Handbook of Media Management and Economics, 2nd Edition [2 ed.] 9781138729292, 9781138729315, 9781315189918

Table of contents :
Cover
Title
Copyright
Dedication
Contents
Contributors
MME Handbook Editorial Review Board
Foreword: Media Industry Sustainability Challenges
Preface
Part I MME Research: Foundation and Overview
1 Media Management and Economics Research: A Historical Review
2 Theoretical Approaches in Media Management Research Revised
3 Evolving Research and Theories in Media Economics
4 Media Management and Economics Research in Europe
5 Media Management and Economics Research in Asia
6 Media Management and Economics Research in Latin America: Challenges and Opportunities for Scholars in the Field
Part II Fundamental Issues in MME Research
7 Human Resource Management in the Media
8 Strategic Management
9 Issues in Financial Management
10 Advertising in Media Management and Economics
11 Marketing and Branding
12 Media Policy
13 Mergers and Acquisitions and Their Performance
14 Content/Program Distribution
Part III Emerging Issues/Areas of Inquiry in MME Research
15 Media Innovation: Three Strategic Approaches to Business Transformation
16 Media Entrepreneurship
17 Social Media
18 Mobile Media
19 Multiplatform: A Distribution Perspective
20 Multiplatform: A Consumption Perspective
21 Media Globalization
22 Changes in Journalism in the Digital Age: The Evolution of News
Part IV Analytical Tools in MME Research
23 Methodological Approaches in Media Management and Economics
24 Audience Measurement and Analysis
25 The Transformation of Advertising Agencies in a Digital World
26 Big Data and Media Management
Part V Future Directions in MME Research
27 Media Management Research in the Twenty-First Century
28 Future Directions for Media Economics Research
Afterword
Index

Citation preview

HANDBOOK OF MEDIA MANAGEMENT AND ECONOMICS The Handbook of Media Management and Economics has become a required reference for students, professors, policy makers, and industry practitioners. The volume was developed around two primary objectives: assessing the state of knowledge for the key topics in the media management and economics fields, and establishing the research agenda in these areas, ultimately pushing the field in new directions. The Handbook’s chapters are organized into parts addressing the theoretical components, key issues, analytical tools, and future directions for research. With its unparalleled breadth of content from expert authors, the Handbook provides background knowledge of the various theoretical dimensions and historical paradigms, and establishes the direction for the next phases of research in this evolving arena of study. Updates include the rise of mobile and social media, globalization, audience fragmentation, and big data. Alan B. Albarran is a Professor of Media Arts at The University of North Texas in Denton, Texas. Dr. Albarran has extensive experience as an editor and author and is widely recognized as an international scholar in the area of media management and economics. He is a former editor of both the Journal of Media Economics and the International Journal on Media Management. Bozena I. Mierzejewska is an Assistant Professor at the Gabelli School of Business at Fordham University in New York, USA. A native of Poland, Dr. Mierzejewska is the editor of The International Journal on Media Management—and serves as an editorial board member at several academic journals. She has authored numerous papers and book chapters on topics related to media management and economics, publishing, and social media. Jaemin Jung is a Professor and Chair in the Graduate School of Information and Media Management at the Korea Advanced Institute of Science and Technology (KAIST) in Seoul, South Korea. A native of South Korea, Dr. Jung is a prolific scholar on topics related to media management and economics, telecommunications, and social media. He serves on several editorial boards for scholarly journals in the field. “This comprehensive Handbook of Media Management and Economics led by the inestimable guru Alan Albarran and colleagues Bozena I. Mierzejewska and Jaemin Jung, brings together focused studies by the media management field’s most established and emerging scholars. It has both breadth and depth treating the most important topics drawing on theory and practice. Established as the Bible of the field from its first appearance forward, this new edition is an essential text and reference work of lasting value.” Everette E. Dennis, Dean and CEO, Northwestern University in Qatar, Qatar “The Handbook of Media Management and Economics is a fundamental source used by scholars w ­ orldwide. The new edition solidifies and expands the publication’s contributions, revealing the maturation and fullness of the field and the global contributions that have brought management approaches to the forefront in explaining media business behaviour and choices.” Robert G. Picard, University of Oxford, UK “Look no further! This is the truly global go-to-guide into the unpredictable world of managing media.” Mark Deuze, University of Amsterdam, The Netherlands

MEDIA MANAGEMENT AND ECONOMICS Alan B. Albarran, Series Editor

HANDBOOK OF MEDIA MANAGEMENT AND ECONOMICS Edited by Alan B. Albarran, Sylvia M. Chan-Olmsted, and Michael O.Wirth THE MEDIA ECONOMY 2ND EDITION Alan B. Albarran WEBCASTING WORLDWIDE Business Models of an Emerging Global Medium Edited by Louisa S. Ha and Richard J. Ganahl THE SOCIAL MEDIA INDUSTRIES Edited by Alan B. Albarran

HANDBOOK OF MEDIA MANAGEMENT AND ECONOMICS 2nd edition

Edited by Alan B. Albarran Bozena I. Mierzejewska Jaemin Jung

Second edition published 2018 by Routledge 711 Third Avenue, New York, NY 10017 and by Routledge 2 Park Square, Milton Park, Abingdon, Oxon, OX14 4RN Routledge is an imprint of the Taylor & Francis Group, an informa business © 2018 Taylor & Francis The right of the editors to be identified as the authors of the editorial material, and of the authors for their individual chapters, has been asserted in accordance with sections 77 and 78 of the Copyright, Designs and Patents Act 1988. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Trademark notice: Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. First edition published 2006 Routledge Library of Congress Cataloging-in-Publication Data Names: Albarran, Alan B., editor. | Mierzejewska, Boçzena, editor. | Jung, Jaemin, editor. Title: Handbook of media management and economics / [edited by] Alan Albarran, Bozena Mierzejewska, Jaemin Jung. Description: 2nd edition. | New York, NY : Routledge, 2018. | Series: Media management and economics Identifiers: LCCN 2017052861 | ISBN 9781138729292 (hardcover) | ISBN 9781138729315 (softcover) Classification: LCC P96.M34 .H366 2018 | DDC 302.23/068—dc23 LC record available at https://lccn.loc.gov/2017052861 ISBN: 9781138729292 (hbk) ISBN: 9781138729315 (pbk) ISBN: 9781315189918 (ebk) Typeset in Bembo by Apex CoVantage, LLC

To the first daughters of my daughters: Lochlynn Jean McLeod and Collette Alan Lloyd —Alan B. Albarran To my family —Bozena I. Mierzejewska To my wife, Hoyeon, and my daughter, Haewon —Jaemin Jung

CONTENTS

Contributorsxi MME Handbook Editorial Review Board xiii xiv Foreword: Media Industry Sustainability Challenges Paulo Faustino Prefacexvii PART I

MME Research: Foundation and Overview

1

  1 Media Management and Economics Research: A Historical Review Alan B. Albarran

3

  2 Theoretical Approaches in Media Management Research Revised Bozena I. Mierzejewska

17

  3 Evolving Research and Theories in Media Economics Brendan M. Cunningham

36

  4 Media Management and Economics Research in Europe Juan Pablo Artero and Alfonso Sánchez-Tabernero

52

  5 Media Management and Economics Research in Asia Jaemin Jung and Youngju Kim

64

  6 Media Management and Economics Research in Latin America: Challenges and Opportunities for Scholars in the Field María Elena Gutiérrez-Rentería

vii

80

Contents PART II

Fundamental Issues in MME Research

93

  7 Human Resource Management in the Media Joyce Costello and John Oliver

95

  8 Strategic Management Nabyla Daidj

111

  9 Issues in Financial Management Ronald J. Rizzuto, Michael O. Wirth and Pisun (Tracy) Xu

130

10 Advertising in Media Management and Economics Louisa Ha

144

11 Marketing and Branding Juliane A. Lischka, Gabriele Siegert, and Isabelle Krebs

159

12 Media Policy Krishna Jayakar

176

13 Mergers and Acquisitions and Their Performance Hans van Kranenburg and Gerrit Willem Ziggers

201

14 Content/Program Distribution Douglas A. Ferguson

219

PART III

Emerging Issues/Areas of Inquiry in MME Research

239

15 Media Innovation: Three Strategic Approaches to Business Transformation Richard A. Gershon

241

16 Media Entrepreneurship Min Hang

259

17 Social Media Andreas Kaplan and Grzegorz Mazurek

273

18 Mobile Media Sangwon Lee

287

19 Multiplatform: A Distribution Perspective Xiaoqun Zhang and Alan B. Albarran

301

viii

Contents

20 Multiplatform: A Consumption Perspective Sylvia M. Chan-Olmsted and Min Xiao

317

21 Media Globalization Xiaoqun Zhang

333

22 Changes in Journalism in the Digital Age: The Evolution of News Angela Powers and Jingyan Zhao

347

PART IV

Analytical Tools in MME Research

361

23 Methodological Approaches in Media Management and Economics Michel Dupagne

363

24 Audience Measurement and Analysis Su Jung Kim

379

25 The Transformation of Advertising Agencies in a Digital World Jürg Kaufmann Argueta and Francisco J. Pérez-Latre

394

26 Big Data and Media Management Philip M. Napoli and Axel Roepnack

410

PART V

Future Directions in MME Research

423

27 Media Management Research in the Twenty-First Century Ulrike Rohn

425

28 Future Directions for Media Economics Research Brendan M. Cunningham

442

Afterword451 Jaemin Jung, Bozena I. Mierzejewska, and Alan B. Albarran Index457

ix

CONTRIBUTORS

Alan B. Albarran University of North Texas Juan Pablo Artero University of Zaragoza, Spain Sylvia M. Chan-Olmsted University of Florida Joyce Costello Bournemouth University, United Kingdom Brendan M. Cunningham Eastern Connecticut State University Nabyla Daidj Telecom Ecole de Management, France Michel Dupagne University of Miami Paulo Faustino Porto University, Portugal Douglas A. Ferguson College of Charleston Richard A. Gershon Western Michigan University María Elena Gutiérrez-Rentería Universidad Panamericana, Mexico Louisa Ha Bowling Green State University Min Hang Tsinghua University, China Krishna Jayakar Pennsylvania State University Jaemin Jung Korea Advanced Institute of Science and Technology (KAIST), Korea Andreas Kaplan ESCP Europe Business School, Germany

xi

Contributors

Jürg Kaufmann Argueta University of Navarra, Spain Su Jung Kim Iowa State University Youngju Kim Korea Press Foundation, Korea Isabelle Krebs University of Zurich, Switzerland Sangwon Lee Kyung Hee University, Korea Juliane A. Lischka University of Zurich, Switzerland Grzegorz Mazurek Kozminski University, Poland Bozena I. Mierzejewska Fordham University Philip M. Napoli Duke University John Oliver Bournemouth University, United Kingdom Francisco J. Pérez-Latre University of Navarra, Spain Angela Powers Iowa State University Ronald J. Rizzuto University of Denver Axel Roepnack Fordham University Ulrike Rohn Tallinn University, Estonia Alfonso Sánchez-Tabernero University of Navarra, Spain Gabriele Siegert University of Zurich, Switzerland Hans van Kranenburg Radboud University, The Netherlands Michael O. Wirth University of Tennessee Min Xiao University of Florida Pisun (Tracy) Xu University of Denver Xiaoqun Zhang University of North Texas Jingyan Zhao Kansas State University Gerritt Willem Ziggers Radboud University, the Netherlands

xii

MME HANDBOOK EDITORIAL REVIEW BOARD

Soontae An, Ewha Womans University, Korea Angel Arrese, University of Navarra, Spain Marianne Barrett, Arizona State University Todd Chambers, Texas Tech University H. Iris Chyi, University of Texas Amy Jo Coffey, University of Florida Steven J. Dick, University of Louisiana at Lafayette Tom Evens, University of Ghent, Belgium Anne Hoag, Penn State University Sonia Huang, National Chiao Tung University, Taiwan Rita Järventie-Thesleff, Aalto University School of Business, Finland Tadeusz Kowalski, Warsaw University, Poland Arne Krumsvick, University of Oslo, Norway Lucy Küng, Oxford University, United Kingdom Laurie Thomas Lee, University of Nebraska Seonmi Lee, Korea Telecom, Korea Joon Soo Lim, Syracuse University Mercedes Medina, University of Navarra, Spain Heinz-Werner Nienstedt, Johannes-Gutenberg Universität, Mainz, Germany Sora Park, University of Canberra, Australia Patricia Phalen, George Washington University George Sylvie, University of Texas Patrik Wikström, Queensland University, Australia Steven Wildman, Michigan State University Kent Wilkinson, Texas Tech University

xiii

FOREWORD

Media Industry Sustainability Challenges Paulo Faustino Centre for Research in Communication, Information and Digital Culture at Porto University and Nova University of Lisbon

It is a great privilege to write the foreword for the second edition of the Handbook of Media Management and Economics, and I appreciate the invitation of the editor, Alan Albarran (with whom I am fortunate to collaborate with over the years at the University of North Texas). The selections of the chapters and contributors of this Handbook are timely, not only because the approaches to the themes are clear and very current but also because these are authors who have produced work of great quality in other academic and scientific contexts (presentations at conferences, publications in other books and journals, teaching, membership in academic associations). In fact, I’ve had the opportunity to accompany and even cooperate, in some cases, in joint projects. Therefore, in a nutshell this Handbook effectively constitutes a kind of “best of ” media management and economics that very well summarizes the main issues and trends of the field, from the perspective of economics, markets, management, innovation, business, technologies, marketing and public policies, and other topics of great relevance. Regarding the main trends in the media industries, the only certainty we have moving forward is precisely the same uncertainty that is observed in several dimensions of media organizations— namely: business models, distribution models, and journalistic models, among many other disruptive elements based on the Internet and on transformation of consumer behavior. However, in the midst of so much uncertainty, we have some certainties about the trend of media consumption—we know that the number of users will continue to grow and will be driven by several factors—namely: (1) broadband access, (2) the growth of the “digital natives” generation and the ever-increasing usability of applications that will sustain population growth with access to the network across multiple platforms (web, mobile, consoles, netbooks, tablet PCs, etc.) and (3) the increase in the average time spent consuming online content and services. These transformations, which are in many cases radical and truly disruptive, have caught many companies, professionals, and entrepreneurs lacking resources (either human or financial) to respond

xiv

Foreword

to all these changes. This is especially true for the economic and financial sustainability of media organizations. The business has become more difficult and is pressing fast changes in media organizations— namely, at the technological, business model, and human resources level, among others. Digital platforms have also brought a strong possibility for measuring audiences in real time, which is also a profound change in how to manage, produce, distribute, and create advertising. Changes in the digital business model have forced organizations into new human resources structures with new qualifications and new profiles. The sustainability of the business model and financing is at the forefront of concerns about the future and economic livelihood of the media industries, especially regarding the role of news and information with the promotion of pluralism. Of course, news organizations and journalism in general should not be reduced to the question of who pays the bill, but in truth it is very difficult to have good journalism without adequate resources. The concerns about media sustainability, financially and economically, are a theme that should concern society in general, based on the principle that the media are still one of the main pillars of development and consolidation of democracies. And it’s not a stretch to say that democracy, even in countries with more consolidated systems, is not a definitive achievement.We must continue to fight for democracy and for a pluralistic and independent media system. Over the last 20 years, there has been a great deal of discussion about the transformation of the media industry and its relationship to telecommunications, which has brought the two industries closer and made them more convergent, especially in terms of content management and distribution. Convergence (driven by digitization and deregulation, among other factors) can be seen as a media movement that was carried out during the twentieth century and that has imposed itself in the early years of the twenty-first century, allowing a confluence between the information transmission platforms that normally competed among themselves. Convergence refers to situations in which some economic and technological activities converge around common business or activities. However, the need to think about technologically nomadic communities is a new issue. For example, mobile devices demonstrate the limits of traditional journalism and allow the emergence of new collaborative and “locative” environments of production, reaggregation, and distribution of information and knowledge. And the big challenge from a business perspective is how to monetize and generate resources that contribute to the sustainability of media companies. The economic sectors that lead convergence include computing (both hardware and software), communications, and content. With the advent of the Internet, the proliferation of computers, and globalization, the communications sector has been challenged to solve infrastructure problems and propose new solutions. Changes to the devices allow access to content, but also create, publish, and share content, whether through computers, netbooks, or mobile phones. The content industry has also modified its production, communication, marketing, and distribution processes. In other words, media companies are increasingly developing with the information and communications technologies sector, resulting in a new designation of a macro-sector: technologies, media and telecommunications (TMT). Convergence in technology, media, and telecommunications is helping to standardize management practices and business strategies. In many media companies one finds a convergence of business models, distribution platforms, means of production, marketing tools, and interactivity with the consumer. Independently of the type, size, or geography of the company or media support, they are confronted, to a greater or lesser extent, with similar challenges in terms of management strategies and practices in the following areas: creation of new products, diversification of revenues, reorganization of work, brand management, investment in technology, cooperation with companies, cost reduction,

xv

Foreword

management by projects, portfolio management, talent management, multiplatform content, continuing training, audience engagement, and productive synergies. It is clear that the main dynamics of the media industry in the present are already identified, and we already know, for example, that the Internet represents not only a distribution system or channel (e.g., radio and television) but also a technology and accelerating platform for the transition from media activity to a new era, a circumstance that reinforces the demand for new knowledge and professional profiles of media organizations, regardless of the segment in which they operate. These challenges, strategies, and other issues related with the media business and markets are much analyzed throughout this new Handbook. It constitutes a true academic “bible” that helps us to understand the transformations in society and, consequently, the impact on media companies. For a more attentive and demanding reader, the contents of this work—of great consistency and intellectual density—are prone to a deeper interpretation on the role of the past, present, and future of media organizations.

xvi

PREFACE

On behalf of my coeditors, Bozena Mierzejewska and Jaemin Jung, we are very pleased to present the second edition of the Handbook of Media Management and Economics. I had the pleasure of serving as editor of the first Handbook, published in 2006 by Lawrence Erlbaum Associates. LEA was later acquired by Taylor and Francis, and “T and F,” as it was known, was acquired by Routledge. Common to these acquisitions was Linda Bathgate, long-time communications editor for LEA,T&F and finally Routledge. Linda was a driving force in the development of the first Handbook, and she started talking about a need for a new edition in 2013. The work for a second edition began with a proposal to Routledge in the spring of 2016. Linda left Routledge in the summer of 2016 for another publishing opportunity. She had been working with Ross Wagenhofer, who took over the communications list. Ross was as supportive of this project as Linda, and after a lot of organization and planning we received a contract for the new Handbook in the fall of 2016. One of my challenges was to form a new editorial team. Sylvia Chan-Olmsted and Mike Wirth served in these roles on the first Handbook, and they did a marvelous job but my sense was that it would be a good idea to incorporate some fresh perspectives. I have known Bozena and Jaemin since both were doctoral students, and I have seen them grow in many ways as scholars and editors. In fact, Bozena really pushed for the second edition of the Handbook and stressed how important it was for the field that it be updated. A huge plus in bringing on Bozena and Jaemin was their familiarity with MME scholarship in Europe and Asia respectively. Since the publication of the first Handbook, a great deal of MME scholarship has emerged from Europe and Asia. Their involvement and awareness would help build the global flavor needed for the new Handbook, and both offered wide contact bases to draw upon as we were investigating potential contributors and reviewers to join us with this project. I am very honored to have Bozena and Jaemin join me on this project; both are outstanding professionals and it has been a privilege to work with them. Once the editorial team was finalized, we had to make decisions about narrowing down the potential list of topics (a very tough task), finding contributors to write specific chapters, and organizing an editorial board to help review chapter drafts and offer outside feedback to the editors. This was accomplished—as were all editorial responsibilities—through Skype sessions across 17 hours of different time zones, countless emails, and sharing of documents through the cloud. Our two overarching goals with each of the chapters were exactly like the first Handbook: we asked contributors to (1) review the relevant literature on the topic, focusing on the years since 2006, xvii

Preface

when the original Handbook was published; and (2) offer a research agenda for future work on the topic based on a synthesis of the literature. Of course, authors approached this from different perspectives and areas of interest, but still there is a uniformity to the Handbook thanks to these two goals. However, many topics in the second edition of the Handbook did not exist in the first edition (e.g., social media, big data, innovation). We have tried to build upon the first edition by expanding the range of topics as the field has expanded since 2006. Several contributors to this edition also authored chapters in the first edition, but most contributors are younger scholars who represent the future of the MME field. We are confident that they will help to grow the field further over the next decade. My hope is that this text will be welcome and appreciated by fellow professors and scholars and graduate students who are interested in the MME field, and passionate about research. I also hope the Handbook will stimulate more research and scholarship focused on MME over the life of this publication. I thank Bozena and Jaemin for their help and dedication to this effort. I thank the contributors for their work and the reviewers for their suggestions. My thanks to Linda Bathgate for helping make the first MME Handbook a reality and for encouraging the second edition. I thank Ross Wagenhofer, assistant Nicole Salazar, and staff at Routledge for their support. Finally, I’m grateful to my wife, Beverly, for her support while working on my fifteenth book, and to my daughters, Beth Lloyd and Mandy McLeod, for their love and blessing us with five wonderful grandchildren (Nate, Lochlynn, Collette, Landry, and Weston). Alan B. Albarran

*** The first edition of this Handbook was published over ten years ago, and then I contributed one chapter. Much about media and this academic discipline has changed since then, but the overall purpose of this book has not. It is written with two groups of people in mind. First, it is intended for anyone who needs deep understanding of media management research and current debates. This would certainly include scholars, policy makers, or students. We hope it will inspire them in their further work. The second group includes those who are working in media or related industries and who aspire to know more about current research and scholarly debates. None of that has changed since the first edition. The second edition has been reorganized and rewritten by a different set of authors to represent the diversity and advancement of the discipline.This book is a necessary and logical step in recording those advancements and achievements in one volume, and creating a resource for our readers. I hope we managed to achieve this goal. The process of creating this volume was lengthy, but enjoyable at every stage. It all would not be possible without leadership and guidance of Alan Albarran, who invited Jaemin and me to be part of this undertaking. Our authors, when invited to contribute, agreed very quickly and generously shared their expertise. They also respected our guidance and sometimes endured our reminders. Reviewers played a key role with their comments and observations, delivered honestly and constructively. Many people helped make this book a reality. I am particularly indebted to Alan Albarran for his mentorship and patience during the writing process. My thanks also go to Jaemin, for joining the team. It has been an honor to be a part of this truly global team of editors. I also thank our publisher, Routledge, and its staff Ross Wagenhofer and Nicole Salazar. Finally, on a personal note, I give thanks to my family, who continually demonstrate incredible support and understanding. I dedicate this work to you. Bozena I. Mierzejewska

*** xviii

Preface

More than ten years have passed since the first MME Handbook was published. A Korean proverb says that “even rivers and mountains change in ten years.” I believe there have been more drastic changes in the media industry throughout the production, distribution, and consumption of news, information, and entertainment. I served as an editorial review board member of the first MME Handbook. There were 37 authors, who wrote 30 chapters. Among them 30 scholars worked for universities or institutions of the United States, and 7 authors belonged to European affiliations. Eighteen out of 21 editorial review board members were from U.S. universities, 2 from Europe, and I was the only person from Asia. In sum, including both the authors and the editorial board members, 48 out of 58 scholars had affiliations in the United States. There were nine scholars from Europe and only one from Asia. In publishing the second edition, we invited completely new authors who work for institutions in diverse regions and changed the content of whole chapters. The editorial members were also invited from across regions. I’m delighted to work with MME scholars all over the world. Whenever I communicated with the authors and the editorial board members, I fully perceived their sincere attitude toward academic research and passion for practical contribution to the media industry. I sincerely thank all the authors and editorial board members, who have made this project possible. It is no doubt that the second MME Handbook will be spread worldwide and will be cited frequently in future research. Given the nature of MME research, industry practitioners will benefit from the Handbook. Although it was challenging, it was an enjoyable journey. Alan asked me not to make any laudatory comments. Nonetheless, I can’t help but express my thanks to Alan and Bozena. I feel very privileged to have had an opportunity to work with them as a coeditor and I learned a lot throughout the whole processes. Whenever I have a chance to express my gratitude in the academia, the list must have my adviser, Dr. Sylvia Chan-Olmsted at the University of Florida. Without her support in my doctoral program, I would not be where I am today. I also must take this opportunity to express my thanks to coauthor Dr.Youngju Kim, at the Korea Press Foundation. I feel privileged to have such a wonderful lifelong coworker in academia. Finally, this work is dedicated to my parents, parents-in-law, wife, and my daughter. Jaemin Jung

xix

PART I

MME Research Foundation and Overview

1 MEDIA MANAGEMENT AND ECONOMICS RESEARCH A Historical Review Alan B. Albarran

Trying to assess the literature reviewing the history of both media management and media economics research is a daunting task. One reason for this dilemma is the vast amount of material available. The earliest scholarship attributed to the study of what could be classified as media management or media economics research traces its roots back to the 1940s in the United States. There may have been published sources in other countries prior to the 1940s available in other nations, but even Google falls short in trying to locate such material, not to mention language and cultural barriers. Media management and media economics are treated by many scholars as separate but related fields of study. Media management and economics are linked interdependently to one another. The industries are by their very nature economic institutions exhibiting a variety of management approaches and practices. One cannot study management without considering the economic aspects of a business enterprise, and vice versa. Yet, most of the scholarship developed since the 1940s has tended to focus on either media management or media economics as separate and distinct subjects. This may have been influenced by the size of media companies and the proximity to available data to study. From the 1940s to the 1970s media companies tended to be bifurcated into smaller, familyowned enterprises, or large corporate owners, such as the major newspaper groups (e.g., Pulitzer, Hearst, New York Times, Gannett) or national broadcast networks (ABC, CBS and RCA, which initially owned NBC). Consolidation of the various sectors of the media industries began in the 1970s. As media companies consolidated, management strategy and practice became more focused on the financial and economic conditions of their portfolios of media brands and what we identify today as platforms. Investment bankers, hedge funds, insurance companies and financial brokers all recognized media as a stable cash-generating business for investors. Hence, a greater emphasis on financial performance became the norm, with corporate owners and stakeholders demanding growing profits and return on investment. Management priorities were centered on building free cash flow and increasing the value of the enterprises they managed. Consolidation also brought with it growing confusion over what the word “media” represents, and what constitutes a “media” firm. Historically, media referred to publishers of newspapers and magazines; broadcasting in the form of radio and television; music and sound recordings, and so forth. Distribution was then a powerful tool of media companies. Now we think of these older industries as “traditional” or “legacy” media that still exist, but complete in a world where distribution is no longer controlled by media firms due to the disruption of digital media. Instead, power has shifted

3

Alan B. Albarran

to the consumer using mobile media, streaming media, social media and transmedia and emerging fields like artificial intelligence and augmented reality. Three other areas of change since 2006 include the rise of user-generated content, popularized by video sites like YouTube and Vimeo. News organizations, at first resistant to using user-generated videos and photos of news events, now regularly feature video captured by smartphones from consumers. Advertising is becoming more sophisticated as a field with the rise of big data, efforts to measure audience engagement, and the actual effectiveness of advertising expenditures. Technology has enabled more precise positioning of advertising, especially via social media and e-commerce platforms (e.g., Facebook, Amazon). The rise of false or “fake news” is impacting the perception of journalism and its relationship to society. User-generated content, changes in advertising effectiveness, and fake news all have managerial and economic considerations for the media industries. Given this overview, the author considered four research questions to provide a framework to use as a guide for developing this chapter. Rather than repeating the work done in the initial MME Handbook (Albarran, Chan-Olmsted, & Wirth, 2006), the focus is on the decade that followed (up until 2016) for analysis to provide a historical review. The research questions are detailed ahead: RQ1:  What significant changes have taken place across the media industries since the publication of the original Handbook of Media Management and Economics (2006)? RQ2:  What were some of the significant MME publications published since 2006? RQ3:  How do we assess the state of knowledge of MME research since the publication of the original Handbook? RQ4:  What propositions should guide the research agenda for the next decade of MME research?

What Significant Changes Have Taken Place Across the Media Industries Since the Publication of the Original Handbook of Media Management and Economics (2006)? To address this question one must consider not just the obvious changes, such as which companies are the industry leaders, new platforms, innovative technologies or the entrance of new entrepreneurs across the media industries, but the environment in which these actions took place. In 2006–2007 the global economy—especially the economies of developed nations—was very strong. Capital and credit flowed freely from borrowers to lenders, often without proper checks and balances. Housing was booming as new subdivisions and housing units were being built to accommodate demand. Employment was strong and near capacity. Apart from the Middle East, where war was waging in Iraq and Afghanistan, there was stability around the globe. Almost overnight everything changed. In the summer of 2008 the housing boom turned into a major bust, bringing with it the near collapse of the banking system in the United States and upheaval in the financial markets worldwide. Stock markets around the world sank in what would later become known as “the Great Recession.” Millions lost jobs and their homes.Valuations fell dramatically as businesses cut back on capital spending. Credit all but dried up. Only coordinated action by the world’s largest central banks and their respective governments prevented a total meltdown in the financial markets by bailing out our failing banks, slashing interest rates to near zero, and purchasing billions in bonds each month to add liquidity to a damaged global economic system. For the next decade, interest rates in the United States would be raised only one time—not until December 2016. The trough in the markets bottomed on March 9, 2008. But it would take nearly ten years for the markets to rebound to its 2007 levels. While the economy was gloomy for much of the decade, technology was a bright spot. Billions were invested in broadband network development by cable and telecommunication companies to improve bandwidth speed for Internet applications and more powerful phone networks from slower 4

Media Management and Economics Research

3G to 4G and later LTE.The power in broadband networks would benefit the development of many distribution and reception technologies. In 2007 the world was introduced to the iPhone, which revolutionized the mobile phone industry. The iPhone launched thousands of applications or “apps” with the creation of Apple’s App Store. Competitors followed, including Android phones powered by a Google operating system. Mobile phones were now called smartphones. Growth in broadband also advanced the ability to stream video to the home, leading to a range of new competitors in the video marketplace—Netflix, Hulu and Amazon Video emerging as the early leaders. New television sets were manufactured with builtin Internet capability to access home Wi-Fi networks. The iPad debuted in 2010, giving consumers another mobile device to use for access to the Internet. Streaming also grew in the audio area as well with the rise of Pandora, Spotify and Apple Music, along with a renewed growth in podcasting. Bluetooth-enabled automobiles allowed consumers to listen to music and podcasts in their cars. Other new technologies either in development or making debuts included drones, driverless automobiles, virtual reality games and wearable technology. Artificial intelligence and augmented reality platforms were also emerging. Social media became mainstream as Facebook,Twitter, LinkedIn, Instagram and Pinterest emerged as popular platforms for sharing information, opinions, photographs and hobbies. The global popularity of social media was quickly recognized by advertisers, leading to a further shift in marketing dollars away from traditional media to digital media. Social media would encounter its own set of challenges with issues like privacy and security, posting of false information and violent live content, and illegal use of copyrighted materials, yet it would continue to grow and expand. Consolidation among media companies was not as prominent during 2007–2016 due to the great recession and little capital available for expansion. Several mergers were completed in the United States, the largest being Comcast’s acquisition of NBC Universal; Disney’s acquisition of Marvel Entertainment; AT&T adding to its distribution capabilities with the acquisition of DirecTV; and consolidation in the cable television space with Charter buying Time Warner Cable and Bright House. Regulators did not allow some firms to merge due to antitrust concerns. Both AT&T and Sprint Nextel tried to merge with T-Mobile but were ultimately rejected. Time Warner and AOL ended their failed merger in 2009; AOL was acquired by the Huffington Post and later Verizon, while AT&T is trying to acquire Time Warner. Facebook, Amazon, Netflix and Google became known as the “FANG” stocks, and were recognized by financial investors for their remarkable growth and ability to dominate the markets where they are engaged. One of the greatest advantages these companies have is their ability to harvest large amounts of consumer data detailing uses and preferences, allowing them to leverage advertisers and marketers. These companies are part of “big data,” a subject treated by a separate chapter in this new Handbook. Napoli (2016) points out that media industries are “well positioned” to tap in to the potential of big data. Big data is generating new markets for research, and ultimately helps media companies in their strategy and decision-making. This short review finds that forces such as economics, technology, globalization, consolidation and the introduction of social media all contributed to a very fast-moving and evolving environment. Together, these events would influence the scholarship produced across the media management and economics.

What Were Some of the Significant MME Publications Published Since 2006? Publication of articles and books in the MME field has flourished since 2006.The growth of scholarship was certainly influenced by some of the significant forces and changes discussed in the previous section, but these were not the only reasons. Many new graduate programs devoted to the media 5

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industries, be it media management, digital media, media economics or other focuses, emerged in Europe, Asia and Latin America, to add to the evolving programs across North America. A new generation of scholars emerged, with strong interests in digital media and emerging technologies. Outlets for scholarship also grew. The Journal of Media Economics and the International Journal on Media Management remain the most prominent journals in the field, along with the Journal of Media Business Studies. Mobile Media and Communication, Digital Journalism, Journal of Social Media Studies, Journal of Digital Media Management, Electronic News, Media Industries, Journal of Media Law, Social Media + Society and Media Watch are just some of the journals where articles related to aspects of media management or media economics may be found. There are also more conferences devoted to the MME field, allowing researchers to present work in progress and acquire comments and critiques on their work before submitting to a journal. The World Media Management and Economics Conference is a biannual event held around the world, as is the International Media Management Association (IMMA). The former is not an association that requires membership. The European Media Management Association (EMMA) holds an annual conference as well as a special seminar for PhD candidates. The Latin American Media Management Association (LAMMA) is another regional association founded in South America. Other conferences, such as the Broadcast Education Association and the Association for Education in Journalism and Mass Communication, have MME-related divisions and annual paper competitions. These publications and conference venues provide scholars numerous outlets for their research, more so than at any time in the history of the MME field. To organize a discussion of key publications since 2006, we will first consider published books over the period 2007–2016, followed by journal articles widely recognized in the MME field. This review is limited to works published in English, while recognizing there are many books and articles published in other languages around the world. Regarding published books, compilations and edited volumes will be considered first, followed by books that focus on topics relevant to MME.

Compilations and Edited Volumes Several compilations and edited volumes have been published that review relevant literature and present different perspectives to readers. Towse and Handke (2013) examined the impact of digitalization in their handbook examining the creative sector of the economy. Picard and Wildman (2015) edited a handbook around the themes of influential factors and practices, platform applications, and economics and policy. Anderson, Stomberg and Waldfogel (2016) edited a two-volume handbook authored primarily by economics scholars from Europe and the United States. Their work is spread among three sections, investigating market structure and performance, individual media sectors and political economy. In terms of political economy, Wasko, Murdock and Sousa (2011) edited the most significant update to this critical approach to media management and economics. Friedrichsen and Mühl-Benninghaus (2013) edited a handbook devoted to the topic of social media management. Regarding edited volumes, several works are included here that have expanded the field in different directions and their focus on individual topics of exploration. Dal Zotto and van Kranenburg (2008) produced a volume devoted to the relationship between management and innovation in the media industries. Deuze and Steward (2010) feature scholars explaining how their work contributes to a critical understanding of the management of media work. Media work was also the subject by Johnson and Compare (2014). Noam’s edited volume focuses on media ownership around the globe (2014). Albarran edited three different volumes: a handbook investigating Spanish language media (2008) and social media (2013) from industry perspectives, as well as an exploration of MME research in a transmedia environment (2013). Küng, Picard and Towse (2011) edited a volume examining the impact of the Internet on the media. Vukanovic and Faustino (2011) explored managing media 6

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content in an age of convergence. Noam (2015) and other contributors looked at the topic of media ownership at a global level. Lowe and Brown (2015) attempted to answer the question “what’s so special about media management?”.

Single-Author Works Many single-authored works related to the media management and economics have been published since 2007. The texts identified here are meant to be a representative sample of key works, not a census of all the published volumes during the decade of analysis. Books devoted to management include titles by Albarran (2017a), Deslandes (2008) and Wirtz (2011, 2015). Books centering on media economics include Albarran (2017b), Picard (2011) and Vogel (2010). Important works in the political economy tradition include McChesney (2008) and Mosco (2009). Other topics extended the field. Noam (2009) authored the most complete review of media concentration and ownership. Küng (2015) conducted an inquiry into digital news, while Graham, Greenhill, Shaw and Vargo (2015) looked at the impact of the Internet on regional newspapers, magazines and local broadcast news. Küng (2017) and Gershon (2013) authored texts related to media strategy using different tools of analysis. Gershon (2016) also published a work examining innovation in digital media and design. International works related to media management and economics include Díez’s (2008) examination of the market for magazines in Argentina, and Gutiérrez-Rentería’s (2014) study of the Mexican media conglomerate Televisa. Zhao (2008) authored one of the first books on the media in China, while Georgiades (2015) studied the topic of employee engagement in media firms in Europe, the U.S. and Brazil. Cunningham, Flew and Swift (2015) examined media economics from both neoclassical and political economy approaches. Artero (2015) has compiled the most complete review of books published on media management and economics, and is an excellent source to locate the earliest texts in the field. While not specifically cited here, works in this area are being published in many “regional” languages where teaching programs and research teams operate. These include Germany, the Nordic countries, and Poland and Russia.

Articles in Scholarly Journals While the MME field features numerous potential publishing outlets, the works cited in this section are limited to the three most important journals in the field: the Journal of Media Economics, the International Journal on Media Management, and the Journal of Media Business Studies. Hence, this is a very selective review of works across the fields of media management and economics rather than an effort to compile a complete literature review of the entire field. Even with a purposive review consisting of just three scholarly journals, one cannot help but be impressed by the wide areas of inquiry and investigation occurring across the field since the publication of the first MME Handbook in 2006. Some initial observations from reviewing the contents of these three journals are warranted. First, traditional media is still a major interest of scholars, primarily in the newspaper, television and film sectors. Digital and social media in all forms are important topics of study. Researchers continue to be interested in topics related to market structure, industry concentration and consolidation, marketing and branding, and advertising. Articles also investigated areas less mentioned in earlier scholarship, such as the multiplatform environment, innovation, entrepreneurship, network analytics and big data. Finally, one can’t help but notice the increase in research generated from scholars across Asia and Europe, reflecting the growth of more PhD programs with an emphasis on media management and economics. Studies are grouped by topics, but not listed in any order of priority. 7

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Management Studies Researchers continue to grapple with basic questions about media management. Küng (2007) questions if media management matters, and offers an analysis of how media companies differ along with a suggested research agenda. North and Oliver (2010) studied managerial perceptions regarding consolidation in the UK independent TV production market. A later study (Oliver, 2013) involved a survey of UK media executives to understand their perceptions of the market. Hess (2014) attempted to redefine what a media company is in terms of both offline and online operations. Malmelin and Moisander (2014) reviewed brands and branding studies in the context of media management research, and called for more theoretical development in the area. Other studies related to management include an examination of leadership in Greek media companies (Tsourvakas, Zotos, & Dekoulou, 2007) and Adams’s (2008) study on newspaper managers and views on technology. Strategic management is widely investigated across the media industries, and two studies are representative of this trend.Vukanovic (2009) researched five different films to assess strategic efforts for both traditional and digital media efforts. Daidj and Jung (2011) determined that even though media companies are engaged in a competitive, converging environment they are still moving toward coopetition practices as part of their strategic efforts.

Market Structure Variables Media economics researchers continue to investigate aspects of the industrial organization model. For example,Yang and Chyi (2011) assessed competition dynamics among online newspapers, while Vizcarrondo (2013) looked at concentration of the media over a 34-year period, and found the media industry to be consistently unconcentrated. Huang and Wang (2014) examined market performance for online news through the application of Anderson’s concept of the long tail. Roson (2008) presented a model that considered price discrimination and audience composition in an advertiser-supported broadcast environment. A later study by Häckner and Nyberg (2012) explicated a model also examining broadcasting channel differentiation when considering news versus entertainment content. Sharma and Wildman (2009) considered how both content delivery and advertising should be utilized in the emerging area of mobile media. The authors correctly surmised that advertising will be an important source of revenues for mobile operators.

Leadership Including Corporate Boards, Stakeholders and Mergers Several studies now exist that help understand the decision-making and performance of corporate boards, along with new studies on mergers and acquisitions. Shao (2010) argues for fixed compensation of CEOs and executive boards to increase performance for stakeholders. Soloski (2015) examined the composition of corporate boards of newspapers before and after the recession of 2008–09, and found few changes were made at the leadership or board level despite the loss of billions in value. Regarding mergers and acquisitions, Owers and Alexander (2011) reviewed 57 different mergers during 1997–2008 to understand restructuring transactions for firms valued at $1 billion or more. Muehlfeld, Sahib and van Witteloostuijn (2007) looked at a sample of newspaper mergers during 1981–2000 and found that transaction-specific and regulatory factors were an important influence on media mergers and acquisitions.

Multiplatform Studies The transition for media companies to a multiplatform environment has spawned numerous studies, recognizing the shift of traditional media companies to utilize new platforms to reach consumers. 8

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Colapinto (2010) authored a case study on the platforms used by the Italian-based company Mediaset. Ksiazek (2011) utilized audience panel data from Nielsen along with network analytics to understand cross-platform audience behavior. Foros, Kind and Schjelderup (2012) examined the various types of advertising prices across multichannel platforms. Järventie-Thesleff, Moisander and Villi (2014) conducted a case study of two different Nordic media firms, encouraging companies to pursue both incremental and radical change across platforms. Doyle (2015) questioned the ability of media companies to provide content across multiple platforms at a time when production budgets were tightly constrained. Lischka (2015) surveyed online and business journalists in Switzerland and found that multiplatform reporting was tied to the innovative values of journalists and enhanced output, but not necessarily working procedures. Sattelberger (2015) looked at multiplatform marketing strategies used in the German film market, while Gimpel (2015) interviewed executives for their insights about implementing multiple platforms in the video entertainment industries.

News and News Management Gade and Raviola (2009) and Sylvie and Gade (2009) offered conceptual-based studies investigating changes in newsroom management and the skills that news managers must develop due to convergence. Steyn and Steyn (2009) examined how managers incorporate teamwork in South African newsrooms. Sylvie and Weiss (2012) conducted a meta-analysis of mass communication literature on newsroom changes to determine the role of innovation and possible use of sociotechnical systems. Opgenhaffen and d’Haenens (2015) analyzed the guidelines used by 12 different news organizations to manage their social media activities. In terms of transnational media, Strube (2010) conducted an overview of the literature over a 25-year period along with a propositional inventory. Strategy by transnational companies was the focus of separate studies by Oba and Chan-Olmsted (2007) and Strube and Berg (2011).

Entrepreneurship Studies The rise of entrepreneurship in general, along with the application of entrepreneurship to the media industries, represents another expansion of MME research. Hang and van Weezel (2007) offered an overview of media and entrepreneurship. Achtenhagen (2008) looked at the topic from the perspective of traditional media—specifically two newspapers in Sweden—and offered a set of propositions for further study. Hoag (2008) applied entrepreneurship metrics to the media industries in the U.S., and found that the media sector was more entrepreneurial than any other service or manufacturing sector. Compaine and Hoag (2012) conducted a study of 30 entrepreneurs to identify areas of support and barriers to entry, discovering that few barriers exist.

Audience Studies The evolving and shifting audience environment has always been of interest to MME scholars. Becker, Clement and Schaedel (2010) considered how both adoption and direct/indirect financial incentives influence user participation in online communities.Van der Wurff (2011) utilized student samples to investigate substitutability among the news media in the Netherlands. Phalen and Ducey (2012) offered ideas for media managers about how to cope with audiences engaged with multiple screens and devices.Taneja (2013) looked at audience measurement in India, where two competitors were offering different rating services, one on a weekly basis and the other overnight ratings. Wikström (2014) utilized a case study approach to determine how traditional media companies might engage audiences in creating cultural content. 9

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Television Studies In terms of television, several studies have examined topics from a management focus, such as the search for business models in digital television (Evens, 2010). Förster (2011) centered on TV brand management across the U.S., UK, Spain and Germany. Ferguson and Greer (2013) examined adoption of mobile DTV by local television stations. Klopfenstein (2011) analyzed advertising clutter on TV. Ferguson and Greer (2016) considered how local TV stations use digital tools to connect with generation C, or content-heavy users, like millennials.

Newspaper Studies While newspapers continue to struggle with circulation and advertising in many countries they remain an area of interest for MME researchers. For example, Schulhofer-Wohl and Garrido (2013) investigated how the closure of the Cincinnati Post impacted voter turnout in elections in Kentucky, suggesting that even small newspapers can have an impact on public life. Russi, Siegert, Gerth and Krebs (2014) considered how competition and financial commitment compared across European newspaper markets using qualitative comparative analysis applied from U.S. markets. The authors found that higher competition intensity and the number of competitors served as a “sufficient condition” for financial commitment.

Motion Picture Industry Studies on the motion picture industry tend to focus on issues like distribution and concentration, as evidenced by the following studies. Agostini and Saavedra (2011) examined vertical integration in the Chilean motion picture market and determined that nonintegrated distributors released more films than integrated distributors. Pardo and Sánchez-Tabernero (2012) analyzed market concentration among Western European nations in regards to film distribution with the goal of understanding the dominance of U.S. film distributors in the region. Walls and McKenzie (2012) authored a similar study, considering data on 2,000 films distributed during 1997–2007 in eight different countries and found that Hollywood films accommodated global demand at a time when American box office receipts were declining. In summary, the literature reviewed in this section, consisting of handbooks, edited volumes, single-authored books, and articles from scholarly journals, showcases a diverse and thriving field of scholarship. The literature illustrates that MME research is very active across most continents that make up the globe.

How Do We Assess the State of Knowledge of MME Research Since the Publication of the Original Handbook? Scholars have pushed the field into new directions, and expanded the scope of knowledge. Researchers continue to examine traditional media, while new and emerging areas of study, such as the multiplatform environment, entrepreneurship and big data, are finding their way into the literature. In assessing the state of knowledge, the following propositions are offered as a summary of the research across the MME field, which will help in establishing future directions for scholars to consider. 1. From a historical perspective, MME research has largely been driven by traditional media, but studies examining new media will be the main driver moving forward. We can anticipate more studies devoted to technology and technological forces of twenty-first-century media—mobile media, social media and the cloud are three likely targets. Big data represents the first body of research that draws upon the cloud for study.

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2. Research across the MME field is becoming more sophisticated in terms of both theoreticaldriven scholarship and methodological tools of analysis. Regarding theoretical development, we are seeing not only refinement and expansion of existing theory but also the utilization of multi-theoretical studies across the literature. In terms of methodological studies, a shift is occurring with the interest in big data, and new and refined approaches in data analysis, especially for complex and integrated data sets. Media economics research witnessed an expanded interest in econometrics over the last decade. 3. Scholars are still wrestling with the basic questions of how to define media management, media economics and media firms, especially in a shifting, technology-driven world. Perhaps it is time to abandon this effort given the wide nature of what now constitutes a media firm and the expansion of what we think of as the media industries. It may be best to simply recognize that media management, as well as media economics and media firms, represents enterprises that operate on multiple levels and are not easily identified as a simple concept. 4. Research could also be strengthened by combining perspectives and approaches that heretofore have been separated from one another. The most obvious are studies that examine both microand macroeconomic issues. The political economy approach should also be considered as a tool to help explain phenomena in areas related to but outside of traditional media approaches, especially considering investigations related to culture and the arts. 5. MME research has been further enabled by an expansion of scholarly organizations and conferences devoted to MME, drawing scholars from around the world. Venues like EMMA, IMMA and the WMEMC have shown increasing levels of participation and activity. In 2018, the WMEMC will hold its biannual meeting in South Africa, the first time a major MME event has been held in the continent. New and existing PhD programs, most developed involving some combination of business/communication programs, are producing new scholars every year.This is important as many of the initial scholars of the field are either in or near retirement. 6. Finally, MME research continues to play a role in both social and regulatory policy around the globe. Consolidation and market concentration remain a concern for regulators, who often look to academic studies for the latest trends and outcomes.The future of newspapers and other legacy media is clearly in question moving forward in the twenty-first century. It is unlikely that policy makers will have the resources to subsidize legacy media in many countries, raising many questions about the role of the news media and an informed democracy. MME scholars will continue to study this situation, as well as shifting audience and advertiser consumption patterns. Given this assessment of the MME field, it is now possible to offer some suggestions to guide the research agenda over the next decade.

What Areas of Study Should Guide the Research Agenda for the Next Decade of MME Research? This final section offers some ideas that scholars may consider for conducting MME research to help move the field forward for the next decade and beyond. The author hopes that the agenda will serve a heuristic purpose, and is not intended to be proscriptive. Rather, it is one senior scholar’s ideas of how to move our field forward over the next decade. 1. The field would benefit from research that considers the impact of media management and media economics across different levels of analysis (e.g., individual, household, national, global) rather than single levels of analysis. Much of the research over the last decade continues to look at MME from a single-level perspective. Conducting research across different levels is

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2.

3.

4.

5.

6.

7.

8.

9.

challenging and time-consuming, and can be expensive, but it would broaden our understanding of the impact of media management and media economics. While research has become more theoretically driven, our field suffers from the development of new theory. As researchers enter new areas of study, such as social media, big data, virtual reality, transmedia and other new and emerging media, these areas are ripe to begin to harvest new theoretical approaches. The field would benefit from studies that test new theoretical assumptions and challenge existing thinking. Regarding media management, we have seen the area continuing to split in to further subareas of investigation.These include such topics as strategic planning, entrepreneurship, leadership and corporate governance and business models. Most studies tend to look at these topics within the confines of a single industry. It would be helpful to see meta-research that includes studies across industries to gain a better understanding of these areas. In terms of the previous point, the same is true for media economics. Over the past decade media economics has become much more refined, with different types of econometric modeling. Studies examining market structure, concentration, policy actions, firm behavior and so forth are highly prevalent in the literature over the last decade. Again, it is time to consider metaresearch that brings these findings together, to consider the impact of larger sets of data using power analysis and other statistical tools. The Great Recession forced all of us to look at finances and financial management and economics in new light. We need studies across the media industries to better understand the role of finance, financial management, and economics in this new multiplatform environment that we are all engaged in. Understanding financial decision-making under different scenarios and environments would add to our knowledge base. Journalism finds itself in a precarious state as this new Handbook was in preparation.Will a combination of digital subscriptions, advertising and possible government subsidies be enough to save print journalism? The future of journalism is as much an economic issue as it is a societal issue. Both the news media and social media face charges of presenting fake news, affecting the perception of the role and value of news to society. Over time, the impact of fake news could further erode the economic support of true journalism entities. There is still a need for researchers to conduct trend studies over time to understand changes across the media industries in areas like market share, advertising and financial support, labor and employment, and audience consumption patterns. Such studies are always beneficial to researchers to understand the basic lay of the field. There is little done in the way of panel studies or longitudinal research any longer, but MME scholars would find such research of interest. New research on global media and globalization from an MME perspective is warranted. Researchers will continue to be interested in the global media companies that dominate the globe and how that composition may change over the coming years. Could one of the FANG companies (Facebook, Apple, Netflix, Google) buy one or more of the major media companies like Disney or 21st Century Fox? At the national level, the importance of the media economy to domestic GDP is a topic that should be studied regularly in every developed country. Technology will continue to be a ripe area for MME researchers to harvest. Consider just a few of the amazing things that are developing in the twenty-first century: the Internet of things (IoT), self-driving cars, robots, drones, wearable technology, virtual reality and augmented reality. Are there opportunities for MME researchers in these areas? What might these studies examine? An entire agenda of technology-driven studies is waiting to be investigated. MME researchers need to be part of this process.

This suggested research agenda is both ambitious and daunting—and hopefully a worthy reflection of a dynamic and exciting area of study. If scholars consider investigating only a few of these topics 12

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over the next decade it will help to make MME research even more valuable as an area of study. It should be noted that in the initial review of media management research in the 2006 Handbook (see Albarran, 2006), most of the propositions and research agenda were either reconciled or advanced. This is something the MME field should be proud of and celebrate. How the field of media management and economics evolves is now up to you, dear reader. Jump in. Try new things. Develop new ideas and approaches. MME research needs fresh perspectives and new faces to lead the field forward in the twenty-first century. It has been an honor and a pleasure to look back, and encourage the development of our future.

References Achtenhagen, L. (2008). Understanding entrepreneurship in traditional media. Journal of Media Business Studies, 5(1), 123–142. doi:10.1080/16522354.2008.11073463 Adams, J. W. (2008). Innovation management and U.S. weekly newspaper web sites: An examination of newspaper managers and emerging technology. JMM: The International Journal on Media Management, 10(2), 64–73. doi:10.1080/14241270802000454 Agostini, C. A., & Saavedra, E. H. (2011). The effects of vertical integration on the release of new films. Journal of Media Economics, 24(4), 252–269. doi:10.1080/08997764.2011.626991 Albarran, A. B. (2006). Historical trends and patterns in media management research. In A. B. Albarran, S. M. Chan-Olmsted, & M. O. Wirth (Eds.), Handbook of media management and economics (pp. 3–21). Mahwah, NJ: Lawrence Erlbaum Associates. Albarran, A. B. (2008). Handbook of Spanish language media. New York: Routledge. Albarran, A. B. (2013). The social media industries. New York: Routledge. Albarran, A. B. (2017a). Management of electronic and digital media (6th ed.). Boston: Cengage. Albarran, A. B. (2017b). The media economy (2nd ed.). New York: Routledge. Anderson, S., Stomberg, D., & Waldfogel, J. (2016). Handbook of media economics (Vol. 1A and 1B). North Holland: Elsevier. Artero, J. P. (2015). Economía y empresa de comunicación: Escuelas académicas y periodos de desarrollo. Austral Comunicación, 4, 11–40. Becker, J. U., Clement, M., & Schaedel, U. (2010). The impact of network size and financial incentives on adoption and participation in new online communities. Journal of Media Economics, 23(3), 165–179. doi:10.1080/ 08997764.2010.502515 Colapinto, C. (2010). Moving to a multichannel and multiplatform company in the emerging and digital media ecosystem: The case of Mediaset group. The International Journal on Media Management, 12(2), 59–75. doi:10. 1080/14241277.2010.510459 Compaine, B., & Hoag, A. (2012). Factors supporting and hindering new entry in media markets: A study of media entrepreneurs. JMM: The International Journal on Media Management, 14(1), 27–49. doi:10.1080/14241 277.2011.627520 Cunningham, S., Flew, T., & Swift, A. (2015). Media economics. London: Macmillan Education Palgrave. Daidj, N., & Jung, J. (2011). Strategies in the media industry:Towards the development of co-opetition practices? Journal of Media Business Studies, 8(4), 37–57. doi:10.1080/16522354.2011.11073530 Dal Zotto, C., & van Kranenburg, H. (Eds.). (2008). Management and innovation in the media industry. Cheltenham: Edward Elgar. Deslandes, G. (2008). Le management des médias. Paris: La Découverte. Deuze, M., & Steward, B. (Eds.). (2010). Managing media work. London: Sage. Díez, E. A. P. (2008). El mercado de revistas en la Argentina. Buenos Aires: Universidad Austral. Doyle, G. (2015). Multi-platform media and the miracle of the loaves and fishes. Journal of Media Business Studies, 12(1), 49–65. doi:10.1080/16522354.2015.1027113 Evens,T. (2010).Value networks and changing business models for the digital television industry. Journal of Media Business Studies, 7(4), 41–58. doi:10.1080/16522354.2010.11073514 Ferguson, D. A., & Greer, C. F. (2013). Predicting the adoption of mobile DTV by local television stations in the United States. The International Journal on Media Management, 15(3), 139–160. doi:10.1080/14241277.2 013.767259 Ferguson, D. A., & Greer, C. F. (2016). Reaching a moving target: How local TV stations are using digital tools to connect with generation C. The International Journal on Media Management, 18(3), 141–161. doi:10.1080/ 14241277.2016.1245191

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Alan B. Albarran Foros, Ø., Kind, H. J., & Schjelderup, G. (2012). Ad pricing by multi-channel platforms: How to make viewers and advertisers prefer the same channel? Journal of Media Economics, 25(3), 133–146. doi:10.1080/08997764 .2012.700975 Förster, K. (2011). Key success factors of TV brand management: An international case study analysis. Journal of Media Business Studies, 8(4), 1–22. doi:10.1080/16522354.2011.11073528 Friedrichsen, M., & Mühl-Benninghaus, W. H. (2013). Handbook of social media management. Value chain and business models in changing media markets. Heidelberg, Germany: Springer. Gade, P., & Raviola, E. (2009). Integration of news and news of integration: A structural perspective on news media changes. Journal of Media Business Studies, 6(1), 87–111. doi:10.1080/16522354.2009.11073480 Georgiades, S. (2015). Employee engagement in media management. Switzerland: Springer. Gershon, R. A. (2013). Telecommunications and business strategy (2nd ed.). New York: Routledge. Gershon, R. A. (2016). Digital media and innovation: Management and design strategies in communication. New York: Routledge. Gimpel, G. (2015).The future of video platforms: Key questions shaping the TV and video industry. The International Journal on Media Management, 17(1), 25–46. doi:10.1080/14241277.2015.1014039 Graham, G., Greenhill, A., Shaw, D., & Vargo, C. (2015). Content is King: News media management in the digital age. New York-London: Bloomsbury Academic. Gutiérrez-Rentería, M. E. (2014). Estrategias de grupo Televisa: del monopolio a la competencia: Análisis económico, político y social de la industria audiovisual en México. Spain: Editorial Académica Española. Häckner, J., & Nyberg, S. (2012). Every viewer has a price: On the differentiation of TV channels. Journal of Media Economics, 25(4), 220–243. doi:10.1080/08997764.2012.729547 Hang, M., & van Weezel, A. (2007). Media and entrepreneurship: What do we know and where should we go? Journal of Media Business Studies, 4(1), 51–70. doi:10.1080/16522354.2007.11073446 Hess, T. (2014). What is a media company? A reconceptualization for the online world. JMM: The International Journal on Media Management, 16(1), 3–8. doi:10.1080/14241277.2014.906993 Hoag, A. (2008). Measuring media entrepreneurship. The International Journal on Media Management, 10(2), 74–80. doi:10.1080/14241270802000496 Huang, J. S., & Wang,W. (2014). Application of the long tail economy to the online news market: Examining predictors of market performance. Journal of Media Economics, 27(3), 158–176. doi:10.1080/08997764.2014.931860 Järventie-Thesleff, R., Moisander, J., & Villi, M. (2014). The strategic challenge of continuous change in multiplatform media organizations—a strategy-as-practice perspective. The International Journal on Media Management, 16(3), 123–138. doi:10.1080/14241277.2014.919920 Johnson, D., & Compare, D. (Eds.). (2014). Making media work: Cultures of management in the entertainment industries. New York: New York University Press. Klopfenstein, B. C. (2011).The conundrum of emerging media and television advertising clutter. Journal of Media Business Studies, 8(1), 1–22. doi:10.1080/16522354.2011.11073516 Ksiazek, T. B. (2011). A network analytic approach to understanding cross-platform audience behavior. Journal of Media Economics, 24(4), 237–251. doi:10.1080/08997764.2011.626985 Küng, L. (2007). Does media management matter? Establishing the scope, rationale, and future research agenda for the discipline. Journal of Media Business Studies, 4(1), 21–39. doi:10.1080/16522354.2007.11073444 Küng, L. (2015). Innovators in digital news. RISJ Challenge Series. New York: IB Tauris. Küng, L. (2017). Strategic management in the media industry:Theory to practice (2nd ed.). London: Sage. Küng, L., Picard, R. G., & Towse, R. (Eds.). (2011). The Internet and mass media. London: Sage. Lischka, J. A. (2015). How structural multi-platform newsroom features and innovative values alter journalistic cross-channel and cross-sectional working procedures. Journal of Media Business Studies, 12(1), 7–28. doi:10. 1080/16522354.2015.1027114 Lowe, G. F., & Brown, C. (Eds.). (2015). Managing media firms and industries: What’s so special about media management? Heidelberg, Germany: Springer. Malmelin, N., & Moisander, J. (2014). Brands and branding in media management.Toward a research agenda. The International Journal on Media Management, 16(1), 9–25. doi:10.1080/14241277.2014.898149 McChesney, R. W. (2008). The political economy of media: Enduring issues, emerging dilemmas. New York: Monthly Review Press. Mosco,V. (2009). The political economy of communication (2nd ed.). London: Sage. Muehlfeld, K., Sahib, P. R., & van Witteloostuijn, A. (2007). Completion or abandonment of mergers and acquisitions: Evidence from the newspaper industry, 1981–2000. Journal of Media Economics, 20(2), 107–137. doi:10.1080/08997760701193746 Napoli, P. M. (2016). Special issue introduction: Big data and media management. International Journal on Media Management, 18(1), 1–7. doi:10.1080/14241277.2016.1185888

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Media Management and Economics Research Noam, E. M. (2009). Media ownership and concentration in America. New York: Oxford University Press. Noam, E. M. (Ed.). (2015). Who owns the world’s media? Media concentration and ownership around the world. New York: Oxford University Press. North, S., & Oliver, J. (2010). Managers’ perceptions of the impact of consolidation on the U.K. independent television production industry. Journal of Media Business Studies, 7(2), 21–38. doi:10.1080/16522354.2010.11073505 Oba, G., & Chan-Olmsted, S. (2007). Video strategy of transnational media corporations: A resource-based examination of global alliances and patterns. Journal of Media Business Studies, 4(2), 1–25. doi:10.1080/1652 2354.2007.11073449 Oliver, J. J. (2013). Media management tools: UK broadcast media executives’ perspective. The International Journal on Media Management, 15(4), 245–257. doi:10.1080/14241277.2013.863100 Opgenhaffen, M., & d’Haenens, L. (2015). Managing social media use: Whither social media guidelines in news organizations? The International Journal on Media Management, 17(4), 201–216. doi:10.1080/14241277.2015. 1107570 Owers, J., & Alexander, A. (2011). Market reactions to merger, acquisition, and divestiture announcements in the media industries. The International Journal on Media Management, 13(4), 253–276. doi:10.1080/1424127 7.2011.597364 Pardo, A., & Sánchez-Tabernero, A. (2012). Effects of market concentration in theatrical distribution: The case of the big five western European countries. The International Journal on Media Management, 14(1), 51–71. doi:10. 1080/14241277.2011.597365 Phalen, P. F., & Ducey, R.V. (2012). Audience behavior in the multi-screen “Video-verse”. The International Journal on Media Management, 14(2), 141–156. doi:10.1080/14241277.2012.657811 Picard, R. G. (2011). The economics and financing of media companies (2nd ed.). New York: Fordham University Press. Picard, R. G., & Wildman, S. S. (Eds.). (2015). Handbook on the economics of the Media. London: Edgar Elgar. Roson, R. (2008). Price discrimination and audience composition in advertising-based broadcasting. Journal of Media Economics, 21(4), 234–257. doi:10.1080/08997760802544749 Russi, L., Siegert, G., Gerth, M. A., & Krebs, I. (2014). The relationship of competition and financial commitment revisited: A fuzzy set qualitative comparative analysis in European newspaper markets. Journal of Media Economics, 27(2), 60–78. doi:10.1080/08997764.2014.903958 Sattelberger, F. (2015). Optimizing media marketing strategies in a multi-platform world: An inter-relational approach to pre-release social media communication and online searching. Journal of Media Business Studies, 12(1), 66–88. doi:10.1080/16522354.2015.1027117 Schulhofer-Wohl, S., & Garrido, M. (2013). Do newspapers matter? Short-run and long-run evidence from the closure of The Cincinnati Post. Journal of Media Economics, 26(2), 60–81. doi:10.1080/08997764.2013.785553 Shao, G. (2010). Thinking about stakeholders: Compensation arrangements of media companies and their performance. The International Journal on Media Management, 12(1), 5–19. doi:10.1080/14241270903408812 Sharma, R. S., & Wildman, S. (2009). The economics of delivering digital content over mobile networks. Journal of Media Business Studies, 6(2), 1–24. doi:10.1080/16522354.2009.11073482 Soloski, J. (2015). Stability or rigidity: Management, boards of directors, and the newspaper Industry’s financial collapse. The International Journal on Media Management, 17(1), 47–66. doi:10.1080/14241277.2015.1017642 Steyn, E., & Steyn,T. F. J. (2009).The challenge to incorporate teamwork as a managerial competency:The case of mainstream South African newsrooms. Journal of Media Business Studies, 6(2), 47–65. doi:10.1080/16522354. 2009.11073484 Strube, M. (2010). Development of transnational media management research from 1974–2009: A propositional inventory. JMM:The International Journal on Media Management, 12(3), 115–140. doi:10.1080/14241277.2010. 531335 Strube, M., & Berg, N. (2011). Managing headquarters-subsidiary relations from a knowledge perspective: Strategies for transnational media companies. The International Journal on Media Management, 13(4), 225–251. doi :10.1080/14241277.2011.597363 Sylvie, G., & Gade, P. (2009). Changes in news work: Implications for newsroom managers. Journal of Media Business Studies, 6(1), 113–148. doi:10.1080/16522354.2009.11073481 Sylvie, G., & Weiss, A. S. (2012). Putting the management into innovation & media management studies: A metaanalysis. The International Journal on Media Management, 14(3), 183–206. doi:10.1080/14241277.2011.633584 Taneja, H. (2013). Audience measurement and media fragmentation: Revisiting the monopoly question. Journal of Media Economics, 26(4), 203–219. doi:10.1080/08997764.2013.842919 Towse, R., & Handke, C. (Eds.). (2013). Handbook on the digital creative economy. Cheltenham: Edward Elgar. Tsourvakas, G., Zotos, Y., & Dekoulou, P. (2007). Leadership styles in the top Greek media companies: Leading people with a mixed style. JMM: The International Journal on Media Management, 9(2), 77–86. doi:10.1080/14241270701263988

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Alan B. Albarran Van der Wurff, R. (2011). Are news media substitutes? Gratifications, contents, and uses. Journal of Media Economics, 24(3), 139–157. doi:10.1080/08997764.2011.601974 Vizcarrondo, T. (2013). Measuring concentration of media ownership: 1976–2009. The International Journal on Media Management, 15(3), 177–195. doi:10.1080/14241277.2013.782499 Vogel, H. L. (2010). Entertainment industry economics: A guide for financial analysis (8th ed.). Boston: Cambridge University Press. Vukanovic, Z. (2009). Global paradigm shift: Strategic management of new and digital media in new and digital economics. The International Journal on Media Management, 11(2), 81–90. doi:10.1080/14241270902844249 Vukanovic, Z., & Faustino, P. (Eds.). (2011). Managing media economy, media content and technology in the age of digital convergence. Lisbon: Media XXI. Walls,W. D., & McKenzie, J. (2012).The changing role of Hollywood in the global movie market. Journal of Media Economics, 25(4), 198–219. doi:10.1080/08997764.2012.729544 Wasko, J., Murdock, G., & Sousa, H. (Eds.). (2011). Handbook of political economy of communications. New York: Wiley-Blackwell. Wikström, P. (2014). Tools, building blocks, and rewards: Traditional media organizations learn to engage with productive audiences. Journal of Media Business Studies, 11(4), 67–89. doi:10.1080/16522354.2014.11073589 Wirtz, B. W. (2011). Media and internet management. Wiesbaden: Gabler. Wirtz, B. W. (2015). Media management. Seattle, WA: Amazon Digital Services LLC. Yang, J. M., & Chyi, H. (2011). Competing with whom? where? and why (not)? An empirical study of U.S. online newspapers’ competition dynamics. Journal of Media Business Studies, 8(4), 59–74. doi:10.1080/16522354. 2011.11073531 Zhao,Y. (2008). Communication in China: political economy, power, and conflict. Langham: Rowman & Littlefield.

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2 THEORETICAL APPROACHES IN MEDIA MANAGEMENT RESEARCH REVISED1 Bozena I. Mierzejewska

Media management scholarship is growing in complexity and volume (Achtenhagen & Mierzejewska, 2016). After emerging at the periphery of communication and management research, it is slowly developing into its own discipline, where scholars are gaining insights into a wide range of topics related to media organizations and markets (see Chapter 1 in this volume). The overreaching aim of media management is to create new knowledge about industries and specific organizations operating within what is commonly defined as “the media sector.” The discipline’s unique features include a scholarly focus on investigating and understanding the economic and business characteristics of media products (Picard, 2005), as well as the interplay between management, economic, social, and regulatory forces influencing the media sector (Albarran, 2008). Common consensus indicates that “media management is different in fundamental ways from management in other industries because of differences in the underlying economics of media products, the utilities audiences gain from content, and the externality effects media have on society” (Hollifield, 2008, p. 182). This chapter reviews the current state of media management scholarship and the theoretical approaches utilized. It revisits and updates the earlier work of Mierzejewska and Hollifield (2006) published in the first edition of the MME Handbook (Albarran, Chan-Olmsted, & Wirth, 2006), and focuses on the developments since publication. While published research is growing significantly (Albarran, 2013; Wirtz, Pistoia, & Mory, 2013) and Picard and Lowe (2016) claim that media management is no longer an “emerging field,” multiple authors lament a lack of unique theory building (Achtenhagen, 2016; Achtenhagen & Mierzejewska, 2016; Albarran, 2014; Murschetz & Friedriechsen, 2017; Sylvie & Schmitz Weiss, 2012). The field of media management has been accused of being atheoretical and descriptive as scholars have relied on management for appropriate theories to deploy in studying how media business operates. This chapter attempts to assess the validity of that complaint by examining theoretical approaches present in the current body of literature (Mierzejewska & Hollifield, 2006).Through comprehensive examination of the state of scholarship, a research community may document the state of knowledge and identify advancements (Briner & Denyer, 2012), reveal strengths and areas in need of improvement (Booth, Sutton, & Papaioannou, 2016), and guide scholars in locating research ( Jones & Gatrell, 2014).This chapter also aims to help shape future directions for scholarship, thus playing a part in the advancement of media management inquiry. The following research objectives guided this study: (1) what theoretical body of knowledge has been used in media management literature; (2) what the major advances are since publication of

17

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the original Handbook of Media Management and Economics; (3) what areas of concern should guide research over the next decade. In the first edition of this Handbook, analysis covered 309 articles published over the 17 years prior to its publication (1988–2005). This comprehensive review examined 847 articles published during 1988–2016 in the Journal of Media Economics ( JME), The International Journal on Media Management (IJMM), and Journal of Media Business Studies ( JOMBS). There are multiple ways to define theory. In traditional science, a theory is a systematically related set of statements about the causes of relationships underlying observable and empirically testable phenomena (Rudner, 1966). Developed by abstracting from observation and confirmed through repeated experiments designed to test hypotheses, theories are law-like generalizations about underlying causes and relationships.The purpose of a theory is to increase scientific understanding through a systemized structure capable of both explaining and predicting phenomena (Hunt, 1991). In other words, theory can be understood as a lens through which we understand, interpret, and validate what is expected to occur. In communication and social science research, theory refers more broadly to conceptual explanation of phenomena. Among social scientists, a theory represents the way in which the observer sees the environment and its forces rather than its specific causes, as is the case in the physical sciences. Few theories developed in the social sciences have met the physical sciences test of describing lawlike causal forces, but social science theories do constitute a set of useful concepts, frameworks, and models that contribute to general understanding. Even though studying “theory” frightens students and managers as it seems “abstract” and “impractical,” good theories help us make predictions and understand what happens in practice and why (Christensen & Raynor, 2003). In addition to positivist theories—those that describe real cause-effect relations—the social sciences have also developed normative theories, a subset describing norms and behaviors that should exist, rather than those that do exist. Normative theories are prescriptive rather than predictive. Recommendations developed based on normative theories challenge existing systems and generate new points of view. Since a theory represents an advanced level of understanding in an area, and emerges after considerable research on a specific topic, younger fields of inquiry lack fully developed theories. In the absence of a cohesive theory, the primary approach draws on existing research that has revealed underlying relationships or variables to build its conceptual frameworks. This may involve identifying and testing interrelationships between variables that emerged in diverse streams of research. It also may take the form of developing a systematic way to categorize phenomena. Conceptual frameworks serve as a frame of reference where useful thoughts can be organized systematically to develop conclusions tailored to a specific context (Porter, 1991). The use of conceptual frameworks is often a step toward the development of a more fully tested theory. Another approach to abstracting or understanding the variables related to a phenomenon is to develop and test models. Models are specific descriptive statements, often visually diagrammed, about the relationships among variables or the process through which something occurs. In communication sciences, models have been widely utilized and offer convenient ways to think about communication (DeFleur & DeFleur, 2016; McQuail & Windahl, 2016). In contrast to a theoretically or conceptually based approach, atheoretical or descriptive research describes phenomena or events without trying to identify anything more than direct, contextually specific factors. Atheoretical research provides a detailed snapshot of conditions at one time. However, because underlying forces are not abstract, as soon as the conditions or contexts change, it can no longer be assumed that the findings are valid. Nor can it be assumed that the findings can be applied to similar situations. Consequently, descriptive research has little long-term value to the scholarly community. In summary, in its abstraction from the specific to the general, theory allows us to recognize, understand, and solve problems that have similar underlying factors, even when those problems may 18

Theoretical Approaches

seem dissimilar on the surface.Theory allows us to predict probabilities, but not certainties, in human behavior. Theories, while useful, do have limitations: • •

Theories are focused and very specific; therefore, they cannot give full explanations of all factors involved. This very characteristic usually results in deterministic explanations. Theories tend to be based on narrow, sometimes unrealistic, assumptions. They aim to develop models for predicting future behavior and consequences, but need to deal with complications of the unpredictability of individual humans and social groups.

As with theories, using models involves some risks. They tend to encourage scholars to harden their conceptions of how a process works, slowing further development and refinement, and they can be self-perpetuating, keeping alive questionable assumptions (McQuail & Windahl, 2016). While the understanding of the value and use of theory has not changed since the mid-2000s, scholars observed that particularly complex and paradoxical phenomena should best be studied by employing disparate theoretical perspectives (Lewis & Grimes, 1999), interpretative methods (Alvesson & Kärreman, 2007), or meta-studies (Point, Fendt, & Jonsen, 2016). These open-minded and nonorthodox approaches enable fields to grow and advance knowledge. Along with the dramatic increase of scholarly output around the world (Bornmann & Mutz, 2015), theorizing and the processes of theory development and theorizing have gained renowned interest (Glynn & Raffaelli, 2010; Shepherd & Suddaby, 2017).

Theoretical Body of Knowledge and a Decade of Major Advances in Media Management Publications This chapter examines all research articles published in three journals widely regarded as the field’s core periodicals (Achtenhagen & Mierzejewska, 2016; Küng, 2007; Strube, 2010).The sample extends from each journal’s founding to 2016, a total of 848 articles (this number does not include book reviews, editorials, announcements, corrigenda, etc.).The articles distributed as follows: JME n = 376 (44%), JMM n = 286 (34%), and JOMBS n = 186 (22%). This set of articles differs significantly from the one used in an earlier study by Achtenhagen and Mierzejewska (2016, p. 24), which analyzed only articles cited more than ten times (276 articles), a much smaller selection. Table 2.1 offers a breakdown of the journals. As the sheer number of published articles shows, the field has grown significantly. It is also worth noting the proliferation of newly established journals and associations with the mission to promote media management scholarship. The author carried out the classification of research methods, theories or conceptual frameworks, and type of data and media sector analyzed. A coding sheet was developed through a deductive process by first identifying working definitions for each category. For example, following Creswell Table 2.1 Overview of articles analyzed.

JME JMM JOMBS Total

Journal start date

# Articles published through 2016

# Articles published 1988–2005

# Articles published 2006–2016

1988 1999 2004

376 (44%) 286 (34%) 186 (22%) 848

244 132  14 390

132 154 172 458

Source: Author.

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Bozena I. Mierzejewska Table 2.2 Research methods in media management scholarship. Research type

1988–2005

2006–2016

Grand total

Qualitative Quantitative Essay Mixed methods Grand total

102 143 140   5 390

175 163  94  26 458

277 306 234  31 848

Source: Author.

(2013), the codebook used common definitions of qualitative, quantitative, and mixed methods. Other elements of coding included theoretical approaches used, as well as media sector studied. In addition, the author acknowledged and briefly examined some of the relevant work in three other journals: Journalism and Mass Communications Quarterly, Media Industries Journal, and the Journal of Media Innovations. Relevant as they may be, these three titles have published a relatively small number of articles that could be included in this data set. Table 2.2 presents the proportion of research methods/methodologies used in the articles. Studies most commonly used qualitative methods, followed by quantitative methods. Since the first Handbook was published, the use of mixed methods has considerably increased, while the number of essaytype studies has declined (see Chart 2.1). Perhaps field emphasis on qualitative methods can be partly explained by the challenges in access or cost of adequate quantitative data sets. The increased popularity of mixed methods is very encouraging as it may suggest growing research sophistication in the field. Quantitative and qualitative methodologies used together can add insights and understanding that might be missed when only a single method is used; moreover, it can produce more complete knowledge informing theory and practice. However, the use of qualitative and mixed methodologies calls for a careful research design (Creswell, 2013). Chapter 23 by Dupagne in this volume specifically deals with methodological approaches in media management and economics research. Considering the sources of data in published articles, secondary data sources continue to be the most prominent means of data collection (46%), while primary sources were used in 29% of all

Secondary

23%

Primary

11%

Conceptual Research

11%

Primary & Secondary 1%

23%

18%

6%

4%

1988–2005

2006–2016

Chart 2.1 Data sources used in media management scholarship. Source: Author.

20

General Media

95

Television

63

Newspapers

Movies

Cable TV

50

14

36

25 12

Broadcast TV

17 19

Internet

20 14

News Media

5 27

Public Service Broadcasting

9 21

Advertising Industry

7 21

Recorded Music

14 12

Online Media

1988–2005

4 16

2006–2016

Chart 2.2 Market segments studied in published articles Source: Author.

81

55

63

Bozena I. Mierzejewska

studies. Since primary data are collected by researchers for a specific study, it increases fit to research questions, but they can also prove costly and time-consuming. The analyzed publications have used data and examples from a variety of media market segments. However, most studies (21%) referred to media generally, either by studying a set of firms operating across all media sectors (e.g., the biggest companies in a geographical area) or by studying organizations operating in multiple sectors of the media industry. Other sectors receiving scholars’ attention include television and newspapers. A shift in market segment foci can be observed as shown in Chart 2.3.Whereas cable TV, broadcast TV, and Internet providers were a main focus before 2005, an increasing number of articles focus on the audiovisual sector as well as newspapers and news media. This reflects the growing importance of media companies diversifying into several new sectors, and popular debates and concerns about the future of news organizations and journalism as a profession. Studies focusing on motion pictures, journalism, and advertising have considerably increased. As technological developments contributed to the emergence of new media sectors, a number of studies focusing on these sectors, such as social media platforms, OTT TV (over-the-top television services), or mobile media, started to appear. Keeping in mind the time lag in getting research results published, we can expect an increase of research focused on those sectors in the future. To organize the discussion and outline the “big picture,” this review must be selective and limited to the most significant observations about media management scholarship of the last decade: consider the sheer volume of material published only in the three main journals of the field. Theoretical perspectives are important ways of seeing and understanding the world, but they are also based on different assumptions.Therefore, we should keep in mind that specific theories are not selected in isolation from the researcher’s own values and priorities or the norms and expectations brought by peers. Concepts and theories are often borrowed from other disciplines, and are being applied to our area. Among all articles analyzed, management theories dominate, characterizing more than half (56%) of the articles. Next in frequency were economic theories, appearing in nearly one third of studies (27%), followed by communication theories and atheoretical/essay items (6% and 10% respectively). This finding is in line with an earlier study by Mierzejewska and Hollfield (2006), where management theories were also most frequent; however, we see evidence that use of economic theories

Management Theories

195

126

Economic Theories

Atheoretical, Applied or Essay

Communication Theories

43

281

106

46

26 25

1988–2005

2006–2016

Chart 2.3 Theories used in published journals 1988–2016 and change over time Source: Author.

