Abstract and Keywords
This introductory chapter begins by reviewing some facts about the world’s media ownership. It then sets out the book’s purpose, which is to analyze the media sector, across countries, across time, and to identify its dynamics, concentration, and ownership trends. This is followed by an overview of the research perspectives, past literature, questions addressed, and conclusions reached by the present study.
MEDIA concentration has been an issue around the world. To some observers, the power of large media conglomerates has never been greater. To others, the Internet has brought openness and diversity. Which perspective is correct? The answer has significant policy and business implications.
Large media proprietors and their companies have drawn attention, fear, and ire. The fear is that communications media are increasingly controlled by an ever-shrinking number of firms and that those firms are capable of affecting public opinion, the national agenda, democracy, and global culture. In the United Kingdom, the focus is Rupert Murdoch; in Italy, Silvio Berlusconi; in Mexico, Televisa and Carlos Slim; in Brazil, Globo; in Argentina, Clarin; in Japan, five conglomerates; in France, Vivendi; in Sweden, Bonnier; in Spain, Telefonica; in the United States, Disney, Time Warner, Sumner Redstone, Rupert Murdoch Bill Gates, and Google. Hardly a country, it seems, is without such disputes. Even in tiny Iceland, media concentration created a major governmental crisis in 2004 when the country faced holding its first-ever public referendum on a constitutional dispute arising from the issue.
The debate has become the information-age version of the industrial-age struggle over the control of the means of production. That earlier conflict led, in some countries, to revolution, and in other countries to the socialization of key industries. The United Kingdom, for example, nationalized its heavy industry sector after World War II. The underlying notion was that private ownership of coal and steel companies could be leveraged into control over the economy and society. With hindsight, that fear seems overblown, and this points to the need for a careful analysis of facts and dynamics before launching into policies.
(p.4) It is necessary to put the debates over mediaconcentration into a wider context. It is the media sector’s analog to the debate about inequality in the wider economy and society. The debate over media concentration is part of a much larger mobilization that has been taking place over the control of information resources. This includes advocacy for unimpeded access of content to the Internet (“net neutrality”);1 the “open source,” file-sharing,2 “open innovation,”3 and “copyleft” movements4 that have challenged the traditional intellectual property system; the privacy protection advocacy against the use of personal information;5 the “unlicensed spectrum” initiatives that seek to end the licensed exclusivity of access to airwaves;6 the push against a “digital divide”;7 the move to municipal and free Wi-Fi connectivity;8 and more. All of these developments have their particular reasons but also a common thread. They are manifestations of a wider conflict over the extent and nature of control in the information society.
Most observers are familiar with the various flash points but have not always connected the dots and recognized the emerging social movement on the model of environmentalism. For years, information sector companies and governments have touted their activities as the key to the planet’s economic and cultural future and the solution to most of its problems. No wonder that control over this sector is being contested by more than business competitors. As the information sector permeates society, society with its internal and international conflicts in turn permeates the information sector.
People have more problems in accepting media power than economic power. They may tolerate the mega-wealth of a Sam Walton, Bernard Arnault, Amancio Ortega, or the Albrecht brothers. But they intensely dislike the media ownerships of Rupert Murdoch, Silvio Berlusconi, or the Marinho and Azcarraga families, even though their wealth, while considerable, is much lower than those at the pinnacle of the pyramid (Murdoch is #83 and Berlusconi #181 in the Forbes billionaires list for 2014). And this aversion is no coincidence. People recognize that media is a powerful instrument of influence over their hearts, minds, wallets, and votes. They attribute to media—and therefore to their owners—responsibility for what they dislike in their society. Whether it is violence, gender stereotyping, racism, offensive policy, materialism, hedonism, escapism, low political participation, entrenched status quo, inequality, drug dependency, low literacy—for all these and more, the media system is held partly responsible either as a contributing cause or as an absent remedy. And since so many of society’s ills are blamed on media, media reform becomes social reform.
Beyond their influence over mindshare, media also loom big in volume and presence. Their worldwide revenues account for about 7% of the world GDP. As a share of “discretionary income” (what is left after outlays for necessities such as food, shelter, medical services, etc.), it is closer to 20%. And it overlaps with more than half of “discretionary time” (non-work waking time).
