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