lesson 5-media economics

Media EconomicsThe way media companies have always done business

doesn’t work as well in the digital age

• Why discuss money?• Because nearly every

change in the mass communication system has come from a drive for profit.

• Profit is also what is driving huge changes in the way media do business today.

• Take newspapers, for instance.

• In the 18th century, newspapers were for the wealthy and well-educated.

• Money was made through subscription rates that were high for the time.

• Benjamin Day changed that.

• He started the New York Sun and charged only a penny for it.

• Instead, he made his money through advertising. Since so many readers picked up the cheap copy, advertisers came in droves, making Day rich.

• That formula worked for media for 150 years:

• Cheap product = Large audience = More advertising dollars

• That money helped to:– Hire more reporters for

newsrooms– Hire disc jockeys on

radio– Fund various programs

on television

• That formula also made media companies profitable.

• Over the last 30 years, media companies started consolidating into a number of conglomerates.

• As a result, fewer companies control more of the media.

• The Internet, though, has changed that formula.

• Newspapers put stories up free on their sites.

• TV shows can be watched for free on YouTube or Hulu.

• Radio? Why not just go to iTunes or Pandora?

• As a result, tens of thousands of employees of so-called “old media” have been laid off in recent years.

• Meanwhile, old media businesses have tried and struggled to come up with new business plans.

• The largest media company in the United States is Comcast, which owns NBC Universal.

• Disney, which owns ABC, is second.

• NewsCorp., which owns Fox, is third.

• A number of new models have come up that are trying to keep media companies afloat.

• One is to make them nonprofit organizations, meaning all profits must go back into the company, not to stockholders or owners.

• The Texas Tribune, which started in 2009, is an example of a nonprofit news media organization.

• The online newspaper takes donations as well as sells advertising to fund reporters who cover state government in Austin.

• ProPublica, which started in 2008, is a nonprofit newsroom that gives its work to other media, like The New York Times and CNN.

• It’s funded primarily through billionaire Herbert Sandler, who wanted more news options.

• ProPublica won the Pulitzer Prize in 2010 and 2011.

• Another idea is micropayments, something Time magazine advocated in a 2009 article.

• The idea is that rather than pay $1 for a newspaper, you’d pay a few cents for a newspaper article.

• Google is currently exploring this option.