With such a large role of media in society and economy, a skewed distribution of their ownership (p.5) is a major element in the distribution of “information capital” and of wealth more generally. Those who fear an undue influence of media therefore tend to see in each merger or business expansion an affirmation of their dread over mind control. Others are more hopeful. They believe that technology, entrepreneurship, and market forces are self-correcting counter-forces that open media to new voices and pluralism. They point to de-mergers and the periodic failure of once-dominant firms. What makes the debate frustrating is that it is generally devoid of data analysis. Where numbers are used, it is usually as ammunition rather than illumination. This enables people to come to whatever conclusion they desire. There is therefore a need for social science research, done methodically, patiently, and in a multidisciplinary fashion.
What, then, are the facts about the world’s media ownership and concentration?
The answer to the empirical question is not as obvious as many sincerely believe. First, although numerous mergers have taken place and have led to large global media companies, the mass media and information sector have also grown rapidly, in volume, attention time, and revenue (even with widespread price declines). And de-mergers have also taken place, such as for Time Warner.
Second, with digital convergence a much discussed tendency, firms have been crossing the lines that once divided the mass media, telecommunications, and computer industries. Software operating system companies are offering phone services, phone companies provide video distribution, and TV set manufacturers become music and game companies.
Third, the internationalization of economies and services means that well-established media firms from countries, typically advanced ones, have gained a presence in other countries, and in the process have grown in size and market power.
New media have been emerging, most notably driven by the Internet, thus creating new distribution channels and content providers. And some internationalization of media also means that some domestic oligopolies have been challenged from entrants from other countries.
Thus, although the fish in the pond may have grown in size, the pond has grown too, and new fish and new, connected ponds have been added.
The same issues led to my earlier book Media Ownership and Concentration in America, Oxford University Press, 2009. That book discussed, in 499 pages, ownership and concentration trends for US media industries over a 25-year period. It inspired the present volume.9
Why extend the analysis to the world at large? People politicize or personalize media trends—discussing how this government agency or that media mogul are the culprits. But will that identify the nature of the problem? Tolstoy wrote that happy families are all alike, but that each unhappy family is unhappy in its own way. And so the question is, when it comes to media concentration: Is every country unhappy in its own way? Or are there commonalities? Because if we can identify common trends, we can seek the drivers, whether technological, economic, or political. This has policy implications. When drivers are fundamental in nature, it is challenging to deal with them through regulatory policy. But when a country or a region is an outlier, with a media market that is different from similarly positioned countries, a corrective policy might be more effective.
The key question then is whether in media industries the market power achieved by some companies is the result of individual media barons’ business acumen, possibly coupled with inept or supportive government regulation; or, alternatively, whether the underlying technology of production and distribution defines economic characteristics that, in turn, lead to market structures of high concentration. In the latter scenario, a few moguls will end up at the top spots, by luck, pluck, skill, stealth, or connections, but their identity is secondary to the fact that the market equilibrium for that medium will be a monopoly or oligopoly. The underlying technology and its economics are the base.
To address this question, this book analyzes the media sector, across countries and across time, and identifies its dynamics, concentration, and ownership trends. This would seem to be a (p.6) straightforward question, but in the policy arena the discussion of media markets is often marked more by heat than by light. Views are strong but numbers are scarce. To many media critics, the sky has been falling for decades. Others believe that the Internet and market forces are overcoming all barriers and that we are in the midst of a flowering of media.
Part of the vehemence of the debate stems from the self-image of its advocates.10 Opponents of media concentration view themselves as a last line of defense against homogenized news controlled by giant media conglomerates. They point to Italy, where Silvio Berlusconi used his media empire to achieve policy power and public office, and fear for democracy in their country and the world. In contrast, proponents of media deregulation see themselves as removing the shackles of the state from media in the midst of a historic blossoming of information technology. Both sides project themselves as defenders of free speech, either protecting media from the heavy hand of government, or, alternatively, protecting diversity from being choked off by communications empires. Both sides are, to some extent, correct. Yet their principled views are often, consciously or not, colored by a result-oriented pragmatism. In the aforementioned example of Iceland’s constitutional crisis over media concentration, it was actually the political left-of-center (normally the home of advocates for ownership limitations) that strenuously defended the dominant media conglomerate—whose editorial positions were supportive of the Left—against the political right-of-center (normally the home of anti-regulation, free market advocates) that tried to break it up.
Given all these perspectives and biases, how then should public policy be determined? At a minimum, it should be based on a solid factualbase on the nature of the problem. Principled analyses of issues of public policy are important. But it is also true that a generic overview coupled with factual selectivity can be a labor-saving work method that also enables its practitioners to assume a posture of great moral rectitude. It is essential to proceed beyond selective facts that are culled to suit respective policy preferences. Given the intensity of debate, it should be the role of academia to step back. It is therefore the aim of this book to create a decent fact base, interpret the data, and analyze the underlying dynamics. This process might be more tedious than advocacy and opinion, but it enables informed discussion.