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Theoretical Approaches

has declined, while the use of communication theories and atheoretical/essay-type research did not change in the last ten years. This analysis reveals a strong and robust growth tendency in media management research. A more detailed look at studies using management theory shows a broad spectrum of research problems and outcomes. This overview is intentionally broad and aims to highlight the main groups of theoretical approaches and their use in the developing media management field. The following groups of theoretical approaches will be discussed in the next section of this chapter: strategic management theories; audience/consumer behavior theories; organizational and professional culture theories; and finally, theories focusing on technology, innovation, and creativity.

Strategic Management Theories Strategic management has been the most consistently used theoretical or conceptual framework in media management studies. Several studies explored and described the nature media companies’ competitive advantage, specific strategic options, or implementation process. Albarran’s early seminal work explaining media concentration strategy (2002) and Picard’s study of adaptation to changing market conditions (2004) have been expanded by studies on vertical and horizontal integration (e.g., Agostini & Saavedra, 2011; Fu, 2009; Ji, 2015; Sukosd & Lake, 2013), mergers and acquisitions (Hongjai & Sang-Woo, 2010; Muehlfeld, Sahib, & van Witteloostuijn, 2007), and the changing nature of competition (Daidj & Jung, 2011). Media concentration continues to interest scholars (Pardo & Sánchez-Tabernero, 2012; Vizcarrondo, 2013). Since its beginnings, strategic media management research has predominantly relied on two conceptual frameworks: structure-conduct-performance (SCP) and resource-based view (RBV) (Chan-Olmsted, 2006). The SCP approach focuses on the structure of industries and the linkages among an industry’s structure and organizational performance and conduct (Bain, 1968; Porter, 1991). Per the SCP framework, the structure of an industry (e.g., number, size, and location of firms) affects how firms behave (or their individual or collective “conduct”). In turn, the industry’s performance relates to the conduct of firms. Numerous early studies applying this approach (Busterna, 1988; Gomery, 1989; Picard, 2000; Ramstad, 1997; Wirth & Bloch, 1995; Young, 2000) have been expanded by examining the restructuring practices that occur in anticipation of and response to changing markets. The argument that changes in market structures, technology, or regulatory intervention has been used to illustrate strategic alliances (Gade & Raviola, 2009), financial commitment (Russi, Siegert, Gerth, & Krebs, 2014), or specific cases (Colapinto, 2010; Massey & Ewart, 2012), among others. Media management scholars conceptualize performance as economic (the traditional way to measure performance), social (the responsibilities that should be fulfilled for the betterment of democratic society) (Fu, 2003), serving the public interest (Coffey & Cleary, 2011), and as reflected and measured as media diversity (Sjøvaag, 2016;Vizcarrondo, 2013). Market consolidation has stimulated research on market structure and ownership of media companies with the conclusion that structure affects content diversity. This stream of research plays an important role in supporting global policy-making efforts. Media economics and management research has a long tradition of comparing types of ownership structures on type of content (Lacy, 1991), as well as looking for contingencies and performance outcomes in public, private, nonprofit (Maguire, 2009), family (Powers, Broadrick Sohn, & Briggs-Bunting, 2014), or employee ownership (Fedler & Pennington, 2003; Picard & van Weezel, 2008).While scholars have identified a set of characteristics and possible pitfalls affecting performance, there is no agreement as to the optimal form of ownership. There is, however, agreement that regulating ownership is necessary to maintain pluralism and fair competition (Hutchison, 2009; Valcke, 2009; Yanich, 2010). Alongside the trend of consolidation, media companies pursued strategies of entering global markets, which spurred a corresponding surge in research on transnational media. From a conceptual standpoint, much of the early research on transnational media operations 23

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focused on international trade in media products or industry-level structures and economics of overseas media markets (Dupagne, 1992; Gershon, 2000) and on effects of firm-level behaviors within and across international markets (Chan-Olmsted & Chang, 2003). To a lesser degree, the focus was on the effects of foreign market environments on transnational media organizational strategies and decisions (Chan-Olmsted & Chang, 2003; Gershon, 2000). Later studies expanded into discussing specific strategies of how to benefit from access to global markets and audiences ( Jöckel & Dobler, 2006; Oba, 2009; Strube & Berg, 2011). Interestingly, 2011 was the last year that research utilizing the transnational management approach was undertaken. One possible reason is that as global media distribution is less constrained by logistical or legal issues, any media venture online may soon be said to reach global markets or audiences, making “transnational media organization” an outdated term. It is important to note that very few published studies discuss the ownership of distribution platforms and its impact on content selection/filtering. The presence of a few dominant players (and owners) of ISPs and social media platforms, which seem to dominate distribution of online content selection and filter using algorithms based on individual users’ browsing history, signals a clear need to expand this line of research. The resource-based view (RBV) recognizes the importance of resources to competitive advantage (Barney, 2001). It builds on the assumption that a firm can equip itself with tangible and intangible resources, in a way that is more highly attuned to the demands of the environment, thus creating a source of competitive advantage. The differences in how firms adjust to a changing environment can help explain why some firms consistently outperform others. Understanding the ability to adapt is particularly useful in the media sector, which is undergoing rapid change triggered by new “smart” and digital technologies and, resulting from these, unprecedented changes in consumer demand. Studies by Doyle (2013) and Oba and Chan-Olmsted (2007) insightfully utilize the RBV paradigm. In trying to understand the components of strategy and successful outcomes, published studies focused on singular case studies of success stories (Colapinto, 2010; Kim, Heo, & Chan-Olmsted, 2010; Maijanen & Jantunen, 2014). Grounded in the traditional strategy frameworks of Porter’s value chain (1991) several studies focused on identifying the source of competitive advantage (Evens, 2010; Jöckel, Will, & Schwarzer, 2008; Kehoe & Mateer, 2015). While the value chain concept is commonly used in practice and can be well used in pedagogy to iterate core competencies and functional level strategies, it does not advance our understanding of patterns or typologies of activities that would explain superiority in market performance. Resources can potentially be a source of competitive advantage; thus strategic management refers to a company’s ability to utilize its resources to address changing a business environment “as dynamic capabilities” (Eisenhardt & Martin, 2000). The choice and design of a business model are one of the key foundations of dynamic capabilities, enabling a company to reconfigure resources and skills in order to adapt or shape the changing business environment (Teece, 2010). Media business models have become quite a popular theme for research, utilizing concepts and frameworks developed by strategic management scholars. Empirical studies using this approach (Casero-Ripollés & Izquierdo-Castillo, 2013; Cestino & Matthews, 2016; Cook & Sirkkunen, 2013; Ellonen, 2012) focused mainly on data from news organizations (newspapers and online news). The lack of studies covering other sectors is surprising, and should be further explored. Recent popularity of the “business model” keyword at media management conferences and discussion panels suggests that this will continue to be a growing area of publication, and hopefully, contribute to theoretical concepts of media management. Business models research can be utilized in the areas of innovation, change, and performance, enhancing our understanding of which business model components in media are unique and necessary for successful adjustment to the rapidly changing environment. A third approach to studying strategic management in the media management field is based upon ecological niche theory from the biological sciences (Dimmick, 2003; Dimmick & Rothenbuhler, 1984). Niche theory posits that industries occupy market niches just as biological species occupy 24

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ecological niches. The theory has proved to be valuable in examining competition among media corporations for scarce resources, such as advertisers and audiences. It also helps to explain how sectors of the media industry adapt to new competition, such as the Internet or other new technologies. The number of studies using niche theory has declined; notable exceptions were the study focusing on media brands by McDowell (2006), and an examination of the evolutions of newspaper competition strategies (Mierzejewska,Yim, Napoli, Lucas, & Al-Hasan, 2017). While the SCP and RBV approaches and niche theory represent the most frequently used theoretical approaches to strategic management, the study of strategy also covers a wide range of other topics. Research has proliferated using specific strategies and case studies to evaluate success components of new product introductions (Kanuri, Thorson, & Mantrala, 2014; Kaplan & Haenlein, 2009); project management (Lundin & Norbäck, 2009); and market entry (Strube, 2010a). In the three analyzed journals half of all articles anchored their research within a spectrum of strategic management theories. This may not be surprising given the fact that media management has grown alongside media economics, and focuses mainly on a variety of questions about how media organizations function in changing market conditions. What is surprising, however, is that most authors preparing those publications are researchers and faculty who work in nonmanagement departments, like communication, journalism, and advertising.

Media Consumer Behavior Theories Approximately 30% of the analyzed management articles focused on some aspect of media consumption or audience behavior in response to new technologies. While studies published before 2006 sought to observe past and current behaviors, later studies attempt to develop predictions for media usage and consumption. Studies aiming to understand why and how media products or services have succeeded have predominantly used the diffusion of innovations theory (Rogers, 1995), also known as adoption of innovations research. The theory posits that successful diffusion of innovations occurs following predictable patterns and stages. Demographic factors such as age, education, and income have been found to be related to a consumer’s willingness to adopt innovations. The theory originally developed to study farmers’ adoption or non-adoption of new agricultural products; since then, it has been widely applied in social sciences to understand human responses to innovation and change. It can help to explain a number of factors in bringing new products to market, including success, failure, and pricing. In media management, diffusion theory has been used to examine consumer behavior in relationship to a number of new products and technologies, like digital television (Atkin, Neuendorf, Jeffres, & Skalski, 2003; Dupagne & Driscoll, 2010; Ferguson & Greer, 2013), highdefinition (HD) radio (Greer & Ferguson, 2008), and digital cable (Kang, 2002). Another theoretical model built partially on the diffusion of innovations has become widely accepted in management and its subfield of information systems as a means to explain user acceptance. The technology acceptance model (TAM) attempts to explain the factors that determine user acceptance of new technologies in various spheres. Only a small number of studies use the TAM framework to study topics like TV viewing (Hino, 2015), mobile TV (Hazel Kwon & Soo Chon, 2009), or mass customized newspapers (Putzke, Schoder, & Fischbach, 2010). Both approaches (diffusion of innovations and TAM) can be valuable to understand individual decisions to adopt new technologies, but diffusion of innovations can also be used to understand organizational decisions. Only a few media management scholars have used diffusion of innovations to look at organizational adoption issues within media companies (Ferguson & Greer, 2016; Lawson-Borders, 2003). A second stream of research on media consumer behavior deals with understanding and measuring audiences.They can be grouped according to three types of research lenses: observing and understanding audiences; measuring their size, reaction, or qualities; and discussing audience as product. 25

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The main focus of such studies has been to explore attitudes and identify predictors of future audience behaviors. There was significant diversity among them of constructs and frameworks used, which can probably be probably explained by the wide variety of topics and contexts. Mostly exploratory in nature, these studies did not aim to test or develop theories. Perhaps the reason was that audience research tends to be published and discussed within media and communication studies disciplines, and these studies fall on the periphery of media management scholarship. Among studies looking to measure and predict audience and media consumer behavior, the concept of attitude and affinity has been used, in line with the classical attitude-behavior paradigm, which assumes that behavior can be predicted by attitudes or beliefs. Media management studies within this paradigm looked at participation in online communities (Becker, Clement, & Schaedel, 2010), paying for online news (Kammer, Boeck, Hansen, & Hauschildt, 2015), or watching imported content (Yang & Tso, 2007). Traits used in estimating and predicting media consumption included word of mouth (Hsu & Jane, 2016) and nostalgic reactions to content (Natterer, 2014). However, the most consistent stream of research is devoted to identifying factors that influence willingness to pay for media products (Chyi, 2005; Kammer et al., 2015;Yang, Ha, Wang, & Abuljadail, 2015). They show that it is a highly complex phenomenon with a large heterogeneity of factors. Understandably, more research is needed in this area, ideally based on behavioral data rather than self-reported behavior survey data. Within the audience-as-product lens, the media industry conceptualizes audience ratings used to quantify value to advertisers as a “currency.” Hence, the audience is a “product” sold to advertisers, generating revenues to media organizations. In media management research, this stream has contributed to discussions about the technological changes transforming how audiences consume media (fragmentation and autonomy) (Napoli, 2001, 2012), as well as how the audience measurement market operates and evolves (Nelson & Webster, 2016; Taneja, 2013). These new tools of audience data collection challenge the existing institutionalized system of audience valuation. The traditional system of measuring exposure based on representative samples is being supplemented or possibly substituted by measures of engagement and interactivity based on time spent and social listening data. Granted, these studies did not aim to expand already existing theories, but they clearly add to our understating of the pivotal role the audiences play for media managers. In today’s media environment, where audiences can engage in production and distribution of user-generated content, they too can be conceptualized as “producers.” Media management researchers are in a prime position to advance this dual concept of an audience, its valuation, and interdependence. Similarly, the examination of new technologies like big data, algorithmic media, or artificial intelligence, which enable predicting, measuring, and interacting with audiences, almost certainly will be a growing area of research in the foreseeable future. Increasingly, media audiences are being defined as communities of interest unified by media content preferences. Two constructs, media brand and measure value of audience as brand equity, have emerged to become a popular field of research in media management scholarship. Anchored in marketing, psychology, and consumer behavior frameworks, media branding constitutes an important section of media management. Chapter 11 discusses this topic in further detail.

Organizational Culture Theories Culture, defined as a set of “shared beliefs and values of a given group or occupation” (Schein, 2003, p. 171), became popular as a management topic in the 1980s. It has often been equated with decisions, influencing behaviors, and managing organizational practices (Clegg, Kornberger, & Pitsis, 2015). Studies of organizational culture offer a promise of clarity in a confusing, continuously changing world, and seek explanations and solutions to motivate and control employees, increase productivity, or implement organizational changes. As an approach to understanding organizations, 26

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organizational culture theory provides a bridge between the structural and agency camps of organizational studies. In media management journals it became a topic of research interest partly because of the need to craft responses to the uncertainty of the changing market. In the set of articles reviewed for this chapter, 20% of studies focused on various aspects of organizational culture. However, the application of organizational culture theory as a base for studying media organizations and management practices is relatively new (Küng, 2000, 2003a). Some recent examples of studies using culture theory include a case study of the influence of organizational cultural identity on strategies of content development (Deslandes, 2011), and an examination of functional and managerial changes occurring in newsrooms (Sylvie & Gade, 2009). Although the organizational culture lens seems very promising for research in industries affected by dramatic or disruptive change (Alvesson, 2016; Choi, 2011), it is also an opportunity for media management scholarship to study change, innovations, or professional cultures through this theoretical frame. Clearly, this gap should be addressed. Studying professional cultures and subcultures offers a different way to look at organizations. Cultures unite individuals within the same occupation, who share a value system and give the profession their collective identity. Media management research demonstrates interest in professional cultures of those who work within that sector. Witschge and Nygren (2009) wrote about pressures of the journalistic profession; Becker,Vlad, and Martin (2006) conducted an examination of the labor market and hiring practices in media organizations; and the study by Philips, Singer, Vlad, and Becker (2009) looked at how technological change affects the journalistic profession. All those studies reflect long-standing interest in the professional culture and working conditions of journalists. Different professional groups working in the media sector pose an interesting avenue of future research, especially in the context of increased popularity of the sharing economy and the rise of an on-demand workforce (Sundararajan, 2016). Creating organizational cultures that effectively influence employees to change is part of leadership’s function. An effective leader’s skill set includes motivating employees to embrace organizational change. Leadership and culture are fundamentally intertwined and leaders are the “architects of culture” (Schein, 2010, p. xi). In media management literature published in the three journals, a growing number of studies have directly or indirectly examined leadership. Early studies have looked at the relationship between leadership and change (Killebrew, 2003; Pérez-Latre & Sánchez-Tabernero, 2003); organizational issues (Sylvie, 2003); organizational values (Demers, 1996); or human resources (Dal Zotto, 2005). Later studies tend to focus on leadership roles in specific situations, like managing change (Schultz & Sheffer, 2008), managing structural tensions (Achtenhagen & Raviola, 2009), or work practices (Lischka, 2015; Sylvie & Gade, 2009). Skills for guiding organizations through periods of change and uncertainty continue to be essential for media managers, and clearly there is a need for more research in this area. Also, there is a need to expand this stream of research beyond journalism and newsrooms, and look at other sectors of media.

Technology, Innovation, and Creativity With many articles mentioning the words “technology,” “innovation,” or “creativity,” it is surprising that few of them studied those concepts in detail. Besides the theoretical approaches explaining adoption and acceptance of technologies (discussed earlier in this chapter), none of the studies use theories originating in the technology management discipline. Questions related to roles and functions of technology inside organizations or how technologies facilitate new product offerings are just a few posed by the field of technology management. This absence can probably be explained by differences in defining the term “new product development.” While in general management those functions are termed research and development (R&D), and are affiliated with patents, technological processes, and knowledge flows, media management uses it to mean content development, creative endeavors, and innovations of organizations (Dogruel, 2015). Incorporating theoretical perspectives 27

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from technology management can enrich media management research, especially considering the growing importance of technology in developing innovative media products, which include both content and technology components (e.g., apps), and the increasing dependence on tools to create, filter, and distribute content. In contrast, we see considerable growth of research within innovation and creativity. Typically studied in conjunction as closely related concepts, innovation and creativity are actually different constructs. Creativity is often defined as the ability of an individual or a group to produce novel work, while innovation is used in reference to change processes inside an organization. Metaanalyses of innovation and creativity management research within media management provide an in-depth and holistic view of recent developments and capture how researchers theorize their role (Dogruel, 2015; Sylvie & Gade, 2009). This research supports the argument that managers need to consider how to create new competencies, anticipate, and show agility in responding to new market opportunities. Such conclusions align with the newly emerged, and continuously growing, stream of media entrepreneurship research. Media entrepreneurship may be defined as a “new ventures bringing to existence future media goods” (Achtenhagen, 2008, p. 126), or as an individual possessing a set of entrepreneurial traits (Sylvie & Gade, 2009). Studies in this area are particularly relevant to media organizations in times of structural change (Küng, 2003b) as the market shifts from being dominated by organizations with predominantly corporate cultures (e.g., media conglomerates like Disney) to being driven by organizations with start-up, entrepreneurial cultures (e.g., Facebook or Google).

Working Toward a Theoretical Research Agenda Besides showing the theoretical body of knowledge used in media management, and discussing its recent advances, the objective of this chapter has been to show areas of concern that could guide future research. The growth of academic journals, the number of articles analyzed in this study, and also at the considerable research published in books, reports, and conference papers, shows that the discipline of media management is blooming. Since 2006 it has made considerable progress in documenting issues, highlighting challenges, and collecting empirical observations. However, the multiplicity of theoretical perspectives does not bring us closer to consensus about the theoretical roots of the field. Over time, theoretical plurality has grown and it is becoming increasingly difficult to integrate study results and see a systematic approach to the challenges of media organizations. Generally, media management tends to be un-programmatic and idiosyncratic. As such, we do not come closer to developing our own theories. Theory development requires a coordinated program of knowledge development and testing. While this chapter has illustrated the diversity of theoretical approaches, as in any discipline developing new theory is difficult. Media management tends toward using existing theories to explain phenomena rather than developing new ones (Picard & Lowe, 2016). On the one hand, it is helpful for any emerging discipline to worry about status and shortcomings. On the other hand, ideally research should strive to make substantial theoretical contributions.The fundamental question seems to emerge—do we need media management theory or can we continue borrowing from other disciplines? One could argue that borrowing from other fields is both sufficient and necessary to get published, but while they may be valid in their respective domains, exporting them to a new context may diminish their explanatory power. As Achtenhagen (2016) explains, there is a need to further develop the understanding of what is special about media management, while remaining connected to the mainstream discourse of general management. Another challenge lies in the methodology for published research, also observed as “a methodological cloud” (Sylvie & Schmitz Weiss, 2012). Quantitative and qualitative methods are used in equal measure, but the field would benefit from developing robust research designs, clear operationalization 28

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of constructs, and adequate data samples. It’s time to consider working with the same set of research tools to refine their precision and contextual fit. As the media industry evolves, old traditional players (the incumbents) are supplanted by the new kids on the block (the disruptors), so there is a growing need to tackle research questions relevant to media organizations and society. The gap between academia and media practitioners has been of concern for some time (Küng, 2007, 2010, 2016). Besides differing logics and time dimensions there are potential difficulties in communication between academics and practitioners (Bartunek & Rynes, 2014). We need to do more to share our work with practitioners and help them to solve problems as well as engage in discussions to increase the relevance of our research. While the challenges confronting media management have been addressed, we should not overlook its achievements. This study has revealed that the body of media management research has advanced over time and is characterized by greater maturity and sophistication. Growth in the body of literature indicates that there is interest in the topic, which gives optimism for the course ahead. Here are a few suggestions to help move the field forward, and hopefully spur discussion among scholars. •

•

•

•

There is a need to find focus on different theoretical approaches or a shared standard. It will enable fine-tuning of existing models and frameworks, and eventually advance the creation of a unique theory of media management. New technologies will inevitably impact the media sector, with a big chance that future technologies will completely uproot media organizations from the old media–new media dichotomy. Today’s new media will become the old media of tomorrow. It would be useful to develop standards to capture the continuous change, rather than keep formulating new definitions. The field would benefit from studies taking a meta-analytical approach—that is, studies attempting to summarize and cumulate findings across studies. These contribute to building a common understanding of concepts. Scholars need to become agile and relevant to media managers, media workers, and policy makers, and strive for rigor in creatively developing a specialized body of media management knowledge.

Conclusion This chapter looked at theoretical approaches in media management and economics, through a systematic review of 847 articles published in three main journals of the field. It points out the major advances since the publication of the original Handbook of Media Management and Economics and proposes a few suggestions to move further research forward.The largest body of research is anchored in strategic management, followed by theories of media consumer behavior. The danger of borrowing existing theories from other fields falls short in explaining many aspects of media operations. Here the “difference” of media from any other industries makes a case for a new, original theory development. Such theory-building efforts might still be at an early stage, but the aim should be to promote diversity of innovative research designs and questions bringing light to the complex phenomenon of economic and managerial aspects of the media sector. Media management and economics research will soon be celebrating 30 years since its first journal—The Journal of Media Economics—was founded. In this time, we have accumulated a sizeable, diverse, and original body of knowledge. As the rapid pace of technological evolution and other forces continue affecting the media industry, we need to persist in enhancing media management from a theoretical vantage point.

Note 1 Parts of this chapter are based on the earlier version of a publication under the same title.

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Theoretical Approaches Clegg, S. R., Kornberger, M., & Pitsis, T. (2015). Managing and organizations: An introduction to theory and practice. London: Sage. Coffey, A. J., & Cleary, J. (2011). Promotional practices of cable news networks: A comparative analysis of new and traditional spaces. International Journal on Media Management, 13(3), 161–176. doi:10.1080/14241277.20 11.568421 Colapinto, C. (2010). Moving to a multichannel and multiplatform company in the emerging and digital media ecosystem: The case of Mediaset Group. International Journal on Media Management, 12(2), 59–75. doi:10.108 0/14241277.2010.510459 Cook, C., & Sirkkunen, E. (2013). What’s in a niche? Exploring the business model of online journalism. Journal of Media Business Studies, 10(4), 63–82. Creswell, J. W. (2013). Research design: Qualitative, quantitative, and mixed methods approaches. Thousand Oaks, CA: Sage publications. Daidj, N., & Jung, J. (2011). Strategies in the media industry:Towards the development of co-opetition practices? Journal of Media Business Studies, 8(4), 37–57. Dal Zotto, C. (2005). Human resource leadership in highly dynamic environments: Theoretically based analyses of 3 publishing companies. Journal of Media Business Studies, 2(1), 51–70. DeFleur, M. L., & DeFleur, M. H. (2016). Mass communication theories: Explaining origins, processes, and effects. London: Routledge. Demers, D. P. (1996). Corporate newspaper structure, profits, and organizational goals. Journal of Media Economics, 9(2), 1–23. Deslandes, G. (2011). Corporate culture versus organizational identity: Implications for media management. Journal of Media Business Studies, 8(4), 23–36. Dimmick, J. W. (2003). Media competition and coexistence: The theory of the niche. Mahwah, NJ: Lawrence Erlbaum Associates. Dimmick, J. W., & Rothenbuhler, E. (1984). The theory of the niche: Quantifying competition among media industries. Journal of Communication, 34(1), 103–119. Dogruel, L. (2015). Innovation research in media management and economics: An integrative framework. Journal of Media Business Studies, 12(3), 153–167. doi:10.1080/16522354.2015.1069478 Doyle, G. (2013). Re-invention and survival: Newspapers in the era of digital multiplatform delivery. Journal of Media Business Studies, 10(4), 1–20. Dupagne, M. (1992). Factors influencing the international syndication marketplace in the 1990s. Journal of Media Economics, 5(3), 3–30. Dupagne, M., & Driscoll, P. D. (2010). Comparison between early high-definition television owners and nonowners. Journal of Media Economics, 23(4), 216–230. doi:10.1080/08997764.2010.527226 Eisenhardt, K. M., & Martin, J. A. (2000). Dynamic capabilities: What are they? Strategic Management Journal, 1105–1121. Evens,T. (2010).Value networks and changing business models for the digital television industry. Journal of Media Business Studies, 7(4), 41–58. Fedler, F., & Pennington, R. (2003). Employee-owned dailies: The triumph of economic self interest over journalistic ideals. International Journal on Media Management, 5(4), 262–274. doi:10.1080/14241270309390042 Ferguson, D. A., & Greer, C. F. (2013). Predicting the adoption of mobile DTV by local television stations in the United States. The International Journal on Media Management, 15(3), 139–160. doi:10.1080/14241277.2 013.767259 Ferguson, D. A., & Greer, C. F. (2016). Reaching a moving target: How local TV stations are using digital tools to connect with Generation C. International Journal on Media Management, 18(3–4), 141–161. doi:10.1080/1 4241277.2016.1245191 Fu,W. (2003). Applying the structure-conduct-performance framework in the media industry analysis. The International Journal on Media Management, 5(4), 275–284. Fu, W. (2009). Screen survival of movies at competitive theaters:Vertical and horizontal integration in a spatially differentiated market. Journal of Media Economics, 22(2), 59–80. doi:10.1080/08997760902900072 Gade, P., & Raviola, E. (2009). Integration of news and news of integration: A structural perspective on news media changes. Journal of Media Business Studies, 6(1), 87–111. Gershon, R. A. (2000). The transnational media corporation: Environmental scanning and strategy formulation. Journal of Media Economics, 13(2), 81–101. Glynn, M., & Raffaelli, R. (2010). Uncovering mechanisms of theory development in an academic field: Lessons from leadership research. Academy of Management Annals, 4(1), 359–401. doi:10.1080/19416520. 2010.495530 Gomery, D. (1989). Media economics: Terms of analysis. Critical Studies in Mass Communication, 6(1), 43–60.

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Bozena I. Mierzejewska Greer, C. F., & Ferguson, D. A. (2008). Factors influencing the adoption of HD Radio™ by local radio station managers. International Journal on Media Management, 10(4), 148–157. doi:10.1080/14241270802426725 Hazel Kwon, K., & Soo Chon, B. (2009). Social influences on terrestrial and satellite mobile-TV adoption in Korea: Affiliation, positive self-image, and perceived popularity. International Journal on Media Management, 11(2), 49–60. doi:10.1080/14241270902756419 Hino, H. (2015). TV today, mobile TV tomorrow? Extrapolating lessons from Israeli consumers’ adoption of innovative TV viewing technology. International Journal on Media Management, 17(2), 69–92. doi:10.1080/14 241277.2015.1030748 Hollifield, A. C. (2008). Invisible on the frontlines of the media revolution. International Journal on Media Management, 10(4), 179–183. doi:10.1080/14241270802426741 Hongjai, R., & Sang-Woo, L. (2010). Effects of mergers and competition on consumer benefits in the multichannel video programming industry in Korea. Journal of Media Economics, 23(2), 68–89. doi:10.1080/0899 7764.2010.485538 Hsu,Y.-L., & Jane,W.-J. (2016). Bidirectional causality for word of mouth and the movie box office: An empirical investigation of panel data. Journal of Media Economics, 29(3), 139–152. doi:10.1080/08997764.2016.1208206 Hunt, S. D. (1991). Modern marketing theory: Critical issues in the philosophy of marketing science. Cincinnati, OH: South Western. Hutchison, D. (2009). Regulating ownership: A transatlantic comparison. Journal of Media Business Studies, 6(3), 79–92. Ji, S. W. (2015). Vertical integration, regional concentration, and availability in cable programming networks. Journal of Media Economics, 28(4), 184–216. doi:10.1080/08997764.2015.1094077 Jöckel, S., & Dobler,T. (2006).The event movie: Marketing filmed entertainment for transnational media corporations. International Journal on Media Management, 8(2), 84–91. doi:10.1207/s14241250ijmm0802_4 Jöckel, S.,Will, A., & Schwarzer, F. (2008). Participatory media culture and digital online distribution—reconfiguring the value chain in the computer game industry. International Journal on Media Management, 10(3), 102–111. doi:10.1080/14241270802262419 Jones, O., & Gatrell, C. (2014).The future of writing and reviewing for IJMR. International Journal of Management Reviews, 16(3), 249–264. Kammer, A., Boeck, M., Hansen, J. V., & Hauschildt, L. J. H. (2015). The free-to-fee transition: Audiences’ attitudes toward paying for online news. Journal of Media Business Studies, 12(2), 107–120. doi:10.1080/165223 54.2015.1053345 Kang, M. H. (2002). Digital cable: Exploring factors associated with early adoption. Journal of Media Economics, 15(3), 193–207. Kanuri, V. K., Thorson, E., & Mantrala, M. K. (2014). Using reader preferences to optimize news content: A method and a case study. International Journal on Media Management, 16(2), 55–75. Kaplan, A. M., & Haenlein, M. (2009). Consumer use and business potential of virtual worlds: The case of “Second Life”. International Journal on Media Management, 11(3–4), 93–101. doi:10.1080/14241270903047008 Kehoe, K., & Mateer, J. (2015). The impact of digital technology on the distribution value chain model of independent feature Films in the UK. International Journal on Media Management, 17(2), 93–108. doi:10.1080/14 241277.2015.1055533 Killebrew, K. C. (2003). Culture, creativity and convergence: Managing journalists in a changing information workplace. The International Journal on Media Management, 5(1), 39–46. Kim, M., Heo, J., & Chan-Olmsted, S. M. (2010). Perceived effectiveness and business structure among advertising agencies: A case study of mobile advertising in South Korea. Journal of Media Business Studies, 7(2), 1–20. Küng, L. (2000). Exploring the link between culture and strategy in media organizations: The cases of the BBC and CNN. The International Journal on Media Management, 2(2), 100–109. Küng, L. (2003a). Editorial—culture and the media industry. International Journal on Media Management, 5(3), 168–170. doi:10.1080/14241270309390030 Küng, L. (2003b). What makes media firms tick? Exploring the hidden drivers of firm performance. In R. G. Picard (Ed.), Strategic responses to media market changes (pp. 65–82). JIBS Research Reports No. 2004-2. Sweden: Jönköping International Business School. Küng, L. (2007). Does media management matter? Establishing the scope, rationale, and future research agenda for the discipline. Journal of Media Business Studies, 4(1), 21–39. Küng, L. (2010). Why media managers are not interested in media management—and what we could do about it. International Journal on Media Management, 12(1), 55–57. doi:10.1080/14241270903558467 Küng, L. (2016). Why is media management research so difficult—and what can scholars do to overcome the field’s intrinsic challenges? Journal of Media Business Studies, 13(4), 276–282. doi:10.1080/16522354.2016. 1236572

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Theoretical Approaches Lacy, S. (1991). Effects of group ownership on daily newspaper content. Journal of Media Economics, 4(1), 35–47. Lawson-Borders, G. (2003). Integrating new media and old media: Seven observations of convergence as a strategy for best practices in media organizations. The International Journal on Media Management, 5(2), 91–99. Lewis, M. W., & Grimes, A. I. (1999). Metatriangulation: Building theory from multiple paradigms. Academy of Management Review, 24(4), 672–690. Lischka, J. A. (2015). How structural multi-platform newsroom features and innovative values alter journalistic cross-channel and cross-sectional working procedures. Journal of Media Business Studies, 12(1), 7–28. doi:10. 1080/16522354.2015.1027114 Lundin, R. A., & Norbäck, M. (2009). Managing projects in the TV production industry: The case of Sweden. Journal of Media Business Studies, 6(4), 103–121. Maguire, M. (2009). The nonprofit business model: Empirical evidence from the magazine industry. Journal of Media Economics, 22(3), 119–133. doi:10.1080/08997760903129333 Maijanen, P., & Jantunen, A. (2014). Centripetal and centrifugal forces of strategic renewal:The case of the Finnish Broadcasting Company. International Journal on Media Management, 16(3–4), 139–159. doi:10.1080/1424 1277.2014.982752 Massey, B. L., & Ewart, J. (2012). Sustainability of organizational change in the newsroom: A case study of Australian newspapers. International Journal on Media Management, 14(3), 207–225. doi:10.1080/14241277.2012 .657283 McDowell, W. (2006). Confrontation or conciliation? The plight of small media brands in a zero sum marketplace. Journal of Media Business Studies, 3(2), 1–22. McQuail, D., & Windahl, S. (2016). Communication models for the study of mass communication (2nd ed.). London: Longman. Mierzejewska, B. I., & Hollifield, C. A. (2006). Theoretical approaches in media management research. In A. Albarran, S. Chan-Olmsted, & M. Wirth (Eds.), Handbook of media management and economics (pp. 37–65). Mahwah, NJ: Lawrence Erlbaum. Mierzejewska, B. I.,Yim, D., Napoli, P. M., Lucas, H. C., & Al-Hasan, A. (2017). Evaluating strategic approaches to competitive displacement: The case of the U.S. newspaper industry. Journal of Media Economics, 30(1), 19–30. doi:10.1080/08997764.2017.1281817 Muehlfeld, K., Sahib, P. R., & van Witteloostuijn, A. (2007). Completion or abandonment of mergers and acquisitions: Evidence from the newspaper industry, 1981–2000. Journal of Media Economics, 20(2), 107–137. doi:10.1080/08997760701193746 Murschetz, P. C., & Friedrichsen, M. (2017). Making media management research matter. In M. Friedrichsen & Y. Kamalipour (Eds.), Digital transformation in journalism and news media: Media management, media convergence and globalization (pp. 17–28). Cham: Springer International. Napoli, P. M. (2001). The audience product and the new media environment: Implications for the economics of media industries. International Journal on Media Management, 3(2), 66–73. doi:10.1080/14241270109389949 Napoli, P. M. (2012). Audience evolution and the future of audience research. International Journal on Media Management, 14(2), 79–97. doi:10.1080/14241277.2012.675753 Natterer, K. (2014). How and why to measure personal and historical nostalgic responses through entertainment media. International Journal on Media Management, 16(3–4), 161–180. doi:10.1080/14241277.2014.989567 Nelson, J. L., & Webster, J. G. (2016). Audience currencies in the age of big data. International Journal on Media Management, 18(1), 9–24. doi:10.1080/14241277.2016.1166430 Oba, G. (2009). Programming strategies of U.S.-originated cable networks in Asian markets: Descriptive study based on the product standardization and adaptation theory. International Journal on Media Management, 11(1), 18–31. doi:10.1080/14241270802518273 Oba, G., & Chan-Olmsted, S. (2007). Video strategy of transnational media corporations: A resource-based examination of global alliances and patterns. Journal of Media Business Studies, 4(2), 1–25. Pardo, A., & Sánchez-Tabernero, A. (2012). Effects of market concentration in theatrical distribution: The case of the big five Western European countries. International Journal on Media Management, 14(1), 51–71. doi:10. 1080/14241277.2011.597365 Pérez-Latre, F. J., & Sánchez-Tabernero, A. (2003). Leadership, an essential requirement for effecting change in media companies: An analysis of the Spanish market. International Journal on Media Management, 5(3), 199–208. doi:10.1080/14241277.2011.597365 Phillips, A., Singer, J. B.,Vlad,T., & Becker, L. B. (2009). Implications of technological change for journalists’ tasks and skills. Journal of Media Business Studies, 6(1), 61–85. Picard, R. G. (2000). Changing business models of online content services: Their implications for multimedia and other content producers. The International Journal on Media Management, 2(2), 60–68.

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Bozena I. Mierzejewska Picard, R. G. (2004). Environmental and market changes driving strategic planning in media firms. In R. G. Picard (Ed.), Strategic responses to media market changes, (pp. 65–82). ( JIBS Research Reports No. 2004–2). Sweden: Jönköping International Business School. Picard, R. G. (2005). Unique characteristics and business dynamics of media products. Journal of Media Business Studies, 2(2), 61–69. Picard, R. G., & Lowe, G. F. (2016). Questioning media management scholarship: Four parables about how to better develop the field. Journal of Media Business Studies, 13(2), 61–72. doi:10.1080/16522354.2016.1176781 Picard, R. G., & van Weezel, A. (2008). Capital and control: Consequences of different forms of newspaper ownership. International Journal on Media Management, 10(1), 22–31. doi:10.1080/14241270701820473 Point, S., Fendt, J., & Jonsen, K. (2016). Qualitative inquiry in management: Methodological dilemmas and concerns in meta-analysis. European Management Review, 14(2), 185–204. Porter, M. E. (1991). Towards a dynamic theory of strategy. Strategic Management Journal, 12(3), 95–117. Powers, A., Broadrick Sohn, A., & Briggs-Bunting, J. (2014). Family-owned newspapers: Filling niches in local U.S. communities. Journal of Media Business Studies, 11(2). Putzke, J., Schoder, D., & Fischbach, K. (2010). Adoption of mass-customized newspapers: An augmented technology acceptance perspective. Journal of Media Economics, 23(3), 143–164. doi:10.1080/08997764.2010.502514 Ramstad, G. O. (1997). A model of structural analysis of the media market. Journal of Media Economics, 10(3), 45–50. Rogers, E. (1995). Diffusion of innovations. New York: Free Press. Rudner, R. S. (1966). Philosophy of social science. Englewood Cliffs, NJ: Prentice-Hall. Russi, L., Siegert, G., Gerth, M. A., & Krebs, I. (2014). The relationship of competition and financial commitment revisited: A fuzzy set qualitative comparative analysis in European newspaper markets. Journal of Media Economics, 27(2), 60–78. doi:10.1080/08997764.2014.903958 Schein, E. H. (2003). The culture of media as viewed from an organizational culture perspective. International Journal on Media Management, 5(3), 171–172. doi:10.1080/14241270309390031 Schein, E. H. (2010). Organizational culture and leadership (Vol. 2). San Francisco, CA: John Wiley & Sons. Schultz, B., & Sheffer, M. L. (2008). Blogging from the labor perspective: Lessons for media managers. International Journal on Media Management, 10(1), 1–9. doi:10.1080/14241270701820390 Shepherd, D. A., & Suddaby, R. (2017). Theory building: A review and integration. Journal of Management, 43(1), 59–86. Sjøvaag, H. (2016). Media diversity and the global superplayers: Operationalising pluralism for a digital media market. Journal of Media Business Studies, 13(3), 170–186. doi:10.1080/16522354.2016.1210435 Strube, M. (2010a). Development of transnational media management research from 1974–2009: A propositional inventory. International Journal on Media Management, 12(3–4), 115–140. doi:10.1080/14241277.2010.531335 Strube, M. (2010b). Entering emerging media markets: Analyzing the case of the Chinese magazine market. International Journal on Media Management, 12(3–4), 183–204. doi:10.1080/14241277.2010.527313 Strube, M., & Berg, N. (2011). Managing headquarters-subsidiary relations from a knowledge perspective: Strategies for transnational media companies. International Journal on Media Management, 13(4), 225–251. doi:10.1 080/14241277.2011.597363 Sukosd, M., & Lake, W. (2013). From centralization to selective diversification: A historical analysis of media structure and agency in China, 1949–2013. Journal of Media Business Studies, 10(4), 83–104. Sundararajan, A. (2016). The sharing economy:The end of employment and the rise of crowd-based capitalism. Cambridge, MA: MIT Press. Sylvie, G. (2003). A lesson from the New York Times: Timing and the management of cultural change. The International Journal on Media Management, 5(4), 294–304. Sylvie, G., & Gade, P. (2009). Changes in news work: Implications for newsroom managers. Journal of Media Business Studies, 6(1), 113–148. Sylvie, G., & Schmitz Weiss, A. (2012). Putting the management into innovation and media management studies: A meta-analysis. International Journal on Media Management, 14(3), 183–206. doi:10.1080/14241277.2011.6 33584 Taneja, H. (2013). Audience measurement and media fragmentation: Revisiting the monopoly question. Journal of Media Economics, 26(4), 203–219. doi:10.1080/08997764.2013.842919 Teece, D. J. (2010). Business models, business strategy and innovation. Long Range Planning, 43(2), 172–194. Valcke, P. (2009). From ownership regulations to legal indicators of media pluralism: Background, typologies and methods. Journal of Media Business Studies, 6(3), 19–42. Vizcarrondo, T. (2013). Measuring concentration of media ownership: 1976–2009. The International Journal on Media Management, 15(3), 177–195. doi:10.1080/14241277.2013.782499

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Theoretical Approaches Wikström, P., & Ellonen, H. K. (2012).The impact of social media features on print media firms’ online business models. Journal of Media Business Studies, 9(3), 63–80. Wirth, M. O., & Bloch, H. (1995). Industrial organization theory and media industry analysis. Journal of Media Economics, 8(2), 15–26. Wirtz, B. W., Pistoia, A., & Mory, L. (2013). Current state and development perspectives of media economics/ media management research. Journal of Media Business Studies, 10(2). Witschge,T., & Nygren, G. (2009). Journalistic work: A profession under pressure? Journal of Media Business Studies, 6(1), 37–59. Yang, K.C.C., & Tso, T. K. (2007). An exploratory study of factors influencing audience’s attitudes toward imported television programs in Taiwan. International Journal on Media Management, 9(1), 19–27. doi:10.1080/14241270701193466 Yang, L., Ha, L., Wang, F., & Abuljadail, M. (2015). Who pays for online content? A media dependency perspective comparing young and older people. International Journal on Media Management, 17(4), 277–294. doi:10.1 080/14241277.2015.1107567 Yanich, D. (2010). Does ownership matter? Localism, content, and the Federal Communications Commission. Journal of Media Economics, 23(2), 51–67. doi:10.1080/08997764.2010.485537 Young, D.P.T. (2000). Modeling media markets. How important is market structure? Journal of Media Economics, 13(1), 27–44.

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3 EVOLVING RESEARCH AND THEORIES IN MEDIA ECONOMICS Brendan M. Cunningham

In 1951 Kenneth Arrow published the first formal proof of the first fundamental theorem of welfare economics (Arrow, 1952). This theorem states that a competitive market equilibrium is Pareto optimal. That is, perfectly competitive markets give rise to an outcome which cannot be improved upon without reducing the welfare of someone in the economy. In this sense competitive outcomes are socially efficient. Whether this result obtains in reality depends upon whether reality is well represented by the conditions upon which the theorem is predicated. Prominent among these conditions is the presence of perfect information in markets. Information is predominantly supplied by media industries, broadly defined. The Internet, newspapers, television, radio, books, and telecommunications provide a vast amount of details regarding a wide host of topics and events. And effective performance of media industries, as primary suppliers of information to consumers and firms, is a precondition for markets to deliver socially desirable outcomes. Any shortcomings in media industries will necessarily imply that subpar information is available to the economy. Imperfect information gives rise to numerous distortions and market failures. Examples include adverse selection (Ackerlof, 1970), in which a market fails to provide high-quality goods. Suppose that the quality of a product cannot be ascertained in advance but everyone knows that there are as many low-quality “lemons” (valued at 1) in the market as there are high-quality products (valued at 10). Consumers will be willing to pay only 5.5 for the product, which is the value of lemons averaged with the value of quality products. Poor information does not allow buyers to ascertain product quality, which reduces prices. But then sellers of high-quality products are unwilling to sell at this low average price of 5.5, so they exit the market. As a consequence, only low-quality lemons are traded on the market. The advent of the Internet has significantly resolved this information-driven market failure. User-generated reviews of products and services, as well as widespread availability of seller ratings and media stories about a product, provide buyers with a host of information regarding quality. There are even services which evaluate the quality of reviews themselves and signal whether sellers are falsifying those reviews. For example, see fakespot.com, which employs a machine learning algorithm to identify low-quality Amazon reviewers by examining how many reviews they have submitted and whether multiple reviews use the same language and grammar to describe a product. That is, adverse selection in the quality of information itself is addressed by the Internet. A second common information failure in markets is moral hazard, which occurs when inadequate information following a transaction induces a party to behave “immorally,” or in a manner inconsistent with the terms of the transaction (see Arrow, 1965, for the earliest formal discussion of this 36

Evolving Research and Theories in ME

problem in the economics literature). For example, a car driver might drive irresponsibly once s/ he is covered by automobile insurance because the cost of an accident accrues to the insurer. Or in service industries, the quality of a given employee’s effort at work is often unobservable because the product is difficult to quantify and it is the result of group effort. This can induce an employee to offer inferior effort on the job. Social media posts have been used by employers to identify employees who are not exerting the quality of effort which is expected of them as part of their employment. Williams (2015) reports numerous instances in which social media posts by employees, both on and off the job, lead to firing. Wysochanski (2016) reports on the case of a college professor who was fired by a board of trustees for posts she made to her Facebook page. Information revealed through newer forms of media is increasingly addressing moral hazard in labor markets, thereby enhancing the efficiency of those markets. Additional information technologies can be used to address moral hazard. For example, automobile insurers are now providing discounts to drivers who allow them to monitor their driving behavior through computerized car systems (see Lieber, 2014). It is worth noting that the term “media” has two definitions: (1) the industry that facilitates mass communication and (2) an intermediate layer or intervening substance. The media industry simultaneously embodies both of these concepts. Media firms serve as an intermediate layer between numerous constituencies as they facilitate mass communication. From an economic perspective, media firms have traditionally operated as part of a two-sided (or perhaps multisided) market. See, for example, Rochet and Tirole (2003) for one of the earliest discussions of such markets. That is, there are almost always two types of customers in media markets. For example, newspapers and magazines will typically charge a per-issue or subscription price to readers but they will also sell print space to advertisers. In the United States, traditional radio and television broadcasters still cultivate an audience but that audience does not pay for content. Instead, radio and television revenue is largely derived from advertisers. In certain circumstances there are additional sources of revenue. The public may provide a subsidy to broadcasters in the case of certain media firms. Alternatively, individuals and firms might donate to a broadcaster. There are other media industries, though, which do not feature multisidedness. There are a host of nuanced issues in two-sided markets. Should a firm lower the price it charges consumers, thereby sacrificing revenue, in order to expand its audience and draw more advertising revenue? How does disutility from advertising impact audience size and revenues from consumers? What is the nature of advertising and how does it impact product markets and consumers? Government policy is particularly challenging in two-sided contexts. A merger could potentially lower prices for consumers but raise prices for advertisers, who in turn might mark up prices on their own products and reduce consumer welfare. These and other issues have been, at least partially, addressed by a fairly sizeable literature. Increasingly, though, the Internet has destabilized the traditional function of media firms as intermediaries facilitating communication. In the past, the roles of producing information and distributing it were vertically integrated by media firms. For example, a radio station would hire staff to produce programming and gather advertising while also operating broadcast facilities while holding a spectrum license. The Internet has emerged as an alternative distribution mechanism for all forms of media with a variety of convenience and cost advantages, thereby casting a shadow on the viability of the traditional vertically integrated model. For example, podcasting serves as a competitive alternative to the incumbent approach of radio broadcasting. The Internet has also drastically altered the advertising market. Prior to the Internet, the minutes of television and radio broadcasts, as well as the column inches available in newspaper and magazines, were in finite supply. A given number of firms, with a capital stock which was expensive to expand, could send out only a certain amount of information. This implied that the “space” available to advertisers had an inherent scarcity and, therefore, value. Such scarcity was essentially eliminated by the emergence of the Internet in that a comparatively immense volume of column inches, or video 37

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and audio, can be supplied at much lower cost. Consequently, advertising is a far less secure source of income for traditional media firms and many have struggled to stay solvent in the new environment. Moreover, widespread availability of the Internet has lowered barriers to entry in media industries. Creation and distribution of information have historically involved significant fixed costs, costs which could be covered only by raising significant financial capital. Modern information technology and networks allow cheap information distribution and have radically reduced fixed costs. Consequently there is an increasing disintermediation of information flows between producers and consumers. Blogging, podcasting, online video delivery and the like allow almost anyone to create and distribute information for an immense audience at minimum cost. As mentioned earlier, these disintermediated forms of publishing provide advertisers with an “embarrassment of riches” in terms of venues for their material. In such a highly competitive environment there is a far greater role for systems which assist consumers in their pursuit of particular information or entertainment. Providers of those systems, such as Google, have been immensely profitable at a time when the fortunes of traditional media enterprises have largely been in decline. In what follows the existing literature on various aspects of media industries will be described. It begins with a discussion of the fundamental economic role of media. It will then turn to issues associated with the production and consumption of advertising and content. The political impact of media has emerged as an increasingly important topic and this branch of the literature will be discussed next. Finally, policy issues in media industries, including regulation, and the law and economics of the media will be addressed. For each of these topics the impact of the Internet and open research questions which might shape future research will be discussed. A conclusion which seeks to summarize the overall state of the literature and potential overall trends in media economics scholarship will be also offered.

The Economic Role of Media In perhaps the first explicit paper on media firms, Steiner (1952) offered an analysis of the type of information which radio broadcasters would offer to audiences. The central focus of his efforts involved an analysis of how market structure might alter the variety, or diversity, of information offered to audiences. His analysis suggested that a competitive market structure would involve each broadcaster pursuing a “business-stealing” strategy in which firms would attempt to garner more audience by duplicating the output of their competitors.The end result would be a relatively homogeneous supply of information by broadcasters. In contrast, a monopoly broadcaster would avoid this competitive arms race to steal audience and simply capture the whole market by catering to heterogeneous preferences and maximally differentiating its offerings. The availability of a diverse portfolio of information can have a significant impact on consumers and firms. In an environment characterized by uncertainty, the type of information which will be of value to consumers is largely unknown. While media may provide at least part of the information which underpins markets, a vast amount of information is provided by firms themselves through advertising.Telser (1964) notes that advertising serves as a means of informing consumers about the availability of products and the characteristics of those products. In this sense advertising can serve to enhance competition in markets. However, a market which requires significant advertising expenditures on the part of participants is one which is hard to enter. In this sense advertising can serve as a barrier to entry and lower competition. Comanor and Wilson (1979) offer an extensive discussion of the relationship between advertising and competition. They describe theories in which advertising can impact the elasticity of demand for a particular product, thereby inducing a change in pricing and profits. The empirical evidence regarding the impact of advertising on pricing, competition, and demand elasticities, at that point, was mixed. In part this ambiguity was driven by difficulties in determining causality between

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advertising and equilibrium outcomes in markets. Becker and Murphy (1993) provide a highly novel model of advertising and its impact on consumers and the market for advertised goods. The model generates a host of results but their analysis suggests that the most likely role for advertising in markets is that it increases the elasticity of demand while generating profits by shifting the entire demand for a good. Erdem, Keane, and Sun (2008) provide evidence from high-quality microeconomic data which supports this claim for almost all goods they examine.The exception to this finding is ketchup, where the advertising emphasizes horizontal differences in the product. Additional research regarding the competitive impact of advertising is warranted in order to determine whether this result is generalized. Ippolito and Mathios (1990) present evidence that the benefits of advertising may extend beyond competition. In the market for cereal they establish that the lifting of a government ban on advertising of health benefits led to a diffusion of information about the health effects of consumption choices. Importantly, since advertisements regarding health effects have a very low, or perhaps zero, price for consumers, firms were supplying information that was particularly valuable to consumers with a high cost of information acquisition (perhaps due to education levels or related factors). As a consequence of a rise in advertising, consumers began to make healthier choices regarding cereal consumption. Supply of similar information by the government was not as effective as private advertising. Ippolito and Mathios (1995) document a similar pattern of advertising supplying low-cost and valuable information to consumers which led to the adoption of low-fat diets. Efforts to quantify the economic impact of non-advertising content are in great need. Sorensen (2007) presents evidence that appearing on the New York Times bestsellers list can increase sales of books through a market expansion, rather than business-stealing, effect. Similarly, Pope (2009) shows that published rankings of hospitals have a significant impact on patient demand. Jensen (2007) provides compelling evidence that the general impact of information in markets is significant. He establishes that the diffusion of mobile phone technology on the coast of India changed behavior in fishing industries. Specifically, fishing boat operators in near-shore fisheries could call markets and inquire regarding the prices for different kinds of fish. This allowed effective arbitrage across geographically separate markets and reduced the dispersion of prices. Moreover, waste was reduced since, prior to the availability of mobile phones, boats would often bring their catch to markets with insufficient demand, leading to a wasteful surplus. The introduction of valuable information benefited consumers, intermediaries, and suppliers. That is, it was a Pareto improvement. Additional market improvements have emerged as a consequence of Internet media firms. More specifically, Internet firms are at the forefront of challenging and replacing traditional market intermediaries. Barber and Odean (2001) document the impact of online brokerages, in which consumers can employ their own information to engage in what is essentially direct trade in assets. This has reduced the cost of market participation through elimination of costly brokerage fees. Autor (2001) describes the benefits from Internet platforms which have reshaped labor markets. A host of web pages have streamlined job searches, hiring, and remote work. As a consequence local conditions and quirks have a smaller impact on the labor market equilibrium (the Winter 2001 edition of Journal of Economic Perspectives offers a wealth of material on the economic impact of the Internet). Waldfogel and Reimer (2015) describe the large influx of book titles and a corresponding significant increase in consumer welfare as publishers were disintermediated by online markets and electronic books. In general, media’s ability to offer intermediary platforms at much lower costs reduces barriers to entry while increasing competition. This trend is beneficial to both buyers and sellers through reduced transaction costs and fewer frictions. Internet disintermediation began many years ago in numerous markets, which implies that there should be ample data to estimate its numerous welfare effects. Additional effort in this direction would be highly valuable.

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Advertising: Fundamental Issues and New Developments Advertising has long been a mysterious phenomenon, to both economists and market participants. As noted by Jones (1990, p. 234), an early nineteenth-century Philadelphia retailer named John Wanamaker famously observed, “Half the money I spend on advertising is wasted, and the trouble is I don’t know which half.” Bagwell (2007) offers an extremely comprehensive and insightful review of the vast literature on advertising. A summary of Bagwell’s history of thought regarding advertising is as follows. One of the earliest theories of advertising is the persuasive view, in which advertising alters consumer preferences by creating less elastic demand. This will generally give rise to higher prices if firms have any market power. For this reason, advertising can have effects which seem anticompetitive and implicitly serve as a barrier to entry. As time passed a new thread in the literature emerged, in which advertising played an informational role. Firms employed advertising to notify consumers regarding the availability of products as well as the characteristics of those projects. From this perspective advertising allows firms to enter markets and attract consumers who would otherwise purchase from competitors. A third strand of the literature emerged subsequently, in which advertising provided a direct payoff to consumers as a complement to a good that is purchased. Bagwell concludes that empirical efforts to distinguish between the validity of each of these approaches to advertising have found a variety of results. No single theoretical model appears to explain the role of advertising in all contexts. Rather than repeat Bagwell’s thorough and insightful discussion of the advertising literature, instead the literature on advertising that has emerged subsequent to his effort is described. Unsurprisingly, much of this literature has focused on the structural changes to advertising markets as a consequence of the Internet. Evans (2008) and Goldfarb (2014) note that Internet advertising differs significantly from advertising in other media since detailed information regarding particular consumers can be conveyed to advertisers so that they can “target” their message. Athey and Gans (2010) provide a theoretical framework for understanding the impact of the enhanced opportunity to target advertisements online. They find that targeting increases the effective supply of advertising (less advertising is “wasted” on uninterested consumers), thereby reducing prices and increasing the return to advertising. Bergmann and Bonatti (2011) find that targeting enhances the social value of advertising but that prices are nonlinear in targeting (first increasing and then decreasing). Athey, Calvano, and Gans (2013) investigate the impact of greater “multihoming” behavior by consumers, where they consult multiple media outlets instead of one, as a consequence of the Internet. They find that even in the presence of tracking technology, multihoming can lead to lower media profits, a result which is consistent with recent financial stress in traditional media. Advertising markets are also increasingly automated through online transactions which are driven by auctions with dynamic pricing, in contrast to traditional advertising markets. For a thorough and comprehensive review of this emerging issue please see Ma and Wildman (2016), who describe the emergence of online advertising markets, the economics of targeted advertising, search advertising, and auction mechanisms. Further, Edelman, Ostrovsky, and Schwarz (2007) investigate the “generalized second price” auction frequently used by online advertising platforms. They show that truth telling is not an equilibrium in such markets. McAfee (2011) describes how these auctions can be designed to enhance learning about advertising cost and improve the performance of auctions. De Corniere and De Nijs (2016) theoretically investigate the role of information sharing regarding consumers in online advertising transactions. They find that such sharing increases the price of advertised products. In addition, they establish conditions under which sharing is privately and/or socially optimal.

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Chandra (2009) provides important evidence regarding the potential impact of targeted advertising. He establishes that newspapers facing greater competition have lower circulation but greater advertising prices, potentially as a consequence of market segmentation and more homogenous subscriber bases. More recently, Zentner (2012) provides international evidence that the diffusion of the Internet has led to lower advertising expenditures in newspapers, magazines, and television.There is no significant impact on radio advertising. Further exploration of this result is warranted in order to establish if this is a consequence of prices, quantity, and/or both. Further, the heterogeneity of the impact across media types is worthy of exploration. A sizeable literature has also recently investigated traditional advertising markets. For a behavioral approach to non-informative advertising see Brekke and Rege (2007), in which consumers can engage in herding behavior in the presence of advertising. See Banerjee (1992) for an early discussion of herding behavior.When there is imperfect information an individual may become convinced that a group is making a particular decision because it has access to valuable information that the individual lacks. In such a situation the individual may mimic the choice of the group even though that choice runs counter to the information she or he possesses. In this sense the individual is following the group in the same way that an individual animal follows a herd. Such outcomes can lead to inefficiency. In contrast, Doraszelski and Markovich (2007) offer a unique dynamic model of advertising in which asymmetries and strategic advantages can emerge. Peitz and Valletti (2008) show that in television markets, if consumers do not pay for subscriptions there is greater advertising intensity when consumers dislike ads. Also, without subscription revenues the content of media is less differentiated. Reisinger, Ressner, and Schmidtke (2009) show that in a model with pecuniary externalities advertising can be either a strategic complement or a substitute. Market entry can potentially raise profits and advertising levels. Barigozzi, Garella, and Peitz (2009) analyze the choice between generic advertising, in which a firm promotes its own product, and comparative advertising, in which a firm uses ads to differentiate the quality of its product from that of its rivals. In a related effort, Chakrabarti and Haller (2011) establish that comparative advertising can yield a welfare loss and advertising can impact firms that do not advertise by diverting demand. Crampes, Haritchabalet, and Jullien (2009) establish the relationship between entry, advertising, and subscription revenue. They show that under certain conditions there is an excessive level of entry in advertising markets and an insufficient level of advertising. Saak (2012) offers a model in which a monopolist advertises an experience good to heterogeneous consumers. In this setting advertising is high in the early stages of a product’s life as consumers learn about their valuation for the good.While advertising can delay learning, regulations which ban ads can nevertheless reduce welfare. Numerous empirical efforts have recently contributed to our understanding of advertising. Foremost among these are a number of field experiments. In a retail field experiment, Simester, Hu, Brynjolfsson, and Anderson (2009) find complex dynamic advertising effects in which future sales may actually decrease in response to advertising, particularly for the “best” customers. They also report evidence that consumers switch the sources of their suppliers in the direction of those that advertise. Bertrand, Karlan, Mullainathan, Shafir, and Zinman (2010) find that loan demand was significantly impacted by advertising in a field experiment involving direct mail in Africa. Advertising features were randomized among consumers.While not all aspects of advertising were effective, those that were tended to appeal to a consumer’s emotions. For example, including a picture of an attractive woman increased demand for loans. Anand and Shachar (2011) employ an extremely compelling structural estimation framework in order to investigate the impact of advertising for television programs. They find that an advertisement decreases the likelihood that a consumer will choose her best alternative to the advertised program by 10%.Their approach allows them to distinguish between the direct impact of advertising

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on consumers and the information role of advertising. Interestingly, observational analysis has also extended to the macroeconomic role of advertising. Zheng, Kinnucan, and Kaiser (2010) provide evidence that advertising can predict national investment. Cowling, Poolsombat, and Tomlinson (2011) report that rising advertising rates are associated with increased labor supply in the United States. They hypothesize that advertising boosts the return to consumption of goods and services, leading to a substitution of consumption for leisure. As described earlier, the role of advertising in health is an important and relatively recent strand in the literature. Blecher (2008) reports evidence that tobacco advertising increases demand in developing countries. Fast food advertising exhibits a significant impact on childhood obesity in the empirical analysis reported by Chou, Rashad, and Grossman (2008). Somewhat similarly, Saffer, Dave, and Grossman (2016) report that advertising of alcohol does increase consumption but the impact is larger for those who are already significant consumers. Perhaps one of the most noteworthy changes in the advertising landscape in health care markets occurred in 1997 when the U.S. Food and Drug Administration made it easier for pharmaceutical companies to advertise directly to consumers (DTC) on multiple media platforms. Königbauer (2007) offers a model which suggests that such advertising can facilitate the entry of generic pharmaceuticals and improve consumer welfare. Iizuka and Jin (2005) report results which suggest that the market-expanding effect of such advertisements is more significant than the business-stealing effect (the latter is potentially inefficient). Advertising directly to physicians also has a significant impact on pharmaceutical use, according to Iizuka and Jin (2007). Dave and Saffer (2012) estimate that broadcast advertising significantly increases the demand for the drug which is advertised and also increases the drug’s price. Nonbroadcast advertising has a smaller effect. Estimates suggest that broadcast DTC advertising can explain 19% of the growth in drug expenditures. Lakdawalla, Sood, and Gu (2013) provide evidence which suggests that expansion of insurance can induce advertising by pharmaceutical companies, thereby increasing utilization even beyond the newly insured. There is a positive spillover from greater insurance availability which is channeled through advertising markets. Anderson, Ciliberto, Liaukonyte, and Renault (2016) report additional evidence from the over-the-counter pharmaceuticals market which suggests that comparative advertising is less effective at raising perceived quality for the advertised product. Such advertising actually benefits other rivals in markets. In contrast, self-promotion is far more effective at raising the perception of product quality. There is emerging evidence that, at least in pharmaceutical markets, advertising may have important supply-side effects. Both Kwong and Norton (2007) and Grossman (2008) suggest that advertising can also play an important role in product improvements. They report results which suggest that innovation in pharmaceuticals increases in the presence of advertising. Joshi and Hanssens (2010) offer an explanation for this result. Their analysis suggests that the market value of a firm increases in its own advertising. This equity market response may well supply the capital needed for a pharmaceutical company to invest in research and development. The relationship between advertising and innovation is worthy of additional exploration.

Content: Recent Theories and Evidence A necessary condition for the existence of effective and valuable advertising is the production of compelling content by media firms. A host of subtle issues are involved in the decision to produce content of a particular type. Historically, content development has involved significant fixed costs of production and distribution. The Internet and widespread inexpensive information technology have immensely reduced these costs and, consequently, impacted the strategies which media firms adopt when they choose what to produce and how much they will differentiate from their competitors. And the present landscape features the entry of more competitors in content production, in large

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part due to falling costs. Programming is now developed by firms such as Netflix, Amazon, and, in the near future, Apple. Fritz, Mickle, and Karp (2017) describe emerging plans for Apple to enter movie and television production. The incentive for these firms to produce content is not advertising, per se. Rather, it is a means to induce consumers to subscribe to a particular service (examples are Amazon Prime and Netflix streaming) and/or induce demand for hardware which has exclusive access to the content (in the case of Apple). As discussed earlier, Steiner (1952) offers one of the earliest discussions of programming choices with a focus on radio broadcasting. In a theoretical extension to his analysis, Beebe (1977) suggests that a monopolist will broadcast “least common denominator” and homogeneous programming. Similarly, Spence and Owen (1977) show that niche programming with a small potentially audience will be undersupplied when consumers must pay for access to such programming. More recently, the analysis of Berry and Waldfogel (2001) illuminated the implications of entry by media firms.They found that entry results in a welfare loss which is equivalent to 45% of revenue in radio broadcast industries since average costs can potentially increase as each firm produces less output. If the output is defined in radio broadcasting as anything which generates revenue then it is natural to consider the audience (which can be “sold” to advertisers) as a station’s output. If business stealing occurs then entry by radio stations means each station has a smaller audience. This, in turn, means the incumbent station’s average cost, which is the ratio of audience size to fixed costs, increases. It would be worth revisiting this result given that the Internet and information technology have radically altered the structure of costs. Nilssen and Sørgard (2002) provide a model in which consumers have asymmetric costs for consuming media from a less-than-ideal source. They establish that a private incumbent will duplicate the attributes of a public entrant. Similarly, Gal-Or and Dukes (2003) report that media firms have an incentive to minimally differentiate when consumers dislike advertising. By offering similar content, media firms induce a low level of advertising, which, in turn, raises advertising prices. One of the more prominent strands in the literature on content investigates the determinants of product variety in media markets. Perhaps one of the earliest contributions on this topic (subsequent to Steiner 1952, discussed earlier) was Hall and Batlivala (1971), who discuss the relationship between market structure and duplication of programming on television. Bourreau (2003) shows that in a duopoly model the incentive to differentiate is greater under a subscription content market (in contrast to advertising-supported media). His model also establishes that quality is higher under advertising-supported media. Lin (2011) offers an extensive and thorough extension of this analysis. Gabszewicz, Laussel, and Sonnac (2004) provide a model which predicts that, when consumers dislike advertising, media firms will optimally differentiate their programming. Rogers and Woodbury (1996) provide evidence that radio markets with a larger number of stations offer a greater variety of formats. Relatedly, Berry and Waldfogel (2001) provide evidence that mergers in radio broadcasting increased the variety of station formats. This result is consistent with a strategy in which product position is used as a strategy for preemption. George and Waldfogel (2006) report results which suggest that the entry of the New York Times in local markets (as a consequence of lower distribution costs) induced lower circulation of local newspapers among college-educated subscribers. Local papers would then focus on local coverage and reduce coverage of national issues in order to differentiate from the New York Times. Chandra (2009) finds similar results. In a related effort George (2007) provides evidence that in more highly concentrated newspaper markets there is more variety in content. More recently, Gentzkow, Shapiro, and Sinkinson (2014) report results from an estimated and calibrated model which suggests that ideological diversity of newspapers is increasing in competition. Alexander and Cunningham (2004) report similar results for local television news. The variety of results regarding diversity and competition in newspaper markets suggests that additional investigation is warranted.

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In the music industry, Ferreira and Waldfogel (2013) suggest that the wider availability of content across national borders as a consequence of the Internet has not displaced local music. Sweeting (2006, 2009) shows that media may theoretically prefer to coordinate on advertising timing, or differentiate on timing, depending upon consumer behavior. He finds that radio stations generally prefer to coordinate on timing. Such coordination averts consumer switching to avoid advertisements. Berry, Eizenberg, and Waldfogel (2016) estimate that there is significant over-entry in radio markets. In particular, welfare could be improved if high-quality stations were converted into low-quality. Sweeting (2013) suggests that if radio stations were forced to pay performance royalties the consequential radio station closure would be significant and relatively rapid. Mooney (2010) finds that new technology, such as satellite radio and the Internet, were not significant factors in the decline of radio listenership. Rather, consolidation has a larger impact on audiences. Waldfogel (2012) reports results which suggest that quality in the music industry has not decreased since the simultaneous introduction of Napster and reduced costs for the production of music.

Media and Politics The role of media has a long legacy. Thomas Jefferson, one of the “founding fathers” of American democracy, observed, “were it left to me to decide whether we should have a government without newspapers, or newspapers without a government, I should not hesitate a moment to prefer the latter” (“Jefferson Quotes,” n.d.). Whenever a citizenry influences public decisions, either through elections or referendums, the information which is publicly available will significantly impact realized public policies. Carlyle (1841) described the media as the “Fourth Estate,” a political power which was equal among the other three estates, consisting of the clergy, nobility, and commoners. Particularly in democracies, the information provided by media can have a significant impact on the functioning of the political process. Voters are informed about a wide variety of policy, economic, and social issues from the content they glean from media industries.This information can shape their assessment of political actors and, in part, determine the electoral viability of incumbents and/or their challengers. Particularly in recent years this role of the media in the United States has undergone significant upheaval, a pattern which has been repeated in terms of the fundamental structure of media itself. Besley and Burgess (2001) provide a theoretical model which suggests that a political system should be more responsive in the context of a vibrant media. They also provide evidence from the Indian newspaper market that state governments more promptly addressed food shortages in locales where newspapers had healthy circulation. Leeson (2008) shows that government influence over media results in a less informed and engaged electorate. Besley and Prat (2006) provide a possible theoretical explanation: media may be captured by the political system, which then subverts the availability of valuable information. DellaVigna and Kaplan (2007) show that the introduction of Fox News led to more political support for Republicans in subsequent elections. Oberholzer-Gee and Waldfogel (2009) provide evidence that increased availability of Spanish-language broadcasters increased Hispanic voter turnout in the United States. Gerber, Karlan, and Bergan (2009) provide evidence from a field experiment which suggests that political knowledge and voting tendencies were not impacted through randomized receipt of a free newspaper subscription. However, voting patterns were impacted by the availability of a newspaper. A fascinating recent literature seeks to investigate whether media offers bias-free information to audiences. Mullainathan and Shleifer (2005) provide an extremely compelling model of bias. They assume that a portion of consumer payoffs from media involve confirmation of preexisting beliefs. Their model suggests that under common beliefs there is a slant in news coverage, even under competition. The slant becomes more extreme when consumers do not hold common beliefs. However,

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consuming multiple sources of news will provide an unbiased view of the world. Baron (2006) shows that bias may induce lower prices for news as a consequence of consumer skepticism. His model also shows that there are very limited mechanisms available to control bias. For example, bias is not decreasing in the level of competition. Guo and Lai (2014) show that bias can increase as advertisers have more bargaining power relative to media firms. Gentzkow and Shapiro (2006) provide somewhat similar insights in a model of Bayesian consumers. Such consumers may infer that a news source is of high quality when biased information conforms to their prior beliefs. Similarly, Gentzkow and Shapiro (2010) provide a measure of newspaper slant. Analysis of this measure provides evidence that consumers do reward newspapers which provide information that is consistent with their beliefs. Groseclose and Milyo (2005) provide similar evidence of the existence of bias in media. A somewhat related potential cause of bias is a conflict of interest between editorial staff, who create content, and advertising staff. There may be an incentive to skew content in favor of advertisers in order to curry favor and enhance advertising revenues. Reuter and Zitzewitz (2006) provide evidence that this does occur in the financial press but the negative impact on consumers is limited. Dewenter and Heimeshoff (2014) provide similar evidence in the automobile trade press. Interestingly, the model and results in Chiang and Knight (2011) suggest that consumers may be aware of this bias and use it strategically. Political endorsements can induce support of a candidate but “unexpected” endorsements (e.g., a left-leaning publication endorsing a right-leaving candidate) can have a greater impact on voter behavior. Durante and Knight (2012) provide additional evidence of relatively sophisticated media consumption behavior in Italy and Agirdas (2015) offers very recent insights on the topic of bias in newspapers. Additional insights regarding the impact of biased information on social media platforms are sorely needed. Such platforms are designed to foster “stickiness”—that is, they provide information and interactions which entice consumers to spend a great deal of time on one platform and not switch to others. Showing consumers agreeable information will tend to achieve this goal. This gives rise to the possibility of “filter bubbles” or “echo chambers” in which consumers do not obtain a diverse portfolio of information (some of which they may not like). For a more thorough discussion of this topic see Bozdag (2013). The political implications of this development are relatively unexplored but increasingly important. How do filter bubbles limit the ability to achieve consensus and compromise in politics? Do such bubbles increase instability and influence policy in a particular direction? These are fascinating topics which are worthy of additional consideration.

Government Policy in Media Markets There are many ways in which government policy shapes media. First, as pointed out by Doyle (2006), much of media production has the characteristics of a public good. It is non-rival because consumption of information and entertainment by one individual does not hamper the ability of another to consume it. In the presence of widespread and inexpensive duplication and distribution technology, as offered by modern information technology and the Internet, it is non-excludable.The producer of media cannot generally prevent others from consuming her output. Public goods are generally undersupplied by private producers. Copyright law, which grants exclusive reproduction and distribution rights to media producers, at least partially resolves this issue by creating excludability and inducing production of media. For a compelling discussion of this topic, see Besen and Raskind (1991). Harbaugh and Khemka (2010) offer a model of copyright enforcement which illustrates many of the complex dynamics associated with exclusivity. Their analysis suggests that targeted enforcement of copyright law may be the best way to preserve media producers’ rights. The emergence of the

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Internet and social media may have significant implications for the optimal form of copyright and its enforcement. An alternative solution to public goods challenges in media involves direct provision of media by a government agency or publicly subsidized nonprofit. Additional analysis of copyright and public media is warranted. One public good which is significantly regulated and vital to media is radio spectrum. Typically a regulatory agency will disburse rights to radio spectrum so that broadcasters can deliver content and advertisements to consumers. For a recent discussion on the design of these auctions see Cramton (2013), who suggests that U.S. auction design could be improved by adopting auction procedures used in the UK. Jenkins (2006) provides multiple definitions of media convergence. One such definition involves the availability of the same media across multiple distribution channels. The recent 5–10 years have witnessed a quickening of convergence. Spectrum management has yet to address this trend and additional analysis is welcome. For example, is it efficient to have a radio station available on traditional radio spectrum (e.g., AM or FM) and also available on mobile phone spectrum (via data services and Internet streaming)? Should spectrum be reallocated in the presence of convergence? There are related issues of access to information which are equally important. Fundamentally, there is a question of technological standardization and whether Internet distribution should become the standard for media delivery, thereby freeing resources for competing valuable uses. Daidj and Jung (2011) also note that businesses are pursuing previously unseen strategies as a consequence of convergence. This could have significant implications for regulators. Antitrust policy in media industries has a long legacy. Many policies restrict ownership concentration in markets such as television, radio, and newspapers. These policies depend upon a clear definition of a market. However, Internet distribution has disrupted these market definitions. For example, all local newspapers are now theoretically available everywhere when their content is posted online, rendering a narrow geographic definition of a local newspaper market potentially irrelevant. A critical question for policy makers is the substitutability of Internet media for media in alternative distribution channels. Ellonen, Tarkiainen, and Kuivalainen (2010) provide evidence that for nonsubscribers the online version of a magazine is a substitute for print versions. Liebowitz and Zentner (2012) present compelling evidence that, particularly for younger cohorts, Internet consumption is reducing television viewing. Yoo (2002) provides an early effort to address adjustments to regulatory policy as a consequence of the Internet. Similarly, Yoo (2014) discusses the manner in which conventional merger review may not well fit the new environment for media. Jeziorski (2014a, 2014b) illustrates that mergers have a complicated impact on consumers and advertisers in two-sided markets. The Internet has also born completely new regulatory questions. For example, Owen (2011) analyzes the question of network neutrality—that is, whether regulators should influence the manner in which traffic of different types is treated by Internet service providers. Bauer and Obar (2014) provide a comprehensive discussion of some of the goals pursued by network neutrality advocates and conclude that no single policy will achieve those goals. Dewenter (2016) provide an analysis which suggests that when downstream content is heterogeneous, network neutrality is not necessary to limit distortions from market power upstream. In contrast, Economides and Tåg (2012) establish that under certain conditions network neutrality regulation can be welfare-enhancing. In the future these issues will only grow in importance to regulators, media practitioners, and scholars.

Future Directions for Research This section summarizes some valuable future paths for research in the field of media economics. These areas were also discussed earlier. First, since the nature of advertising has radically changed with the advent of the Internet it is plausible that its impact on competition is also different. Equally

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important is an investigation into the economic impact of new forms of non-advertising content, such as social media. Quantification of the reduction in frictions as a consequence of new media, and implications for market efficiency, is also in order. Recent evidence that advertising may contribute to product innovations is also intriguing and worthy of additional exploration. What portion of productivity improvements can be associated with advertising? Turning to content, there are a wide range of heterogeneous results regarding the relationship between product variety and competition. Pursuing an explanation for diversity in the relationship between variety and competition would be valuable for a variety of reasons, including regulatory consideration. In addition, the role of bias in social media content is an increasingly important topic, particularly as applied to politics. Moreover, alternatives to copyright as a means of inducing media production, such as public subsidies or public broadcasting, are worthy of more exploration as advertising revenues continue to decline. Lin, Fu, Yeh, and Huang (2013) as well as Poort and Baarsma (2016) provide compelling frameworks for analyzing the benefits of public media. Finally, the optimal form of regulation in the presence of media convergence via the Internet is in need of additional analysis. There are also many opportunities for industry-specific future research. The impact of virtual reality on the movie and television industries is worthy of further exploration. Knapp and HennigThurau (2015) examine the economic effect of the 3D feature on movie success. How will content evolve in response to the availability of greater interactivity with consumers? Similarly, how will advertising develop as a consequence of virtual reality? In the music industry, what are the new models for promotion and discovery of artists which best function on social media? How will artists receive compensation when music is increasingly commoditized by streaming services? How will radio broadcasting evolve when on-demand alternatives, such as podcasting, are equally, if not more, beneficial for consumers? Finally, will paywalls or micropayments allow magazine and newspaper publishers to flourish over the next decade or longer? Each of these issues is worthy of additional extensive analysis.

