Copyright © 2006 Allyn and Bacon6-1 William R. Davie and James R. Upshaw Chapter Six – The...

Copyright © 2006 Allyn and BaconCopyright © 2006 Allyn and Bacon 6-6-11

William R. Davie and James R. UpshawWilliam R. Davie and James R. UpshawChapter Six – The IndustryChapter Six – The Industry

William R. Davie and James R. UpshawWilliam R. Davie and James R. UpshawChapter Six – The IndustryChapter Six – The Industry

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Principles of Electronic MediaPrinciples of Electronic MediaPrinciples of Electronic MediaPrinciples of Electronic Media


Principles of Electronic MediaPrinciples of Electronic MediaChapter Six – The IndustryChapter Six – The Industry


Civilization and profits go hand in hand.

Calvin Coolidge




¤ Fundamentals¤ Two Roles

¤ Service¤ Profit

¤ Commercial Broadcasting¤ Is a Business¤ Offers Extensive Choices


A Dual RoleA Dual RoleA Dual RoleA Dual Role

¤ “Note this basic fact: In the U.S. system, local stations are the only true broadcasters. To win a government license to transmit programming “over the air,” a station must have a local address and a specific audience to serve. This audience usually is considered to be everyone within a clearly defined geographic area that the station’s radio waves can reach” (p. 116).


Dual RoleDual RoleDual RoleDual Role

¤ “Because these invisible waves are considered to belong to the American people, all of us are, at least in spirit, consumers with a special stake in the broadcast industry. Laws and regulations have long required that local broadcasters perform public service” (p. 117).



¤ “The FCC once required that stations air substantial programming intended mainly as public service, not as advertising vehicles. But government pressure to maintain this practice slacked off in recent decades. Unprofitable programs, such as public-affairs shows digging into important public issues, have mostly withered away from commercial programming” (p. 117).



¤ “Most important, perhaps, the system does not interfere with profit making. Unlike broadcasters in most countries, U.S. broadcasters were permitted to take a sharp turn toward private enterprise from the beginning” (p. 119).




Principle #1

In commercial broadcasting, public service must support business objectives by promoting or otherwise benefiting the company.




¤ The Industry¤ Business Dynamics¤ Explosion of Choices

¤ Cable¤ Satellites¤ Computers¤ Internet




Principle #2

The industry rests on a three-legged stool of economic factors: broadcaster, audience, and advertiser.




Levels of Operation - Corporations¤ Corporate Objectives¤ Government’s Role¤ Shareholder Interests


Corporate ObjectivesCorporate ObjectivesCorporate ObjectivesCorporate Objectives

¤ “Today, companies known as station groups have acquired many local outlets and oversee their operations from whole time zones away. The older networks and some of the newer ones are members of much larger corporations, some of them conglomerates – that is, having interests in many businesses besides broadcasting. The policies and practices found at all of these levels ultimately must satisfy stockholders who pour their investment dollars into the companies” (p. 121).


Corporate ObjectivesCorporate ObjectivesCorporate ObjectivesCorporate Objectives

¤ “This sort of financial weight tends to alarm critics who contend that placing great media power in just a few hands is certain to reduce the variety of voices in today’s culture. Others argue that powerful companies actually produce a wider variety of programming than smaller companies can” (p. 122/123).


Government LimitsGovernment LimitsGovernment LimitsGovernment Limits

¤ “By the late 1990s, under the 1996 Telecommunications Act, one person could buy eight radio stations in a single town and could own as many stations nationally as that person could afford” (p. 123).


Government LimitsGovernment LimitsGovernment LimitsGovernment Limits

¤ “Ownership restrictions are intended to prevent monopolies and to encourage diversity. However, some corporations that own electronic media insist that if they can’t expand their control, competitors will engulf them and deny their services to consumers” (p. 123).


Shareholder InfluenceShareholder InfluenceShareholder InfluenceShareholder Influence

¤ “Except when someone starts and runs a small company using his or her own savings, media businesses need massive and continuous investment. Advertising revenue alone won’t cover all corporate obligations and keep a business growing. Instead companies sell stock to investors, use the proceeds to create and market programs, make profits, pay dividends to the investors, and thus keep attracting new investors” (p. 124).



¤ “Electronic media are based on fairly simple scientific principles but require expensive facilities and constant upgrading. […] People willing to buy shares of stock, putting capital into a growing corporation, are crucial allies. In return, they receive voting power over corporate policy. Those with the most stock can become company directors, helping to make the biggest strategic decisions” (p. 125).