Overview of Research Perspectives
The subject of media concentration has, of course, received much attention in academic articles, governmental reports, and opinion pieces, indeed much more than can be covered here. For a partial view of the literature, see the “General References on Media Ownership and Concentration” at the end of the book. That bibliography alone covers 24 pages. Some of it deals with specific media moguls11 or companies.12 Other studies deal with industries,13 countries, and regions14 and with public regulation, policy, and law.15 There are also many governmental16 and NGO reports,17 economic (p.7) investigations, and management-oriented analyses.18 Authors also analyze the impact of media ownership on politics.19 Only a few examples are provided here, and the reader is referred to the general bibliography and to the bibliographies of its individual country reports.
The most influential works have been of the “big picture” variety,20 often non-empirical. To simplify considerably, there are two schools of thought, and they can be roughly characterized as those of media pessimists and of media optimists. Media pessimists think of the sky as falling; media optimists see the dawn of a bright new day.
Perhaps the most prominent media pessimist has been Ben Bagdikian. Bagdikian is a Pulitzer Prize-winning journalist and former dean of the journalism school at the University of California, Berkeley. He writes in his widely used book, The New Media Monopoly: “Five global-dimension firms, operating with many of the characteristics of a cartel, own most of the newspapers, magazines, book publishers, motion picture studios, and radio and television stations in the United States.”21 These firms are Time Warner, Viacom, Disney, News Corp., and Bertelsmann. He observes, remarkably considering such rival contenders as Hitler, Stalin, and Mao: “This gives each of the five corporations and their leaders more communications power than was exercised by any despot or dictatorship in history” (p. 3).
Bagdikian’s mantle has been assumed by Robert McChesney of the University of Illinois, who is much more careful with his numbers than Bagdikian. But Bagdikian’s less nuanced numbers have taken on a life of their own. Celebrated film documentary maker Michael Moore picked the number five and globalized it: “By the end of the millennium five men controlled the world’s media.”22
Lawrence Lessig, the noted Stanford law professor (and for a time my friendly co-columnist on new media at the Financial Times Online), escalated the number: “Indeed, after the changes that the FCC announced in June 2003, most expect that within a few years, we will live in a world where just three companies control more than 85% of the media.”23
In academia, the pessimist view has long been the orthodoxy. But there have also been media optimists, who see an abundance of openness and diversity, much of it due to the Internet. (I ignore the self-interested advocacy documents of companies and trade associations.)
Perhaps the most comprehensive expression of the optimist view, for specifically the United States and more generally the world, is Adam Thierer’s Media Myths: Making Sense of the Debate over Media Ownership.24 Thierer, an economist at several Washington-based free-market think tanks, concludes: “To the extent that there was ever a ‘Golden Age’ of media in America, we are living in it today. The media sky has never been brighter and is getting brighter with each passing year. And this is most definitely not a case of looking for silver linings around the clouds; there are no clouds.”
Much of the literature on media concentration has been stronger in commitment than in empirical evidence, richer in certitude than in numbers, on both sides. One exception is the volume Who Owns the Media?25 a comprehensive data-compiling effort edited by Benjamin Compaine, (p.8) Christopher Sterling, Thomas Guback, and J. Kendrick Noble Jr. in 1979, with subsequent newer editions with Douglas Gomery.26
Compaine and Gomery, like Thierer, are media optimists. They answer the question of who owns the media: “Thousands of large and small firms and organizations . . . controlled, directly and indirectly, by hundreds of thousands of stockholders, as well as by public opinion” (p. 578). “Looked at as a single industry, there can be little disagreement that there is more competition than ever among media players. The issue could be stopped with a single word, Internet. But it goes beyond this development” (p. 574).
Another empirical study, covering the entire world is a 2001 World Bank study by Andrei Shleifer, Caralee MclIesh, Tatiana Nenova, and Simeon Djankov.27 The study focuses mainly on state ownership of TV and newspapers in developing countries and correlates ownership with factors of political and economic variables. It also identifies the nature of non-state ownership (widespread vs. family owners). They find that newspapers and television media tend to be controlled by families or governments for reasons of political influence or fame. They find that poorer countries have a greater state ownership in media, and that those countries are also characterized by less political freedom.