Conclusion The body of media economics scholarship is sizeable, varied, and insightful. This literature has approached the topics of advertising, content, politics, and regulation from a variety of perspectives while employing an impressive diversity of techniques. Presently, media scholars face a compellingly dynamic environment in which rapid and emerging structural changes to costs and distribution methods are significantly altering the behavior of consumers and firms. This milieu represents a simultaneous challenge to established knowledge regarding media industries and an exciting opportunity to create new theories and test those theories with previously unused data and techniques.

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4 MEDIA MANAGEMENT AND ECONOMICS RESEARCH IN EUROPE Juan Pablo Artero and Alfonso Sánchez-Tabernero

Introduction The most relevant institutional fact concerning research on media management and economics in Europe is the opening of the first schools of communication. The field’s academic tradition had started in the United States 50 years earlier, with the Missouri School of Journalism, founded in 1908, and Columbia Graduate School of Journalism (1912). At that time, France already had a school: École Superieure de Journalisme de Paris (1889). Some years later a new one appeared: École Superieure de Journalisme de Lille. However, the French écoles were fully skills-oriented and for many decades they did not develop significant research programs. The London School of Journalism had the same goal of training journalists (1920). In fact, the first European schools of journalism or communication that started within universities frequently used translations of American handbooks as textbooks.The pioneers of the study of communication in Europe followed the works of their colleagues from the United States. The paradox was that, at that time, many European students of communication had more knowledge about the American media system than about the European model. After the Second World War, some journalism schools developed links with universities. On top of that, a group of European scholars was looking into communication issues from their personal backgrounds: economics, sociology, law, political science, or psychology. They were interested in media because, among other factors, the war had showed the power of news and the importance of propaganda and public opinion. In Spain, the University of Navarra launched its Instituto de Periodismo in 1958. The German School of Journalism started in 1961. It was a more academic version of its predecessor, the Werner Friedmann Institute, founded in 1949. In the UK, the University of Central Lancashire started its first journalism course in 1962. Other initiatives followed soon in Cardiff and Kent. Italian universities developed courses about media and advertising during the 1970s, after the experience of some successful institutes, like the Istituto Superiore di Giornalismo di Palermo (1953). In summary, in most European countries, research about media and communication started in the 1960s, in newly created schools of communication or within departments of law, management, sociology, languages, or political science. Research on media management and economics was primarily located within those new institutions created inside universities. The same thing holds true with the then newly created business schools, but the interest from management researchers toward media industries tended to develop in later decades.

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The aim of this chapter is to offer a historical overview of the development of media management and economics research in Europe since its beginnings in the 1930s to the present. Albarran (2006) and Picard (2006) gave similar contributions, but they were not exclusively focused on Europe and most of the references came from the United States. Additionally, those chapters offered historical trends and patterns on media management and media economics separately. Consequently, this chapter will be exclusively centered on European research and will handle media management and economics with an integrated perspective. That leads to highlighting some other works not valued enough in previous pieces of research. As far as the goal of this chapter, although it is intentionally broad, a particular strategy has been selected to handle it. The time lapse has been divided into three periods of development of the field (Artero & Sánchez-Tabernero, 2011; Artero, 2012): introduction (1930–1959), growth (1960–1989), and maturity (1990–2015).The purpose is to give big names and places to each stage. In other words, this chapter intends to highlight the key scholars and institutions that helped to expand the field in Europe. Regarding academics, some of their seminal books will be cited, even though this list is not and cannot be exhaustive and does not claim to be an annotated bibliography. On the other hand, universities will be studied in reference to programs, journals, and research centers that had to do historically with the expansion of media management and economics. Finally, this text proposes a research agenda for the next decade.

Introductory Period (1930–1959) In the first decades, no relevant European contributions can be found from a media management tradition. In fact, management research itself was taking its first steps. But from a media economics perspective, five early books can be identified, illustrating the first steps of the field and some of the pioneering names and places. Klingender and Legg (1937) gave an economic analysis of the Hollywood film industry. Klingender was a Marxist art historian and Stuart Legg was a documentary maker. Because of that, the wellknown Scottish director John Grierson, who is credited to have invented the term “documentary” itself, wrote the preface of their book. In fact, Grierson himself and the periodical World Film News financed the publication. The book studies capital in the American film industry, studio owners, and capitalist backers, as well as the problems of the British one. Schmidt, Schmalenbach, and Bächlin (1948) were Swiss art historians. Their book gives an integral consideration of not only the economic side but also sociological and aesthetic perspectives on the film industry. It was originally published in German 1947 under the title Der film: wirtschaftlich, gesellschaftlich, kunstlerisch, after an exhibition held in Basel in 1943.The Swiss Film Institute prepared the subsequent German and English editions. A French translation of around 130 pages was also issued in 1951. Coase gave a pioneering and specifically economic contribution in 1950. Then a young professor at London School of Economics, he tried to explain how British broadcasting became a public monopoly. His book was published before the Beveridge Report for the renewal of the BBC Charter of 1951. Coase and Beveridge were both colleagues at university. His interest in media industries had been advanced in 1947 with an article at the Journal Economica titled “The Origins of Monopoly Broadcasting in the UK.” Right after publishing his third book in 1950, he migrated to the United States. Coase remained interested in media (including studies on the Federal Communications Commission) throughout the rest of his academic career, which culminated in his winning the Nobel Prize of Economics in 1991. He worked for many years at the University of Chicago and became one of the most relevant leaders of the neoclassical economic school developed at that institution. His liberal intellectual roots were clear from the beginning. For instance, he states in his key text

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on then-monopolistic British broadcasting, “It is reasonable to assume that the force of competition would operate as a stimulus to improvements of all kinds” (1950, p. 185). His seminal contribution was critical to the opening to competition of British television a few years later. From a similar economic perspective, Mercillon’s (1953) French book on American cinema explains how Hollywood reached an oligopolistic structure that worked with a certain fair play. This was his first published volume as a researcher at the Centre National de la Recherche Scientifique. Mercillon later held different positions at French universities like Montpellier, Dijon, and Paris I. Italian Gianelli (1956) also wrote a book on film economics, but it focused more on European countries. A strong believer in European integration, he even declared that “the key to the European union lies in cinema” in a previous book (1953a, 25). In that same year, he published an important survey on the Italian film audience (1953b). All three books were motivated by his job as the secretary of the Italian film industry association, which he represented in a meeting on transnational cooperation at UNESCO headquarters in Paris in 1955. These five cited pioneering contributions illustrate how research on the economic and business side of media in Europe was divided from the very beginning into two different schools of thought. The first one can be labeled as neoclassical, functional, or simply liberal and finds its roots in the Chicago school and the Vienna circle. Regarding media research, it has been recognized as media management and economics. The second school is labeled as neo-Marxist or critical and is based on the perspectives that originated at the Frankfurt School first and other institutions later, like the Birmingham center and the British cultural studies in general. They prefer denominating the field as political economy of communication. This chapter focuses exclusively on the media management and economics research tradition, even though other important works with a more critical background are also included.

Growth Period (1960–1989) From the 1960s onwards, the interest in media management and economics came mainly from three broad academic fields: law, sociology and political science, and business and marketing. But each researcher had his or her own methods, interests, and sources of inspiration.They did not have a specific journal to publish their papers: the Journal of Media Economics was the pioneer and was founded in the United States in 1988. Therefore, their pieces of research were scattered in journals of communication, marketing, law, political science, or advertising. European scholars did not have an international association in the field, although in some countries national associations for research in communication and journalism did exist. On top of that, European professors were able to attend conferences organized or sponsored by associations like the Association for Education in Journalism and Mass Communication (AEJMC), International Communication Association (ICA), and International Association for Media and Communication Research (IAMCR). All of them launched “sections”, “divisions”, or “interest groups” related to media economics or related fields. In its origins, AEJMC was an American association, targeted to professors of journalism. It had different names and at the middle of the last century it expanded internationally. In 1965, it launched its division of   “Advertising”, which was the predecessor of the “Media Management and Economics” division. ICA was also an American association, founded in Austin, Texas, in 1950. Some decades later, it started its “Communications Law and Policy” section. The history of IAMCR goes back to the first years of UNESCO. In 1946, its Committee on Technical Needs in the Mass Media claimed that it was an “International Institute of the Press and information, designed to promote the training of journalists and the study of press problems throughout the world” (Nordenstreng, 2008, 226). After several proposals and controversies, IAMCR had its initial conference in 1957. It was the first true

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association for communication research with an international perspective. It also launched a section called “Political Economy”. From a contextual point of view, two relevant facts should be pointed out. First of all, at that time Europe was still divided in two blocs in which the western world was divided, between the free market countries and the state-directed economies: Western Europe versus Eastern Europe. The battle between capitalism and communism influenced research in the field. The scholars who sympathized with the free market perspective used to study how media markets and companies operate. In contrast, left-oriented researchers tended to emphasize the (usually perverse) effects of media firms in society. The second contextual fact concerns the media industry itself. In this period, the deregulation of the audiovisual industry had not started in Europe. With the relevant exception of United Kingdom, which launched its first private television channel in 1955, radio and television in Europe were almost always owned by the national states. On top of that, market shares of Hollywood studios in the European film markets were high, while most national companies were weak and unprofitable. As a result, research in media management in Europe was not particularly challenging and it was focused on print media. Many researchers tried to identify models of good public broadcasting services. In the music and movie industries, the main interest was the protection of the cultural national identity from the big American corporations. During the growth period, some authors who shared the neoclassical perspective had a positive attitude toward the “laissez-faire” proposal as long as the law was able to restrict the power of the big corporations (Bertrand, 1966;Toussaint, 1978; López-Escobar, 1978; Nieto, 1984). Other scholars studied how the media markets worked but they did not judge the effects and the fairness of the liberal system (Sterling & Haight, 1978;Vejanouski & Bishop, 1983; Lange & Renaud, 1989). All of them considered that the regulators’ prime task is to protect both freedom of the provider of news and entertainment contents and choice of the consumer. At the end of the period, researchers paid attention to more theoretical issues. Nieto (1984) maintained that media operate in the market of citizens’ time, Dunnett (1988) studied the economics of print industries, and Bordwell, Staiger, and Thompson (1985) explained why some content traveled better than others across different countries and cultures. In fact, at the end of the 1980s the discipline reached its age of maturity. It did not limit itself to translating American texts and concepts and it went beyond the mere application of economic theories to the media markets. As stated before, between 1960 and 1989 there was a growing but still scarce number of texts about media management in Europe because of the market context. During that period, media referred more to democracy, freedom of expression, and cultural identity than to profits and growth strategies of big corporations. Such reality applied particularly to the broadcasting industry. As a result, most studies analyzed print media organizations (Nieto, 1967, 1973; Pinillos, 1975; Hoyer, Hadenius, & Weibull, 1975; Engwall, 1978), although some books dealt with all media industries (Conesa, 1978; Tallón, 1981; Picard, 1989). Logically, in the United Kingdom there were some interesting academic contributions in the field of broadcasting management because at that time it was the only national audiovisual European market in which private companies had a relevant role (Barwise & Ehrenberg, 1988; Tydeman & Kelm, 1986). In this field, research evolves from a skill-oriented perspective toward a more complex analysis. The first books followed the American model based on the purpose of explaining how to manage a media organization. In the 1970s and 1980s new concerns appeared: the need to identify consumers’ implicit demands, the paradox of serving two publics with different interests, audiences and advertisers, the relevance of people management in creative industries, the pros and cons of vertical and horizontal integrations, and the difficulty of measuring intangible assets like the value of brands, knowledge, relations, movies or sport rights, and innovative spirit. Those challenges will be studied more in depth in the next section.

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Maturity Period (1990–2015) By 1990 the discipline of media management and economics had been fully established in Europe: the number of scholars and the diversity of interests and research methods have grown in a very significant manner. Most international communication associations have a strong presence of European scholars within their economics and management sections. Three schools of thought or areas of interest have been clearly settled: media management, media economics, and political economy of communication. Two key events will have a vital influence in the period. From the political point of view, the fall of Berlin wall in 1989 meant the end of the communist bloc. As a result, a new group of researchers from the Eastern European countries emerged. On the other hand, from the market perspective, the Old Continent started a process of deregulation of its audiovisual industry, which generated a great interest among policy makers, citizens, and investors but also among researchers. The collapse of the communist regimes in Europe had two main effects: first, media scholars all over the world paid attention to the quick transition from state-owned media outlets to private ownership in newly free market societies. In addition, the old communist system vanished like a house of cards and the countries concerned did not have any investors or entrepreneurs with the knowledge and the capital required to take over the old media firms. In some way, Eastern Europe was, in 1990, a unique laboratory to study how media behave during an accelerated transition from communism to capitalism. The second effect was the emergence of a promising group of researchers from the countries under former Soviet influence. Some of them had leading positions in departments or schools of communication and at the same time were involved in the transformation of private or public companies. They joined boards of public service corporations or worked as consultants for private media firms. Because of that, and perhaps also as a way to forget about the communist indoctrination, most of them had a pragmatic and descriptive approach. Galik (1997) studied the presence of foreign capital in the Hungarian media market. Jakubowicz and Sükösd (2008) undertook several comparative studies of all Central and Eastern European countries ( Jakubowicz always emphasized that his native Poland was in Central Europe, not in the East). Huber (2006) carried out a similar task. The most frequent concepts included in those pieces of research were media in transition, new ownership structures, transformation of firms, and integration in the European market. From a market point of view, the deregulation of the audiovisual industry changed the predominant interests of researchers on media management from print media to broadcasting. During the previous period, European scholars identified the differences between the American press system, based on the dominance of small local newspapers which used to have monopolistic positions, and the European press model, characterized by regional or national titles in oligopolistic markets. In a similar way, in this period the main comparison was about the television industry. In Europe, broadcasters had a strong bargaining power against producers, while in America it was the other way around (Artero, 2008). Moreover, European state-controlled broadcasters had more than one third of national market share, while PBS accounted for less than 3% of the American television audience market. Some scholars were concerned with the dangers of media concentration and tried to assess how to make growth strategies of media firms and the public interest compatible (Sánchez-Tabernero, 1993; Pilati, 1993, 2000; Wolf, 1999; Doyle, 2002; Faustino, 2004; Artero, 2009). Other monographs dealt with management of radio firms (Prado, 1981), movie studios (Creton, 2001; Gates, 2002; Buquet, 2005), or television companies (Dunnett, 1990; Gambaro & Silva, 1992; Richeri, 1993; Dematté & Perretti, 1997; Bustamante, 1999; Medina, 2005).

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A variety of handbooks about media management were published, which shows the maturity of the field. Some authors, after contributing abundantly in academic journals, decided to answer broader questions, like: What is so special about media management? What are the key strategic decisions in communication markets? What are the main competitive advantages in the media and entertainment industries? Those were the basic goals of textbooks like those published by Nieto and Iglesias (1993), Heinrich (1994), Herscovici (1994), Población and García-Alonso (1997), SánchezTabernero (2000), Galik (2001), Doyle (2002), Picard (2002), Aris and Bughin (2005), Nieto (2006), Scholtz (2006), Caro (2007), Aguado, Galán, Fernández-Beaumont, and García (2008), Deslandes (2008), Küng (2008), De Mateo, Bergés, and Sabater (2009), Vukanovic and Faustino (2001), Wirtz (2011, 2015), and Lowe and Brown (2016). At the same time, two more issues became popular: the future of public broadcasting and the effects of the Internet. Public service television was a useful way to balance the commercial logic in the market. But the launching of new private channels in all European countries—more than 100 each year from 1990 to 2000—caused a decrease in PBS’s audience. Public channels faced the risk of becoming almost irrelevant. As a result, the key question was whether PBS should protect its ratings by programming content targeted to the general public or if, on the contrary, they should focus on culture, education, and other programs that were complementary to the most popular content. Fernández Alonso, and Santana (2000), Moragas and Prado (2000), Manfredi (2004), and Lowe and Bardoel (2007), among others, analyzed such dichotomies. After 1996, the Internet was the most disruptive phenomenon changing the rules of the game in communications markets and, logically, it captured the attention of academics. First, scholars pointed out the weakening of barriers to entry, because it made it possible for each citizen to become a content provider (Zerdick, 2000; Lauf & van der Wurff, 2005; Albornoz, 2007; Rojo, 2008; Wirtz, 2011; Nienstedt, Russ-Mohl, & Wilczek, 2013). The strengthening of the field of media management and economics in Europe was possible thanks to the excellent work of a growing number of researchers. But, on top of that, some departments or schools played a leading role. Those academic institutions gave continuity to the scholars’ efforts, funded research projects, sponsored conferences and workshops, launched masters and doctoral programs, and fostered interest in the topic among professors and students. One of the pioneering institutions was the European Institute for the Media (EIM), located in the University of Manchester. Under the direction of George Wedell, the EIM conducted policyoriented research. It pointed out that any action by policy makers should be based on an in-depth understanding of legal, technological, and managerial aspects of the media industry.The EIM’s media monographs were very influential during the 1980s and 1990s because they addressed relevant challenges in the whole European media market. The Departments of Media Management of Turku School of Economics and Jonköping International Business School played a relevant role too. They had a person in common: Robert Picard, who was a “bridge” between the United States and Europe, founded both research groups. Before arriving in Europe, Picard had been the founder of the Journal of Media Economics and had published his seminal book, Media Economics: Concepts and Issues, in 1989. His international prestige and his ability to build teams were very useful for the development of the field, first in Turku and after 2013 in Jonköping and at Oxford University later on. The University of Navarra was also one of the first academic institutions in Europe that paid attention to the managerial and economics aspects of media. The leading figure was Alfonso Nieto, a visionary scholar whose purpose was to understand how media companies would create competitive advantage in the future. Nieto has published papers and monographs since the late 1960s. He was the supervisor of 23 doctoral dissertations about media management in Navarra and created one of the most dynamic research groups in the field.

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Other departments were also very active and have created strong teams, publishing in top communication journals. Gabriele Siegert was a key figure at the University of Zurich and HeinzWerner Nienstedt in Mainz. Peter Goodwin and Charles Brown were the leaders at the University of Westminster, and Gillian Doyle at Stirling, until she moved to Glasgow. Lucy Küng fostered the research area in Saint Gallen and Ghislain Deslandes at the ESCP Europe in Paris. Other relevant academic institutions were the Hamburg Media School, which launched a master’s program in media management in 2004, and Saarbrucken University in Germany, following similar experiences of Westminster, Saint Gallen, Navarra, and Stirling. The maturity of the field in Europe fostered the launch of the International Journal on Media Management in 1999 in Saint Gallen (although the editorial offices moved to New York) and the Journal of Media Business Studies in Jonköping in 2004. One year before, the European Media Management Association (EMMA) was founded in Brussels. EMMA is a not-for-profit academic organization that supports research and teaching in the field and organizes an annual international conference and a summer school for young scholars. Conferences and seminars promoted by EMMA and other academic institutions gave birth to several international projects with the participation of researchers from a big variety of European countries. That was the case for three influential books: the Handbook of Media Management and Economics, edited by Albarran, Chan-Olmsted, and Wirth, in 2006, Media Economics in Europe, edited by Heinrich and Kopper, also in 2006, and Managing Media Firms and Industries, edited by Lowe and Brown, in 2016. A clear evolution took place from the beginning of the 1990s from the point of view of research methods. Most journals, papers, and monographs were focused on providing empirical evidence through quantitative methods.They were already used in the past, but the novelty during this period was that the case studies or the more descriptive pieces of research lost impact. Scholars and editors of academic journals consider that surveys and other market analyses based on hard data have more value than those based on in-depth interviews, focus groups, and other qualitative techniques. Of course, the methods used have a strong influence on the topics studied and the research questions: the predominance of quantitative research during the last decades has caused the popularity of media economics and media market analysis over management of media companies. In other words, most researchers in Europe are paying a lot of attention to what is happening in the market not only because of the uncertainty generated by disruptive technologies but also because it is relatively easy to measure. However, they are not providing enough valuable insights into how to create barriers to entry, how to identify new business models, or how to design better competitive strategies.

Research Agenda for the Next Decade After more than half a century of study and research, media management and economics has become a mature discipline in Europe. A growing number of scholars are paying attention to the field, which is challenging both because of the impact of disruptive technologies in the industry and also because it deals with interdisciplinary issues. In addition, the most relevant problems and controversies are analyzed through a big variety of research methods, which provide rich and complementary insights. On top of that, the end of the communist regimes in most Central and Eastern European countries has expanded geographical frontiers: more market-oriented economies have been added to the European media landscape. However, many questions about media management and economics remain unanswered. New risks and opportunities appear on the horizon, particularly concerning the effects of globalization of media and entertainment companies and markets, and several mistakes of the past should be corrected, like some dogmatic proposals which are contradicted by empirical evidence. In fact, the age of

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maturity allows for walking new paths, discovering new territories, and searching for new approaches and perspectives. The first challenge refers to the research’s lapse of time. The majority of academic papers try to discover and describe what is going on today in a given market. Such coincidence of focus happens because of the methodological feasibility of the research: it is easier to measure the present than to compare the evolution of a given phenomenon across the years. In this context, the step further lies in undertaking more diacritical and prospective studies. Diacritical analysis requires more sets of data, and prospective studies are based on complex qualitative research. But both frames are complementary and they add value to the predominant synchronic studies. A similar problem takes place with the geographical scope of most pieces of research: many scholars are comfortable dealing with their local or national markets and quite frequently they avoid looking into other countries because they do not know the media system in depth. Sometimes they do not understand the language, and they may not be able to find the right sources. This trend has been aggravated by the collapse of the European Institute for the Media, which was the main promoter of comparative studies at the European level during the 1980s and the 1990s. A possible solution is to create groups of scholars from different countries who study the same issue with the same sources and research methods across several national markets. On the other hand, in some way, European scholars should go back to the past and remember that one of the reasons behind the field’s development was its interdisciplinary nature. In the beginning, the mix of different sciences was a need. Media management and economics lacked the required substance and knowledge to survive alone. Now the accumulation of a variety of backgrounds is not compulsory but it adds high value to the field. Until the 1990s, most big research projects were undertaken by groups of experts in the field who worked with lawyers, economists, psychologists, and political scientists. Such richness of perspectives should grow—and not decrease—adding new disciplines to teams. Neuroscientists may help to explain consumption decisions, engineers may provide clues about digital entrepreneurship, experts in fashion, design, and aesthetics may suggest new ways to present the content of media, and philosophers may help to identify the effects of news and entertainment in society and firms’ duty to behave with social responsibility. From the methodological point of view, there is room for improvement concerning theoretical approaches, quantitative and qualitative skills, and reliability of sources. Good theory leads one to ask the relevant questions for firms, citizens, and society at large. Good research methods are essential to find empirical evidence, to validate previous hypotheses through reliable facts and well-reasoned arguments. This scientific approach implies discarding arbitrary speculation or repetition of a priori judgments. Good sources are crucial to differentiate relevant information from unsubstantiated opinions. In fact, the hybrid nature of media management and economics is particularly appropriate to merge deductive, inductive, and descriptive methods. It is also an appropriate field to mix quantitative analysis and more conceptual approaches. Finally, some challenges refer to the most promising areas of study. All of them deal with two great topics: (1) evolution, problems, threats, and opportunities in news and entertainment markets and (2) media firms’ sustainability of competitive advantages in a context of uncertainty and growing level of competition. Without any goal of exhaustiveness, we suggest ten topics that are becoming as complex as they are relevant.

Quality Factors of Media Content How to make compatible the firm’s editorial purpose (identity), with respect for professional benchmarks (quality), with adaptation to consumer demands (appeal)

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Consequences of Changes in Ownership of Media Outlets and Groups Several factors deserve researchers’ attention. The evolution from family-owned firms to public corporations favors transparency and professionalism but it also gives priority to short-term goals. On the other hand, an increasing number of citizens have become providers of content on the Internet but they do not have any professional criteria and some not-for-profit institutions have launched news media to avoid the pressure of commercial interests.

Management of People Media firms are changing the logic of the past, which followed the “model of the assembly line” to the logic of the “learning organization”, in which every employee contributes with his or her talent, knowledge, relationships, creativity, and innovative spirit.

Effects of Digitization and New Technologies The success of the Internet and other new ways to spread news and entertainment content has consequences for media firms. It increases efficiency but it also allows the existence of more rivals in the market. New technologies also have an important impact on society, which has more access to a big variety of sources of information, but at the same time, it may create a gap between the citizens who have digital skills and those who are left behind.

Market Concentration The number of content providers has grown exponentially in Europe. In spite of that, some markets are highly concentrated, particularly those which have network effects (like search engines or social networks) and those which have big economies of scale as it happens in the entertainment economy. Good research could find ways to make the citizens’ rights and the firms’ search for profits compatible.

Identification of New Business Models The two basic sources of income of media—direct payment of consumers and traditional advertising— have decreased because more outlets fight for a “piece of the pie.” As a result, new revenues should be discovered: premium-pay-content, personal services, sponsorship, conferences and executive education, and e-commerce. Media companies unable to reach a high level of resources will decrease the attractiveness of their offers and may become irrelevant for consumers.

The Discovery of New Barriers to Entry, Which Are Needed to Avoid Never-Ending “Price Wars” Some barriers of the past have lost their effectiveness, like economies of scale or production and distribution capacities. Researchers should study how to build up new intangible barriers, like brands, knowledge, relationships, teamwork, creativity, and innovative spirit.

The Use of Big Data and Information About Consumer Behavior to Produce and Market More Targeted Content Digital technology makes it possible to know the habits and preferences of each user. It also favors the elaboration and distribution of products and services adapted to personal needs. 60

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Advertising Management In the past, advertising was based on rigid formats (TV or radio commercial breaks, magazine or newspaper ads) addressed to audiences who could decide only if they wanted to listen or read messages. Nowadays, one-way communication is not tolerated; instead dialogue is compulsory. Everybody feels that he or she has the right to answer and to give his or her opinion. Therefore, media outlets should find innovative solutions which are able to capture the attention of the audience and foster a true conversation between advertisers and users.

Corporate and Business Strategies Adjusted to a Multi-platform Environment Media and entertainment firms should use a universe of devices, many of them mobile, to distribute a large variety of content that is required both for private firms and for state-owned corporations. Each platform determines the content’s characteristics.Therefore, in this context, research should be based on an understanding of consumer demands, technological advances, and managerial implications. In summary, many challenges appear on the horizon for the growing number of European scholars who work in the field of media management and economics. Progress will be arduous because research projects need to use rigorous methods as well as interdisciplinary lenses. The rewards will also be relevant. New discoveries will have a positive impact on society and empirical evidence will foster markets’ freedom, empowerment of citizens, technological innovations, quality and variety of content, employment opportunities, social responsibility of firms, and effective commercial communication.

References Aguado, G., Galán, J., Fernández-Beaumont, J., & García, L. J. (2008). Organización y gestión de la empresa informativa (Organization and management of media companies). Madrid: Síntesis. Albarran, A. B. (2006). Historical trends and patterns in media management research. In A. B. Albarran, S. ChanOlmsted, & M. O.Wirth (Eds.), Handbook of media management and economics (pp. 3–21). Mahwah, NJ: Erlbaum. Albarran, A. B., Chan-Olmsted, S., & Wirth, M. O. (Eds.). (2006). Handbook of media management and economics. Mahwah, NJ: Erlbaum. Albornoz, L. A. (2007). Periodismo digital: los grandes diarios en la red (Digital journalism. The big newspapers on the Internet). Buenos Aires: La Crujía. Aris, A., & Bughin, J. (2005). Managing media companies: Harnessing creative value. New York: John Wiley. Artero, J. P. (2008). El mercado de la televisión en España: oligopolio (TV market in Spain: oligopoly). Barcelona: Deusto. Artero, J. P. (2009). Corporate governance and risk identification in global media companies. Pamplona: Ediciones Universidad de Navarra. Artero, J. P. (2012). Development of media economics as an academic field through its seminal books. In M. McCombs & M. Martín Algarra (Eds.), Communication and social life: Studies in honor of professor Esteban LópezEscobar (pp. 55–76). Pamplona: Ediciones Universidad de Navarra. Artero, J. P., & Sánchez-Tabernero, A. (2011). Economía y empresa de comunicación (Media management & media economics). In J. Cantavella & J. F. Serrano (Eds.), Enciclopedia de la comunicación (Encyclopedia of communication) (pp. 374–491). Madrid: CEU. Barwise, P., & Ehrenberg, A. (1988). Television and its audience. London: Sage. Bertrand, C-J. (1966). The British press: An historical survey. Paris: OCDL. Bordwell, D., Staiger, J., & Thompson, K. (1985). The classical Hollywood cinema: Film style & mode of production to 1960. New York: Columbia University Press. Buquet, G. (2005). El poder de Hollywood: un análisis económico del mercado audiovisual en Europa y Estados Unidos de América (The power of Hollywood: economic analysis of European and American audiovisual markets). Madrid: Fundación Autor. Bustamante, E. (1999). La televisión económica: financiación, estrategias y mercados (The economics of TV: financing, strategies and markets). Barcelona: Gedisa. Caro, F. J. (2007). Gestión de empresas informativas (Management of media companies). Madrid: McGraw-Hill.

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Juan Pablo Artero and Alfonso Sánchez-Tabernero Coase, R. H. (1950). British broadcasting: a study in monopoly. London: Longman. Conesa, F. (1978). La libertad de la empresa periodística (Freedom in newspaper firms). Pamplona: EUNSA. Creton, L. (2001). Economie du cinema (The economics of film industry). Paris: Nathan. De Mateo, R., Bergés, L., & Sabater, M. (2009). Gestión de empresas de comunicación (Management of media companies). Sevilla: Comunicación Social. Dematté, C., & Perretti, F. (1997). L’impresa televisiva (The TV firm). Milano: Etaslibri. Deslandes, G. (2008). Le management des médias (Management of media companies). Paris: La Découverte. Doyle, G. (2002). Understanding media economics. Thousand Oaks, CA: Sage. Dunnett, P. (1988). The world newspaper industry. London: Helm. Dunnett, P. (1990). The world television industry: An economic analysis. London: Routledge. Engwall, L. (1978). Newspapers as organizations. Farnborough: Enzensberger Saxon House. Faustino, P. (2004). A imprensa em Portugal: transformações e tendencias (The press in Portugal: changes and trends). Lisboa: Media XXI; Formalpress. Fernández Alonso, I., & Santana, F. (2000). Estado y medios de comunicación en la España democrática (The State and the media in democratic Spain). Madrid: Alianza. Galik, M. (1997). Evolving the media market: The case of Hungary. Budapest: Budapest University of Economic Sciences. Gambaro, M., & Silva, F. (1992). Economia della televisione (The economics of TV). Bologna: Il Mulino. Gates, R. (2002). Production management for film and television (3rd ed.). Oxford: Focal Press. Gianelli, E. (1953a). Cinema Europeo (The European movie industry). Rome: ICAS Edizioni dell’Ateneo. Gianelli, E. (1953b). Indagine di mercato sul cinema in Italia 1950–1953 (A study about the Italian movie market 1950–1953). (1953). Rome: ICAS Edizioni dell’Ateneo. Gianelli, E. (1956). Economía cinematográfica (The economics of the film industry). Rome: Reanda. Heinrich, J. (1994). Medienökonomie (Media economics). Opladen: Westdeutscher Verlag. Heinrich, J., & Kopper, G. G. (Eds.). (2006). Media economics in Europe. Berlin:Vistas Verlag. Herscovici, A. (1994). Economie de la culture et de la comunication (The economics of culture and communication). Paris: Harmattan. Höyer, S., Hadednius, S., & Weibull, L. (1975). The practice and economics of the press: A developmental perspective. London: Sage. Huber, S. (2006). Media markets in central and Eastern Europe: An analysis on media ownership in Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia. Berlin: Lit Verlag. Jakubowicz, K., & Sükösd, M. (Eds.). (2008). Finding the right place on the map: Central and Eastern European media change in a global perspective. Bristol: Intellect Books. Klingender, F. D., & Legg, S. (1937). Money behind the screen: A report prepared on behalf of the Film Council. London: Lawrence  & Wishart. Küng, L. (2008). Strategic management in the media. London: Sage. Lange, A., & Renaud, J. L. (1989). The future of the European audiovisual industry. Manchester: The European Institute for the Media. Lauf, E., & van der Wurff, R. (2005). Print and online newspapers in Europe: A comparative analysis in 16 countries. Amsterdam: Het Spinhuis. López-Escobar, E. (1978). Análisis del “nuevo orden” internacional de la información (Analysis of the “new world order” of communication). Pamplona: Ediciones Universidad de Navarra. Lowe, G. F., & Bardoel, J. (Eds.). (2007). From public service broadcasting to public service media. Göteborg: Nordicom. Lowe, G. F., & Brown, C. (Eds.). (2016). Managing media firms and industries: What’s so special about media management? Berlin: Springer. Manfredi, J. L. (2004). La televisión pública en la transformación del estado de bienestar (Public television and the evolution of the welfare State). Sevilla: Instituto Andaluz de Administración Pública. Medina, M. (2005). Estructura y gestión de empresas audiovisuales (Market anaysis and management of television). Pamplona: Ediciones Universidad de Navarra. Mercillon, H. (1953). Cinéma et monopoles (Monopolies and the movie industry). Paris: Armand Colin. Moragas, M. de, & Prado, E. (2000). La televisió pública a l’era digital (Public TV in the digital era). Barcelona: Pòrtic. Nienstedt, H. W., Russ-Mohl, S., & Wilczek, B. (Eds.). (2013). Journalism and media convergence (Vol. 5). Berlin, Boston, MA: Walter de Gruyter. Nieto, A. (1967). El concepto de empresa periodística (The concept of newspaper company). Pamplona: Universidad de Navarra. Nieto, A. (1973). La empresa periodística en España (The newspaper company in Spain). Pamplona: Ediciones Universidad de Navarra. Nieto, A. (1984). La prensa gratuita (The free newspapers). Pamplona: Ediciones Universidad de Navarra.

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Research in Europe Nieto, A. (2006). Economia della comunicazione istituzionale (The economics of corporate communications). Milan: Franco Angeli. Nieto, A., & Iglesias, F. (1993). Empresa informativa (Media companies). Barcelona: Ariel. Nordenstreng, K. (2008). Institutional networking: The story of the International Association for Media and Communication Research (IAMCR). In D. W. Park & J. P. (Eds.), The history of media and communication research: Contested memories (pp. 225–248). New York: Peter Lang. Picard, R. G. (1989). Media economics: Concepts and issues. London: Sage. Picard, R. G. (2002). The economics and financing of media companies. New York: Fordham University Press. Picard, R. G. (2006). Historical trends and patterns in media economics (pp. 23–26). In A. B. Albarran, S. ChanOlmsted, & M. O. Wirth (Eds.), Handbook of media management and economics. Mahwah, NJ: Erlbaum. Pilati, A. (Ed.). (1993). Media industry in Europe. Milano: MIND Institute Media Economics. Pilati, A. (2000). Il mercato dei media in Italia (Media markets in Italy). Milano: Hoepli. Pinillos, P. J. (1975). La empresa informativa: prensa, radio, cine y televisión (Media companies: newspapers, radio broadcasting, film and TV). Madrid: Ediciones del Castillo. Población, J. I., & García-Alonso, P. (1997). Organización y gestión de la empresa informativa (Organization and management of media companies). Madrid: CIE-Dossat 2000. Prado, E. (1981). Estructura de la información radiofónica (News radio broadcasting). Barcelona: ATE. Richeri, G. (1993). La TV che conta: televisione come impresa (The TV that matters: TV as a business). Bologna: Baskerville. Rojo Villada, P. A. (2008). Modelos de negocio y consumo de prensa en el contexto digital (Business models and newspaper readership in the digital context). Murcia: Universidad de Murcia. Servicio de Publicaciones. Sánchez-Tabernero, A. (1993). Media concentration in Europe. Industrial needs and the public interest. Manchester:The European Institute for the Media. Sánchez-Tabernero, A. (2000). Dirección estratégica de empresas de comunicación (Strategic management of media companies). Madrid: Cátedra. Schmidt, G., Schmalenbach, W., & Bächlin, P. (1948). The film: Its economic, social and artistic problems. London: Falcon Press. Scholtz, C. (2006). Handbuch Medienmanagement (Handbook of media management). Berlin: Springer. Sterling, C. H., & Haight, T. R. (1978). The mass media: Aspen Institute guide to communication industry trends. Bellmay, NJ: Praeger. Tallón, J. (1981). Empresa y empresario de la información: temas para un curso de empresa informativa (Media companies and managers: issues for a course on media management). Madrid: Dossat. Toussaint, N. (1978). L’économie des medias (Media economics). Paris: Presses Universitaires de France. Tydeman, J., & Kelm, E. J. (1986). New media in Europe: satellites, cable,VCRs and videotex. New York: McGraw-Hill. Vejanouski, C., & Bishop, W. D. (1983). Choice by cable: The economics of a new area in television. Lansing: Institute of Economic Affairs. Vukanovic, Z., & Faustino, P. (Eds.). (2001). Managing media economy, media content and technology in the age of digital convergence. Lisbon: Media XXI. Wirtz, B. W. (2011). Media and internet management. Wiesbaden: Gabler. Wirtz, B. W. (2015). Business Model Management: Design – Instrumente – Erfolgsfaktoren von Geschäftsmodellen (5th ed.). Wiesbaden: Gabler. Wolf, M. J. (1999). The entertainment economy: How mega-media forces are transforming our lives. London: Penguin. Zerdick, A. (Ed.). (2000). E-conomics: Strategies for the digital marketplace. Berlin: European Communication Council; Springer.

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5 MEDIA MANAGEMENT AND ECONOMICS RESEARCH IN ASIA Jaemin Jung and Youngju Kim

Asian Media Market Environment In recent decades, the Asian media industry has been dramatically transformed as a result of several factors. Following the economic success of Japan and the so-called Four Asian Dragons—Hong Kong, Singapore, South Korea, and Taiwan—the two largest developing countries—China and India—are thriving internally and with respect to the global markets. New growth opportunities in South Asian countries, such as Vietnam, Indonesia, and Malaysia, are also receiving attention from the world economy. The region’s economic growth has changed the patterns of world trade, including the soaring media trade within Asia and between Asian countries and the rest of the world (International Trade Association, 2016). As a media content originator and disseminator, Asian countries’ influence has increased. For example, China’s Wanda Group became the world’s largest cinema chain operator by acquiring U.S. cinema chain AMC Theatres, Australian cinema chain Hoyts, and the UK’s Odeon & UCI Cinema Group. Wanda also acquired U.S. film studio Legendary Entertainment, maker of blockbuster hits, such as Jurassic World and the Dark Knight trilogy. South Korea has emerged as a major exporter of popular culture. First driven by the spread of K-dramas and K-pop across East, South, and Southeast Asia, the Korean wave—the so-called Hallyu—evolved from a regional development into a global phenomenon, gaining popularity in Europe and North and South America ( Jin & Yoon, 2017). Digital technologies, social media, and mobile devices have rapidly expanded throughout Asia, particularly in East Asia and in some countries in Southeast Asia. These technologies have transformed the production, distribution, and consumption of news and entertainment and have yielded an increase in new platforms and players. Asian countries have their own search engines, social networking platforms, and messaging services that surpass even the global giants, such as Google and Facebook. For example, although Google dominates the world’s market share as a search engine, China’s Baidu and Korea’s Naver account for approximately 80% of their domestic search engine market share, beating Google (Stat Counter, 2017; Korea Times, 2017, April 23). Asia’s regional messenger apps—WeChat in China, Line (originated in Korea) in Japan, and KakaoTalk in Korea—are leading their respective national markets. New Asian players in the digital world are also noticeable in video streaming services. Iflix, as a Netflix alternative, was launched in Malaysia and the Philippines in 2015 and offers local programming and Hollywood hits to its subscribers in 18 territories across Asia, the Middle East, and North Africa ( Jarvey, 2017). Viu, the multi-territory streaming service

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operated by Hong Kong’s PCCW, is producing original shows for the Chinese, Indian, and Southeast Asian markets (Erater, 2017). Although most East Asian countries enjoy high-speed broadband connectivity, placing them in the highest-ranking group in the world (Statista, 2017), Internet penetration rates of less developed Asian countries, such as Pakistan, Bangladesh, Sri Lanka, Myanmar, Cambodia, Laos, and TimorLeste, are approximately or less than 10%—much lower than the average rate of the rest of the world (Internet Live Stats, 2016). A wave of deregulation and privatization ignited the change in the structure of the traditional media industry and gave rise to new marketplaces for media products and services in Asia. However, strong nonmarket forces still create extra complexity for both researchers and practitioners when analyzing the Asian media market (Ho & Fung, 2016; Kim & Park, 2004). Despite drastic changes in the media environment and heterogeneity among Asian nations in terms of economic power, population, market size, culture, laws and regulations, and technological infrastructure, Asia is still treated as one unit and not much attention has been paid to the Asian media market except for in a few developed East Asian countries. In this chapter, the scope of Asia follows the customary division of Asia into the South, the Southeast, and the East. Oceania and parts of the Asian continent that belong to the Middle East and the former Soviet Union are excluded. Yet, the remaining area covers 26 countries inhabited by more than 4.1 billion people, or 56% of the world population as of January 2017 (Worldnometers, 2017).1

Media Management and Economics Research Trends in Asia The United States is the undisputed pioneer and headquarters of communication research. Europe as a whole represents the second center of communication research activities and hosts such activities in various forms. Apart from these two camps, Asia is a gradually rising “third force” in the field of communication research (So, 2010). Nonetheless, communication and media studies on Asia have been far less publicized in the English-language literature than studies on the United States and European countries. In particular, studies on economic and managerial approaches to the media industry have been far less prevalent and are poorly understood. The dominance of the United States and Europe is also applicable to the field of media management and economics (MME) research. The United States has been leading media economics since the launch of the Journal of Media Economics ( JME). Europe has become the center of media management research with the initiation of two journals: the International Journal on Media Management (IJMM) and the Journal of Media Business Studies ( JOMBS). Although Asia may still be behind the United States and Europe in terms of the size and maturity of its research community, the region should not be overlooked given both the increasingly active role its scholars are playing and its growing economy and global influence (So, 2010). In general, scholarly research interest in the media industry is not a recent trend in Asia. Extant research involving the political economy throughout the 1970s and 1980s addressed the cultural industry as an important research field (Hang, 2006). However, the history of research concerning microeconomic theories and quantitative methodologies is relatively short. Furthermore, managerial research that explores the role of the media firm as a financial institution is a rather recent trend. Given the growing richness and scale of the Asian media market and the growth of MME scholarship, the research field is rapidly evolving. A set of Asian scholars interested in MME as an approach to explain the media market have developed academic communities. For example, the Korea Media Management Association, the Media Economics & Management Division at the Korean Society for Journalism & Communication Studies, and the Broadcasting Management & Marketing Division at the Korean Association

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for Broadcasting & Telecommunication Studies exist in Korea. In China, the Chinese Committee for Media Economics and Management Research (CCMEMR), a national association for media economics and management scholars, was created. Asian media scholars also held global conferences on MME—evidence of the rising interest in this field. The 7th World Media Economics Conference was held in Beijing in 2006 and the International Media Management Academic Association Conference was held in Korea in 2016. According to research that reviewed 1,257 media economics studies, international journals, domestic articles, books, and conference papers in China have increased exponentially over time. In the 1980s, 178 articles appeared, a figure that tripled to 519 in the 1990s. During the four-year period since 2000, 560 studies were conducted (Hang, 2006). In 2003, South Korea launched the Journal of Media Economics & Culture ( JMEC), which—although it publishes broad topics on the media—aims for a core platform of media economics research in Korea. According to a meta-analysis of three major Korean journals, including the JMEC from 2003 to 2007, 118 out of 760 articles were published on media economics, which accounted for 15% of all published articles ( Jung, 2008). The previous meta-review studies on media economics in Asia indicate greater interest by scholars and a surge in demand for research on the economic issues raised by media industries. However, these studies are outdated, written in the local language, and more focused on media economics. In addition, one study was limited to an examination of research in China and another was confined to research in Korea. To paint a more accurate picture of MME research in Asia, it is necessary to review more studies published in English journals, including not only on media economics but also on media management research, by analyzing theoretical and methodological approaches.

Analysis of MME Research in Asia This chapter reviews articles published in the Journal of Media Economics ( JME; 1988–2016), International Journal on Media Management (IJMM; 1999–2016), and Journal of Media Business Studies ( JOMBS; 2004–2016) that focus on Asian countries and regions. Additionally, we analyze the research on MME as published in the Asian Journal of Communication (AJC; 1990–2016). Domestic journals of each Asian country were not analyzed given the limited scope of research and the language issue, which renders them inadequate in the international database.Thus, it should be noted that this chapter is written for an English-speaking readership and better represents how studies of Asian media markets are reflected in journals published in English.

Selection of Articles Because three journals ( JME, IJMM, and JOMBS) publish research on managerial and economic issues, articles on Asian countries are obvious. Although the AJC publishes articles targeting Asian countries, the journal covers all perspectives on communication and media. Thus, we cautiously approached selecting articles in the AJC that focus on MME. Regarding whether an article fits under MME, we most seriously considered the theoretical orientation, relevance of the topic, object of analysis, and implications of the research. The methodological tools, the data, and their relevance to MME were also considered. Additionally, we paid attention to the literature cited and how much of it relates to MME. On the basis of the criteria, first, articles adopting economic and management theories, such as the industrial organization model, the home market effect, niche theory, the resource-based view, and a firm’s strategy—diversification, M&A, investments, or pricing—were clearly selected for the analysis. Although adopted theories do not originate from economics and management but from communication theory, such as diffusion of innovation, when economic or marketing features work

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as critical factors of the study, they were included for analysis. Any article utilizing communication theories and investigating the impacts of financial news on the stock market, public opinion, or managers’ decision making was also included. Second, certain topics such as policy making or the cultural impact on the media market are appropriate to count as media economics research; however, greater effort was devoted to determining whether a topic should be included as MME research. Articles focusing on competition and the pricing of telecommunication and media policies were included. Papers examining the impacts of Western content on local market competition and changes in local firms’ programming were also included. However, a study that was more inclined to a government’s telecommunication political development planning, act, or law was not included as a target of analysis. Papers analyzing the broadcasting and film industry from the perspective of cultural imperialism were not included. In other words, the political economy of media as a form of critical inquiry is not within the scope of this chapter. In the analysis of the four journals, MME research on Asia is depicted by the number of articles (volume), country, target industry, level of analysis, applied theory or framework, methodology, data collection, time frame, and author nationality. To ensure inter-coder reliability, the authors of this chapter discussed and carefully selected articles together, coded each category respectively, and compared the results. For disagreements, we reached a consensus through ongoing discussions.

Volume of MME Research As Table 5.1 shows, in the four journals, there are 125 articles on Asian MME issues. In the JME, 44 (11.8%) out of a total of 374 articles were devoted to the analysis of Asian countries, excluding editor’s notes and short commentaries. In the IJMM, there were 20 (6.9%) out of 291 articles on Asia. In the JOMBS, 11 (5.9%) out of 188 articles were devoted to Asian countries. In the AJC, 50 (9.1%) out of 557 articles addressed managerial and economic phenomena in Asia. Overall, in the four journals, 125 out of 1,404 studies published during the analysis period explored media management and economic issues in Asian countries. In sum, articles on MME in Asian countries account for 8.9% of all publications. Regarding the number of MME studies on Asia over time, a gradual increase is observed during the analysis period. After the launch of the JME in 1988, no articles that focused on any Asian country were published for more than ten years. In 1999, Sussman (1999) wrote a paper titled “Who Speaks for Asia: Media and Information Control in the Global Economy,” and noted that East and Southeast Asia have become regional production platforms for the manufacture of Western media and information commodities, primarily driven by transnational institutions. Immediately after Sussman’s work, articles on Asian media markets emerged in the JME. An analysis of the volume of

Table 5.1 Volume of MME research in Asia: 1988–2016. 1988–1990 1991–1995 Total Asia JME 30 IJMM JOMBS AJC 6 Sum 36

0(0)

Total Asia 63 0(0)

1996–2000 Total Asia

2001–2005 Total Asia

2006–2010 Total Asia

2011–2016 Sum Total Asia

74 23

1(1.4) 77 13(17.8) 59 13(22.0) 71 17(23.9) 374/44(11.8) 0(0) 110 4(3.6) 80 12(15.0) 78 4(5.1) 291/20(6.9) 14 2(14.3) 74 5(6.8) 100 4(4.0) 188/11(5.9) 1(16.7) 73 8(11.0) 72 10(13.9) 72 5(6.9) 124 12(9.7) 204 14(6.9) 551/50(9.1) 1(2.8) 136 8(5.9) 169 11(6.5) 273 24(8.8) 337 42(12.5) 453 39(8.6) 1404/125(8.9)

Parentheses = percentage of Asia-related MME articles out of all articles published in that time period.

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research on Asian countries in five-year units shows an apparent increase in the number and proportion of Asian media market papers compared with all articles published during the period. Only 1 (1.4%) out of 74 articles was published during 1996–2000, and this figure increased to 13 (17.8%) out of 77 during 2001–2005. There were 13 (22.0%) out of 59 during 2006–2010, and 17 (23.9%) out of 71 papers during the most recent period of 2011–2016. Articles on Asia first appeared in the IJMM in 2002, three years after the journal launched. Gershon and Kanayama (2002) analyzed Sony’s transnational media management strategy, and 4 (3.6%) out of 110 articles on Asian countries were published during 2001–2005. This figure increased to 12 (15.0%) out of 80 articles during 2006–2010 but declined to 4 (5.1%) out of 78 articles during the next period. The first article on Asia in the JOMBS appeared in 2005 right after the journal’s launch in 2004. Lan and Xu (2005) explored how development in provincial satellite television was altering competition and television firms’ strategy in China. Although two studies were devoted to Asian countries, they accounted for 14.3% out of 14 articles published in the JOMBS during 2001–2005. The number of articles on Asian countries increased to five (2006–2010) and four (2011–2016), but accounted for just a limited portion (6.8% and 4.0%) of the total articles published during these periods. In the AJC, the first article to explore the issue of the Asian media market appeared in 1990. In a longitudinal analysis of the coverage of international news in Taiwan, the authors examined the economic dependency of Taiwan on foreign countries as a decisive factor in news coverage (Tang & Chan, 1990). During each of the next five-year periods, although the proportion was low and there was not much variation in each period, the number of managerial and economics articles on Asian countries seemed to increase. Overall, in the JME, although there was an apparent increase in articles on Asian countries, other journals did not show a critical increase. Nonetheless, the total number of articles on the Asian media market in the four journals increased from only 1 to 8, 11, 24, 42, and 39 in each five-year period. This gradual increase indicates that the interest in media economics and management issues in Asia has been growing (Table 5.1).

MME Research by Country or Region This chapter analyzed 125 articles published in four journals. For cross-country comparison studies on more than two Asian countries, each country was coded respectively. For example, in a study on how newspapers connect with audience communities, the authors compared the cases of Finland, Japan, and Korea (Villi & Jung, 2015). Although it is a single article, we coded Japan and Korea separately. Thus, the number of observations in the country analysis is 140 cases. Overall, among 26 countries in East, South, and Southeast Asia, a total of 12 countries appeared in the publications. A closer look at the countries reveals that four of them accounted for the majority share of all MME research in Asia: China, Japan, South Korea, and Taiwan. Research on these four countries or their people is most prominent. South Korea was the most frequently researched country, appearing 43 times (30.7%). Following South Korea, Taiwan appeared 26 times (18.6%), China including Hong Kong appeared 25 times (17.9%), and Japan appeared 16 times (11.4%). In sum, research that focused on the four countries accounted for 80% of all articles.2 Nine cases (6.4%) covered Asian regions or countries in general rather than a specific country. After the big four comes another group of countries with active research: Singapore (6 times; 4.3%), India (5 times; 3.6%), Thailand (4 times; 2.9%), and Indonesia (3 times; 2.1%). The final group of countries that appeared in research at an even lower frequency includes Malaysia, Bangladesh, and Sri Lanka. Each of these three countries appeared only once in the journals. The remaining countries are inactive in MME research in the four journals. It should be noted that the research on five

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countries—Thailand, Indonesia, Malaysia, Bangladesh, and Sri Lanka—appeared only in the AJC. In other words, the countries appearing in the three MME journals are limited to six: South Korea, Taiwan, China (Hong Kong), Japan, Singapore, and India.

MME Research by Industry The broadcasting, newspaper, and film industry are found to be the major areas for MME studies in Asia. The broadcasting industry, including terrestrial TV/radio, cable, and satellite systems, was most frequently analyzed in Asian contexts, accounting for 43 articles (34.4%). Following broadcasting, newspaper and film are the second most frequently appearing industries, accounting for 21 studies (16.8%). Articles covering the three industries accounted for almost 70% of all articles. In other words, seven out of ten articles published in the four journals dealt with the broadcasting, newspaper, or film industry. In particular, the JME has more publications in the broadcasting (38.6%) and film (29.5%) industries compared with the three other journals. Research on advertising/public relations (6 articles; 4.8%), the Internet (5 articles; 4.0%), telecommunication (5 articles; 4.0%), and music (3 articles; 2.4%) followed the three largest areas. Only one article covered research on the game industry with a managerial perspective. Eleven articles (8.8%) covered the media industry in the Asian market in general rather than focusing on a specific media industry. Despite the emerging trend on social media as a research topic, only one comparative study analyzed the profits and financial market values of Chinese and U.S. social media (Fuchs, 2016).

MME Research by Level of Analysis In terms of level of analysis, we tracked whether a study was conducted along the dimensions of individual (producer/consumer), firm, industry, or country. The firm level was the most frequently studied (39 articles; 31.2%), at which scholars have explored the strategies of media firms. Following the firm level, studies were conducted at the individual level (33 articles; 26.4%) and at the industry level (32 articles; 25.6%). The remaining articles were devoted to the country level (20 articles; 16.0%). Overall, studies are fairly distributed among diverse levels. Although the JME has more articles that focus on the general media industry competition, almost half of the IJMM and JOMBS articles tackled the issues at the firm level. Twenty-five percent of the JME articles were devoted to the country level, but only three such articles existed in the IJMM. Given the nature of the JOMBS, no study was conducted at the country level in that journal. Regarding the individual-level analysis, 24 out of 32 articles were conducted with an audience analysis and focused on consumption. Only eight articles were devoted to analyzing the perception or features of individuals, such as news reporters working for media firms on the production side.

MME Research by Applied Theory or Analytical Framework Various economic, management, and other theories were used to explain the media market phenomena in Asia. Although some papers apparently adopted theories, such as industrial organization economics, the home market model, the resource-based view, niche theory, or game theory, others introduced some concepts as a basis of research and described previous related research. The industrial organization model is most frequently adopted as the theoretical framework to examine the relationship between market structure, competition, and media performance. Twenty articles (16.0%) were conducted on the basis of the industrial organization approach. For example, some studies examined the relationship between market structure, competition, programming (content) diversity, and customer satisfaction in diverse contexts, such as Taiwan’s TV market (Li, 1999;

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Li & Chiang, 2001; Li, Liu, & Chen, 2007) and newspaper market (Lee, 2007), the Korean multichannel video programming industry (Hong, Lee, & Hwang, 2011; Rhee & Lee, 2010), terrestrial TV programming diversity in Korea (Lee & Youn, 1995; Park, 2005), the Chinese TV market (Yuan, 2008), and TV program diversity in Indonesia (Lau & Atkin, 2012). Theories related to the international film trade, such as home market effects and cultural discounts, were adopted in eight studies (6.4%). The diffusion of innovation covering adoption, resistance, or diffusion was also frequently used (7 articles; 5.6%). Studies adopting the niche theory as a framework appeared five times (4.8%). Other studies utilized frameworks such as the resource-based view, game theory, the principle of relative constancy, the survival model, and others. However, the use of those frameworks is very limited in terms of volume. Although 29 studies (23.2%) focused on firm strategy, it is difficult to clarify the theory applied. Similarly, some articles challenging regulation and policy issues did not adopt explicit theories.

MME Research by Methodology We reviewed the methodology used in each article published in the four journals. Broadly, the methodology was categorized as a quantitative, a qualitative, and a mixed approach. First, the quantitative approach was ahead of the qualitative approach in terms of methodology used in MME research in Asia. Eighty-two out of 125 (65.6%) adopted quantitative methods and 39 articles (31.2%) used qualitative methods. Only three articles (2.4%) combined quantitative and qualitative approaches, and one paper was a critical review of economic research on the Asian media market. Although the JME is more inclined to a quantitative approach given the nature of economic research, the JOMBS has more articles with a qualitative approach. Thirty-six out of 44 articles (81.8%) published in the JME and 4 out of 11 articles (36.4%) in the JOMBS adopted quantitative methods. Meanwhile, the IJMM has ten quantitative and nine qualitative articles. In the AJC, the number of quantitative articles (32; 64.0%) was twice that of the qualitative articles (16; 32.0%).

Quantitative Research by Data Collection Methods The quantitative methodology was more specifically coded as a survey, an experiment, secondary data analysis, mathematical modeling, or quantitative content analysis. In the case of using multiple data collection methods, each method was coded respectively.Thus, although 82 articles used a quantitative approach, the total number of data collection observations was 95. Those who conducted quantitative research to study MME on Asia most often relied on secondary data. Half (49.5%) of the quantitative research collected data throughout secondary sources. In particular, 70% of the JME articles utilized secondary data for their research. Obtaining secondary data from firms, commercial organizations, industry associations, or governmental or international agencies is comparatively inexpensive, can be done quickly, and is of high quality (Beam, 2006). Following secondary data gathering, the survey was the second most frequently used method to collect data, taking up 30.5% of quantitative methods. Although the total number of published articles was not large, 70% of the quantitative research in the IJMM and 50% of the quantitative studies in the JOMBS used the survey method to collect data. Meanwhile, secondary data (14 cases; 37.8%) and survey (12 cases; 32.4%) were used almost equally in the quantitative research published in the AJC. The quantitative content analysis method was used in 16 (16.8%) out of 95 cases. Two quantitative studies conducted interviews with managers to collect additional data and quantitatively coded the dialogue. In a study on the effects of ownership concentration in Taiwan’s cable television industry, following the questionnaire survey, Chen (2002) employed personal interviews with presidents, managing directors, or financial managers of cable system

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operators to acquire additional data. In another study that examined the advertising revenue gap between China’s party and mass-appeal newspapers (Huailin & Zhongshi, 1998), the authors conducted a content analysis of advertisements and administered interviews with 20 managers of 12 provincial-level party newspapers. Interview recordings were transcribed and the content was analyzed in a quantitative manner. There was only one modeling approach done without an empirical examination. Ho and Sun (2008) proposed a game-theoretic model to analyze the strategic reaction of the newspaper market incumbent to a tabloid-like entertainment newspaper entrant and its impact on the industrial structure by modifying Judd’s multiproduct competition model (1985), considering the property of heterogeneous competition in the Taiwanese newspaper market. Meanwhile, no study conducted an experiment or another quantitative method to collect data.

Qualitative Research by Data Collection Method The qualitative methodology was divided into focus group interviews, one-to-one in-depth interviews, observations, action research, and others. Regarding the data collection in the qualitative research, 13 out of 39 qualitative research articles published in the four journals conducted in-depth interviews with experts in diverse media industries. In fact, all 39 qualitative articles collected data from secondary data, which seemed to be quantitative data collection. However, different from quantitative data for statistical analysis, the data used in the qualitative studies were primarily from press reports, including the news media, trade magazines, and academic publications, such as books and journals. Firms’ revenue or market share changes over time are included in the article as descriptive explanations. Except for the one-to-one in-depth interviews, other qualitative methods, such as focus group interviews (FGIs), participatory or nonparticipant observations, reflective filed notes, or pictures for data gathering, were not used at all in the 39 qualitative studies. Meanwhile, three studies combined quantitative and qualitative methods to collect data. For example, Bohley (2010) examined country-of-origin effects in a bookstore competition in Singapore using diverse methods. She conducted open-ended interviews with individuals associated with Singapore’s print industry and government. To triangulate the interviews and participant observations, she further conducted a survey of college students. Lee (2006) explored the relationship between partners in joint ventures by studying MGM Network’s entry into the Korean market. She examined the effectiveness of the release strategies of the major Hollywood studios using a correlation analysis and four-year data on 267 Hollywood films distributed in South Korea. Additionally, in-depth interviews were conducted to analyze major Hollywood distributors in South Korea, such as 20th Century Fox, Paramount, and Buena Vista South Korea, a Disney subsidiary. Another study combined a consumer survey with an in-depth interview to understand the cable industry in Taiwan (Li, Liu, & Chen, 2007). Because data were not publicly available, they conducted intensive interviews with firms’ managers and industry experts to collect information on customers and market competition. Additionally, a telephone survey was administered to measure subscribers’ satisfaction.

Case Study Research Design The case study approach is common in media management research because the unit of analysis is often the organization or the firm (Doyle & Frith, 2006). Gaining an in-depth understanding of how an industry works does not necessarily mean researching a large number of cases. Case studies tend to be associated with qualitative research because qualitative data collection methods are common in such studies. However, case studies can also use quantitative data as part of either multimethod or

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single-method research that relies on solely such type of data (Beam, 2006). Indeed, a case study or a comparative case study is not a method but a research design (Hollifield & Coffey, 2006). As a research design, we speculated on whether the research was a study of a single or of multiple cases in a certain country, or cross-country comparative cases. Eleven articles tackled singlecase issues, such as China’s media market after WTO entry (Lin, 2004) or Sony Corporation’s transnational media management (Gershon & Kanayama, 2002). Another 11 studies analyzed multiple cases for comparison purposes: party and mass-appeal newspapers in China (Guo, 2001), competitive strategies for the internationalization of CNNI and BBC World (Shrikhande, 2001), or market-entry strategies of four Western publishing houses in China (Strube, 2010). Fifteen studies conducted cross-country comparative case studies: the effects of recession on advertising expenditures (Picard, 2001), cultural diversity in the movie industry (Moreau & Peltier, 2004), competition in satellite broadcasting (Sohn, 2005), the impact of regulatory changes on cable market performance (Schejter & Lee, 2007), a comparison of the audience measurement system (Taneja & Mamoria, 2012), newspaper firms’ audience community building (Villi & Jung, 2015), and mobile news diversity (Dwyer, 2015). Interestingly, only 2 out of 15 cross-country case studies made comparisons between Asian countries. Lin and Liu (2011) compared market trials of mobile broadcasting TV in Singapore and Taiwan. Another cross-country comparison study between Asian countries was the investigation of four Asian countries’ (Hong Kong, South Korea, China, and Japan) news apps (Dwyer, 2015). Except for two studies, other cross-country studies compared one or two Asian countries with countries in other regions. The most frequently compared country was the United States, which appeared in 11 out of 13 studies. Following the United States, the United Kingdom and France appeared six times; Germany, Italy, and Finland were compared in four studies; and Spain, Sweden, and Australia followed at three times. Twenty other countries in Europe, North America, and South America were compared one or two times with Asian countries in diverse media industry contexts.

MME Research by Time Frame Approach Regarding the timeframe of the research, the cross-sectional study was ahead of the longitudinal research. Approximately 60% of MME articles on Asia were cross-sectional studies, which explored phenomena in the media industry at a certain point in time. In particular, the cross-sectional study accounted for 80% of the articles on Asia in the IJMM, and more than 60% of the articles in the JOMBS and the AJC. Meanwhile, 60% of articles in the JME on the Asian media market were longitudinal studies. However, it should be noted that most studies categorized as having a longitudinal time frame collected data on firm, industry, or country over time, but explained the change in revenues, market share, penetration rates, and others in a descriptive manner. Only a few studies utilized longitudinal panel data and conducted econometric statistics.

MME Research by Author Nationality Because a set of scholars is an essential part of an academic field, we review the authors of MME articles on Asian countries to determine the contribution of Asian scholars.3 Ninety-eight (78.4%) out of 125 articles were written by Asian authors. Seventeen (13.6%) articles were coauthored by Asian scholars and non-Asian scholars. As expected, Asian scholars worked with non-Asian scholars in cross-country comparison studies on the impacts of cable TV policy change in Korea and Israel (Schejter & Lee, 2007), the film trade in the United States, Europe, and Japan (Lee & Waterman,

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2007), an assessment of the newspaper audience community in Finland, Japan, and Korea (Villi & Jung, 2015), and the work motivation of journalists in Taiwan and the United States (Chang & Massey, 2010). Meanwhile, only ten articles (8.0%) were written by non-Asian scholars. There was not much variation by journal: almost eight out of ten articles were written by Asian scholars in three journals—the JME, the IJMM, and the ACJ. Only the JOMBS has fewer articles by Asian scholars (54.5%) and a higher percentage of co-works (36.4%) between Asian and non-Asian scholars.

Lessons From the Meta-Review We reviewed three journals covering MME issues, selected articles on Asian countries, and analyzed the theoretical and methodological aspects of the studies. Additionally, articles focusing on MME published in the AJC were analyzed. The results from the findings presented show the gradual progress of MME research in Asia. After the launch of the JME, studies on any Asian country were not found for the first ten years. Although not drastic, the number of studies on the Asian media industry has increased gradually. In particular, one out of four or five articles published in the JME in the most recent ten years represented research on economic issues of Asian countries. Overall, in the four journals reviewed in this chapter, at least more than one article focusing on managerial and economics issues of the Asian media market has been published almost every year.

Skewed Scope in Country, Industry, Sector, and Theories Considering the increase in MME research on Asia, the scope of the analyzed countries is quite limited.The big four in East Asia—China (including Hong Kong), Japan,Taiwan, and South Korea— take up almost 80% of Asian MME research. Overall, only 11 countries appeared in the analyzed journals. If we count articles in the three MME-focused journals, only six countries (the aforementioned big four, India, and Singapore) were targets of the research. The remaining five countries (Bangladesh, Indonesia, Malaysia, Sri Lanka, and Thailand) appeared only in the AJC. The analyzed target industry was also skewed into three sectors. Almost 70% of the articles explored issues in the broadcasting, newspaper, and film industries in Asia. This result might have occurred because of the provision of reliable and consistent data for these industries. Despite the flourishing academic interest in games, mobile, and social media, only a limited number of studies have been conducted on the issue of MME on Asian countries. In terms of level or dimension of analysis, firm level was slightly ahead of other levels, such as individual, industry, and country. However, out of 32 articles analyzing the individual level, 24 of them were conducted to understand media consumers. Only eight studies were devoted to exploring the perception or behavior of individuals working on the production side. All economic and managerial theoretical perspectives can enrich and deepen the discipline of MME in Asia. However, the findings from the meta-review of studies on the Asian media industry in this chapter revealed that the discipline is still far from achieving the goals suggested by previous studies, suggesting the use of diverse economics and management theories (Albarran, 2004; Fu & Wildman, 2008; Küng, 2016; Lacy & Niebaur, 1995). Only a limited number of economic and managerial theories have been used in analyses of the media industry in Asian countries. As a single framework, the industrial organization model was most frequently and obviously used as a basis of research. Following the IO model, the home market model with a cultural discount, the diffusion of innovation, and niche theory was frequently adopted as a framework. A group of studies used the firm’s strategy as a foundation of that research; however, most studies on strategy were more descriptive explanations with certain concepts rather than adopting theories to examine hypotheses.

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Lack of Diverse Methodological Approaches and Rigorous Statistical Analysis In terms of methodology, the number of articles using quantitative methods (65.6%) was double that of those using qualitative research (31.2%). Meanwhile, only three studies used both quantitative and qualitative methods together. Regarding data collection, although some studies collected data in multiple ways, the most frequently used method was to gather data from secondary sources. Data collection from surveys, in-depth interviews, and content analysis followed. Participatory observation was used in only one study. No study conducted experiments or used other quantitative methods to collect data. In fact, this is not only an issue with MME research in Asia. Previous studies analyzing 309 articles published in the JME and the IJMM for 15 years after the launch of the JME also revealed that the experiment was used only in two studies and field or participant observation was least used (Beam, 2006; Hollifield & Coffey, 2006). A review of articles on the Asian media industry in the four journals revealed statistical problems as well. Given the nature of economics research, more than 60% of the published articles used quantitative approaches. In particular, 36 out of 44 (82%) papers published in the JME used quantitative methods. Moreover, more than 40% of the published articles collected data over time. In the case of the JME, the number of studies using longitudinal data reached 60%. Although most studies ran a regression analysis, they explored single equation models with a single dependent variable and more than two explanatory variables. However, in many situations, such a one-way or unidirectional cause-and-effect relationship is less meaningful. Even worse, many studies did not articulate the issue of autocorrelation between members of series of observations ordered in time (as in time series data) or space (as in cross-sectional data). Admitting that the goal of the studies was not the precise modeling of any event, such as box office or advertising revenues, but rather the examination of the relationship between conceptual phenomena, the problem of endogeneity should still be considered.

Looking Ahead: Suggestions for Future Research Asia as a Content Originator and Distributor Studies published in the four journals mostly addressed the media trade between the United States and any Asian country. Empirical affirmation of the home market model in general offers implicit support for the theory that cultural discounts of U.S. films exist in the Asian market. It should be noted that these studies followed a line of research that treats the United States as a producer and people in Asia as consumers. However, Asian countries also have their own media content production industries that are on the rise. Significant intra-regional trade of media content exists among Asian countries. Furthermore, Asian countries also started to spread their content, such as movies, TV dramas, music, and games, to the rest of the world. By not simply exporting programs but also selling full packages of show formats, Asian countries enhanced the brand power in the global media industry. “Better Late Than Never” is an American reality-travel series that airs on NBC and that bought the remake rights for the South Korean series Grandpas Over Flowers from CJ E&M, one of the largest media and entertainment groups in Asia. In terms of comparative case studies exploring the similarities and differences among firms/industries in other regions, these studies are mostly confined to a comparison between an Asian country and the United States or a few European countries. Only two studies compared the phenomena between Asian countries. Considering increased media trade among and the heterogeneity of Asian countries, more attention should be given to comparative case studies among Asian countries. Thus, it is necessary to elaborate on models that explain the media trade within Asia or predict the success

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factors or comparative advantages of Asian content in other regions. Investing a serious amount of time in building theories and frameworks that are more appropriate in the Asian context, rather than simply applying Western-originated theories to examine Asian phenomena, is highly recommended.

Overcoming Disciplinary Fragmentation As aforementioned, the industrial organization model was primarily adopted to explain the managerial and economic phenomena in the Asian media industry. Research based on industrial organization economics defines the scope of the market and competitors within a certain industry (i.e., broadcasting, film, or newspaper). However, competition is not happening within a certain industry. Because the same media content is consumed in diverse digital platforms and strong Asian media players are prospering, the traditional demarcation of the media industry must be redefined. It is necessary to extend the scope of the newspaper, broadcasting, or film industry to new distribution channels, such as the Internet or the mobile platform. More attention should also be given to social and mobile media in Asia. Considering Asia’s population and its growing economy, research on the economic characteristics of regional search engines and mobile and SNS services relative to global platforms might be valuable. Advanced high technology, such as the Internet of things (IoT), robots, drones, self-driving cars, virtual reality, augmented reality, and artificial intelligence (AI), will provide media scholars with new research opportunities. For example, a study compared the quality of a robot-written article with that of a human journalist’s work in South Korea and found that both the public and journalists gave higher scores to the robot’s work ( Jung, Song, Kim, Im, & Oh, 2017). It could be an opportunity for media companies to reinvent the news production system by generating news faster, at a larger scale, and with fewer errors. As such, new research opportunities are open to every region in the world. However, there might be different values and behaviors in the production and business operation of high technology in the Asian media market due to the different organizational culture and management system.The adoption or the resistance, the diffusion process, and the ethical quandary of media products utilizing high technology will also illuminate a different picture in Asia.

Elaborating on Cultural Values and Nonmarket Factors Most studies adopted theories and frameworks that were developed in Western countries and applied them to the phenomena of the Asian media market. Because MME research in Asia is still at a relatively early stage and is behind that of the United States and Europe in terms of quantity, the application of established Western-originated theories to the Asian phenomena might be meaningful from the aspect of generalization. However, considering the complexity and heterogeneity of the Asian context, building theories and frameworks that can better explain the Asian market is a necessary step to moving forward. For example, one study presented the theories of the ancient Chinese military strategist Sun Tzu and the philosopher Confucius, and illustrated how they have long been applied to marketing strategy (Chen & Wells, 1998). Associating ancient Chinese military and ethical philosophy with modern business competition enabled the presentation of a proper guide for those aiming at the markets in cultural China. From a cultural standpoint, a large number of articles conducted cross-country comparative studies, mostly between the United States or a few Western European countries and any Asian country. They assumed that cultural differences exist between Western and Asian countries without explicitly measuring cultural distance or difference. Moreover, people in different countries in Asia may perceive and act differently given their respective cultures. In contrast, digital technologies might also plausibly dilute the different patterns of consumption caused by cultural differences. Thus, it is

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necessary to delve more precisely into cultural differences and similarities to improve the understanding of the Asian media industry. It should also be noted that understanding nonmarket factors is critical to understanding the Asian media market. Despite the economic progress, liberalization, and privatization of the media industry, market forces are not always the major determinants of what happens in the industry and with policy making in Asia. Nonmarket forces, such as politics or tradition, can exert a far stronger influence on what goes on in Asian media institutions, making Asian cases the more exciting and, at the same time, more complex cases of media markets to understand (Kim & Park, 2004). Thus, additional questions about how media economics and management can resolve nonmarket issues, such as government interventions in explaining the market behavior in Asia and to what degree, should be asked.

Case Studies With Diverse Methods and Multiple Countries One of the highest barriers to testing theories and applying multivariate statistical tools in Asian MME research is the collection of reliable and consistent data. Even basic data, such as paid circulation, advertising price, market share, revenues, and production costs, are mostly confidential, resulting in a lack of reliable quantitative measures. However, widespread use of digital media enables scholars to utilize more reliable data by tracking consumer or firm behavior on diverse platforms. Although we admit the value of quantitative analysis, strategic decisions are not always made on the basis of data analysis but, many times, on managerial cognition. Hence, relying on interviews with industry practitioners and information through observations can be more effective in management studies. Many insights from management research, in particular when less tangible resources were involved, could be explored only using a case study approach and observations of the effects of otherwise unobservable, idiosyncratic effects on business strategy (Chan-Olmsted, 2003; Godfrey & Hill, 1995; Lockett & Thompson, 2001). In fact, a number of articles conducted a qualitative case study on an Asian country. However, they typically presented an analysis of the overall performance of a certain firm or industry, providing a historical analysis only using a literature review and desk research. Without a doubt, in-depth interviews or FGIs with core members of firms, industry, or government and participatory observations provide a more vivid picture for understanding the nature of the Asian media market.

Building Asian Scholars’ Research Community Unfortunately, the academic world is centered on English-language journals. Although this chapter reviewed all articles in the four journals on the media industry of Asian countries, they were all published in English. Thus, domestic MME studies written in each Asian local language are missing. There is no doubt that plenty of domestic journals also publish MME issues in Asia, and their findings would reveal a more concrete picture. In fact, it is a very difficult task to examine all of the different journals published in different languages, let alone identify the journals that publish high-quality research. Although this was not our initial objective, we suggest that attempting to collaborate with local scholars in each Asian country (or even a select number of countries, such as the big four) and conduct analyses of journals published in local languages using comparable quality criteria might be worthwhile. Each country would have a specific evaluation method, such as indices or rankings. We also expect more active research to reveal the inherent nature and the characteristics of not only economically developed Asian countries but also less developed ones to increase the explanation power in Asian media markets. Given the accumulation of MME studies in Asian countries, we could find

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similarities and differences in the media market dynamics not only among Asian countries but also between Asia and other regions. In conclusion, research on MME in Asia is relatively young. However, we have witnessed a gradual increase in the related research on the Asian media industry in both the number of publications and the development of the academic community. The prospering economy of Asia, technological development, the widespread nature of Asian media content, and newly emerged regional players together provide new research opportunities for scholars researching the Asian media market. Based on a meta-review of articles on Asian MME research in the four journals, and suggestions for future research, we hope that scholars and practitioners engage in more serious investigations of the Asian media industry.

Notes 1 The 26 countries are as follows: 8 countries in East Asia (China, Japan, South Korea, North Korea, Taiwan, Hong Kong, Mongolia, and Macao); 7 countries in South Asia (India, Pakistan, Bangladesh, Nepal, Sri Lanka, Bhutan, and Maldives) belong to the South Asian Association for Regional Cooperation (SAARC); and 11 countries in Southeast Asia (Indonesia, Philippines, Vietnam, Thailand, Myanmar, Malaysia, Cambodia, Laos, Singapore, Timor-Leste, and Brunei Darussalam). Among them, ten countries except for East Timor (Timor-Leste), which separated from Indonesia in 1999, belong to the Association of Southeast Asian Nations (ASEAN). Out of the 26 Asian countries, how many countries and how often they have been analyzed with regard to MME are investigated in this chapter. 2 Interestingly, the research focusing on Korea, China, Taiwan, and Japan accounted for 80%. However, it is difficult to determine whether the four markets were of interest to media scholars or whether the researchers had access and the ability (language and otherwise) to conduct research in those countries. Another question is why Japan appeared infrequently relative to the three other major Asian countries. Do scholars have less interest in the Japanese media market? Otherwise, we assume that Japanese scholars have weaker incentive to publish in an international journal relative to Korean and Chinese scholars. 3 Although we relied on the author’s last name as a clue to identifying his or her nationality, doing so can be misleading in several cases, such as surnames that were changed after marriage or second-generation Asian Americans. Thus, we also relied on our personal information about the author and considered his or her previous and current affiliations. Nonetheless, we admit that it is necessary to interpret the nationality of the authors with caution.

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6 MEDIA MANAGEMENT AND ECONOMICS RESEARCH IN LATIN AMERICA Challenges and Opportunities for Scholars in the Field María Elena Gutiérrez-Rentería Introduction Writing about studies in media economics and media management in Latin America is not an easy task, but it is an exciting one given the richness of the region, represented by natural resources, young people, and sociocultural values shared between countries that characterize this part of the American continent. This study is informed by contributions from academics from the perspective of economics and media entrepreneurship in these countries. These works allow us to know and to delve into the characteristics of the media industries that exert great influence on the information and entertainment offered to society, and are important for the economic, political and social development of the region. This study follows Albarran, who defines media economics as the “study of how media firms and industries function across different levels of activity in tandem with other forces, and social aspects using theories, concepts, and principles drawn from macroeconomic and microeconomic perspectives” (Albarran, 2017, p. 3). Albarran emphasizes viewing these studies through a holistic lens (Albarran, 2017), an opinion shared by Godoy (2016). In this research, academic studies carried out on strategic media management are also relevant (Nieto & Iglesias, 2000; Sánchez-Tabernero, 2000). Of special interest are studies that reflect the management behavior of the organization to adapt their business models and to make the economics of the company more efficient, as well as to develop effective strategies to help them compete in the market, expanding both in the domestic region and in foreign markets. The chapter consists of four parts. The first discusses characteristics of the Latin American macroeconomics environment. The second part deals with the microeconomic background of the telecommunications industry and media companies in the most important markets. The third part details studies carried out on media economics and media management in the region. The fourth part presents areas of opportunity for scholars in Latin America and offers a future research agenda.

