T10. Media Economics Flashcards
What are the main topics discussed by media economics?
- International Trade: Impact on media content/services.
- Business Strategy: Competitive tactics and market positioning.
- Pricing Policies: Methods for setting prices.
- Competition: Nature and intensity in media markets.
- Industrial Concentration: Market dominance and its implications.
- Macroeconomic Influences: Effect of broader economic conditions.
- Microeconomic Analysis: Study of individual markets and consumer behavior.
- Economies of Scale and Scope: Cost advantages from expansion and diversification.
What is media economics?
It’s the combination of economics and media study. It examines economic concepts/issues affecting media firms.
Define microeconomics
- Study of individual markets, products, firms.
- Focus: Consumer, firm, government decisions.
- Key concept: Marginal utility.
Define macroeconomics
- Study of broad economic aggregates.
- Focus: GDP, total output, employment, national income.
- Key concept: Economic performance and trends.
What is a firm?
An establishment where resources (labor, land, capital) are converted into goods and services, generally aimed at profit maximization.
What are the special features of media firms?
Intangible Product: Media content’s value lies in its intangible meanings, messages, and stories, leading to increasing returns to scale.
Non-Rivalrous Consumption: Media content can be consumed by multiple people without depletion, unlike traditional products.
Public Service Broadcasting (PSB): Some media firms prioritize public service over profit, often relying on public funding.
Economies of Scale and Scope: Production costs don’t increase with consumption, leading to efficiency and lower costs.
Principal-Agent Problem: Managers may not always act in the shareholders’ best interests, potentially conflicting with profit maximization goals.
Define profit
Represent the surplus after deducting all expenses from revenues, driving firms to maximize them through effective management.
Define revenue
Total income from selling goods or services, sourced from various streams like advertising, subscriptions, and content licenses, influenced by pricing and quantity sold.
Define costs
Expenses incurred in production, encompassing explicit costs (e.g., wages, rent) and implicit costs (opportunity costs), prompting firms to minimize them through resource efficiency.
Define perfect competition
When many sellers offer identical products, each acting as a price-taker without market dominance. No barriers to entry or exit exist, fostering competitiveness and efficiency.
Define monopoly
When a single firm controls the entire market, dictating prices and quantities with significant market power. Barriers to entry, like patents or regulations, often lead to reduced consumer choice and potential inefficiencies.
Define oligopoly
When a few large firms dominate the market, possessing some market power to influence prices. Oligopolies exhibit rivalry, strategic interactions, and potential collusion, impacting market outcomes and consumer welfare.
What are the key economic characteristics of the media?
Dual Product Market: Media firms operate in two markets simultaneously: content and audiences. They sell content to attract audiences, which are then monetized by selling advertising space, offering a key revenue stream.
Economies of Scale and Scope: Media firms benefit from economies of scale as production costs remain constant regardless of consumption levels, fostering efficiency. Additionally, economies of scope arise from producing multiple products or services, further enhancing efficiency and lowering costs.
What is the logic behind the “economies of scale” system?
In media, as more consumers engage with a product, average production costs decrease due to low marginal costs. Initial high costs for creating content diminish per consumer, boosting profits as audience size expands.
What is the logic behind the “economies of scope” system?
Media firms capitalize on efficiencies by offering varied product characteristics using existing resources. By repurposing content across platforms and formats, firms lower costs and expand reach, unlocking additional revenue streams in the digital era.