It is the nature of a fast-paced, short-attention-span society for readers to seek a single and simple “bumper sticker” answer to complex and divergent set of facts and trends. These people will be disappointed. This book has tried to assemble and sift through vast amounts of information, starting with extensive country reports. That data – several hundred tables – then gets summarized and aggregated in successive stages, first on a country basis at the end of each chapter; then, across countries, media industries, companies, and owners. A large number of results are reported in the chapters that follow, and summarized in chapter 38 and its concentrations, which form the end of the funnel. We report here a few broad findings.
We find that the trends generally support the pessimists when it comes to content media but the optimists (for now) in platform media. However, it is the reverse for the current level of concentration.
One must distinguish between two categories of media: those creating content and those distributing it over network platforms. (Some media industries combine the two functions.) For both, market concentrations have been quite high. The top four companies in the four major platform media industries which we investigated accounted, by weighted country average, for a dominant 88% of their particular national industry market. For content media industries, the average figure for the main 10 industries was 67%. (These may be different companies in different media industries.) If we pool the industries in each sector into broad categories in order to identify cross-industry conglomeration, we find that the top four firms hold 79% of their country’s overall platform media market and 40% of its content market, respectively.
Platform media are and have always been considerably more concentrated than content media (over twice as high), largely due to the much greater capital intensity of network platforms and the higher network externalities. However, the gap has declined. As content companies have become more capital-intensive their market concentration increased. For content media, the average national market share of the top four firms rose by 1.5% per year.28 The trend of the content industries starts at a much (p.9) lower level than platforms but rises steadily. In the United States, it rose almost twice as fast as the weighted world average, though from a lower base.
Another way to summarize the trend is to look at the absolute (as opposed to percentage change) in the market share of the top four firms in a content market. Collectively, these firms gained, based on a decade’s observations, on average 0.9% per year. When all 10 content industries are pooled, the share of the top four firms rises by 0.5% per year. In the United States, the absolute rise in the market share of the top four firms in the average content industry has been 1.25% per year, over twice the weighted world average, though from a lower base.
Some of these percentages may not look high, but when extended forward beyond the decade measured to another decade or two, it portends a significant rise in content media concentration around the world.
In contrast, the concentration of platform companies has declined since the 1980s, due to the opening to competitive entry, the licensing of multiple mobile operators, and a variety of regulatory measures to increase competition. It declined by an annual −0.6% (and −0.3% for the pooled platform market). Even with these reductions in concentration, the overall concentration platform level is still very high, with the top four firms holding, on average, 88% of the average platform industry. In the United States, the concentration in platforms has declined in the 1980s, driven by regulatory changes, has subsequently risen, and after 1995 declined and risen again with consolidations in mobile and the re-assertion of the wireline incumbents. It has been fluctuating but with an overall upward trend. Thus, the US concentration trend in platform media has been “S-shaped,” in an upward-sloping oscillation. Given the similarity of factors around the world, this might be the future trend elsewhere, too, and it would reverse the present downward tendency.
Looking forward then, and considering the fundamental drivers of media discussed above, one must expect further market concentration. Many people have been enticed by the promise of the “long tail,” which has indeed enabled niche media creations to reach audiences. But at the same time, digital media also lead to winner-takes-all markets. In their sub-markets, companies like Google, Amazon, or Facebook dominate, and they do so in many countries across the globe. Much of content is accessed thorough them or provided by them. Content production itself moves from the relatively simple text mode with low entry barriers to video creations that are interactive, immersive, and expensive to produce. Print media become integrated with video news and cover many more subjects on a 24/7 basis. As media move online and worldwide, the pressures toward rising concentration are an economic reality. The Internet, once the hoped-for solution, is becoming part of the feared problem.
Thus, the glass is half full. There is now a much greater ability for individuals to express themselves and to reach distant audiences, and for audiences to find highly specialized content. In the sense of options there is a much greater media pluralism than existed in the past. However, if one looks beyond the potential options to the actuality of choices exercised, one finds a greater concentration than before, and often higher than for the traditional offline media.
In this media environment, who then are the world’s largest owners of media? Whether by revenues or attention time, it is, by far, the Government of China. Looking for the world’s largest private media owners, these are not individuals or families but rather the American-based institutional asset management firms State Street Bank, Vanguard, Fidelity, and Capital Group. Of individual or family media owners the largest are Carlos Slim, the two Google founders Larry Page and Sergey Brin, and the Cox family. Rupert Murdoch is #12 and Silvio Berlusconi is #22. Of the major media companies in the world, the top 30 institutional owners hold about 10–20%,29 the top 30 individual owners hold 8–16%, and the 30 governmental owners (p.10) hold 13%. These top 90 owners thus account for 30–50% of the world’s major media assets.
