Renovating Media Economics

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"Renovating Media Economics", presentation by Stuart Cunningham and Terry Flew, [email protected], Department of Media and Communication, University of Sydney, October 24, 2014

Transcript of Renovating Media Economics

  • 1. Reconsidering Media Economics [email protected] University of Sydney 24 October 2014 Stuart Cunningham and Terry Flew Creative Industries Faculty Queensland University of Technology
  • 2. Dominant media-economic theories Mainstream (neoclassical) media economics Critical political economy Emergent economic approaches Institutional economics New Institutional Economics (NIE) Evolutionary economics Major case studies Public service media (PSM) The changing ecology of television
  • 3. Mainstream (neoclassical) media economics (Picard, 1989; Albarran 2002, 2010; Alexander et. al., 2004; De Vany, 2004; Doyle, 2006, 2013; Hoskins et. al., 2004) Critical political economy (Mosco, 2009; Hardy, 2014)
  • 4. Beyond dualistic thinking Economics as a discipline is more diverse and pluralistic than it appears from the outside Keynesian revolution of 1930s; other challenges to hegemony of neoclassical theory from institutionalism, behaviouralism, network economics, post-Keynesian economics etc. the neoclassical approach [is] no longer the overwhelmingly dominant paradigm it once was (Wildman, 2006, p. 68) an economic approach to the media needs to be informed by information economics, and network economics, institutional economics and evolutionary or innovation economics (Ballon 2014, p. 76)
  • 5. Why is this relevant to media studies? new developments in media industries and markets are stretching the capacity of the established neoclassical and critical political economy paradigms: convergent digital media Socio-economic value of premarket and nonmarket forms Disruption of long established media business models agentive nature of media audiences New media/digital content as sources of wealth creation and economic innovation
  • 6. Mainstream media economics Application of neoclassical microeconomics Individual as primary unit of analysis Rational choice assumptions Market equilibrium prices Theory of supply and demand Influence among media decision-makers Media policy influence
  • 7. Economics, as a discipline, is highly relevant to understanding how media firms and industries operate [because] most of the decisions taken by those who run media organisations are, to a greater or lesser extent, influenced by resource and financial issues (Gillian Doyle, Understanding Media Economics, 2013, p. 1). Policy researchers seem to divide roughly between the market economics and social value schools of thought, and the two are often so far apart in their assumptions and languages that they are unable to communicate with each other (Entman and Wildman, 1992, p. 5).
  • 8. Worked example of applied media economics: tablet PCs 1. Apple iPad revealed unmet consumer demand for tablets 2. Tablet PCs generated monopoly profits for Apple 3. New suppliers entered the market with lower-cost products (also network effects of Android platform) 4. Apple forced to lower prices and introduce lower cost competitor: iPad Mini
  • 9. Challenges of media for economics Heterogeneous nature of media product difficulty in determining what the price is for Dual media markets: consumers/advertisers Tendencies towards concentration of ownership and market oligopoly Importance of non-economic principles in media policy e.g. diversity and media pluralism, public goods, socio-cultural dimensions of media content
  • 10. Twilight of the media mogul?
  • 11. Digital transformation of media industries and markets Shift from content scarcity to content abundance What is the content of digital media products, services or platforms? Freely available content and implications for professional media production Are content aggregators (Google, Apple etc.) in the media industries?
  • 12. Critical Political Economy (CPE) understanding historical processes of social change; mutually constitutive relationship between economic, social and cultural institutions, relations and practices; moral philosophy oriented towards critiquing the industrial structures and social relations of capitalism; commitment to linking intellectual work with progressive social movements. (Mosco 2009, p. 4).
  • 13. Is CPE a big tent? Winseck (2011) proposes that institutional, evolutionary and (some) neoclassical economics is broadly within a commodious CPE Contested within the field, where CPE has been defined in opposition to: Cultural studies Neoclassical economics Media industry studies (Meehan and Wasko, 2014)
  • 14. Revisiting the active audience debate Cultural studies questioned degree that audiences adhered to dominant ideologies, pointing to active audience/user agency Critiqued among CPE theorists as cultural populism (McGuigan 1992) The cultural as formative of industrial/market structures or residual and merely reflective (Stuart Hall, 1986)? But heartland debates in media and cultural studies have done little to conceptually advance what form of media economics should supplement or contend with critical political economy
  • 15. Power: an immanent critique Power (Thompson 1995) Asked to do too much theoretically? Relationship between economic, political and cultural/symbolic power? Power as top-down (domination) or relational? examples
  • 16. Impasse in media economics Neoclassical ME vs. CPE has become a stale rehearsal of well-worn pro/anti-market arguments My main argument with many of the versions of the return to Marxism today [is] they share exactly the same worldview as the so-called neoliberals. They think there is one solution to the problem. One thinks that the market will solve everything, the other that doing away with the market will (Nicholas Garnham, interview with Christian Fuchs, 2014, p. 121).
  • 17. Institutionalism Long history in the social sciences Middle-range theories (Merton) Structure/agency dialectic (Giddens) Historical path-dependency Neoclassical focus on rational choice individualism has historically marginalised institutional economics Dissenting tradition: Veblen, Galbraith Communication studies: political economy of Harold Innis and Canadian comms. school it is on individuals that the system of institutions imposes those conventional standards, ideals, and canons of conduct that make up the communitys system of life (Veblen 1909 [1961], p. 38).