Macroeconomic Environment in Latin America There are shared social and cultural values in ​​ these Latin American countries that are different from the Anglo-Saxon world.The region is diverse with respect to the system of government, the political

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environment and the economic situation of the various countries. Knowledge of the Latin American market is very useful for understanding the media system and the studies carried out on the industry. To understand the region better, it is necessary to provide a brief overview of its historical origins. Most of the countries in Latin America achieved their independence from Spain, Portugal or France during the nineteenth century. The respective wars of independence were accompanied by armed conflicts against viceroy authorities, as well as against loyalists. Beginning in the first three decades of the twentieth century, the Hispanic-American region was characterized by a liberal economic model, until the crisis caused by the economic depression of the 1930s. From 1930 to 1960, the region was distinguished by a greater participation of the state, and the beginning of populist policies. The years 1960–1980 were characterized by a close relationship between political sectors linked to the power structure, and entrepreneurial groups-—the development of military governments and the retreat of the state. The 1980s and 1990s stand out as the beginning of different democratic movements, the increase of poverty and the presence of neoliberal policies in some countries, like Argentina, Chile and Mexico (Marino, Mastrini, & Becerra, 2010). These two decades are also distinguished by the opening of political systems to democracies, although the military presence remains strong and some political parties weaken. Finally, from the 1990s, the effects of globalization can be observed through the opening of markets, and the liberalization and deregulation of industries. Much has been written about the Latin American problem and its historical aspects, but no specific political system defines this region of the American continent. Dallanegra-Pedraza (2003) describes the characteristics of the political system of the region during the decades after World War II. These are state interventionism, protectionism, nationalist and “nationalizing” attitudes, and the growth of social and labor laws.The same author points out that the liberal or conservative sectors— depending on the case—could accede to the government only by means of the famous coups d’etat. Since 1989, the reduction of state participation and development of neoliberal policies were among the political trends. Most Latin American countries began to experience greater political stability after 1990, though there is still a heterogeneous scenario within the region. Crisafi (2014) points out the reality of the social economic crisis provoked by neoliberalism, low partisan institutionalization and the emergence of new personalist leaderships in Argentina, Bolivia, Ecuador, Peru and Venezuela. These differ from high partisan institutionalization in some countries, such as Uruguay, Chile and, to a lesser extent, Colombia, Brazil and Paraguay. Currently, Latin America and the Caribbean are made up of 33 countries of the American continent and the population in Latin America is close to 626 million (Eclac, United Nations, 2016a). Brazil and Mexico account for 53% of the population of Latin America, while Colombia, Argentina, Peru,Venezuela, Chile, Guatemala and Ecuador account for 33% of the population. The continent is young. Approximately 34.5% of the total population is between 15 and 34 years of age, while 27.8% is made up of children and adolescents between 0 and 14 years of age.The EclacUnited Nations estimates that in 2020, the child and adolescent population will be 24.1% and the population between 15 and 34 years of age will be 32.3% (Eclac-United Nations, 2016a). The opening of international markets and globalization has contributed to the growth of Latin America. The region was considered an emerging economy with positive growth during the final years of the twentieth century and the first years of the twenty-first century, resulting from the rise of raw materials, internal reforms and the growing world economic environment (World Bank, 2016). However, growth in the region has also declined in recent years due to the global economic crisis. The largest economies are those belonging to South America, led by Brazil, and to North America, represented by Mexico (Wainer & Belloni, 2016). These countries show degrees of industrialization, but are based on the export of primary products and their derivatives. On the other hand, the

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ten most competitive countries of the region are Chile, Panama, Costa Rica, Mexico, Colombia, Peru, Uruguay, Brazil, Ecuador and Guatemala (World Economic Forum, 2015). Latin America also stands out for having diverse political environments. In some countries, populist policies remain, while neoliberal policies predominate in other countries. Some of the issues of greatest concern in the area of ​​socioeconomic development in the region are the concentration of wealth and, hence, social inequality; the international economic crisis; Latin America and China relations; the industrialization of the region; confidence in institutions; the development of the financial system; the development of physical infrastructure; the increase of the educational level of the population, including the professional training of the labor force, as well as greater innovation of the private sector (Benavides, 2012; Fajnzylber, Guasch, & López, 2008; Ortigoza, 2016). The use of digital technologies and Internet penetration are increasing. The number of average households connected to the Internet in the region is 43.4% as of 2015 (Eclac-United Nations, 2016b). Despite this, more than half of households still do not have access. The region is also characterized by inequality between countries. For example, Nicaragua, Cuba and Haiti had a penetration rate of less than 15% in 2015, while other countries range between 15% and 45%. The countries with the highest Internet penetration are Argentina, Panama, Paraguay, Chile and Costa Rica.

Media and Telecommunications Industries in Latin America: Background The history of the communications and telecommunications industry is different for most Latin American countries because of the macroeconomic and microeconomic circumstances of each country. The concentrated market structure of the Latin American media is due to political, economic and market forces. For example, contrary to the United States, in Mexico there was no effective legislation to avoid the development of an audiovisual monopoly, such as Grupo Televisa (GutiérrezRentería, 2010b, 2011a, 2011b). None of the rules established in the United States was adopted in Mexico until the first half of the 1990s. On the other hand, the very nature of the audiovisual industry led to the development of a market monopoly, due to the scarcity of broadcast signals and to the elevated fixed costs of broadcasting (Gutiérrez-Rentería, 2001). Reig (2011) claims that the trend in Latin American groups resembles the United States and Europe in regards to the types of synergies, acquisitions, concentration of the industry and capital diversification.The author concludes that entrepreneurial politicization is much more explicit in Latin America than in either Europe or the United States. Sánchez-Tabernero (2000) points out that political power favored the processes of concentration of communication companies in Latin America, as well as southern Europe. Latin America features concentrated market structures; the leading companies are distinguished by having dominated the domestic market for decades (Noam, 2016). Examples are the Mexican and Brazilian industries (Gutiérrez-Rentería, 2007; Moreira, 2016). On the other hand, traditional media companies are privately held firms with a family business origin; some actively participate in capital markets with a presence abroad as publicly held firms. Finally, the region is characterized by high consumption of entertainment through electronic media, mainly radio and commercial television, and a low level of literacy (Godoy, 2016; Gutiérrez-Rentería, 2001; Gutiérrez-Rentería & Santana, 2012; Mazziotti, 1996; Orozco, 2002, 2005). Other features that have distinguished the media system in Latin America are neoliberal policies and the constant intervention of the state through media policies. Guerrero and Marquez (2014) mention the challenges of discretionary practices and little enforcement of the law; Hughes and Lawson (2007) express a similar opinion.

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Central America (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama) has also been characterized by the dynamics established by the media industry, represented by family businesses, society and government. It features an oligopolistic market where private initiative has had to circumvent different political regimes (Salzman & Salzman, 2009). The Colombian media industry has had its own challenges, dealing with periods of violence, especially since the 1960s, when guerrillas and paramilitary groups were formed. This situation not only had repercussions in the form of insecurity and social instability but also affected the economy and the development of various industries (Arango-Forero, Gutiérrez, Forero, Valderrama, Prada, Barrera, & Reyes, 2009). Starting in the 1990s, the Colombian media industry also underwent a series of alliances, acquisitions and mergers between communication companies (Arango-Forero, 2012). Perhaps the most significant was the participation of foreign companies in the country. As in other countries, the Colombian press has historically been linked to political activity, and the companies with the highest market penetration participate in an oligopolistic market. The most important firms are family-owned businesses. Important media firms throughout the history of the Colombian media are Grupo Caracol, Organización Ardila and Radio Cadena Nacional (RCN). The case of Venezuela is different. Gibens (2009) points out that the various confrontations that have existed between Venezuelan presidents and information companies are directly related to the diversity of concepts that each of the presidents has had regarding social responsibility and the measures necessary to “protect” citizens and government administrations from opposition attack. The market structure of the media is also characterized by being concentrated, and is led by PhelpsGranier, Grupo Cisneros and Cadena Capriles. The 1990s also saw strategic alliances between media companies and different foreign capital communication groups. Deregulation and liberalization of the Bolivian market also occurred in the 1990s and foreign capital entered. The media industry in this country was characterized not only by the lack of confidence in the media but also by the increase in competition (Soruco & Pinto, 2009). Radio is the most popular medium in the region and the structure of the newspaper market is oligopolistic, run by family businesses. For its part, the newspapers and television sectors are the main sources of information and entertainment in Ecuador. This country is characterized by a media industry under the tutelage of private initiative and represented by almost ten national groups ( Jordan & Panchana, 2009). Some of them are Isaías Group, El Universo Group, Communications Group El Comercio, Fidel Egas Group and Alvarado Group. Jordan and Panchana (2009, p. 121) describe the environment of the industry: “The sector still maintains independence from the state, due to its historical development from private capitals . . . Still, as of 2007 the Correa government created a new media structure affecting radio, television and newspapers.” Chile is one of the most competitive economies in Latin America, open to international markets and returned to the democratic path in 1990. This country is small and the media industry is in the hands of a small group of entrepreneurs (Godoy, 2016). University-based television is the medium of greatest penetration and consumption and the most chosen by advertisers. The national press has a strong brand presence represented by about eight newspaper companies, with El Mercurio obtaining the highest circulation in the country (Benavides, Errázuriz, Kimber, Santa, & van Weezel, 2009). Authors Noam and Mutter (2016) point out Chile has the highest percentage of foreign investment in the media industry. Godoy (2016) characterizes the Chilean media industry as dynamic, marketoriented and open to foreign capital investment. The Argentine media industry was immersed in a restrictive environment between 1930 and 1980, due to the fluctuation between democratic and military governments of the country. Since 1990, the industry has experienced growth and consolidation traits (Silvestri & Vasolo, 2009; Albornoz, 2000).

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The Brazilian media industry had the same initial characteristics as the Mexican one, composed of a commercial audiovisual sector in the hands of few entrepreneurs led by Grupo Globo, a multimedia company with private capital and a dominant position it held for years. The media industry was immersed in a political and governmental environment in an authoritarian regime for almost 20 years (Caparelli & Dos-Santos, 2002). As in other countries, the internationalization of the industry and the consolidation of the national multimedia groups began in the 1990s (Moreira, 2016). Digital convergence and the opening of the telecommunications markets brought opportunities for some leaders from Latin America. For example, the Mexican companies, like Grupo Televisa and América Móvil, have been characterized by their presence in the Ibero-American telecommunications market (Gutiérrez-Rentería, 2014; Gutiérrez-Rentería & López, 2014; Kuhlmann, Robles, & Abdel, 2010; Noam & Mutter, 2016). Otherwise, entertainment through social networks is the main activity of Internet users (Katz, 2015). Katz points out that the availability of social networks in the local language facilitates high consumption, and also reflects the interests and culture of users in each country. According to Katz (2015) services such as medical appointments, online studies and interaction with government agencies are used less than entertainment services. Finally, advertising revenues across Latin America are concentrated among Argentina, Brazil, Chile, Colombia and Mexico. Traditional media accounts for more than 70% of advertising investment, with television the most popular among advertisers. In terms of digital and mobile advertising, Brazil, Argentina and Mexico are expected to lead in advertising expenditures through 2019.

Media Management and Economics Research in Latin America Most of the academic works on media economics in Latin America can be classified as within industrybased applied economics influenced by neoclassical economics. One also finds the critical tradition from the contributions of political economy and Marxist studies, according to the classification suggested by Albarran (2013b) and Picard (2006). Most academic studies related to media management can be classified within the modern school. According to Albarran (2016), the modern school of management considers both the macroeconomic and microeconomic variables of the industry, and is concerned with increasing organizational effectiveness.Table 6.1 shows the classification of the 120 studies related to the fields in Latin America that have been identified and reviewed carefully in order to meet one of the objectives of this chapter. Table 6.1 Main theoretical tradition of Latin American research in media economics and media management, 1983–2017. Tradition Applied

Critical

Institutional foundations Industry-based also influenced by neoclassical economics Marxist studies, British cultural studies, political economy

Level of analysis

Topics examined

Consumer, firm, market, industry

Structure, conduct, performance, spending, diversification, strategy

Nation-state, global

Ownership, power, policy decisions, social and cultural effects of media, globalization, welfare Total studies:

Number of studies 54

66

120

Source: Produced by the author according to criteria established by Albarran (2016, p. 21).

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Studies of Applied Media Management and Economics in Latin America The level of analysis of studies pertaining to applied economic theory is related to the consumer, the company, the market structure and the industry. In most of these studies, neoclassical economic theory is used to explain the behavior of some Latin American industries (e.g., Albarran & Hutton, 2009; Aldana & Vallejo, 2010; Arango-Forero, 2010; Benavides & Leiva, 2014; Gutiérrez-Rentería, 2007, 2001; Gutiérrez-Rentería & López, 2014; Gutiérrez-Rentería & Santana, 2013, 2010; Katz, Koutroumpis, & Callorda, 2013; Pis, 2008; Salzman & Albarran, 2011; Serrano, 2000; Trejo-Pech & Gutiérrez-Rentería, 2011). In some of these works, the authors have attempted to follow the basic academic contributions of neoclassical economics, such as the industrial organizational (IO) model, the theory of the firm, Porter’s five forces model, corporate finance and different theories pertinent to media entrepreneurship. These studies describe the competitive market as well as the environment in which they participate. Most of the research is empirically based. There are studies that clarify the link between applied economic theory and media management. These works have served (a) to explain the strategic action of some communication entrepreneurs according to macroeconomic analysis and microeconomic environment of the industry; (b) to explain the characteristics of their market products; (c) to add to knowledge of demand, from the point of view of the characteristics of either the various audiences or the advertisers (Arango-Forero, 2013; Arango-Forero, Arango, Llaña, & Serrano, 2010; Arango-Forero, Gutiérrez, Forero,Valderrama, Prada, Barrera, & Guzmán, 2009; Barrón, 2009; Benavides & Leiva, 2014; Benavides, Errázuriz, Kimber, Santa, & van Weezel, 2009; Gutiérrez-Rentería, 2007; Gutiérrez-Rentería, Rodríguez, & López, 2016; Katz, 2015; van Kranenburg & Hogenbirk, 2006; Medina & Barrón, 2010; Medina & GutiérrezRentería, 2008; Medina, 2014; Pis, 2008; van Weezel & Benavides, 2009; Wilkinson, 2015). In regards to media consumers, other studies identify the behavior of users regarding digital technologies and new habits of entertainment and access to information through mobile devices (e.g., Albarran & Hutton, 2009, 2013a; Benavides & Leiva, 2014; Gutiérrez-Rentería, Santana, & Pérez, 2016; Leiva, Benavides, Wilkinson, Gutiérrez-Rentería, & Santana, 2016; Túñez-López & GuevaraCastillo, 2011; van Weezel & Benavides, 2013). The following section describes the principal characteristic of media economics and management studies in Latin America. Gutiérrez-Rentería and Santana (2013) discuss the increase of both content supply and distribution channels in a convergent environment in Mexico.The authors present the main strategic actions taken by leaders of the Mexican communications and telecommunications market in a digital environment.They also identify the main characteristics that defined the traditional media in comparison with digital media (Gutiérrez-Rentería & Santana, 2013). Studies by Gutiérrez-Rentería (2007) analyze the competitive strategies needed to enter the audiovisual market in Mexico, characterized by a maximum level of concentration. The same author presents a case study of Grupo Televisa during the period 2003–2009, a time when the company was involved in implementing digital convergence. The study measures the economic performance of the company, using ratio analysis. Finally, Gutiérrez-Rentería (2010a) describes the structure of the Mexican media market facing the digital age, and the opportunities and weaknesses in the era of digital environment. In this study the author identifies the main strategic alliances between Mexican competitors and shows a new dynamic of the industry as a result of the different alliances between companies. A similar study by Medina and Barrón (2010) examines the globalization of the Latin American telenovela industry, as the main TV content product produced in the region. The authors detail the production and distribution of the main exporters of the genre, and the international influence that this segment has had in the emergence of new producers. Barrón (2009) examines the internal

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processes of the leading Mexican groups and their success in international markets. Medina (2014) analyzes the advertising industry in Mexico and points out that the Mexican advertising market is the largest in Latin America and is characterized by high levels of fragmentation, with users producing and consuming information and entertainment simultaneously. The study also shows that younger generations do not like to feel invaded by advertising. Pis (2008) applies economic theory to study the Argentine magazine industry, using macroeconomic and microeconomic environment variables to explain the sector. The study emphasizes the concept of a media company as initially defined by Nieto and Iglesias (2000). Arango-Forero and Bernal (2009) describe the younger television audiences in Colombia, and show the fragmentation of the audiences caused by multichannel consumption in the country. Arango-Forero (2013) analyzes the audiovisual media industry in Colombia through the competitive actions of Grupo Caracol and Radio Cadena Nacional (RCN). The study analyzes the management strategies behind the business model of both companies. Other examples of studies on media consumption include Benavides and Leiva (2014). The authors explore different factors driving local newspaper readers to buy, visit shops and look for additional information about products or services in Chile. On the other hand, van Weezel and Benavides (2013, p. 703) assess if different tactics employed by the media firm can increase audience engagement. Finally, van Weezel and Benavides affirm the results are helpful for managers who use social networks to improve relations between the media brand and its audience. Though these studies contribute to the study of media economics and media management in Latin America, there is still work to be done.

A Research Agenda for Latin America Scholars The following research proposals are suggested after analyzing the various industries in Latin America.This research should not be of merely academic interest; it should include studies which serve and are linked to the industry, considering the contribution academic scholars can make to the training of communication professionals. 1. Lack of information on media markets in Latin America. One of the main obstacles to the study of the media industry in Latin America is the difficulty in accessing information from official sources, or from the media firms themselves (Hughes & Lawson, 2007). Access to information on the region is easier or more difficult depending on local legislation, and political and social circumstances (Boas, 2013; Guerrero & Márquez-Ramírez, 2014; Lugo, 2008; Mastrini & Becerra, 2011; Repoll, 2010). A comparative study to show current public communication policies in each of the countries is needed. Two research questions could guide this project: What does the legislation say about information transparency that must be provided by media companies? What are the official institutions devoted to providing information to the media and what kinds of data are presented? Another proposal is joint work among government, industry and universities to create institutions or consortiums devoted to the construction of reliable databases in the region, as has been proposed by Albarran (2009). This would permit in some way comparative “cross-country” studies to help explain the dynamics of the industry by sector and would contribute to the use of consistent methodologies. 2. Case studies of the main traditional media companies in the region (the leaders from the beginning that are still active in their countries).

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Certain firms have been leaders in their respective domestic markets for many years, and continue to offer services in the region. Some examples are Grupo Globo (Brazil), the newspaper El Mercurio (Chile), Grupo Cisneros (Venezuela), Grupo Televisa (Mexico), América Móvil (Mexico) and TV Azteca (Mexico). These firms have also experienced success in international markets. More studies are needed that somehow reflect the strategic media management that companies require to enter the Latin American market, to remain and to expand their presence not only at home but also in foreign regions. Possible research questions include: How has the structure of the Latin America media market changed over time as measured by sector? What are the leading companies still active in their origin domestic market by sector? What are the strategic actions of Latin American media market leaders that have expanded their presence in other countries? Some theories of media economics that are applicable are game theory on models of oligopoly, and the industrial organization model. The study of the market structure allows one to understand if the company’s positioning is advantageous. At the same time, it can explain the effect of a leadership position or market domination on the company’s bottom line. Knowing the way participants compete in Latin America is useful in understanding the best strategies. As Albarran (2013b) suggests, it is necessary to integrate studies with a global perspective, and not only a single nation. 3. The importance of more studies related to media business models and finance. There is little research that identifies how the business model’s strategy influences the company’s economic and financial performance over time. Studies of this nature of the leading companies would be useful. What is the most representative business model of the company and the performance measured by financial ratios? What are the different digital business models that are emerging or changes in the traditional business model of Latin American companies and their impact on the financial performance? Through these analyses, more complete studies can be constructed to assess the communications market as measured by market attractiveness, as well as to understand the different alliances, acquisitions or mergers between companies in the same region and foreign firms. 4. Studies on Latin American leadership and company culture. What type of leadership has distinguished the principal media entrepreneurs in the region who have managed to circumvent the different circumstances of the macro and micro environment in the region? What are the different types of leadership of young entrepreneurs who are making an impact with digital native media? It would also be relevant to identify the Latin American model of leadership compared to other regions. 5. Studies which define the media consumer by socioeconomic level and demographics in Latin America. Research is needed to delve deeper into the use and consumption of different types of content and media by socioeconomic and age segments in the region. Studies are needed that identify the interests of audiences regarding the content and the motivations for consumption of content that reflect the values ​​and culture of Latin American society. On the other hand, it would be interesting to know the level of confidence and interest that Latin American audiences have in the content offered by companies of national origin, as well as the

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development of a model that contributes to a better understanding of the use and consumption of information from younger generations. 6. Interdisciplinary studies related to media economics. Unfortunately, the Latin American region has few universities that offer media economics, media management, media entrepreneurship or entrepreneurial journalism, unlike the work which has been carried out for decades in the United States and Europe (Barret & Batts, 2016; Graybeal & Sindik, 2016). The development of curricular resources and research studies in an interdisciplinary way with other schools of social sciences, such as economics, sociology, business, finance and marketing, is needed to help bridge this gap. More interdisciplinary studies related to media management and economics are required, with a holistic view of the reality of the environment as suggested by Albarran and Moellinger (2017). Likewise, there should be more studies related to media management in the region, including the characteristics of the market as suggested by Sánchez-Tabernero (2000) and considering variables of the economy that can be compared with other countries.

Conclusions There is a need for more research on media economics and media management in Latin America. Of particular importance is the need to develop models that serve to generate value within the digital economy of the region. As members of a society, we need to learn to generate value in our own local communities helped by the opportunities afforded by the digital economy. On the other hand, the media industry is also at a disruptive stage and needs journalism and communication professionals who bring together interdisciplinary skills and attitudes to contribute to these efforts and add social value. Finally, in the opinion of this author, Latin America is in an area of ​​opportunity for communication professionals and the industry. An example of this is the various cases of young entrepreneurs who, through their participation in the digital native media, have stood out due to their interdisciplinary nature and business attitude, together with their social skills and vision for markets.

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María Elena Gutiérrez-Rentería Gutiérrez-Rentería, M., López, C., & Rodríguez, A. (2016). Estructura competitiva del mercado de las Telecomunicaciones en México: América Móvil y Grupo Televisa (2009–2014). In M. Saavedra & B. Tapia (Eds.), Tópicos Actuales de Finanzas (pp. 700–724). Mexico:VI Congreso de Investigación Financiera FIMEF. Gutiérrez-Rentería, M. E., & Santana, J. (2012). Understanding the radio industry in Mexico: Challenges and opportunities. In J. Hendricks (Ed.), The Palgrave handbook of international radio (pp. 416–428). London: Palgrave Macmillan. Gutiérrez-Rentería, M., & Santana, J. (2013). Convergence in the Mexican media industry 2011. In A. Albarran (Ed.), Media management and economics research in a transmedia environment (pp. 147–159). New York: Routledge. Gutiérrez-Rentería, M. E., Santana-Villegas, J. C., & Pérez-Ayala, M. (2016). Smartphone: Usos y gratificaciones de los jóvenes en México en 2015. Palabra Clave, 20(1), 47–68. doi:10.5294/pacla.2017.20.1.3 Hughes, S., & Lawson, C. (2007).The barriers to media opening in Latin America. Political Communication, 22(1), 9–25. doi:http://dx.doi.org/10.1080/10584600590908410 Jordan, R., & Panchana, A. (2009). The media in Ecuador. In A. Albarran (Ed.), The handbook of Spanish language media (pp. 103–124). New York: Routledge. Katz, R. (2015). El ecosistema y la economía digital en América Latina. Retrieved from www.fundaciontelefonica. com/arte_cultura/publicaciones-listado/pagina-item-publicaciones/itempubli/430/ Katz, R., Koutroumpis, P., & Callorda, F. (2013). The Latin American path towards digitization. Info, 15(3), 6–24. Kuhlmann, F., Robles, A., & Abdel, G. (2010). La industria de las Telecomunicaciones en México: Diagnóstico, prospectiva y estrategia. Mexico: Centro de Estudios de Competitividad del ITAM. Retrieved from http://cec.itam.mx/ sites/default/files/telecomuncaciones.pdf Leiva, R., Benavides, C., Wilkinson, K., Gutiérrez-Rentería, M., & Santana, J. (2016, May).Young adults’ smartphone use: A three-country comparative study. Presented in XII World Media Economics and Management Conference, New York. Lugo, J. (Ed.). (2008). The media in Latin America. London: McGraw-Hill Education. Marino, S., Mastrini, G., & Becerra, M. (2010). El proceso de regulación democrática de la comunicación en Argentina. Oficios terrestres. Retrieved from http://sedici.unlp.edu.ar/bitstream/handle/10915/45366/ Documento_completo__.pdf?sequence=1 Mastrini, G., & Becerra, M. (2011). Media ownership, oligarchies, and globalization In D. Winseck & D. Yong Jin (Eds.), The political economies of media. The transformation of the global media industries (pp. 66–83). London: Bloomsbury Academic. Mastrini, G., & Bolaño, C. (2000). Globalización y monopolios en la comunicación en América Latina. Buenos Aires: Biblos. Mastrini, G., & Marino, S. (2008). Al final del periodo: Los límites del progresismo. Políticas de comunicación en Argentina durante el gobierno de Néstor Kirchner. Revista ECO-Pós, 11(1), 78–96. Mazzioti, N. (1996). La industria de la telenovela la producción de ficción en América Latina. Argentina: Paidós Estudios de Comunicación. Medina, M. (2014). México. In M. Shaver & A. Soontae (Eds.), The global advertising regulation handbook (pp. 18–25). New York: Sharpe. Medina, M., & Barrón, L. (2010). La telenovela en el mundo. Palabra Clave, 13(1), 77–97. Medina, M., & Gutiérrez-Rentería, M. (2008). Globalization with Latin flavor. Journal of Spanish Language Media, 1, 79–83. Retrieved from http://dadun.unav.edu/bitstream/10171/13615/1/JSLMvol-12008.pdf Moreira, S. (2016). Media ownership and concentration in Brazil. In E. Noam (Ed.), Who owns the world’s media? Media concentration and ownership around the world (pp. 606–633). Oxford: Oxford University Press. Nieto, A., & Iglesias, F. (2000). La empresa informativa (2nd ed.). Spain: Ariel. Noam, E. (Ed.). (2016). Who owns the world’s media? Media concentration and Ownership around the World. New York: Oxford University Press. Noam, E., & Mutter, P. (2016). Brazil-data summaries. In E. Noam (Ed.), Who owns the world’s media? Media concentration and ownership around the world (pp. 634–640). Oxford: Oxford University Press. Orozco, G. (2002). La televisión en México. In G. Orozco (Ed.), Historias de la televisión en América Latina (pp. 203–240). Barcelona: Gedisa. Orozco, G. (2005). México. In A. Cooper-Chen (Ed.), Global entertainment media (pp. 203–217). Mahwah, NJ: Lawrence Erlbaum. Ortigoza, M. (2016). Cooperacion académica para la acción política en América Latina y el Caribe. Cuadernos Latinoamericanos, 27(49), 22–37. Picard, R. (2006). Historical trends and patterns in media economics. In A. Albarran, S. Chan-Olmsted, & M. Wirth (Eds.), Handbook of media management and economics (pp. 23–36). New York: Routledge. Pis, E. (2008). El mercado de las revistas en la Argentina. Argentina: Universidad Austral.

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PART II

Fundamental Issues in MME Research

7 HUMAN RESOURCE MANAGEMENT IN THE MEDIA Joyce Costello and John Oliver

Introduction Media companies that adapt to changes in the competitive environment will succeed, while those that don’t will fail. That is the conclusion many of the contributors to this Handbook will make during the course of their arguments. Our discussion on strategic human resource management (SHRM) issues facing media companies now and in the medium-term future is no different. “Adapt or die” is the mantra that we have chosen to adopt in our view of the issues facing many media firms’ HRM departments. An organization’s deliberate strategy to adapt to its changing environment means that SHRM practice and policies need to support the organization’s goals (Shameem & Khan, 2012); therefore, the authors propose examining the key trends in HR functional components of recruitment, performance and retention. These three elements support organizational objectives pertaining to human capital and are the foundation of HRM policies and procedures (Taylor & Woodhams, 2016). This chapter first reviews recent advances made in human resource management research which builds upon Redmond’s (2006) discussion of human relations management in media management studies. While “human relations” tends to focus on the soft skills of interpersonal relations (Taylor & Woodhams, 2016) our discussion focuses on “human resource management,” which we believe enables better human relations management in the long run. This chapter then addresses the need for organizations to remain adaptive to changes in the competitive environment by focusing on the key areas that are most likely to affect strategic human resource management initiatives for the media workforce. Finally, we consider how initiatives such as recruitment, retention and performance may play out in the future. By examining these aspects of SHRM, we can begin to identify the gaps in our understanding of how media organizations’ human resource practices should adapt and evolve over time (Picard & Lowe, 2016).

A Decade of Advancement in HRM Studies in Media Companies? Redmond’s (2006) review of the state of HR in media organizations led him to recommend several key points, such as the need for further qualitative studies, a more comprehensive understanding of the reality of the life of the media worker and how being a shift worker might cause personal problems, and to investigate if companies are going to great lengths to provide support. The overarching theme was about the “quality of career experience” and relates to the individual experience within

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a media organization. Since his call, there have been a limited number of studies that have directly explored SHRM in media organizations (Becker,Vlad, & Martin, 2006; Adams-Bloom, 2009). Achtenhagen and Mierzejewska (2016) identified the top three media management journals as: the Journal of Media Economics ( JME), International Journal on Media Management ( JMM) and Journal of Media Business Studies ( JOMBS). A search of these three reveals that most studies refer to HRM in passing in the context of making recommendations based off their own discussions (Berke, 2011; Bartosova, 2011; Baetzgen & Tropp, 2015), their own experiences ( Joseph, 2011) or interviews of HR managers, but in a context of collaboration between global conglomerates and local companies (Pathania-Jain, 2001). Other studies, such as Panico, Raithel, and Michel (2014), built upon the conversation of constructs that impact hiring when they explored how media coverage affects employer reputation. While this study explored the impact on students getting ready to search for jobs, the authors concluded that integration of PR into HR would assist in managing employer branding (Panico, Raithel, & Michel, 2014). However, there are some studies that specifically focus on functions of HRM in media organizations. Becker, Vlad and Martin (2006) address how changes in the U.S. newspaper labor market has impacted hiring trends. They discovered that large U.S. daily newspapers tend to hire only experienced journalists (Becker,Vlad, & Martin, 2006). This trend would suggest that media organizations will have to invest in training if they want to keep a more experienced journalist up-to-date with technological advancements. The main study from JMM that directly addressed SHRM practices was Adams-Bloom’s (2009) exploration of high-performance work organizations’ (HPWO) initiatives.This study discovered evidence of HPWO practices (profit sharing, feedback and nonmonetary rewards) was more prominent in news organizations than professional development, such as training, advance certification or conferences. Adams-Bloom (2009) concluded “measurement of HPWO success is dependent on demonstrating increases in productivity and profitability” (p. 142).This infers that more research is needed on how performance can impact productivity. Dekoulou, Pühringer, Georgakarakou and Tsourvakas (2010) elaborated on how an organizational learning culture could improve performance among journalists, especially those desiring to attend advanced training. The implications for SHRM were clearly linked to the need to evaluate human resource development practices and engagement, although studies in the past decade have brought mainstream SHRM conversations into media management literature. Overall, it is evident that media management scholars have many opportunities to advance understanding of how HRM practices can be improved and tailored to the changing environment.

Media Companies and Their Employees Need to Remain Adaptive A dynamic media environment is being driven, primarily, by technological influences and change. Media firms need to adapt to this turbulent environment and realign their SHRM policies in accordance with the strategic management of their organization (Shameem & Khan, 2012). Commonly, HR tasks, such as recruitment, retention and performance of employees, are not industry-specific, but competencies of management relating to creative talent management, digital technology that constantly evolves and continuous innovation do influence standard HR functions (Artero & Manifredi, 2016). A central tenet of our discussion is that media firms and their employees need to remain adaptive, particularly as firms that adapt fastest can achieve a competitive advantage over rivals (Oliver, 2016). Research by Reeves and Deimler (2011) and Reeves, Love and Nishant (2012) presented a powerful argument for media firm adaptation. They examined the volatility in the U.S. media industry between 2005 and 2011 and concluded that during periods of turbulence in demand, competition and profit margins, firms that outperformed others did so due to their ability to interpret and adapt to signals of impending market volatility. Their research indicated that DirecTV, Time

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Warner Cable and The Walt Disney Co. had all outperformed their industry rivals (including Omnicom Group, The Washington Post,Viacom, Cablevision Systems and Thomson-Reuters) because of their ability to rapidly adapt their businesses to volatile operating conditions. Central to these adaptive media firm practices and processes is the role that human capital or employees played as a key strategic resource in delivering superior business performance (Wang, Jaw, & Tsai, 2012).

Four SHRM Themes Emerge From a Dynamic Media Environment In our discussion of human resource recruitment, retention and performance initiatives, we should acknowledge that today’s dynamic media environment has resulted in changes in the labor market that have created a challenging context for how SHRM departments manage their workforce. Firstly, while the number of mega-media conglomerates is increasing globally, the workforce is being downsized and employees are being moved from permanent contracts to a freelance working basis (Deuze, 2011). The “casualization of labor agreements, outsourcing, downsizing and freelancing,” and the emergence of zero-hours contracts impact HRM’s ability to recruit, retain and manage the performance of the non-permanent and transient workforce as policies and regulations are not always applicable to this sort of workforce (Lowe, 2016, p. 7). Not providing training and development for temporary employees can sometimes be viewed as a cost-savings measure, although studies have found that if organizations do provide training to non-permanent employees, the training does have a positive effect on their affective commitment to the organization (Chambel, Castanheira, & Sobral, 2016). A second change in the labor market is innovation in technology. Since the transition from analog systems to digital in the 1990s, there is an increased focus on the frequency and manner in which media employees need to be trained if they are to keep up with emerging new medias (Artero & Manfredi, 2016). The migration of training to online platforms introduces other challenges to SHRM, such as individual attitudes and aptitudes relevant to embracing technology (Venkatesh, Morris, Davis, & Davis, 2003). Thirdly, the social voice of internal and external stakeholders has become more prominent in the social media age, impacting organizations’ ability to handle crises ( Johansen, Johansen, & Weckesser, 2016). Consequently, organizations are using employee engagement as a means of channeling this voice. Employee engagement studies have found internal stakeholders, such as employees, want their voices to be heard in a manner that positively affects their work-life balance and well-being (Ruck, Welch, & Menara, 2017), while external stakeholders, such as consumers, have broad societal expectations and are increasingly engaging in dialogue with organizations about expected social responsibilities (Golob & Podnar, 2011). Finally, with the baby boomers changing how and when they exit the workforce, succession planning is no longer a straightforward process. For example, nonprofit organizations have been looking forward to the baby boomers retiring, which would give retirees more time to volunteer, but it turns out that many are not retiring and are instead changing their workday through part-time or contract work (Loretto & Vickerstaff, 2015). Instead, with baby boomers remaining in organizations past the expected retirement age, media organizations may face having employees who have a wealth of technical experience, but may face technological adaption challenges and are ultimately more costly to retain. These four trends disrupt SHRM functions by creating new challenges.The downsizing of organization combined with baby boomers not exiting the workforce as planned could cause obstacles in performance management. A focus on innovation and training has causal implications for training and retention needs. Finally, a rise in social voice may impact how media organizations position themselves in recruiting employees.

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Managing Strategic HRM Functions Into the Future Recruitment: The Rise of Data Analytics Employment could be seen as a simple economic transition in exchange for labor, but the bargaining power of both parties is not always equal. Potential employees are looking for employment, income, fairness, voice, job satisfaction and occupational identity, while the employer is often focused on profit maximization, shareholder value, quality and service and control (Budd & Bhave, 2008). Recruitment is often affected by changes in technology and labor market shortages (Hough & Oswald, 2000). Key issues with recruitment involve the level at which labor turns over and the ability to attract sufficient number of high-caliber candidates for tomorrow’s needs, the latter being increasingly difficult to forecast given one must understand which technical and tactical aspects are needed prior to any time of disruptive innovation. Gade and Lowrey (2011) assert that the public use and expectations of technological innovation by journalists have changed, inferring that there are large external pressures on media organizations to ensure their staff meet those desires. In Jung and Kim’s (2012) study of newspaper firm employees, they found employee burnout and exhaustion can lead to an increased turnover intention. This implies that HRM will not be able to stabilize recruitment patterns. Consequently, SHRM will have to strive to make recruitment more efficient for the organization without taking into consideration the baseline technological skills needed by tomorrow’s workforce. SHRM can accomplish this through the incorporation of data analytics (Shehu & Saeed, 2016) and being more attractive to potential employees via its social impacts (Biswas & Suar, 2016). Hailing from the industrial/organizational (I/O) psychology field, data analytics has slowly been expanding into the realm of HRM, with algorithm or people analytics propelling data-driven recruitment (Fink, 2010). The data mining approach allows for the freedom to develop decision models when selecting recruits.This approach enables organizational strategy to be embedded in the decision tree, thus improving HRM’s ability to react to organizational change in a more concise and measurable manner (Shehu & Saeed, 2016). The goal of people analytics is to embrace the power of algorithmic systems in an attempt to predict a better person-organization fit between high-performing recruits and the company (Fleck, 2016). Even though Facebook and Google have long embraced this technology, the adoption rate in the business world is slowly increasing, from 24% in 2015 to 32% in 2016 (Schwartz, Bohdal-Spiegelhoff, Gretczko, & Sloan, 2016). Especially in industries such as the media, which rely on creative talent, companies are moving beyond apprehension to engage with the technology-driven recruitment. Indeed, Schwartz et al. (2016) found that organizations in media and communications had lower adoption of people analytics, as opposed to life sciences and health care, and financial and consumer businesses. This low adoption by media organizations means the hiring process is not as effective or efficient as other industries. Due to the non-static nature of hiring and the ever-changing and evolving rules around recruitment (Shehu & Saeed, 2016), datadriven recruitment is understood to increase the quality of hiring talented and qualified individuals while also improving the experience and diversity of the candidate. By actively seeking ways to use data to support talent decisions, HRM executives can become a talent multiplier (Harris, Craig, & Light, 2011). Because the complexity of data analytics is not a mainstream HRM competency, HR departments need to adapt. Harris et al. (2011) proposed a ladder of analytical HR applications that integrates six functions in order to provide a framework which could be used by media organizations. The first rung of the ladder focuses on building a solid employee database that goes beyond typical demographic information. Harris et al. (2011) emphasize how Google used its skills in big data to build an employee database that consolidated all the information regarding attitude, behaviors and skills it acquired about employees. This in turn allowed Google to identify performance trends and identify critical talent management—the second rung of the ladder. Harris et al. (2011) use the example of 98

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sports teams, such A.C. Milan, having used this form of analytics when determining in what soccer talent they would invest. Likewise, media organizations, like HRM, could use the analytics of creative performers and build their own algorithm that places values on creative content, audience engagement, reputation enhancement and ability to influence intended outcomes. The third rung focuses on HR investments and managing critical workforces accordingly, through initiatives such as investing in technological training and talent management. With media management and a focus on creative talent, it is easy to forget that those individuals in functional positions within the organization that support and enable talent also need investing. For example, an in-house engineering team that supports journalists could need training in maintaining and repairing new 360-degree virtual reality cameras or drones. Consequently, there needs to be a system in place that can address issues organic to the media organization and tailored to the needs of the individual. The fourth rung—customized employee-value propositions—is particularly important when it comes to employee life-cycle planning. SHRM research has predicted that with the largest percentage of the workforce departing (the baby boomers) succession planning and recruitment will affect all industries (Kiyonaga, 2004). This rung calculates how much value employees place on different benefits and aspects offered by the organization. Because turnover can have a significant impact on an organization on a cultural, moral and financial level ( Jung & Kim, 2012), this application aims at using data to reduce attrition issues. Yet, predicting the future workforce is more than succession planning for the departure of baby boomers. The fifth rung—workforce planning—aims to predict the business and staffing levels needed. For example, in terms of discontinuous innovation and the evolution of how music has been distributed (8-track, cassette, CD, MP3), this transformation in the music production industry saw a complete change on a business level, where the factories and personnel required to produce CDs were not needed with the mainstream adoption of the MP3 format. Workforce planning for media organizations is particularly difficult given the ever-changing nature of disruptive technology. The final rung is the talent supply chain, which focuses on the skills the workforce will need. Just as data analytics is changing the skills needed by HRM personnel, innovation and technological skills are evolving in media organizations. Therefore, Harris et al.’s (2011) proposed framework could assist HRM to provide the initial structure to begin building its big data recruitment. Once populated with organizational data, media management researchers could explore how the different rungs acted as predictors for high performance, engagement and turnover intentions. As highlighted earlier, recruiting the right individual for the right job remains a challenge. By seeking a person-organization fit that optimizes congruence between the organization’s values and needs and the individual (Kristof-Brown, Zimmerman, & Johnson, 2005), SHRM can take advantage of its corporate social responsibility (CSR) programs as a recruitment tool.

CSR and the Socially Aware Recruit Even though data-driven recruitment can help identify talented individuals whose values and capabilities match the needs of the organization, there is often a power play between the workforce supply and the employer’s demands and needs. Historically, media organizations have followed the trend among many private sector corporations of offering stock options and financial incentives as a means of recruitment (Redmond, 2006). This, however, has neglected intrinsically based needs, such as being able to actively contribute to one’s community—an element that millennials entering the workforce are collectively demanding (Feldmann, 2014). As mentioned earlier, there is a general trend toward societal expectations of organizations to operate in a socially responsible manner. This has led to a new “socially aware” recruit who is looking for a work environment that is more aligned with higher ethical standards and social responsibility (Ng, Lyons, & Schweitzer, 2012). 99

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Media products themselves have strong social value in terms of shaping political, economic, social and technological issues (Mierzejewska, 2011). Accordingly, HRM has slowly begun to capitalize on the very core of media organizations’ ability to contribute to society. For example, BSkyB (2002) began including its corporate social responsibility strategies in its annual shareholders report long before the 2010 ISO 26000 guidance on social responsibility. “The goal of the strategy is to enhance the reputation of the Group through: community activities, a commitment to managing environmental impacts, and managing the business in a responsible manner” (BSkyB, 2002, p. 19). The very nature of an organization providing social enterprise has played a part in SHRM communicating its organization’s CSR stance as part of employer branding. Employer branding considers the brand equity, loyalty and ability to attract talent (Biswas & Suar, 2016).Yet, it is the organization’s reputation that often serves as an antecedent to attracting potential recruits. By focusing on how the organization actions can benefit society through ethical behavior or economic development of the community, CSR programs have shown they have the ability to enhance the organization’s reputation (Panico, Raithel, & Michel, 2014; Ruiz, García, & Revilla, 2016). Although CSR has not always been embedded in employer branding, Aggerholm, Andersen and Thomsen (2011) argue that CSR allows the corporate sustainable vision to be part of an integrated communication process between the organization and key stakeholders, such as potential employees. Biswas and Suar (2016) found evidence that CSR and top leadership significantly influenced the individual’s perception of the organizational prestige. From a gender viewpoint, being female has been found to significantly increase the positive relationship between CSR and job satisfaction (Tanwar & Prasad, 2016). Studies have also found that millennials tend to seek out work environments conducive to higher ethical standards and social responsibility (Ng & Gossett, 2013). While media organizations have typically highlighted the economical aspect of CSR (Tsourvakas, 2016), organizations such as Time Warner (2017) now promote that they have high recognition for employee volunteering and were among the world’s most ethical companies in 2014 and winners of Best Place to Work for LGBT Equality in 2016. This helps enable employer branding in terms of highlighting its ethical practices (a key layer of Carroll’s 1991 CSR pyramid) and shows its awareness and action on social issues, such as diversity. Following the assumption that CSR is an important part of future employer branding, CSR can be viewed at an organizational level and at an individual level. Faroq and Rupp (2016) stipulate that the macro CSR literature is dominated by external and internal focuses. At an organizational level, CSR’s six core characteristics focus on social and economic alignment, practices and values, multiple stakeholder orientation, extending beyond philanthropy, voluntary activities and management of externalities. In recent media management literature (Tsourvakas, 2016), CSR’s relation with media organizations has been conceptualized through Carroll’s model of CSR and stakeholder theory. Carroll’s (1991) pyramid of CSR focuses on economic, legal, ethical and philanthropic responsibilities in an ascending order of importance and each construct is identified as required, expected or desired. However, scholars have criticized the non-interlocking levels and proposed a modified version: the three-domain model of CSR (Schwartz & Carroll, 2003). With the focus on economic, legal and ethical constructs, the Venn model accounts for areas that overlap, making it easier to delineate conditions that affect organizations in different scenarios. For example, media organization Pearson PLC (2016) has a CSR policy to responsibly source paper for books for economical and ethical reasons, whereas a public-owned broadcasting network in an emerging economy such as Nigeria may have legally mandated public service announcements that have ethical impact. For SHRM, having implicit knowledge of its organizational culture and if it leans toward more of an economic, legal, ethical or balanced orientation (Schwartz & Carroll, 2003) can be used to better portray the organization’s CSR efforts. Another organizational-based CSR theory that is often used is stakeholder theory, which has two competing perspectives. The neoliberal perspective is that businesses are responsible only to their 100

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shareholders or owners of the business, with the relationship principally economical because of maximizing profits (Scherer & Palazzo, 2010). The stakeholding perspective stipulates the organization is responsible to all those with whom it has significant relationships which might affect their survival (Scherer & Palazzo, 2010). This latter perspective would be more applicable to HRM because of the need and ability to be able to recruit talent. However, scholars have recently begun to investigate the individual’s view on CSR (iCSR) which reflects the individual’s perception of values and principles and the behavior of the organization (Secchi, 2009; Secchi & Bui, 2016). Rodrigo and Arenas (2008) examined the attitudes of employees toward their organization’s CSR programs and developed a continuum for classification. By understanding if the employee was committed, indifferent or dissident, the authors could predict the acceptance of the organizational evolving CSR roles, individual identification with the organization, a sense of importance of work and social justice (Rodrigo & Arenas, 2008). Secchi and Bui (2016) argued that these perceptions could be relative or absolute.The former is related to what one believes should be done, and can be closely related to the prospective employee who most likely would not have any experience working with the organization. Conversely, the absolute perception would be more relevant to current employees who have to deal with “ad hoc situations, problems, and issues” (Secchi & Bui, 2016, p. 4). Individuals’ attitudes toward CSR activities can potentially influence whether they will apply to an organization. Hence, HRM’s communication of CSR activities needs to take into consideration and identify the personal values and attitudes of the ideal candidate. Studies have found that individuals who value CSR initiatives such as corporate volunteering tend to have stronger organizational loyalty than employees who do not value CSR, and decreased turnover ( Jones, 2010). This has important financial implications for the organization if turnover is decreased. So while it is observable that many HRM departments are emphasizing their organizations’ contributions to society as a means of recruitment, there are gaps in our knowledge about whether the recruits have a high sense of individual corporate responsibility or whether they have an economical reason, such as needing a job to pay the bills. One possible area to investigate is whether current media employees believe being socially responsible is an essential reason for their selection and continuation of employment. It is not known if being socially responsible is part of the professional identity of media employees. By understanding more about how intrinsically based motivations are related to CSR programs, HRM departments can determine to what extent they utilize CSR as part of the employer branding scheme. Accordingly, incorporating studies about data-driven recruitment in a media organization context paves the way forward to a more substantive understanding of key characteristics of media employees. By maximizing the communication of the organization’s commitment to impact positive social change and responsibility, HRM should be able to recruit a high caliber of employees who will have a good person-organization fit. Albeit an oversimplification of recruitment, these two aspects lead to the next HRM challenge: enabling conditions for high performance.

Performance: (Re)training Will Improve Productivity in an Increasingly Digital World Whether mass or niche media, competition from participatory or peer media has increased the pressure on media employees to create content that is more engaging (Küng, 2017). However, this has not always resulted in increased labor productivity nor assisted in managing performance. Indeed, labor productivity is an issue that many Western governments and economic commentators have grappled with since the global financial crisis of 2007–11. While employment levels have increased since the crisis, labor productivity has struggled to reach precrisis levels, primarily because of the sustained harshness of macroeconomic conditions, which have affected business capital expenditure, investment in research and development, and skills training. 101

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Recent research by Oliver (2017) examined the productivity of human resources in the UK’s creative industries during 1997–2014. The premise of the study was to examine the strategic adaptation and renewal of human resources following more than two decades of technological change and disruption caused by digitalization and new media. The creative industries’ contribution to the UK economy over this period has significantly increased, with gross value added (GVA) increasing from 3.96% (£31,205m) to 5.20% (£84,067m) of the total UK economy. The total number of employees in these industries has also increased from 931,000 in 1997 to 1,808,000 in 2014. However, the productivity of employees (calculated as GVA per employee £) indicates some of the challenges that companies face. Figure 7.1 illustrates the interindustry GVA per employee (£) performance based on comparative figures for the year ending 1997 and 2014.The UK publishing industry outperformed all other creative industries by increasing the GVA per employee from £20,554 to £45,244 (+120%). The worst-performing industry was film, television, video and radio, where GVA increased by 56%, from £5.985 billion to £10.807 billion and the number of employees increased 63%, from 161,800 to 264,000.The result was a modest increase in GVA per employee of 11% from £36,990 to £40,936. The findings for the UK publishing industry may appear counterintuitive at first glance, since the size of the labor force has decreased from 308,500 in 1997 to 225,000 in 2014. However, the structural changes and adaption of human resources, driven by an increasingly digital publishing environment, have produced a far more productive workforce. However, as productivity can be impacted by macro issues, such as technological innovation, HRMs need to keep abreast of advancements in training in order to facilitate productivity and enhance performance. Although the media industry is often viewed as a pioneer in exploiting technology, the continual evolution of technological platforms requires increased training to meet technical skills required to execute one’s job (Küng, 2017). Understanding “how to analyze basic usage metrics, such as

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open rates, click-throughs and conversions” (Siculiano, 2011, p. 206), is an imperative skill for those involved in any form of online communication. In order to master this skill and others related to technological innovation, there needs to be an investment in training the workforce. From an HRM perspective, there must be a realistic balance between employees meeting deadlines and being able to engage in training. Nowadays there are more ways to adjust training around work constraints as the delivery of training has moved from traditional face-to-face to online virtual environments (Koop & Burkle, 2010). E-learning strategies have enabled HR departments to adapt to changes in the workplace, such as moves toward nontraditional workplaces (i.e., telecommuting), an emphasis on knowledge transfer, and acceleration of the rate at which change is affecting organizations (Brandenburg & Ellinger, 2003). Learning and development research increasingly explores just-in-time training (JITT) and bite-sized or micro learning (BSL) as a means to support selfdirected learning (Kopp & Burkle, 2010; Gray, 2015). In the 24/7 operating cycle, prevalent among media organizations where remote work is common, JITT allows the individual employee to receive requested training on the spot (Kopp & Burkle, 2010). JITT emphasizes an on-demand approach and because of its often online aspect, it can be done “anywhere, anytime, anyhow” (Brandenburg & Ellinger, 2003, p. 9). As multinational media organizations, such as Sky and Pearson’s PLC, may span wide geographical areas, JITT provides a cost and time benefit for employees and the employer (Holton, Coco, Lowe, & Dutsch, 2006). However, a key challenge for HRM staff is that JITT requires them to predict or anticipate learning and development needs for tomorrow’s technology (Brandenburg & Ellinger, 2003). Given the rate of innovation and its ability to impact media organizations, it can be challenging to identify what training the workforce of today will need, for instance, to deal with the evolving artificial intelligence integration tomorrow. Despite the advantage of being able to deliver training just in time, there remains the question of how much training is actually necessary.With the busy nature of media organizations, HRM departments could be tempted to try to get all of the training done in one go. While this is a cost-saving measure and limits disruption, it does not take into account the effectiveness of such a measure, nor does it take into account the human attention span (Gray, 2015). Bite-sized or micro learning (BSL) instead focuses on the amount of learning the individual can effectively absorb. Studies have found that the order of consumption or the individuals being able to treat bite-size learning as a buffet to pick and choose what and how much they needed was deemed more effective (Gray, 2015). For HRM in media organizations, using micro learning mimics the ways individuals access information and entertainment throughout their daily lives. However, with both of these types of learning, it is often down to the individuals’ own sense of self-directed learning. Not everyone will feel comfortable with online training so one of the challenges with e-learning is the individuals’ level of computer self-efficacy or competency (Holton et al., 2006).Theories such as unified theory of acceptance and use of technology (UTAUT) explore the individual’s behavior intentions in terms of technology adoption (Venkatesh, Morris, Davis, & Davis, 2003). UTAUT consists of four dimensions: performance expectancy, effort expectancy, social influence and facilitating conditions (Venkatesh et al., 2003). Performance expectancy measures how the users perceive the technology will assist them in performing their jobs. It is a measure of the degree to which the individual is extrinsically motivated and their outcome expectations. As this construct has roots in social cognitive theory, it suggests the outcomes are directly job-related (Venkatesh et al., 2003). The second dimension, effort expectancy, measures how easy the users perceive using the technology will be. Entrenched in innovation theory, it focuses on the difficulty of use (Venkatesh et al., 2003).This does make the assumption that the technology is predominately viewed as difficult. Together these first two constructs are often strongly linked to predicting the individuals’ intention to use technology (Venkatesh, Thong, & Xu, 2012). Social influence measures how the

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user reacts to the social pressure to adopt technology. This relies on the subjective norms or social factors relevant to the individual. With its origins in innovation diffusion theory, social influence focuses on image and status (Venkatesh et al., 2003). Finally, facilitating conditions measure the users’ perceptions of what kind of support they anticipate their organization will provide for technology adoption.This looks at how the individual perceives compatibility between the internal and external constraints, and is grounded in innovation diffusion theory. Venkatesh et al.’s (2003) scale incorporated the voluntary use of technology by members of the entertainment and telecommunication industries compared to the mandated use in banking and public sector. Studies where individuals voluntarily engaged in e-learning systems found a significant relationship between performance expectancy (Chung, Lee, & Kuo, 2016), effort expectancy, social influence and facilitating conditions (Oh & Yoon, 2014). Researchers have also found that individuals who are intrinsically motivated significantly impact the user’s intention to use e-learning systems (Yoo, Han, & Huang, 2012). This implies that the e-learning does need to be voluntary or perceived as an enjoyable act. An important aspect of UTAUT, which has implications for SHRM, is that many findings imply gender, age, experience and voluntary use significantly moderate the relationship between the constructs and behavioral intentions (Venkatesh, Thong, & Xin, 2016). Several scholars found evidence that being male, a millennial and educated at a bachelor’s level or higher would significantly impact the various UTAUT constructs (Al-Shafi, 2009; Buhler & Bick, 2013; Mohammadyari & Singh, 2015;Venkatesh et al., 2012). This has implications for media organizations that strive to have diverse workforces. Furthermore, scholars such as Prensky (2001) postulate that the younger generations’ acceptance and adoption of technology contribute to an attitude of being a digital native. If JITT and BSL training programs are implemented, then there needs to be controls factored in that will assist non-male, non-millennial, nondegree holders to improve their computer self-efficacy. The more general gaps in UTAUT literature include whether information systems usage is mandated in the organization (Hwang, Al-Arabiat, & Shin, 2016).This provides an opportunity for media management researchers to investigate if just-in-time learning and bite-size learning have a probability of successful engagement if voluntary. Sky (2015) recently developed a “Sky Development Portal System” in order to facilitate learning and development online. This system provides JITT and BSL learning opportunities, but does not account for the employees’ computer literacy. Additionally, it is unknown if the training is voluntary, or if it is an aspect that could play a moderating role between the UTAUT dimensions and its outcome of use. For media management academics wanting a better understanding of how SHRM can improve performance, it is recommended to first analyze if and how training programs have been adapted. With a lack of empirical evidence organic to media organizations, it is difficult to predict how this SHRM function would differ from that of other industries.Yet, because the media industry is often the first to be impacted by technology, it is an opportunity for leaders in the forefront of research.

Retention: Employees Will Demand to Be Intellectually and Emotionally Engaged Finally, in order to retain high-performing, talented employees, organizations must invest in career development programs and look at ways to facilitate a work-life balance and sense of well-being. For media organizations, this is particularly critical as social media has changed the 24-hour news cycle to a minute-by-minute update. Some HR scholars would argue there are many ways to try to manage retention issues related to job satisfaction, organizational commitment, job embeddedness and job alternatives (Phillips & Edwards, 2009). However, instead of treating the symptoms that cause burnout and high turnover, the authors recommend a preventative solution focus. By understanding

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how HRM can foster engagement, media organizations can adapt to the needs of the workforce, thus preventing high turnover. Engagement is habitually used to infer improvement or involvement on the part of the employee. While this puts the onus of effort on the individual, HRM personnel tend to use the term as if to imply the employees are motivated and tuned in to the pulse of the organization. Alfes, Truss, Soane, Rees and Gatenby (2010) define employee engagement as “being positively present during the performance of work by willingly contributing intellectual effort, experiencing positive emotions and meaningful connections to others” (p. 5).This does place the attitude of being engaged with the individual, but also calls on him or her to interact with colleagues in a manner that has purpose. However, the organization’s responsibility in the concept of employee engagement is to be actively listening and open to criticism about what is working and what is not working within the organization. Kahn (1990) proposed that engagement occurs at cognitive, social and behavioral levels. Following the ideas of interactionalist theory in the seminal works of Goffman (1971), Kahn (1990) states, “personal engagement is the simultaneous employment and expression of a person’s ‘preferred self ’ in task behaviors that promote connections to work and to others, personal presence (physical, cognitive, and emotional) and active full role performances” (p. 700). However, Alfes et al. (2010) argued that Khan’s (1990) theory lacked the ability to incorporate the seemingly innate need of people to feel good about their work and their organization. Hence, Alfes et al. (2010) stipulated employee engagement occurs on intellectual, affective and social levels. Intellectual engagement focuses on the cognitive aspect, where individuals analyze their jobs and determine how they can do them better. Media organizations often rely on employees to be creative, but workloads and deadlines may inhibit the individual’s opportunity to actively participate in intellectual engagement. Affective engagement is related to the emotions one feels about doing one’s job (Alfes et al., 2010). For print and broadcast journalists, there may a more immediate feeling of being able to make a positive impact by doing a good job because of the common practice of online engagement with audience members. Social media sites, such as Twitter, allow more immediate interaction between journalists and audiences and can impact journalists’ professional identity (Ottovordemgentschenfelde, 2017). Although likened to a positive attitude, employees’ emotional engagement is not consistent over time and can even backfire. For example, an individual who may have a positive level of emotional engagement could easily change to a negative one if he or she felt an organizational change negatively impacted them. Or, if employees were given a certain level of creative freedom and autonomy, but upon a restructuring, new levels of red tape and bureaucracy were introduced, they could perceive a lack of organizational support, which could easily develop into negative attitudes toward the organization (Reinardy, 2014). Furthermore, Tan and Weaver (2007) found a positive correlation between media agenda and policy agenda. For the journalist who has strong beliefs about immigration but works for a media organization whose agenda runs to the opposite end of the gauntlet, the extreme differences could lead to increased turnover. Finally, Sablonnière, Tougas, Sablonnière and Debrosse (2012) found that negative attitudes toward rapid organizational change resulted in increased psychological distress and burnout symptoms. The last dimension, social engagement, focuses on how frequently employees engage in “constructive dialogue with those around them about their work or how to improve working methods or skills” (Alfes et al., 2010, p. 6). Burke and Fiksenbaum (2009) found that Norwegian journalists who reported higher levels of passion had better work outcomes than those who reported high levels of work addiction. This has important implications for knowledge transfer within organizations if employees are passionate and able to communicate effectively with others. De Jong, Curşeu and Leenders (2014) have found contrary evidence that states negative attitudes and relationships affect group cohesion and performance only when the team has task interdependence. If the social engagement aspect can be moderated by the complexity and interdependence of the task at hand,

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then this implies a higher level of engagement is needed for more complex tasks. For media organizations that are silo-oriented as opposed to agile, this can inhibit social engagement and creation of “a web of strong personal relationships across business units” (Lank, Randell-Khan, Rosenbaum, & Tate, 2008, p. 106). A good employee engagement program allows employees to unlock their potential, increases commitment and desire to maximize individual performance, enables potential creativity and enhances their sense of well-being (MacLeod & Clarke, 2009). For the organization, a good level of employee engagement is supposed to reinforce commitment and encourage retention. HRM incorporates various tools in order to create a workplace where employees and organizational values and goals are in congruence (Kuhn, 2016). One such tool is measuring the employee voice through annual engagement surveys or employee listening tools, such as “pulse surveys, anonymous social tools, and regular feedback check-ins by managers” (Schwartz et al., 2016, p. 6). This active form of listening increases the dialogue between HRM departments and employees. By engaging in actions such as listening to the employee voice, HRM departments can identify well-being issues that affect overall employee engagement. Nevertheless, in a 24/7 operating environment of media organizations, employee well-being may be seen as put to the side and ignored. As employees slowly realize that their smartphone and tablet tether them to being in constant reach, work-life balance may quickly fall by the wayside. Some researchers say this unbalance leads to burnout and work-family (life) conflict. Gourlay et al. (2012) found that individuals working shifts (opposed to Monday to Friday, 9 to 5) reported poor work-life balance. The implications for those in media organizations are very clear. Poor balance can impact the emotional (affective) engagement of the individual. However, this problem does not come with an easy solution for HRM departments.There is a delicate balance between being able to accommodate job-related well-being and avoiding increased burnout and work-family conflict. Consequently, some organizations allow employees to modify their work schedule, telecommute and take sabbaticals to refocus and return reinvigorated (Pagano & Pagano, 2009). While extended leave programs may not be prominent in the media industry (the Associated Press does encourage staff to take sabbaticals), research on the benefits of sabbatical programs is primarily concentrated in medical and academia fields. Finally, some SHRM are incorporating apps and tools to help the employee become less stressed (Schwartz et al., 2016). The adoption of these tools of course relies on the individual’s willingness to engage in technology, as discussed in the section about training.

Conclusions SHRM functional activities within media companies need to attract talented individuals, generate commitment toward the success of the organization, improve the satisfaction of the employees and facilitate employee engagement. While there are some media industry-oriented studies that look at employee e-recruitment (Eckhardt, Laumer, Maier, & Weitzel, 2014), employee motivation and burnout ( Jung & Kim, 2012), and how CSR communication influences employee training and performance (Golob & Podnar, 2011), there remains much to understand when exploring and managing HRM trends in media organizations. It is unknown if CSR as a recruitment tool will enhance the person-organization fit. There remain gaps in our understanding of how JITT or BSL training will be able to meet demands for increasing performance during an era of technological innovation. And employee engagement research could provide beneficial guidance to practitioners who need to balance creative employees’ passion and desire for autonomy with organizational strategies to adapt to changing markets. Meanwhile, there are a variety of views on the research design that media management researchers will need to employ in the future. For example, Picard and Lowe (2016) believe that researchers 106

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should adopt more longitudinal approaches to study phenomena in order to better understand how an issue develops over time. Achtenhagen (2016) on the other hand suggests that more quantitative studies should draw on sample sizes that will allow researchers to generalize their findings to entire populations or sections of populations. This in turn would help researchers understand the magnitude of certain phenomena, as well as cause-and-effect relationships. By designing studies in a manner that seeks to determine causality, Achtenhagen (2016) argues that scholars can build empirical studies that support more evidence that creative employees in media organizations differ from other industries. As many of the studies discussed earlier are based on theories grounded in organizational behavior and general management theories, and Picard and Lowe (2016) argue that media management scholars need to ensure theories that cross over are relevant, it is clear that SHRM would benefit from a theory that incorporates SHRM in an industry where the workforce is a balance of creative and functional employees. In the interim, the authors argue that Harris et al.’s (2011) proposed framework could be used to incorporate big data and HRM analytics throughout the various HR processes. Several organizations, such as Google and A.C. Milan, are already incorporating various aspects of the ladder. This presents an opportunity for media management researchers to work with industry to see what antecedents and outcomes result with adoption of such frameworks. From our discussion, it is evident that more studies concerning media companies that adapt their HRM recruitment, performance and retention policies and procedures in relation to the strategic changes in their competitive environment are needed. In light of our discussion, opening the gambit of “adapt or die” is still relevant but the authors believe it needs to be amended to include the word “invest.” Failing to invest in more technologically advanced recruiting through data-driven analytics or in human resources through training and engagement programs, will inhibit the organization’s ability to adapt. As such, the mantra for SHRM should be “invest and adapt, or die.”

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8 STRATEGIC MANAGEMENT Nabyla Daidj

Firms operate in a more and more complex, dynamic, less predictable environment, especially in the media and entertainment industry. This situation requires companies to follow various strategic approaches and to develop new patterns of strategic thinking. There are several strategic models and tools. Most of them have advantages and disadvantages and have evolved. Furrer, Thomas, and Goussevskaia (2008) studied the evolution of the literature on strategic management between 1980 and 2005 and analyzed the evolution of some “strategic keywords” showing the different academic and environmental influences. Ten years after the publication in 2007 of a paper written by Lucy Küng entitled “Does Media Management Matter?” the question remains a highly topical issue. Consequently, the goal of this chapter is to present some key strategic management tools, to explain how they have evolved since the end of the 1990s and to analyze how they can be applied to the media sector.This chapter forms part of the past and ongoing work on the application of managerial and economic concepts and theories to media industries published by several scholars (e.g., Albarran, 2006, 2013; Mierzejewska & Hollifield, 2006; Picard, 2006). This chapter is divided as follows. The first section describes the evolution of strategic management thinking using the concept of competitive advantage as an example. The second section explains the forces that shape competition in a company’s industry environment using Porter’s five forces model as an overall framework. It moves on to explore the concepts of internal resources and competencies that can impact a media company’s competitive position and performance in the global marketplace. The third section is dedicated to the impact of the digital transformation on media strategies and business models. Digital transformation is a concept which has attracted attention from both practitioners and academics. The concept has received wide recognition, yet in practice, it is a new and evolving concept. The final section concludes and gives a future research agenda.

The Evolution of Strategic Management Concepts From Strategy to Strategic Management There is a variety of meanings and interpretations of strategy and strategic management depending on the author and sources. The term ‘strategy’ is used to refer to different ideas. The concept of strategy was developed first in a military and political context. The military strategy books The Art

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of War, by Sun Tzu, and On War, by von Clausewitz, are famous and have become business classics. Sun Tzu developed the tactical side of military strategy and von Clausewitz (2007) highlighted the dynamic and unpredictable nature of military strategy. If strategy can be seen in decisions and actions used within a military context, it must not be confused with the notion of ‘tactics’. Great battles are often analyzed by historians in terms of strategy (referring to a general plan and to the deployment of resources) and tactics (related to the employment of resources already deployed). As Bracker (1980) pointed out, Since its first mention in the Old testament, the concept of strategy has been largely a semantic issue. . . . Our word strategy comes from the Greek strategos, ‘a general’ which in turn comes from roots meaning ‘army’ and ‘lead’. The Greek verb stratego means to ‘plan the destruction of one’s enemies through effective use of resources’. . . . The first modern writers to relate the concept of strategy to business were von Neumann and Morgenstern (1947) with their theory of games. (p. 219) The strategic management discipline originated in the 1950s and 1960s. When the 1960s gave rise to basic concepts of strategy, the 1970s provided important knowledge about their development and application. There are different streams in this field (see Table 8.1). Although there were numerous scholars, the most influential pioneers were Alfred D. Chandler, Igor Ansoff, and Peter Drucker. Three books are considered ‘classic strategy books’: Chandler’s Strategy and Structure (1962), Ansoff ’s Corporate Strategy (1965), and Learned, Christensen, Andrews and Guth’s Business Policy: Text and Cases (1969). Porter’s seminal work, Competitive Strategy (1980), contributed also to the foundation for the growth of the strategic management field.

Sustainable Versus Transient Competitive Advantage At a general level, strategy refers to actions that have been taken and decisions that are to be made by an organization in achieving its objectives and in particular to achieve a sustainable competitive advantage. It’s worthwhile to look briefly at the notion of sustainable competitive advantage, which has been questioned since the end of the 1990s. The concept of sustainable competitive advantage has remained a cornerstone of management thinking and behavior. It presents a good example for illustrating the evolution in strategic thinking in recent years. Firms compete in international markets. How do firms create and sustain competitive advantage? At the heart of positioning there is a competitive advantage (Coyne, 1986). In the long run, firms succeed relative to their competitors (Porter, 1979). The idea emerged in the 1980s, when Porter (1980) argued that a business can develop a sustainable competitive advantage based on cost, differentiation or both. Competitive advantage cannot be understood by looking at a firm as a whole. It stems from the many discrete activities a firm performs in designing, producing, marketing, delivering and supporting its product. Each of these activities can contribute to a firm’s relative cost position and create a basis for differentiation. (Porter, 1985, p. 33) Other authors (Hall, 1980; Henderson, 1983) insisted on the need for firms to possess unique advantages in relation to competitors in order to survive. Barney (1991) contributed to the discussion by exploring the relationships between a firm’s resources and sustainable competitive advantage. He considered that a firm can achieve sustainable competitive advantage thanks to resources that 112

Table 8.1  Evolution of strategic management concepts Main concepts

Authors

The 1950s

Management by objectives (MBO)

Drucker (1954)

The 1960s

Chandler: Structure follows Strategy

Chandler (1962)

Ansoff matrix (penetrating the market, product development, market development and diversifying)/ and the contingent strategic success paradigm

Ansoff (1965)

SWOT analysis (LCAG)

Learned, Christensen, Andrews & Guth (1969).

The 1970s

Mc Kinsey matrix (1970-1975) Boston Consulting Group analysis and matrix PIMS (Profit Impact of Marketing Strategies, 19601980)

Consulting groups (BCG, Mc Kinsey, AD Little)

The 1980s

Five forces framework, value chain, sustainable competitive advantage (differentiation, cost)

Porter (1980, 1985)

Resources, competencies, capabilities (RBV) Strategic intent

Barney (1991); Hamel & Prahalad (1989, 1993, 1994); Wernerfelt (1984, 1989).

Profit patterns

Slywotzky & Morrisson (1988).

Hypercompetition

D’Aveni (1994); D’Aveni, Dagnino, & Smith (2010)

Coopetition, complementor, value network

Bengtsson & Kock (1999)  Brandenburger & Nalebuff (1996)

The 5 types of management (strategy as plan, as ploy, as pattern, as position and as perspective) into “10 schools of thought” (The Design School; The Planning School; The Positioning School; The Entrepreneurial School; The Cognitive School; The Learning School; The Power School; The Cultural School; The Environmental School; The Configuration School)

Mintzberg, Lampel, & Ahlstrand (1988)

Disruptive innovation (technologies/products)

Christensen (2000)

Knowledge and Knowledge management (KM)

Davenport & Prusak (1998); Nonaka & Takeuchi (1995)

Blue ocean versus red ocean

Kim & Mauborgne (2005a and b; 2014)

Business ecosystems Open innovation Keystone advantage

Moore (1996) Chesbrough (2003) Iansiti & Levien (2004)

Platforms (two-sided and multi-sided)

Eisenmann, Parker, & Van Alstyne (2006) Gawer & Cusunamo (2002, 2008); Hagiu & Wright (2015).

Business models (value creation, capture and monetization)

Afuah & Tucci (2000); Massa & Tucci (2014); Osterwalder & Pigneur (2009);Timmers (1998); Zott,Amit, & Massa (2011).

The 1990s

The 2000s

The 2010s

Lean startup

Ries (2008)

Shared value

Porter & Kramer (2011)

Transient/temporary advantage in a changing context (digital transformation, uberization)

McGrath (2013a, b and c)

Source: adapted from Daidj (2015, 2017) and updated.

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must possess four attributes—value, rareness, inability to be imitated, and inability to be substituted— which are widely known as ‘VRIN-scheme’. Since the end of the 1990s, a debate on what actually constitutes a sustainable competitive advantage has ensued. For Christensen (2001), the pursuit of competitive advantage is not futile, but the real issue for strategists is to understand the process of competition and how competitive advantage comes about. In their analysis of business ecosystems, Iansiti and Levien (2004) pointed out the fragile nature of competitive advantage “in situations of significant technological and market upheaval” (p. 9). McGrath (2013a, 2013b, 2013c) asserted that sustainable competitive advantage is obsolete for competing in today’s dynamic world. Firms operate in rapidly changing economic and technological environments in relation with hypercompetitive markets (D’Aveni, 1994). McGrath proposed to refer to another concept named ‘transient competitive advantage’ because markets change in a radical way. “Stability, not change, is the state that is most dangerous in highly dynamic competitive environments” (McGrath, 2013b, p. 7). “The end of competitive advantage means that the assumptions that underpin much of what we used to believe about running organizations are deeply flawed” (McGrath, 2013a, p. 18). She gave several examples of companies from the media sector which were not able to see change coming, such as Kodak, Sony, and Blockbuster. According to McGrath, the new ‘playbook’ is based on six assumptions of competing in arenas (not industries alone) and exploiting temporary competitive advantages: continuous reconfiguration; healthy disengagement; using resource allocation to promote deftness; building an innovation proficiency; leadership and mind-set; and personal meaning of transient advantage. A good example of this is the strategic evolution of Kodak, an American company created in 1880 by George Eastman, a visionary pioneer and philanthropist. His slogan ‘You press the button, we do the rest’ made him famous around the word. In 1963, Kodak launched the Kodak Instamatic Camera, which found worldwide success, with more than 50 million units sold over seven years. In 1987, Kodak unveiled the first concept of a ‘one-time-use’ camera. Until that time, no one had considered the camera to be a consumable. Kodak invented the first digital camera in 1975. Launched in 1995, the Kodak DC40 was the first digital camera marketed by Kodak. In the 2000s, Kodak operated mainly in the imaging sector, covering the entire graphic production chain: image acquisition, printing, print consumables (paper, ink) and storage. Kodak marketed its products and services to individual customers, professionals, and government agencies, such as NASA. But on January 19, 2012, Eastman Kodak Company filed voluntary petitions for Chapter 11 business reorganization. What happened during the 2000s? Is it the end of the myth of sustainable advantage? In 1997, Christensen, in his book The Innovator’s Dilemma, developed the idea that a new technology (often disruptive) could unexpectedly overturn the dominant technology in the market sector. Disruptive technologies are those that force changes in industry frontiers, business processes, and business models. The Kodak case has been analyzed by Christensen. Kodak completely dominated the industry of analogue photography for decades. Thanks to its R&D program, Kodak was the first to market its digital camera. But innovation is a necessary requirement, but not the only one. The firm did not succeed in adapting its business model to a disruptive technology, such as digital imagery. In addition, the camera itself is less popular throughout the world. Today people take pictures more and more with their mobile phones.

A Strategic Approach at Two Levels: External and Internal To simplify in the field of strategic management, two complementary approaches enable an explanation of the sustainable competitive advantage of a company, or alternatively its difficulties and its positioning problems in the market. The purpose of this section is less a comprehensive presentation of strategic tools and concepts but rather a focus on two of them (Porter five forces framework and RBV) to analyze their advantages, limits, and even more the obstacles to their implementation. 114

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The General Overview Environmental factors are those areas over which an organization has little control. Several tools can be used in order to analyze the external conditions—to identify the key factors from the external environment that might affect the organization, the current factors, and the changes that are going to happen in the external environment. The initial ‘external’ analysis of the environment calls on the use of various models, including PESTEL (political, economic, social, technological, environmental, & legal) and SWOT (strengths, weaknesses, opportunities, & threats), which is a model originated in the 1960s by Humphrey on the one hand and Learned, Christensen, Andrews, and Guth (LCAG) on the other hand. Several authors would have contributed to the development of the SWOT analysis. One of them was Albert Humphrey, who conducted a research project in the 1960s and 1970s at Stanford University. This project led to his team action model (TAM). Many authors refer to the LCAG model, including SWOT analysis, divided into two parts, external (OT) and internal (SW). Regarding external market conditions, LCAG suggests analyzing the opportunities and threats. In addition, in this category, Porter’s five forces framework (1980, 1985) can be included.This well-known model determining industry attractiveness stresses the fact that the company must adapt to its environment and find attractive and profitable sectors—that is, sectors that are characterized by relatively weak competitive pressure (low rivalry, low threat of substitutes, low threat of entry, low buyer power, and low supplier power). The traditional analysis of the internal level is phrased in terms of strengths and weaknesses of the firm related to SW(OT). A second ‘internal’ analysis, based on ‘resources, competences and capabilities’ (Barney, 1991; Prahalad & Hamel, 1990; Wernerfelt, 1984), insists conversely on the ability of a company to use and transform its environment. The most competitive company is the one which possesses the most advantageous resources and the competences necessary for the implementation and combination of these resources. Table 8.2 presents these two levels of analysis: external and internal. Both of them are based on several tools mentioned earlier. Concepts presented in bold are particularly relevant for a strategic analysis.

Table 8.2 The levels of strategic analysis. Internal level (company level)

External level (environment/market) SWOT portfolio models (matrix) BCG, McKinsey, A.D. Little (ADL)

Resource-based view (RBV) (resources, competencies, capabilities), knowledge-based view (KBV) Company value chain

PEST(EL)* five forces framework + 1

Value chain

Business models Revenue models *  PESTEL: political, economic, social, technological, ecological, and legal. Source: Adapted from Daidj (2015) and updated.

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Industry value chain Interorganizational networks (value network, business ecosystem)

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Structural Analysis of Industries and Positioning Within Industries (External Analysis) The Presentation of the Framework In 1979, Harvard Business Review published “How Competitive Forces Shape Strategy”, by Michael Porter. Porter’s five forces are an important framework used for assessing the potential for profitability in an industry. It draws upon industrial organization (IO) to derive forces that determine the competitive intensity and therefore attractiveness of a market. It takes into account supply and demand, substitutes (products), the relationship between volume of production and cost of production, and market structures like monopoly and oligopoly. In this seminal work, Porter identified five factors that act together to determine the nature of competition within an industry. The five forces framework is an external environment tool for understanding the ‘big picture’ of the environment, enabling the company to take advantage of the opportunities and minimize the threats. This model gives the company an edge over its competitors. The strength of the five forces varies from industry to industry and determines longterm industry profitability. The five forces are as follows: the threat of new entrants, the threat of substitution, the bargaining power of suppliers, the bargaining power of customers/buyers (BtoA, BtoB, BtoC), and competitive rivalry within the industry. Rivalry refers to the intensity of competition and to the degree to which a firm responds to strategic moves of its competitors in the industry.