Fundamental Drivers of Media Concentration
The debate over media concentration is usually framed, depending on one’s politics, as one of empire-building media moguls undermining either democracy or traditional values. But personalizing the issue of media concentration and putting it in terms of political preferences misses the larger issue. We find and document in this study that media concentration is indeed taking place around the world, and that it is too prevalent and consistent in its trends to be the outcome of national, institutional, and personal particularities. Instead, its drivers are the fundamental economics of media. Various individuals and companies take advantage of these trends and accelerate them but do not cause them.
What are these fundamental economic drivers of media concentration?
Characteristic #1 of Media: High and growing fixed costs, low and declining marginal costs
Media production usually involves high fixed costs, that is, costs that remain constant independent of the number of units produced. These are mostly the upfront capital investments and development costs. At the same time, the marginal costs—or the incremental costs required to produce and distribute the next unit—are relatively low for media. Media content is typically expensive to produce but cheap to reproduce. Media platforms such as networks are expensive to create but cheap to extend to additional users. The combination of these fixed and marginalcosts are average costs. As fixed costs are distributed over more and more units, average costs decline.30 We can observe these characteristics for films, TV programs, computer software, electronicnetworks, newspapers, and games. Platform media such as telecommunications networks have always been highly capital-intensive. Products that exhibit these properties are said to have high economies of scale.
There are several business implications. The economies of scale lead to large-sized companies who can produce at lower per-unit cost. This leads to market concentration. There are incentives to reach large size through mergers and to be a first-mover in a product in order to gain scale. In the extreme, one encounters a winner-takes-all near-monopoly.
New media are more capital-intensive than old ones. Their ratio of capital costs to marginal costs is higher than that of traditional media. In consequence, their scale economies are greater and their market concentration is higher. On the whole, the concentration of media industries is the inverse of their age. Book publishing is the oldest of mass media and the least concentrated. It has been followed chronologically by periodicals, newspapers, film, radio, broadcast TV, cable TV, and now the Internet. This chronological order matches pretty much the ranking of the respective industry concentrations.
This move to higher levels of concentration for newer media must be distinguished from the typically exuberant early years of a new medium. But the initial free-for-all gives way as market leaders with resources and scale emerge and end up dominating for a long time. Examples are the early years of film, wireline telecom, radio, cable TV, mobile telecom, and Internet service providers. In each case, thousands of companies entered initially in the United States but only a few dominate today. This is not unique to media. There were, similarly, hundreds of manufacturers of automobiles and of airplanes in the early years of these industries, but they soon gave way to a handful of large producers.
Characteristic #2 of Media: Network effects
Network effects arise when users benefit each other by sharing a platform or an experience. Individual benefits from media are often (p.11) interdependent with that of other users. Networks have a fundamental economic characteristic: the value of connecting to a network depends on the number of other people already connected. For platform media, the larger the network, the more value it provides to its users and the more valuable it becomes itself. For content media, a major benefit of use is to share experiences with one’s peers.
This changes the economics of demand. The more people are on the network or share an experience, the more people are willing to pay for the product. Usually, economic theory implies that price and demand are inversely related—the lower price, the higher the number of customers. But now, at least in some cases, the relationship is the opposite—the higher the number of users, the higher their willingness to pay. Larger networks and content providers thus face a lower price sensitivity by users and might be able to charge higher prices than smaller ones.
There are several formalizations of network effects. Robert Metcalfe, the co-inventor of Ethernet, proposed a “law” according to which the value of a network increases exponentially with the number of nodes.31
Network effects have several business implications. As in the case of scale economies, firm size is important. The larger the firm’s user base, the more value is provided to users. It also creates advantages to early heavy marketing to create a critical mass. For a film, the attention thus created gains a cumulative advantage.32 First-movers have an advantage; it is usually easier for a firm to capture market share if it is the first to launch a particular product or service. Interoperability is important, because it enables the users of a new or small product or service to link into a larger one and benefit from its network size. Conversely, firms possessing large network effects will resist the interconnection and interoperation of smaller competitors by proprietary standards, or they will collaborate with each other in an oligopolistic fashion while excluding new challengers.
