Archive for the ‘Media Economics’ Category

Profits vs Quality

February 23, 2010

Media companies always look for the right balance between quality and short-term profits. Quality requires big investment in several areas: production, good supplies, research and innovation, distribution, customer service and on top of everything… people.

When recession arrives, managers tend to cut expenses. Some of the “cutting” is healthy: in fact, the crisis are excellent excuses to get rid of inefficient people and innecesary burdens. But the danger is to cut to much, to destroy the organization’s muscle.

When the crisis arrives, the goals should be i) short-term survival, and ii) to arrive at the end of the crisis helthier and stronger than rivals. Companies that “at the end of the tunnel” have not not big debts, preserve the prestige of their brands and keep their teams happy and motivated have good option to capture a big part of market´s growth. In times of crisis, managers should have drive and inspiration to keep the balance: they should reach the financial targets while protecting quality.

The Future of Consumer Magazines

February 2, 2010

Consumer magazines were the first and only mass media during the XVIIth century. But next century newspapers took over as the most influencial media both in Europe and America. Then, after the First World War, radio stations became more popular than magazines. The same happened with TV channels after the Second World War.

More recently, magazines have lost a new battle: now Internet has more niche products, gets more advertising income and attracts more users.

Magazines have low entry barriers and, because of that, there are more titles in the market than ever before -in spite of i) the advertising crisis and ii) the increasing number of subsitutes.

Editors of consumer magazines should be very innovative to sort out those problems. They have highly valuable assets: their brands. They should take advantage of them to create new products and services to attract new readers and advertisers.

Media Concentration in the World

January 19, 2010

From 1960 to 2000 there were a controversy about concentration of media companies all over the world. Sometimes, media moguls were described as people who did not care about their media outlets’ impact on society because they were only focused on how to increase profits and shareholder value. During that period, big media companies became more international, more diversified, more horizontally and vertically integrated, and more powerful.

What is going on nowdays? Are media markets more concentrated? The answer depends on how we define markets. If we analize the newspaper market or the magazine market, we will identify a trend towards more concentration in most countries. But if we take the “information market” (including online services, radio news networks, 24 hours news TV channels, blogs and other user generated contents) it is obvious that there are less players whith dominant positions and less bottlenecks in the value chains. That applies both to news markets and entertainment markets.

If media markets are less concentrated, it is time to change some legal frameworks which made sense in the old times but which are inefficient and oldfashioned when choice for consumers is almost limitless. (That, of course, applies only to free market societies but not to state-controlled economies like China, Cuba or North Korea).

The same crisis for everyone?

November 5, 2009


It is a recognised fact that the advertising industry is crossing a deep period crisis due to the economic crisis faced by the different world economies. In fact, the world advertising investment has fallen during the first semester of 2009 in 16.4%. However, a detailed analysis of the data leads us to conclude that the effects are not the same for all countries and all media. As long as geographical areas are concerned, America and Europe are the most influenced ones.

Regarding media, we find that conventional media are being influenced to a greater extent than non conventional media. Among conventional media different responses before crisis are found. For example, the Internet is the only medium that where the total advertising expenses have not declined, but experienced a slight growth. The medium most influenced by the crisis has been the cinema, with a fall of 63.3% from January to September 2009. Next follows the investment in magazines, falling in a 37%. Investment in advertising in newspapers and television has fallen in a 28%, whereas expenses in radio have been reduced in a 17%.

This leads to conclude that the crisis has not been the same for all the media. Research suggests that in a period of crisis advertising in audiovisual media is less influenced than investment in printed media. Data from the current recession period seem to confirm it. Radio has emerged as a more resistant medium in crisis times and advertising expenses have experienced a strong decline. The surprising data can be found in the fall in advertising investment in television. Its share in total investment has declined and during two quarters in a row in 2009 has lost more investment than the industry average.

Is there any willing to pay for on line content?

September 28, 2009

The paid content:UK/Harris Inteactive poll has shown the small willingness to pay for on line newspapers.  Only 5% of the users say they would pay for on line news. However, when the question uses the combination of discounts with on line and paper edition, the willingness to pay increases. Nearly 48% of users would pay for on line news if it included a free/discounted paper sub.  This means that print still has a value.