Limitations of Porter’s Five Forces Model Porter’s five forces model has been a subject of criticism, though it is considered a powerful tool for industry analysis and strategic design. Regarding first data and information, this framework has the same limitations as the PESTEL model. In order to conduct a relevant analysis, the sources have to be viable, reliable, and valid. The amount of detailed information required is very high and it is not easy in some cases to gather data on competitors. Porter’s framework has been discussed by other academics, such as Coyne and Subramaniam (1996), who have stated that three dubious assumptions underlie the five forces model: First, that an industry consists of a set of unrelated buyers, sellers, substitutes, and competitors that interact at arm’s length. Second, that wealth will accrue to players that are able to erect barriers against competitors and potential entrants; in other words, that the source of value is structural advantage. Third, that uncertainty is sufficiently low that you can accurately predict participants’ behavior and choose a strategy accordingly. Even if the odds of each assumption being individually correct is moderate, the combined chances of at least one of these being wrong is high. (pp. 15–16) According to the two authors, these three assumptions are not valid and consequently the analysis will not be sufficiently robust for firms to plan and respond to competitive behavior. Another limitation of the five forces framework is related to its lack of relevance in dynamic environments. Teece (2007) considers that there are several factors that underline inherent weaknesses of the model but the most important point is that market structure is considered ‘exogenous’. In addition, Teece (2007) adds that “relevant factors ignored or underplayed by the five forces include technological opportunities, path dependencies, appropriability conditions, supporting institutions, installed base effects, learning, certain switching costs, and regulation” (p. 1325).

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The Five Forces’ Application to the Media Industry Several authors (MacDonald, 1990; Silk, Klein, & Berndt, 1999) have analyzed the media industry or one of its markets through the lens of Porter’s five forces. But we can provide a typical example showing the limitations of the five forces framework as a strategic predictive tool. As the external factors change at a very fast pace, it is difficult to predict development that may affect the present or future of an organization and the potential arrival of new competitors. This is precisely what happened in the market for game consoles. At the end of the 1990s, three console manufacturers, Sony, Nintendo, and to a lesser extent Sega, dominated the video games market. Sega was present with its 32-bit Saturn console, launched in 1994 (a huge failure), and then with its Dreamcast console in 1998. Even if the Dreamcast launch was successful, this success was short-lived, however, because of the fierce competition with Sony (later on with Microsoft) and led Sega to stop its activities as a console manufacturer. Originally, Sony was mainly a consumer electronics group, renowned for the quality, originality, design, and innovation of its products since its creation in 1946. Sony developed its expertise in the field of electronics to design the first PlayStation (PS1) in 1994. With this launch, Sony was the first to change game formats and offer CDs instead of the old cartridges, thus contributing to the spread of 3D in the video game field. Nintendo, a company founded in 1889, diversified its electronics activities in the 1970s and launched the Family Computer (Famicom) in 1983 in Japan, later launched in the United States as the NES (Nintendo Entertainment System). Then, the firm developed and produced the Super Nintendo, launched in September 1991, followed by the Nintendo 64-bit N64 in late 1996. What are the main features of the video game consoles industry? In this industry, innovation is considered to be the key success factor and technological prowess has grown with each new generation of console launched (Carpenter, Daidj, & Moreno, 2014). Substantial R&D expenses are required. It is also a two-sided platform industry with proprietary standards and high direct and indirect network externalities (Daidj & Isckia, 2009). The subsidized pricing of the console, for example, serves to develop the user base and draw in developers. The sector is also characterized by path dependency whereby choices made by console manufacturers in relation to next-generation consoles are determined, in part, by previous decisions for part generations. Consequently the barriers to entry are very high and the threat of new entrants should be very low in this situation, as represented ahead. But that has not prevented Microsoft from entering this market in 2001 with its Xbox.

Expansion of the Five Forces Model In the 1990s following many criticisms, the five forces model was augmented by several scholars in order to include a sixth force, effectively completing the model. The six forces model became a market opportunities analysis model, as an extension to Porter five forces analysis. Three main trends have appeared: •

•

Government: government policy (laws, norms, regulations) is one of the forces to consider when analyzing the structural environment of an industry. Gordon (1997) considered that the government could be the sixth force as it has direct and indirect influence in the industry on main stakeholders. This sixth force in the model is described also as the power of other stakeholders, and can refer to a number of other groups or entities. Hunger and Wheelen (2001) adopted this approach and suggest that this sixth force could include, besides government, local communities, special interest groups, and shareholders. Innovation: one of the limitations of the five forces model is that it assumes relatively static market structures and does not take into consideration changes and dynamic market trends based in

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•

particular on technological innovation. Innovation is then often considered as the sixth force in order to analyze rapidly changing and highly competitive environments (hypercompetition). Complementors: this notion has been introduced in the mid-1990s by Grove (1996), former CEO of Intel Corporation, and Brandenburger and Nalebuff (1996). Grove (1996) defined complementors as “other businesses from whom customers buy complementary products. Each company’s product works better or sometimes only works with the other company’s product” (p. 29). Hardware and software companies are classic complementors: faster hardware increases users’ willingness to pay for more powerful software. Grove stated that these complementary activities, as a sixth factor, can influence the industry as changes in these businesses (e.g., new technologies) can impact the dynamics between the industry and the complementors.

Porter knew these researchers’ work but referred to innovation, government, and complementary products and services as ‘factors’ that affected the five forces (Porter, 2008) but considered that they were not the sixth force. The influence of these factors can also be captured in the other five forces. Porter (2008) writes, Advanced technology or innovations are not by themselves enough to make an industry structurally attractive (or unattractive) . . . . Government is not best understood as a sixth force because government involvement is neither inherently good nor bad for industry profitability. The best way to understand the influence of government on competition is to analyze how specific government policies affect the five competitive forces. . . . Government operates at multiple levels and through many different policies, each of which will affect structure in different ways. . . . Complements can be important when they affect the overall demand for an industry’s product. However, like government policy, complements are not a sixth force determining industry profitability since the presence of complements is not necessarily bad (or good) for industry profitability. Complements affect profitability through the way they influence the five forces. (pp. 86–87) Actually, all strategic tools considering only the external environment should be combined with other tools describing the internal conditions of the organization itself, as we will explain in the next section.

The Internal Diagnosis External analyses have been developed in order to describe the environmental conditions that favor high levels of firm performance. But these analyses are not sufficient to understand how firms generate competitive advantage and superior performance. Both external and internal analyses are important in the strategic management process.

The Resource-Based View (RBV) Approach The idea of considering firms as a large set of resources goes back to the seminal work of Penrose (1959). But this concept received renewed attention in the 1980s, in particular by Wernerfelt (1984, 1989). Since then the resource-based view (RBV) has become an influential framework for analyzing corporate strategy (Barney, 1991; Grant, 1991; Hoopes, Madsen, & Walker, 2003; Peteraf, 1993; Wernerfelt, 1984). Peteraf (1993) analyzed links between the resource-based model and competitive advantage. He highlighted several factors necessary to sustain the rents: resource heterogeneity,

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ex post limits to competition, imperfect resource mobility, and ex ante limits to competition. Amit and Schoemaker (1993) developed a behavioral view of strategic assets and analyzed how to target, develop, and deploy them. Wernerfelt (1989) proposed some guidelines for firms in order to identify their critical resources and decide how to apply them. In this approach, the aim is not to focus on the external environment of the company but instead to thoroughly analyze the company’s resources. The RBV considers the firm a ‘collection’ of resources which are tied to the firm’s management: firms are heterogeneous with respect to their resources and capabilities. This analysis, based on ‘resources and competencies’, insists on the ability of a company to use and transform its external environment and to change the rules of the game or the game it chooses to play. It is based on the idea that the organization can be studied as a set of resources, which may differ depending on the company. The resources are of various kinds: physical (machines, manufacturing facilities), human (qualifications, degree of adaptability of employees), and financial (the various sources of liquid assets). They may also be intangible and may be based on goodwill (existence of intangible assets, such as a patent, brand, or know-how). “Resources and capabilities can be viewed as bundles of tangible and intangible assets, including a firm’s management skills, its organizational processes and routines, and the information and knowledge it controls” (Barney,Wright, & Ketchen, 2001, p. 625). Intangible assets are particularly important in that they are hard to access and imitate. They often constitute strategic resources—that is, unique resources from which the company’s competitive advantage stems. The analysis of the strategic capacity of a company depends on several factors. To describe a general overview of a firm, the RBV analysis must be combined with the competence-based view (CBV), representing the second level of analysis. The concept of resources is thus often associated with the concept of organizational competencies—that is, the routines, know-how, and processes that are specific to the company and to its collective learning process. They must be difficult to imitate in order to create a sustainable advantage. They form part of the “core competencies that are the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies” (Prahalad & Hamel, 1990, p. 82). In addition, these competencies enable the organization to outperform its competitors.With strong core competencies in its existing businesses, a company can seek new customers by developing new value chains. Core competencies have to be analyzed in relation to resources and distinctive capabilities. Both of them provide sustainable competitive advantage.

Extensions of the RBV Hamel and Prahalad (1993, 1994) proposed a complementary approach to Porter’s external analysis by identifying internal factors affecting the firm’s competitiveness with an emphasis on dynamic capabilities and competencies. Hamel and Prahalad (1989) deepened this analysis and defined the concept of strategic intent, in which the organization must develop a long-term strategy thanks to its core competencies to achieve a leadership position by defining emerging market opportunities, identifying markets in which its capabilities provide a sustainable competitive advantage, or creating entry barriers (linked with a high level of innovation, capital investments, proprietary technologies, or a strong brand). In this situation, the firm becomes a key player and may alter its competitive environment. The knowledge-based view (KBV) is an extension of the RBV. The firm is considered a heterogeneous-bearing entity (Hoskisson, Hitt, Wan, & Yiu, 1999). The KBV considers knowledge as a key element to combine the distinctive resources and the core competencies of organizations. As Chan-Olmsted and Shay (2016) write, “recent developments in corporate branding research grounded in the resource-based view (RBV) of the firm have argued for the inclusion of corporate

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branding as a strategic resource that meets the parameters of an intangible knowledge-based resource” (p. 52). The audience could be also considered a specific and a key knowledge-based resource (Dimmick, 2003). A better understanding of the audience (key features and evolution) is the basis for increasing revenue. There has been some criticism about the RBV by several authors, such as Porter, about the lack of consideration of external conditions (market, industry). “While the organizational differences emphasized by the resource-based view are surely meaningful . . ., it would be misguided to disconnect the influence of organization from the industry and competitive contexts in which firms operate” (McGahan & Porter, 1997, p. 30).

The RBV’s Application to the Media Industry The RBV is one of the most relevant approaches adopted by several authors who have published on strategy in the media industry (Chan-Olmsted, 2006; Chan-Olmsted & Chang, 2003; Liu & ChanOlmsted, 2003; Mierzejewska & Hollifield, 2006; Mierzejewska, 2011; Oba & Chan-Olmsted, 2007; Picard, 2002). A large number of publications already exist and various topics have been analyzed by referring to this framework since the end of the 1990s. For example, Miller and Shamsie (1996) have applied and tested the RBV in a study of the major U.S. film studios from 1936 to 1965. They have explained that property-based resources are likely to contribute most to performance in stable and predictable settings but “in contrast, knowledge-based resources in the form of production and coordinative talent and budgets boosted financial performance in the more uncertain (changing and unpredictable) post-television environment of 1951–65” (p. 519). Peltier (2004) suggested that the content access control is a key issue following the ‘content is king’ motto developed by Bill Gates in 1996 (Gates, 1996). Content represents a scarce resource and a source of value for both traditional (books, newspapers, TV channels) and new (Internet, video games) media. This fear of a shortage in content has motivated several M&As (among them AOL Time Warner,Vivendi) and upstream vertical integration operations. Chan-Olmsted and Chang (2003) have also explained how resources play a role in shaping the conglomerates’ diversification strategies. Many other firm-specific resources and capabilities relevant to the media products are likely to shape a conglomerate’s preferences in both product and geographic diversification as well. . . . Knowledge-based resources such as access to content production talents (e.g., writers, actors, producers) and the capability of transferring or repurposing content products for different media outlets as well as the availability of a multi stream revenue system would also determine the degree of geographic diversity and the extent, directions, and mode of product diversification. (Chan-Olmsted & Chang, 2003, p. 230) As suggested by previous studies, which stress the flexibility of knowledge-based resources in coping with changing and uncertain environments (Miller & Shamsie, 1996), the knowledge-based resources of media conglomerates (Daidj, 2016) would be more critical in determining the effectiveness (i.e., performance) of their international product diversification strategy. Since the beginning of the 2000s, the convergence of information and communication technologies (ICT) has affected various industries (telecommunications, media, Internet) and has led to multiple linkages between different market sectors: broadcasting, content production, IT, telecom, web, consumer electronics, video games, media, social media, and advertising (Daidj, 2015). Convergence has transformed established industries and has enabled entirely new forms of content (user-generated

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content), services, and applications to emerge (Daidj, 2011, 2015; Picard, 2011; Wirtz, 2001, 2017) and business models (Westerlund, Rajala, & Leminen, 2011). It has led also to the emergence of new players, new sources of value creation, a greater transferability of strategic capabilities, and a growing interest in the media from telecommunications groups (both operators and manufacturers), Internet protocol television operators (IPTV), and IT companies (equipment and software). Table 8.3 shows the key resources and competencies of three ‘Internet giants’: Apple, Google, and Microsoft. They have succeeded in a context of convergence (Schimmer, Müller-Stewens, & Sponland, 2010) thanks to the development of distinctive resources and core competencies as they have progressively diversified their activities. At a more general level, as Küng (quoted by Tokbaeva, 2016) has explained, one of the key current disruptive forces in the media industry is closely related with the sheer scale of the new tech giants. This is probably the biggest strategic challenge, since these disrupters pose a number of threats, all of which impinge on media organizations’ strategic sovereignty. These include loss of control over distribution, over the context in which content is consumed, of a direct relationship with consumers, and of data relating to that relationship. (p. 27)

Business Models Evolution in a Context of Digital Transformation The issue is no longer how firms have adapted their strategy to technological and industrial convergence, but rather how the sector is going to face the current digital transformation (Matt, Hess, & Benlian, 2015), which affects the whole economy and all levels of society. The objective of this section is to identify and to explore main issues related to digital transformation for a better understanding of them in the media and entertainment sector without aiming to be exhaustive. It is a relatively new and complex phenomenon, demanding in-depth analysis in the future.

From Convergence to Digital Transformation Digital transformation is a buzz and polysemous word.There are many dimensions of digital transformation sometimes confused with other terms, such as digitization or digitalization. Digital transformation is often considered the next step of digitization. There are many explanations and definitions for digital transformation. Both academic and professional groups address this topic (Table 8.4). Digital transformation is not just about tools and digital technologies, defined by Liu, Chen, and Chou (2011, p. 1728) as “the integration of digital technologies into business”. Most definitions include additional changes in user experience, products, offerings, and business models, including value proposition and revenue (see next section). Digital transformation has also had an impact within companies on business process and digital capabilities (Westerman, Bonnet, & McAfee, 2014). The foundation of digital business transformation is closely related with organizational and external changes (market strategy). Users at both internal and external levels are affected (Earley, 2014).

Impact of the Digital Transformation on Business Models in the Media Sector: Toward Disrupted Business Models? Innovative ICT industries coupled with ever-growing products, services, and applications have placed business models at the heart of the new digital revolution (Osterwalder & Pigneur, 2010). As an integrating concept, the business model makes it possible to approach the various aspects related

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Table 8.3 The main resources and competencies of Apple, Google, and Microsoft. Apple

Google

Microsoft

Core business

Designing and manufacturing consumer electronics, PCs, and related software and peripheral products and networking solutions.

Development of a very powerful search engine: “matching Internet users with advertisers looking for leads”.

Threshold resources (tangible and intangible)

Organizational culture promoting entrepreneurial behavior Significant brand equity Customer service

Sophisticated search technology Strong brand image

Threshold competencies

Know-how in designing small, power-efficient consumer electronic devices Alliances with recording companies (iTunes 24x7 online commercial platform) Diversification strategy in a context of convergence

Unique (or distinctive) resources and/or core competencies

World’s number one brand name Provide innovative products and solutions via design and development of hardware and software Vertically integrated digital content distribution business Human resources The end of charismatic leadership? How to manage in the future?

Capability to solve both software engineering and hardware engineering issues to make Google Search viable and the most widely used search tool Capacity to create BE Diversification strategy in a context of convergence Scaling systems to handle traffic and monetizing it resulting in the development of the most widely used research engine Content (acquisition of YouTube in 2006)

Development, manufacturing, licensing, and supporting software products (operating systems, server & business solution applications). R&D resources focused on cloud computing services Technology Brand image Patents licenses Expertise in many IT-based innovations and technologies Implementing knowledge competencies in an online system Building BE Diversification strategy in a context of convergence Financial resources (high performances)

Key challenges by 2020/impact on resources and competencies

Source: Adapted from Daidj (2011, 2015) and updated.

How to define a “new conglomerate” strategy Creation of Alphabet Inc. in 2015: toward more autonomous business units and brands?

How to continue to add value and to achieve a sustainable competitive advantage?

Strategic Management Table 8.4 Key words related to the digital transformation. Authors

Definition

Key words

Bounfour (2016)

“Digital transformation is a new development in the use of digital artifacts, systems and symbols within and around organizations” (p. 20). “Digital transformation is concerned with the changes digital technologies can bring about in a company’s business model, which result in changed products or organizational structures or in the automation of processes. These changes can be observed in the rising demand for Internet-based media, which has led to changes of entire business models (for example in the music industry). Digital transformation is a complex issue that affects many or all segments within a company. Managers have to simultaneously balance the exploration and exploitation of their firms’ resources to achieve organizational agility” (p. 124). “Tomorrow’s management, supported by digital transformation, reflects many different tensions; notably between internal and external resources, horizontality and verticality in organizations, and short timeframes for decision making” (p. 1732). “Executives in all industries are using digital advances such as analytics, mobility, social media and smart embedded devices—and improving their use of traditional technologies such as ERP—to change customer relationships, internal processes, and value propositions” (Capgemini, 2011, p. 1). “A truly digital enterprise stands for more than just using new technologies for the sake of it. Rather, what truly distinguishes and gives a digital enterprise its competitive advantage is its culture, strategy and way of operating. Digital enterprises strive continuously to enable new and leaner operating models underpinned by agile business processes, connected platforms, analytics and collaboration capabilities that enhance the productivity of the firm. A digital enterprise relentlessly searches out, identifies and develops new digital business models” (p. 9).

External and internal levels

Hess, Matt, Benlian, and Wiesböck (2016)

Liu, Chen, and Chou (2011)

Bonnet (2013); Capgemini Consulting (2011); Fitzgerald, Kruschwitz, Bonnet, and Welch (2013) Weinelt (2016)

Changes in products, organizational structures, and process Agility

Management tensions

Reenvisioning customer experience, operational processes, and business models Digital enterprise Agile business process Connected platforms New digital business models

Source: Elaborated by the author.

to implementing a strategy: which resources and competences to mobilize in order to deliver their product or service, how to develop this product or service, and how to organize their activities in order to generate revenue. The choices made in these three fields directly influence the structure of revenue and the expense level (which together form the revenue model) and ultimately determine the profitability of the company’s chosen business model (Casadesus-Masanell & Ricart, 2007). A business model includes revenue streams.The key question is how to generate revenues. A firm can

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develop a revenue model based on subscription costs and fees (customer side), advertising (often used in media and entertainment), sponsoring revenues, revenue sharing (with other firms), and commissions and transaction cuts from provided services, and by simply selling a product. However, a business model is also a complex model. According to Baden-Fuller and Mangematin (2013), So far the literature lacks clear typological classifications that are robust to changing context and time (Hempel, 1965). Here we suggest the typology that considers four elements: Identifying the Customers (the number of separate customer groups); Customer Engagement (or the customer proposition); Monetization; and Value Chain and Linkages (governance typically concerning the firm internally). Each of these dimensions relates to the business model definition of either value creation or value capture, or both, and lends themselves to creating subcategories and thus the chance of a meaningful map of possibilities. (p. 420) Since the value chain is closely linked to the idea of business models, it may cast light on the sharing of revenues between the different companies involved (Daidj, 2015). Chan-Olmsted and Shay (2016) have evolved the concept of value chain by referring to the new digital media value network: Rooted in Porter’s concept of value creation activities and Wirtz’s business model approach, the proposed model demonstrates how media firms can develop a competitive advantage in corporate branding by leveraging the linkages between users, social media, interfaces, and the firms themselves. In essence, technological advances have significantly altered the role of media consumers. (p. 48) Given these brief reminders about business models, there remains the matter of the effects of the digital transformation on business models in the media sector. As was already mentioned, digital transformation is very often associated with on the idea of disruption. Disruption is rarely the result of a single innovation but occurs when two or more technologies converge. Disruptive innovation studies often analyze the issue of adaptation from the perspective of incumbents but research must take into consideration how new entrants introduce and develop disruptive innovation and therefore how they develop new business models. These are several disruptive technologies and innovations that shape enterprises in the field of IT. Media groups are also affected by these technological changes, which will have a significant impact on business models and revenues.

Future Research Agenda Bowman, Singh, and Thomas (2002) have underlined a parallel evolution between strategic thinking and how environmental challenges (technological and strategic) have changed over time. The objective of this chapter was not to give a comprehensive overview of the evolution of the concepts and tools of strategic management reflecting the changing dynamics of economies. The main goal was rather an attempt to give insights about the present challenges the discipline of strategic management has to face in order to facilitate a better understanding of dramatic strategic changes companies experience nowadays and to propose renewed frameworks related to the media industry. Technology breakthroughs like social media, mobile computing, analytics/big data, cloud computing, and to a lesser extent the Internet of things (IoT) have already begun to produce several

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effects in the media sector. An examination of the impact of two technologies—namely, cloud computing and business analytics—is proposed as follows. With cloud technology, any application or service can be delivered over a network or the Internet, with minimal or no local software or processing power required. The cloud refers also to the process of sharing resources (e.g., hardware, development platforms, and/or software) over the Internet. Multiple users can access the infrastructure simultaneously from different organizations. Cloud computing is considered a key innovation as it converts a fixed cost—maintenance of a data center—into a rental cost, which facilitates entry by new competitors. The pay-as-you-go (or pay-per-use) model is presented as the main business model of cloud technology. The cloud is enabling the explosive growth of Internet-based services, from search to streaming media to offline storage of personal data. For example, Netflix has been one of the biggest customers of Amazon cloud services—although Amazon’s recent move toward a monthly subscription model will put it into direct competition with Netflix for the pool of monthly subscribers and may change that (Bensinger, 2016). It is well known also that predictive data analytics play a key role in the success of companies which demand “powerful business analytics to make sense of the information and take full advantage of it” (Berman, 2012, p. 16). Media companies have long gathered customer data to understand who watched their content and consequently to increase audience and revenue per customer for content and offerings. Several ‘data-powered’ media companies have already adopted analytics and business intelligence (Newman, 2017). The ‘convergence motto’ known as AnyTime, AnyWhere, AnyDevice (ATAWAD) and ATAWADAC (ATAWAD + AnyContent) has to be combined in order to match each client’s needs and to improve the personalization of the viewing experience. As Küng (quoted by Tokbaeva, 2016) has underlined, “media management is an applied science; it seeks to apply theory to real situations. But the scope and velocity of change in those situations make scholarly investigation difficult: change is endemic, boundaries are being redrawn, the next ‘new thing’ becomes old very fast” (p. 29). The digital transformation is an emblematic example of this more complex reality. The concept has inspired numerous researchers and academics and has given rise to different interpretations. In the near future, digital transformation should be analyzed in depth and closely linked to other classical concepts in the strategy field, including value creation and capture, value chain (reconfiguration), business and revenue models (evolution), and networks (renewed linkages), in particular in the media and entertainment industry. Further research could address and investigate these key issues.

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9 ISSUES IN FINANCIAL MANAGEMENT Ronald J. Rizzuto, Michael O. Wirth and Pisun (Tracy) Xu

Introduction Ten years ago this Handbook chapter focused on media academic finance research in the following areas: dividend policy, capital structure theory, mergers and acquisitions, financial restructuring with a focus on tracking stocks, and real options analysis. At that time, media academics were doing limited research on these topics, with the exception of mergers and acquisitions. Notable research included Chan-Olmsted and Chang (2003), Compaine and Gomery (2000), Gershon (2002), Munk (2004) and Ozanich and Wirth (2004). Over the past ten years, media academics have broadened their focus to include financial restructuring with a particular emphasis on divestitures—sell-offs and spin-offs. As a result, this chapter discusses the topics noted earlier plus the area of business valuation, and interweaves the research work of media and traditional corporate finance academics. Following the literature review, the chapter concludes with ideas for future media finance research. This chapter provides a comprehensive review of recent media finance research with a focus on the U.S. market. Perspectives based on international markets are different due to variations in accounting standards, institutional environment and market structure.

Literature Review The following corporate finance topics are included in our literature review: corporate restructuring; mergers and acquisitions; business valuation methodology and research; capital structure and leverage decisions; and dividends and share repurchases. Developments in the academic literature (i.e., since 2005) are emphasized.

Research on Corporate Restructuring Eckbo and Thorburn’s (2013) survey of the theoretical and empirical corporate finance literature provides a comprehensive review of the concept of a “conglomerate discount” for excessive conglomeration, the valuation penalties corporations incur, the strategies available to companies to unlock value for shareholders, and an extensive discussion of restructuring techniques and their impacts, including: divestitures, spin-offs, equity carve-outs, tracking stocks, leverage recapitalizations

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and leveraged buyouts (LBOs). They also provide a review of the corporate restructuring empirical findings from both U.S. and international financial markets. Landers’s (2004) media industry divestiture research focused on the activity of several media companies (AOL Time Warner, Walt Disney, Viacom, News Corp., Comcast, AT&T, Cox Communications and Clear Channel Communications) between 1996 and 2000. The author observed that divestitures were a distinct research area and were not merely “acquisitions in reverse.” Landers noted that the 1996 Telecommunications Act created the opportunity for media industry mergers and necessitated the restructuring of many companies. The following categories were used to catalogue the 261 divestitures that occurred during this time period: portfolio restructuring (sell-off, spin-off, equity carve-out, split-off, split-up); financial restructuring (leveraged buyout); and organizational restructuring (downsizing). Of the 261 divestitures, 84% were sell-offs (where a parent company divests a subsidiary by selling it outright to an acquirer), 12% were downsizing/closures (where a parent company reduces the number of employees or closes a subsidiary), and 3% were equity carveouts (a partial divestiture where a parent company sells a portion of a subsidiary’s shares to the public while retaining an equity stake in the unit). Common reasons for divestiture included: furthering the brand, generating capital to reduce debt, refocusing on the core business, cutting costs and compulsory divestitures. Landers’s key contributions were: (1) recognizing divestitures/restructuring as an important media research area and (2) linking the media restructuring literature with the existing corporate finance restructuring literature. Alexander and Owers (2009) observed that there were more media industry divestitures, 2,382, than mergers and acquisitions, 496, from 1997–2008. Of the divestitures, 66 were over $1 billion as compared to 59 acquisitions of this size. Their article used an event study methodology for five case studies to gauge the impact of the announcement of restructuring on cumulative abnormal returns (CAR)—that is, the sum of the abnormal daily stock return relative to the sum of the average daily stock return after the announcement over different time periods. CAR’s statistical tests evaluate the significance of the market’s reaction to a divestiture announcement. Of the five cases evaluated, three were sell-offs (Vivendi, Tribune and Clear Channel) and two were spin-offs (Viacom and Liberty Media). The five case studies encompassed various motivations for restructuring: (1) Vivendi—raise cash to reduce debt, (2) Tribune—raise cash to buy back stock to reverse a declining stock price, (3) Clear Channel—reversal of an earlier overaggressive acquisition strategy, (4) Viacom—undo an earlier unsuccessful acquisition of CBS, and (5) Liberty Media—simplify a complicated corporate structure that financial analysts and investors found difficult to understand.The authors found that all of the case studies led to material economic gains for the restructured companies and the impact of the announcements was statistically significant for all firms except Vivendi. Owers and Alexander (2011) extended their 2009 research by empirically testing whether the 65 $1 billion+ media divestiture transactions (57 sell-offs and 6 spin-offs), 1997–2008, generated positive returns (including firm value impact) for buyers and sellers.They found a 3.66% average increase in selling firm abnormal returns and a 3.22% average increase for buying firms relative to the market over the three trading days around the time of the announcement.They concluded that the abnormal returns, for both buyers and sellers, were comparable to those in previous cross-industry studies (Hite, Owers, & Rogers, 1987; Markides, 1992).

Research on Mergers and Acquisitions This section focuses on two fundamental merger and acquisition (M&A) financial performance questions: (1) Do mergers generate benefits for buyers and sellers? (2) How do mergers create value for buyers? Several approaches have been used to answer these questions. The first stream of research studies the short- and long-time horizon wealth effects on shareholders by employing event study

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methodology to examine abnormal returns to the shareholders of acquiring/target firms over varying time periods surrounding the announcement of a transaction. The consensus of the short-term wealth effects literature is that M&As create statistically large gains for target shareholders. Golubov, Petmezas and Travlos’s (2013) survey found (1) average returns to target shareholders ranged from 20% to 40% at the time of acquisition announcements and (2) the combined value of the acquirer and target is, on average, marginally positive, with the target capturing the majority of the gains. The empirical evidence regarding short-term wealth effects suggests that acquiring shareholders do not gain in M&A transactions and that targets benefit at acquirers’ expense. Alexandridis, Mavrovitis and Travlos (2012) compared the sixth merger wave (2003–2007) with previous waves. They found that acquirers continued to destroy shareholder value and that cash-financed acquisitions destroyed more value than in the past (see Golubov, Petmezas, & Travlos, 2013, for a detailed review of earlier M&A research studies). A growing body of empirical research questions this traditional view by providing evidence supporting the neoclassical theory of M&A (Maksimovic & Phillips, 2001; Jovanovic & Rousseau, 2002; Harford, 2005), which argues that firm profit maximization drives the ownership of assets to their highest value use because acquirers expect, on average, to gain from M&A activity. Consistent with this perspective, a significantly positive abnormal return to acquiring shareholders was found to be associated with the first bid within an industry (Cai, Song, & Walkling, 2011), the acquisition of nonpublic firms (Arikan & Stulz, 2016) and public acquisition beyond the most competitive M&A markets in the United States, UK and Canada (Alexandridis, Petmezas, & Travolos, 2010). In addition, Ahern and Harford (2014) identified a new metric to measure the division of merger gains and found that targets do not do a great deal better than acquirers. The long-run wealth effects literature extends the event window to several years after the announcements and examines the acquirers’ post-acquisition stock performance. The findings are inconclusive. The size and direction of long-run M&A effects depend on the estimation techniques used (benchmark performance measure versus event window), means of payment (equity versus cash), bid status (hostile versus friendly), type of target firm (private versus public) and industrial relatedness of the acquirer and target. Bouwman, Fuller and Nain (2009) added a market valuation dimension. The authors found that acquirers purchasing during high stock market valuation periods underperformed those purchasing during low stock market valuation periods two years after the announcement. A second stream of research in this area studies the impact of the acquisition on the operating performance of the acquirer.The general approach is to compare accounting measures (e.g., earnings per share [EPS], leverage, profit margin, return on assets or equity) prior and subsequent to a transaction and to isolate the M&A effect by making adjustments for the industry trend or constructing a matching sample of non-acquisition firms by controlling for firm characteristics such as size and market-to-book ratio. Despite the breadth of the literature in this area, there is no clear evidence of improved post-acquisition performance, showing that earnings-based performance measures are associated with a decline in profitability of merging firms while cash flow performance measures are associated with a significant gain (see Martynova & Renneboog, 2008; Golubov, Petmezas, & Travlos, 2013). Post-acquisition performance is not related to the types/strategies of M&A deals in terms of related versus unrelated, horizontal versus vertical and/or focusing versus diversifying. However, Ghosh (2001) demonstrated that method of payment had a significant impact. Cash flow increased significantly following cash acquisitions but declined for stock acquisitions. A third stream of research studies the drivers of value creation in M&As by focusing on the two basic types of synergy—operating and financial. Common sources of operating synergy include economies of scale, greater pricing power, efficiency improvement and higher growth in new or existing markets resulting from the combination of two firms. Financial synergy is usually associated 132

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with a lower cost of capital or higher cash flows, such as tax benefits and/or increases in debt capacity. Using a sample of 264 large mergers, 1980–2004, Devos, Kadapkkam and Krishnamurthy (2009) reported average M&A synergy gains equivalent to 10% of the pre-merger equity values of the combined companies (8.38% from operating synergies and 1.64% from tax savings) with most operating synergies generated from savings in capital expenditures and working capital. Hoberg and Phillips (2010) investigated product market synergies and found value creation for M&A transactions with similar product market language. Bena and Li (2014) provided evidence of synergistic benefits based on technological linkages between acquirer and target firms’ innovation activities. Media M&A studies closely follow the first two streams of research reviewed earlier by examining M&A stock and operating performance. The general conclusion is that M&A destroys value for media acquirers. Peliter (2004) examined the relationship between economic performance, as measured by return on assets and net profit margin, and key motivations for making M&A decisions, including economic efficiency (size and scope), complementarity of assets, diversification across the media business, and internationalization. Utilizing a sample of 45 mergers by 11 major media firms (Time Warner, Disney, Viacom, News Corp, Sony, Bertelsmann, EMI, Vivendi, Lagardere, Pearson and Reed Elsevier), 1980–2000, Peliter found inverse correlations among all the metrics and profitability with the exception of the degree of internationalization. Owers and Alexander (2011) investigated the market’s reaction to media merger announcements, 1997–2008, in addition to divestiture announcements, as discussed in the corporate restructuring section.They found average abnormal returns for the target company increased by 15.25% but declined by −4.15% for the acquiring company over the three trading days around the M&A announcement, indicating that, on average, short-run media M&A transactions are good for the seller but destroy shareholder value for the buyer. They noted that the positive impact on the media target was comparable to the average gain of 18.21% documented in the cross-industry study of Hackbarth and Morellec (2008). However, the negative impact on the media acquirer was greater than the average abnormal return of −0.52% acquirers experienced in broader industry studies.

Research on Valuation This section builds on Ozanich (2006) from the first edition of this Handbook by focusing on recent advances in the valuation literature. Readers are encouraged to read Ozanich’s chapter to familiarize themselves with media valuation research literature not provided here. Albarran and Patrick (2005) reviewed valuation models used in the radio industry, detailing and comparing the multiple of revenues, multiple of cash flows, and a discounted cash flow model. Glaum and Friedrich (2006) stressed the increased importance of discounted cash flow (DCF) valuations for telecommunications companies and a reduced role for the relative valuation/market multiples (RV) approach after the “high-tech bubble.” Based on interviews with 25 sell-side analysts specializing in the European telecommunications sector, they found that DCF (72%) and RV models (24%) were the preferred valuation methods. The “DCF-dominant” analysts said they continued to use the multiples method as a “sanity check.” Nineteen of the 25 analysts indicated their valuation methods had changed since the high-tech bubble, noting that “their valuations were more fundamentally driven and cash-flow oriented today than [they were] at the end of the 1990s, with DCF now being the dominant valuation technique” (Glaum & Friedrich, 2006, p. 172). Bancel and Mittoo’s (2014) survey of 365 European financial analyst practitioners from a variety of industries found that DCF and RV were equally popular.There was widespread agreement regarding valuation frameworks but significant disagreement on the process for evaluating DCF valuation model parameters. While 87% of practitioners used the weighted average cost of capital to estimate the DCF discount rate and 80% used the capital asset pricing model (CAPM) to estimate the DCF 133

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cost of equity, there was significant divergence in the estimation of CAPM parameters. Bancel and Mittoo highlighted the importance of parameter estimation in the valuation process and urged academics and practitioners to focus on this issue. The authors also found that the 2007–2008 financial crisis caused 45% of respondents to revise their DCF parameters: 30% changed their discount rate, 24% their cost of debt, 21% their country risk assessment and 14% their firm liquidity assessment. Hoffman (2013) analyzed the process used by TeleCable, Landmark Communication’s cable television affiliate, in its acquisition of 145 companies over a period of two decades.The DCF framework employed in the company’s valuation process provided strict discipline for evaluating acquisitions as well as a structure for managing the integration of the acquisition into the core business. The company’s DCF model parameters included: a ten-year projection time frame, reasonable revenue and cash flow projections consistent with recent past performance, a minimum 15% after-tax hurdle discount rate as a baseline for acquisitions, a terminal value based on a multiple of EBITDA (earnings before interest, taxes, depreciation and amortization), and a “standard exit EBITDA multiple” (typically a multiple of 5) used for all acquisitions. Although Landmark’s board based its final acquisition valuations on a simpler criterion (a multiple of EBITDA), the DCF analysis was a required part of acquisition decisions. As Hoffman stated, the justification for DCF analysis . . . was not that it produced superior valuations. . . [T]he exercise was valued for the requirement that management carefully evaluated the economic drivers of the business, the opportunities to control costs, the rationality of forecasted growth rates, and the probability of competition and market forces affecting short- and long-term results. (Hoffman, 2013, p. 118) This approach resulted in $100 million in acquisitions, generating a $1.4 billion sale price for Landmark and nine-figure dividends over its history. Over the past few years, many new companies have appeared in the Internet, social media, mobile advertising and e-commerce space. Firms such as Google, Twitter, Facebook, Etsy, Alibaba and Snapchat (Snap) have become public companies, requiring financial analysts to grapple with how to value firms that did not have positive cash flow and sometimes did not have revenues prior to their initial public offering (IPO). Martin and Medina’s (2017) equity analyst’s report provides a valuation of Snap’s IPO and underscores the valuation challenges associated with these types of companies. In 2016, Snap had revenues of $404.5 million, EBITDA of −$459 million and net income of −$514.6 million. The report projects that the company will continue to generate negative EBITDA and free cash flow (FCF) until 2020. Several models/methods were used in valuing Snap: DCF, multiples including enterprise value (EV) to Sales, EV to EBITDA, P/E (price to earnings) and several FCF metrics. Martin and Medina concluded that Snap was overvalued by comparing its 2017 EV/Sales multiple of 30 with Facebook’s 2017 EV/Sales multiple of 10 and Google’s multiple of 6. In addition, based on an average EV/Sales multiple of 9 for Google and Facebook three years after their IPOs, they projected a 12% decline in Snap’s value based on 2019 projected revenues. Martin and Medina (2017) estimated Snap’s equity value between $21.9 and $27.4 billion ($19 to $23 per share). Alternatively, Nowak, Constantini and Lanterman (2017) estimated Snap’s equity value at $33.1 billion ($28 per share) using a ten-year DCF model as their primary valuation technique. These two valuations of Snap underscore two key points about valuations. • •

Valuation model parameters are more important than the valuation model used. New companies in the Internet, social media, mobile advertising and e-commerce space have become increasingly important parts of the media ecosystem. 134

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Research on Capital Structure and Leverage This section provides a broad view of the most relevant capital structure literature.The seminal work of Modigliani and Miller (1958) and the developments of the trade-off and pecking-order theories ( Jensen & Meckling, 1976; Myers, 1977; Myers, 1984; Myers & Majluf, 1984) highlight the work that’s been done to address three key capital structure research questions: (1) How do companies determine their capital structure? (2) Is there an optimal capital structure? (3) How does capital structure affect firm value? In spite of the extensive work that’s been done to answer these questions, empirical results are largely inconclusive (Graham & Leary, 2011). As a result, many financing decisions remain unexplained and capital structure remains a puzzle. Research in this area has broadened the earlier studies’ focus on cross-sectional variation to the time series nature of corporate capital structure and the aggregate trend. Graham, Leary and Robert’s (2015) analysis of capital structures of U.S. nonfinancial publicly traded firms, from 1921–2010, provides a representative work.The authors found that the aggregate leverage ratio, measured as debt to total financial capital, for unregulated firms fell from 17% to 11% from 1921 to 1945, more than quadrupled to 47% by the early 1990s, and declined to 28% by 2010. In contrast, the capital structure of the regulated sector (utilities, railroads and telecommunications) remained quite stable, with the aggregate leverage ratio ranging from 40% to 55% over time. Changes in government borrowing, macroeconomic uncertainty and financial sector development were found to be the most important factors associated with the substantial shift in financing behavior over time rather than traditional firm characteristics-based determinants. The two classic capital structure theories are trade-off theory and pecking-order theory.Trade-off theory suggests that a firm chooses an optimal capital structure by balancing the costs (e.g., financial distress) against the benefits (e.g., debt interest tax shields) of debt financing. Based on asymmetric information and adverse selection, pecking-order theory asserts that a firm’s capital structure reflects its cumulative financing decisions over time, with internal finance preferred over external finance and debt preferred over equity. These theories leave many of the observed capital structure patterns unexplained, such as the deviation from target leverage. Graham and Leary (2011) provide a comprehensive review of the successes and struggles experienced by traditional capital structure models. Extensions of existing theory, such as dynamic capital structure theory, have been developed to fill in the research gap. The dynamic capital structure theory incorporates the dynamic and endogenous nature of capital structure decisions into the conventional static framework of balancing the tax benefits of debt and the costs of financial distress. One strand of literature utilizes the costly adjustment model, which assumes a high cost of constant recapitalization, leading to an expectation that a firm’s leverage will drift within a range around the optimal leverage ratio (Fischer, Heinkel, & Zechner, 1989; Goldstein, Ju, & Leland, 2001). Capital structure adjustments are undertaken only when the benefits of being close to the target outweigh the costs of rebalancing. Empirical studies confirm the existence of leverage targets and the mean reversion behavior of gradual adjustments toward targets (Byoun, 2008; Faulkender, Flannery, Hankins, & Smith, 2012; Hovakimian & Li, 2011; Huang & Ritter, 2009; Kayhan & Titman, 2007). In contrast, the speed of adjustment (SOA) of capital structure has become a topic of intense debate in the literature. The magnitude of SOA documented in the aforementioned studies ranged from rapid adjustment, 17%–23% per year, to slow adjustment, 35%–40%, over five years. Empirical studies exploring SOA heterogeneities find evidence that differential SOAs are related to firmspecific factors impacting the costs and benefits of capital structure adjustments, including the degree of deviation from target, firms’ financing needs, cash flow situation, financial constraints, the sensitivity of cost of equity to leverage, and corporate governance quality (Byoun, 2008; Chang, Chou, & Huang, 2014; Faulkender, Flannery, Hankins, & Smith, 2012; Zhou, Tan, Faff, & Zhu, 2016). In 135

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addition, Cook and Tang (2010) found that firms adjusted their leverage toward target faster when macroeconomic conditions were good, providing firms with better access to external capital. The other strand of inquiry in this area studies dynamic capital structure by endogenizing the financing decision with other corporate decisions, such as investment. DeAngelo, DeAngelo and Whited (2010) show that firms deviate deliberately, but temporarily, from target by issuing transitory debt to meet funding needs associated with investment shocks when equity issuance and cash holdings are costly. They also conclude that intentional temporary movements away from target lead to low leverage targets, leverage changes accompanying investment spikes, and slow average speed of adjustment to target. Another area in which capital structure inquiry has expanded is to examine the impact of nonfinancial stakeholders, such as suppliers, customers and employees, on capital structure choices. Related studies focus on the important role of product/labor market conditions and the strategic use of debt financing. Research results demonstrate that, on average, companies maintain a lower debt level when they operate in an industry with strategic alliances or joint ventures established with its customer/supplier industry (Kale & Shahrur, 2007); when their suppliers are dedicated, with much of their output being sold to one customer (Banerjee, Kim, & Dasgupta, 2008); and when they adopt more employee-friendly policies as measured by the Employee Treatment Index (Bae, Kang, & Wang, 2011). Furthermore, using the right-to-work laws and unemployment insurance work stoppage provisions as sources of exogenous variation, Matsa (2010) found that companies use more debt financing to improve their bargaining power with workers.

Research on Dividends and Stock Repurchases Payout policy involves large wealth transfers in the economy and plays an important role in corporate finance. The level (how much to pay) and form (how to pay) of corporate payout have changed remarkably over time. A prominent trend is that stock repurchases have become the dominant form of stockholder payout (Floyd, Li, & Skinner, 2015). The level of repurchasing activity has increased dramatically and the distribution is widespread across firms. Because traditional theories of payout policy (i.e., agency, signaling, free cash flow, tax- and clientele-based theories) lack the power to explain the secular changes and increased repurchases (Farre-Mensa, Michaely, & Schmalz, 2014), research has explored alternative motivations and provides additional insights regarding why firms repurchase stock. This section reviews the latest academic studies focusing on stock repurchases. As noted in Brav, Graham, Harvey and Michaely’s (2005) survey, stock repurchases are preferred because they provide greater financial flexibility—the ability to avoid underinvestment as well as financial distress. In contrast, dividends constitute a long-term commitment of regular payments that cannot be easily reversed, which creates significant constraints (Leary & Michaely, 2011). Bonaimé, Hankins and Harford (2014) relate payout policy to corporate hedging policy and find that firms that do not engage in risk management have a more flexible payout mechanism, favoring stock repurchases over dividends. Hoberg, Phillips and Prabhala (2014) argue that payout flexibility allows firms to aggressively combat product market competitive threats. As a result, firms facing changes in the product market have a lower (higher) propensity to pay out (retain cash or liquid assets) and are particularly conservative with respect to paying dividends. Kulchania (2016) examined the effects of cost structure on payout and found that firms with higher fixed costs choose to pay a higher fraction of their total payout via stock repurchases. Stock mispricing and opportunistic market timing to exploit mispricing are also cited by managers as key repurchase determinants (Brav, Graham, Harvey, & Michaely, 2005). One strand of literature examines long-run abnormal returns following repurchase announcements. Positive long-run abnormal returns, often interpreted as evidence of repurchase timing skill, appear to be

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associated only with overly pessimistic analyst recommendations (Peyer & Vermaelen, 2009) and occur only after the completion of individual repurchase programs but not during the periods between authorization and completion (Bargeron, Bonaimé, & Thomas, 2017). Furthermore, Fu and Huang (2016) show that repurchases from 2003 to 2012 did not incur positive long-run abnormal returns and argue that recent repurchase events were for business-operating reasons rather than for market timing. Another strand of literature examines market timing behavior by testing whether firms consistently repurchase shares at below-average price points. A few studies utilized actual repurchase data (available on a monthly basis since 2004 in the United States) and found that repurchase prices were lower relative to average stock prices during the same month or quarter. Managers exhibited better market timing ability: within small and growth firms (Ben-Rephael, Oded, & Wohl, 2014) and within firms that repurchase less frequently and whose insiders are simultaneously purchasing in their own accounts (Dittmar & Field, 2015). Conversely, Dittmar and Dittmar (2008) examined the repurchase waves and found a positive relationship between relative market valuation and growth in repurchasing activity. They also found that repurchases are highly pro-cyclical and that they follow GDP growth. Managerial incentives and compensation practices have drawn much attention in the literature as a primary driver for payout policy trends. Recent studies in this area have advanced our understanding of traditional channels linking compensation to corporate payout, including the dividend protection channel and the earnings per share (EPS) channel. The dividend protection channel builds on the value impact of dividend payments on stockbased compensation. Executive stock options are generally not protected against the decline in stock price (Lambert, Lanen, & Larcker, 1989; Murphy, 1999). As a result, the adoption of non-dividend protected options incentivizes management to avoid/reduce dividends, and, if there is a target payout amount, to replace dividends with repurchases. Recent findings consistently show a negative (positive) relationship between executive stock options and dividends (repurchases), following the dividend tax rate reduction in 2003 (Aboody & Kasznik, 2008) and across international regimes (Burns, McTier, & Minnick, 2015; De Cesari & Ozkan, 2015). Cuny, Martin and Puthenpurackal (2009) reveal the dominant effects of disincentives from lack of dividend protection for options. Reductions in dividends were not fully offset by repurchases, resulting in lower total payout for firms with higher options usage. The EPS channel links repurchase decisions to EPS-related considerations. A well-documented EPS-related motivation for repurchases is to offset the earnings dilution caused by the exercise of employee stock options. Consistent with previous literature (Kahle, 2002), Cuny, Martin and Puthenpurackal (2009) found evidence of antidilution-driven repurchases and conclude that the increase in repurchases due to antidilution incentives is of smaller magnitude and does not offset the decreased dividends due to non-dividend protection incentives. EPS-based executive compensation contracts also play an important role in payout policy.Young and Yang (2011) used a sample of UK nonfinancial firms, 1998–2006, to document a significant positive link between the level of repurchase activity and the compensation arrangement contingent on EPS, including bonus and long-term incentive plans conditioning rewards on EPS performance. Cheng, Harford and Zhang (2015) found that U.S. CEOs with EPS-based bonuses were more likely to repurchase, and the closer they are to their EPS bonus threshold, the greater the effect. Another EPS channel that motivates repurchases relies on benchmark-beating earnings management activity. Almeida, Fos and Kronlund (2016) studied the repurchases employed to meet analyst forecasts and show that such repurchases are negatively related to R&D, employment and cash holdings.Their findings shed new light on how payout policy affects other corporate decisions, suggesting that managers are willing to sacrifice valuable investments to finance repurchases.

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Future Media Industry Finance Research This section provides ideas for future media industry finance research, emphasizing the potential for applying finance theory and methodology to answer media industry research questions. The continued evolution of information delivery mechanisms and related technology underscores the importance of this particular research topic.

Corporate Restructuring Research The media industry is a fertile area for research on corporate restructuring because there are numerous examples of companies attempting to unlock value through spin-offs, divestitures, split-offs and tracking stocks. Contemporary examples of corporate restructuring in the media industry include: Gannett, Tribune Company and E.W. Scripps in the newspaper industry; and AOL Time Warner, Liberty Media, Viacom and NBC Universal in the cable/broadcasting industry. The prospect for more of this type of activity in the future appears to be great. At the time this chapter was being written, speculation suggested that Disney may spin off ESPN and ABC as separate companies. Possible research projects in the area of corporate restructuring include the following: 1. Investigate the size of the conglomerate discount in the media industry by chronicling the size of the discount as well as whether the restructurings unlock value for shareholders similar to the research of Khorana, Shivdasani, Stendevad and Sanzhar (2011). 2. Extend the research of Mazur (2015) to other media companies beyond Liberty Global and Expedia by developing research projects focused on how media industry spin-offs create an acquisition currency. Likewise, examine how spin-offs like Starz Entertainment are merged into other firms (e.g., the Lions Gate Entertainment merger with Starz). 3. Document the pace of spin-offs/separations over time for the media industry by exploring how media industry experiences with respect to spin-offs/separations compare to other industries. This would provide a comparison to the work of Zenner, Junek and Chivukula (2015). 4. Develop a case study focused on Liberty Media’s various tracking stocks to extend and update the research of Davidson and Harper (2014), and their view that tracking stocks are disappearing. Davidson and Harper’s research ignores John Malone’s Liberty Media, which currently has three tracking stocks: Liberty SiriusXM Group, the Braves Group and the Formula One Group, along with the tracking stocks that are being created as a result of Liberty Media’s acquisition of GCI Cable.

Mergers and Acquisitions Research As illustrated in the foregoing literature review, the research on mergers and acquisitions is extensive. Research focused on whether mergers generate benefits for buyers and sellers and on whether mergers create value for buyers is massive. However, the results are not definitive. Some future suggestions for research questions on which media finance researchers interested in mergers and acquisitions might focus include the following: 1. Empirically investigate the factors associated with the poor returns realized by media industry M&A acquirers. Are the poor returns a result of competition and high premiums, bad decision making or other factors? 2. Empirically examine the sources of value and synergies in media mergers and acquisitions. New areas to focus on include: technology and innovation, product synergies, market power and corporate governance.

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Valuation Research Although there is a substantial body of valuation-focused corporate finance research literature, very little of it comes from media academics. This is an interesting anomaly given the existence of many public companies in various segments of the media industry. Some interesting research topics media finance researchers might pursue include the following. 1. Conduct a survey research study focused on media industry financial analysts and finance professionals to see how their valuation methodology has changed since the dot-com/Telecom bubble (1999–2001) and the “Great Recession” (2007–2009). The broader industry research of Glaum and Friedrich (2006) and Bancel and Mittoo (2014) provides the comparison points for studies in this area. 2. Identify the DCF and CAPM parameters used by media financial analysts and their rationale for selecting those parameters as part of an academic research study focused on media industry valuation methodology. 3. Develop a baseline academic study of the methods and parameters used to estimate the value of Internet, social media, mobile advertising, e-commerce and other types of new media companies. 4. In the valuation literature review, we did not find any additional research related to the use of real options for company valuations. As the corporate finance research of Block (2007) shows, the adoption of real options for company valuations and capital investment decisions has been quite slow to develop. However, given the potential for real options to capture the value of embedded options, media academics should continue to monitor developments in this area for possible future media finance research ideas.

Capital Structure and Leverage Research Media researchers have not focused on capital structure, possibly because capital structure/leverage in the media industry is rather stable and cross-sectional variations are limited. However, given the substantial developments in cross-industry research discussed earlier, capital structure/leverage presents a promising area for future research and deserves more attention from media researchers. A few suggestions for research in this area are provided ahead. 1. Extend the dynamic capital structure models to the media industry and investigate how media firms manage capital structure over time. Possible research questions include: Is there a leverage target? Do firms make adjustments if leverage ratios deviate from the target? If so, how rapidly do the adjustments take place? What might prevent firms from making immediate adjustments? 2. Endogenize the financing decision and focus on its interrelation with other corporate decisions. Following DeAngelo, DeAngelo and Whited (2010), it would be interesting to see how media firms meet funding needs associated with unanticipated investment shocks. 3. Examine the product market effects of capital structure and link firms’ financial policy to real activities. As documented in recent studies (Kale & Shahrur, 2007; Banerjee, Kim, & Dasgupta, 2008), the interests of a firm’s suppliers and customers play an important role in the determination of capital structure. A noteworthy extension would be to explore whether and how financing decisions may affect and be affected by the characteristics of the upstream and downstream firms in the media industry vertical supply chain. 4. Explore the strategic role of financing choices. Recent literature uncovers the strategic impacts of labor contracting on financing decisions (Bae, Kang, & Wang, 2011; Matsa, 2010). Given the considerable power of labor unions in the media industry, research on labor-related questions

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could be rewarding. Do media firms consider labor effects in making financing decisions? What are the important labor-related factors? Can labor account for the within-industry variation in financial policy?

Dividend and Stock Repurchase Research The payout pattern in the media industry has followed the general trend across all industries, with stock repurchases becoming the primary payout vehicle. Lazonick (2015) found that four media companies (SBC Communication, now AT&T, Time Warner, Disney and DirectTV) were among the top 25 stock repurchasers from 2004 to 2013. The average percentage of dollars spent in repurchases over net income ranged from 45 to 230%, while the average percentage of dollars spent in dividends over net income ranged from 0 to 78%. In spite of the dramatic changes over time and notable economic impacts, little research has studied payout policy in the media industry. Ideas for future research in this area include the following. 1. Document the evolution of corporate payout policy in the media industry and investigate the determinants.The main research questions include: How have media industry corporate payouts changed over time? Do the existing payout models explain the changes identified? If not, what forces are behind these changes? 2. Extend recent payout literature related to financial flexibility, mispricing and compensation practices to the media industry. Some interesting research questions include: Does financial flexibility play a role in media firms’ payout policy? Are repurchases in the media industry “good” buys? What is the long-run stock performance following repurchase announcements? Do media managers time the market when buying back shares? How does the executive compensation structure of media firms affect the level and form of payouts? Through which channels do a media firm’s compensation practices impact its payout choices? 3. Analyze how payout policy interacts with other corporate decisions by studying the existence, magnitude and importance of payout causal effects on investments (Almeida, Fos, & Kronlund, 2016). The review of recent corporate finance literature provided in this chapter covers the areas of restructuring, valuation, capital structure and leverage, and dividends and repurchases. Fruitful avenues for future media finance research are identified and rich and accessible information is provided to broaden knowledge of media financial management practices and of the evolving media industry finance landscape.

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10 ADVERTISING IN MEDIA MANAGEMENT AND ECONOMICS Louisa Ha

What Is Advertising? Advertising is commonly referred to as “the paid communication from an identified sponsor using mass media to persuade an audience” (Thorson & Rodgers, 2012, p. 4). However, such a definition’s emphasis on payment excludes public service announcements (PSAs) and other pro bono advertisements as common forms of advertising in media. Also, using “mass media” in general does not differentiate the editorial content and advertising messages. Hence, it is proposed that for media management purposes, advertising should be defined as any deliberate message with an identified sponsor displayed in third-party editorial media. This definition underscores the role of editorial media and third parties in the advertising process. Third-party editorial media are media producing professional editorial content which is independent from and not owned by the advertiser or sponsor.The purpose of advertising is to utilize the mass reach and credibility of independent editorial media other than the advertiser itself to inform and persuade consumers. Based on this definition, station promos on a TV station’s own program or its sister stations’ programs would not be counted as advertising but self- and cross-promotion respectively.Websites also would not be considered third-party editorial media and so the advertiser’s web content is not advertising from media management’s perspective. TV commercials for newly released movies would be considered advertising unless the movies are owned by the TV networks airing the commercials, such as Paramount (owned by Viacom). The choice of which third-party media to use to advertise the product is an important decision for advertisers. The deliberateness of message includes both persuasive intent and informative or goodwill intent because advertising can have multiple purposes other than persuasion that do not involve any change in attitude, such as reinforcement, reminders, and announcements (Faber, Duff, & Nan, 2012). Media management is about the management of media with editorial content in which the media organization selects the content or sets rules for content to be displayed in its media outlet. So, user-generated social media, such as Facebook and Twitter, is still editorial media, albeit most of its content is not created by the companies themselves. One of the media industry’s economic characteristics is that it operates in a dual product market, serving both the advertisers and the consumers. Media companies can have dual sources of income with direct and indirect consumer payment (Picard, 1989; Albarran, 2002). Direct consumer payment may be in the form of subscription, pay-per-view, single copy price or admission tickets. Advertising is a common form of indirect consumer payment, in which media consumers receive 144

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the advertisements and buy the advertised product instead of paying for the media content directly. It has become the lifeblood of media with the largest audiences, such as broadcast TV networks and social media. The free or very low price further increases the reach of the media. The large audience of editorial media is what attracts advertisers to pay for the advertising space or airtime. Consequently, the media industries become the drivers of popular culture (Anderson & Gabszewicz, 2006). Media managers can choose their revenue model, relying on either indirect payment income, such as advertising, sponsorship, commission on sales or government and organizational funding, or direct payment income, such as subscription fee or single copy sales or a mix of both. The importance of advertising as the income revenue for the media industry is paramount in capitalist markets, such as the United States, Japan, and South Korea. Government-owned media are more a niche service in these markets. Corporations are the major sponsor of media content. In the United States, advertising expenditure in 2017 was estimated to reach 210 billion U.S. dollars (eMarketer, n.d.). All major media either are funded solely by advertising income, such as broadcast TV and radio, or have a substantial portion of income coming from advertising, such as newspapers, magazines, and basic cable TV. The maximization of the value of the advertising inventory and advertising sales management are important topics for media management. Advertising inventory is perishable and can be available only once, similar to a seat on an airplane. Furthermore, if the advertising space is unsold, the media organization must fill it with editorial content and lose revenue. The lost sale of the unused advertising space cannot be recuperated at a later time. Although these topics are not commonly found in published research, media managers have their own internal training on how advertising value can be maximized by putting a premium on space and airtime with the highest demand and filling the rest with a low advertising price. Apart from being the primary source of funding for commercial media, advertising is also part of the media content. In television, there are paid programs and infomercials that fill the fringe airtime of television. The Sunday inserts of newspapers with coupons and shoppers are what attract people to buy Sunday newspapers. The amount of advertisements determines the amount of newsholes (news editorial space) to fill for newspapers and other news media ( Jones & Carter, 1959; Lacy, Robinson, & Riffe, 1995). This chapter will focus on research about advertising’s influence on editorial content and its implications for media management. Research on this broad topic can be subdivided into five categories: (1) the economic nature of media, (2) importance of advertising revenue in different media, (3) revenue models of media, (4) commercial pressure on media and influence of advertising on editorial content diversity and independence, and (5) advertising clutter and perception of editorial quality.

Economic Nature of Media as Goods The study on the economic nature of media sheds light on how media product and services should be provided to the public. There are three forms of goods: public goods, mixed goods, and private goods (Blümel, Pethig, & von Dem Hagen, 1986). Not all forms of media products are the same in economic nature. Broadcast and online media are public goods or near public goods because they are non-rival in consumption and are almost non-excludable (Hoskins, McFadyen, & Finn, 2004; Owen & Wildman, 1992). Non-rival consumption means that someone consuming a broadcast TV program will not diminish another person consuming the same program at the same time. Everyone can simultaneously consume the same program without additional cost. Broadcast radio and TV are also non-excludable because anyone with a receiver will be able to receive the terrestrial broadcast within its footprint. Online content is basically the same as broadcast. As long as people have Internet service, they can access the online content without diminishing others’ use of the digital content because the Internet service provider does not control what content is accessed by the users. To 145

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exclude someone from accessing online content for free requires extra effort and cost to the content provider, such as a paywall or authentication system that blocks people from using it, similar to cable TV. Cable TV makes the program service excludable through the set-top box’s scrambling of the cable transmitted signals. Movies shown in cinemas and pay cable are mixed goods because consumers can consume the content at the same time (non-rival) but they are excludable through the ticket admission and cable subscription and provision of set-top box to display the TV signals. Online entertainment content, such as Netflix, can more easily achieve online subscription because of the on-demand convenience, binge watching possibilities not available offline, exclusive original shows, and much lower price compared to high cable subscription fees and movie tickets. Print books are private goods as one individual can read only one book at a time and others have to read another hard copy of the book. Typically, people cannot share a book at the same time. Based on the economic nature of the media product format, for public goods such as broadcast TV and radio, the government is the natural funding source because of the difficulty of excluding people from use and also the strategic importance for the government of having a mass medium to communicate with the public. But government is a natural monopoly. Many government-funded media become the propaganda machine for the government. If we want competition of media products and diversity of content, and to have the media serve a watchdog function for the public to monitor the government’s performance, then they have to be provided by private sectors. Public broadcast networks, such as the BBC, are a still monopoly because public revenue such as broadcast license fees cannot support multiple public broadcasters competing for the same revenue pool. If the private sectors are to provide public good types of media product formats, they have to use an indirect form of consumer payment to compensate for the cost because no one will pay for the service as broadcast and online content is non-excludable and non-rival in consumption. Advertising becomes the best form of funding support or revenue for these media forms because the public nature of these media means they will reach a large number of audiences at no additional cost to the media.They can charge advertisers a high price for access to the large audience. Advertisers themselves lack the independent editorial content and the audience base of TV networks and popular web sites.They have to pay for that access to audiences. The extremely high price of Super Bowl broadcast TV commercials in the United States is an example of the provision of a highly popular sports game to give advertisers simultaneous reach to the largest national audience with a very high profit margin for the network that owns the broadcast right. The protection for the broadcast TV network is the exclusivity as the only source for the commercial airtime and the live broadcast for all audiences. In general, people are unwilling to pay for media content when there are substitutes available for free, even though those substitutes may be of lower quality. Ha and Zhang (2017) discussed the parity readers or audiences who care less about the quality and the importance of public good property of news content, especially online content, when access to free alternatives is easy for Internet users. The rise of free tabloids and free newspapers in the United States and other parts of the world which are totally supported by advertising shows that the concept of free news content is well accepted by consumers (Gabszewicz, Laussel, & Sonnac, 2012; Tennant, 2014). These free newspapers operate on a public good basis to serve parity news readers. Although these newspapers probably are perceived as lower quality than the elite newspapers, they are seen as functional substitutes for news to many mass audiences. Despite readers’ annoyance about advertising, they would still rather get information and entertainment for free than pay a high price. Chyi’s (2012) study of U.S. adults online regarding news payment found that how users are charged does not make much difference—whether they are charged does. Bleyen and Van Hove (2010) examined the revenue models of different Western European online newspapers and found that elite quality papers more likely to charge subscription fees online than the popular press. Similarly, in the United States, the newspapers that reported success using subscription models for online newspapers are limited to the elite papers, such as the Wall Street Journal and 146

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the New York Times. Most paywalls of U.S. newspapers were not successful (Ha & Zhang, 2017; Mutter, 2015). In fact, the media market will be much smaller if the direct pay model dominates because only a few news media outlets are able to command a price people are willing to pay directly.

Importance of Advertising to Different Media Because of the different economic properties of media formats, the importance of advertising is different for different media. To those media formats that are more of a public good in nature and for which it is easy to find substitutes, such as broadcast television, radio and online media, advertising is the most important source of income. Peitz and Villeti (2008) show how broadcast TV stations that have no mechanism to collect money from consumers and have to rely totally on advertising resulted in an advertising nuisance, while pay-TV, such as cable, can have dual sources of revenue and is less likely to have market failures. Advertising is supplemental and not the primary income for cable TV service. Pay-TV service already compensates the welfare of the viewers with highly differentiated programs and the role of public broadcasting is deemed unjustified to correct market failure. Evans (2009) explicates how online advertising provides two potentially significant economic efficiencies: online advertising allows the economy to reduce the amount of resources devoted to creating content for aggregating and sorting potential buyers. Online advertising increases the accuracy of the match between the buyer and the seller with user data so that the seller has greater ability to target consumers who are likely to buy, and the consumer is more likely to receive useful messages and less likely to receive time-consuming but irrelevant messages. Based on these economic functions, advertising should be the primary source of income for online media. Using a Marxian critical approach, Robinson (2015) explains the success of Facebook and Google as a nonpaying sphere coexisting with a capitalist enterprise by how the relationships with other capitals together with the loyalty of their users are crucial factors in their ability to accumulate capital to be attractive to advertisers.Their dependence on advertising income means they create value produced elsewhere in the economy instead of charging the users. One important question for media managers is what factors affect advertising revenue. In an early study on newspaper advertising, Glover and Hetland (1978) found circulation is the most important predictor of advertising revenue, more than the advertising rate. Although studies such as Kalita and Ducoffe (1995) found no impact of advertising revenue on the price of magazines, they cannot deny the importance of advertising as an income for consumer magazines. These results show only that magazine price is independent of advertising income. Depken II and Wilson’s (2004) study of 95 U.S. magazines found mixed results. For about half the magazines, advertising intensity correlates with higher magazine price and higher number of subscriptions, but for some other magazines, advertising intensity lowers the cover price and the number of subscriptions. Entertainment magazines benefit the most from advertising. Indeed, the price of consumer magazines now is very hard to study because of the deep discount practices of magazines in selling their subscriptions and the great difference between single copy and subscription prices. Most importantly, some trade magazines totally rely on advertising. In addition to the magazine’s readership size, Wirtz, Pelz, and Ullrich’s (2011) study of German magazines demonstrated that advertising revenue performance can be substantially affected by the advertising marketing competence of the magazine. Kind, Nilssen, and Sørgard’s (2009) economic analysis shows that the scope for raising revenues from consumer payment is constrained by competition which offers close substitutes.They proposed that the less differentiated the media firms’ content, the larger the proportion of their revenue from advertising. However, when the number of competing media products is large, the firm’s ability to get revenue from advertising is lowered and would facilitate the growth of direct payment. For many traditional media, their online websites are still just a complementary service of existing traditional media (the clicks and bricks) of broadcast and cable TV, playing just a supportive role 147

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rather than a full-blown content service or a primary revenue generator (Chan-Olmsted & Ha, 2003, Ha & Chan-Olmsted, 2004). By operating on an additional online platform, the advertising income from the offline traditional media supports both the offline and online operation because typically online advertising does not generate sufficient income for the websites.

Revenue Models of Media Because the media industry has dual product markets, revenue models of media products highly vary. They can range from completely free to consumers (supported fully by advertisers) to completely paid by the consumers, such as premium cable service, like Home Box Office (HBO). Advertising allows people who cannot afford or are unwilling to pay for media content access to information and entertainment. Free content can maximize audiences because there is no monetary risk to the audience. So, for media that strive to achieve the largest audience, the free model supported by advertising is the best way to go. This indirect payment revenue model is a win-win situation for the two sides of the media markets—the advertisers, who need to find ways to communicate to a large or specific audience, and the audience, who wants to get content for free. Media get profits from advertising and serve both advertisers and audiences as customers. Several studies on the “free” model of media content payment supported such benefits of advertising as the revenue source of media. Halbheer, Stahl, Koenigsberg, and Lehmann’s (2014) econometric analysis of free, sampling, and full paid content models of online newspapers shows that a paid content strategy is optimal only if advertising effectiveness is sufficiently low compared to prior quality expectations. For intermediate levels of advertising effectiveness, the publisher should use a sampling strategy. The publisher should switch to a free content strategy once advertising is sufficiently effective compared to posterior quality expectations. The free sample strategy (metered paywall) should be kept even if paid content is used to engage the readers. Kesenne’s (2012) study shows that media companies earn more by charging advertisers rather than consumers in sports programming, entertainment content, and news. After analyzing the business practices of 48 leading webcasters in the United States and South Korea, Ha and Ganahl (2004) found that both clicks-and-bricks and pure-play webcasters in both countries have a similar reliance on advertising as their major source of revenue, even though they employ different content strategies to their own media’s advantages. Ha and Ganahl’s (2007) study of the business models of webcasters worldwide found that indirect consumer payment is most prominent in all types of leading webcasters in their study of 16 countries and the Arab region. Those that do not receive a parent organization subsidy or government support rely on advertising to provide the free webcast service.Very few of the leading webcasters were able or willing to charge consumers for their content except in download and exclusive entertainment content. This is especially important for all new media services as free content reduces risk perception and encourages trial. Consumers have more latitude for technical problems and other issues when it is free. In online media where no geographic protection is afforded to the media content providers, content providers compete on offering unique content and better packaged content. Podcasts and mobile apps use the same free trial concepts to maximize trial and use. In fact, more than 90% of mobile apps are free and many are advertising-supported (Ruiz, Nagappan, Adams, Berger, Dienst, & Hassan, 2016). Basically, all popular social media run on a primarily advertising-supported model to maximize their audience. The only exception is LinkedIn, a professional social media site, which uses a combination of advertising (recruiting service for companies) and subscription at the premium level. Media managers have to face the reality of finding revenue or funding support for their media content. Although Waterman and Ji (2012) painted a gloomy picture of overall revenue decline of the U.S. media industry as a percentage of GDP and the shift toward direct market payment of media products and services from advertising, other scholars see media technologies bringing new business models and opportunities for media companies. Kumar and Sethi’s (2009) study of web content 148

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providers concludes that pure revenue models, such as free-access models and pure subscription feebased models, are not sufficient to support the survival of online information sellers. They advocated hybrid models based on a combination of subscription fees and advertising revenues to replace the pure revenue models. Using the optimal control theory, they identify optimal levels of subscription fees and advertisements for web content over time. It is especially important for a monopolist or market leader to choose a hybrid model to capture the market (Lin, Ke, & Winston, 2012).YouTube, the largest video portal, now employs a hybrid model, offering YouTube Red, which is free of advertising for U.S.$10 a month, and regular YouTube with advertising for free. It was reported that six months after its launch it was able to get 1 million paid subscribers, and another 1.5 million subscribers were on free trial. The bulk of its audience is still the free users (Singleton, 2016). This is following Anderson’s (2009) freemium model, in which digital products can be provided as free at a basic level and also at a premium for those willing to pay for them with higher-quality or exclusive content. As Tag (2009) shows, companies that allow a package without advertising provide a good-quality experience for their subscribers, but those consumers who chose to have the free ad-supported version received an increased quantity of ads, which created a bad experience for consumers. These tactics were employed to drive them to the ad-free version. Pauwels and Weiss’s (2008) study of an online service provider changing from a free to fee model concludes that the failure was caused by pushing for the change before the momentum in fee subscriptions has materialized, when they set prices higher than the level the consumer is willing to pay for their content, when they are up against a dominant competitor with better (perceived) content and/or lower price levels, when they charge fees for all (previously free) content, and when they fail to ramp up marketing communication efforts and execute them effectively. Should media managers just choose between two extremes—an extremely annoying ad-supported media environment and a clean ad-free environment—or can we find a good compromise? More importantly, should advertisers be denied a healthy and credible editorial media to communicate their messages to their consumers? Finding the right balance is a challenge for media managers and advertisers.

Variations of Advertising (Sponsored Messages) Due to public skepticism toward advertising and audiences’ skipping and avoidance of commercials and advertisements, advertisers try to attract attention to the brand and advertising messages via integrating with editorial content (hybrid advertising formats), such as product placements and sponsored content (von Rimscha, Rademacher, Thomas, & Siegert, 2008). Product placements can take the form of prop placement putting the brand product in the background or planned integration into the editorial content. Sponsored programs attach the brand name to a TV/radio program. In 2014, product placement revenue reached 6 billion U.S. dollars and is expected to grow to 11.5 billion by 2019 (Lafayette, 2015). But many of these product placement packages include commercial spots. These variations of advertising are all sponsored messages that have a commercial intent to promote a brand or a product.These sponsored contents are not skippable or blockable by adblocker programs and DVR skipping functions. They become forced brand message exposure to the audience. But in von Rimscha et al.’s (2008) interviews of 20 advertising industry experts, including agency executives, advertisers, and media company executives, they did not think these hybrid forms of advertising were as effective as traditional TV commercials because of the many limitations of using those formats and advertising creativity was very limited. These hybrid forms were seen as useful supplementary materials to reinforce the product commercials. Surprisingly, the media companies were more eager than the advertisers and agencies to offer integration of editorial content and advertising messages. Their study shows that both advertisers and media company executives believe that advertising should be editorial content itself in a longer form so that commercials themselves are attractive to the audience and do not rely on editorial content to support them. Ham, Park, and 149

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Park’s (2016) national study of 21,944 U.S. consumers found their responses to product placement in television and movies highly varied from apathetic, negative, entertainment, information value to ambivalent with mixed feelings. Those who are more positive toward product placement are also those who are positive toward advertising. Hence product placement does not mitigate the negative attitudes toward advertising. It is still preaching to the choir. Native ads, also known as sponsored content (Wojdynski & Evans, 2016), are getting more and more traction as people avoid advertising in editorial media, especially online. Business Insider estimated U.S.$4.1 billion was spent on native ads and forecast that 74% of all digital advertising revenue by 2021 would be from native ads, which include native in-feed ads on publisher properties and social platforms (Boland, 2016). Wojdynski and Evans’s (2016) experiment found very few participants can distinguish native ads from editorial content. They also found that a middle-positioned disclosure attracts greater visual attention and likelihood of fixation compared to top- and bottompositioned disclosures, which have been believed to have stronger attention. Nonetheless, recognizing the advertising disclosure negatively affected the credibility of the native ad as a news story. But in general, most people did not know the content was sponsored. The persuasive effect is also low for sponsored content. Their study results indicate the need to develop sponsor disclosure standards based on empirical evidence to avoid lowering the credibility of the media. Carlson’s (2015) case study on a controversial Church of Scientology native advertisement on the Atlantic website shows that the acceptance of native ads is not just a desperate attempt for online sites to receive sufficient advertising support or about how to properly label the sponsored content, but it also presents a challenge to publishers and advertisers to provide native content that matches and blends well with accompanying editorial content.The nature of native ads is still a philosophical debate about whether advertising should be part of the editorial content.

Commercial Pressure on Media and Influence of Advertising on Editorial Content Diversity and Independence Because the advertiser’s interest is to gain access to its target audience to push for its products and the media’s interest is to satisfy such needs of the advertisers to reach the largest audience (popular content) or the most profitable consumers (young or affluent consumers), media executives have been accused of not trying to develop innovative content and of going for the least objectionable programs and “dumbing down” programs to appeal to the masses (Brown & Cavazos, 2005; Eastman & Ferguson, 2013). Blasco and Sobbrio (2012) called this commercial media bias the inherent limitation of advertising-supported media. Does commercialized content result in lower quality or diversity of content? Many studies on mass media blamed advertising for homogeneous and mass appeal programs and media content. Einstein’s (2004) study of U.S. commercial broadcast networks’ programs found advertising drove the program development of these networks and reduced the diversity of program content. Picard’s (2004) study on commercialism’s impact and newspaper quality found advertising-supported newspapers lower their quality by emphasizing content of social value less and appealing to sensationalism and other questionable practices. Lischka’s (2014) study of German newspapers shows those which have more advertising revenue are more likely to report less about the economic crisis and unemployment problems than those which have less advertising. Nonetheless, Pires (2014) purports that the size of the market determines if advertising promotes diversity in political ideology in news media. When the market size is small, advertising will reduce the diversity, but when the advertising market size is large, news media compete with multiple political ideologies to capture readers and adapt more to the political preference of the audience. In contrast to the common perspective of advertising’s negative effect on content, there are other studies that show that improvement in diversity and content actually attracts more advertisers. Li and 150

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Thorson (2015) found that when newspapers increase the proportion of news content and diversity, they improve both subscription and advertising revenue. Sun and Zhu’s (2013) study compared the change in content of blogs with ad revenue and those did not adopt ad revenue sharing programs and showed that those blogs participating in the ad revenue sharing program indeed shifted toward popular topics, such as the stock market, salacious content, and celebrities, to attract audiences and advertisers. But they did not find a decrease in quality. They found the quality also increased with popularity. So, advertising as a revenue actually professionalizes media content by improving quality as well as popularity. In addition to advertising effects on editorial quality, advertising’s negative effect on editorial independence and self-censorship practice has been studied quite extensively by researchers. Soley and Craig’s (1992) survey of news editors who perceived pressure from advertisers showed that 90% of them reported advertisers’ attempts to influence their news coverage.Yet most of them would still report news that is negative about the advertisers. Another study by An & Bergen (2007) from the perspective of advertising directors of newspapers shows similar pressures from advertisers, especially at small newspapers and chain-owned newspapers. Germano and Meier (2013) found that newspapers are more likely to not cover negative news about their advertisers through self-censorship. Rinallo and Basuroy’s (2009) study of newspapers and magazines in the United States and several European countries shows that advertisers indeed have an advantage in positive news coverage of them in the news media and publishers that depend more on a specific industry for their advertising revenues are prone to a higher degree of influence from their corporate advertisers than others. But is the advertiser’s pressure that high on news reporting? Price’s (2003) study of U.S.TV networks’ news correspondents found only 7% of the respondents felt pressure from advertisers. Owners’ pressure is more important than that of advertisers but still in general they perceived they have a high degree of autonomy in their reporting. Colistra’s (2014) study on TV reporters demonstrated that pressures from advertisers predicted reporters’ perceived instances of agenda cutting (reducing coverage or omission of items) in news decisions. So, these studies show that advertisers’ influence on news editorial content depends on how much the newspapers rely on the specific advertisers and the autonomy of the editorial staff. Front-line news people seem to be less susceptible to influence from advertisers than the advertising sales staff and editors. In general, advertisers are found to be a threat to editorial independence. Usually the editorial staff is unwilling to compromise while the advertising sales staff is torn between clients and editorial colleagues. However, studies on business news coverage show the press is much more independent from advertisers or the business sector than those studies that examine the influence of advertising on editorial content. Zhang’s (2014) study on the food industry’s news coverage in the United States found that major firms in the food industry have all been reported about negatively in regard to food safety. Another study on the negative coverage of the BP oil spill (Watson, 2014) and a recent CBS report on the Ford Explorer’s exhaust leakage on 60 Minutes and CBS News (CBS News, 2017) seem to indicate news media give higher priority to public interest than protecting businesses in news coverage. Although these studies did not focus on advertiser pressure on editorial content or measure the advertising spending of these large firms on the newspapers under study, these large firms under study are all large advertisers for news media. Negative reports on them risk losing their advertising support. So, these are counterexamples of commercial pressure on news media. Public interest and inter-media agenda setting can override the advertiser’s pressure on news coverage.

