Media Economics PBF3164

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Questions and Answers

What is the concept that competition among firms represents, as described by Porter (1980)?

Competitive advantage (correct)

Market structure

Strategic management efforts

Concentration

Competition is non-existent in a monopoly.

True

What is one of the tools or methodologies commonly used to measure concentration in a market?

Concentration ratios

The _______________ is calculated by squaring the market shares of each firm to assess competition.

Herfindahl-Hirschman index Signup and view all the answers

What are the three main types of economies identified in the content?

Command economy, market economy, and mixed economy Signup and view all the answers

In a command economy, the government regulates all economic activities and controls decision-making related to production.

True Signup and view all the answers

Define 'supply' in the context of economics.

Supply refers to the quantity of goods a producer is willing to offer in the market. Signup and view all the answers

Price is determined by __________ and demand forces.

supply Signup and view all the answers

Match the following concepts with their definitions:

Demand = Represents the quantity of goods buyers want in a market Market economy = Complex system of buyers and sellers that operate freely without government interference Mixed economy = Combines free market principles with government regulation and oversight Advertising = Primary means of financial support for media enterprises Signup and view all the answers

What is price elasticity of demand?

Price elasticity of demand is the responsiveness of quantity demanded to a change in price. Signup and view all the answers

How is price elasticity of demand calculated?

Dividing the percentage change in quantity by the percentage change in price Signup and view all the answers

In elastic demand, a change in price results in a proportionally greater change in the quantity demanded.

True Signup and view all the answers

In ________ demand, a change in price results in a proportionally equivalent change in demand.

unit-elastic Signup and view all the answers

What influences wants, needs, utility, and value, including perceptions of technology products among different age groups?

Life stages, income, household size, and other demographic variables Signup and view all the answers

What is the primary difference between media products and life-sustaining products like shelter, food, and clothing?

Media products have an opportunity cost Signup and view all the answers

Media content is considered discretionary because it is essential for survival.

False Signup and view all the answers

Media companies focus on attracting consumers through a combination of marketing and branding efforts to influence their ______________ decisions.

allocation Signup and view all the answers

Match the media integration strategy with its description:

Horizontal Integration = Expanding into different markets Vertical Integration = Controlling all aspects of creation, production, distribution, and exhibition Signup and view all the answers

Study Notes

Understanding the Media Economy

The media economy is a complex system driven by the interaction of supply and demand forces.
There are three main types of economies: command economy, market economy, and mixed economy.

Types of Economies

Command Economy:
- Government regulates all aspects of economic activity.
- No open or free market.
- Examples: North Korea and Cuba.
Market Economy:
- Complex system of buyers and sellers.
- Prices and quantities produced are determined openly and freely through competitive market forces.
- No country operates in a truly open market economy without government oversight or regulatory guidelines.
Mixed Economy:
- Combination of free market principles and government regulation and oversight.
- Examples: United States and the United Kingdom.

Supply and Demand

Supply: Quantity of goods a producer will offer in a market using available resources.
Demand: Quantity of goods buyers want to acquire in a market.
Price: Cost of a good or service, determined by supply and demand forces.
Long Tail Theory: Media content products with long-term incremental value, representing a demand curve that follows a long downward trajectory.

Price Elasticity of Demand

Price Elasticity of Demand: Responsiveness to price changes.
Elastic Demand: Proportionally greater change in quantity demanded in response to a change in price.
Unit-Elastic Demand: Proportional change in quantity demanded in response to a change in price.
Inelastic Demand: Less than proportional change in quantity demanded in response to a change in price.

Cross-Elasticity of Demand

Cross-Elasticity of Demand: The concept that comparable products and goods can be substituted for one another.
Examples: movie tickets, music streaming services, and over-the-top (OTT) streaming services.

Other Forms of Demand

Actual Demand: The demand for media content or product at the individual level.
Advertiser Demand: Advertisers purchasing time and space among media outlets to reach the audience.### Advertising and Media Economy
Advertising represents the primary revenue form in most media economy sectors.
Advertisers seek to maximize exposure to their messages when acquiring time and space in the media economy.

Media Properties and Mergers

Media properties include radio and TV stations, newspapers, magazines, film studios, recording companies, internet service providers, and digital-based firms.
Media mergers and acquisitions increased in the 1980s and 1990s due to low-interest rates, available capital, and high demand for businesses with strong profit margins.

Wants, Needs, Utility, and Value

Wants are something we desire to enhance our lives, influenced by peers, family, institutions, culture, and advertising.
Needs are basic necessities for survival, such as food, water, shelter, and clothing.
Utility is the satisfaction derived from using media products and services.
Value is the worth we place on a particular product or service, influenced by wants and needs, and is subjective in nature.

Pricing Media Products

Media products have an economic cost, and the pricing of media products is a critical decision for media companies.
Subscriptions are a popular way to access media products, with different packages or tiers and options for advertising or ad-free experiences.
Legacy media has struggled to retain subscribers due to higher distribution costs, whereas digital media products have lower distribution costs.

Allocation

Allocation decisions are made by suppliers, advertisers, and consumers in the media economy.
Suppliers must determine how many units of a product to produce based on resources.
Advertisers must decide what messages to place in what mediums, depending on strategic goals and budgets.
Consumers make allocation decisions related to media products and services based on discretionary income and time.

Horizontal and Vertical Integration

Horizontal integration involves entering different markets to create a competitive advantage.
Vertical integration involves controlling all aspects of creation, production, distribution, and exhibition to leverage assets more efficiently.
Examples of horizontal integration include Disney's expansion into theme parks, streaming, and film studios.
Examples of vertical integration include Time Warner's merger with Turner Broadcasting System and Disney's acquisition of Pixar, Marvel Entertainment, and Lucasfilm.

Competition and Concentration

Competition refers to the degree to which competitors compete for the same resources, such as audiences and advertisers.
Concentration refers to a characteristic of a market's structure, exemplified by the theory of the firm.
Measures of concentration include concentration ratios and Herfindahl-Hirschman index (HHI).
Regulators are challenged by the digital transformation leading to the dissolving of market boundaries and the degree of activity across markets.

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Description

This quiz covers the basics of media economics, including types of economies and application of supply and demand concepts.