  • 18. New Institutional Economics (NIE) Douglass North, 1993 Nobel prize winner - economics had cut itself off from history, neglecting the historically evolving role of institutions and the significance of how such institutions develop over time NIE maintains continuities with mainstream microeconomics, particularly in retaining architecture of rational choice theory in its analyses of individual behaviour different to old institutionalism and economic sociology
  • 19. Key NIE concepts Bounded rationality while individual behaviour can be intentionally rational, in practice all decision makers (entrepreneurs, consumers, politicians, etc.) act subject to imperfect information and limited cognition (Furubotn and Richter, 2005, p. 556). Transaction costs costs of running the economic system (Kenneth Arrow) - include market engagement costs, managerial transaction costs, and political transaction costs Uncertainty and imperfect information Ex ante/ex post imperfect information Asset specificity both the nature of the asset and its use are incompletely defined A list/B list in creative industries (Richard Caves)
  • 20. The firm as a nexus of contracts Origins with Coase (1937) Institutional form than economises on transaction costs Implicit and relational contracting Contracts rely upon trust, social networks, reputation Applicable across both private and public sector institutions
  • 21. Institutions in NIE institutions as the humanly devised constraints that structure human interaction (North, 1994, p. 360) Institutional arrangements/governance structures (micro) Institutional environment/ rules of the game (macro) Formal institutions: rules, laws, policies etc. Informal constraints: norms, conventions, cultural codes etc. links to history and culture
  • 22. Levels of NIE analysis (Williamson) Level of theory Level of analysis Frequency of change Purpose 1) Social theory Embeddedness, informal institutions, mental maps, beliefs, norms 100-1000 years Often non-calculative; spontaneous 2) Law and politics Institutional environment; rules of the game; governing institutions 10-100 years Getting institutional environment right 3) Transaction cost economics Governance structures; contracts; regulations 1-10 years Getting governance structures right 4) Neo-classical economics Resource allocation; prices; employment; incentives Continuous Getting marginal conditions right
  • 23. Public Service Media (PSM) case study Transition from PSB to PSM in context of media convergence Spectrum scarcity case for PSB no longer plausible Public good/merit good case challenged in multichannel environment PSBs not the only providers of quality, niche or minority content Diversity of PSB histories no single template
  • 24. Political economy, PSBs and citizenship PSBs seen as central to nation building, citizenship and the public sphere Not all PSBs are non-commercial, and even non-commercial PSBs have commercial activities Normative definition of PSB: does not include, for instance, CCTV as worlds largest state-run broadcaster Challenges of PSB Charters lead or follow public taste? Private providers can achieve public good e.g. Google Books case
  • 25. Core NIE propositions relevant to PSM Public and private sector organisations/firms as a nexus of contracts Separation of ownership from management, and principal-agent problem Tendency to expand into conglomerates risk of becoming too big Relational or incentive-based contracting comparable employment arrangements across public and commercial media
  • 26. Relational contracting in public sector media how much is Tony Jones worth? ABC salary leak reminder that there is no longer a base pay for ABC presenters Differential salaries reflect various performance-based (relational) contracts within the organisation
  • 27. Governance challenges for PSM Accountability of PSM managers to the public via the government? Should a PSM be trusted to regulate itself? Distinctiveness of PSM histories and organisational cultures Political problem: electoral politics increasing a battle for political property rights loss of autonomy for public institutions
  • 28. Public Value Tests (PVT) and PSM innovation Public Value Tests being applied to digital expansion of PSBs in EU How is public benefit to be assessed? EU: media pluralism established in broadcasting context (PSB) but role of PSM in digital environment is contested Ex ante tests as an inhibitor of PSM innovation Innovation increasingly central to PSM remit
  • 29. Evolutionary Economics Emphasises non-equilibrium processes and dynamics of capitalist transformation from within (contrast to neo-classical static equilibrium) Technological and institutional change endogenous to market economies Joseph Schumpeter creative destruction bourgeois Marxist (Catephores) Strong influence upon innovation economics
  • 30. Kondratieff and Schumpeterian notions of long-wave cycles five from the Industrial Revolution: (1) steam and cotton, (2) steel and railways, (3) chemistry and electrical engineering, (4) petrochemicals and cars, and (5) ICT expansion of the fifth or a new, sixth, wave consisting of biotech, pharmaceuticals, recycling and alternative energy, software, mobile communications, and digital technology?
  • 31. Evolutionary account of media in the economy Economic model (1) welfare (2) competitive (3) growth and (4) innovation Typical indicative content Arts, crafts, material culture, heritage, PSB? cultural industries: film, broadcasting, music, publishing creative industries: digital content, new, Internet and mobile media Sub-discipline/ approach Cultural economics Neo-classical (descriptive)/ Political economy (critique) Evolutionary economics/innovation economics Policy framework Subsidy/grant Industry policy investment/innovation
  • 32. evolutionary economics provides a non-teleological, non-totalistic account of the dynamics of capitalism that is as dynamically conflictual as its Marxist counterpart a theoretical and historical framework for a more adequate understanding of the nature, scope and rate of change media industries are undergoing,
  • 33. Conclusion Intention of the book is not polemical for or against one or other school of thought but rather to identify merits of diverse strands of economic thought in understanding changing media environment Trade (Nelson and Winter) between economics and media, comms. & cultural studies can generate new insights into long established issues e.g. technological determinism Opening the black box of capitalist dynamics promotes a better understanding of the economy/culture interface dual face of capitalism as both a system fundamentally grounded in violence and the most effective engine for bettering the material condition of mankind ever known (Ott & Milberg, 2004- Centre for Capitalism Studies) Merits from point of view of policy advocacy (Entman & Wildman)