Reflection: Media Economics

28 07 2008

Kathy tasked the class to read several chapters of Media Economics. Two sections of the reading specifically interested me.

Among other topics, chapter 11 reviewed the effects of advertising on media content. I attended the Bellingham Visual Journalism Conference two weeks ago and a panel of journalists and editors there discussed the pressure of advertising on editorial content. A business manager from the AP easily named the top story topics (i.e. finance, health care and energy) that drew the biggest advertising dollars. I was not surprised to read in Media Economics that nearly 90 percent of editors at U.S. daily newspapers had experienced pressure from advertising to change reporting or editorial content and “37 percent reported capitulating to advertiser pressure.”

I thought to myself about how the pressure to sell ads and maintain revenue affects editorial direction. The book does not address the ethical implications of this pressure because ethics is well outside the scope of economics, but if journalists and editors are so pressured by advertisers that it affects their editorial direction, I do not think they are not acting in the best interest of the public welfare. Unfortunately, I expect more and more media will adhere to advertisers’ wishes to keep their physical publications afloat as more people become accustomed to accessing news online for free and subscriptions decline. I understand that without a sustainable business model, news outlets cannot function, but nevertheless this tangent of advertiser pressure built into the editorial process concerns me.

Chapter 13, which covered government intervention, also inspired some thoughts. The book identifies copyrights as externalities enforced by governments to encourage research and development. I immediately thought of Sobel’s article about interoperability. I find it ironic that DRM, instituted to enforce copyright, was so effective that it actually threatened interoperability, forcing the French government to intervene and create Dadvsi’s Law. In this case an externality actually created a more unfair environment for consumers of digital music in the market that it was supposed to regulate. In short, the externalities that entered the digital music marketplace actually polluted it.

According to Sobel, Apple was so effective with building DRM into its business model to protect copyrighted digital content that it threatened to monopolize the market in Scandinavian countries and their governments intervened and sued Apple. It seems to me that “positive” externalities in digital media markets tend to have a domino affect with results that aren’t necessarily beneficial to the affected markets. The book defines this as “government failure.” I think that government intervention is most successful when affecting public goods rather than private goods simply because public goods share the qualities of nonrivalry and nonexculadability, according to the book. These qualities prohibit uncontrolled affects of government intervention because no competitive market exists. In contrast, competitive markets of private goods can evolve government interventions into standards (DRM) that don’t necessarily benefit the marketplace.

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2 responses

29 07 2008
kegill

Ads v editorial. Supposed to be two different side of the house … is contextual advertising (online) an improvement?

You’ve described the law of unintended consequences. :-/

4 08 2008
TWoN - Part 2 « Net-Centric Economics

[…] Paolo […]

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