Media, Telecommunications and Business Strategy

Richard A. Gershon

• Publisher: Routledge
• Year: 2020
• ISBN:
  9781000091427
• Edition: 3
• Topic: Languages & Linguistics
• Subtopic: Communication Studies
• Index: Languages & Linguistics

As the clear lines and historic boundaries that once separated broadcasting, cable, telephone and Internet communication dissolve, this comprehensive new edition examines the relationship and convergence patterns between industries by exploring the effects of digitalization in media and information technology.

With today's dynamic and rapidly evolving communication environment, media managers need to have a clear understanding of the different delivery platforms as well as critical management and planning strategies going forward. Advancements in new media and communication technology coupled with a rapidly changing global economy promise a new set of hybrid-media companies that will allow for the full integration of information and entertainment services and give new meaning to the term programming. This book provides a detailed look at seven key sectors of the media and telecommunications field as well as ongoing changes within the industry. The new edition includes updated research throughout including material on major business and technology changes as well as the importance of digital lifestyle reflected in E-commerce and developments in Over-the-Top Video-streaming services. Special attention is given to such areas as strategic planning, innovation, marketing, finance and leadership.

Perfect for courses in media management and media industries, as well as professional managers, this book serves as an important reference guide during this transitional time.

PART I

The Media and Telecommunications Industry Structure

1

MEDIA AND TELECOMMUNICATIONS ECONOMICS

Principles of Market Structure, Business Conduct, Supply and Pricing

Media Organizations

The media organization is in the business of creating information and entertainment content. Media organizations routinely make creative and editorial decisions that affect content. Their business depends primarily on the sale and distribution of their product or service. In principle, there are two ways that media organizations make money, including advertising and/or subscription fees. Table 1.1 provides a brief sampling of the different kinds of electronic media organizations that will be examined in this book.

Production Cycles

The nature of information and entertainment product requires that media organizations produce new product in regular production cycles. Some production cycles are daily, as in the case of newspapers and television news broadcasts. Other production cycles can be hourly (on-line news), weekly (news magazines) or monthly (specialized magazines). Still other production cycles can be seasonal in nature such as the premiere of a new television program or film release.

Some media products, including newspapers, magazines and television sports, are highly perishable commodities. In short, such media products as yesterday’s newspaper and televised sporting events lose their commercial value once the intended message reaches its audience. The combination of regular production cycles (coupled with the highly perishable nature of media product) requires journalists, writers and producers to be fast and creative while simultaneously adhering to strict deadline pressures.¹

TABLE 1.1 U.S. Electronic Media Organizations

	Examples:
U.S. Television Networks	Major Networks: • CBS • ABC • NBC • FOX
	Minor Networks • CW Network • Telemundo • Univision
	Select Examples:
Network Affiliate Stations	• WBBM – CBS affiliate – Chicago, IL • WOOD – NBC affiliate – Grand Rapids, MI • KABC – ABC affiliate – Los Angeles, CA • KSAZ – FOX affiliate – Phoenix, AZ
	Select Examples:
Independent Broadcast Stations	• WPIX – New York City, NY • WGN – Chicago, IL • KMSP – Minneapolis/St. Paul, MN • WJAN – Spanish, Miami, FL
	Select Examples:
Television/Film Production	• Universal Studios • Paramount • Walt Disney Pictures • Pixar, 21st Century Fox, Marvel • Sony Pictures • Dream Works
	Select Examples:
Cable Program Services	• ESPN • Discovery • CNN • HBO • Fox News • Food Network • MSNBC
	Select Examples:
Multichannel Television Distribution	• Comcast, XFinity • Charter, Spectrum • Verizon Communication • Cox Communication • AT&T
	Select Examples:
Over-The-Top Video Streaming Services	• Netflix • Amazon Prime • Hulu • Disney+ • YouTube • CBS All Access
	Select Examples:
Internet Search Engines	• Google • Yahoo • Baidu • Bing
	Select Examples:
Social Media	• Facebook • Twitter • Linked-In • YouTube • Instagram
Direct Broadcast Satellite	• DirecTV • The Dish Network
Satellite Radio	• SiriusXM

Alternatively, some media products, including films, syndicated television programs, copyrighted music and computer software, retain much of their intrinsic value well after their initial release. The economics of television, film and music are built on the assumption that such products build value over time. Once the cost of production has been realized, the same software product can be sold over and over again in different venues. The objective, therefore, is to maximize audience reach and to favor those distribution platforms that can accomplish this.

Telecommunications and Common Carriers

The word “Telecommunications” refers to those organizations (both commercial and noncommercial) involved in the production and distribution of information and entertainment via electronic communications media. It is derived from the Greek word tele, which means far away or transmission over a long distance. The prefix “tele” can be found in such words as: telephone, television and teleconferencing, to name only a few. When discussing the business of telecommunications, it becomes important to understand the meaning and purpose of so-called common carriers.

