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4: Economics of Mass Media

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    • 4.1: Introduction
      In the late 19th century, Andrew Carnegie had a brilliant idea. Instead of buying materials and manufacturing steel, Carnegie bought up mines, railways, and all other aspects of the industry, pioneering a business model that later became known as vertical integration, in which a company owns both its suppliers and buyers. Gathering, manufacturing, and delivering raw materials and finished goods all under the control of a single corporation allowed Carnegie’s profits to soar by cutting out the mi
    • 4.2: Characteristics of Media Industries
      The merger of Comcast and NBC is just one example of the myriad ways media companies do business. Television, print publishing, radio broadcasting, music, and film all have their own economic nuances and distinct models. However, these business models fall into three general categories: monopoly, oligopoly, and monopolistic competition. Of these three basic media business models, monopoly is probably the most familiar. A monopoly occurs when one controls a product or service—for example, a smal
    • 4.3: The Internet’s Effects on Media Economies
      The challenge to media economics is one of production. When print media was the only widely available media, the concept was simple: Sell newspapers, magazines, and books. Sales of these goods could be gauged like any other product, although in media’s case, the good was intangible—information—rather than the physical paper and ink. The transition from physical media to broadcast media presented a new challenge, because consumers did not pay money for radio and, later, television programming; in
    • 4.4: Digital Divide in a Global Economy
      More than just a tool for information transfer, the Internet has become a conduit for a globalized workforce. A corporation in New York can outsource electronically based work to a highly connected developing country like India without incurring the sort of shipping charges or communication delays that previously impeded such efforts. Internet access, particularly for business, has made development possible in remote areas, allowing corporations access to less expensive labor and allowing money
    • 4.5: Information Economy
      The modern theory of the information economy was expressed in the 1998 publication of Information Rules: A Strategic Guide to the Network Economy, written by Cal Shapiro, an economics professor at University of California, Berkeley, and Hal Varian, now chief economist at Google. Their fundamental argument was simple: “Technology changes. Economic laws do not.”Carl Shapiro and Hal R. Varian, Information Rules: A Strategic Guide to the Network Economy (Cambridge, MA: Harvard Business School Press,
    • 4.6: Globalization of Media
      The media industry is, in many ways, perfect for globalization, or the spread of global trade without regard for traditional political borders. As discussed earlier, the low marginal costs of media mean that reaching a wider market creates much larger profit margins for media companies. Because information is not a physical good, shipping costs are generally inconsequential. Finally, the global reach of media allows it to be relevant in many different countries.
    • 4.7: Cultural Imperialism
      Cultural imperialism was around long before the United States became a world power. In its broadest strokes, imperialism describes the ways that one nation asserts its power over another. Just as imperial Britain economically ruled the American colonists, so did Britain strongly influence the culture of the colonies. The culture was still a mix of nationalities—many Dutch and Germans settled as well—but the ruling majority of ex-Britons led British culture to generally take over.