Advertising Clutter and Perception of Editorial Quality Advertising clutter has been defined as the “a large amount of non-editorial content in an editorial medium” (Ha & McCann, 2008, p. 570). It is more about the density rather than the quantity of such noneditorial content. Goldstein, Suri, McAfee, Ekstrand-Abueg, and Diaz’s (2014) experiment 151

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studied the economic and cognitive costs of annoying online display advertisements and concluded that media lose their audiences by accepting annoying ads. As Ha and McCann (2008) pointed out, advertising clutter can be the objective physical presence of advertising (actual amount of advertisements) and the subjective perceived amount of advertising (which varies by individuals). Different people have different expectations or acceptance level of advertising. The advancement in digital technologies allows a more sophisticated way of presenting and customizing advertisements based on location and other user data. To media managers, advertising clutter is both an evil (possible irritation to the audience) and a blessing (more advertising revenue and indication of a high demand for advertising for the media company). Based on prior studies on advertiser pressure on news media mentioned earlier and newshole and press performance studies which assume that a larger amount of advertising will lower the readers’ perceived editorial quality (e.g., Lacy & Fico, 1991), Ha and Litman (1997) examined whether an increase in advertising clutter in consumer magazines results in a decline in circulation and diminishing returns in advertising revenues of those magazines using a longitudinal analysis. They indeed found diminishing and negative returns of advertising clutter for circulation of leading consumer magazines in the United States, which may reflect consumers’ perception of lowered editorial quality when the magazine has too many ads and consumers’ lower inclination to buy the magazine. They recommended media companies set a maximum amount of advertising based on the optimal point before diminishing returns for circulation, which is about half of the total pages for entertainmentoriented magazines. Ha’s (1996) experiment on the three dimensions of magazine advertising clutter found only negative effects of perceived quantity and intrusiveness on readers’ attitudes toward the advertising in the media. Schumann, von Wangenheim, and Groene (2014) found lower click-through rates among consumers who reported higher ad clutter in their experiment. Lee and Cho’s (2010) experiment found that for a highly cluttered web page, frequency of the target ad facilitates the memory but not recognition of banner ads. Bellman et al.’s (2012) study found that there was a marked decline in online ad recall and recognition beyond three minutes of commercials within the prime-time shows online. Zanjani, Diamond, and Chan (2011) confirmed that online information seekers are more likely to feel intruded on by ad clutter than surfers. Ha (2017) points out that the increasing consumer avoidance of advertising with the aid of technology such as digital video recorders (DVRs) to skip advertising and other adblocker software is a serious warning for advertisers and media managers to create a healthy advertising environment. They have to make advertisements more informative and entertaining for the consumers. Ads may not be perceived as clutter when consumers are the one who requested the information/ads (pull), such as a product search on Google. But when ads are unsolicited (push), then they are easily perceived as clutter unless they offer consumers other value, such as entertainment. An optimal advertising environment should make advertising available on demand and offer entertainment and information value to consumers.

Research Agenda for the Next Decade Advertising is a moving target as a research subject because it continues to evolve in format with the advancement in technologies and acts as an indirect payment for many editorial media. This author proposes five topics on advertising that are important for media management and economics researchers to study in the next decade: (1) Is blurring or mixing editorial content and advertising a good thing for advertisers, media, and consumers? (2) Is advertising the culprit or scapegoat for editorial quality/integrity problems in media? (3) What is the audience’s receptiveness toward new forms of advertising in different media? (4) Should advertising still be the primary source of revenue for commercial media or is direct payment a better way to ensure quality content in the consumer’s

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interest? (5) Regarding advertising clutter, what is the optimal amount of advertising and acceptable advertised product types in editorial media?

Is Mixing Editorial Content With Advertising a Good Thing? The foregoing discussion on the latest trends in advertising format variations points to advertisers’ worry about dwindling exposure to advertising when people can skip ads and are skeptical of traditional advertising formats. The effectiveness of such advertising variations remains to be seen and empirical studies actually point to the ineffectiveness of native ads on brand recall and preference. In fact, empirical evidence shows that consumer attitude toward product placement is similarly as negative as it is in advertising. This trend of mixing editorial content with advertising to increase exposure and credibility is quite troubling. On the one hand, making ads more like editorial content means that they should be more informative (advertorial/native ads) and true to the actual use of products (as in product placement) and relevant to the editorial content consumption. On the other hand, by hiding the advertising purpose of the content, this runs into the ethical question of deceit. Why do advertisers hide their advertiser identity if they have legitimate products to promote? The revival of branded TV programs, such as Redbull TV, and custom publishing of branded magazines, such as Rhapsody (for United Airlines), is another trend for researchers to study. Are they effective in building brands? Are consumers receptive to the concept of content created by advertisers only? The experimental study by Cole and Greer (2013) shows consumers rated branded magazines as having lower credibility than non-branded magazines. But more research is needed on TV programs and different types of branded content. The inherent promotional nature of advertising of native ads and branded content apparently contradicts the impartiality expectation of third-party editorial media. The more advertising is mixed with editorial content, the more likely editorial content of media may lose credibility, which will damage their reputation and lower the support of the audience. These are important media management questions that media managers should weigh in on, and researchers should provide guidance with empirical research from both ethical and pragmatic perspectives to determine who the true benefactors of native advertising in the short and long term are.

Is Advertising the Culprit or Scapegoat for Editorial Quality and Integrity Problems in Media? While there is ample research evidence of advertisers putting pressure on editorial media to gain positive coverage or minimizing negative coverage of themselves, and the inclination toward content with mass appeal to maximize audience, advertising is not the only culprit for unsatisfactory media performance in society. The increasing distrust in media and concern about media bias probably indicate a bigger issue (Tsfati & Cappella, 2003). If advertising is the only culprit for lower editorial content quality, then all state-owned or non-advertising-supported media should have the highest editorial quality. More importantly, who determines editorial content quality? The elites and the intellectuals? Or the media managers and editors who serve as gatekeepers for media organizations? Or the consumers at large, who have different interests and backgrounds? We want to make sure that advertising does not become the easy scapegoat for media’s own problems and that advertising provides a win-win solution to providing media content to the largest audience with choices for the audience. If media are only favoring advertisers, then they will lose credibility and audience, which is to the detriment of advertisers and media ultimately. Advertisers need editorial media that have the trust and support of their audiences. So, researchers should identify specific conditions when advertisers cross the line between the church and the state distinction between editorial content and advertising and when advertisers have unruly influences on editorial

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content that jeopardize the trust of audiences and perceived bias of media. Most importantly, how the audience perceives these interfering advertisers has not been studied. Putting the audience into the equation will help advertisers and media managers understand that they are running the risk of losing the audience. In addition, those studies that examine advertising’s (negative) effect on editorial quality should control for other structural and organizational factors, such as a media organization’s investment in the newsroom, number of large advertisers (advertiser concentration), ownership of the media, the editorial staff ’s perceived autonomy, journalistic norms, and competitive environment in the market. Defining editorial quality and integrity clearly with consistent measures for both information and entertainment media is an essential step toward this direction.

Audiences’ Receptiveness Toward New Forms of Advertising in Different Media As discussed regarding the different media forms and research on clutter, audiences’ receptiveness toward advertising in each form of media varies. This may be due to tradition and expectations. However, new forms of advertising are not within the common expectations of the consumers. How receptive they are to those new forms of advertising, such as native advertising, programmatic advertising, and location-based advertising, is still largely unknown. Promoted tweets resemble regular tweets and how consumers respond differently to regular tweets and promoted tweets is not fully understood. Product placements integrate the advertised product with editorial content and directly influence the content through the use of the products in editorial content. However, for unknown brands, product placement has minimal effects because consumers cannot recognize the brand in the placement. But for well-known brands, product placement is a good way to remind consumers that popularity of the brand is a part of the prop of the program.Would consumers welcome a disclaimer that the product placement is paid for in the program credits rather than the natural use of the product in the program? Would consumers have a positive or negative attitude toward paid product placement if they knew about it? How much can consumers learn about the product in product placement? There are certainly limitations in product placements as a form of advertising. How about paid explicit endorsement of products by YouTubers who are popular personalities? These are all important questions for researchers to answer in studying audience’s receptiveness toward new forms of advertising.

Should Advertising Still Be the Primary Revenue Source for Commercial Media? Although prior research has shown that direct payment will lead to more customer satisfaction providing either niche or exclusive premium content that consumers cannot get otherwise, media managers still have the option to capitalize on the dual product market of media. Media managers have to choose whether they provide content free to consumers using advertising (broadly defined as any sponsored content, including infomercials and home shopping channels), charge consumers a highly subsidized low price (charging consumers, but below cost and subsidized by advertising), or offer a metered use with free samples or fully paid by the consumers directly. Each type of payment model has found success. However, as the media environment is getting more and more competitive with more entrants to the markets online as either user-generated media, mobile apps, or over-the-top (OTT) streaming, the landscape may be tilted more toward a fully advertising-supported model and other forms of indirect payment as these news digital media entrants are all by nature public goods, as discussed earlier. As media consumers can be broadly divided into parity consumers, who do not care so much about exclusive and unique content, and non-parity consumers, who care about the quality of the experience, media managers should increasingly consider a hybrid model that serves 154

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both types of audiences differently if they want to maximize the impact of their media content while preserving an advertising-free environment for those consumers who have high demands and resent advertising. Because of the unwillingness to pay for online content in general and the higher willingness to pay for entertainment content by consumers (Yang, Fang, Abuljadail, & Ha, 2015), the perceived substitutability among different types of online news content versus entertainment and reasons for such perception will be an important study area. Media management researchers should study managers of different media regarding their beliefs about the type of model most profitable or best suited to the media form and how such beliefs influence their content strategies. Content analysis comparisons of different media forms with different revenue sources can also assess the impact of advertising on content quality and content diversity.

Advertising Clutter, Optimal Amount of Advertising, and Types of Acceptable Advertised Products in Different Types of Editorial Media As long as editorial media still accept advertising, advertising clutter will continue to be a concern because consumers consider it not as part of the editorial content and as interfering with their editorial content consumption. Advertising clutter can affect their perception of editorial content quality and resentment toward advertising. Traditional media, such as television, radio, and newspapers, still heavily rely on advertising as income; then the task for media managers is to study the optimal amount of advertising in their type of media. Ha and Litman’s (1997) study shows entertainment-oriented and information-oriented magazines have different thresholds of diminishing and negative returns of clutter for circulation and advertising revenue. We need more research on other media to find out the optimal amount of advertising to maximize the exposure to the advertising while maintaining editorial quality perception for the consumers. Comparing the optimal amount of advertising in different types of media will be a fruitful way to help media managers set their advertising limit policy and for legislators and industry associations to set up guidelines for industry to follow. More research should also be done on advertising inventory management and how media companies optimize the advertising rates to ensure a healthy amount of advertising. In addition, consumers should be educated on the contribution of advertising to the provision of free media content. As Schumann et al.’s (2014) study demonstrates, once consumers are reminded of such benefit, their negative attitude toward advertising is greatly reduced. Apart from setting the maximum amount of advertising, developing norms for types of products and services and execution quality that are acceptable for advertising should also be explored. Advertising executions that are annoying and below standard quality should not be accepted. Products that are hazardous to health or advertisers that have bad records in the Better Business Bureau should not be allowed to advertise. Such standards may vary by the type of media. User-generated media and mobile media may be the focus media in future studies as they contain the most consumer information for advertisers and media managers have the least control of when and how ad content is shown because many ads are programmatic and automatically fed to the screen.These proposed research topics will ultimately foster the development of an optimal media environment for advertisers, media companies, and the audience.

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11 MARKETING AND BRANDING Juliane A. Lischka, Gabriele Siegert, and Isabelle Krebs

Introduction Over a decade ago, McDowell (2006) stated that the primary motive for media brand management is the competitive marketplace, which also holds true for media marketing. The rise of media marketing—which refers to the marketing of media companies, not the marketing that uses media as vehicles to deliver ad messages to target groups—dates back to the 1970s and 1980s, when new competitors entered and the media market changed from a seller’s to a buyer’s market. During this time, media markets with dominant public service broadcasters were “suddenly” confronted with commercial competitors. The increasing competition concerning audience and advertising markets forced all media companies to invest in marketing activities and orient the organizations to meet the customers’ needs and desires. Related to the value chain of media production, media marketing is sometimes referred to as the final step after content production, packaging, and distribution. However, media marketing in the broadest sense covers a market-oriented media management, as is the case for marketing in general: “We see marketing management as the art and science of choosing target markets and getting, keeping, and growing customers through creating, delivering, and communicating superior customer value” (Kotler & Keller, 2006, p. 6). Although media marketing refers to the supply side as well, the focus lies on the sales market. For decades, media marketing referred to the four Ps—product, price, place (distribution), and promotion—until it finally turned toward the concept of customer-relationship-marketing (e.g., Sohn, Lacy, Wicks, Sylvie, & Powers, 1999, pp. 270–272). As competition increases and audiences fragment throughout the modern-day digital age, media companies are urged to increasingly pay attention to their brands (Chan-Olmsted & Kim, 2001; Ots, 2008; Siegert, 2008), as it becomes increasingly more difficult for media brands to remain visible and become recognized by consumers in online social network environments. According to the Reuters Digital News Report (2017, p. 10), most UK news users remember the path through which they found a news story (Facebook, Google, etc.), but “less than half could recall the name of the news brand itself when coming from search (37%) and social (47%)”. At the same time, consumers request trusted news brands and bemoan the decline of newspapers “with many valuing the immersive, personal experience of reading their favourite title”, as a study of German, Spanish, UK, and U.S. news users reveals (Vir & Dodds, 2016, p. 14). As an important goal for media companies has always been differentiation from competitors, branding remains a very common strategy in the media industry (for an overview, see the

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Handbook of Media Branding: Siegert, Förster, Chan-Olmsted, & Ots, 2015). One of the most essential aptitudes of a media brand is the capacity to signal symbolic characteristics to audience members, advertisers, employees, and other stakeholders, beyond its functional value. These symbolic characteristics support differentiation and decrease market failure problems that media products experience. Therefore, media organizations can gain a competitive advantage through a strong brand. Media branding can be seen, on the one hand, as a prototype of a media marketing strategy, and, on the other hand, as an integrated management strategy that covers external as well as internal relationships. Based on McDowell’s (2006) brand definition and Küng’s (2008) definition of media industries, we define a media brand as: 1. An organization or person who creates, edits, publishes, or distributes, or 2. A product that contains • •

Informative, entertaining, or educational content that is publicly available, and Signals symbolic value to internal and external stakeholders.

Examples of the aforementioned categories include: (1) publishing houses, online distributors, and television channels, as well as news hosts, journalists, actors, directors, authors, and owners of media organizations, in addition to (2) television series, movies, legacy and online news outlets, radio stations, radio shows, newspapers, and magazines. Although Facebook often refuses to refer to itself as a media company (Segreti, 2016), this definition includes Facebook as a media brand because it is an organization that manages and distributes mass-media content. A value chain–based comparison of the two types of media companies—namely, platform operators and content providers—has been provided in Hess (2014). Today’s multi-platform environment, which enables the distribution of media content in different formats to different audiences, sparks new challenges for media marketing and branding. This “technological convergence, fostered by the transition from analog to digital communication, has blurred the once familiar distinctions among all types of communication platforms” (McDowell, 2006, p. 246). This chapter reviews the state of traditional media marketing and branding research, specifically contemporary research focusing on media marketing and branding facing a complex and audience-centered media environment, identifies established and developing research areas on a map of media marketing and branding research, and suggests a research agenda for the next decade, considering today’s media marketing and branding environment.

Roles of Marketing and Branding for Media Marketing and branding matter, in particular, to media organizations, as media products are experience or credence goods. As such, audience members cannot assess their quality before consumption, yet, they need to experience the product. In other words, one must watch the new James Bond movie to know whether one was entertained. Regarding news, it can be hard for audience members to assess whether the information is accurate, even after consumption, especially with the growing number of news sources online or on social networks, where entry barriers are low for content providers. In an online or social network environment, news brands can signal credibility and authority. Here, media brands assist audience members in making their consumption choices and evaluating media content. As Daidj and Jung (2015, p. 42) explained, “Therefore, [publishing] activities depend not only on a large extent on advertising expenses and marketing and publishing policies, but also on reputation (the star system, word of mouth, reviews, prizes, awards, etc.)”, which become part of media brands.

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Thus, a brand can repair the experiential and credence good characteristics of a media product to a certain extent. This suggests that media brands “can be viewed as institutional arrangements which help to ease market problems to a certain degree” (Siegert, 2008, p. 12), since they signal quality and credibility. For example, when a consumer has an indirect experience with a new movie (e.g., through a trailer, media reports, or word of mouth), he or she can more easily evaluate the entertainment value of that movie beforehand. In fact, the mere function of movie trailers is to reduce market failure through providing a priori information without giving away too much content prior to viewing the movie—that is, retaining a movie’s perishability. Similar functions hold true for news headlines (i.e., informing the reader about the expected value of reading the article), audio samples of a song, or the cover text of a book. Thus, the way media products are presented and structured indicates an attempt to decrease market failure through a priori information, as such knowledge eases consumption decisions. Media brands have a similar function, as they indicate a priori information for audience members as part of the image users develop in their minds. According to Keller (2008), the power of a brand lies in the minds of its customers. How customers regard a brand depends on consumption experiences with the brand as well as marketing communication. Media brand marketing aims to build strong relationships with audiences. Through brand awareness and brand knowledge, audiences create a brand image, attachment, preference, and, eventually, loyalty (Aaker, 1996; Keller, 2008). Media marketing differs from other brand communication regarding communication goals, media messages, or platforms (Weinacht, 2015). Media brand messages, such as trailers, develop specific expectations for audiences and build a framework of how the content will be perceived. Additionally, media organizations that self- or cross-promote their own products are often advertisers, advertising objects, and an advertising channel in one. They can use their audience-building competencies to communicate—that is, “The ability to win individuals over to view, listen to and read by offering them content which is interesting and target group specific” (Siegert, 2008, p. 22). Apart from consumers, media brand communication also addresses advertisers as the other side of the two-sided market. Media brands assist advertisers in choosing a certain advertising vehicle over another and placing their advertisements (Dahlén, Friberg, & Nilsson, 2009; Sommer & Marty, 2015). Moreover, media brands assist online content distributors in evaluating media content. Concerning the latter example, Facebook tends to classify the most liked and commented-on topics, and shares real-world events only as trending topics when they are also leading in the coverage of major news media brands, such as “BBC News, CNN, Fox News, The Guardian, NBC News, The New York Times, USA TODAY, The Wall Street Journal, Washington Post, BuzzFeed News” (Facebook, 2016). Sadly, names or visual appearances of popular news brands are also misused to help spread fake news purporting to be real news on social networks, such as Facebook (Gilbert, 2016), which can potentially damage a particular news brand. Media brands also address the task of aligning different value sets in a media company—that is, personal value sets of employees, organizational value sets of the company and the editorial department, and professional standards. Thereby, the media brand coordinates the organization’s decisionmaking processes, such as the development, production, and distribution of media products, with the aim of achieving market success as well as legitimacy (Siegert, Gerth, & Rademacher, 2011; Siegert & Hangartner, 2017).

State of Traditional Media Marketing and Branding Research The following section defines central terms in media marketing and branding and develops media marketing and branding research maps by reviewing three recent meta-studies: Weinacht (2015), Malmelin and Moisander (2014), and Krebs and Siegert (2015). Previous reviews of media brand

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research were provided by Walter McDowell in his book chapter “Issues in Marketing and Branding” (McDowell, 2006) and by Sylvia Chan-Olmsted in her article “Media Branding in a Changing World: Challenges and Opportunities 2.0” (Chan-Olmsted, 2011). McDowell and Chan-Olmsted considered not only publications about media branding but also traditional marketing literature and publications on branding in general. Thus, their reviews do not focus on solely media branding and marketing.

Approaching the Field of Traditional Media Marketing and Branding Research Weinacht (2015) conducted a qualitative content analysis of English and German media brand management literature relating to the terms “media and brand management”, “communication and management,” and “public relations and media” published between 2000 and 2014. The focus of the analysis was on communication goals, media messages, media platforms, and selected instruments in the communication mix. Communication goals of media marketing are often related to the concepts of brand awareness, brand image, and brand loyalty, according to Weinacht’s (2015) findings. Brand awareness refers to familiarity with a brand, which is a cognitive goal of communication. Brand image relates to thoughts and feelings regarding a brand, which is the affective dimension of attitudes. Brand loyalty can be defined as repeated intentional or behavioral consumption of a brand (McDowell, 2006, p. 234). The concept of brand loyalty can be broadened to attitudinal dimensions—that is, cognitive, affective, and conative dimensions—when referring to “the degree to which customers intend to repeat their purchases in the future (intention of future behavior), express a positive attitudinal willingness toward the provider (affective loyalty), and consider this provider to be the sole option for future transactions (cognitive loyalty)” (Picón, Castro, & Roldán, 2014, p. 747). Loyal users of media brands spend more time watching a certain program and decide to visit media brand websites more often. On the cognitive dimension, an audience member regards a media brand as the best alternative to fulfill his or her needs. On the affective dimension, an audience member prefers a certain media brand and decides to continue patronizing, or reusing, its services. On the conative dimension, an audience member expresses a reuse intention, which transfers to the actual reuse behavior (Lischka, 2015). However, these goals of media marketing can conflict with normative goals regarding the editorial content of the media brand, which could lead to a decrease of editorial credibility. Such interdependencies between media brands, organizational actors, and audiences are illustrated in the MBAC (“media, brands, actors, and communication”) model by Siegert et al. (2011) that describes brand identity–driven decision making. Research on brand messages focuses on: (1) typologies of media brand presentation with regards to content, (2) strategic capabilities of media messages from a manager’s perspective, (3) functions of media brands from an audience perspective, (4) usage of messages in media brand campaigns, and (5) effects of media brand communication (Weinacht, 2015). The author notes that platforms of media marketing are rarely studied in depth—except for television, which is the preferred object of investigation. Similarly, research on instruments of the communication mix, such as advertisements, promotion, social media, internal communications, public relations, or product placement in media marketing, is rare, according to Weinacht (2015). Malmelin and Moisander (2014) offered a meta-theoretical analysis of existing research on branding published in international, peer-reviewed academic journals—namely, the International Journal on Media Management, the Journal of Media Business Studies, and the Journal of Media Economics from 2000 to 2012. They analyzed 35 articles dealing with media brands and branding—namely, articles that at least mentioned the concept of brand. The meta study, therefore, excluded research published in monographs or edited volumes. 162

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The authors arrived at five basic conceptions of brand in media management research: (1) product, (2) extension, (3) identity, (4) differentiation, and (5) equity (Malmelin & Moisander, 2014, p. 13). Media brands as products are referred to as news brands, website brands, or television brands, as well as “collections of cross-media brands” (Doyle, 2006, p. 107) in times of platform convergence. Wellestablished media brands can use brand extensions to exploit and grow their business. The outward expression of a brand is discussed as brand identity or personality, including concepts such as brand attributes, brand promises, brand name, and logo. Brand identity can also act as a decision-making tool for brand management and content production (Siegert et al., 2011; Siegert & Hangartner, 2017). Furthermore, media brands are viewed as strategic differentiation of media products through marketing. Finally, media brands are conceptualized as valuable financial and symbolic assets that offer equity to media organizations. Improvement of brand equity can be achieved through marketing. Customer-based brand equity includes the brand relationship, which consists of consumers’ brand image, association, satisfaction, and loyalty (Chan-Olmsted, 2006; Keller, 1993; Krebs & Lischka, 2017; Oyedeji, 2010). Thus, these media brand concepts are closely related, and marketing is a means to reach and change one of the concepts.

Network Analysis of Media Marketing and Branding Research Based on the key concepts that Malmelin and Moisander (2014, pp. 23–25) and Krebs and Siegert (2015) ascribed to each reviewed article, we performed network analysis to map the research areas of media branding and marketing. A network analysis is a widely used methodological approach to visualize network connections. Network analysis is a powerful way to reveal how theoretical concepts are related in academic research—namely, which concepts play a central role, whether certain concepts create cliques, which concepts build the periphery of a network, or how distant certain concepts are from each other (Paisley, 1989; Rice, Borgman, & Reeves, 1988). Network analyses have been applied to map academic research areas—for example, communication technology research (Zheng, Liang, Huang, & Liu, 2016), agenda setting research (Tai, 2009), or Internet studies (Peng, Zhang, Zhong, & Zhu, 2013). In this chapter, social network analysis is used to reveal the associations and structures of research areas within media marketing and branding research. The goal of this network analysis is to illustrate research-created relationships between media marketing and branding key concepts in order to identify research areas for further development. The ascribed key concepts by Malmelin and Moisander’s (2014) and Krebs and Siegert’s (2015) studies constitute the nodes within the network.The studies using these concepts represent the connections between nodes. For example, Malmelin and Moisander (2014, p. 22) ascribed the key concepts “media brand”, “brand association”, and “brand image” to Chan-Olmsted’s (2011) study “Media Branding in a Changing World”. Thus, the terms “media brand”, “brand association”, and “brand image” create a triangular network. McDowell’s (2004) study, which utilized the ascribed key concepts of “brand association”, “brand equity”, and “brand differentiation” (Malmelin & Moisander, 2014, p. 23), extends that triangular network with two additional nodes, “brand equity” and “brand differentiation”, as both are connected to “brand association”. In that network, brand association is the central node with one “bow tie wing” on each side. As more studies become available to connect key concepts, the area of said network becomes increasingly denser. A network, thus, reveals highly connected and isolated research areas. It also shows which concepts or topics are central to the field and which lie on the periphery. Therefore, networks illustrate the connectivity of research areas in media marketing and branding in an innovative way. Malmelin and Moisander (2014) ascribed 31 different key concepts in total to 35 articles, ranging between one and eight concepts ascribed to each article. Such key concepts were, for example, brand, branding, brand loyalty, media brand, brand image, news brand, brand architecture, or brand trust. Almost every article included the general concept “brand” or “branding”, which would have created 163

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an immense artifactual node in a network.Therefore, and since “brand” was a qualifying criterion for Malmelin and Moisander’s (2014) meta study, we did not add this key concept to the network. The resulting network, thus, identifies the research area beyond the general terms “brand” and “branding”. Figure 11.1 reveals the network of media branding and management research based on Malmelin and Moisander’s (2014) data. The network is rather sparse (density = 0.196, i.e., 20% of potential connections within the network exist) and decentralized (centralization = 0.255, i.e., connections between nodes do not relate to one central “broker” node). From visual analysis, the network consists of two core areas: (1) media brand, brand equity, and brand personality, and (2) brand management, brand extension, and brand identity (printed in bold in Figure 11.1), several peripheral areas, and one isolate topic (brand power). The two core areas that are most connected to other concepts can be summarized as (1) an “ingredients theme”, consisting of media brand, brand equity, and brand personality (black nodes), and (2) a “process theme”, consisting of brand management, brand extension, and brand identity (white nodes). The ingredients theme consists of concepts of objects of brand management. The process theme predominantly consists of concepts relating to overall brand management activities. There are many peripheral concepts around the two cores in media branding and marketing research. Except for the isolated node, all peripheral concepts are connected to other peripheral themes, and often to the central nodes. Therefore, there is a great variety of concepts in research that appear to be connected through one or two studies. Very few concepts are related through the maximum count of three studies, although brand identity, being a rather ingredientsrelated research topic, appears to be connected to research on brand management and extensions as

satisfaction differentiation

trust

awareness

image

association

Small media News

loyalty

affect

Magazine

personality equity

Media

Parent/global Heritage mngmt

book

extension

owner

casting

name identity

attribute

Strategy Format

promise

power

TV architecture

Figure 11.1 Research areas in media branding and management based on Malmelin and Moisander (2014). Core terms printed in bold. Grey arrows indicate one or two studies linking two terms. Black arrows indicate three studies linking two terms. Three studies is the maximum count of studies linking two terms. Similar node patterns indicate a “theme clique”. Uppercase terms precede the word “brand”—for example, Magazine brand. Lowercase terms follow the word “brand”—for example, brand equity.

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well as to similar peripheral topics. The ingredients and process cores are directly connected to each other and through the two concepts’ parent/global brands and brand names (light grey nodes). The ingredients theme is connected to many attitudinal concepts, such as satisfaction, awareness, trust, loyalty, or image (in italics), as well as to a few specific media categories, such as books, magazines, small media, or news. These themes build the periphery around the ingredients theme. Within the attitudinal peripheral area, brand satisfaction, brand loyalty, and brand associations are central themes (light grey nodes with black frame). The concepts of the process theme relate to organizational concepts, such as strategy or architecture, as well as brand features, such as attributes, format, heritage, or promise on the periphery.These concepts are well connected to each other, but have no connections to other areas of the network, except for the process core theme. Overall, the media branding and management research universe consists of two “galaxies”, each with one among and across a wellconnected tripartite “sun”. The concepts around the suns are diverse, but rather exclusive to one galaxy. For example, there is no study relating media brand identity and brand image, according to Malmelin and Moisander’s (2014) coding. Thus, research in one galaxy may refer to the suns in the other galaxy, but rarely to the “alien” concepts of those suns. Krebs and Siegert (2015) analyzed 221 media brand and branding research publications in English and German referred articles, books, and book chapters from 1995 to 2013. The authors identified the major theoretical approaches used—namely, (1) brand identity, (2) brand position, (3) brand image, (4) brand strategy, (5) brand management, (6) brand personality, (7) brand equity, and (8) brand extension. These approaches constituted the network nodes. The authors found that media brand strategy and management is the key area of research, followed by the brand perception and image perspective. For our network analysis, we included only literature from the year 2000 and onwards, similar to Malmelin and Moisander (2014). Thus, the sample for the network analysis covers literature published between 2000 and 2013 (2000 to 2012 in Malmelin and Moisander 2014) in referred articles, books, and book chapters (referred articles of three major academic journals in Malmelin and Moisander 2014). In addition, the coding schemes differed between Malmelin and Moisander (2014) and Krebs and Siegert (2015) and, thus, the number of nodes in the networks differed accordingly (31 and 8, respectively). Figure 11.2 illustrates the networks between theory approaches of the English (n = 121), German (n = 111), and English and German publications (n = 232) analyzed in Krebs and Siegert (2015). The node colors for the concepts were kept identical to the colors in Figure 11.1. For a direct comparison with Malmelin and Moisander’s (2014) network, the English literature network in Figure 11.2 is more appropriate. In contrast to Figure 11.1, the network of the English literature is rather dense (density = 0.643, i.e., 64% of potential connections within the network exist).Therefore, the English-language research connects the eight key approaches well to each other.Yet, this density increase is also due to the less granular coding scheme used in Krebs and Siegert (2015). Similar to Figure 11.1, it is also decentralized (centralization = 0.213, i.e., connections between nodes do not relate to one central “broker” node). Except for the brand extension perspective, which is the least connected concept, all other theory concepts are well connected within the English-language literature. Brand management is the best-connected concept, although not being “broker” nodes, brand management and brand image are in the center, as they are the best-connected theory approaches within the network. Both core topics are similar to the core ingredients and process themes in Figure 11.1. Hence, although sample and coding categories differ, there is a major similarity between both networks of the English literature: the core of the research area of media branding lies in media brand objects, or ingredients, and their management process. In the German literature network in Figure 11.2, all concepts are equally well connected to each other. The German literature network is denser (density = 0.786, i.e., almost 80% of

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Image

Extension

Management Personality

Management

Position

Identity

Image Position

Identity

Strategy

English literature Identity

Strategy

Equity

German literature Image Equity

Extension Personality Management

Position Strategy

English and German literature Figure 11.2 Research areas in media branding and management based on Krebs and Siegert (2015). Black arrows indicate five (ten) or more studies linking two terms in English or German (or English and German) literature. Grey arrows indicate less than five (ten) studies linking two terms in English or German (or English and German) literature. Node patterns relate to the node patterns in Figure 11.1.

potential connections within the network exist) and less central than the English literature network (centralization = 0.106). Therefore, German-language research almost equally relates all key concepts to each other. However, brand image and brand management are the only concepts related to brand personality. Thus, image and management have a “broker” role for the brand personality concept. Combining English-language and German-language literature, the network results in an almost perfectly dense (density = 0.893) and decentral (centralization = 0.020) network. Therefore, by employing the English and German literature, the scholarly field of media branding connects the major theory concepts very well to each other, lacking a theory core or peripheries. Thus, there are no insufficiently researched key theory concepts. However, more research applies to brand management, whereas studies that employ brand personality or brand equity are relatively rare.

Contemporary Research Into Media Marketing and Branding Facing a Complex and Audience-Centered Media Environment The changes in the media industry induced by digitization, like multi-platform environments with new communication streams and multi-platform strategies, also brought about new challenges to

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research. This chapter focuses on topics of the latest research dated 2015 and younger and trends in the current media environment. Today’s media marketing and branding environment is characterized by international competition, ambiguity, aggregation, and participation. Picard and Lowe (2016, p. 62) portrayed the media environment as “VUCA”—that is, volatile, uncertain, complex, and ambiguous—“in which platforms multiply, channels proliferate, and markets fragment”. When facing such an increasingly competitive future, media brands are a potent tool for media organizations that signal relevant characteristics to internal and external stakeholders for the audience and advertiser markets. However, given marketing and branding, concepts must be adapted to the multi-platform environment.This especially applies to the expansion of established brands into the web, as a possible brand fit and brand extension strategies were named as fields of interest for the industry and research (Chan-Olmsted, 2011). Social media and extended possibilities of user engagement alter marketing and branding. Users now interact more directly with media brands and even shape content and media brands. Research is investigating the effects of this new relationship between users and brands and possible consequences, for instance, arising from user engagement for traditional media brands (Krebs & Lischka, 2017; Ots & Karlsson, 2012). Participatory or co-branding and a diminishing brand control only two of major trends named, in addition to influences of a new value chain, as well as an increase of integrated content and others, which will further shape marketing and branding research (Chan-Olmsted & Shay, 2015). According to Jones (2005), brand value is cocreated through interaction with various stakeholders. Not only brand value but also marketing and branding are no longer intra-organizational processes, but rather result from negotiation processes between intra- and extra-organizational stakeholders. Stakeholders increasingly request to know more about an organization that is standing behind a brand, which is resulting in organizational self-disclosure; in turn, companies open channels for engagement with their stakeholders (Hatch & Schultz, 2010). Chan-Olmsted (2011, pp. 3–4) assumed that media branding and marketing had become more complex with the development of multiple online channels and platforms, especially through social networks allowing a direct contact with audience members, as they had noted that changes in “consumer behavior, communication technologies, and market conditions, mostly triggered by the arrival of Web 2.0, mean that the success of branding today is increasingly dependent on an organization’s ability to manage its brand in a dynamic environment”. As a result, “media work must be viewed not as a value chain, but more broadly as value networks in which companies, consumers, partners and subcontractors work closely with one another” (Malmelin & Villi, 2017). This applies even more so for a multichannel and social media–focused environment. Within this more interactive sphere, the changing role of consumers for branding has also come into focus. Users not only receive brand associations but also participate in creating brand associations (Chan-Olmsted & Shay, 2015). With social networks, media managers lose and audiences gain some control over the marketing and branding processes. On Facebook,Twitter, Snapchat, and so forth, audiences and content providers are organized in peer-to-peer structures, and are engaged in content creation, distribution, and conversations around a brand; thus, they play an essential role in cocreating a media brand. Ots and Hartmann (2015) explained that audience interactions may indicate sincere appreciation, while also making media brands increasingly difficult to control or direct for managers. Thus, media managers turn from brand “guardians” to “hosts” (Christodoulides, 2009) that (must) invite formerly external stakeholders as well. In this participatory media environment, media brands become objects of a public negotiation process. As a result, media brand images may vary individually and dilute in comparison to the intended image. Social TV is one example of how audiences are involved in the production process through conversations on social networks. Van Es (2016) identified a participation dilemma between the

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producer’s desire to control the production process and the goal of emotionally involving a large audience. Using the example of several seasons of the U.S. television show The Voice, the author revealed that producers had reconfigured the ability of the audience to intervene in the production process through social media and regained control over the production process.Van Es (2016, p. 120) argued that “Producers, it seems, concluded that their interactive and real-time qualities became a threat to the tightly structured narratives needed to attract eyeballs and keep them watching the show”. The audience-centered perspective in media brand research has been reviewed in Förster (2015a), stating that the role of consumers as codevelopers of brands, innovations, and products has yet to be considered very much in research. In recent research, an audience perspective on media branding has strengthened through the concept of customer-based brand equity (CBBE) (Aaker, 1991; Keller, 1993;Yoo & Donthu, 2001). CBBE has been studied for newspapers in local (Bakshi & Mishra, 2016) and online environments (Krebs & Lischka, 2017), as well as for cable news outlets (Oyedeji & Hou, 2015). Bakshi and Mishra (2016) showed that, regarding local newspapers in India that contain local news, a fit between the newspaper’s ideology and world views of the reader, credibility, and entertaining content enhance brand equity. Guo (2015) noted that traditional newspaper and television brands heavily engage with users on social networks through community building and experience sharing—a trend that has started in the competitive online marketplace (Davidson, McNeill, & Ferguson, 2007). Malmelin and Villi (2015) argued that the audience community is an important strategic resource for media brands, due to information gained about the audience when engaging. Oyedeji and Hou (2015) showed that the credibility of online brand extensions of legacy news channels is strongly determined by the audience evaluation of the parent news outlet. In online environments where users can interact with and comment on news, Lischka and Messerli (2016) illustrated that online engagement can slightly enhance loyalty toward a media brand. Krebs and Lischka (2017) confirmed this result and revealed that serious content is more important for the media brand equity of users than any form of audience engagement. McDowell (2015b, p. 153) also reached a similar conclusion: “In an overcrowded media marketplace, the best way to nurture a sustainable competitive advantage over rivals is to provide audiences with extraordinary branded content”. However, it has often been argued that audience engagement and integration can increase commitment with the media brand (Malmelin & Villi, 2015). In addition to this audience perspective, the role of media brands has been studied in the TV branding process (Förster, 2015b) and related to small media brands (McDowell, 2015a). Sommer and Marty (2015) analyzed media brands as a decision criterion in media planning and, therefore, assess media brands on the second side of the market—namely, the advertising market. Recent studies assessing media marketing are related to multi-platform strategies in movie marketing (Sattelberger, 2015) or social network marketing for traditional media brands (Wolter, 2015), news magazines (Friedl & Förster, 2015), and for a Netflix show (DeCarvalho & Cox, 2016). Apart from a focus on social networks as communication channels, no overall pattern novel to the current research area of media marketing and branding has been disclosed. Related to audience engagement, diversified roles and tasks emerge at media organizations, such as community or social media managers. In an age of online media work, the responsibilities of media managers increasingly focus on supporting collaborative networks and developing systems that enhance creativity and innovation (Malmelin & Villi, 2017). As media organizations also compete in the employee market, the media brand can signal relevant characteristics to attract the most appropriate employees and prevent a “brain drain”. Traditional organizations have reported that it is harder to attract and retain talented managers, as start-up companies have become more attractive for young professionals (Axelrod, Handfield-Jones, & Welsh, 2001; Beechler & Woodward, 2009). For example, the news outlet BuzzFeed was able to hire top

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journalists and, thus, has become a competitor to legacy news outlets, not only on the level of audience attention but also in terms of content (Küng, 2015). Legacy news brands not perceived as innovative will have a harder time attracting employees who could act as agents of innovation. Thus, employer branding might become more relevant for media brands. In an ambiguous environment, legacy media organizations are required to innovate, whereas their products have a (sometimes large) residual fit (Gilbert, 2006) in the market. In many countries, traditional news users still strongly prevail compared to younger online or social network news users (e.g., in Germany, France or Australia; see Newman, Fletcher, Levy, & Nielsen, 2016, p. 88). Media brands that address a general audience must be known by and appeal to such traditional as well as younger online audiences. Thus, media organizations and brands must be able to develop their media brands in an ambidextrous way—namely, profit from established brand resources, yet develop novel brand resources in parallel.Thus, not only product innovation but also innovation of established brands and the creation of brand extensions are necessary, especially for legacy media organizations. Regarding the multi-platform media environment, media brands are present on various channels communicating to different audiences. In this regard, public service broadcaster brands have become public service media brands (Lowe, 2011). Although the parent brand characteristics are transferred to brand extensions, as shown by Oyedeji and Hou (2015), media brand image may still differ across distribution platforms due to platform-specific content distribution and additional platform brand images. Chan-Olmsted and Shay (2015) also highlighted the strategic advantages of co-branding to manage the audience’s experience across different platforms and increase consumer touch-points—for example, through cross-industry co-branding (Netflix and Best Buy). In this case, the term “co-branding” refers to cross-industry branding, whereas, for audience integration, it refers to co-creation. In the future, media brands will have to deal with consumption situations in which content is aggregated with content of other sources and media brands, and the distribution channel is a brand of its own. In a social network or online search environment, fewer users remember the brand name of the media outlet from which they received news (Newman et al., 2017, p. 10). When distributing content on social networks, it is harder for media brands to create a specific brand image than in traditional media consumption situations, especially with young audience members who do not know a media brand through its direct channel and may recognize a certain brand only after many occasions. In addition, media brands lose control over distribution on algorithm-based platforms, such as Facebook. Since content is a very important factor that affects brand equity (Krebs & Lischka, 2017), media brands lose brand management capacity due to aggregating platforms. Although language and geography are found to shape patterns of global media use (Taneja & Webster, 2016), a media brand can become an international player, such as the streaming service and entertainment producer Netflix. Such global brands challenge established players in national markets that must reconsider their brand positioning and brand proposition for their audiences. A competitive media environment also implies the rise of new market players. Start-up media organizations should first develop a brand identity and image. For example, the relatively new news outlet BuzzFeed still focuses on creating an image of a credible news source in the minds of audiences (Tandoc & Foo, 2017). More generally, journalists and editors of start-up news outlets must assess whether and how they address audiences and news issues (Carlson & Usher, 2016). They “learn” whether a news issue fits their news brand and, thus, the brand identity becomes more established. This is a great opportunity for media brand researchers to observe media brand development and branding processes from the beginning. In sum, three fields of contemporary media marketing and branding research can be summarized: social network marketing and branding, participation or co-branding, and branding of media organizations in specific market situations—namely, start-ups or global media organizations.

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A Map of Traditional and Contemporary Media Marketing and Branding Research A summary of the media branding and management research field based on the previous network analyses and most recent studies is illustrated in Figure 11.3. The brand ingredients core—namely, relating to objects of marketing and brand management—and management process core—namely, relating to marketing and brand management activities—which were disclosed in the network of Malmelin and Moisander’s (2014) study-, define the center of the media branding and management field. These core areas are very well connected, as shown in the networks of Krebs and Siegert’s (2015) study. The media brand ingredients area is connected to research on media brand attitudes and media categories. The recent focus on CBBE enhances the equity concept of media brands. The management process area is connected to research on media brand organization and media brand features. More recently, media marketing and audience-centric branding in participative media environments as well as branding of media start-ups have become current research interests.

Research Agenda for the Next Decade Regarding the future of the research in media brands and marketing, we suggest, in line with Weinacht (2015), to further challenge theoretical models and approaches presuming that insights from general business studies can be simply transmitted to media brand management. In relation to media branding, Malmelin and Moisander (2014, pp. 16–17) suggested three areas of further research: (1) theoretical research on specific media brands, (2) empirical exploration of the strategic nature of media brands, and (3) analysis of challenges and complexities of media brand management. Krebs and Siegert (2015, pp. 44–45) suggested that future research should address social media and overall changes in media usage, affecting the relationship of program and content brands—for example, through nonlinear TV consumption. In addition, we propose suggestions for future research in four areas, relating to major environmental conditions concerning media marketing and branding. Today’s media marketing and branding environment is characterized by international competition, ambiguity, aggregation, and participation (CAAP), which has implications for audiences and advertisers as well as employees and media brand managers. Future research should address this CAAP situation, which offers unique opportunities for future media marketing and branding

3) Brand Features

1) Brand Attitudes CBBE Brand Equity

2) Media Categories Brand Ingredients

Media Brand

Brand Mngmt Brand Extension

4) Brand Organization Management Process

Brand Brand Perso- Identity nality

5) Social-Network Marketing and Branding 6) Participational/ Co-Branding

Established Field Developing Field

7) Start-up/ Global Branding

Figure 11.3 Research area map of media marketing and branding.

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research. Research in the following areas will provide answers to media marketing and branding in practice and scholarship. 1. Competition • • •

Observe media brand identity and image development for start-ups from the very beginning Describe the formation of global media brands in relation to local brands Explain how to foster employer branding to attract relevant, innovative employees

2. Ambiguity • • • • •

Analyze the effects of competition between news brands dedicated to journalism and other brands offering news Support the balancing act of targeting media brands and marketing to audience groups using traditional “old” and “new” aggregative or participatory distribution channels Understand how to profit from established means and create novel media brand resources Show how media brands can adhere to economic as well as societal values Explain the relationship between brand culture and corporate culture

3. Aggregation • • •

Understand the role of media brands in a social network environment in which content is algorithmically selected and fake news suppliers may misuse media brands Translate media marketing and branding concepts and approaches to a multi-platform, multiplayer usage environment Find solutions for media brand management that is facing decreasing control over content distribution on aggregative content sites, such as social networks

4. Participation • • •

Find out how to trigger engagement and participation of a broad range of users Assess effects of audience participation on media branding and marketing Find novel ways for media brand management that is facing decreasing control over content through audience participation

Beyond that, media marketing and branding research must closely observe industry trends in order to address new challenges for media brands in a CAAP environment. Overall, media marketing and branding research will face great research opportunities in the future. On the one hand, there are opportunities to enhance the media aspect in media marketing and branding through research for various media categories and media-related challenges. On the other hand, the importance of the media aspect may decrease the focus on globalizing trends of content suppliers and distributors.

Summary This chapter reviewed the state of the literature and proposed suggestions for future research into media marketing and branding. The authors developed a research map based on two metastudies (Krebs & Siegert, 2015; Malmelin & Moisander, 2014) and the latest media marketing and branding research focused on media marketing and branding, which is facing a complex and audience-centered media environment. The core concepts of media marketing and branding— namely, brand equity, media brand, brand personality, brand management, brand extension, and brand identity—are well connected in traditional research. Established research areas connected

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to these core concepts are (1) brand attitudes, including the developing field CBBE, (2) media categories, such as magazines, news, television, or small media brands, (3) brand features, such as brand attributes, heritage brand, format brand, and brand promise, and (4) brand organization, including brand architecture or brand strategy. Developing research areas are (5) social network media marketing, (6) branding in a participatory environment, and (7) branding for start-ups or global media brands. The authors suggest four areas for future research based on an analysis of today’s competitive, ambiguous, aggregative, and participatory (CAAP) media marketing and branding environment. Future research should address this dynamic CAAP situation, which has implications for audiences and advertisers as well as employees and managers of media brands. In summary, media marketing and branding research should focus on the ambiguity of coping with “old” distribution channels and audiences and while simultaneously embracing “new” aggregative and participatory online and social network content environments.

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12 MEDIA POLICY Krishna Jayakar

Policy is defined as any course of action or decision rule that an organization voluntarily adopts or is required to adopt, under the influence of an external agent. In the media and telecommunications industries, a number of external agents make policy according to this definition—either by imposing rules of decision or behavior on firms, or by shaping the external business environment. These external agents include legislatures, regulatory agencies, government departments at the federal, state and local level, the courts, industry groups, professional associations, standard-setting bodies, international organizations and so forth. In addition, policy-making bodies may be technical groups (e.g., the Internet Engineering Task Force, IETF), or multi-stakeholder organizations (e.g., the Internet Corporation for Assigned Names and Numbers, ICANN). Reviews of media policy have often been organized along the lines of media industries (e.g., newspapers, radio and television broadcasting, cable, broadband).The silo model may no longer make sense in the era of convergence. The digitization of all traffic has erased the distinctions between different platforms and modes of media consumption. For example, data for 2017 show that in the United States, only 74.7% of prime-time TV viewership was live, the rest coming from time-shifted viewing using digital video recorders (DVRs) and video on demand (VOD) (Comscore, 2017). Consequently, television networks are forced to significantly alter their ratings analysis and advertising pricing strategies, and/or negotiate distribution agreements with over-the-top (OTT) video providers. Millennials and younger viewers (age 18–34) especially are unlikely to draw a distinction between live TV and other forms of audiovisual consumption. Similarly, voice over Internet protocol (VoIP) calls carried over broadband networks now provide a near-perfect substitute to telephone service provided by a telecommunication company. As a consequence, data show that for the first time since the 1930s, telecommunications carriers’ international voice traffic was down in 2015–17, the slack being made up by VoIP providers, such as Skype (Beckert, 2017; Christian, 2017). Media policy is also erasing previously held distinctions between different media, in favor of integrated regimes. Media managers are also likely to be impacted by policy initiatives in all industries, not just those pertaining to the specific market niches in which they function. To systematize the presentation of a topic that is very broad and multidimensional, this chapter divides the analysis into three levels—local (including municipal governments, states, provinces and regional governments), national and international—and into two areas—content and infrastructure (see Table 12.1). Several policy areas have overlapping local, national or international jurisdictions, but they are discussed at the most relevant level. For example, copyright is discussed at the national level, even though it is governed by international treaties, and copyright enforcement requires 176

Media Policy Table 12.1 Levels and areas of policy. Local/state Content

Infrastructure

Tower citing, ROW, cable franchising, pricing, universal access

National

International

Broadcast content, advertising codes, copyright, accessibility, national origin programming, subsidies Spectrum management, ownership, interconnection, net neutrality, mergers and acquisitions, universal access

Data protection, copyright

Domain names, standard setting

local government actions, such as search of suspected manufacturing sites and seizure of offending material. Turning to policy areas, content refers to the informational content transmitted over electronic media, including one-to-many (broadcast content), one-to-one (voice communications) and many-to-many (social media) content, including the policies covering the derivative information created by interactions with media (call records, transaction generated information (TGI) and web analytics data). Infrastructure policies cover the wired and wireless infrastructures over which information is transmitted to the end customer, including policies promoting universal access to broadband networks. Since the objective is to analyze how media policy affects management in general, the chapter will focus less on the specifics of national policy in any country, and more on the general themes and trends in media policy studies. For example, the First Amendment is hugely important in protecting freedom of speech in the United States, and the extensive history of court cases and regulatory decisions that hinged on it is not discussed in this chapter, but freedom of speech and expression as a concept is discussed. The presentation of topics in this chapter is as follows. In separate sections, media policies at the local, national and international levels are discussed, in that order. Within each section, policies pertinent to content and infrastructure are discussed in that order, except for local/state policies, which are mostly confined to infrastructure issues. For each topic, the policy issue is discussed, and selected publications are cited, indicating the status of the literature, followed by directions for further research.

Media Policy-Making at the Local/State Level Media and communication networks, by their very nature, are national and international in nature. Broadcast signals are not easily confined within territories, and the very purpose of telecommunications networks is to enable communication over vast territories. In the United States, broadcasting is considered a form of “interstate commerce” subject to federal jurisdiction (Kirkpatrick, 2011; Lee, 1925). Therefore, local and provincial jurisdictions are not usually heavily engaged in policy-making for media and telecommunications. However, they often oversee the links (the so-called last mile) connecting end users to networks utilizing a variety of technologies, such as telephone wires, satellite dishes, coaxial or fiber optic cable and fixed wireless connections.

Zoning Laws, Tower Placement and Rights of Way Local governments often have rules and regulations on the permissible use of land for a variety of purposes, including the protection of local property values, improving traffic safety, avoidance 177

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of interference with aviation, environmental concerns and aesthetic considerations. The placement of broadcast and mobile communication towers and the collocation of such elements on existing facilities have to comply with zoning ordinances as well as with applicable environmental regulations. Rights of way enable media and telecommunications providers, such as cable companies, to lay coaxial or fiber optic cable in privately and publicly owned land. Rights of way may also involve the connection of wires to the poles, ducts or conduits owned by a third party. Facilities such as broadcast and mobile communication towers and cable plants are required to abide by local regulations on zoning and rights of way. Scholars have examined whether inconsistencies and differences in local policies on land use cause problems for media firms and create the potential for discrimination (Cramer, 2016; Judd, 2014, 2015; Lester, 2013). Some media firms, such as former monopoly telephone and cable companies, were often allocated preferential rights-of-way treatment unavailable to later entrants, who had to negotiate with incumbents for rights of way and pole attachments. In 1978, the United States Congress directed the FCC to harmonize local laws and ensure that nondiscriminatory access to pole attachments and rights of way would be available to cable companies at just and reasonable rates. In 1996, FCC rulemaking consequent to the Telecommunications Act expanded the right to both telecom and cable companies; however, it also implemented two different rate methodologies, a “cable rate” and a “telecommunications rate,” with telecom companies in most cases having to pay higher rates under similar circumstances (FCC, 2011, 2015). These discriminations are no longer justifiable in a converged marketplace, and subsequent rulemakings in 2011 and 2015 brought the rates closer into parity (FCC, 2015). To address these problems, national laws have sometimes preempted or limited local land use policies ( Judd, 2014, 2015). For example, the 1996 Telecommunications Act in the United States, while reiterating local authority over land use, stated that local agencies may not unreasonably discriminate among providers or regulate in a way that limits the deployment of mobile services, and must act promptly on applications and provide written justifications for decisions (Section 332(c)(7)). But in other cases, national regulations have moved in the opposite direction. In 2014, Industry Canada announced changes to their Antenna Tower Siting Policy strengthening requirements for telecommunications firms to consult with and provide more information to municipal governments and communities (Skovron & Heyman, 2014). In response to zoning laws and tower placement regulations, telecom companies have had to change the pace and timing of infrastructure investments. In some cases, over-strict land use regulations have impeded the deployment of telecommunications networks to rural areas (Lester, 2013). Practices such as cellular tower collocation, facilities leasing and infrastructure sharing have also become more common, though these changes may be attributable to economic factors as well (Meddour, Rasheed, & Gourhant, 2011).

Licensing of Media and Telecommunications Firms Local and state governments in many jurisdictions have varying degrees of authority to permit media and telecommunications firms to operate in their territories, through licensing, franchising and subsidy support. In addition, local and state governments sometimes offer differential treatment to certain firms in return for the assumption of certain responsibilities—for example, through common carrier designations and carrier of last resort (COLR) obligations. Local/state governments may exercise controls over the entry of media and telecommunications firms, or preferentially channel public support to some authorized firms. In the United States, cable companies were franchised to offer service in each area by local governments under the provisions of the 1984 Cable Act ( Jackson, 2016). The franchising rules in the 1984 Cable Act, and its further amendments in the 1992 Cable Act and the 1996 Telecommunications Act, spell out the rights and

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responsibilities of both parties: the cable franchisee and the franchising authority. For example, the 1984 Act limited the franchising fees that municipalities could impose on providers and required them to provide explanations if franchises are not renewed; cable franchisees were required to serve all customers in the market. The 1992 Cable Act prohibited local authorities from exclusive franchising—namely, restricting the market to only one approved video provider; thereafter, cable systems have continued as monopolies only in markets where local economic factors did not justify competitive entry. The 1996 Act phased out cable rate regulations except for the basic tier. It may also be noted that franchising requirements never applied to internet service providers (ISPs) offering broadband service; only multichannel video program distributors (MVPDs) were subject to local authorization. Local preferences may also be expressed through subsidy support instead of entry restrictions. In Germany, the Lander (provinces in the federated system) governments have their own public broadcasters to serve their territories and support them with license fees charged to viewers; some Lander collaborated to support public broadcasters active in all their territories.Though private broadcasters are permitted, they rely exclusively on advertising support. Also, in the United States, state regulators have the authority to designate telecom providers as eligible telecommunications carriers (ETCs), allowing them to receive subsidies from federal universal service programs (see section on universal service later in this chapter).

Price Regulation In many jurisdictions, some media and telecom services are provided by monopoly firms, due to economic or historic reasons (e.g., Mueller, 1997, on the U.S. telephone history). To prevent these monopolies from exploiting the customer, governments have typically imposed rate regulations on the services that face no competition. Only the few services that are exclusively within the territory of a state are subject to local regulation; others are regulated nationally. Local price regulations have applied to local exchange telephone carriers, intrastate long-distance carriers and local cable systems. Telephone local exchange carriers (LECs) were historically subject to rate of return regulation that limited their profit margin to a rate negotiated between the carrier and the state public utility commission (PUC) (Viscusi, Harrington, & Vernon, 2005). Some states have moved toward price caps, in which the prices of individual services are benchmarked in a particular year and then annually adjusted based on inflation and productivity improvements in the industry. Newbury (1998) found that price caps are economically more efficient than rate of regulation. Access charges are payments from a long-distance company to an LEC for the origination or termination of long-distance traffic, since part of that traffic travels over the local plant owned by the LEC ( Jayakar, Schejter, & Taylor, 2010). Since most carriers will pass on these costs to their end customers, access charges have a direct bearing on consumer prices. Only where such traffic is entirely within the geographical boundaries of a province or state is the state PUC responsible for its regulation; interstate access charges in the United States are regulated by the FCC. In most other nations, local authorities have no role in access charge regulation; due to its larger territory and federal constitution, the United States is an exception (see Jayakar, Schejter, & Taylor, 2010). Another example of state regulation of prices is basic cable rates. Prior to 1984 in the United States, cable rates were regulated by municipal governments, resulting in a patchwork of regulations, and in some cases excessive financial burdens that resulted in some systems going bankrupt ( Jackson, 2016). To address this situation, the 1984 Cable Act fully deregulated prices, but this resulted in a sharp increase in subscription rates. In 1992, Congress re-regulated cable prices, but only at the basic tier. MVPDs continue to offer a bare minimum number of channels in the basic tier, including over-the-air television signals available in the local market, leased access channels, and public,

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educational and government (PEG) channels—indeed, requiring franchisees to offer PEG channels in their basic line-up is one of the few prerogatives remaining to local franchising authorities. MVPDs have persistently tried to “up-sell” their basic tier customers to higher-priced tiers, and subscription to the basic tier has fallen significantly.

Universal Access A major government responsibility in many countries is the promotion of universal access to broadband and other telecommunications networks. States and local governments have also taken on this responsibility either under legislative requirements or as part of local economic development efforts. National governments often assign tasks to local governments to achieve broadband deployment goals. A 2011 survey investigated 74 municipal broadband systems in ten European Union countries and found that municipal systems within the same country shared common characteristics and differences with systems in other countries, since they were based on common national legislative and financial frameworks (Troulos, & Maglaris, 2011). In the U.S. state governments have often supplemented federal efforts at broadband and mobile network deployments through state universal service programs (see Lichtenberg, 2015 and prior year reports for a comprehensive listing and description of state universal service funds). In the United States, state PUCs also have other responsibilities for universal service. For example, state PUCs designate telecom carriers as ETCs, enabling them to receive subsidies from federal universal service programs, such as Lifeline. Though Lifeline is a federal program, many administrative and oversight functions are exercised by state PUCs. In addition to designating ETCs, they approve the Lifeline bundles offered by firms (number of minutes, services included), set eligibility thresholds and specify the requirements for proving eligibility (Conkling, 2015). In 2016, a major reform of the Lifeline program, in addition to extending Lifeline subsidies to broadband, appeared to “federalize” aspects of the program and diminish the role of the states. First, it instituted a “National Verifier” database to assume responsibility of verifying the program eligibility of households from the ETCs (and the responsibility to oversee the process from the state PUCs). Second, it created a streamlined federal Lifeline broadband provider (LBP) authorization process, parallel to state processes to authorize ETCs to provide broadband. Third, it amended the rules to remove state-specific eligibility criteria for Lifeline participation. In 2017, the FCC partially reversed course and put a moratorium on the federal LBP authorizations, and turned over exclusive authority to the states once more ( Jayakar & Park, 2017).

Media Policy-Making at the National Level Though local jurisdictions do have several policy-making and implementation functions within their territories, media and telecommunications policies are predominantly within the jurisdiction of national authorities. The activities of national regulators and government agencies extend to content, infrastructure and human resources issues. In this section, these three issue areas are discussed separately.

Content Legal traditions in many liberal democratic countries include protections for media organizations against government interference with freedom of speech. However, authoritarian states and even some democratically elected governments have challenged or denied free speech rights (Puddington, Piano, Dunham, Nelson, & Roylance, 2015). Legal restrictions on free speech have been placed on a variety of grounds, including sedition, promotion of communal disharmony, blasphemy, and 180

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propaganda against the established political order. But in addition to these codified restrictions, other constraints on free speech emerge from the arbitrary actions of government officials often justified on the pretext of preserving social order or controlling harmful cultural influences or propaganda. Media organizations in the globalized media landscape are at risk of running afoul of the unstated and arbitrary policy preferences of state actors (Puddington et al., 2015). However, this review of media policy focuses only on the declared policies of states with regards to content. In general, media policies have focused on promoting desirable content, and restricting other types considered harmful on economic, cultural or social grounds. Favored content includes children’s programming and national origin programming (defined variously in various jurisdictions as films and television programs reflecting local cultural values, involving significant local production investments or local artistic talent, and so on). Other types of content have attracted restrictions. Even in countries recognizing strong protections for free speech rights, such as the United States with its First Amendment, it is recognized that freedom of expression is not an absolute right. Reasonable restrictions may be placed on speech “based on the type of speech, the type of the speaker and even the medium of communication” (Olson, 2016, p. 31). Other types of speech may not be placed under prior restraint, but may be subject to legal sanctions after the fact if they are found to have caused harm—for example, through defamation.

Broadcast Content: Obscenity, Incitements to Violence, and So Forth For a variety of reasons, broadcast media enjoy fewer free speech protections than print media. First, broadcast media use a scarce public resource, the broadcast spectrum, and in return are expected to assume certain public service responsibilities. Second, broadcast signals are more intrusive and available unsolicited to all persons, including children, with a compatible receiver within the broadcast zone. Third, the psychological effects of incitements to violence or of audiovisual depictions of obscene or violent content are stronger and more immediate than written incitements or descriptions. Accordingly, media policy in many countries restricts several types of content, including pornography, indecency and incitements to violence. For example, India’s Programme and Advertising Code prohibits television programs containing a long list of proscribed content, including that which violates good taste or decency; wounds religious sentiments; contains obscenity, attacks the dignity of the courts or senior officials, such as the president; or promotes ethnic, linguistic or racial superiority (Rules 6 and 7) (Cable Television Network Rules, 1994). Some of these categories are so vaguely defined that it permits the government to act against practically any content it deems offensive, and exerts a chilling effect on broadcasters. Violating content policies may expose broadcasters to fines and other penalties, and therefore have economic implications. Even more liberal countries have created guidelines for broadcasters on issues such as gender portrayals or graphic depictions of violence. For example, see the Canadian Association of Broadcasters’ Equitable Portrayal Code (Canadian Radio-television and Telecommunications Commission [CRTC], 2014a), or the Violence Code (CRTC, 2014b). In Europe, far-right hate speech against immigrants has renewed debate on the right legal and policy responses (Maussen & Grillo, 2014). Others have questioned whether indecency regulations, such as “safe harbors,” are enforceable in the new technology environment given that vulnerable groups, such as children, have access to broadcast material over DVRs and streaming media (Steele, 2010).

Program and Content Diversity As public trustees, spectrum licensees are expected to serve the public, including minorities, children and special needs populations. However, economic modeling shows that the tendency in advertisingfunded models is to provide least common denominator programming that will be acceptable to a 181

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large audience, rather than niche programming of high interest to small audiences (Owen & Wildman, 1992). Choi (2006) updated this analysis to examine program diversity outcomes in competition between a purely advertising-supported platform and one supported through subscriptions and advertising revenue. Media policy seeks to promote pluralism and diversity of broadcast content, by including program diversity as a condition in licensing hearings. In the United States, for example, the FCC has adopted policies to promote access to diverse and independent programming to viewers, including a 2016 order banning pay-TV carriage agreements that unreasonably burdened smaller and independent television producers (FCC, 2016b). However, some of the emphasis on program and content diversity has lessened, since broadcast spectrum scarcity is not as much of a pressing concern.Viewers now access content from a wider mix of cable and satellite television networks, subscription VOD services, over-the-top (OTT) content providers and advertising-supported video distribution sites. With channel scarcity no longer a bottleneck, the importance of content diversity in media policy has also waned. While political coverage is encouraged, media regulators have sought to encourage values such as fairness, impartiality, editorial independence, balance and neutrality. Regulators may be concerned about coverage of politics in news and current affairs, or about political advertising. In terms of news content, the British Broadcasting Corporation’s Editorial Guidelines advocate the following values: trust, truth and accuracy, impartiality, editorial integrity and independence, avoidance of harm and offense, service of the public interest, fairness, protection of privacy, transparency and accountability (BBC, 2017). A Center for Law and Democracy report surveyed national rules for political advertising (Karanicolas, 2012), and divided regulatory regimes into strong, permissive and middle-path systems. The United Kingdom is classified as a strong regulatory regime for political advertising. In the United States, which Karanicolas (2012) classifies as a permissive regulatory regime, the First Amendment prohibits a direct government role in the regulation of broadcast content, but the FCC has used its responsibility to promote the public interest, convenience and necessity to prescribe rules that ensure balanced political advertising. Broadcast stations are required to provide equal opportunity to all legally qualified candidates for political office to use its facilities—but the appearance of a candidate in any bona fide newscast, interview, news documentary or on-the-spot coverage is exempt from this requirement (Section 73.1940, Title 47 Code of Federal Regulations). Such access also needs to be provided at the lowest unit charges prevailing around the time of the election (Section 73.1941, Title 47 Code of Federal Regulations). Political advertising has been enormously lucrative for media organizations, with the data provider Statista (2017) estimating that aggregate political advertising spending on broadcast television, radio and cable networks in the United States in the 2016 election year reached $8 billion. Media diversity continues to attract research attention as mergers and acquisitions drive the vertical and horizontal integration of markets, even as audiences continue to diversify. Researchers have continued to seek tools to measure various dimensions of diversity. Napoli and Gillis (2008) describe and critique a new Diversity Index, which seeks to quantify ownership concentration in a market cutting across multiple industry segments (e.g., newspapers cross-owned with a local television station and an FM broadcaster). Sjovaag (2016) argues that media pluralism in a tightly interconnected global ecosystem needs to be measured on multiple dimensions and proposes five: structure, organization, production, output and reception of media messages. How online content producers might respond to new technological environments has also come in for attention. Garcia Pires (2015) models how a content provider might alter the diversity of its offerings in environments with and without network neutrality. The author finds that without net neutrality, the overall diversity of content offerings online might be reduced. Media researchers have also examined how content diversity might be used as a brand management tool by corporate media producers (Kohnen, 2015).

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Broadcast Content: Economic Interests Regulations have been put in place over time to protect the economic interests of television stations in preserving the viability of their markets and protecting broadcast content, or conversely, to ensure that broadcast networks would not exploit competitors in the aftermarket for broadcast content. When cable systems first emerged, the FCC stipulated that cable systems “must carry” all broadcast signals available in their coverage area, and prohibited the importation of distant television signals that duplicated a local television station’s broadcasts. In 1992, the FCC initiated “retransmission consent” as an option for television stations, under which cable systems would need to negotiate a per-subscriber carriage fee prior to retransmitting a television station’s signal. Stations are required to make an irrevocable choice of either “must carry” or “retransmission consent” every three years, but a station electing the more lucrative “retransmission consent” but failing to conclude an agreement risks losing carriage on its local cable system altogether. Researchers have examined this dynamic from a variety of perspectives, including discrete choice of programming networks (Clements & Abramovitz, 2006), bargaining case studies (Gershon & Egen, 1999) and game-theoretic models (Chae, 1998). For direct satellite broadcasts (DBS) as well, operators are required to obtain retransmission consent before carrying station signals into territories where they are available off the air (the “local into local” rule) and are obliged to, on the request of stations, to carry all signals in a market when they carry any one station (the “carry one carry all” rule) (Frieden, 2006). The digital transition of television broadcasting during 2009–2011 renewed the controversy over must carry and retransmission consent. Television stations may utilize the 6-megahertz channel to generate multiple program feeds; “digital must carry” applies only to the “primary broadcast feed” of each television station. How must carry rules adapt to the converged marketplace remains to be seen; Garcia-Murillo and Macinnes (2011) examine must carry rules in the transition to a “net-centric” model of television distribution. Other rules were put in place to guard against the discriminatory and anticompetitive effects of vertical integration in television production and distribution. In the 1970s, the Financial Interest and Syndication (Fin-Syn) rules limited the amount of prime-time programs that the networks could produce themselves, and prohibited the networks from controlling the aftermarket for television programs, specifically through in-house syndication arms. In 1991, the Fin-Syn rules were relaxed, allowing vertical reintegration between production houses, networks and syndicated distributors. Concerns about the anticompetitive effects of vertical integration have come to the fore in mergers, such as Comcast-NBC Universal (Yoo, 2014).

Advertising Advertising and marketing communications, representing attempts by an individual or company to persuade others to consume its products or services in pursuit of revenue and profits, is considered commercial speech that generally merits less protection than non-commercial speech. Even as commercial speech is regarded as essential for the smooth and efficient functioning of markets, it is also recognized that governments are free to regulate commercial speech that is “false, misleading, deceptive, or that promote(s) illegal products and services” (Kerr, 2016, p. 152). For example, in the United Kingdom, the Advertising Standards Authority (ASA) acts as an independent industry-funded regulator that implements the Advertising Codes authored by the Committee of Advertising Practice (CAP) (ASA, 2017). ASA functions under a system of co-regulation, in which it acts under contract with the official regulator, Ofcom.The Advertising Code has separate sections dealing with misleading advertising, advertising to children, political advertisements and so forth. In addition, the marketing of products considered especially sensitive, such as medicines and

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medical equipment, slimming products, financial services, gambling, lotteries, alcohol and tobacco, faces special attention. In the United States, advertising and marketing regulation is primarily the responsibility of the Federal Trade Commission (FTC). FTC regulations cover a wide range of advertising and marketing practices, including advertising to children; health claims in foods, over-the-counter drugs, dietary supplements; claims of national origin (“Made in USA”), telemarketing and online advertising (FTC, 2017). In email marketing, the FTC is the primary agency responsible for enforcing the Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM) Act of 2003, which aims to ensure that email campaigns are labeled clearly as advertising, do not use deceptive headers, identify senders and their location clearly, and offer recipients the opportunity to opt out of future mailings. Media managers and researchers have examined the economic effects of advertising regulations from many perspectives: the effectiveness of regulations, the impacts on consumers and industry, and the responses of industry to regulation. For example, Bosqueprous, Espelt, Guitart, Bartroli, Villalbi and Brugal (2014) find that Europe countries with tighter restrictions on alcohol advertising had significantly lower incidences of hazardous drinking. Jones and Gordon (2013) found that co-regulation (partnership between a government agency and an industry body) and voluntary regulation are ineffective. Iwasaki and Tremblay (2009) studied the effects of an advertising restriction on industry-wide efficiency in the U.S. tobacco industry and found that in an imperfectly competitive market, such as cigarettes, advertising restriction can be efficiency-enhancing. Firms are able to enhance their joint output with fewer inputs by saving the “zero-sum” spending on advertising. Savell, Fooks and Gilmore (2016) compare the systematic campaigns by the alcohol and tobacco industries to influence marketing regulations.

Copyright Copyrights are awarded to original works of authorship fixed in any tangible medium of expression, such as literary, musical, scientific, dramatic and artistic works and sound recordings (Vaidyanathan, 2001). Copyrights provide the owner with the exclusive right to make, use, distribute or sell the protected product, process or creative work, and license such activity by others on payment of appropriate royalty. These rights are typically granted for a limited period of time, after which the creative work passes into the public domain. In each country, national laws decide what works are covered, the specific rights granted and the duration of protection. For example, France grants protection for the life of the author and 70 years for musical compositions, while the U.S. term was the life of the author plus 50 years, until it was amended to the life of the author plus 70 years in 1998 (UNESCO, various years; Vaidyanathan, 2001). Also, rights protected by one regime may not be available under another, an example being the French moral rights (droit morals or droit d’auteur), the creator’s rights to preserve the artistic integrity of his or her works. Copyrights are also a matter of policy, since the substantive rights granted under national laws may not be safeguarded unless administrative procedures are put in place: formalities for recognition, permissible and non-permissible use, the burden of proof, remedies for infringement, dispute resolution and any rights of appeal ( Jayakar, 2003). Though copyrights in most jurisdictions are automatically secured when a work is created and published in a tangible medium, a copyrighted work may still need to be registered with a national authority to protect certain rights (Gregory, Saber, & Grossman, 1994). In the United States, registration is necessary for filing a case of infringement in court and seeking damages and penalties (United States Copyright Office, 2012). Reporting copyright offenses, collecting evidence and prosecuting violators require cooperation from courts, local customs and

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border inspection officials, prosecutors and law enforcement agencies. Implementation issues thus cross over from the purely legal domain and enter the political-administrative arena. The emergence of social media has further complicated the legal and administrative dimensions of copyright (Curtis, 2015). First, it has created a forum where users, deliberately or inadvertently, may violate the copyright of media companies and other individuals. In such cases, social media sites have put in place notification and takedown systems, by which the copyright owner may notify the social media site of a copyright infringement, and the site promptly removes the allegedly infringing content. However, aggressive use of notice-and-takedown provisions may also limit opportunities for fair use of copyrighted content for artistic expression, critical commentary or scholarship (Collins, 2010). A related question is also what liability, if any, social media sites have for copyright violations by their members. In most countries, digital intermediaries, such as social media sites and Internet service providers, were not considered liable so long as they adhered to notice-and-takedown (Seng, 2010; Wu, 2014), though Elkin-Koren (2014) questions whether immunity is still justifiable as social media platforms evolve technologically. Also, the extent of the social media sites’ control over usergenerated content is still being debated (Reed, 2014): for example, to what extent can a user ask for her content to be removed, and what rights does a social media site have to curate, archive and disseminate user-generated content? Questions of copyright ownership and liability will be central to social media business models based on monetization of user-generated content.

National Origin Programming Many countries have put in place a preference for content that originates within the country, and reflects the nation’s culture, values and social circumstances. Research has shown that economic factors acting in isolation may result in a surfeit of cheap international programming, usually of American origin (Crane, 2014; Richeri, 2016; Waterman, 2005). American movies and television shows with high production investments, good technical quality, star power and mass market appeal displace local productions, leading Hollywood to capture the majority market share in many film and television markets around the world.This eventually decimates local production industries, which are fragile to start, by depriving them of needed revenues and investments. Especially when broadcasting systems are deregulated and opened up to competition, cheap, high-quality Hollywood products rush in to fulfill the increased demand for audiovisual products. To ensure the survival and competitiveness of local film and television production industries, many countries have put in place multipronged policies of support (Bakhshi, Cunningham, & MateosGarcia, 2015; Lee & Lim, 2014). Some of these measures include input quotas for foreign films and television programs, minimum program percentages for local productions on broadcast television, subsidies for national productions, tax incentives for local audiovisual production industries, training programs, and direct government investments in production facilities. For example, the European Commission revised its Audiovisual Media Services Directive in 2016 to reiterate that preferences will continue to be given based on the country of origin of audiovisual products (European Commission, 2016a).The directive states that at least half of the television broadcast time should be allocated to European films and television programs, and video-on-demand (VOD) services should also feature European works prominently. In Canada, the regulator CRTC requires that broadcasters “must contribute to creating and presenting Canadian programming” and that it should be “a priority” (CRTC, 2017). Though subsidies for national origin programming enjoy significant local support, they have also been critiqued by economists as market-distorting, and as incentivizing producers to “game” the system. For example, Jones (2015) conducted a survey of British producers engaged in film coproductions with other European nations, and found that the primary incentive was financial—in order to

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gain access to European coproduction subsidies—rather than creative or audience-driven. However, the strategy was not without benefit, since the productions were more “culturally European” than pure British products, which enabled them to perform better in the European market. However, Mackenzie and Walls (2012), in their analysis of Australian films, found that subsidies had no impact, positive or negative, on the popularity of films at the domestic box office.

Infrastructure National media policies are deeply concerned about infrastructure issues, among them the rollout of information networks, the quality of service on information networks, the accessibility and affordability of networks for consumers and nonaffiliated content and service providers.

Spectrum Management The electromagnetic spectrum comprises all types of electromagnetic radiations, of which the range 3 kHz to 300 gHz may be used for communications and broadcasting (National Telecommunications and Information Administration [NTIA], 2016). Though technological advances have gradually increased the range of the spectrum that may be used for various purposes and increased the efficiency of spectrum use in terms of information through-put, the number of services relying on the spectrum has also increased dramatically. The emergence of new applications, such as 5G mobile communications, the Internet of things (IoT) and self-driving cars, is likely to further increase the demands on the spectrum (European Commission, 2016b; NTIA, 2017). To maximize the use of the spectrum and avoid harmful interference between applications and users, national spectrum management agencies have created complex allocation schemes in which frequency bands are reserved for specific types of uses (e.g., maritime communications, terrestrial broadcasting, cellular mobile communications, satellite services), and within each band, channels are allocated to different users.The allocation process to users may involve different mechanisms, such as licensing hearings or spectrum auctions. In each method, spectrum is usually allocated for the exclusive use of the licensee/auction winner for a fixed, often renewable, period of time, and for specifically identified uses (Hazlett & Bazleton, 2007). Economists recommend more flexibility in spectrum use; under these proposals, auction winners would be able to reallocate spectrum to services with the greatest market demand, or share it with third parties through lease or resale (Kash, Murty, & Parkes, 2014; Minervini, 2014). Governments have aimed to increase spectrum availability for new applications using a variety of strategies. One approach is to reallocate spectrum to new and high-demand services from existing use categories, such as defense (Cheah & North, 2011). In the United States, reverse auctions were used to incentivize TV stations to vacate their UHF channels, and go off air, move to a VHF channel allocation or share another station’s VHF channel. The freed spectrum was then auctioned to mobile communications providers; the difference in price between the reverse auction payments to broadcasters and forward auction revenues from mobile carriers resulted in $19.8 billion in net revenues as of March 2017 (FCC, 2017a). Technological solutions, such as spectrum sharing and using lower-power cells, have also been proposed. Finally, a “spectrum commons” approach has been put forward, in which a larger portion of the spectrum is allocated to unlicensed use, which smart sharing technologies can utilize without interference (Brito, 2007).