¤ Conflicts of Interest: (e.g. Disney)¤ “However, among those on the corporation’s

megapayroll are the journalists of ABC News. They’ve been employees of the corporation since it acquired ABC in 1996. Some observers had misgivings about Mickey Mouse’s entertainment empire buying a major news operation; they were concerned that corporate profit goals might influence journalistic performance” (p. 125).




Principle #3

U.S. commercial electronic media will oppose efforts to regulate them.




Principle #4The urge to consolidate ownership is fundamental

to broadcasting, as it is to many other industries.




Levels of Operation – Networks¤ Effects of Regulation¤ Changing with the Times – A New Age


Regulation’s TollRegulation’s TollRegulation’s TollRegulation’s Toll

¤ 1970s¤ The financial interest and syndication

rules: “The first rule prohibited networks from acquiring financial stakes in programs produced by others. The second rule barred networks from selling programs to local stations” (p. 126).



¤ “Another tether on the networks was the prime-time access rule, which limited network programming to three hours a night during the four-hour prime-time period. Like the syndication rule, this encouraged stations to create shows or buy them elsewhere” (p. 126).



¤ “These government limits substantially broke the big networks’ choke-hold on what Americans could watch, helping to diversity TV content. The limits also badly damaged network profitability. Soon new networks and cable TV grabbed viewers from the Big Three” (p. 126).



¤ “Within a couple of years in the mid-1980s, ABC, CBS, and NBC were sold to or merged with richer companies” (p. 127).


The New Age of NetworksThe New Age of NetworksThe New Age of NetworksThe New Age of Networks

¤ “The networks had not lost all of their financial strength or their resilience, however… For instance, NCB, which had become NBC Universal made $2 billion in profit in 2003. On the other hand, the old networks know they no longer rule alone and have branched out widely. They’ve acquired Internet outlets, formed alliances, and generally reinvented themselves to compete with new rivals” (p. 127).




Principle #5Consolidation increases broadcasting’s dependence

on approval from Wall Street investors.




Levels of Operation – Station Groups

¤ Trading Stations

¤ Why Growth?

¤ Larger Group

¤ Levels and Geographic Regions

¤ Negotiate Programming

¤ Interest in Localism


Station GroupsStation GroupsStation GroupsStation Groups

¤ “Between 1994 and 1998, the number of owners of full-power commercial TV stations spiraled from 658 down to 425 – a drop of more than one-third. Radio stations have become especially ripe targets for consolidation of ownership” (p. 128).


Station GroupsStation GroupsStation GroupsStation Groups

¤ “After many years when no one was permitted to own more than 40 stations, the 1996 Telecommunications Act repealed national ownership limits. Buyers were allowed to hold as many as eight stations in a local market. Within the next year, the total number of owners of U.S. radio stations dropped almost 12 percent as stations groups new and old bought up all they could” (p. 128).


Motives for GrowthMotives for GrowthMotives for GrowthMotives for Growth

¤ Efficiency: reduces the cost of doing business.

¤ Increased appeal for advertisers in terms of multiple layers of market exposure.

¤ Better cooperation in times of catastrophe.¤ Programming negotiations.


What Happened to What Happened to Localism?Localism?What Happened to What Happened to Localism?Localism?

¤ “One major objection to electronic-media consolidation is that it reduces the diversity of programming and thus denies viewers and listeners access to many points of view”

¤ LCD vs. the “niche market”


What Happened to What Happened to Localism?Localism?What Happened to What Happened to Localism?Localism?

¤ “However, opponents of consolidation insist that content diversity will wither if too much power falls into too few hands” (p. 130).¤ -”When you talk about more voices, are you

talking about more voices by one ventriloquist?” (Byron Dorgan, Sen. North Dakota).




Levels of Operation – Production

Companies

¤ Pioneering TV

¤ Independents


Production CompaniesProduction CompaniesProduction CompaniesProduction Companies

¤ “Although megacorporation own some production studios today, the traditional mode, responsible for most TV programming over the past half century, is to contract with an independent production firm” (p. 130).




Principle #6

Because of its technologies, broadcasting generally is more capital intensive than labor intensive.




Locally

¤ Radio

¤ Who Manages and How?

¤ Who Works?

¤ Television

¤ Managerial Functions

¤ The Rank and File


Radio and Television RolesRadio and Television RolesRadio and Television RolesRadio and Television Roles

¤ Programming¤ Advertising Sales¤ Business Affairs¤ Engineering¤ Human Resources¤ News¤ Production




Into the Future

¤ New Paths to New Audiences

¤ New Prospects


New MarketsNew MarketsNew MarketsNew Markets

¤ HDTV¤ Customizable Media Products¤ Cable¤ Satellite

Copyright © 2006 Allyn and Bacon6-1 William R. Davie and James R. Upshaw Chapter Six – The...

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