Common carriers are in the message delivery business. Common carriers transmit messages to anyone who is willing to pay for it. The message can include a telephone conversation, a text message, an Internet data transmission, a satellite videoconference and/or cellular telephone call. In principle, a common carrier must offer their services on a nondiscriminatory basis; that is, the service provider cannot interfere with the content of a message nor can they pick and choose their users.² In short, if the user pays for the telephone call (or affixes the right amount of postage to a letter), the common carrier by law must send the message as sent without interference. In this book, the reference to common carriers will typically refer to those businesses principally engaged in the delivery of voice, data and video communication messages to business and residential customers.³ Table 1.2 provides a select sampling of the different kinds of telecommunications carriers that we will discuss and analyze.

TABLE 1.2 Select Sampling of International Telecommunications Carriers

	Select Examples:
Cellular Telephony – USA	Verizon AT&T T. Mobile
Cellular Telephony – International	China Mobile, China Turkcell, Turkey Vodafone, United Kingdom Telefónica, Spain NTT Docomo, Japan Orange, France (formerly France Telecom) Entel, Chile Vodacom, South Africa
Satellite Carriers	Intelsat SES World Skies EutelSat Communications

Media Management and Economic Performance

Economics provides an important lens by which to understand the major structures and interplay of forces that occur in the marketplace. Most of the definitions and problems posed in this chapter help us to clarify why certain business organizations adopt the business strategies that they do. It is my intention to apply relevant economic terms and examples to the fields of media and telecommunications.

Microeconomics

The term microeconomics examines the behavior of decision-makers in the economy. As Robert Picard points out, business organizations and governments are decision-makers. So too are individual citizens in their role as workers and consumers.⁴ The field of microeconomic study is built around three basic types of choices that must be made in any economy:

1 What products and services should be produced?

2 How shall the products and services be produced, including method, location and time frame?

3 Who is the intended audience for the various products and services being produced?

A central tenet of this book is that different market structures give rise to different patterns of behavior by the firms that operate in them. The term competition can be used to describe the degree of rivalry among sellers or buyers in the marketplace. It can also be used to describe the degree of openness that may exist in a market with respect to the availability of certain products and services.

Elements of Market Structure

Elements of market structure refer to the interaction of buyers and sellers in the marketplace and the structural features which affect the behavior of firms in the marketplace. They include:

1 Seller concentration

2 Product differentiation

3 Barriers to entry

4 Buyer concentration

5 Demand growth.

Seller Concentration

Seller concentration refers to the number of sellers of a given product or service in the marketplace. Seller concentration takes into consideration the degree of competition in the marketplace and its effect on the quality and cost of service. The level of competition can be subdivided into three categories of players: monopolies, oligopolies and a fully competitive marketplace (i.e., the neoclassic model of market organization).⁵

Monopoly

At one end of the marketplace spectrum is the pure monopoly, where there is a single seller who controls the product or service. In a telecommunications context, a monopoly refers to a single service provider in a given marketplace. A good example from the past was local cable television. Until the late 1990s, cable television tended to be a one-of-a-kind service provider in most small to medium-sized communities. This is no longer the case with the advent of direct broadcast satellite (DBS) television as well as telephone-based multichannel television service.

The monopoly, owing to the lack of competition, exercises strong control over prices and product quality since consumers presumably cannot go elsewhere. Monopolies, by their very nature, have little incentive to be innovative. The lack of competition causes them to be satisfied with the status quo. And while they may ensure adequate levels of service, they are by no means willing to promote the development of new products and services.

Oligopoly

An oligopoly refers to a situation where a few sellers are dominant within an industry. Perhaps the simplest example would be the four major U.S. television networks, ABC, CBS, NBC and FOX. Together, they account for 40–45 percent of prime-time television viewing. Oligopolies can be seen in other telecommunications fields such as cellular telephony, where such companies as Verizon, AT&T and T-Mobile dominate the mobile phone industry in the U.S. It is common among oligopolies for there to be a certain amount of interdependent price setting. If one firm raises or lowers its prices (or engages in a unique marketing strategy), the others are likely to follow suit.

Pure Competition

Pure competition suggests that there are multiple players providing service within the marketplace. There is a constant entering and exiting of the field among product and service providers. Pure competition can be seen in cable television programming where there are multiple program services vying for the viewers’ attention. Similarly, pure competition can be seen among the manufacturers of consumer electronics like smartphones and laptop computers. In the latter case, the cost of entering the market is considered reasonable with few barriers to ent...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Copyright Page
• Table of Contents
• Notes on Contributors
• Preface
• Acknowledgments
• About the Author
• PART I: The Media and Telecommunications Industry Structure
• PART II: Media Management and Telecommunications
• Index of Names
• Index of Subjects
• Index of Companies