Broadcast and Mobile Spectrum Allocation Closely related to the issue of spectrum management is the allocation of channels to specific users within use categories, such as terrestrial broadcasting and mobile communications. The primary 186

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purpose of frequency licensing is to eliminate chances of destructive interference between signals; channels are spaced sufficiently apart to minimize its chances. But in addition to technical considerations, equity, social need and competition may also factor into the allocation decision. In Canada, the CRTC examines four factors: ownership, financial capacity, technical capacity and programming in making the broadcast station licensing decision (CRTC, 2016). The goal of promoting program diversity is another factor in station licensing. In the United States, the FCC attempted to promote minority ownership of broadcast stations in the expectation that minority ownership will lead to greater amounts of minority-oriented programming (Mason, Bachen, & Craft, 2001; Napoli & Yan, 2007). Station licensing hearings may also build in preferences for independent owners (versus multiple-station groups), or for women and local ownership. Many jurisdictions, such as the United States, also impose limitations on the number of stations that might be owned by the same group, or the percentage of the national market that may be reached cumulatively by the group-owned stations. Some countries have also put in place cross-media ownership restrictions, such as limiting the number of radio and TV stations that the same group may own in the same market (FCC, 2016a). Traditionally, mobile communications licenses were allocated based on regulatory hearings, with or without licensing fees. But problems of corruption, such as India’s 2G spectrum scandal (McDowell & Lee, 2003), have led many jurisdictions to a relatively more transparent auctions model. But auctions too are not without problems, since success may be the result of overbidding, the so-called winner’s curse. The winner’s curse has saddled winning bidders with onerous payments to government, sometimes making them unable to make the necessary network investments or even slide into bankruptcy. The evidence for the winner’s curse is mixed. Mackley (2008) found evidence for a short-term winner’s curse in European 3G auctions, but Cable, Henley and Holland (2002) found no such evidence in their econometric analysis of spectrum auctions in the United Kingdom, nor did Lee, Seol and Kweon (2013) in their study of the first spectrum auction in South Korea. Equity and other considerations have played a role in mobile spectrum allocations as well. For example, the FCC in its spectrum auctions has aimed to ensure that a portion of mobile licenses will be awarded to small businesses. In 2005, one-third of the radio spectrum for broadband personal communications services (PCS) was set aside for small business bidders (Congressional Budget Office [CBO], 2005). However, the CBO (2005) found that this preference came at a cost. Smaller bidders, without the technical know-how and financial resources of the large, established telecom companies, may be unable to deploy services as quickly or efficiently as the latter. Secondly, the CBO estimated that consumer prices may be higher in the short term as smaller bidders may not have the scale advantages available to larger players. Third, the CBO stated that auction proceeds from these restricted auctions may also be lower, leading to less revenue for the taxpayer. However, many jurisdictions continue to build in these small business preferences into auction processes in order to prevent oligopolistic concentration of the industry into the hands of the dominant telecommunications providers, and the opportunities it creates for competitive discrimination against upstream and downstream providers and consumers.

Mergers and Acquisitions Mergers and acquisitions have become a regular feature of those industries, motivated by a variety of factors, including the following: to obtain economic scale and scope (Dutz, 1989; Warf, 2003), to control related product lines or distribution channels (Albarran & Dimmick, 1996, Foley, 1992), to foreclose competition in upstream or downstream segments (Leveque & Shelanski, 2003), to seize opportunities created by free cash flow ( Jensen, 1987), and to respond to globalization and deregulation (Koi-Akrofi, 2014; Warf, 2003). Scholars have examined the consequences of mergers and acquisitions too, for firm performance and corporate governance (Ferris & Park, 2002; 187

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Rheaume & Bhabra, 2008; Ulset, 2007), industry structure and impact on competition (Atkin, Lau, & Lin, 2006; Tardiff, 2007). A consequence (often overlooked) is that mergers and acquisitions can have a cascading effect on the industry, as competitors respond with their own merger activity (King & Schriber, 2016). Due to these wide-ranging consequences, media and telecommunications mergers have attracted considerable attention in media policy. Specifically, mergers are reviewed for impacts on consumers, upstream and downstream suppliers and competitors, and the markets for complementary goods (Chen, 2007; Shelanski, 2002). A starting point might be the examination of the change in market concentration as a consequence of the proposed merger, using measures such as the Concentration Ratio 4 (CR4) and the Herfindahl-Hirschman Index (Naldi & Flamini, 2014); but many other considerations may figure in the agency decision. Typically, multiple agencies in charge of consumer protection or antitrust enforcement may review a merger. In the United States, for example, the FCC and the Federal Trade Commission (FTC) may review a media or telecommunications merger. Both agencies apply somewhat different criteria to their reviews (Barkow & Huber, 2000). Mergers may be permitted after review by the agencies, or blocked, or allowed to proceed subject to conditions. Dual review has sometimes come in for criticism—this is the system by which more than one regulatory or executive agency reviews a proposed merger utilizing often divergent benchmarks.Yoo (2014) argues that dual review of the 2011 Comcast-NBC Universal merger allowed the agencies to extract concessions from the merging parties, which were not directly related to the merger itself. Merger review is also inherently a political process, in which corporate lobbying, political connections and media campaigns all play a role (Ferris, Houston, & Javakhadze, 2016).

Standard Setting Standards policy is an integral part of a country’s industrial and high technology policies, which also has great relevance for the media and telecommunications industries. Standards for devices, interfaces, network equipment, and services have a strong bearing on the speed of network deployment, consumer adoption, accessibility and the quality of service. The role of mobile communication standards in these processes has attracted considerable research attention (Gruber & Verboven, 2001; Koski & Kretschmer, 2005; Lee, Chan-Olmstead, & Kim, 2007; Lee & Lee, 2014). Gruber and Verboven (2001) found that setting a single standard accelerated the diffusion of analog mobile technologies. Koski and Kretschmer (2005) measured the diffusion of 2G wireless phones and found that standardization leads to more firm entry and speedier adoption, but higher prices; after controlling for prices, convergence to a single standard was found to have a significant positive effect on adoption. Lee and Lee (2014) found that standards competition was a driving force behind early smartphone adoption in OECD and BRICS countries, though additional factors, such as operating systems competition, open source platforms and price were also additional factors. However, premature standardization can reduce innovation (Mackie-Mason & Netz, 2006), and lock in an inferior standard (Katz & Shapiro, 1986; Mackie-Mason & Netz, 2006). Researchers have also disputed the price effects of standardization. On one hand, standard setting increases the substitutability between products, reducing the pricing power of providers, and leads to lower prices. Conversely, inter-standard competition can also have major pricing impacts. Competition between standards, especially in the presence of network externalities, leads to “all or nothing” outcomes, causing the competitors to more aggressively price their product when competing between standards. Koski and Kretschmer (2005) in their analysis of OECD data find evidence for the latter effect. Verification of these competing effects requires more study and analysis. Standard setting, especially the development of an indigenous technology standard, may be used by countries to give domestic industries a manufacturing advantage or to create barriers to the 188

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importation of foreign equipment and parts. Emerging economies have sometimes adopted indigenously developed standards, as in the case of China’s TD-SCDMA standard (Liu & Jayakar, 2015). The objective appears to be to catch up with their more technologically advanced competitors and build their national innovation systems (Kshetri, Palvia, & Dai, 2011). However, the adoption of an indigenous standard deprives national operators and consumers of many of the benefits of standardization identified by Mackie-Mason and Netz (2006). For example, adopting an indigenous standard runs the risk of depriving national operators of the benefits of lower equipment costs due to economies of scale, limits consumer benefits deriving from network externalities (development of complementary goods and services) and may give lesser incentive to technological innovation within the indigenous standard due to the smaller size of the potential market. Multiple standards may initially slow the growth of markets and disadvantage domestic firms in competition with better-established international players.The adoption of standards, whether domestic or international, is an integral part of media policy and impacts all stakeholders.

Access, Interconnection and Net Neutrality A seamlessly interconnected broadband infrastructure has advantages both for consumers who want to reach a wide variety of services and for service providers, especially start-ups and new entrants who want to reach customers.The higher levels of the Internet hierarchy present no major problems for connectivity due to sufficient surplus capacity and densely redundant connections. Policy-makers avoid intervention and leave connectivity between networks to be worked out through a variety of “peering arrangements” (agreements by which networks exchange traffic) (Frieden, 2012). However, the last mile—the point of access from an individual household or business to the network—often constitutes a bottleneck. The high cost of the physical infrastructure implies that there is no effective substitute for the last-mile connection; even where customers can switch to a competing provider or another platform, they may be constrained by the high cost of equipment (digital set-top boxes, satellite dishes, etc.) or long-term subscription contracts. The telephone LEC or ISP has significant pricing power in the last mile, as well as the opportunity to discriminate against upstream providers. Media policy therefore has been concerned with access and interconnection in the last mile, for traditional telephone networks as well as for broadband. For telephone calls, interexchange carriers were expected to pay access charges to LECs for the origination and termination of longdistance calls; this was considered compensation for the interexchange carriers’ customers’ use of local exchange companies’ last-mile connections at origination and termination of the calls ( Jayakar, Schejter, & Taylor, 2010). Access charges were fixed by regulators using a variety of methods in various jurisdictions, all with the intent of allowing reasonable compensation for the LECs without unduly burdening long-distance customers. On broadband networks policy-makers have been concerned that the ISPs’ control of the lastmile connection should not be used to discriminate against upstream providers (Frieden, 2015; Greenstein, Peitz, & Valletti, 2016). Cable companies providing both video and broadband access have an added reason to discriminate against upstream video providers, since access to OTT video services has led some customers to disconnect from the ISP’s video services (cord cutting), or reduce their consumption to lower-cost basic tiers (cord shaving) (Accenture, 2016). ISPs therefore have the incentive to practice a number of anticompetitive behaviors, such as blocking or throttling (deliberately slowing) traffic from unaffiliated video providers. Network neutrality rules have been put forward in many countries as a way of avoiding these potential anticompetitive actions by ISPs. In the U.S., net neutrality as a policy proposal emerged in 2003 (Wu, 2014) and after bitter debates, including a reversal by the courts of the FCC’s initial 2010 attempt, the FCC in 2015 adopted the Open Internet Order (FCC, 2015). Essentially, network 189

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neutrality imposes an obligation on ISPs to deliver traffic from all content and service providers to end customers without selectively blocking, throttling or paid prioritization of any traffic, subject only to reasonable traffic management actions.While its supporters argue that net neutrality is essential to ensure that the Internet remains an open forum for innovation, its opponents claim that net neutrality is tackling a problem that does not exist (Hass, 2007), or that it may violate the free speech rights of ISPs (May, 2007). The FCC’s 2015 order was also specifically critiqued for violating the First Amendment rights of broadband providers (Campbell, 2015), and that it will reduce broadband providers’ incentives to invest in infrastructure (Wright and Hazlett, 2017). But the order received strong support from consumer groups, which saw it as an essential rule to ensure freedom of access on the Internet, and against the known anticompetitive behaviors of large ISPs (Gasparini, 2017). In 2017, the FCC, in a statement titled “Restoring Internet Freedom,” announced that it would no longer be implementing the Open Internet Order (FCC, 2017b).

Universal Service Policy-makers and scholars recognize that access to a high-quality, reliable telecommunications and broadband infrastructure is an essential prerequisite for participation in the social, economic and political life of modern societies (Strover, 2014). In addition, widespread broadband and telecommunications availability has been shown to contribute to job creation ( Jayakar & Park, 2017), firm productivity (Grimes, Ren, & Stevens, 2012) and economic growth in general (Holt & Jamison, 2009). Many countries have implemented universal service policies, aiming to make telecommunications and broadband services accessible and affordable to all citizens. Though the term “universal service” has a long history (Dordick, 1991; Mueller, 1996), there is ambiguity about what services should be included in the universal service package. Initially applied only to basic voice service, universal service was gradually expanded to include other services, such as long-distance, directory assistance and emergency services. Later, the definition was expanded to include broadband and mobility services (FCC, 2010). In some countries, universal service subsidies also cover telecom and broadband access in schools, libraries and rural healthcare clinics. A closely related policy question is where funding for universal service programs should originate. Countries have experimented with a number of models, such as general government budgets in countries where the telecommunication system was publicly owned, or a share of telecom industry revenues, or from a subset of telecom services (e.g., only public switched telephone network revenues, excluding VoIP or ISP revenues) (Crandall & Waverman, 2010). In India the Universal Service Obligation Fund was created, into which all telecommunications providers contributed a share of revenues ( Jayakar & Liu, 2014).

Media Policy at the International Level Though media policy is primarily the responsibility of the governments of sovereign states, international organizations play a significant role in areas of decision-making where states cannot effectively coordinate their actions. Many of these international organizations are those in which sovereign states are members—for example, various United Nations agencies, the International Telecommunications Union (ITU), the World Intellectual Property Organization (WIPO) and the World Trade Organization (WTO). Others are global multi-stakeholder entities, such as the ICANN and IETF, mentioned earlier.These international organizations help nation-states coordinate their actions across national boundaries, in several issues spanning both content and infrastructure: copyright, data protection, domain names and standards.

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Content Copyright In an increasingly interconnected world, where information goods flow seamlessly across national borders, it is imperative for the protection of creative artists and computer programmers that their intellectual property is globally recognized. However, significant differences may exist between countries on the legal statutes, procedures and implementation processes by which copyright owners gain recognition and protection for their works ( Jayakar, 2003). Countries have tried to remove this nonuniformity through international intellectual property rights (IPR) conventions. The most important of these conventions are the Berne Convention of 1886; the Universal Copyright Convention of 1952, and the 1994 Agreement on Trade Related Aspects of Intellectual Property (TRIPS).The Berne Convention is administered by the World Intellectual Property Organization (WIPO). The TRIPS agreement addresses distortions in international trade resulting from inadequate IPR enforcement, and seeks to remove these distortions; in 1995, TRIPS was folded into the World Trade Organization (WTO). All IPR conventions seek to lay down common standards of protection—the scope of rights, duration and procedures—that states are expected to copy into their national legislation. These conventions are also based upon the principle of national treatment, wherein all nations agree to extend the same protections to citizens of all signatory nations which are available to their own citizens. Over time, most states have become signatories to international IPR treaties. As required by these agreements, states have legislated domestic laws that create similar substantive rights for intellectual output in every jurisdiction. But since these agreements were not particularly concerned about procedures and implementation, a number of treaties focusing specifically on enforcement were enacted under WIPO, and later as part of the TRIPS negotiations. The TRIPS agreement specifically binds states to enact adequate enforcement mechanisms to protect the rights guaranteed by the earlier agreements, including civil judicial procedures for IPR enforcement, standards for evidence taking, injunctions and damages, border control measures, and criminal prosecutions for large-scale IPR violations. Bilateral agreements may focus on copyright enforcement. For example, the U.S. has laws such as the Omnibus Trade and Competitiveness Act (1988), which requires annual reviews of the IPR enforcement practices of U.S. trade partners, and permits retaliatory trade sanctions against violators. The European Union has similar laws. International copyright enforcement is enormously important for media firms, which are increasingly multinational in their corporate structure and derive a larger share of revenues from foreign markets. U.S. trade associations, such as the Motion Pictures Association of America (MPAA), are strong advocates of international copyright enforcement, since its members now draw a larger share of revenues from international markets than they do domestically. Media economists have also addressed the issue of international copyright enforcement: Picard (2005) quantified piracy losses, while Waterman (2005) explored why some IP industries are better protected than others. Harbaugh and Khemka (2010) model copyright enforcement assuming two types of buyers: high-value buyers, such as corporations and government, and low-value individual users.They found that stricter copyright enforcement tended to increase prices toward “super-monopoly” levels for all users, leading the low-end users to switch to inferior pirated copies. Paradoxically, Harbaugh and Khemka’s model reveals that stricter copyright enforcement may actually increase low-end piracy.

Data Protection Even as the ability of corporations and government to collect, archive and process individual data has expanded exponentially, no consensus has emerged on common standards of protection for personal

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information. At the same time, the collected data also might easily be transported across national borders to be archived and processed in a location where the individual’s expectations of privacy and data security, based on his or her home country laws, may not be fulfilled. Dominant informationbased businesses, such as Google, Apple, Facebook and Amazon, are global corporations, with customers and operations in hundreds of countries. Harmonization of national laws on data protection and privacy may be required through international treaty. Various international organizations, such as the European Union and the OECD, have attempted to evolve an international legal framework for data protection. A 2010 court case in Spain resulted in a ruling that recognized the right of all EU citizens “to be forgotten”—namely, to request that their personal data be removed and made inaccessible from search engines (European Commission, 2012). A similar case brought against Google in Japan was dismissed in February 2017 (Russell, 2017). But despite the voluminous coverage and controversy surrounding the issue, Ambrose and Ausloos (2013) argue that the “right to be forgotten” remains conceptually vague. It conflates the “right to oblivion” or full erasure of publicly available data (including those at potentially dispersed sites on the Internet) with the “right to erasure”—namely, the removal of data submitted to a service provider by an individual, from the provider’s own database, once the relationship is terminated by either party or the individual requests erasure. Ambrose and Ausloos argue that the “right to erasure” is not likely to be burdensome to the service provider, unlike the “right to oblivion.” A further issue in data protection is what Bauer, Lee-Makiyama, van der Marel and Verschelge (2014) have called “data localization” and its consequences for the trade in services. In order to ensure that citizens’ data would be guaranteed all the rights and protections available under national law, several states have prohibited the international transfer of personal information. In some cases, countries have negotiated bilateral treaties that extend data privacy protections to its citizens within a foreign trading partner. Researchers have addressed initiatives such as the European Union’s Privacy Shield, which sought to protect the privacy rights of European Union entities in the United States (Tracol, 2016). According to Bauer et al.’s survey, several nations, including China,Vietnam and Indonesia, have “data localization” requirements in place. Their simulations show that “data localization” may reduce GDP growth, in the case of Vietnam by as much as 1.7%.

Infrastructure As in the case of copyright and data protection, several infrastructure issues require international coordination as well. Two of these are the domain name system and international standard setting.

Domain Name System The two-part name-and-number domain name system (DNS) is the addressing system that uniquely identifies every device connected to the Internet. It envisions a hierarchical and distributed naming system organized in an inverted tree structure, beginning with the “root” server at the very top, followed by a number of top-level domains (TLDs), classified into generic top-level domains (gTLDs) (also called global top-level domains) and country-code top-level domains (ccTLDs). Name servers in each level contain the list of name-and-number assignments made at the level immediately below. The operations of the DNS require the performance of a number of different activities, including the assignment of domain names and addresses, address resolution, technical standard setting, the creation of new top-level domains, dispute resolution, coordination and communication. A number of institutions handle these various managerial functions: the Internet Engineering Task Force to develop technical standards for the Internet; the Internet Research Task Force (IRTF) for longterm planning; the Internet Architecture Board or IAB to oversee the IETF and the IRTF; and the Internet Society (ISOC), an umbrella organization that coordinates between the various ad hoc 192

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organizations active in the management of the Internet. It accepts both individuals and organizations as members. Since 1998, the Internet Corporation for Assigned Names and Numbers (ICANN), a private sector organization, has functioned as the overseer of the Internet DNS. Its chief responsibilities are to coordinate the functions of the Internet Assigned Numbers Authority (IANA), including establishing the policies for the allocation of IP number blocks; overseeing the root server system; creating new top-level domains as required; and promoting standards and technical parameters. ICANN is supported in its activities by several supporting organizations and advisory committees, representing various Internet stakeholder groups: registries and registrars, ISPs, IP owners, ccTLD managers and individual users. In keeping with the private sector orientation of ICANN, national governments have no direct role in ICANN; they find a voice on the Government Advisory Committee (GAC), which has only a purely advisory function and no decision-making authority. This led some observers to herald ICANN as a new type of international organization, with a clear global mandate but no basis in multilateral treaty, and no role for national governments (Feld, 2003; Mueller, 2002). Several aspects of the operations of the DNS are of interest to economists and management researchers. The registrar and registry business of assigning domain names to users and enabling address resolution services has emerged as a multibillion-dollar business opportunity. Katz, Rosston and Sullivan (2010) model the economic consequences of the expansion of gTLDs. Halvorson, Der, Foster, Savage, Saul and Voelker (2015) describe the new economic opportunities created by the creation of new TLDs, such as. academy, as a “land rush.” Significant attention has been devoted to the question of the protection of trademarks online, specifically centered on ICANN’s Uniform Domain Name Dispute Resolution Policy (UDRP) (Fernbach, 2013; Loutocky, 2014).

International Standard Setting Standard setting for telecommunications networks, satellite communications and the Internet requires coordination spanning national boundaries. Traditionally, this was achieved through international bodies with wide national representation: intergovernmental organizations, such as the International Telecommunications Union, or national membership organizations, such as the International Electrotechnical Commission (IEC), or associations of national standard-setting bodies, such as the International Organization of Standardization (ISO) (Liu, 2014). Standard setting through these international organizations worked through consensus-building and consultation at periodic meetings, and adopted standards utilizing majority voting, processes more amenable to an environment where the rate of technological progress was slow. However, the ITU-IEC-ISO process was critiqued as too slow, bureaucratic and inefficient for the new technology environment, resulting in its rapid eclipse in favor of newer types of standardsetting organizations (Besen & Farrell, 1991). These new types of organizations were less likely to be governmental, or nationally representative; most are voluntary organizations of experts, ad hoc coalitions or consortia of industry, and technical forums (Buthe & Mattli, 2010; Rysman & Simcoe, 2005). However, national governments and leading international trading blocs are not without power. Bradford (2014) demonstrates how the EU exercised influence over international markets and standard setting via its ability to influence the terms of trade between its huge market and global partners. However, the activities of these competing industry consortia or regional trading blocs have led to the “balkanization” of the standard-setting process (Liu, 2014).

Summary and Directions for Future Research Media and telecommunications policy-making functions at the intersection of law, engineering and economics, and seeks to achieve socially optimal results in a highly contested political environment. 193

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Policy-makers have to contend with multiple causes and effects and insufficient and imperfect data. With these imperfect tools, policy-makers have to seek equitable and socially just outcomes using the least intrusive methods. However, their decisions are enormously consequential to media managers and firms. Researchers may therefore wish to investigate telecommunications and media policy as it intersects with management and economics. Here is a sampling of such topics: • • • • • • • • • • • • • • • • • • • •

Impact of land use regulations and tower placement rules on cost of service to rural areas and the timing of infrastructure rollout plans Impact of state authorizations for eligible telecommunications carriers (ETCs) on participation in federal programs, such as Lifeline Comparative analysis of licensing, franchising and subsidy policies as barriers to entry to markets, across nations and across subnational units, such as states Changing demographics of subscription to basic cable tiers and premium tiers in the context of cord cutting and cord shaving Efficacy of traditional policy options, such as “safe harbors,” in protecting children in a converged media environment Dimensions of media diversity; metrics to measure media diversity across platforms Media mergers and impact on content diversity Impact of advertising regulations on consumers, industries and social welfare Monetization of social media content; copyright in user-generated content and the business models of social media Impact of national origin subsidies on the competitiveness of individual films and film industries; cost-effectiveness of film and television production subsidies Effectiveness of spectrum sharing and unlicensed spectrum; market for spectrum Equity considerations in spectrum allocation; impacts on spectrum revenues Benchmarking media concentration in a converged marketplace for merger review Effect of intra-standard and inter-standard competition on prices and quality of service in the mobile industry Business use of broadband technology; effects on firm productivity, and economic activity Effect of net neutrality on innovation, network investments and access to content and services Copyright enforcement and prices, production of derivative products Quantifying the impact of new gTLDs Empirical analysis of trademark protection and ICANN’s dispute resolution policies Dynamics of international standard setting by industry consortia; standards as trade barriers; standards and national competitive strategy

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13 MERGERS AND ACQUISITIONS AND THEIR PERFORMANCE Hans van Kranenburg and Gerrit Willem Ziggers

Introduction Globalization, deregulation, technological innovation, and the convergence of previously separated sectors, such as media, entertainment, information, and consumer electronics sectors, have changed the media landscape into a turbulent environment. The development of new media has accelerated the blurring of the boundaries and the convergence of different sectors into the integrated information multimedia entertainment sector. Most technologies described as ‘new media’ are digital, often having characteristics of being manipulated, networkable, dense, compressible, and interactive (Kranenburg & Ziggers, 2013). Because of these developments, many firms are experiencing severe challenges, as content proliferates, audiences change behaviors, advertising revenue erodes, and new competitors emerge. For example, the rapid convergence between fixed and mobile distribution is a structural driver underpinning convergence in the sector (Chan-Olmsted, 1998). Mobile communication provides the opportunity of quadruple services (broadband Internet, TV, telephony, and mobile services), enabling customers to get all their household communications from a single provider against lower churn and acquisition costs (Chan-Olmsted & Guo, 2011). In response to this development fixed and mobile operators are colliding. The offensive move of UK telecom incumbent BT by acquiring EE from Deutsche Telekom and Orange in a deal valued at £12.5 billion challenged the pay-TV market, urging Sky and Virgin to look for mobile operators.(Evans & Donders, 2015). Overall, firms developed capabilities and resources and created new businesses or adapted to existing businesses and emerging markets through internal growth or used external sourcing options to improve their performance and to sustain their competitive advantages. Mergers and acquisitions (M&As) provide opportunities for firms to get access to and to develop a range of new resources, capabilities, and new products that they need to further develop both core activities and complementary activities. Moreover, M&As have a unique potential to transform firms and to contribute to firms’ growth and renewal. They can be instrumental in renewing market positions, acquiring capabilities and resources at a speed not possible through internal development or alliances.The wave of M&A transactions in the integrated information multimedia entertainment landscape during the last decades is an indication of the popularity of the use of M&A strategies of firms. For example, PWC (2016) in its research on megadeals (deals of at least $1 billion) in the entertainment, media, and communications industry during 2011–2016 concluded that during the 2011–2016 period four different M&A strategies prevailed in this sector, expressed as percentage of megadeal value,

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consolidation considerations (67%), capabilities extension (20%), content enhancement (6%), and innovation acquisition (5%). Remarkable and apparent in all four categories is their limited geographic expansion. Only 19 of the 90 megadeals during this period had cross-border implications, and their numbers have been decreasing, mainly due to cultural, language, and regulatory challenges. The aim of this chapter is to gain a deeper understanding of what M&A activity drives in the integrated information multimedia entertainment sector, its performance assessment, and future research topics. First M&A as an external sourcing option among internal development and alliances will be discussed from the perspective of the strategic importance of firm’s activities and the firm’s relative strength compared to competitors. Next the motives and theoretical rationale for M&A activity will be elaborated by addressing some of the driving theories. It will be followed by a section on the success of M&A activity performance measurement resulting in a typology for M&A performance assessment. Finally, the chapter concludes with an agenda for future research.

Market Exchange, Alliances, and M&As Sector convergence, digital disruption, and changing customer preferences continue to impact the integrated information multimedia entertainment landscape. These developments raise the question of how firms can cope with these changes and forces of competition. In general, firms engage in competition for the market usually through research and development (R&D), competition to develop the ‘killer’ product, service, or feature that will confer market leadership and thus diminish or eliminate actual or potential rivals (Kranenburg & Ziggers, 2013). Moreover, firms find ways to invent new or better products, improve services, and/or identify cost savings through better processes or technologies, and enter new markets. Firms are also forced to better connect with customers who are accessing and interacting with content in fundamentally different ways compared to the past. One way for firms to deal with these developments and to create a sustainable competitive advantage is through internal growth. Some firms may have the knowledge and capabilities needed to create the necessary internal growth.These firms have access to a range of capabilities and resources that the firms need to further develop both core activities and complementary activities. However, firms in the integrated information multimedia entertainment sector operate under rapidly changing conditions and are constantly faced with changing internal and external conditions. In general, the effort to develop desired capabilities and resources and to create new businesses or to adapt to existing businesses and enter emerging markets through internal growth would be a risky strategy. Firms may lack the time, knowledge, resources, and capabilities to create the necessary internal growth. Furthermore, new markets might be difficult to penetrate because a lack of market presence and information on customers’ needs, local operating conditions, and government regulations. Therefore, external sourcing options, such as market exchange, alliances and mergers, and acquisitions, give firms access to a range of capabilities and resources and access to markets that the firms need to further develop both core activities and complementary activities (Kranenburg, Pennings, Dal Zollo, & Hagedoorn, 2008). The choice for a particular external sourcing option depends on the strategic importance of the resources, capabilities, or activities for the firm’s performance and sustainable competitive advantage. If the importance is high then firms prefer to control or even to possess the resources, capabilities, or activities instead of being dependent on the willingness of other parties to cooperate with the firm. Firms prefer to control or possess the resources, capabilities, or activities when they have already or can create a strong position in comparison to their competitors. The management literature shows that mergers, and acquisitions, if properly managed, contribute to the improvement of long-term performance of firms (Chakrabarti, Hauschildt, & Sueverkruep, 1994; Hitt, Hoskisson, Johnson, & Moesel, 1996). This holds if these options are applied to increase innovative capabilities and to build a substantially enlarged user base for new activities and new businesses.

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Table 13.1 presents an overview of preference for external sourcing options. The choice is based on the strategic importance of resources, capabilities, or access to markets for the firm and its position compared to its main competitors. Market exchange is defined as an entire complex of institutions which people buy and sell and hire and borrow and lend and trade and contract and shop around to find bargains (Schelling, 1978). Market exchanges require an almost instant (real-time) bid- and ask- matching mechanism, settlement and clearing, and marketwide price communication and determination. Many broadcast companies are buying content from the market. For instance, content offered by television broadcasters influences the competition for audience and advertisers between television broadcasters. In the race for content, live sport plays a very important role.Viewers are watching programs on demand, skipping the ads. Live sport is therefore crucial for advertisers, particularly in the United States.The other major shift—more evident in Europe—is competition between pay-TV firms and telecommunications firms. The UK firms Sky and BT both sell television and broadband packages to consumers. BT, which makes substantial profits on broadband, was able to pay more for sport content than Sky’s previous rivals for the English Premier League football rights—Setanta and ESPN—which had only subscription and advertising revenues. In 2015, Sky and BT Sport paid a record £5.136 billion for live Premier League TV rights for three seasons during 2016–17. Since BT entered in 2012, the UK rights for Premier League games have nearly tripled to £1.7 billion per season (Financial Times, 2015). These firms have also been seeking to lock in their costs through long-term deals. That could make it harder for other firms, such as Netflix, Google, or Apple, to buy into the market. Other European telecommunications firms (e.g., Spain’s Telefónica and Germany’s Deutsche Telekom) also are interested in offering sports content. In general, market exchanges are not appropriate when a firm considers the needed capabilities and resources or access to the market as strategically important to create sustainable competitive advantage (Capron & Mitchell, 2004). When firms undertake market exchanges, they have generally limited opportunities to learn the intangible aspects of the technology, customers, and markets or the firm may become too dependent on the resources and capabilities of the other firms or access to the markets. More integrative modes may help the firm to develop the needed future resources and capabilities or access to important markets. They provide stronger opportunities for a firm to get access to and develop a range of resources, capabilities, and activities that a firm needs to develop further both core capabilities and activities and complementary ones. A popular integrative mode is an alliance. Alliances play a particularly important role in rapidly changing industries, such as the multimedia entertainment landscape, where learning, sharing costs, and flexibility form the basis of competition (Daussauge & Garrette, 1999; Gomes-Casseres, 1996). Many different forms of alliances exist, such as licensing agreements, customer-supplier relationships, research contracts, and partnerships between rival firms. A distinction between the forms of alliances can be made based on equity. The two main

Table 13.1 Overview of preference for market exchange, alliance, or M&A. Strategic importance of resource, capability or activity

High Medium Low

Alliance M&A Alliance Alliance Market exchange Market exchange Low Medium Strength compared to main competitors

Source: Author’s summary.

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categories are equity-based alliances, especially joint ventures, and non-equity agreements, such as joint R&D, marketing, and supply agreements. Equity-based alliances are often established to raise mutual dependence. A non-equity alliance is more flexible and needs lower investment costs than the equity-based alliance. The non-equity alliance is any contractual agreement between two or more firms in which none of the firms have a degree of ownership. It is generally believed that this type of alliance has a relative short-term focus. This type of alliance is particularly suited to monitor technological developments, new opportunities, and new product markets at relatively low costs (Hagedoorn & Kranenburg, 2003). Alliances can also be classified into horizontal, vertical, and conglomerate alliances. When firms are operating in the same product market and are allied, the partnership is classified as a horizontal one. A vertical relationship is defined as an agreement between firms operating in a different stage of the value chain within a specific market. Finally, a conglomerate partnership is an agreement between firms with no vertical or horizontal relationship (Gomes-Casseres, 1996; Daussauge & Garette, 1999). Alliances can help firms to create a sustainable competitive advantage in the integrated information multimedia entertainment sector. For instance, the alliance between Netflix and film production firm MRC helps Netflix to transform its firm into a serious player in the world of quality TV. MRC is the firm behind the successful television series House of Cards. MRC historically has done a lot of unusual distribution deals, whether it be film or digital. MRC and Netflix established an exclusive partnership for the production and distribution of House of Cards. It became the first original show on Netflix. Due to these types of alliances, Netflix reduces its dependence on market exchange transactions for content. Even if alliances are successful, there is no guarantee that the alliance will survive. For instance, in 1991, U.S. computer animation film studio Pixar established an alliance with U.S. multimedia and entertainment conglomerate Walt Disney Company. Due to this alliance, Walt Disney had access to the incredible creative talents of Pixar to deliver a new animated movie segment to the market and the customer enjoyed the new products that were result of the partnership. Five animated movies were made in the partnership, including Toy Story and Finding Nemo.These movies have earned more than $3 billion and accounted for more than 25% of Disney’s profits. However, CEO of Pixar Steve Jobs terminated the alliance because of cultural differences and incompatible objectives between the two partners. To safeguard access to the creative talent of Pixar, Walt Disney acquired Pixar in 2006 (CNN Money, 2006). M&As provide a viable vehicle when the firm needs to make extensive changes or respond fast to the developments to maintain or improve its competitive advantage. These actions give firms immediate access to the needed resources, capabilities, technologies, mind-sets, and future streams of innovations, and may build the needed market position (Gaughan, 1991; Hitt et al., 1997; Hagedoorn, Cloodt, & Kranenburg, 2006). In general, these actions are strategically crucial for firms to improve their competitive advantage and their survival chances. M&As have a unique potential to transform firms and to contribute to corporate growth and renewal. They can be instrumental in renewing market positions at a speed not possible through internal development or market exchange.Through M&A existing capabilities can be leveraged into much more significant positions. They can provide the ability to access the benefits from combining assets and sharing capabilities in a way not obtainable through alliances (Haspeslagh & Jemison, 1991). Although M&As refer to integrative modes that serve to transfer ownership control from one firm (the target) to the other (the acquirer), strictly speaking, they are different. A merger is defined as a transaction whereby two or more equally valued firms become one. This transaction is negotiated with the target’s management and, when approved by its board of directors, the terms of the offer are submitted to a vote of the shareholder. However, not all transactions between firms are negotiated with and approved by the target firm’s management, especially transactions in which a dominant firm

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acquires the assets of the less dominant target firms. This type of transaction is known as acquisition (Kranenburg, Pennings, Dal Zotto, & Hagedoorn, 2008). Sometimes the term ‘acquisition’ also refers to those deals in which the acquirer buys only minority shares or voting rights of the target firm. In other words, the acquirer buys only part of the firm. All M&A transactions fall into the more general concept of takeovers (Hirshleifer, 1995). In turn, takeovers may be friendly or hostile. When the target firm’s manager initially rejects the acquisition offer the takeover turns hostile ( Jenkinson & Mayer, 1994). In reality, most mergers are acquisitions, with one firm controlling the other; therefore the terms ‘mergers’ and ‘acquisitions’ are used interchangeably. M&As can be classified as horizontal, vertical, and conglomerate transactions. M&As are considered horizontal when the firms are in direct competition and share the same product lines and markets.They are considered vertical when one is a customer of the other—namely, when they have a downstream-upstream structure in which the former buys inputs to the latter to produce the final output. Finally, mergers are considered conglomerated when firms are in different markets and/or do not have business lines in common (Hay & Morris, 1991). An interesting example of a conglomerate acquisition is the acquisition of motor sport organization Formula One by U.S. media conglomerate Liberty Media. In 2016, Liberty Media, controlled by John Malone, acquired Formula One from Luxembourg-based investment fund CVC Capital Partners in a complex deal that valued the sport at $8 billion. John Malone also owns two other major media conglomerates, Liberty Interactive and Liberty Global. Liberty Interactive’s subsidiaries include the home shopping channel QVC. UKbased Liberty Global is one of the world’s biggest broadband Internet service providers and international cable firms, with operations in 14 countries. Furthermore, Malone also has a stake in Barnes and Noble, the biggest retail bookseller in the United States. Liberty Media is a major media conglomerate with stakes in several sports and entertainment businesses. Liberty Media also has stakes in U.S. cable TV firms, entertainment and ticket sales firms, and the satellite and online radio company Sirius XM. A main reason for Liberty Media to acquire Formula One was the exclusive rights to offer Formula One races to its viewers. The acquisition of the Formula One racing business opens a new chapter for the motor sport. Liberty Media sees the opportunity to draw more fans to the sport around the world, lift television ratings, and increase commercial revenues. Broadcasting revenues account for up to 35% of Formula One annual revenues of more than $1.8 billion. Race promotion accounts for another third, 15% comes from advertising and sponsorship, with the rest made up from hospitality, TV production, licensing, and other sources (Financial Times, 2016).

M&A Waves M&As behave in waves of short periods with intense M&A activities. A majority of M&A activities occurred during one of these major waves of M&As (McNamara, Haleblian, & Dykes, 2008). The occurrence of M&As is highly cyclical, which results in booms in the occurrence of M&As followed by slumps of M&As. These booms in the occurrence of M&As are driven by high valuation of bidder stock and economic shocks (Garfinkel & Hankins, 2011). Managers can become afraid that their firm will become the target of an acquisition in the case that they do not acquire themselves. Shareholders may express fear that their firm is left behind when potential target firms are acquired by competitors. The consequence is that firms show herd behavior. Of course, the acquiring firm does not necessarily need the target firm and therefore it may pay too much to acquire the target firm. Each wave is characterized by a concentration of M&A activities in specific industries. The very first wave started with horizontal mergers in the U.S. oil, steel, railroad, telephone, and mining sectors at the beginning of the 1900s (Stearns & Allan, 1996). Many firms with small, stand-alone market shares consolidated in these sectors.These firms used the word ‘trusts’ for their business arrangements

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and big trusts became big monopolies, which ended up raising anticompetitive concerns. This is what led the emergence of antitrust laws in the United States. The second merger wave took place also mainly in the United States during the 1920s and was characterized by vertical mergers. During this period, giant automobile manufacturers emerged and the public utility sector was particularly involved too. The third wave of M&As was in the 1960s. Many firms adopted a diversification strategy and spread out their business lines into new industries and areas of research activity. This way is characterized as the existence of conglomerates. However, since many firms did not achieve the expected synergies, the market capitalization of these firms significantly decreased at the end of the 1960s. Consequently, many firms started to divest their acquired activities. The fourth wave, occurring in the 1980s, has been called the wave of disciplinary mergers. Many of these M&As largely occurred in a hostile takeover environment which involved a replacement of the target’s manager. Most M&As took place in the banking and financial services industries. Deregulation and privatization boosted a new wave of M&As in the 1990s (Mitchell & Mulherin, 1996). Another important driver for this fifth wave of M&As was the Internet revolution (Andrade, Mitchell, & Stafford, 2001). The fifth wave can be characterized as size-increasing M&As. Many of the most prominent M&As were neither purely horizontal or vertical nor purely unrelated. Rather they presented market extensions of firms in the same industry that served different and currently non-competing markets. The most remarkable M&As were concentrated in the banking and financial services as well as in the telecommunications, entertainment, media, and technology sectors (Kranenburg, Cloodt, & Hagedoorn, 2001). At the end of 2000 this wave experienced a slowdown apparently due to a collapse in the Internet bubble and the earnings and financial problems of the telecommunications industry (see Kranenburg & Hagedoorn, 2008). Finally, since 2002 a considerable increase of M&As has been observed worldwide in the telecommunications, entertainment, media, and technology sectors once again as these sectors converged into the information multimedia entertainment sector (Kranenburg & Ziggers, 2013). Empirical evidence shows that M&As are a viable mode to provide a quick and seemingly easy route to achieving product market objectives and to enter new technological fields and to gain access to new technology and technological knowledge capabilities. An important development in the information multimedia landscape is the accelerated technological convergence on the product market level. In general, in this landscape the product market and technological motives for undertaking M&As are at work simultaneously. Box 13.1 presents an overview of the M&A activities of the U.S. information multimedia entertainment company Alphabet for the period 2001–2016.

Box 13.1  Alphabet’s acquisition strategy for future value creation Google, a young company in 2001, beginning to enter the online search world, offers the struggling online business Deja and its fading hosting Usenet community a lifeline by taking over the company and promising to service the needs of the community. Besides this promise, it made another promise in the accompanying press release in 2001 for the takeover announcement. Google would continue to build and acquire necessary technologies to provide the best search experience to millions of Google users worldwide. Around 200 acquisitions later it is hard to argue that Google, reorganized in late 2015 as a new entity called Alphabet, has not kept its word. Its main strategy is the acquisitions of technologies with which to supplement its key products and services. Acquisitions allow Alphabet to operate in a variety of businesses: media and entertainment, auto tech and navigation, robotics, smart home, commerce, Google for enterprise/productivity, cloud, health care, payments, and telecommunications.

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What can be learned from Alphabet’s acquisition strategy? Alphabet follows in general a low-key approach to its technology takeovers, giving the impression that technology is originating from its own engineering staff. This is an often overlooked benefit of acquiring smaller firms or ones that do not have a fully released product. Alphabet’s $1.65 billion purchase of YouTube in 2006 may not fit this picture and shocked analysts and observers as it was considered just a cash-cow integrated with Google’s ad and search platforms with no alterations. This impression was wrong as Google picked up another seven companies to bolster YouTube’s services. Only three of those deals’ values were publicly released, totaling ‘only’ $158 million. The rationale of this strategy is that Alphabet is targeting companies with passionate, talented teams and a strong focus on user experience, creating inclusive and universal products understood by the majority. In the words of CEO Larry Page a deal has to pass the toothbrush test: is the product something you use daily and would it make your life better? Companies that are small and flexible can better adapt to Alphabet’s culture and way of thinking, adjusting their products to be immediately identifiable as ‘Google products.’ One of the key success factors for Alphabet’s acquisitions is the retention of the founders of the entrepreneurial spirit. It works closely with founders of acquired companies and at the core provides the opportunity for them to have access to plenty resources. This has resulted in that in 2015 about 67% of start-up founders who accepted jobs at Alphabet between 2006 and 2014 were still with the company. With its constant bets on future developments, like the opportunity for digital interaction in real-world environments (e.g., InGress), it needs such people to sustain the flow of ideas. The motive that drives Alphabet’s acquisition strategy is the quest for new technologies, capabilities, and entrepreneurial talent that serve future markets and stay ahead of competition. There are huge question marks over the YouTube deal over time, how a market will evolve, or whether a market will actually emerge. In performance terms, it is likely to be a failure in conventional terms, but over time a deal could be tremendously significant in influencing market development and placing the acquirer in a privileged position for future strategic moves. (Sources: CBInsights, 2017; Luckerson, 2015; Stringer, 2017)

M&A Motives Firms can have different motives to participate in mergers and acquisitions. In general, these motives can be classified into two main groups: M&As motivated by strategic intent versus manager’s self-interest. The first group includes motives that increase the value of the merging or acquiring firms. The M&A has the potential to increase the actual or future economic profits of the firms. The second group of motives is related to the interest of the managers of the firm and less to the increase of the firm’s value. Most scholars agree that M&A decisions are driven by a complex pattern of motives and that no single theoretical approach can explain the motives underlying an M&A decision. The strategic management field identifies several theories explaining the logic behind mergers and acquisitions. For instance, Trautwein (1990) identifies seven different theoretical approaches and explanations regarding motives for M&As. However, agency theory can also be used in combination with the empire-building theory. These eight motives can be organized into three categories: M&As as rational choice, M&As as process outcome, and M&As as macroeconomic phenomenon. Table 13.2 adapted from Trautwein (1990) presents the M&A motives and the theories. 207

Hans van Kranenburg and Gerrit Willem Ziggers Table 13.2 M&A motives. Motive

Theory

Description

M&A as rational choice

Efficiency theory

M&A is planned and executed to achieve synergies: operational, financial, and managerial synergies. M&A benefits bidder’s shareholders. M&A is planned and executed to achieve market power. Horizontal and conglomerate M&A may allow firms to cross-subsidize products, simultaneously limit competition in more than one market, and deter potential entrants from the market. M&A benefits bidder’s shareholders. M&A is planned and executed by managers who have better information about the target’s value than the stock market. M&A benefits bidder’s shareholders. A raider is a person who causes wealth transfers from the shareholders of the firms (s)he bids for in the form of greenmail or excessive compensation after a successful takeover. M&A benefits bidder’s shareholders. M&A is planned and executed by managers who thereby maximize their own utility instead of shareholders’ value. M&A benefits managers. M&A decisions are outcomes of processes governed by one or more of the following influences: organizational routines, political games played between a firm’s subunits and outsiders, and individuals’ limited informationprocessing capabilities. M&A waves are caused by economic disturbance. Economic disturbances cause changes in individual expectations and increase the general level of uncertainty, thereby changing the ordering of individual expectations. Previous nonowners of assets now place a higher value on these assets than their owners and vice versa. The result is an M&A wave.

Monopoly theory

Valuation theory

Raider theory

M&A as process outcome

M&A as macroeconomic phenomenon

Empire-building theory/agency theory Process theory

Disturbance theory

Source: Adapted from Trautwein (1990).

M&As as Rational Choice To achieve a competitive position in a market, firms must work efficiently. Firms become more efficient when they create synergies (Clougherty & Duso, 2011). The word ‘synergy’ is derived from the Greek word ‘synergos,’ which means working together. In the strategic management literature, synergy refers to the ability of two or more units or firms to generate greater value by working together than they could achieve by working apart (Goold & Campbell, 1998). Efficiency theory views M&As as being planned and undertaken to create value through synergies.This theory assumes achievements of financial, operational, and managerial synergies. Financial synergies result in lower cost of capital while operational synergies are achieved by combining operations of separate units or by knowledge transfer. Operational synergies can be classified into cost and revenue synergies (Schweiger & Very, 2003). These synergies can be achieved through economies of scale, vertical economies, and economies of scope in production, R&D, and administration (Larsson, 1999). Managerial synergies are achieved by using the bidder’s superior management planning, tactics, and monitoring abilities in the target’s organization. 208

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Monopoly theory also refers to value creation through synergies. The theory states market power is achieved by planned and executed M&A transactions.This theory summarizes three main advantages of M&As which are called collusive synergies (Chatterjee, 1986). These synergies can be obtained by strategically cross-subsidizing products (profits from one market used to sustain a fight for share in another market) or by simultaneously limiting competition in more than one market by, for example, building a foothold in a competitor’s main market, which in turn offers the same in its main market (Porter, 1985). Finally, these synergies can also be obtained by threatening potential competitors from the market of the firm.These collusive synergies can be realized from either horizontal or unrelated M&As. Valuation theory views M&A transactions as planned and executed by managers. The main argument of this theory is that managers have better private information about the target’s value than what is known to the stock market. Trautwein (1990) suggests that bidders’ managers may have unique information about possible advantages from combining the target’s business with their own or may have detected an undervalued firm just waiting to be acquired. The main motive for M&As in raider theory is the transfer of value from shareholders of the target firm to those of the acquiring firm. The raider is a person who causes wealth transfers from the shareholders of the firms he or she bids for. The transfers include greenmail or excessive compensations to the raider after successful takeovers. Per the efficiency, monopoly, valuation, and raider theories, M&As especially benefit the bidder’s shareholders. However, the other rational choice theory to explain the motive of M&As does not have the benefits of the bidder’s shareholders in mind, although it also views M&As as planned and executed transactions. In empire-building theory, M&As are planned and executed by managers intentionally to maximize their own utility instead of the shareholders’ value. Empire building is the act of attempting to increase the size and scope of an individual’s or organization’s power and influence. Empire building is typically seen as unhealthy for a corporation, as managers will often become more concerned with acquiring greater resource control than with optimally allocating resources. Hence, individual managerial goals and benefits can explain the motive underlying the M&A decision.The theory that describes the natural conflict between shareholders and managers is the agency theory. The conflict arises because individuals choose actions to maximize their own utility, suggesting that managers will not always act in the best interest of shareholders ( Jensen & Meckling,1976).

M&As as Process Outcome Process theory can also be used to explain the logic behind M&As. This theory explains M&As by saying that firm’s strategic decision-making process and its results are impacted by a firm’s routines, its social and political development, and its characteristics, such as experience of previous transactions. Old solutions for similar situations are used on new problems and new solutions are an alternative only when the old ones fail. Routines play an important role in the decision-making process (Cyert & March, 1963). They are the outcome of what the organization has learned over time to be appropriate steps to take to meet different problems. Strategic decisions, such as M&As, are the outcome of political games between different internal and external stakeholders, their tactical considerations, and the mutual adjustments they make throughout the process (Pettigrew, 1977). Hence, M&A decisions can be explained as outcomes of processes characterized by several nonrational influences. The strategic decision seems to be more rooted in ‘rules of thumb’ and ‘gut feeling’ than rational and comprehensive analysis.

M&As as Macroeconomic Phenomena The third group of motives can be explained with disturbance theory. This theory looks at waves of M&As which are caused by economic disturbance on a macro level, causing changes in individual 209

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expectations and increasing the level of uncertainty (Faulkner, Teerikangas, & Joseph, 2012). These economic disturbances cause change in expectations of owners and nonowners of assets. In general, nonowners of assets place higher value on assets than their owners, and vice versa, resulting in an M&A wave. Laamanen and Keil (2008) emphasize that firms tend to imitate each other’s M&A practices, which looks to macroeconomic effects. This phenomenon is also known as herd behavior of firms.

M&A Performance M&As remain a core strategic priority in the integrated information multimedia entertainment sector (Ernst & Young, 2016). Despite its popularity, a substantial body of analysis of M&A performance shows failure rates for acquirers of between 45% and 82% on a wide variety of measures (Angwin, 2007; Hunt, 1990; Papadakis & Thanos, 2010). This contrast between its popularity and failure rate raises the question of why firms’ management continues to engage in M&A deals both in number and in monetary terms when they are likely to fail. The answer to this question may be grounded in how performance is assessed and the motives for acquiring firms.

Performance Measurement Most research on M&A performance assessment can be grouped into three research streams (Zollo & Singh, 2008): accounting-based measures (e.g., Kusewitt, 1985; Lu, 2004; Zollo & Meier, 2004), stock market–based measures (e.g., Agrawal, Jaffe, & Mnadelker, 1992; Sudarsanam & Mahate, 2003; Haleblian & Finkelstein, 1999), and managers’ personal assessments regarding the realization of upfront set objectives (e.g., Angwin, 2004; Homburg & Bucerius, 2006; Papadakis, 2005).These three performance measures will be briefly discussed.

M&As Performance Based on Accounting-Based Measures The rationale behind studies that use accounting-based measures to evaluate the success of an acquisition is that the strategic aim of it is to earn a satisfactory return on capital (McGee, Thomas, & Wilson, 2005). This should be reflected in accounting measures, such as return on assets (ROA) (Hitt, Harrison, Ireland, & Best, 1998). The approach in accounting-based evaluations is to compare post-acquisition returns to the weighted average of the pre-bid returns of each target and acquiring firm (Sudarsanam & Mahate, 2003). In general, the results of this stream of research provide no clear evidence of improved post-acquisition performance (Tuch & O’Sullivan, 2007; Papadakis & Thanos, 2010). Although accounting-based measures do have advantages, there are reasons to question the usefulness of these measures (e.g., Chenhall & Langfield-Smith, 2007; Lubatkin, 1983). First, accounting profits represent the narrowest measure of performance, as they measure only the economic performance of a firm (Lubatkin & Shrieves, 1986); they are said to reflect only a firm’s past performance (Chenhall & Langfield-Smith, 2007; Montgomery & Wilson, 1986). Finally these measures fail to assess the success of a specific acquisition due to the fact that they provide aggregated data of an entire firm’s performance (Chenhall & Langfield-Smith, 2007; Montgomery & Wilson, 1986; Papadakis & Thanos, 2010).

M&As Performance Based on Stock Market–Based Measures The rationale behind studies that use stock market–based measures is that the firm’s purpose is to maximize shareholder value (McGee, Thomas, & Wilson, 2005). M&A performance is measured 210

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by examining the development of either the target firm’s share price or the acquiring firm’s share price during a certain period. Besides reflecting a direct measure of shareholder values, they are also easily accessible for publicly traded firms. These measures are used because they are the only direct measure of shareholder value and data are easy to acquire (Lubatkin & Shrieves, 1986; Papadakis & Thanos, 2010). The use of stock market–based measures has been criticized too. One main shortfall is that short-event windows represent an ex ante and not an ex post measure of performance. They reflect shareholders’ expectations of future profits, rather than predicting the M&As’ future profitability (Montgomery & Wilson, 1986; Zollo & Meier, 2008). Other important restrictions are that they can be used only for listed companies and share prices may fluctuate not because of an acquisition (Schoenberg, 2006).

M&As Performance Based on Managers’ Assessment The rationale behind studies using subjective measures is that managers can provide both financial and nonfinancial information (Brouthers,Van Hastenburg, & Van Den Ven, 1998) capturing performance in a more multidimensional way. Moreover, studies indicate that managers’ perception defines how they act (Papadakis & Thanos, 2010). A more pragmatic reason is that researchers often face problems obtaining objective measures of performance. Inherent on using subjective measures of M&A performance is that the information provided may be subject to managerial bias (Lubatkin & Shrieves, 1986). Managers may overestimate their firm’s performance (Venkatraman & Ramanujam, 1986), a reason multiple sources are required (Bowman & Ambrosini, 1997). The few studies that used objective and subjective performance measures provided ambiguous results. For example, Schoenberg (2006) did not find correlations between objective and subjective measures of acquisition performance, while Papadakis and Thanos (2010) found correlations between managers’ subjective measures and accounting measures but not with stock market–based measures. The lack of comparability between performance criteria reported may explain the contradictory results often reported for M&A performance. Do these findings point to a need for a better M&A performance measure? According to Meglio and Risberg (2011), ambiguity is not the problem with M&A performance assessment, but the problem lies in the effort to overcome such ambiguity by searching for a general measure of performance that is valid across all types of M&A activities. The range of measures should not be considered a method problem, because M&A performance is a construct that does not have a general connotation (Meglio & Risberg, 2011). This implies that that one should not seek the best measure that is applicable in all situations, but unambiguous measures that spell out what is measured. A clear definition of M&A performance, along with its boundary conditions, is pivotal to prevent the common mistake of comparing different measures as if they were the same (Meglio & Risberg, 2011). Practically, measures of M&A performance therefore should account for the multiple motives for M&As.

M&A Performance—for the Good of the Firm The general assumption is that an acquiring firm will engage in M&A only where it will increase economic value for shareholders. This logic refutes the likelihood that managerial actions could be in the best interest of the firm and yet may not result in improved firm value from the transaction (Angwin, 2007). On a single M&A basis, profit maximization may be secondary to what is good for the firm. This raises new questions over the way in which M&A performance maybe assessed. A more sophisticated view of motivations may cause M&A performance evaluations to be revised, considering ‘actual’ rather than ‘inferred’ practice, and help unravel why so many deals appear to perform poorly and why so many M&A transactions continue to take place. M&A performance studies in general tend to focus on single items or use broad single categories; however, there are far more motivating factors in M&As. Consequently, M&A performance is 211

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evaluated in narrower terms than is required, because significant motivations are not included, their complexity massively underestimated, and the role of context and process largely ignored (Angwin, 2007). These exclusions imply that the results of M&A performance research may be biased as many deals are being evaluated on distorted views of M&A motives, not representing the main intention of management. Motivations for acquisitions and mergers will vary depending upon different socioeconomical-political systems and therefore should be at least be evaluated in terms of what management intended to achieve. In terms of data gathering, caution is required for obtaining motives as those reported (e.g., doffer documents, public statements, surveys) as they may be designed for the public and to comply with legal and institutional requirements, not representing the full or the real reasons for acquisition (Angwin, 2007). Instead it is more likely reported motivations will be in terms of the legitimate language of economics and finance, with emphasis on improving financial returns (Trautwein, 1990). Gathering information on motivations for that reason requires thorough, in-depth data collection. Based on the shortfall in capturing M&A performance, Angwin (2007) developed M&A archetypes that better reflect reality. Based on these archetypes hypotheses can be generated about the configuration of motives which may result in superior outcomes and those that result in lesser outcomes. Among the dimensions are acquiring firm-level motives (i.e., shareholder value maximization, increased competitiveness in the short term [exploitation] versus creating opportunities through exploration, influence, or stability), contextual drivers (i.e., the extent to which contextual drivers are strong or weak and whether they are in harmony with the acquiring firm’s competitiveness), and top management motives (i.e., acting selflessly or prevailing self-interest). Using these three dimensions Angwin (2007) identified eight archetypes, which will be briefly explained. Type 1:The classical M&A type The firm is conducting M&A based on rational value maximizing strategies (e.g., economies of scale and scope; increasing bargaining power). Management is acting as good agents and the contextual drivers encourage this type of M&A—for example, the string M&A of Verizon acquiring AOL, which acquires Millennial. The acquisition of AOL, completed in mid-2015, was announced to allow Verizon to push more rapidly into the market shift to digital content and advertising and mobile video content. Just after the deal AOL announced it was acquiring Millennial, a mobile ad platform that should enlarge AOL’s own digital mobile ad platform offering. Millennial, after an IPO and some acquisitions and briefly valued at around $2 billion, had stayed independent. It fell prey to industry consolidation. AOL finalized the deal in late October 2015 for just over $200 million (Siglin, 2015). Type 2:The contextual dissonant, classical M&A type The contextual pressure may be at odds with the firm’s wishes to maximize shareholder value. This type may represent conflict between firm and management rational value maximizations and those of the context. The Comcast/Time Warner merger was almost a done deal when the FCC informed Comcast it needed to convince it of the merger’s merits. The Justice Department concluded that the merger was against the best interest of the American consumer. The intended merger had to be terminated. Netflix was apparently one of the companies that objected to the proposed merger as it argued that the combination of Comcast and Time Warner would be “just too much in one company” (Siglin, 2015).

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Type 3:The contextual dissonant, non-value-maximizing M&A type Contextual factors may be at odds with classic firm motives, but may be accommodated if the firm is motivated by non-maximizing motives. It will be unlikely that the acquisition will succeed in classical terms but may be beneficial in the long term. For example, an acquirer facing ethical pressure would seek to avoid likely censure in the media. Type 4:The contextual consonant, future value–creating M&A type Contextual factors set conditions for a classic M&A and management motives are aligned. However, rents may be generated in the future due to the need for exploration or stability. For example, a firm may be anticipating the convergence of industries/technologies, suggesting future profit opportunities or influence. Consider the acquisition of NBS by Livedoor. The purpose of this acquisition was to gain power over Fuji TV. NBS being a leading shareholder in Fuji TV provided Livedoor power in the Fujisankio Communications Group. The aim was not to get immediate benefits out of the acquisition (Angwin, 2007). In classical terms this M&A is likely to underperform (see also Box 13.1). Type 5:The contextual dissonant, management self-interest M&A type Contextual pressures force the acquirer into deals which do not fit with classical motives and may also face an agency problem. The deals may result in satisfying management and addressing the context, but they are unlikely to benefit the firm in classical terms. Firms that are caught up in an M&A fashion and over-acquire are an example of the M&A type. Type 6:The management self-interest M&A type Contextual factors may be favorable for M&As in terms of maximizing firm value. An agency problem may mean that management seeks to benefit personally from the deal.This does not exclude the possibility of the deal being successful. The acquisition of Blue Circle by Lafarge is an example of the acquirer seeking to achieve global dominance through acquisition and enhance the profitability through economies of scale. The agency problem involved was the CEO was suggested to benefit from the deal as he became CEO and overpaid for the deal. However, the deal was regarded as a success (Angwin, 2007). Type 7:The contextual dissonant, non-value-maximizing, self-interest M&A type The contextual pressures may not be in line with the firm’s classical motives, but could fit with exploratory motives. For example, the awareness of global warming could provide firms with opportunities to acquire prototype alternative technologies in anticipation of this ongoing trend. An agency problem does give top management the opportunity to benefit personally and is likely not to provide benefits to the firm. Type 8:The non-value-maximizing, self-interest M&A type The contextual pressures may be favorable for M&A by the firm, although the firm may be motivated by non-maximizing outcomes. This may allow the firm to engage in speculative acquisitions and mergers, encouraged by top management self-interest. The merger

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of SolarCity and Tesla may exemplify this M&A type. The motive of the merger was to accelerate the transition toward a sustainable world by creating an integrated firm. Both companies are heavily indebted and Musk as both owner and shareholder in both companies was accused of self-interest (Financieel Dagblad, 2016, 2017). Angwin (2007) stresses that only a few archetypes can be described as classically oriented toward improving shareholder value. Most of the archetypes are likely to underperform in classical terms and a more refined approach to M&A motivations could therefore result in quite different results, something which is confirmed by Nugyen, Yung, and Sun (2012). In their study using a sample of 3,520 domestic acquisitions in the United States their overall conclusion is that about 80% of the deals involved multiple motives and that in general value-increasing and -decreasing motives frequently coexist, the latter being an explanation for the lack of value gains of M&As (Mehrotra, van Schaik, Spronk, & Steenbeek, 2011). All in all, M&A performance is complex and one should evaluate M&A performance beyond classical evaluations to capture other motives of M&A activity. Instead of considering whether it is right to experiment and explore for future gain or whether to comply to governmental pressure, one could wonder if firms in these situations may be significantly worse off if they didn’t engage in M&A activity (Angwin, 2007).

A Research Agenda The wave of M&As in the integrated information multimedia entertainment landscape during the last decades shows the popularity of M&A strategies for firms to improve their performance and to sustain or improve their competitive advantage.Taking this into consideration, several suggestions for future research can be made that allow for a deeper understanding of M&A activity, its complexity and impact. A first area of future research entails the study of (real) motives that drive M&A transactions. Those insights may help to improve not only the value of the target firm’s shareholders but also the value for the acquiring firms and their stakeholders. In general, M&As are used when firms want to achieve certain strategic and financial objectives. Of course, the main objective of M&As is to create value in terms of better financial advantages, improvement of market power, diversification and reduced earnings volatility, financial, operational, and managerial synergies, economics of scale, access to capabilities, and resources and technologies, and to capture new and fast-growing markets. However, empirical evidence shows that many M&As fail to create value or even destroy value (Papadakis & Thanos, 2010). In most cases, the real winners of M&As are the target firm’s shareholders, who receive a significant takeover premium on top of market prices (Dess, Picken, & Jay, 1998). Over the past decades, there has been only modest improvement in the M&A success rate (Schoenberg, 2006; Marks & Mirvis, 2011). To increase the success rate of M&As, it is important to understand the real motives behind M&A transactions. M&A decisions are driven by a complex pattern of motives and generally no single theory can explain the motives underlying them. Another interesting area of research is the success of M&As, from both a process and measurement perspective. Successful M&As are neither an art nor a science, but a process (Sherman & Hart, 2006). Shrivastava (1986) claims many M&As fail due to poor integration. Jemison and Sitkin (1986) identified the M&A process as an important aspect to take into consideration to create value. The process perspective emphasizes that the M&A process is a factor, in addition to strategic and organizational fit, that affects performance. The M&A process can be divided into different phases. Most common is to divide the process into four phases: idea, acquisition justification, acquisition integration, and results (Haspeslagh & Jemison, 1991).The first two phases make up the pre-combination stage, while the other two phases make up the post-combination stage. Even though the process is divided into different phases, they must be considered together. Every phase of the process is important for the 214

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outcome of M&A transactions and will influence performance. Enhancing our understanding of the interaction of the different phases during the integration process will contribute to the improvement of the success rate of M&A transactions. However, this must be linked with the measurement of M&A performance. The literature is not clear about how to measure performance of an M&A. Different methods exist to measure M&A performance. Although these methods measure different facets of performance, they still are not able to explain the significant variance in post-M&A performance. There is a need for additional theory development and new perspectives on M&A performance measurement methods. A third area of research interest is the impact of M&A activity on business models. In a multiplatform environment and urged by the increased rivalry on the distribution side and the quest for content, there is a need to get insight into the impact on the traditional business and earning model of content providers and content distributers. Self-exploitation could generate more profits for content rights owners. As argued by Evans (2014) contrary to lump-sum payments, which implies a financial burden for new distributors without any guarantee of attracting new subscribers, content owners’ surplus is maximized by pay-by-subscription. Thus, future research could address how business and earning models affect the entrance of new distribution platforms, and how they affect competition and bargaining power between content providers and distributors. Finally, a fourth area of research interest is how M&A activity affects consumer welfare. In general, regulatory authorities evaluate the effects of M&As on the involved market products’ prices, quality, diversity of choice, and innovation since these factors directly affect consumer welfare. Hence, M&A activity in the integrated information multimedia entertainment sector may also influence media pluralism and content production. Excessive concentration of media ownership may pose a risk to media diversity and democratic opinion forming. It is not clear what the effects of these M&As are on consumer welfare, media pluralism, and content production, as well as how antitrust authorities should set rules, both ex ante and conventional ex post regulation, that ensure open market competition. Therefore, it is recommended to study the effect of the current development of M&As on consumer welfare and on media pluralism and content production.

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14 CONTENT/PROGRAM DISTRIBUTION Douglas A. Ferguson

This chapter examines business-to-business and business-to-consumer market activity among media companies and industries with regard to content and distribution.What follows is a broad consideration of managerial and economic issues and strategies as they exist now, with some contextual discussion of how they evolved.The focus is on the features of content distribution in the United States but the chapter also observes how international markets (where traditional media remain vital) contrast or compare with American considerations (Adilov & Martin, 2013; Ballon, 2014). The goal is to convey the nature of discontinuous change in the content distribution sphere, an upending of conventional media industries (e.g., the marginalization of broadcast networks and later cable networks). Regarding the organization of the chapter, the first section of the chapter briefly examines the recent research on content distribution. The next section considers the current and shifting structure of media outlets with subsequent topics branching into specific differences and discontinuous change. In effect, this chapter often bases its initial analysis on the part of the media sphere that is the least revolutionary. Many of the examples in this chapter focus on media that combine sight, sound, and motion (television and motion pictures) because of their sheer dominance in public life, but other media forms, like print, radio, and Internet, cannot be ignored. Certainly the separate silos in which each legacy medium has most often operated are no longer dominant, although many legacy corporations still specialize in a particular type of content. Media economics scholars (e.g., Albarran, 2017) have popularized a similarly broad-brush approach to understanding how media commerce operates. The most importance sources for research on content and program distribution are centered upon a handful of communication journals devoted to the media industries: Journal of Media Economics, International Journal on Media Management, and Journal of Media Business Studies. Other major journals of interest include the Journal of Broadcasting & Electronic Media and Journalism & Mass Communication Quarterly. Media displacement owing to competition and newer technologies is an important consideration for content distribution. Mierzejewska, Yim, Napoli, Lucas, and Al-Hasan (2017) studied the U.S. newspaper industry and identified a mimicking strategy whereby traditional media have attempted to provide the benefits of newer forms of distribution.The authors concluded from 20 years of data that a mimicking strategy is inferior to product differentiation for traditional media. Pantea and Martens (2016) have examined similar models in Europe with regard to entertainment via the Internet. The Internet is the root of competitive pressure on traditional media (Hess, 2014).

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Kinjo and Ebina (2015) have considered the role of habit among Japanese TV audiences, especially older viewers. Similar studies of viewer inertia provide some solace to traditional content providers because programs made available on newer distribution platforms are not always met with changes in habit. Jang and Park (2016) presented media diary evidence in Korea to confirm the complexity of media choice. Gimpel (2015) created an acronym for the anywhere, anytime, any device (AWATAD) lifestyle and has argued that media companies face severe challenges going forward. Cross-platform media behavior has generated interest among researchers. Kim (2016) identified the media repertoire approach as a useful tool to understand media use across media platforms and confirm past predictors (Ferguson & Perse, 1993). Another study by Ksiazek (2011) used a network analytic approach to factor audience duplication into models of choice.

The Modern Era of Content Distribution Digitalization of the media has made possible different distribution avenues for the same types of products. A television series was once the exclusive domain of television networks and their affiliated stations. No other means of distribution was possible until the advent of cable, satellite, home video devices, and Internet connectivity. Over-the-air signals enjoyed a protected space and both content creation and distribution were orderly if not entirely simple. Much has changed. For example, newspapers and radio stations have video feeds. Television stations use social media. The boundaries between entire media industries have become more porous. This chapter necessarily weaves an ongoing discussion of the latest media/digital platforms: online TV, podcasts, blogs, smartphones, social networks, user-generated content, and video game consoles. All of this change has not escaped the attention of other media economics scholars. For example, Albarran (2017, p. 2) noted, “Increasing fragmentation and digitalization of the media industries have eliminated the boundaries associated with studying ‘traditional’ media. Television, radio, and newspapers no longer operate as single entities, but as enterprises offering content across multiple distribution platforms. Doyle (2016) addressed the survival of television channels (also raised in this chapter) from the standpoint of the UK. Evens and Donders (2016) have reviewed research on economics and policy with regard to television, but it remains difficult to examine the forces behind discontinuous change, as developments unfold and sometimes seem ready to explode. As a starting point, the next section reviews the structure and function of media content. The discussion follows the “who says what to whom over which channel” (sourcemessage-receiver) pattern of mediated communication (Lasswell, 1948). The dominant thread throughout the chapter is the amount of sometimes-discontinuous change shaking the foundations of suppliers and their audiences.

The Structure of Content Remembering what the media world still resembled in the early 1990s is worth brief consideration. Newspapers and magazines operated on a subscription or single-purchase model because the government did not claim ownership of the paper or ink they used. Advertising was useful, ancillary information that slowly evolved into a major revenue stream by the late 1800s. Readers found new commercial ventures interesting, but merchants desired ongoing attention to their goods and services. Publishers were happy to oblige with display and classified advertising. The motion picture industry followed a variation on single-purchase in the form of an admission price. Performances were not live but still functioned as a theatrical experience. The film industry first established a division among producers, distributors, and exhibitors. As the cost of content rose,

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the big eight Hollywood producers became distributors and muscled their way into the exhibition business. In 1948 a Supreme Court case broke the vertical integration hold of Paramount and other monoliths, just as television was capturing the public attention. As indicated earlier, no medium quite draws a crowd like those that combine sight, sound, and motion. Radio took root in a different historical era than newspapers, when the electromagnetic spectrum was considered public (and after the federal government had decided that centralized regulation was the best tactic to facilitate commerce). A nascent broadcast medium in the late 1700s might have seen greater freedom, but past decisions and policies in the United States have made speculation a moot question. Broadcasters quickly became heavily regulated and thereafter provided a free service and their stations supported themselves with advertising revenue. Television developed in the 1930s but waited until the resolution of World War II to dominate the second half of the 1900s. Radio adjusted to television in the 1950s by evolving a format-driven way to differentiate audio content while newspaper dailies consolidated within cities and regions. Cable and satellite television nibbled away at broadcasting in the 1990s and today the new distributors making the most headway are using the Internet to sell content, perhaps less uninterrupted by advertising (Lotz, 2007; Schweidel & Moe, 2016; Wilbur, 2015).

The Function of Content The function of media content is to provide information and entertainment while finding a way for content providers to show a profit (or at least cover their costs, in the case of nonprofit public media). When the distribution models had clear physical or electronic channels within which providers could compete, the economics were based on audience availability and scheduling structure (Webster, 2009). Static and streaming content offered by the Internet complicated the profit model for various traditional media. Entertainment continues to invade the transmission of information. Usergenerated content (UGC) is a nontrivial competitor to traditional media but distribution of such content is largely controlled by new companies, like Google and Facebook. For example, YouTube Red provides a new type of television network, still unproven in profits, while Facebook, Snapchat, and Apple attempt to reach under-40 audiences in a variety of nontraditional ways. Facebook, for example, seeks an alliance with local broadcast news operations to reach younger audiences as an advertising partner with television affiliates (Greeley, 2017). In turn, the public wants to be informed and entertained, sometimes satisfying both desires at the same time. Over time these wants have become needs, if program loyalties and consumption habits are credible and consistent. The cost of mass content was for many decades offset by advertising but commercial-free subscriptions to HBO and newer home-recording devices that bypass viewing advertisements (e.g.,TiVo) may be changing the acceptance of commercial interruptions. Audiences, especially younger consumers, are slowly becoming accustomed to skipping ads (or choosing a subscription that provides “what you want, when you want it, uninterrupted”). Two important audience metrics for traditional media consumption are “time spent” and “average audience size” measured by time of day or by the quarter hour. In 1990, it was still possible to sample all the popular TV shows, listen to the radio while commuting, read a morning newspaper, and still have time for other activities. Today, 24/7 access to smartphones and the Internet and the steady availability of streamed audio and video have transformed a quiet media universe into one that produces more content than the typical person has the time to read, watch, or hear. In economic terms, the ability to profit from content distribution depended on relative scarcity. With only three major broadcast television networks in the 1960s, regulators at the FCC complained that ABC, CBS, NBC, and their major-market affiliates had a license to print money.When the number of choices and voices for mediated content was limited, the same scarcity applied to distributors

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for video. Local television made deals with seven or eight movie studios. The ability of print and audio media to generate revenue was also a function of scarcity, but times began to change in the 1980s and 1990s, with fierce competition from cable and satellite, better known today as multichannel video program distributors (MVPDs). Newspaper subscriptions and revenue have dramatically declined in the recent past even as readership has increased (Sass, 2015). Radio in the United States today is still format-driven but consolidation of ownership (and competition from live streaming, music downloads, or podcasts) continues to limit innovation in radio stations, as debt obligations at major radio corporations (e.g., Cumulus, iHeartMedia) loom large at this writing. The year 2016 was a watershed for media content with Netflix and other bundlers eager to acquire first-run content. FX Networks president and general manager John Landgraf complained in 2016 that the amount of original content was unsustainable, with at least 430 shows (breaking the record of 419 programs in 2015). Levin (2016) described all the video content this way: 150 prime-time scripted series on the major broadcast networks; 50 more on pay cable channels including HBO, Showtime and Starz; 180 on basic-cable channels and 130 or more on streaming services, including 71 that have aired or been announced on Netflix alone, excluding kids and foreign-language series. Viewers began to wonder if they would have time to watch it all. The ease with which usergenerated content could find a loyal following on YouTube made stars out of PewDiePie, Lilly Singh, Tyler Oakley, and a legion of imitators. The functions of media content have not changed with additional choices but the competition for audience attention has accelerated. Producing a successful program on the Internet no longer requires the deep pockets of a network or film studio. Viewer habits are forever altered, especially among younger audiences. The news is on our social media and carried in our pockets. People may still read a newspaper, but the choice between free content versus a paywall is a nonstarter. The number of functionally equivalent news sources online makes it difficult to justify a paywall, except for highly specialized content (e.g., Wall Street Journal). Furthermore, ad-blocking software (e.g., AdBlockPlus, added to web browsers) reduces audience exposure to online advertising (Arrese, 2015). Even professional sports suffered a loss of audience in 2016. NFL football and other major sports compete for young audiences with Twitch and its growing supply of viewers watching video game battles or poker matches. No one has forecast the demise of sports entertainment but cracks have appeared in the foundation. ESPN, which spends over $3.3 billion annually just to broadcast the NFL and NBA, eliminated a number of high-priced talent positions to save on expenses (Draper, 2017). Modern electronic devices themselves make a huge difference in consumption patterns. Consider the ubiquitous smartphone. It serves as a pocket television receiver. At one time consumers watched TV when they got home from school or work. They might see TV in a common space or at a bar/restaurant, but until the last decade, television viewers were mostly homebound. For major events, audiences still prefer a large screen, but an office computer monitor or a smartphone is more than adequate when the viewer is bored while waiting for something else to happen. The sight of a toddler with an iPad is increasingly common in public spaces. People on long flights bring their own movies to watch. Yu, Lee, Ha, and Zo (2017) have proposed a model of perceived value that accounts for growing acceptance of tablet devices. Moreover, the expectation that content can continue to be advertiser-supported has come into question. Netflix and HBO have no commercial interruptions. Netflix is a thriving (54% penetration in 2017) “over-the-top” (OTT) distributor of programs, both original and repurposed. Its competitors are Hulu, Amazon Prime, Crackle,YouTube Red, and Seeso, some of which include advertising

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that can be avoided for an additional premium cost. Traditional cable networks have responded by streaming their own content, so much so that some MVPD networks (e.g., Scripps) that do not stream their shows are designated pure-play networks (Bednarski, 2017). Broadcasters are adjusting to new strategies, too. CBS, for example, has planned to take its streaming services CBS All Access and Showtime OTT to a global audience (Munson, 2017). Thus, it is easy to make the claim that much has changed with the number of increased voices and choices. It is a little more difficult to predict the best strategies and tactics for the considerations that have been revealed in this section.