Whereas some studies show that combination of paper and online products are the only way to charge, others continue to believe in the power of the brand, as News Corp.  Richard Freudenstein, CEO of News Digital Media says: “News has conducted some audience research here in Australia and in the UK and U.S., which gives us confidence that, if we get the product and delivery system right, people will happily pay for news content online, on their computer, mobile, e-reader or other devices.”

What it seems clear is that the most appropriate bussiness model will be found after trying and combining numerous possibilities. In the meantime, we will be able to enjoy very valuable on line content for free.

Are soccer rights profitable at all?

September 22, 2009

It seems pay television services are looked again as  a profitable business model for the future of television.  After enjoying the monopoly of soccer rights in the late 90s, pay television services (either satellite or cable) saw themselves fighting for soccer rights with open-to-air channels, loosing the cornerstone of their business.

However, with the advent of digital terrestrial television, the open-to-air channels have struggled to get the permission from the Spanish government to establish pay channels through terrestrial television. And they got it this last summer. Once the permission is got, under a great controversial, the problems come from the electronics industry. There are no decoders ready to assume this change with complete guarantees.And there is only one channel under pay television premises at the moment: Gol TV, which serves soccer games under pay per view.

Are pay services the future to make a profitable business in television? Was no other way than allowing open-to-air channels to become pay services? I do think the answer is easier, since it is not a matter of making television business profitable. The problems we have are the answer of having made soccer rights so overestimated. The question should be formulated as follow: Are there enough advertising incomes and direct viewer payments to give football clubs the money we have offered to them for so many years?

Same crisis: different impact in different companies

September 16, 2009

In the development of their activities firms are influenced by many forces, some of them positive but other negative, that make up the environment the company. Within these factors, the economic is a key element with a large impact on the behaviour of all organizations. The current economic crisis we are now crossing has affected all firms in all industries to a great or small extent. However, we could say that the media industry has been one of the most negatively affected by the crisis. This has involved a substantial decline in the activity of media firms, with consequences for the employment of professionals, in the definition of the strategy of the most outstanding companies and in their profits.

This fall is the outcome of a vicious circle that far from being broken keeps working with the new data that appear. The economic situation is depressing, firms do not see the way out in the short term and try, as far as possible, to cut expenses. In these saving efforts, one of the items easier to cut if the advertising budget, since even today commercial communication is considered by most companies as an expense and not as an investment. The repercussions that these sharp declines in advertising investments have had on newspapers, magazines, radios, televisions and in general on conventional media, has multiplied for these firms the negative impact of the crisis. A yearly two digits fall in income implies an important readjustment in the size of the workforces of these firms and a decline in the profits that for many companies leads entering in the world of losses. In this context it is important for firms to make and effort to remain in the market, knowing that the economy is cyclical and that after the crisis recovery comes. However, if the negative situation continues, the time that firms achieve to stay in the market, will depend on the quality of strategy formulation, so that bad managed firms will be the first to leave the market. Cristina Etayo.

Euronews travel to the East

September 14, 2009

Although it’s not very pleasant for a Spaniard to talk about Turkey just after the last basketball game of the Eurobasket, I do think that the interest of Turkish public television in Euronews Channel deserves some reflexion.

The Turkish Public Broadcasting channel has become the forth shareholder of Euronews, with 15.7%. Euronews president sees a great opportunity to spread its channel, whereas the General Manager of the Turkish channels assesses that it’s also a way of fostering the integration in the European Union.

It is obvious that there are strong political interests behind this.  So, there are some questions which arise, in relation with this channel. To what extent Euronews is an independent channel? Euronews says about itself that it is the unique news channel mantaining impartiality and avoiding a national viewpoint. Is that possible having shareholder such as Turkish Public Broadcaster?

It is time to assume that Euronews is as much voice of the people as the other news channels, with its pressures and influences, and also, we hope, with the professionality of its journalists.