Characteristic #3 of Media: Excess supply
Media production increases exponentially at a substantial rate, while media consumption increases linearly and slowly. Given the gap between production (supply) and consumption (demand), excess supply is inevitable. This has consequences for both content style and marketing.33 Attention is the scarce resource. As Nobelist Herbert Simon observed, “a wealth of information creates a poverty of attention.”34 New media consumption must be mostly supported by substitution from existing media in terms of time or full attention. Inevitably, this leads to competition for “mindshare” and “attention.” Compared to 1998, fewer than half as many of the new products make it to the bestsellers lists, reach the top of audience rankings, or win a platinum disc.35
In addition to technology, people have been a major driver of the rising supply. There has been a huge increase in the number of information producers. It has been observed, that 90% of all scientists who have ever lived are alive today.36 This is also true for most or (p.12) all information-based occupations, whether screenwriters, composers, architects, lawyers, engineers, MBAs, and so on. More information workers lead to more information products. In almost any scientific field, more research articles were written just this year alone than in the entire history of human beings before 1900. In the field of chemistry, within a span of 32 years (1907–1938), one million chemistry articles were written and abstracted. In contrast, it took less than one year for a million such articles to be produced in 2010. Every thirty seconds, a new book is published. Every day, fifteen new theatrical feature films and 1,500 television scripted shows are being produced.
The business consequence is greater competition, as well as a greater specialization in content. More product innovation and marketing efforts are necessary. Costs rise per product while audiences fragment.
Characteristic #4 of Media: Price deflation
When competition occurs the price drops toward marginal cost. In the short term, marginal cost is near-zero and does not cover fixed cost. The result of price competition with low marginal cost has been price deflation in information products and services. This is a good deal for consumers who enjoy a substantial “consumer surplus” in which they must shell out much less than they would be willing to. But it creates a difficult problem for the supplier. And that is indeed what has been happening. Information has become cheaper for many a decade. It is often becoming difficult to charge anything for it. Music and online content is increasingly free. Newspaper prices barely cover the cost of paper and distribution; the content is thrown in for free. Price deflation poses a threat to long-term viability, since low prices make it difficult to cover costs and achieve profitability.
Price deflation is one of the fundamental economic trends of our time. The entire competitive part of the information sector—from music to newspapers to telecoms to Internet to semiconductors and anything in-between—has become subject to a gigantic price deflation in slow motion. This price deflation leads to economic pressure, to price wars which squeeze out weaker companies. Therefore, one main strategy for media managers is to avoid such price competition and to focus on product differentiation, price discrimination, consumer lock-in strategies, and competition-limiting mechanisms such as patents and copyrights. It has been observed that “the economics of information requires imperfect markets.”37 And to enable this, perhaps the most important strategy is to reduce competition through industry consolidation.
Characteristic #5 of Media: High risk distribution of success
The fifth economic characteristic of media is its high risk in the presence of competition. One often observes an “80–20” outcome in which 80% of all media products do not become profitable, 90% of all profits are generated by 10% of the products, and 50% of profits are generated by 1–2% of products.
In consequence, media firms lower their exposure to risk by creating portfolios of products, such as slates of films, multiple labels of music, or various imprints of books, each in turn consisting of multiple products. This transforms a set of highly risky products into a portfolio of moderate risk, thereby enabling such a firm to access more capital at a lower rate than specialized and smaller firms can. With a lower risk profile, a large and diversified media firm holds a long-term advantage over small and specialized firm.
Characteristic #6 of Media: Convergence of technology—economies of scope
In economic terms, one observes rising “economies of scope,” meaning that there are “synergies,” where production across several lines of business is cheaper than separate stand-alone production. (p.13) Historically, media industries used to be separate from each other. Newspapers, music, TV, telecom, computers, and so on were all realms of their own, each with their own technologies, producers, suppliers, distributors, and cultures.
Starting in the 1970s, integration in the technology began to occur with the increasing overlap of devices, components, and control software. Any content could be encoded as a stream of bits, and then processed, distributed, and displayed in similar ways.38 In the 1980s, increased integration of technology extended the overlap to consumer electronics and content industries. Today, for example, a smartphone combines the technologies of telecom, computers, radio transceivers, consumer electronics, TV monitors, video game consoles, calculators, cameras, music players, dictaphones, navigation devices, and many more. Similarly, the content streams emanating from major media providers include film, video, text, music, stills, games, peer-to-peer communication, and more.
The implications are that media industries and firms that used to comfortably operate in their separate niches are increasingly facing competition from each other. But it also means that companies can expand more easily to adjoining markets, which leads to vertical and horizontal integration, mergers, and to the emergence of media conglomerates. How these two offsetting trends add up is an empirical question.
Characteristic #7 of Media: A public good with high government involvement
The seventh economic property of media is that information is often a “public good,” that is, a product or service consumed in common, such as national defense, a lighthouse, a scientific discovery, or a TV broadcast. As described by Paul Samuelson, a public good is something “which all enjoy in common in the sense that each individual’s consumption in such a good leads to no subtractions from any other individual consumption of that good.”
