Chapter 2 ctva 480

What is a market? A place where consumers and sellers interact with one another to determine the price and quantity of the good produced. Dual Product Market A market in which 2 different products are sold simultaneously to 2 different sets of buyers. Also known as a joint commodity Ex: like how hulu gets money for subscribers and also people putting ads in their shows Media's conflict of Interest Dual purposes from serving 2 masters: Audiences (public) Advertisers (money and profits) Can the media effectively serve both masters? Are they successful at it now? Example: first offering something for free and good then slowly start changing things Roles of Media To entertain, to provide what people want Educate and inform, to provide what people need Geographic Market Traditional electronic media companies operate in specific geographic markets Radio networks , TV networks, and satellite companies -> national market Local radio and TV stations and cable/satellite operators-> regional area Ranked by populations size Internet and digital platforms -> global market Market Structure Market structure is determined by: Concentration of buyers/sellers A market is considered concentrated if revenues are controlled by a limited number of companies Two common ways to measure concentration in the media industry: Ratings data Share of market reached by each competitor Concentration ratio Percentages of revenues controlled by top four (or eight) firms If four firms have less than 50% then market is considered concentrated If eight firms have less than or equal to 75% then market is concentrated Product differentiation Perceived differences among products What are some ways that media companies differentiate their content? Radio stations offering unique formats
TV stations using news to differentiate themselves Broadcast and cable networks differentiating themselves through their individual program schedules In the category of kids and family, disney has four differentiated cable television networks Vertical and horizontal integration Vertical: means you can produce the product yourself Producing your own shows as a network Horizontal: going toward the consumer to use it A network buys the station and uses their content. Like how disney also owns espn or abc Barriers to entry Obstacles new sellers must overcome before they can enter a particular market Capital investments Cost structures Expenses need to create products in the market Fixed costs + variable cost= total costs Fixed costs Expenses to produce one unit of a product variable costs Expenses depend on different units of product Economies of scale The decline in average cost that occurs as additional units of a product are created Economies of scale are important to businesses in an industry with high fixed costs How can economies of scale be achieved by media companies Radio and television stations Cable companies Types of Market Structure Monopoly A single seller of a product exits and dominates the market Barriers to entry are high Oligopoly Three or more sellers of a product, which may be homogeneous or differentiated Barriers to entry are significant monopolistic competition Exists when many sellers offer similar products that are not perfect substitutes for one another Prices varies with both market and the individual firms impacting decisions Barriers to entry are fear Perfect competition No single firm dominates
barriers to entry do no exist Media examples of four major types of market structure Monopoly Cable television Oligopoly Television networks Business Models Advertising Business to consumer Consumers purchase on a case by case basis Subscriptions Recurring charge for the product/service Consumer to consumer Actual transactions are conducted among consumers, but a middle entity helps broker the transactions Freemium Provides a sample of content for free before the user must either pay or subscribe to receive the complete offer Forces affecting markets Economic Technological Broadband, high-definition tv, social tv, and user-generated content Regulatory The FCC, congress, the courts Trade associations Global Media in US saturated but major opportunities abroad Social Demographic changes Information rich versus information poor society SWOT Analysis Commonly used tool to analyze potential alliances A SWOT analysis considers both internal and external factors internal strengths and weaknesses External Opportunities and threats
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