Understanding EU media through economics

What the chapter covers

Introduction: economics and the media

The macro and the micro

Supply and demand of goods

Price and costs (fixed and variable) and equilibrium

Supply-side differences

Demand-side differences

Market definitions

Economies of scale

Comparative and competitive advantage

Competition and monopolies

Mergers and takeovers

Horizontal and vertical integration, conglomerates and the ‘value chain’

Ownership

Mono-media and cross-media ownership the present

Profit motives: economic efficiency and the media market

Learning objectives

When you have completed this chapter you will be able to:

Define and use some of the key terminology and concepts used by economists working on the media.

Apply key economic concepts to the development of the European media market in particular.

Illustrate the debates surrounding market definitions in both global and European terms.

Link competition policy to economic reasoning.

Understand EU economic integration in terms of both media policy-making and the development of other market sectors.

Specify some of the differences between public and private sector finance within the EU.

Themes

Below you will find a simple statement or series of statements around the six themes. They should not be read as a given fact. They are more like hypotheses (see Chapter 2) which need to be proved, discussed, debated and then used in your own analysis of the subject. The ideas and approaches in this book are always to be considered with an open mind; this is important in university study and is what makes it distinct from pre-university study.

Diversity of media

Most media in the EU is in private hands. This is the case for books, magazines, advertising media and the press, for example. Over one half, at least, of the broadcasting system is also in the private sector. The foundation of the private sector is market economics, and some would argue that all media including the public sector operates through similar economic models. So being aware of its operation in economic terms is crucial in our analysis regardless of the diversity.

Internal/external forces for change

The economics of the media is also in the hands of regulators who organise the market and its finances into a system which allows for competition and the operation of market forces. Nowadays those forces are at an EU and a global level and can be seen as a mixed dynamic between ‘internal’ EU and ‘external’ global forces.

Complexity of the media

The media is complex because of the way in which it is financed and how the economics are modelled. This is often conveniently labelled as a discussion about public and private provision within societies. Moreover, the distinction between public and private sector broadcasting, in particular, is being blurred, with a mix of public and private finance being used to develop the ‘old’ media and the ‘new’.

Multi-levels

The economics of the media may be European and global but, due to its variety and complexity, it is also national, regional, local and sometimes ‘glocal’ in proportions. This makes the media, even in economic terms, a multi-level phenomenon.

European integrative environment

It is argued that the European integrative movement is built on the economics of self interest. As trade increases between communities, so the argument goes, the greater is the wealth created, benefitting all the member states. At the same time the degree of political integration is increased. The growth and occasional stuttering of media integration across the EU is in many ways the front-line debate between cultural roots and the power of transnational economics.

Cultural values

As the media operates as much culturally as economically, there is often a tension between the two ways of thinking about society, and this shows itself in different patterns of consumption: different languages and even different cultural norms are reflected in consumers’ choice of media product. Yet, the apparent logic of economics appears to be a unifying process which is perhaps levelling the differences within the EU, even if this is happening at an evolutionary and not a revolutionary pace. Again, there are major debates on this topic.

Essentials

Media products, in both the public and the private sector, need to be paid for by one method or another. In that sense, whether by licence or price and consumption, the media is a part of the study of economics. Due to some relatively recent pioneering work both in the USA and Europe, the study of media economics is increasing and becoming an important part of media analysis.

As with other disciplines, the concepts used are often hotly debated, amended, and form the basis of a lively discussion (sometimes in research we use the words ‘critical review’) of the media for the contemporary era.