The implication of information being a public good is that it is difficult to charge for information, which leads to an under-production or even non-production of certain categories of such information. This leads to government taking a role in assuring for-profit creation (such as by setting and protecting intellectual property rights), by supporting nonprofit creation (e.g., basic research, funding of the arts, public television, etc.), and by assuring the nationwide distribution of information through various regulatory schemes.
A second factor for government involvement is that they aim to shape media in ways supportive to their policy goals and hold on power. These factors lead them to take a strong role in creating public media and in controlling private ones. This is particularly the case in authoritarian countries. In many developing and emerging nations, a symbiotic relationship of large media organizations and governments leads to the market dominance by a very few media companies or by state-controlled media. In many developed countries, too, public service television organizations, for a variety of policy reasons, held monopoly licenses for a long time and their role is still substantial.
The question is whether these fundamental economic and technological drivers that lead to the concentration trends we identified undermine diversity, pluralism, meritocracy, and the credibility of news. Given these fundamental drivers, it is almost inevitable that the economic equilibrium of media markets, left to themselves, will not be at a level of diversity and pluralism that many people consider necessary. This tension between market equilibrium and social optimum has existed for media for at least a century, and it would be surprising if it were to disappear. Recent decades have led to a reduction of restrictions—“deregulation,” “liberalization,” and “privatization”— on media ownership and its exercise because of the expectation that (p.14) technology and market forces would overcome market power. If this hope is not realized, as the analysis suggests, the pendulum will inevitably swing back to various interventionist approaches of regulation, breakups, ceilings, and subsidization.
But this is becoming more difficult. Government rules on limiting media ownership have worked reasonably well on the operational level when industries were simple and enabled simple tools of control, such as ownership ceilings on TV licenses, or of cross-ownership among media. But outside the ordered broadcast frequency licensing scheme (whose significance keeps shrinking), the government’s powers today are much more limited and becoming ever more so. If Google has significant market power in Argentina, how should or could the search engine market there be restructured? If a Korean firm is dominant in interactive games, what then is the Swedish (or the EU’s) governmental remedy? If Skype’s voice quality declines, who would deal with that, if at all, and how? And these are merely conceptual questions, to which are added those of politics, litigation, international trade, intellectual property rights, and international enforcement. Competition might deal with such problems where it exists, but one must be clear-sighted to recognize that a market equilibrium will often be an oligopoly at best. It is always difficult for laws or regulations to modify fundamental transitions of industries. It is particularly difficult to do so where, as in the case of media, any media policy in a free society needs to be done with a light touch.
It is therefore important for academics, public-policy analysts, NGOs, companies, and governments to think creatively about new approaches to these issues, and to balance the public interest, technological innovation, and investment needs in the emerging environment.
The Questions Addressed
This then is the goal of this book: to answer the question whether, where, and how the world’s media are becoming more concentrated. Probably the worst way to approach this question is by anecdote. At any given moment there are journalists, participants, creators, and artists who can tell a compelling story of bias, restriction, and failure of imagination. Yet statistically speaking, most projects would be turned down under any conceivable system, because of limited resources and limited attention relative to the continuously rising information productivity of society. A subjective rejection of worthy projects is inherent to any media system.
The present study was conducted without any preconception as to where the data would lead and without an attempt to prove a point or advocate a position. We did not reach final conclusions until the data for each industry and country had been collected, processed, analyzed, and aggregated, literally up to the last days of work. As the study progressed, we were exhorted to provide policy recommendations. We have resisted doing so here. For the present, the intermingling of normative policy analysis and positive data research would diminish the empirical contribution.
Others have urged us to analyze the societal impacts of media concentration. This, too, is important, but it is not the question that this already long book addresses, and it is a topic that has already received much attention. Instead, this book will engage in the less glamorous task of marshaling the facts systematically.
A main contribution of this book is that it provides a comprehensive data base, across much of the world, across a dozen media industries, and often across two decades. Following often arduous investigation, it assembles the ownerships and market shares of major media firms. This enables the analysis of comparisons, drivers, and trends. The data and the answers might not be complete, but they are more comprehensive than any study that preceded it. National teams of distinguished researchers gathered the data for their respective countries. They followed a common methodology, and we at Columbia tried to make sure that it was followed despite the variations in national data sources and market structures.
