall at the further end]
The treaty—sign!
[Pepin and his nobles follow Zacharias: Attendants bring in fetters.

Carloman submits mechanically to be bound, staring at Pepin, who affixes
his signature to the treaty.]
[Boniface goes round to Carloman.]
BONIFACE.
Son, you do well to take your shame so meekly,

And bear in patience.
CARLOMAN.
[sharply] Have they bound me then?

Look, Boniface! And Pepin is a slave.
Nothing remains now in the world. That treaty,
That pact!
[Chilperic is taken before Zacharias and Pepin; they appear to address
him, to consult with each other: then a monk advances and cuts off
Chilperic’s long hair, while he weeps bitterly. Geneviva and Marcomir
re-enter hurriedly as if they had heard bad news and see Carloman
bound.]
GENEVIVA.
Be true to him.
MARCOMIR.
I will.
GENEVIVA.
Then share
His prison—say you left his monastery,
Step forth and save him from his loneliness,
My Marcomir, his friend. This is the moment;
And, as you love him, speak.
MARCOMIR.
[drawing his cowl closer] No! Once before

I went along with him: I went to hell.
Renew that pain and foulness for his sake,
Because I love him——?
GENEVIVA.
Then because I love,

If nothing else will urge you—for my sake,
Only for mine.
MARCOMIR.

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Media and Digital Management 1St Edition 2018 Edition Noam Full Chapter

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Media and Digital Management 1st

edition 2018 Edition Noam

MEDIA AND D IGITAL

Media and Digital

ISBN 978-3-319-71345-8 ISBN 978-3-319-72000-5 (eBook)

Library of Congress Control Number: 2017964229

Cover image © Maxim Basinski/Alamy Stock Vector

Printed on acid-free paper

2 The Information Environment............................................................................................... 7

3.3.2 2nd Supposed Advantage: Vertical Integration of Content with Distribution?................ 29

4 Technology Management in Media and Information Firms.............................. 59

5 Human Resource Management for Media and Information Firms................ 97

6 Financing Media, Information, and Communications........................................... 127

6.4.5 The Impact of Debt Financing on Content................................................................................... 139

7 Intellectual Asset Management........................................................................................... 165

8 Managing Law and Regulation............................................................................................. 201

8.2.2 Outside Counsel.................................................................................................................................... 205

10 Marketing of Media and Information............................................................................ 267

10.1.4 Limited Attention.............................................................................................................................. 272

10.12.4 Privacy Regulation............................................................................................................................. 296

11 Pricing of Media and Information.................................................................................... 305

11.10 How Firms Organize Their Pricing Function........................................................................... 332

12 Distribution of Media and Information........................................................................ 341

12.7.5 Direct Electronic Distribution to Users: Streaming Music..................................................... 370

13.9 Managerial Accounting.................................................................................................................. 412

14 Strategy Planning in Media and Information Firms............................................. 423

15 Concluding Observations...................................................................................................... 461

15.3 Challenges for Media Managers................................................................................................. 463

 Correction to: Media and Digital Management...................................................... C1

Figure 2.1 The three legs of media. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Figure 9.9 Econometric Regression Analysis: Magazine

Figure 11.1 Price elasticity of demand h = DQuantity DPrice . . . . . . . . . . . . . . . . . . . . 316

Table 3.1 Net present value of a film project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

Chapter 2 The Information Environment – 7

1.2 Approaches to the Study and Teaching of Media

1.3 Outline of the Book – 5

© The Author(s) 2019

1.1 The Need for “Media 1.2 Approaches to the Study

2.2  he Microeconomics of the New Media

© The Author(s) 2019

2.1 Drivers of Change 2.1.2 Technology

2.1.1 The Setting The technology driver of the Industrial Revolution

People are just as much a major driver of the

1 Even if this rate slows down, as every exponential process eventually

2.2.1  haracteristic #1 of Media

4 Salganik, Michael J., Peter Sheridan Dodds, and Duncan J. Watts.

code to a collective software development. ment of infrastructure, protection against market

Governments are involved in most aspects of the

?? 2. With information becoming a central

Quiz Answers vv 11. D

Chapter 3 Production Management in Media

Chapter 4 Technology Management in Media

Chapter 5 Human Resource Management for Media

Chapter 6 Financing Media, Information,

Chapter 7 Intellectual Asset Management – 165

Chapter 8 Managing Law and Regulation – 201

© The Author(s) 2019

3.9  ontent Production in the Next Generation

3.10 Case Discussion – 49

3.11  onclusion: Success Elements for Content

3.12 Review Materials – 55

century. In the USA, the structure of the book

3.2.5.2 Newspapers and Magazines

2 The Information Environment............................................................................................... 7

3.3.2 2nd Supposed Advantage: Vertical Integration of Content with Distribution?................ 29

4 Technology Management in Media and Information Firms.............................. 59

5 Human Resource Management for Media and Information Firms................ 97

6 Financing Media, Information, and Communications........................................... 127

6.4.5 The Impact of Debt Financing on Content................................................................................... 139

7 Intellectual Asset Management........................................................................................... 165

8 Managing Law and Regulation............................................................................................. 201

8.2.2 Outside Counsel.................................................................................................................................... 205

10 Marketing of Media and Information............................................................................ 267

10.1.4 Limited Attention.............................................................................................................................. 272

10.12.4 Privacy Regulation............................................................................................................................. 296

11 Pricing of Media and Information.................................................................................... 305

11.10 How Firms Organize Their Pricing Function........................................................................... 332

12 Distribution of Media and Information........................................................................ 341

12.7.5 Direct Electronic Distribution to Users: Streaming Music..................................................... 370

13.9 Managerial Accounting.................................................................................................................. 412

14 Strategy Planning in Media and Information Firms............................................. 423

15 Concluding Observations...................................................................................................... 461

15.3 Challenges for Media Managers................................................................................................. 463

Correction to: Media and Digital Management...................................................... C1

1.2 Approaches to the Study and Teaching of Media

1.3 Outline of the Book – 5

1.1 The Need for “Media 1.2 Approaches to the Study

2.2 he Microeconomics of the New Media

2.1 Drivers of Change 2.1.2 Technology

2.1.1 The Setting The technology driver of the Industrial Revolution

2.2.1 haracteristic #1 of Media

?? 2. With information becoming a central

Quiz Answers vv 11. D

Chapter 3 Production Management in Media

Chapter 4 Technology Management in Media

Chapter 5 Human Resource Management for Media

Chapter 6 Financing Media, Information,

3.9 ontent Production in the Next Generation

3.10 Case Discussion – 49

3.11 onclusion: Success Elements for Content

3.12 Review Materials – 55

3.2.5.2 Newspapers and Magazines