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The essence of the concept ‘markets of the media’ is the identification and understanding of the context where producers supply, and audiences consume, media content – with the inevitable economic, social, and political ramifications that result from their behaviors. Defining a market is the primary step; as that identifies who is involved in supply and demand and facilitates understanding of market behaviors; allowing prediction of outcomes, even under changing conditions.
Markets In Economics
Markets exist as the contexts where those seeking to supply goods and services interact with those seeking to acquire them (demand). Three factors define a market: the determination of the good (or service), identifying those who seek to provide the good, and identifying those who are capable of acquiring the good. Generally, the more specific the identification of the good, the easier it is to determine and understand remaining market characteristics and structure, and market behaviors.
Several aspects of market structure impact market operations: presence of market power, barriers to entry, and externalities. Market power happens when supply or demand is dominated by a few market participants whose market share is enough that it can impact pricing. Normally this happens when there are few participants (monopoly, oligopoly), perhaps facilitated by barriers to entry (constraints on who participates resulting from technological, economic, or regulatory limits), and product differentiation (monopolistic competition – where product differences are enough that they can split markets into segments). Externalities refers to impacts that market behaviors have outside the market (social benefits from information use), or impacts that outside factors have within markets (such as taxes or subsidies).
Information goods and services, including media content, share some other distinctive features. There are public goods attributes:‘ nonrivalrous consumption,’ which means that consumption by some does not materially affect consumption by others, and ‘nonexcludability,’ which refers to the difficulty of preventing access to the good by those who have not purchased it. Information markets also suffer from ‘imperfect information’; information goods tend to have a high degree of originality, and gaining full knowledge of the good typically requires its consumption; thus, potential consumers (and suppliers) typically base their decisions on incomplete or imperfect information about the product and market. Imperfect information is a major contributor to the variability and uncertainty in value perceptions among consumers (as is variation in consumer tastes and preferences), which also impacts consumption decisions. These lead to some distinctive marketing behaviors – differentiated content and close substitutes, the use of bundling (combining multiple pieces of content within a single packaged product) to aggregate value and reduce uncertainty, and an emphasis on branding and consistency across content offerings to establish norms for expected value.
Media Markets And Market Failures
Historically, media markets were defined by medium, with content form and distribution range tied to technical attributes of the particular medium. Newspapers, books, movies, music, radio, television – all focused on providing content that took advantage of distinctive characteristics of their distribution medium and network. Both producers and consumers coupled content and medium in their conceptualization of media products and markets. Media markets were clear and distinct, and largely independent of one another.
However, few media markets fit the norms for ‘typical’ or perfectly competitive markets; entry barriers, public goods attributes, and imperfect information result in market power, resulting in markets that didn’t achieve what was considered to be socially or economically optimal outcomes. They meet the economic definition of ‘market failure,’ i.e., not perfectly competitive; this was used to justify regulatory intrusions into the market to ‘fix’ the ‘failure.’ To be effective, these efforts need to be based on an accurate understanding of market forces and behaviors. To illustrate, copyright and intellectual property policy is markets of the media 339 a legal response to one set of market failures (the public good characteristics). The solution, though, is the creation of monopoly rights and the granting of monopoly power to the owner of those rights, which happen to create a different kind of market failure, one of possibly greater consequence (Lessig 2004).
Additionally, most media and audiences operate in multiple interlinked markets rather than single independent markets. Media firms, for example, may bundle content with advertising in their products; in the content market, audiences need to provide their time and attention in order to consume the content. Audience attention and content are complements, and media operate in content markets trading content for attention, and then operate in advertising markets to sell that attention to advertisers.
Still, the greatest driver of market transformation is the rise of the digital network economy. Digital technologies have dramatically lowered production costs for virtually all content forms, and enabled content to be provided across media formats. One result has been an explosion in available content. Digital networks have radically reduced content storage and distribution costs, expanding the scope and reach of markets, in the process removing many of the old barriers to entry and encouraging market convergence. With the introductions of new devices for accessing and consuming media content (mobile), opportunities for producing, accessing, and consuming media content have vastly expanded, transforming both markets and the market behaviors that determine supply and demand curves within media markets. These transformations are helping to decouple content and media. ‘Media’ consumption is increasingly driven by active interest in content, with the means of distribution and display of secondary interest. This is a radical shift in the basis of audience behavior that drives demand and media use and will contribute to further market transformation.
Emerging Market Issues
The confluence of technological innovations, policy shifts, globalization of the media, and evolving audience demand is radically transforming media markets. The inherent cost advantages of the digital network economy (Benkler 2006) – an advantage that increases with continued innovation – are driving most traditional media into the digital marketplace while triggering rapid market expansion toward globalization. There are fundamental changes occurring in how supply and demand are determined, and how media markets are defined (“fuzzy markets”; Lacey 2004). A major concern for media outlets is over which definition of market should it base their business models; should they stick with the old or seek to take advantage of the opportunities market transformation present?
Media regulators and policymakers face the same issue when addressing ‘failure’ of media markets. For example, current copyright law emphasizes restricting and controlling access to (and consumption of) content, with fees based on the more limited consumption patterns of traditional media marketplaces and set on a national basis. This is limiting the ability to expand markets globally, as well as limiting development of new markets and distribution strategies.
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