The questions that this book addresses follow. They will be answered in the various chapters and summarized in the final chapter, “Findings”:
B. What are the world’s largest national media markets?
C. What are the largest media industries? Is content really “king”?
D. What are the levels and trends of media concentration in different countries and industries?
E. Are the world’s media becoming more concentrated?
F. What are the overall concentration trends of Media Industries?
G. Have American media become more concentrated?
H. Does the transition to Internet-based media reduce concentration?
I. What countries have particularly high media concentrations?
J. Where is there a high pluralism of voices, and why?
K. What are the factors for high national media concentration?
L. What countries have particularly high cross-media ownership?
M. What countries have a high foreign ownership of media?
N. What countries are high exporters of media?
O. Do American media companies dominate the world media? Does Hollywood dominate content?
P. Where is there a strong role of public (state) ownership in media concentration?
Q. Are there different market characteristics for media in the countries of the North versus those of the South?
R. Are there trends of convergence among countries in media concentration?
S. What are media industries with particularly high—and low—concentrations? What are the explanations?
T. Is there a convergence in market structure among the various media industries?
U. Who are the world’s most dominant media companies?
V. Which companies dominate the attention for news?
W. Who are the media owners, and what do they own?
X. Who are the Institutional Owners?
Y. What is the overall ownership of the Media Sector?
Z. What are the priority problems?
The study proceeds as follows: First, it discusses the project’s organization and methodology (chapters 1 and 2). Next, it provides media concentration analysis and narration (chapters 3–31) for each country. It then calculates national, vertical, and ownership concentration trends and aggregates the data into increasingly large segments and sectors. Chapters 32–36 deal with national comparisons (32), European trends (33), industries (34), companies (35), and owners (36). The concluding analysis and findings (chapters 37–38). The reader may consider the structure to be a funnel: from country reports and data, to global summaries of industries, companies, owners, and countries, to conclusions and interpretation. The reader in a hurry may turn to chapter 38.
For the sources mentioned in this chapter, see the General References on Media Ownership and Concentration at the end of this book.
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(9.) It also inspired this introduction.
(10.) Noam, Eli. Media Ownership and Concentration in America. New York: Oxford University Press, 2009
(14.) See, for example, Caspi & Limor, 1999; Chan, 1993; Cornu & Borruat, 2012; Doyle, 2002; Eickelman & Anderson, 2003; Howard, 2008; Kachkaeva, 2012; Sanchez-Tabanero, 1993; Sanchez-Tabanero & Carvajal, 2002; Smith & Tambini, 2012; Vartanova & Smirnov, 2010.
(16.) See, for example, Advisory Panel on Media Diversity, 2004; Brackman et al., 2002; European Commission, 2007; Federal Communication Commission Media Bureau, 2012; Ofcom, 2009; The State Administration of Radio, Film and Television (SARFT), 2009; Ward et al., 2004; UNESCO Institute for Statistics, 2012; Vīķe Freiberga, 2013.
(18.) See, for example, Albarran & Dimmick, 1996; Berry & Waldfogel, 2001; Compaine, 1995; Dertouzous & Trautman, 1990; Djankov et al., 2001; Noam, 2005; Owen, 1995; Riordan & Salop, 1995; Vogel, 2013.
(21.) Bagdikian, Ben. The New Media Monopoly. Boston: Beacon Press, 2004, p. 3
(23.) Lessig, Lawrence. Free Culture: How Big Media Uses Technology and the Law to Lock Down Culture and Control Creativity. New York: Penguin, 2004
(24.) Thierer, Adam D. Media Myths: Making Sense of the Debate over Media Ownership. Washington, DC: Cato Institute, 2005
(25.) I warmly thank Ben Compaine for inspiring the title of the present book and graciously permitting me to use a similar one to his own. Shleifer et al. (2001), was probably similarly inspired by Compaine’s title.
(26.) Thomas, Guback, and Kendrick Noble, J. Jr. Who Owns the Media? White Plains: Knowledge Industry, 1979, 1982
(27.) Shleifer, Andrei, Caralee Mcliesh, Tatiana Nenova, and Simeon Djankov. “Who Owns the Media?” World Bank, 2001. Also published in the Journal of Law and Economics 46 (October 2003): 341–381
(28.) These are the averages weighted by country size. With an arithmetic averaging, the content media rise, on average, by 0.2% p.a., and platform media decline by 0.03%. Using another index for concentration, the so-called HHI, the average annual growth rate rose by 4.2% when countries are weighted by size, and 0.2 % when averaged arithmetically. The HHI is exponential in nature and its growth is roughly the square of that of the C4.
(29.) The spread is based on different assumptions on asset valuation relative to revenues.
(30.) Unless marginal costs rise significantly, which they rarely do in media industries.
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