Sources of Media Content The main source of video content comes from film and television studios in the form of scripted and reality shows. Broadcast and cable news operations and their associated sports programmers add dozens of original shows that typically air just once. Motion picture studios are the logical place to begin this discussion of sources. Finding a list of content distributors begins with identifying the major content producers. In most cases these are variations on the big eight movie studios of the last century: Paramount, Warner Brothers, RKO Radio (now defunct), 20th Century Fox, MGM, Columbia (now Sony), Disney, and Universal. MGM merged its distribution arm with United Artists at about the time its fading movie studio business changed hands between 1971 (when its merger with Fox failed to materialize) and 2010, when it emerged from bankruptcy. Dozens of independent producers also operate out of Hollywood and other film centers but distribution is funneled largely through six of the original studios. Content targeted at different audiences has produced multiple names for the same company. For example, Disney separated its distribution from RKO in the 1950s and was known as Buena Vista (until 1995), Disney Studios, and Touchstone (depending on whether the movie was rated G or PG-13). Until 2005, even the films of R-rated motion picture company Miramax were distributed by Disney. Another example is 21st Century Fox, which includes separate movie brands Fox Searchlight and Blue Sky computer animation. Ulin (2014) noted that the “greatest power that the studio brings to a film is not producing. Rather, studios are financing and distribution machines that bankroll production, and then dominate the distribution channels to market and release the films they finance” (p. 4). Distribution is so crucial in Hollywood that studios rarely invest in a film without obtaining and exercising distribution rights. Studios are experts in “the art of maximizing consumption and corresponding revenues across exploitation options.Whereas marketing focuses on awareness and driving consumption, distribution focuses on making that consumption profitable” (p. 5). The cost of maintaining a pipeline of content from studio to theaters is considerable. According to Ulin (2014), “The overhead required to run the distribution apparatus cannot be justified without a sufficient quantity of product to market and sell.This relationship is fairly straightforward: the more titles released, the greater the revenue, the easier to amortize the cost of the fixed overhead” (p. 9). Overhead is so immense that many companies form joint ventures to help spread the risk. The numerous logos before the opening of a typical motion picture serve as a reminder of the complexity of most movie deals. Sometimes the international market seems additionally obvious to the audience when the various actors represent multiple nationalities and enhance the worldwide appeal. International box office for total film revenue has grown from 40% in the 1980s to well over 60% nowadays (Ulin, 2014). Global appeal, however, is only one pathway to financial success. In the case of surprise hits (e.g., Stranger Things), new faces of unknown talent and a very compelling story make the difference. Distribution is economic on one hand but creative on the other. If money was the only factor, the biggest deal would always succeed.

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Television Sources While consumers are familiar with their cable or satellite provider, the industry tracks them as multichannel video program distributors (MVPDs). Four such U.S. companies have over 10 million subscribers as of 2017: AT&T-DirecTV (25.3 million), Comcast (22.5), Charter Communications (17.2), and DISH (13.7). The rest (controlling less than 20% of the 110 million homes in the United States) have fewer than 5 million subscribers (Farrell, 2017). After decades of top-ten MVPDs, the consolidation into the big four distributors nowadays rivals the movie studios and broadcast networks. MVPDs typically use a subscription model that favors the one-size-fits-all or smorgasbord approach. At the other extreme are services like Amazon Prime, Vudu, and Google Play that offer on-demand streaming. But in the middle are new streaming services (virtual MVPDs) that appeal to cord-cutters and others who want to pay less for the channels they watch. DirecTV Now, PlayStation Vue, Roku, Sling TV, and YouTube TV offer less than the full list of cable channels but strive to offer the most popular options at a monthly cost between $20 and $40. Palladino (2017) has noted the intricacies that differentiate the streaming options, especially with regard to the number of people who can simultaneously use the same streaming account: You only get one stream with Sling Orange, but if you upgrade to the $25-per-month Sling Blue, you’ll get three simultaneous streams. DirecTV Now doesn’t hide the fact that you’ll get two concurrent streams with your subscription, and that doesn’t increase if you pay for a higher-priced tier of the service.

Other Strategies One strategic opportunity for streaming services like YouTube TV and other virtual MVPDs that include advertising is to target commercial messages to individual viewers. Targeted advertising would capitalize on the unique difference between regular MVPD channels and their virtual counterparts. At this writing, however, all of the recent services are delivering the same television commercials as one would see on regular channels—namely, undifferentiated by appeal to individuals (Poggi, 2017). By 2010, the popularity of high-speed Internet in most American homes transformed broadband from a luxury to a necessity. Given a choice between Internet and conventional cable, some homes have “cut the cord” to cable or satellite service but not to web access. Younger viewers tend to be cord-nevers rather than cord-cutters (Van Esler, 2016). They (and many older viewers) seek fewer channels at a lower monthly cost. In response to streaming options, traditional MVPDs have attempted to create their own “skinny bundles” of channel offerings. Hoefflinger (2016) has defined skinny bundles as “just the channels most of us care about,” which are in contrast to the total number of channels built into even the lowest-tier service that still includes channels viewers seldom care about. Different viewers care differently, of course, but for many years MVPDs had an economic reason to provide thicker bundles: value creation. The tactic is similar to how film studios formerly packaged bundles of old movies to local television stations. To get the best titles buyers have to take a few titles with low audience appeal. But now that virtual bundles have become less expensive than traditional bundles, the big MVPDs have begun to build comparable channel packages. Another strategy they employ is to withhold channels from the streaming services (Kafka, 2017). The future is unclear, but in 2017 CEO Jeff Bewkes of Time Warner projected that virtual MVPDs were three to five years away from passing the largest MVPDs (Pressburg, 2017). As noted earlier, the specialization of content to a particular producer, distributor, or exhibitor is less certain. Newer media are sometimes at odds with specific microeconomic ideas that “[media] 224

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firms (including businesses and corporations) exist and make decisions to maximize profits” (defined as the theory of the firm, according to Investopedia, 2018). Audiences nowadays, however, can frequently bypass the middleman distributor, a concept called disintermediation. Albarran (2017) noted that the theory of the firm is less useful with disintermediation:“In the 21st-century media economy, market structure cannot clearly be defined using broad and simplistic labels” (p. 23).

Media Exhibitors As focused as this chapter has been upon distribution, the constellation of exhibitors in the media value chain should not be ignored.This section examines each medium with regard to how it is supplied for each of its components.

TV Television in the United States is a combination of legacy and newer forms of media.The traditional broadcast networks began as four (with Dumont) and then three networks until the arrival of Fox in the 1980s. The number grew to six (not counting Hispanic networks) with UPN and the WB in the late 1990s but shrunk back to five networks when the WB and UPN merged in 2006 to become the CW. The changes were direct evidence of distributors like Fox and Warner Brothers taking full advantage of the new legal limits of owning stations in big cities. As the number of Hispanic viewers has grown, six major Spanish-language networks (not counting specialty networks) are leaders in this area of the television marketplace: Azteca, Estrella TV, Galavisión, Telemundo, UniMás, and Univision. Network-affiliated stations (affiliates) and their digital subchannels (diginets) still broadcast 6-MHz bandwidth terrestrial signals to mostly wired homes. Cable and satellite distributors also offer channels, called networks, which use market segmentation strategies to serve up the nonbroadcast viewing (for which the relative proportion has shrunk). Starting in the 1980s, cable television created network after network that became competitors to over-the-air channels. Scheduling cartoons on Saturday morning vanished with the arrival of 24/7 alternatives from cable/satellite or multichannel providers. Further complication arrived in the 2010s with libraries of streaming channels delivered through “over-the-top” (OTT) devices (e.g., Chromecast, Apple TV, Roku), including videogame boxes like Xbox and Nintendo. These individual OTT channels grew into OTT services (virtual MVPDs). One giant question is whether TV stations can evolve quickly enough into “Internet-enabled” airwaves (under the name “TV 3.0”) to survive the OTT world. The ATSC 3.0 is a third iteration of high-definition channel realignment after the turn of the century, “created with the idea that most devices will be Internet-connected” (Morrison, 2016). The system will be a hybrid of old transmission over the air but with targeted advertising (sent via mobile phone broadband components) that will be integrated into the programming. Some broadcast groups are also considering programming that would compete with shows seen by millennials on streaming platforms like YouTube and Twitch. For example, Sinclair, a group owner in 81 television markets, announced a 52-market rollout in 2017 of broadcast programming designed to target “millennial mothers in mornings and throughout the day, younger girls after school and younger gamers during prime time” (Mirabella, 2017).

Radio Depending on the format, radio stations acquire news and music content from distributors. Entire radio program formats are offered by such syndicators as Premiere, IHeartMedia, CBS, and Westwood One (Newton & Kaiser, 2013; Norberg, 2016). IHeartRadio became the first large-scale 225

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Internet radio aggregator (over 800 U.S. broadcast stations available to mobile devices and video game systems) and later added “music recommender” services in 2015 to compete with Pandora and Last.fm, two other such services. Another competitor, Spotify (from Sweden), serves 50 million paying subscribers worldwide but has never turned a profit. Some U.S. artists (e.g.,Taylor Swift) have pulled their music from Spotify. Radio depends increasingly on mobile phone dissemination for listeners not in their automobiles. In the last century, potential listeners outside their homes, work, or cars might carry a portable radio for music, but gradually the Apple iPod and access to downloaded music cut into total radio listening. The trend is moving in favor of radio again, as users discover that their smartphone is a source of live radio programming at no additional cost (e.g., using the iHeartRadio app). Listeners use a portion of their cell phone plan (and listen to commercials) but receive free 24/7 music, plus timely local information unavailable on broadband services like Spotify and Pandora, in a manner unimagined a decade ago.

Streaming Audio One of the concerns within the music industry is whether on-demand streaming audio services will cannibalize download or CD purchases. Wlömert and Papies (2016) recruited panels of major German distributors and measured the introduction of Spotify in 2012. They found an overall positive effect on revenues to music companies despite the obvious decline in traditional purchases.

Newspapers Syndicates supply columns, news content, and comic strips to daily and weekly newspapers in the United States. The New York Times News Service and the Associated Press are the major suppliers of national and international news, along with Tribune Media and Universal Press. Comic strips have their own dominant syndicates (e.g., King Features) as do columnists (e.g., Washington Post Writers Group). A more complete list is available at www.columnists.com/resources/guide-to-syndicates. The outlook for newspaper revenue is often gloomy. Declines in circulation and display advertising lead some researchers to wonder how long major-market daily newspapers can survive. Again, the answer likely lies in digital content opportunities and strategic alliances with electronic media. Newspapers can deliver video through their web apps and their ability to give in-depth coverage to local stories and politics easily rivals the radio and television outlets in their respective markets.

Mediated Content The “messages” sent by sources to audiences make up the content being produced and distributed. Depending on the medium, the types of content can be enumerated. Ulin (2014) notes the audience’s genre preferences for scripted entertainment on television: action, romance, comedy, thriller, drama, history/reality, family, music, and adult content. Unscripted entertainment includes sports and live news/interviews. For radio, content is typically format-driven from as many as 120 different formats that reduce to a handful of major music formats: Pop, Rock, Country, Urban, Dance, Easy Listening, Oldies, Latin, Gospel, Classical, and others. Stations strive to retain listeners and register AQH (average quarter hour) and TSL (time spent listening) ratings. Advertisers care most about ratings, which translate into total or target listeners, but programmers focus upon shares, which translate into competitive advantage. Radio programmers also pay attention to unique listeners, known as the cumulative audience, called cume.

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Sequence of Content Creation The path for media content starts with an idea and ends with audience consumption. In terms of vertically integrated media conglomerates, the stages are usually labeled production, distribution, and exhibition. Adams and Eastman (2013) have traced the path of a typical television series on broadcast and cable networks. Ideas become properties that are submitted for development (Ulin, 2009). Maybe 600 concepts are pitched by producers, many of whom have a successful track record. An idea for a new situation comedy (sitcom) produced by Chuck Lorre (Two and a Half Men, Big Bang Theory) gets more attention than a similar show produced by a newcomer. Networks take options by signing a step deal that sets forth the economic parameters if the show makes it to the schedule or even to success. An expanded treatment or final script is commissioned, with the network providing the development money at each step. Maybe the idea will be produced as a movie. If it succeeds, then it becomes a series. If the idea fails, then all parties will decide it was only ever a motion picture. In 2017, the Writer’s Guild of America (WGA) specified no less than $28,052 for the first draft of a half-hour show. Scripts typically run $50,000 for a lesser-known script writer to over $200,000 for someone with an established record. The schedule of WGA fees also includes fees for full-script orders and a bible (which specifies characters and their history). The next stage is a pilot episode, for which program costs can run at least $1 million for a sitcom. Networks at the first step can reject and turn over creative control. After that, they can reject, shelve, or assign to a different producer, while providing money for script development, a pilot, or a limited order of episodes. Some networks push for presentation films that run five or ten minutes. Adams and Eastman (2013) outline the top five factors that decide the fate of a network television series: viewer preferences, costs, similarity to ideas that have worked, ability to deliver advertising target audiences, and competing shows. Beyond that list, a second list includes another five considerations: writer/producer reputation, appeal of the talent (performers), time period availability, compatibility with returning shows, and longevity of the concept. A third list considers syndication to other countries, ability to reuse the show, size of DVD or OTT sales, cost-sharing with other companies, and cross-promotion tie-ins. Littleton (2012) reported on the trend toward allowing distributors to “fast-track” a successful sitcom, based largely on the reputation of its creator with previous series.The so- called 10–90 method chooses a sitcom idea with a commitment to ten episodes to run on a cable channel or broadcast television network. The deal stipulates that if the series is an initial success, then the commitment is made to produce 90 more episodes, so that syndication rights can be presold, rather than waiting four seasons to accumulate the industry-standard 100 episodes necessary for off-network or off-cable syndication.

Valuation of Content Albarran (2017) has described a media value chain that begins with the creation of an idea. Sometimes the idea is sold or “optioned” to a producer, which continues the rest of the value chain: the production, distribution, and exhibition sequence described earlier. Creators “pitch” (sell) their ideas to studios and networks. With media scarcity, the number of ideas far out-supplies the number of opportunities. Albarran also noted that some parts of the value chain disposed of non-core assets at the same time that newer media companies like Google attempted a “different approach to vertical integration by attempting to be all things related to the Internet” (p. 47). Ulin (2014) has identified four drivers of value: time, repeat consumption (e.g., media platforms), exclusivity, and differential pricing.Time varies with how immediate the audience demand to

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consume a media product is (versus waiting for a less expensive opportunity). Repeat consumption considers the potential for a media product to be consumed multiple times in different “windows” of availability on various media platforms (Shay, 2015). Exclusivity applies to whether the consumer has functional alternatives. Finally, differential pricing capitalizes on the other three drivers in combination. As the number of program suppliers and exhibitors has grown with digitalization, the chance of hearing “no” from one or two networks is less of a death sentence. On the 1990s comedy series Seinfeld, viewers got a taste for how ideas are pitched, in that case “a show about nothing” (i.e., nothing beyond the relationships among friends). In today’s content climate, the chance of finding a home for a highly unusual show, termed “high-concept” as networks look to differentiate their content, gets somewhat easier in terms of generating a “breakout” hit. Even then, the sameness is evident for the next miniseries with a similar protagonist, like the story of a mysterious girl who has a mysterious past (e.g., The Fifth Element, Blindspot, Stranger Things, The OA, Logan). Not every new idea is really a new idea, but a growing number of distributors feed a growing number of channels and streaming platforms. Content producers often buy “new” ideas but sometimes develop brand extensions in the form of prequels, sequels, spin-offs, and remakes (Ulin, 2014). The money saved in repurposing old ideas, scripts, and concepts is sometimes lost. But the idea of repurposing an old idea is intoxicating and helps build the new season.When it works, even meager success removes the need to buy or develop new ideas. In 2017 CBS had high hopes for Little Sheldon, a prequel to Big Bang Theory. Regardless of strategy, content producers and distributors in the United States earned between $20 and $40 per cable subscriber per year, according to 2015 RBC data (Spangler, 2016). In terms of EBITDA (earnings before interest, taxes, depreciation, and amortization) per subscriber that year HBO led with $44.40, followed by Netflix ($33), CBS ($31.84), and ESPN at $21.95. When measured per hour, however, ESPN ranked first ($0.35). Economics of content are based on the nonphysical, non-consumable nature of information (Bates, 1990). It is a public good and is readily shared by those without the physical means for production or exhibition, no longer bound by space or time or heavy investment in equipment. Barriers to entry are low when someone with compelling information or other UGC adds it to YouTube or uses Facebook Live to reach followers. Ulin (2014) notes that motion picture studios now struggle to compete in a media world “where infrastructure needs are now commoditized and minimized, where a sole producer with a Web site can achieve equal reach” (p. 4). On the other hand, the major producers and distributors have a huge advantage in terms of promoting big-budget programming to a mass audience. It is customary for a major motion picture to require an amount equal to the production cost on campaigns advertising or otherwise promoting the film and its stars. In contrast, niche programs rely on word of mouth as amplified in some cases by viral campaigns on social media. Twitch is a good example of streaming content that grew large numbers of followers (over 2 million unique viewers per month) without an alliance with a major content provider or distributor. In 2014, Amazon purchased Twitch for almost $1 billion after it attracted 100 million visits per month.

Supply and Demand Considerations In the case of both radio and television, stations and networks are constrained by a schedule. Time slots are consumable. Prime-time network programs account for 8,800 hours per year (Adams & Eastman, 2013). Newspapers can expand sections to accommodate more content and the supporting advertising. Movie theaters have a limited number of screens and make decisions based on holiday and summer seasons, for which the major studios time their release dates for big-budget films.

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But by 2017 companies like Netflix operated as channels without regard to scheduling. Online streaming services are more like 24/7 subscription libraries of media content (what you want, when you want it) than advertising-supported media, but legacy media and libraries provide the same content function. With the exception of live events, media scholars wonder when the tipping point will be reached, where the library metaphor is more apt than the airline schedule. Regardless of when that might occur, distributors who create libraries of on-demand content are not constrained by scheduling options. In this sense, the long tail of lower-demand shows is viable (Waldfogel, 2017). Exclusivity remains an economic boundary for certain second-window movies available on either Amazon or Netflix but not both. In the case of digital television stations, broadcasters have extra platforms (diginets) that create second and tertiary channels bound to a schedule. Themed genres segment the viewers by age or appetite for something different. Digital radio has a similar capability to multiplex its assigned frequency to reach different HD radio audiences with additional music formats.

Strategic Alliances As Albarran (2017) has noted, an alliance with “web portals, niche websites, and Internet service providers is a widely adopted strategy among traditional media companies” (p. 73). For example, NBC, ABC, and Fox collaborated to launch Hulu to form such a strategic alliance, which Albarran (2017) characterizes as a way “to increase their reach, acquire niche and new audiences, construct web properties, build cross-platform structures, and expand their brands” (pp. 73–74). Albarran (2017) also classifies these new business models as advertiser-supported, subscriptions, and pay-per-use.

Technology Another major influence on distribution is technology. According to Albarran (2017), it is “one of the most disruptive forces in the media economy, primarily because media markets are technologically dependent from all positions on the traditional media value chain: production, distribution, and exhibition” (p. 62). Additionally, lower barriers to entry for new distributors result when digital technology lowers distribution costs. In the 1980s, television stations would receive syndicated shows on film and videotape delivered by UPS or FedEx. Satellite distribution eased that burden. Nowadays the Internet connects consumer to content owner, which occasionally disintermediates the need for a distributor. As a result, distributors must look for any means to own content or coproduce with upstart suppliers.

Strategic Considerations for Distributors and Exhibitors Scholars (e.g., Eastman & Ferguson, 2013; Ulin, 2014) have described “windows” as opportunities to consume content, with attention to when a particular program is shown. Until recently, this was the sequence for a major motion picture: (1) theatrical release, (2) home video and DVD, (3) pay television, (4) free television (broadcast), (5) hotel/motel, (6) airline, (7) pay-per-view (PPV) or VOD, (8) nontheatrical, and finally, (9) cable network and TV station syndication. Over time, the windows have changed positions or closed forever (Doyle, 2016). For most television programs the contemporary sequence is (1) network, (2) off-network, (3) first-run, and (4) syndication (stations or diginets or OTT). Made-for-syndication talk shows, for example, begin as first-run programs. Some media content like soap operas and live competitions are seldom seen after their first showing. Scripted shows are easier to repurpose in another window than unscripted “reality” programs, but season-ending compilations (e.g., The Bachelor) give

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audiences an opportunity to relive a moment (and the producers a way to repurpose old material without much expense).

Syndication Programming offered by various media can be produced locally but much is licensed through program syndicators. This applies to TV, radio, and print (as outlined later). Syndication is one of the windows discussed earlier. Some major suppliers dominate each medium but there are dozens of choices (e.g., broadcasting has a very long list at http://rbr.com/media-links/networks-syndicators). Old strategies notwithstanding, the new question regarding availability windows is if (not when) a medium loses its relevance in the media content hierarchy. It is impossible to predict whether ABC, CBS, or NBC (the networks with the longest history) will survive in their current state or merge with a technology company, like Facebook or Google. It should be noted that some past mergers of giant corporations (e.g., AOL-Time Warner in 2000) were disastrous failures. An even newer consideration for distributors and content owners is stacking rights, which permit the simultaneous “streaming release” of all episodes of a program, either in-season or postseason. Netflix and other OTT providers have popularized postseason showings of critically acclaimed series, such as Breaking Bad and Dexter. Original series (not acquired after a previous network showing) like House of Cards, Orange Is the New Black, or Stranger Things are often released all at once, often with a great amount of prerelease promotion for a new season. Broadcast and cable networks have the option of holding back their weekly “day and date” release while selling stacking rights for previous seasons to other exhibitors, like Netflix. At this writing, in-season stacking rights are controversial, with some networks (NBC and ABC) eager to negotiate complete stacking rights for new season renewals (Andreeva, 2016). Other broadcast and cable networks (and their suppliers if ownership is not retained by the network) accept the “rolling five” method, where the network retains streaming rights to only the most recent five episodes during the season for any series. Another strategic consideration for content owners and distributors is the withholding of episodes or second seasons for runaway hits (e.g., House of Cards or Stranger Things). If the second season of Stranger Things (Netflix) had been ready sooner than a projected Halloween 2017 release, the content owner could have accelerated (or further delayed) a window to build demand. If partners are in the mix, however, it is unclear who decides the timing of new episodes. As with networks and studios, attempts to differentiate the quality of a media property is sometimes a matter of branding appeal (e.g., Netflix versus Hulu versus Amazon Prime).The annual Emmy Awards often create demand for critically acclaimed shows that viewers may have overlooked (or lacked a subscription for access to them). To the extent that promotional tactics can capitalize on past success, newer platforms can position their total service as superior to functional alternatives. On the other hand, people watch individual shows, not platforms, and platform loyalty is often thin. OTT services have no flow-through, lead-in, or lead-out. And like HBO, Netflix licenses content from other producers for a period of time.When it periodically loses the rights to shows that viewers might not have seen yet, perhaps that last opportunity could influence a viewer’s decision to watch something, as a last chance before it vanishes. This strategic appeal is not quite the same as appointment television, but is still a reasonable substitute.

Audience-Side Economics and Strategic Response Albarran (2017) noted the importance of attention economics, defined as focused mental engagement on an activity, including media consumption. The author further pointed out that, in addition to examination at the individual consumer level, “researchers could also examine the strategies media 230

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companies use to promote relevance among consumers, as well as how different types of content promote greater or lesser attention” (p. 25). This section of the present chapter focuses upon the audience for media content. Albarran (2017) also posited the “audience fragmentation is at an all-time high” and media consumers are “more empowered than at any other time in media history” (p. 65). Clearly the combination of more audience power and less time to attend to mediated content and messages is a toxic brew for content owners and distributors.Yet they must respond to maximize the value and revenue of their goods and services. Historically the value has come in part from subscriptions and purchases, but primarily from advertising. As noted elsewhere in this chapter, the live schedule, even for prerecorded content, has placed the consumer in a flow of information and entertainment interspersed with “a word from our sponsor.” Moviegoers see the advertising before the film. Broadcast audiences see the commercials before, during, and afterwards. Print readers selectively attend to display advertising that is sometimes in separate sections or printed on better-quality newsprint.

Old Scheduling Strategies and New Realities Strategies for distributing content in a media world with low barriers to entry are vastly different today because the old strategies are less effective. Still, it is necessary to understand the old strategies, most of which gained popularity in the heyday of broadcast television when scheduling was king. Adams and Eastman (2013) list 14 “classic” scheduling strategies from television’s era of limited choices: anchoring, lead-in, hammock, blocking, doubling, linchpin (also known as tentpoling), bridging, countering, blunting, stunting, supersizing, seamless (transition between programs), rotating, and strip sampling (not the same as stripping a syndicated game show or off-network rerun). Each strategy was born in a three- or four-way race for viewer attention in prime time (e.g., 8–11 p.m. Eastern). If a broadcast television network has an abundance of successful programs, it can still attempt the hammock strategy to position weaker or new programs between stronger shows.Viewer inertia has kept this strategy from fading away completely even in a multichannel universe. If fewer strong series are available to a struggling network, it can position the strongest at the beginning of a primetime evening as an anchor (or lead-in) to weaker shows, or in the middle of prime time at 9 p.m. as a tentpole or linchpin. Showing the same type of program with back-to-back choices is called blocking and competitors can choose a different type of program as a countering strategy (blunting is a variant where competitors go head-to-head with an identical genre—e.g., sports versus sports). Stunting is event programming like an awards show. Bridging is rarely used, but is a strategy that attempts to get the jump on the competition by starting shows earlier. Doubling and supersizing are attempts to stretch the time period for a particular show by showing two episodes or lengthening a single episode. Rotating strategy is used when there are not enough episodes in a series, so a single time period alternates two shows. Seamless strategy removes the natural break between shows to hold onto the audience. Strip sampling is used to put the same prime-time program every evening at the same time to form a habit, but it burns through episodes more quickly and was last used with temporary success when ABC ran Who Wants to Be a Millionaire?. These scheduling or program strategies began to crumble when more choices became available and viewing options changed.Viewers acquired DVRs that obviated the need for so-called appointment viewing. Being able to watch a missed show online the next day erased the “must-see” element of live sampling with prime-time programs. With the rollout of specialized cable channels, the need for broadcast networks to serve different appeals gradually vanished in the 1990s. Saturday morning cartoons vanished with the arrival of all-cartoon networks. Game shows exited weekday mornings when the Game Show Network came on the scene. 231

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Streaming television series and movies have quickly evolved into binge viewing, where the audience watches three or more episodes of a series in a single session (Deloitte, 2015). Such viewing is increasingly commonplace, as 86% of the younger millennials and even 33% of those over 69 years old engage in binge-watching TV series (Statista, 2015). Distributors make strategic decisions on whether to increase the value of a property by building anticipation with a weeklyrelease tactic (e.g., Game of Thrones, Breaking Bad) or by generating a stunt appeal with all-at-once release (e.g., House of Cards, Orange Is the New Black). The decision is complicated by partnerships with exhibitors. Cable networks favor weekly release and OTT exhibitors like Netflix prefer binge-worthy shows. Other media platforms (e.g., motion picture distributors) sometimes use a variation on these strategies whereby a tentpole is an imagined franchise, a series of sequels that justify initial investment.With radio, the choice among music formats represents a blocking strategy. Newspapers segregate content by sections (e.g., sports, business, and lifestyle). Consumer habits are changing in a subscription-based world, where commercials are absent or very limited. For home entertainment, HBO was always there as an option, but had limited content and a nontrivial premium price. Netflix began as a mail-order video rental company that began a service that is the functional equivalent of a channel. The media world is finally at the point that there is a Netflix button on remote control devices. Statista (2017) estimates there are over 94 million Netflix subscribers worldwide in 2017 (four times the total in 2012), a number that may call into question the centrality of advertising in what has been a dual product market—namely, selling content to consumers and selling consumers to advertisers. Both markets compete on scarce attention to messages but the former market focuses on information and entertainment and the latter upon commerce for goods and services.

New Strategies As program schedules are replaced by digital libraries of content, content distributors and networks focus more on acquiring exclusive content. Ulin (2014) predicted that downloads and video on demand (VOD) have begun to “dramatically” influence and change the “historical windowing patterns of films and TV” (p. 46). Furthermore, set-top boxes (e.g., cable, satellite, TiVo) have begun to integrate multiple services to provide their subscribers with central locations for purchasing on-demand (or subscribing) to services that move directly to the high- definition room display, without the need for a Fire TV Stick (Amazon) or Chromecast (Google) plug-in device. Home digital assistants, like Amazon’s Alexa, Google Home, and Apple’s Siri, could eventually be the command central for set-top boxes, so future strategies depend on adoption rates and interoperability.

Consumer Spending A key consideration for content producers, distributors, and exhibitors is the extent to which customers spend on media-related products and activities (Albarran, 2017, p. 135). The Census Bureau stopped reporting media spending information in 2012, but the Bureau of Labor Statistics (Wesley, 2016) estimates that the average household spent $2,827 on entertainment, compared to $6,462 on food. Spiegel (2016) identifies “ubiquity of mobile devices and distribution platforms providing instant access” as the key driver of value for media content, along with new distributors angling for synergy, the importance of a strong content portfolio, innovation, and security. With the general decline of newspaper subscriptions and time spent with legacy media like broadcast and cable, consumers have greater interest in mobile media. One only needs to observe the

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growing number of handheld glowing rectangles (e.g., nearly every shopping cart toddler) to suspect a growing reliance on custom media experiences. Smartphones are clearly public necessities. Home Wi-Fi eventually became a household necessity, even for cord-cutters. Consumers continue to replace large-screen media displays for their homes, but the cost for a 50-inch television has fallen from $1,000 in 2010 to $500 in 2017 (Greenwald, 2017). One can easily find a discounted HD receiver for $400 or less. The number of screens per household continues to proliferate.

Advertising Future strategies also fly directly into the face of the established realm of advertiser-supported programs. No one expects advertising to vanish, but most observers worry that avoidance of Internet and broadcast display advertising has become too easy. Albarran (2017) has predicted “a slow, secular decline” for most areas of media advertising (p. 184). The critical need to hold onto an audience (e.g., time-spent, average quarter-hour ratings) was built into the DNA of past strategies. Commercial-free venues like Netflix (and HBO) have given viewers a taste for no interruptions and they seem to enjoy the freedom. The unanswered question is how much the consumer is willing to spend. Switching from a $30/month landline phone to a $100/month smartphone plan is sufficient evidence that consumers can tolerate spending more if the value (or perceived necessity) is great enough. Even audiences with a preference for traditional (“legacy”) media are tired of paying for all the channels. At the end of 2016, TiVo collected survey data that revealed a rising percentage of multichannel subscribers (77%) who desire fewer channels through some “a la carte” scheme. As discussed earlier, the popularity of Sling and YouTube TV is evidence that skinny bundles of channels have become popular among many heavy-use media homes.

In-App Purchases One potential new revenue stream for content owners and distributors lies within the applications (apps) through which most users of mobile devices obtain free and premium streaming content. Many gaming apps are free unless users buy a version without in-app purchases. If content providers can adapt this revenue stream, it might provide lower cost to consumers (and better access to advertisers). For example, being offered the choice to pay $2.99 to watch a movie when compared to the alternative of watching a five-minute “product information” presentation (and completing a survey) could lure viewers to choose the “free” option. Albarran (2017) has summarized the many strategies of free content. The author’s suggested business models are strategic responses to new media realities: (1) direct cross-subsidies (e.g., free cell phones with paid usage), (2) three-party/two-sided markets (e.g., free content in exchange for free advertising), and (3) freemium models (e.g., give away samples and sell content). Freemium models, as noted earlier, are very common nowadays with free phone apps that offer ingame purchases.

Conclusion The mediated world has transformed from discrete media to new media forms that often alter functionality and audience behavior. The common appliance is the screen, now portable, not solely for television channels but also for books, games, news information, and (virtual) human communication. The key game changer is connectivity.

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Although legacy sources of media are beginning to see competition everywhere, legacy distributors have new markets for their products. Facebook is a good example. Seetharaman and Marshall (2017) reported that Facebook was seeking up to 30-minute episodes in a variety of genres: sports, science, pop culture, lifestyle, gaming, and teens. Producers and distributors have opportunities for old and new content. Facebook wants users to stay longer and return more often for fresh programming and information. The potential to reach Internet-connected television audiences reached 74% in 2017. It seems likely that existing sources of information and entertainment must strive for exclusive or otherwise unique programming to remain competitive, or survive at all.The media industries have experienced dramatic change every ten years or so in the past quarter-century, but the newest nontraditional sources represent the greatest opportunities to distributors (and threats to existing business models). Media companies must enhance value of their content the old-fashioned way, by earning the attention of audiences. Media researchers need to develop newer models for program choice and distribution economics.

Research Agenda for the Next Decade Media scholars should continue to focus on economics, social uses, and predictive/heuristic models but also attempt to measure the new behaviors of media consumers. Mergers and acquisitions occasionally foreshadow as well as reflect the new media realities of usage. One important area might be the continued role of advertising in an environment increasingly hostile to advertising (Wilbur, 2015). Another area ripe for research is the development and testing of both competition and strategic models. Models of competition are still relevant (Adilov & Martin, 2013). But with regard to strategic models it has been decades since mainstream media journals have published studies on audience inertia and lead-in effects. Models of audience choice are somewhat limited to the studies by Webster and colleagues (e.g., Taneja, Webster, Malthouse, & Ksiazek, 2012; Webster, 2011; Webster & Ksiasek, 2012;Webster, 2014). Additionally, nonlinear consumption of content needs better measurement and scholarly attention, especially for new media entrants, like Netflix,YouTube, Apple, and Facebook. Media platforms themselves deserve more attention because they seem highly fluid with each passing season of television. The existing work by media scholars (e.g., Kim, 2016, Ksiazek, 2011) is a good starting point. Missing detail about the sustainability of escalating numbers of new television series is a specific need that should erupt about 2018 or 2019.The future of movies looks a little dim at this writing, with the failure of many major movies at the summer box office (a trend that dates back to the rise of Netflix). Finally, scholars must turn their attention to media brands, not because they have been ignored (e.g., Kim, 2017) but because the newest ones (e.g., Netflix) might be understudied. Malmelin and Moisander (2014) set forth an agenda to follow, complete with a review of research literature. The authors note the complexity (which suggests the urgency) of the situation with regard to media brands. Better theory is needed, although the media companies themselves are using some version of trial and error to ensure their success (which should be assessed by scholars). The distribution business shares the same goal of other businesses, not just profitability but also survival.

References Adams, W. J., & Eastman, S. T. (2013). Prime-time network programming strategies. In S. T. Eastman & D. A. Ferguson (Eds.), Media programming: Strategies and practice (9th ed.). Boston, MA: Thomson Wadsworth. Adilov, N., & Martin, H. J. (2013). Editors’ note on future directions for the Journal of Media Economics. Journal of Media Economics, 26(3), 115–119. doi:10.1080/08997764.2013.828522 Albarran, A. B. (2017). The media economy (2nd ed.). New York: Routledge.

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Content/Program Distribution Andreeva, N. (2016, May 15). NBC’s Bob Greenblatt calls in-season stacking rights “the future of our business”, talks program ownership. Deadline | Hollywood. Retrieved from https://deadline.com/2016/05/bobgreenblatt-in-season-stacking-rights-nbc-1201756628/ Arrese, Á. (2015). From gratis to paywalls. Journalism Studies, 17(8), 1051–1067. doi:10.1080/1461670X.2015. 1027788 Ballon, P. (2014). Old and new issues in media economics. In The Palgrave handbook of European media policy (pp. 70–95). Basingstoke: Palgrave Macmillan. Bednarski, P. J. (2017, March 6). OTT starts rocking the cable boat. MediaPost. Retrieved from www.mediapost. com/publications/article/296470/ott-starts-rocking-the-cable-boat.html Deloitte. (2015). Digital democracy survey. Retrieved from https://www2.deloitte.com/content/dam/Deloitte/ us/Documents/technology-media-telecommunications/us-tmt-DDS_Executive_Summary_Report_ Final_2015-04-20.pdf Doyle, G. (2016). Resistance of channels:Television distribution in the multiplatform era. Telematics and Informatics, 33(2), 693–702. Draper, K. (2017, March 6). Here come big ESPN layoffs. Deadspin. Retrieved from https://deadspin.com/ here-come-big-espn-layoffs-1793002796 Eastman, S. T., & Ferguson, D. A. (2013). Media programming: Strategies and practices (9th ed.). Boston, MA: Thomson Wadsworth. Evens, T., & Donders, K. (2016). Television distribution: Economic dimensions, emerging policies. Telematics and Informatics, 33(2), 661–664. Farrell, M. (2017, February 20). Four for the money. Multichannel News, pp. 8–10. Ferguson, D. A., & Perse, E. M. (1993). Media and audience influences on channel repertoire. Journal of Broadcasting & Electronic Media, 37(1), 31–47. doi:10.1080/08838159309364202 Gimpel, G. (2015). The future of video platforms: Key questions shaping the TV and video industry. International Journal on Media Management, 17(1), 25–46. Greeley, P. (2017, March 6). Broadcasters getting schooled on Facebook. TVNewsCheck. Retrieved from www. tvnewscheck.com/marketshare/2017/03/06/broadcasters-getting-schooled-on-facebook/ Greenwald, D. (2017, January 11). The best TVs of 2017. PC Magazine. Retrieved from www.pcmag.com/ article2/0,2817,2372085,00.asp Hess, T. (2014). What is a media company? A reconceptualization for the online world. International Journal on Media Management, 16(1), 3–8. Hoefflinger, M. (2016, May 12). The skinny bundle will be neither skinny nor bundled—but it will be great. TechCrunch. Retrieved from https://techcrunch.com/2016/05/12/the-skinny-bundle-will-be-neitherbut-it-will-be-great/ Investopedia. (2018). Theory of the firm. Retrieved from www.investopedia.com/terms/t/theory-firm.asp Jang, S., & Park, M. (2016). Do new media substitute for old media? A panel analysis of daily media use. Journal of Media Economics, 29(2), 73–91. Kafka, P. (2017, February 9). Viacom says it’s keeping its newest shows away from streaming services. Recode. Retrieved from www.recode.net/2017/2/9/14562734/viacom-hulu-bob-bakish-daily-show-ott Kim, D.D.E. (2017). A unified measure of media brand personality: Developing a media brand personality scale for multiple media. International Journal on Media Management, 19(3), 197–221. doi:10.1080/14241277.2017. 1306531 Kim, S. J. (2016). A repertoire approach to cross-platform media use behavior. New Media & Society, 18(3), 353–372. Kinjo, K., & Ebina,T. (2015). State-dependent choice model for TV programs with externality: Analysis of viewing behavior. Journal of Media Economics, 28(1), 20–40. doi:10.1080/08997764.2014.997242 Ksiazek, T. B. (2011). A network analytic approach to understanding cross-platform audience behavior. Journal of Media Economics, 24(4), 237–251. doi:10.1080/08997764.2011.626985 Lasswell, H. D. (1948). The structure and function of communication in society. In L. Bryson (Ed.), The communication of ideas (pp. 37–51). New York: Harper. Levin, G. (2016, August 9). Too many TV shows? FX chief has all the numbers. USA Today. Retrieved from www.usatoday.com/story/life/tv/2016/08/09/number-of-scripted-tv-shows/88489532/ Littleton, C. (2012, June 26). Fast-tracked sitcom may be way of future. Variety. Retrieved from https://variety. com/2012/tv/columns/fast-tracked-sitcom-may-be-way-of-future-1118055951/ Lotz, A. D. (2007). The television will be revolutionized. New York: New York University Press. Malmelin, N., & Moisander, J. (2014). Brands and branding in media management—toward a research agenda. International Journal on Media Management, 16(1), 9–25.

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Douglas A. Ferguson Martin, C. (2017, January 29). Internet-connected TV penetration reaches 74%. MediaPost. Retrieved from www.mediapost.com/publications/article/293854/Internet- connected-tv-penetration-reaches-74.html Mierzejewska, B. I.,Yim, D., Napoli, P. M., Lucas, H. C. Jr., & Al-Hasan, A. (2017). Evaluating strategic approaches to competitive displacement:The case of the U.S. newspaper industry. Journal of Media Economics, 30(1), 19–30. Mirabella, L. (2017, March 8). Sinclair Broadcast rolls out TBD network targeting millennials. Baltimore Sun. Retrieved from www.baltimoresun.com/news/maryland/bs-bz-sinclair-launches-tbd-20170308-story.html Morrison, G. (2016, May 11). ATSC 3.0: What you need to know about the future of broadcast television. C|NET. Retrieved from www.cnet.com/news/atsc-3-0-what-you-need-to-know-about-the-future-ofbroadcast-television/ Munson, B. (2017, March 7). CBS CEO: All access, showtime OTT global expansion ‘very possible in not-toodistant future.’ FierceCable. Retrieved from www.fiercecable.com/broadcasting/cbs-ceo-all-access-showtimeott-global-expansion-very-possible-non-too-distant-future Newton, G. D., & Kaiser, M.T. (2013). Music radio programming. In S.T. Eastman & D. A. Ferguson (Eds.), Media programming: Strategies and practice (9th ed.). Boston, MA: Thomson Wadsworth. Norberg, E. G. (2016). Radio programming:Tactics and strategy. London: Routledge. Palladino,V. (2017, March 7). How YouTube TV stacks up against DirecTV Now, PlayStation Vue, and Sling TV. Ars Technica. Retrieved from https://arstechnica.com/business/2017/03/tv-streaming-services-comparedyoutube-tv-is-strong-but-struggles-with-variety/ Pantea, S., & Martens, B. (2016). The value of the Internet as entertainment in five European countries. Journal of Media Economics, 29(1), 16–30. Poggi, J. (2017, March 9). YouTube TV and Hulu aren’t reinventing the live TV ad model yet. Advertising Age. Retrieved from http://adage.com/article/media/reinventing-live-tv-ad- model-priority-virtual-mvpds/308202/ Pressburg, M. (2017, March 7). Time Warner chief Jeff Bewkes says streaming won’t pass big cable for 3 to 5 years. The Wrap. Retrieved from www.thewrap.com/time-warner-chief-jeff-bewkes-says-streamingwont-pass-big-cable-3-5-years/ Sass, E. (2015, October 15). Newspapers reach record numbers online—but revenues don’t follow. MediaPost. Retrieved online at www.mediapost.com/publications/article/260511/newspapers-reach-record-numbersonline-but-reve.html Schweidel, D. A., & Moe, W. W. (2016). Binge watching and advertising. Journal of Marketing, 80(5), 1–19. doi:10.1509/jm.15.0258 Seetharaman, D., & Marshall, J. (2017, March 4). Facebook steps up video efforts. Wall Street Journal. Retrieved from www.wsj.com/articles/facebook-intensifies-hunt-for-tv-like-video-programming-1488551106 Shay, R. (2015). Windowed distribution strategies for substitutive television content: An audience-centric typology. International Journal on Media Management, 17(3), 175–193. doi:10.1080/14241277.2015.1099526 Spangler, T. (2016, September 15). Netflix ‘monetization gap’: Streamer earns less per hour viewed than most TV networks, study finds. Variety. Retrieved from http://variety.com/2016/digital/news/netflix-earningsper-hour-viewed-1201861725/ Spiegel, B. (2016). 5 things driving tomorrow’s content deals. PwC. Retrieved from www.pwc.com/us/en/ industry/entertainment-media/publications/global-entertainment-media-outlook/driving-content-deals. html Statista. (2015). Share of consumers who ever binge view television shows in the United States as of November 2015, by age. Retrieved from www.statista.com/statistics/431166/binge-watching-tv-shows-reach-by-age-us/ Statista. (2017). Number of Netflix streaming subscribers worldwide from 3rd quarter 2011 to 4th quarter 2016. Retrieved from www.statista.com/statistics/250934/quarterly- number-of-netflix-streaming-subscribers-worldwide/ Taneja, H., Webster, J. G., Malthouse, E. C., & Ksiazek, T. B. (2012). Media consumption across platforms: Identifying user-defined repertoires. New Media & Society, 14(6), 951–968. Ulin, J. C. (2014). The business of media distribution: Monetizing film,TV, and video content in an online world (2nd ed.) New York: Focal Press. Van Esler, M. (2016). Not yet the post-TV Era: Network and MVPD adaptation to emergent distribution technologies. Media and Communication, 4(3), 131–141. Waldfogel, J. (2017). The random long tail and the golden age of television. Innovation Policy and the Economy, 17(1), 1–25. Webster, J. G. (2009). The role of structure in media choice. In T. Hartmann (Ed.), Media choice: A theoretical and empirical overview (pp. 221–233). New York, London: Routledge. Webster, J. G. (2011). The duality of media: A structurational theory of public attention. Communication Theory, 21, 43–66. Webster, J. G. (2014). The marketplace of attention: How audiences take shape in a digital age. Cambridge, MA: MIT Press.

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Content/Program Distribution Webster, J. G., & Ksiasek, T. B. (2012). The dynamics of audience fragmentation: Public attention in an age of digital media. Journal of Communication, 62, 39–56. Wesley, D. (2016, December 23). How much the average American spends on entertainment. Retrieved from www. creditloan.com/blog/average-american-spends-on-entertainment/ (see also www.pwc.com/us/outlook) Wilbur, K. C. (2015). Advertising content and television advertising avoidance. Journal of Media Economics, 29(2), 51–57. Wlömert, N., & Papies, D. (2016). On-demand streaming services and music industry revenues—insights from Spotify’s market entry. International Journal of Research in Marketing, 33(2), 314–327. Yu, J., Lee, H., Ha, I., & Zo, H. (2017). User acceptance of media tablets: An empirical examination of perceived value. Telematics and Informatics, 34(4), 206–223. doi:10.1016/j.tele.2015.11.004.

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PART III

Emerging Issues/Areas of Inquiry in MME Research

15 MEDIA INNOVATION Three Strategic Approaches to Business Transformation Richard A. Gershon

Introduction The international business landscape has become ever more challenging. Global competition has engendered a new competitive spirit that cuts across countries and companies alike. No business enterprise large or small remains unaffected by the desire to be profitable and strategically well positioned for the future. Such companies are faced with the same basic question—namely, what are the best methods for staying competitive over time? In a word, innovation. This chapter will examine the importance of innovation to the long-term success of media and telecommunications companies. Specifically, it will address three important questions. First, what does it mean to be an innovative media business enterprise? Second, why do good companies fail to remain innovative over time? Third, how do good companies create a culture of innovation? This chapter considers three strategic approaches to media business transformation.They include: (1) business model innovation, (2) product innovation and (3) business process innovation. Special attention will be given to three companies: Amazon.com, Apple and Netflix. This chapter will further consider some new and emerging areas of media innovation research. The arguments presented are theory-based and supported by case study evidence. As a methodology, the case study is unparalleled for its ability to consider a single or complex research question within an environment rich with contextual variables (Eisenhardt, 1989; Morgan & Smircich, 1980).

What Is Innovation? The study of innovation has a long-standing history in the field of business and economics research. Scholarship in this field is widely diverse but shares the common goal of explaining innovation within the larger context of organizational performance (Chesbrough, 2003; Christensen, 1997, 2003; Fagerberg, Mowery, & Nelson, 2006; Kanter, 1989, 2006; Shavinina, 2003;Tushman & O’Reilly, 1997; Utterback, 1996). There is a greater appreciation for the multiplicity of factors that can make an organization smart and creative. From organizational culture and technology prowess (internal strengths) to competitive business climate and technological change (external influences), these and other factors can directly affect a company’s ability to be strategically well positioned and successful (Fagerberg, 2006; Jaaniste, 2009; Marinova & Phillimore, 2003). In the field of media management and economics, the study of innovation has become one of the most critical areas of research (Dal

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Zotto & van Kranenburg, 2008; Dogruel, 2014; Gershon, 2014, 2017; Habann, 2008; Küng, 2011, 2017; Storsul & Krumsvik, 2013; Mierzjewska, 2011; Mierzjewska & Shaver, 2014).

Sustaining vs. Disruptive Technologies Renowned scholar Everett Rogers (1995) defines innovation as “an idea, practice or object that is perceived as new by an individual” (p. 11). In principle, there are two kinds of innovation—namely, sustaining technologies versus disruptive technologies. A sustaining technology has to do with incremental product improvement. The goal is to expand on an existing technology by adding new and enhanced feature elements (Christensen, 1997; Storsul & Krumsvik, 2013). A smartphone manufacturer, for example, is routinely looking to improve on basic design elements like speed, audio reception and graphics display. For most companies, sustaining technology is the most common form of innovation, often receiving more than 80% of the organization’s total research and development budget (Davila et al., 2006). Sustaining technology is very important because it provides the steady and necessary improvements in product design that guard against rival product offerings. It also demonstrates a commitment to brand improvement. The goal is to try to maximize value from an existing product without having to engage in a major product redesign and/or retooling effort in production. By doing so, a company can preserve market share, extend brand awareness and maintain profitability (Banbury & Mitchell, 1995; Christensen, 2003). In contrast, a disruptive technology represents an altogether different approach to an existing product design and process. It redefines the playing field by introducing to the marketplace a unique value proposition (Amit & Zott, 2012; Gershon, 2013a, 2017, 2013a; Kim & Mauborgne, 2005; Küng, 2011, 2017). A disruptive technology is the quintessential game changer. It sets into motion a whole host of intended and unintended consequences for the marketplace.

Why Is Innovation Important? Innovation is important because it creates lasting advantage for a company or organization. It allows a business to develop and improve on its existing product line as well as prepare the groundwork for the future (Aris & Bughin, 2005; Hamel, 2006; Küng, 2013). Successful innovation occurs when it meets one or more of the following conditions. First, the innovation is based on a novel principle that challenges management orthodoxy. As an example, Sony Corporation’s Ken Kutaragi, inventor of the PlayStation videogame system, initially met with a lot of resistance from the company’s senior management because the idea of developing a videogame system was not in keeping with their view of the Sony brand (Nathan, 1999). By combining the power of a small computer with high-end video graphics, the soon-to-be created PlayStation videogame would represent a major step forward in videogame technology. Second, innovation is systemic; that is, it involves a range of processes and methods. The success of Dell computers, for example, was built on five business process principles—specifically, (1) building an e-commerce platform for the sale of personal and laptop computers, (2) building computers using just-in-time manufacturing capability, thus eliminating large excess inventories, (3) constructing a highly sophisticated global inventory management system that would ensure a steady supply of parts and equipment for the company’s worldwide manufacturing facilities, (4) developing a direct-to-home sales delivery system, thus eliminating the need for traditional retail stores, and (5) building a 24/7 customer support center for the purpose of providing greater customer focus. As a consequence, Dell became a global leader in the sale and manufacture of personal computer equipment (Gershon, 2011).

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Media Innovation: Three Strategic Approaches Table 15.1 Successful innovation: feature elements. The innovation is based on a novel principle that challenges management orthodoxy.

The innovation is systemic; that is, it involves a range of processes and methods.

The innovation is part of an ongoing commitment to develop new and enhanced products and services.

Home Box Office: Developed the principle of premium television entertainment. Amazon.com: Established the world’s first and preeminent e-commerce business model. Amazon.com: Direct-to-home sales delivery, global inventory management, 24/7 customer support. Netflix: Online video rental, global inventory management, television/film video streaming. Apple: iPod → iTunes → iPhone → iPad.

Source: R. Gershon, adapted from Hamel (2006).

Third, the innovation is part of an ongoing commitment to develop new and enhanced products and services. Rather than relying on the success of one product, forward-looking companies are constantly challenging themselves to develop the next generation of media products and services. There is a tacit recognition of the importance of linking design strategies with an organization’s core competencies (Danneels, 2002). Consider, for example, that Apple introduced four major product types in the course of ten years: iTunes ( January 2001), iPod (October 2001), iPhone ( January 2007) and iPad ( January 2010). There is natural progression in product design and development (see Table 15.1). While most organizations recognize the importance of innovation, there is a significant difference of opinion regarding the method of and approach to innovation. For some business enterprises, innovation is deliberative and planned. It is built into the cultural fabric of a company’s ongoing research and development efforts, as evidenced by companies like Apple, where the emphasis is on constant product design and refinement (Lashinsky, 2012). In contrast, innovation can also be the result of a triggering event—that is, a change in external market conditions or internal performance that forces a change in business strategy. The challenge for such companies is to dynamically restrategize and adapt one’s resources and capabilities to meet the uncertainty of a changing, highly competitive media environment (Hensman et al., 2013; Oliver, 2016; Picard, 2004; Teece et al., 2016). The most successful companies are those that are able to adapt and adjust strategy faster than one’s rivals (Lal & Strachan, 2007; Naldi et al., 2014; Oliver, 2014). The successful introduction of the Apple iPhone in 2007, for example, forced dramatic changes in the cellphone industry. It challenged companies such as Nokia, Blackberry and Samsung to reenvision their product design and purpose. Such pivotal moments represent what former Intel CEO Andy Grove calls a strategic inflection point, a time when a triggering event in the life of a company requires new solutions or it faces the prospect of business extinction (Webber, 2011).

Business Model Innovation The term business model innovation involves creating entirely new approaches for doing business. Business model innovation is transformative; that is, it redefines the competitive playing field by introducing an entirely new value proposition for the consumer (Amit & Zott, 2012; Holm et al., 2013; Osterwalder & Pigneur, 2010). Business model innovation represents the development of new and unique ways to achieve financial success in support of a company’s larger business strategy (BadenFuller & Mangematin, 2013; Morris et al., 2005; Rayna & Striukova, 2016; Spieth et al., 2014). The study of business model innovation typically falls into two different research perspectives. The first

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Richard A. Gershon Table 15.2 Select examples of media and telecommunications business model innovation. • Apple • Amazon.com • Google • HBO • Netflix

Launched iTunes, the first sustainable MP3 music downloading business of its kind. Created the world’s preeminent EC business model for goods and services online. Helped advance Internet keyword search advertising and developed the principle of micromarketing. Introduced the principle of pay television service. Developed world’s most successful online video rental service.

Source: Gershon (2017).

perspective looks at the relationship between business model design and competitive advantage. The goal is to look at the connections between the selection of business model type and how it provides value for both the customer and organization (Amit & Zott, 2001, 2012; Küng, 2011; Osterwalder & Pigneur, 2010).The second perspective looks at business model innovation and context—specifically, the dynamic interplay between the business model and different ancillary issues, such as emerging technology (Doyle, 2010; Gershon, 2013a; Napoli, 2011; Schlesinger & Doyle, 2015), innovation and creativity (Nylund, 2013; Sylvie et al., 2012; Unsworth, 2001) and innovation failure (Christensen, 1997; Gershon, 2013b). In Blue Ocean Strategy, authors Kim and Mauborgne (2005) make the argument that to create new growth opportunities, innovative companies must invent an entirely new market space. They use the metaphor of red and blue oceans to describe the market universe. Red oceans are all the industries in existence (i.e., the known market space). Direct competition is the order of the day. In contrast, blue oceans describe the potential market space that has yet to be explored. Competition is irrelevant because the rules of the game are waiting to be set. In order to create new market opportunities, demand is created rather than fought over. Table 15.2 provides a comparison of media and telecommunications companies that are industry leaders in the use of business model innovation. Each of the said companies was first or second to market and provides the basic blueprint for others to follow.

Amazon.com Amazon.com, Inc., is an American-based electronic commerce company headquartered in Seattle, Washington. Company founder Jeff Bezos incorporated the company in July 1994. Amazon.com is the largest electronic commerce (EC) retailer in the world. Amazon employs a multilevel EC strategy. In its formative years, Amazon focused on business-tocustomer (B-to-C) EC—specifically, books. The challenge was to become more fully diversified in terms of product and service offerings (Brandt, 2011). In time, the company incorporated customer reviews and leveraged such information as a way to sell more products and services as well as improve the customer experience. Amazon has greatly expanded its third-party marketplace, where merchants worldwide can set up their own virtual stores on Amazon.com and sell their products alongside Amazon’s—all the while leveraging Amazon’s large customer base and credit-card-processing services. The value proposition for all would-be Amazon shoppers is exchange efficiency, which can be translated in one of three ways: selection, convenience and low prices (Gershon, 2014). In sum, Amazon.com has created an altogether new business model that maximizes the potential for instantaneous communication to a worldwide customer base.The company has taken the principle of exchange efficiency to a whole new level in terms of retail trade and distribution. It has created one of the most sophisticated supply chain management systems of its kind and fundamentally changed how retail trade is conducted in terms of information gathering, marketing, production 244

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and distribution (Matthews, 2012). The Amazon.com business model proved highly transformative. Soon other companies would follow suit by offering their own version of Amazon’s production and distribution system.

Product Innovation Product innovation refers to the complex process of bringing new products and services to market as well as improving (or enhancing) existing ones. Highly innovative companies display a clear and discernible progression in the products they make (Rainey, 2005). They force themselves to create newer and better products while challenging the competition to do the same (Annacchino, 2007; Brooke & Mills, 2003; Danneels, 2002). If successful, an original product innovation creates an entirely new market space and invites a host of imitators to follow. For that reason, being first to market can represent a huge advantage, as evidenced by such companies as HBO (pay cable television), Sony, (the Walkman portable music player), the Apple iPhone (digital smartphone), ESPN (cable sports network), Amazon.com (EC) and Netflix (online video rental and home delivery service), to name only a few. The difference of a three- to four-year head start can make a significant difference in helping to establish brand identity and market share. Some notable examples of media and telecommunications product innovation can be seen in Table 15.3.What is interesting to note is the disruptive and transformative effect that each of the said products had on the competitive playing field at the time.

The Power of a Good Idea What is the power of one good idea? From the groundbreaking design of the original Macintosh computer to the social networking possibilities of Facebook, the word “innovation” has come to mean the ability to create something new or entirely different. The best innovators have natural curiosity about their environment. They are keen observers of human behavior and one’s natural landscape. They are willing to juxtapose various idea combinations in order to see what happens. The principle of ideation represents the creative process for developing unique and original ideas for the purpose of advancing new product development (Kelley, 2005). Ideation has two main stages: (1) idea generation, where quantity and diversity of viewpoints matter, and (2) synthesis, in which ideas are discussed, refined and narrowed down to a small set of viable options (Cunha et al., 2015; Nylund, 2013; Küng, 2011). A good idea has to be malleable; that is, it must be capable of adapting to various designs and configurations. As Johnson (2010) points out, a good idea is really a network of possibilities. A good idea spawns infinite connections and opportunities.

Apple For most inventors, lightning strikes once or twice in the course of a lifetime, whereas for Steve Jobs (and by extension—the team from Apple) lightning has struck multiple times. What is most

Table 15.3 Product design and the power of a good idea. • The Macintosh computer, the iPhone • The compact disc • Theme parks and resorts • Social networking • Cable sports network

• Apple • Sony and Philips • Walt Disney • Facebook • ESPN

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important, however, is the degree to which Apple products have influenced consumer behavior by creating a type of digital lifestyle. From the original Mac computer to the Apple iPad, these and other devices have had a transformative effect in the way the public communicates. In 1976, Steve Jobs together with his friend Steve Wozniak helped popularize personal computing by introducing the Apple computer.The launch of the Apple Macintosh in 1984, with its simple-to-use graphics interface and software, challenged the prevailing thinking of the time that computers were strictly the domain of IT professionals in white lab coats. Instead, the Mac was intended for the everyday user (Lashinsky, 2011; Isaacson, 2011). In 1998, Steve Jobs (and the team from Apple) were responsible for the development of the Apple iPod digital audio player. The iPod is an example of a blue ocean strategy that redefined the playing field of music recording and storage by enabling the device to record and store music using prevailing MP3 Internet technology and software. The blending of the Apple iPod and iTunes media store created the first sustainable music downloading business model of its kind (Gershon, 2014, 2017). The Apple iPod and iTunes combination qualifies as an example of new product development and business model innovation as well as a business process innovation since it successfully takes advantage of MP3 software distribution technology. Some years earlier, Jobs recognized the importance and commercial potential of a graphical user interface (GUI) while visiting Xerox Parc Labs in June 1979. The concept of a GUI would have important implications for the future of all Apple devices, most notably the Apple iPhone and iPad. In 2007, Apple introduced the Apple iPhone, which was described at the time as a three-in-one device that includes music, a phone and a mobile Internet capability. The smartphone concept was an absolute game changer in terms of redefining the purpose and scope of what a cell phone was intended to do (Gershon, 2013a, 2017). Taking an integrated approach has been a central tenet of Apple’s basic design philosophy. For Steve Jobs, one way to accomplish this was to control all aspects of the hardware and software design and to make them fully integrated. And equally important, the design itself should convey a kind of simple elegance. As Apple CEO Tim Cook (2017) points out, Steve’s DNA will always be at the base for Apple . . . Because that is what the company is about. His ethos should drive that—the attention to detail, the care, the simplicity, the focus on the user and the user experience, the focus on building the best, the focus that good isn’t good enough, that it has to be great, or in his words “insanely great,” that we should own the proprietary technology that we work with because that’s the only way you can control your future and control your quality and user experience. (“Tim Cook on Apple’s Future,” p. 52)

Business Process Innovation Innovation is about much more than developing new products. It’s about reinventing business processes and building entirely new markets to meet untapped customer needs. Davenport and Short (1990) define business process as “a set of logically related tasks performed to achieve a defined business outcome” (pp. 11–12). Business process implies a strong emphasis on how work gets done within an organization. It should service the organization’s internal and external customers as well as crossing organizational boundaries. Business process innovation involves creating systems and methods for improving organizational performance. The type of business process innovation can occur in a variety of ways within an organizational structure, including product manufacturing, inventory management, customer service,

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Media Innovation: Three Strategic Approaches Table 15.4 Five media and telecommunications companies and the transformative impact of business process innovation. Netflix

Home Box Office Dell

Netflix has become the largest online DVD rental service in the world. The company has developed a highly sophisticated supply chain management system as well as a proprietary recommendation software tool. In 1975, HBO helped advance the principle of satellite/cable networking by using satellite communication to advance long-haul television distribution. In the area of computer manufacturing, Dell created a highly successful business model utilizing just-in-time manufacturing techniques as well as direct-to-home sales capability and 24/7 customer service.

distribution and so forth (Davenport, 1993). A highly successful business process has two important consequences. First, a highly successful business process is transformative; that is, it creates internal and external efficiencies that provide added value to the company and organization. Second, it sets into motion a host of imitators who see the inherent value in applying the same business process to their own organization (Gershon, 2011, 2017; Stoddard & Jarvenpaa, 1995). Table 15.4 provides a comparison of three media and telecommunications companies that are industry leaders in the use of business process innovation. Each of the said companies has rendered a host of imitators that have adopted similar approaches to business process.

Netflix Netflix is an online subscription-based DVD rental service. Netflix was founded by Reed Hastings in 1997. Netflix was founded during the emergent days of EC when companies like Amazon.com and Dell were starting to gain prominence. Netflix was conceived at a time when the home video industry was largely dominated by two major home video retail chains, Blockbuster Video and Hollywood Video, as well as numerous “mom-and-pop” retail outlets. The challenge for Hastings was whether he wanted to duplicate the traditional bricks and mortar approach used by such companies as Blockbuster.The alternative was to utilize the power of the Internet for placing video rental orders and providing online customer service. Netflix is the world’s largest online video rental service (Shih et al., 2007). Netflix qualifies as a uniquely designed business model and demonstrates important features of business process innovation (Gershon, 2011, 2017; Izquierdo-Castillo, 2015). The company has engaged in a number of strategies that have enabled it to be successful. First, Netflix has developed a highly sophisticated supply chain management system that allows the company to offer subscribers both good selection and fast turnaround time. Second, Netflix has harnessed the power of the Internet to create a virtual store. The company maintains a set of centers that serve as hub sites for DVD collection, packaging and redistribution. Early on, Netflix made the decision to partner with the U.S. Postal Service (USPS) to deliver DVDs to its online subscriber base (Shih et al., 2007). Third, Netflix utilizes a proprietary rating and recommendation system which makes suggestions of other films that the consumer might like based on past selections (Gershon, 2014, 2017; GomezUribe & Hunt, 2016; Hallinan & Striphas, 2016). Fourth, Netflix has steadily adapted to changing technology by offering a “Watch Instantly” feature, which enables subscribers to stream DVD quality movies and recorded television shows instantly to subscribers equipped with high-speed Internet connectivity.

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What is interesting to note is that the video streaming of movies is delivering in real time and in greater numbers what cable television failed to achieve in terms of its once highly touted video-on-demand system capability. Such services as Netflix, Hulu and HBO-Go are now referred to as over-the-top services that enable cable subscribers to effectively cut the cord and depend exclusively on their broadband connection for the delivery of video services. Hastings has said on several occasions that Netflix’s purpose is not to provide DVDs via the mail but rather to allow for the best home video viewing for its customers. It’s about the business process of delivery. Streaming will become more and more the centerpiece of how Netflix plans to distribute its television service in the future.

Media Innovation: New and Emerging Areas of Research The field of media management and economics has undergone considerable development in the study of innovation. In this next section, we consider a number of new and emerging areas of media innovation scholarship. They include: (1) the challenges of staying innovative, (2) creating a culture of innovation, (3) innovation and the future of the newspaper, and (4) innovation networks, clusters and global project teams.

The Challenges of Staying Innovative Business failure is typically associated with bankruptcy or poor financial performance. But at a deeper level, business failure is also about the proverbial “fall from grace.” A once highly successful company is faced with a public perception that it has lost all relevancy in an otherwise highly competitive business and technology environment.The consequences are very real symbolically as well as financially. Scholars point to a number of contributing reasons that help to explain why companies fail to stay competitive and/or lose their creative edge.

The Innovator’s Dilemma Authors Collins and Porras (1994) make the argument that highly successful companies are those that are willing to experiment and not rest on their past success. In time, tastes, consumer preference and technology change. Christensen (1997) makes the argument that even well-managed companies are sometimes susceptible to innovation failure. The main reason is that such companies are highly committed to serving their existing customers and are often unwilling to take apart a highly successful business in favor of advancing unfamiliar and unproven new technology and service. He posits what he calls the innovator’s dilemma—namely, that a company’s very strengths (i.e., the ability to develop reliable suppliers and be responsive to customer needs) now become barriers to change and the unwitting agents of a company’s decline. Advancing new technologies and services can sometimes require expensive retooling, whose ultimate success is hard to predict. Such companies lose because they don’t invest in new product development and/or fail to notice small niche players who enter the market and are prepared to offer consumers alternative solutions at better value (Kanter, 2006). The anticipated profit margins in developing a future market niche can be hard to justify given the high cost of entry and the possible destabilization of an otherwise highly successful business. Therein lies the innovator’s dilemma.

The Tyranny of Success Past success can sometimes make an organization very complacent; that is, it loses the sense of urgency to create new opportunities. Companies, like people, can become easily satisfied with organizational 248

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routines. They become preoccupied with fine-tuning and making slight adjustments to an existing product line rather than preparing for the future (Gershon, 2013b; Lucas & Goh, 2009; Tushman & O’Reilly, 1997). But what happens when management orthodoxy and past success stand in the way of innovation? Suddenly, creative thinking and the ability to test new ideas get caught up in a stifling bureaucracy. Sometimes what passes for management wisdom and experience is inflexibility masquerading as absolute truth (Hamel, 2006). Such examples can be seen with the demise of such companies as Eastman Kodak, Blockbuster Video and Blackberry, which allowed an adherence to past practices stand in the way of embracing the future.

Risk-Averse Culture Successful businesses with an established customer base find it hard to change. There is a clear pattern of success that translates into customer clients, predictable revenue and public awareness for the work that has been accomplished to date. The adage “why mess with a winning formula” slowly becomes the corporate norm. There are no guarantees of success when it comes to new project ventures. The difficulty, of course, is that playing it safe presents its own unique hazards. Even well-managed companies can suddenly find themselves outflanked by changing market conditions and advancing new technologies. Worse still, a company’s past success can sometimes make an organization risk-averse and unwilling to make the necessary changes in planning for the future (Utterback, 1996). As Kanter (1989) writes, whenever something new is created, there is always going to be a high degree of uncertainty tied into the project. No one knows for certain what resources will be required and how the project will be received.

The Challenges of a Disruptive Technology The lessons of business history have taught us that there is no such thing as a static market. There are no guarantees of continued business success for companies regardless of the field of endeavor. Schumpeter (1942) introduced the principle of creative destruction as a way to describe the disruptive process that accompanies the work of the entrepreneur and the consequences of innovation. In time, companies that once revolutionized and dominated select markets give way to rivals who are able to introduce improved product designs, offer substitute products and services and/or lower manufacturing costs. The consequences of creative destruction can be significant, including the failure to preserve market leadership, the discontinuation of a once highly successful product line and the potential loss of jobs. Consider, for example, the effect that EC has had on traditional retail department stores. In cities and small towns alike, the basic department store has been severely challenged by the likes of Amazon.com, iTunes and equivalent EC sites. At issue is the fact that customer convenience and the wide scoping availability of goods and services online make EC sites often preferable to the traditional department store.

Creating a Culture of Innovation Creating a culture of creativity is important to the success of project design and innovation. A growing body of research has emerged that looks at the role of creativity as an important consideration in the success of contemporary media companies. The goal is to create an environment in which creative works can best flourish (Ford & Gioia, 2000; Küng, 2008; Nylund, 2013; Sylvie et al., 2012; Unsworth, 2001). Creating media content, whether it be television, film, music or Internet communication, requires a special appreciation for digital media and creative storytelling. 249

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Leadership and Innovation Leadership is a process that involves influence and the art of directing people within an organization to achieve a clearly defined set of goals and outcomes. Successful leaders know what they want to accomplish in terms of organizational outcomes (Albarran, 2013; Hollifield et al., 2016; Northouse, 2004).The executive leader often sets the creative tone for an organization when it comes to product design and innovation (Aris & Bughin, 2005; Bilton, 2007; Gershon, 2017; Küng, 2017). This can be seen with such people as Steve Jobs (Apple), Walt Disney (Walt Disney Company) and Akio Morita (Sony), to name only a few.

Serendipitous Connections One of the important lessons in innovation is that some of the greatest discoveries occur as a result of a chance encounter. The history of business and technological discovery often starts with the chance encounter or accidental mix of things. As Johnson (2010) points out, some of the best discoveries occur when different people with diverse backgrounds and skill sets find themselves in a common space sharing their ideas. The unfiltered exchange of a chance idea can sometimes spawn a radically new working concept. Kelley (2005) makes the argument that the best projects and design configurations are a collaborative effort; they never finish where they began. The author describes it as the “magic of cross-pollination” (p. 68).

Creative Work Space Creating a culture of innovation presupposes having the right work environment with which to develop and implement great ideas. From the corner office to the nondescript cubicle, there is considerable difference of opinion as to how to create the best and most efficient work space. There are, however, certain truisms in terms of what makes for a creative work space. Innovation needs a place to flourish and grow. The creative office should function like a well-designed stage set, thereby contributing to great performance. Good design space creates opportunities for prototyping new ideas (Kelley, 2005). One consideration is the importance of building intelligence into the design of the modern office work space. The combination of computer and telecommunications technology has had a major effect on the spatial design and activity of the modern organization. The buildings and office space that we occupy are not nearly as important the tools we use to get work done. The blending of powerful communication tools with flexible work space can greatly enhance productivity and innovation (Waber et al., 2014). Vitale (2014) extends the argument and considers the importance of virtual networks in support of global project teams and innovation clusters, making the argument that transnational organizations now have to think differently in terms of project design teams, group interactions and so forth. Related to the idea of building intelligence is the importance of mobility, which recognizes that business professionals and creative teams need information access anytime and anywhere. Location should never be an obstacle.

Innovation and the Future of the Newspaper Change is never easy. Change is especially difficult when a new start-up company and/or technology is poised to displace a well-established business. Nowhere is this more evident than the impact that digital media has had on the newspaper industry. The contemporary international newspaper industry finds itself on the receiving end of creative destruction. Starting in 2008, the world’s newspaper

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industry entered into an unprecedented period of decline. At issue is the future of quality reporting and an informed public (Nielsen & Levy, 2010).The causes of newspaper circulation decline are well documented. A number of media research studies have identified five major causes.They include the following: • • • • •

The availability of good substitutes in obtaining news information The loss of advertising dollars due to information available on the Internet A change in readership demographics among younger audiences The high cost of newspaper production and distribution The failure to fully appreciate the importance of the digital lifestyle (Esser & Bruggemann, 2010; Nielsen & Levy, 2010;Van Kranenburg, 2017)

The major test ahead for the modern newspaper owner and publisher is finding the right combination of news gathering, writing and technology delivery efficiencies that is both cost-effective and sustainable over time.Van Kranenburg’s (2017) edited works collection considers the state of the newspaper industry in Europe and features a number of invited scholars to discuss and review best practices related to media innovation by country. The combination of news information on the Internet coupled with the ease and access of posting news information and blog commentary has fundamentally challenged the economic business model for newspaper and magazine production on a worldwide basis. The move from print media to digital has not been easy for newspaper or magazine publishers. Research has shown that readers are reluctant to pay for news content on the web. Several research studies indicate a decline in online readership following the implementation of paywalls in newspapers (Chyi & Tenenboim, 2016; Evens & Van Damme, 2016; Kammer et al., 2015). Research by Chiou and Tucker (2013) suggests that paywalls in local newspapers have proven to be a disincentive for younger readers and tends to drive them away. As such, they are more inclined to seek free news on the Internet and/or news made available via social media (Goyanes, 2015). The problem is made worse by the fact that many organizations are unwilling to pay as much for online advertisements (Esser & Bruggemann, 2010; Nielsen & Levy, 2010). In sum, the business of news media is threatened by the sheer quantity of free news in a variety of formats, ranging from radio, television and cable to multiple Internet newspaper and magazine websites. Not everyone agrees. Edge (2014) makes the argument that while newspapers are undeniably downsizing in terms of laid-off journalists and support staff, there is some evidence to suggest that we may be exaggerating the scale of the financial crisis. Nevertheless, such changes have affected the quantity and quality of news information now available to the public. It’s now possible to contemplate a time when some major cities will no longer have a newspaper and when magazine and broadcast news operations will employ no more than a handful of reporters. According to Picard (2010), we are in danger of moving toward a system in which social elites have access to high-quality news and information because they can pay for it and the rest of the public is left with a poorer news selection. Therein lies the challenge. How does one turn an audience that appreciates news but undervalues it into paying customers? Researchers have considered the effect that digital media and, more specifically, computer tablets and smartphones have had on the newspaper industry. Such technologies have forever changed how we experience reading news. It has introduced into the reader’s experience a number of different value propositions, including graphic images, video streaming, portability and the ability to customize one’s news story interests (Chan-Olmsted, 2016; Doyle, 2010; Gershon, 2013a; Napoli, 2011; Salaverria, 2010; Schlesinger & Doyle, 2015).

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Innovation Networks, Clusters and Global Project Teams One of the most important lessons executives have learned about innovation is that companies can no longer afford to go it alone. The traditional model of R&D is to create and manufacture products exclusively within the confines of one’s own organization. The basic logic is that if a company wants something done right, it builds it in-house.There is a vast body of research that challenges that assumption and makes the argument that the not-invented-here approach is no longer sustainable. Instead, there is a clear and decided move toward innovation networks, clusters and global project teams.

Innovation Networks Successful innovation for the modern enterprise requires building a combination of both internal and external partners. According to Chesbrough (2003), the idea behind open innovation is that there are simply too many good ideas available externally and held by people who don’t work for your company. Even the best companies with the most extensive internal capabilities have to take into consideration external knowledge and information capabilities when they think about innovation. To that end, companies should be drawing business partners and suppliers into so-called innovation networks. The goal of the innovation network is to bring together both internal and external partners to work on a problem or design issue that is better solved collaboratively. New types of creativity are formed by building connections with people and start-up groups that have unique and highly specialized skill sets. One such example can be seen when Apple collaborated with and eventually acquired a company called Portal Player, which led to the creation of the Apple iPod.

Innovation Clusters The term innovation clusters can be used to describe cross-network collaborations between researchers, model developers, program sites and practitioners. Such clusters are composed of researchers, developers and site leaders whose purpose is to codevelop new product ideas or develop solutions to meet specific problems (Kuah, 2002). Surowiecki (2006) argues the value of how crowd-thinking (or the wisdom of the crowds) can enhance business intelligence. Karlsson and Picard’s (2011) edited work collection considers media clusters in particular and how they are used to help advance the international collaboration of television and film productions, news story development and new media project start-ups. Jackson (2017) makes the argument that co-working spaces (i.e., project team clusters) increase the likelihood of ideation, transmedia project design and the development of entrepreneurial partnerships.

Global Project Teams International project teams are the key to smart, flexible and cost-effective organizations. A global project team represents working professionals from a transnational corporation’s (TNC) worldwide operations assembled together on an as-needed basis for the length of a project assignment. They are staffed by working professionals from different countries (Martins et al., 2004; Maznevski & Chudoba, 2000; Lipnack & Stamps, 1997). More and more, the transnational organization uses global virtual teams as part of a larger effort to share international expertise across the entire TNC. The global virtual team offers up certain distinct advantages, including shared access to information, collaborative research and design work, and

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reduced travel costs (Gershon, 2016). A variation on this idea is the formation of an international alliance group, where two or more international companies work together on a common project (Chan-Olmsted, 2004; Hollifield, 2001). One such example can be seen with the partnership that was formed between Sony and Philips Corporation that led to the development of the original compact disc. Advancements in communication technology and intelligent networking have elevated the principle of teamwork to a whole new level in terms of collaborative effort (DeSanctis et al., 2000). At the same time, global virtual teams bring with them a unique set of challenges. Foremost are issues pertaining to trust, involving differences of culture, geographic dislocation, complex problem solving and the effective collaboration of ideas. Specifically, how does one creatively engage a group of people whom one has never physically met, trusting that everyone is equal to the task (Evaristo, 2003; Potter & Balthazard, 2002; Jarvenpaa et al., 1998)? The global project team presents both opportunities and challenges in terms of utilizing the principles of virtual communication in tandem with intelligent networks.

Discussion and Suggestions For Future Research Research in the field of media innovation has significantly increased during the past decade. It has become one of the centerpieces of media research scholarship worldwide. This is reflected in the number of books, journal articles and edited work collections dedicated to the subject, as noted earlier in this chapter.We have also seen the study of media innovation become the basis for a dedicated journal to the subject, as evidenced by the launch of The Journal of Media Innovations. There are a few reasons that account for the growing interest in the subject matter. The explanation in part is due to the natural synergy (or tie-in) between business strategy and innovation. Any attempt to create something new or different is part and parcel of a larger media business strategy. One of the goals in writing this chapter was to provide a working structure that describes the three major types of media business innovation, and more specifically, how they are used in support of a larger business strategy—hence the title of the chapter. A second reason for the growing interest in media innovation is tied to entrepreneurship and leadership theory. What is it about entrepreneurs like Jeff Bezos (Amazon.com), Steve Jobs (Apple) and Akio Morita (Sony), to name only a few, that has made these respective companies commercially successful? More specifically, what is it about these people as leaders and the culture of the companies they created that makes such organizations creative innovators in the best sense of the term? Pilotta, Wildman and Jasko (1988) make the point that corporate culture is a direct reflection of the people who founded them. A third reason for the emergent interest in media innovation is tied directly to specific technology changes—most notably, the Internet and electronic commerce, broadband delivery of services to the home, and intelligent networking and artificial intelligence. Broadband delivery is the great infrastructure challenge of the twenty-first century. Advancements in broadband delivery will figure prominently in the Internet of things (IoT), which has multiple design implication for smart homes of the future. A fourth and final reason for studying media innovation has to do with the issue of disruption— specifically, how does the diffusion of a new technology affect current business players and technology in the marketplace? The most direct example, as noted earlier, is the effect that digital media has had on the newspaper and magazine industry. Similarly, the future of video streaming technology and over-the-top (OTT) television services is poised to disrupt both the broadcast a