Adam D. Rennhoff

Relationships between Media Freedom and Social Capital, Evaluating Newspaper Responses to Internet Competition, and Audience Demand for Television Broadcasts of International Football Games

The first article in this issue finds a U-shaped relationship between media freedom and social capital. This suggests media freedom is associated with open societies where social and economic interactions involve heterogenous groups. Closed societies where interactions involve homogenous groups are not associated with media freedom. The second article examines differentiation strategies used by newspapers to respond to Internet competition. The article concludes these strategies have failed. The third article examines how uncertainty about the outcome of an international football game affects audience demand. Game outcome uncertainty influences demand for international friendly games, but not for qualifying and tournament games. The first article is “Media Freedom and Social Capital” by Sanghoon Lee. This study examines relationships between social capital and media freedom in a sample of 197 countries. Social capital exists when membership in a group or network creates a credential that allows members to participate in and benefit from the network. Social capital can also be identified by norms that members of a group practice such as reciprocity and trust. Social capital can improve the exchange of economically important information, builds social cohesion, and provide social support for group members. Media freedom can also improve “the free flow of ideas and access to information and knowledge” (p. 4) which can aid economic development. This may be the first study to examine direct relationships between social capital and media freedom. The study uses a cross-sectional and a random effects panel analysis. Two types of social capital are examined. Bonding social capital is created by ties between members of a network with similar characteristics, such as an ethnic fraternal organization. Bridging social capital is created by interactions between heterogenous groups with looser ties than the ties in bonding social capital. Membership in ecumenical religious organizations is an example of bridging social capital. Media freedom is a function of the legal and political media environment, measured by indicators developed by media groups and citizens’ perceptions of their ability to select their government and freely express themselves. The analysis finds a U-shaped relationship between media freedom and social capital. Regression results for general social capital are robust. However, results for bonding and bridging social capital are less robust, perhaps because some of the measures “are incomplete proxies for the theoretical constructs” (p. 16). The author concludes that the U-shaped pattern exists because media freedom encourages bridging social capital in open societies. However, bonding social capital plays a dominant role in social interactions in closed societies which do not allow media freedom. The second article is “Evaluating Strategic Approaches to Competitive Displacement: The Case of the U.S. Newspaper Industry,” by Bozena I. Mierzejewska, Dobin Yim, Philip M. Napoli, Henry C. Lucas Jr., and Abrar Al-Hasan. This study offers a fresh look at how newspapers responded to declines in circulation and advertising because of Internet-based competition. Newspapers are a mature mass medium, and can be expected to respond to Internet competition with more than one JOURNAL OF MEDIA ECONOMICS 2017, VOL. 30, NO. 1, 1–2 http://dx.doi.org/10.1080/08997764.2017.1287511

Influence of quality and exclusivity in two-sided markets, effects of infinite durability on the consumption of information goods, and improving sales forecasting for media products

Each article in this this issue provides new insight into demand for media goods. The first revisits network effects in two-sided markets by focusing on the quality and exclusivity of video games. The study finds gamers tend to play just a few widely popular games. Popular games therefore have an outsize influence on the success of video game consoles. The second article examines effects from the introduction of a cloud-based service that give consumers continuous access to movies. The study found sales of movies with cloud-based access increased, and that rentals of movies decreased among some consumers. The third study compares managers’ sales forecasts for movies, books and music with forecasts based on models. The study finds that managers’ forecasts are only superior for a few best-selling media products. Model-based forecasts are better for products with medium and low sales The first article is “Platform Competition in the Video Game Console Industry: Impacts of Software Quality and Exclusivity on Market Share” by Haeyop Song, Jaemin Jung, and Daegon Cho. This study extends the literature on network effects in two-sided markets by focusing on the characteristics of six video game consoles and their associated software. The study examines complimentary products by focusing on how quality and exclusivity influence software and hardware competition in video game markets. The study uses reviews of video game software to measure quality. A panel data set with information about 10 years of sales was assembled for the study. The sample included 2,392 software and console combinations, and 1,396 unique video games. The findings did not support the conventional wisdom that most video game software plays “a critical role in hardware sales, and vice versa”. Instead, a few high-quality games dominate sales because gamers buy an average of just eight games during the life of a game console. A high-quality game that is exclusive to one console can significantly influence the early success of a gaming platform. However, software that works on multiple-platforms is valuable to mature gaming consoles because consumers are interested in “relatively small numbers of attractive products”. The authors discuss the implications of their findings for software and hardware developers. “The Introduction of Infinite Durability to an Information Good and the Decision to Buy or Rent: Evidence from the Film Industry” by Gabriel Pablo Axarlian is based on a natural experiment in the film industry. The experiment occurred when five major film studios introduced a cloud-based system to give consumers continuous access to digital copies of films. A sixth studio, Disney, did not offer customers access to the cloud-based system from 2011 to 2014. Disney’s lack of participation “provided the perfect conditions for a natural experiment to analyze exactly how infinite durability affects consumption patterns of information goods, using films as a proxy”. Consumers purchased access to the cloud-based systemwhen they bought a DVD or Blu-ray copy of a film. The panel-data set examined the sales of 286 films over 73 weeks. Consumer who purchased DVDs were considered low-value consumers, and those who purchased Blu-ray were high-value consumers. The introduction of the cloud-based system increased movie sales to all consumers. However, high-value consumers were more sensitive to infinitely durable movie access. The likelihood of renting films on Blu-ray decreased, which was not the case for films on DVDs. JOURNAL OF MEDIA ECONOMICS 2017, VOL. 30, NO. 3, 97–98 https://doi.org/10.1080/08997764.2018.1458452

Advertising Content and Avoidance, New Media or Old Media, and Media Coverage of Celebrity Suicides

This issue of Journal of Media Economics includes three articles covering a wide range of mediarelated topics. All three articles have important implications for media firms, from advertisers to traditional media content providers. These articles also raise important points in a larger publicpolicy sense, as well. The first article is “Advertising Content and Television Advertising Avoidance,” by Kenneth C. Wilbur. This article, which relies on actual television viewing behavior collected (anonymously) using set-top cable boxes, examines the factors that influences viewers’ decisions to switch the channel when a commercial appears. As the author notes, television-watching is largely a passive activity, whereas the decision to change channels during a commercial break requires action. The author’s data allows him to observe (i) whether a viewer changes channels during a particular commercial and, if so, (ii) how many seconds into the commercial this switch occurs. The author specifies a proportional hazards model that uses information regarding the identity and the content of an advertisement to explain consumer channel-switching behavior. The resulting coefficient estimates indicate the factors that make consumers more or less likely to stop viewing a given advertisement. Among the empirical findings, the author finds evidence that viewers of live sports programming and animated television programming are less likely to change channels in order to avoid commercials. Television viewers appear to be more hesitant to avoid movie advertisements, but advertisements for websites, auto insurance, and women’s clothing are frequently avoided. There also appears to be diminishing returns on television advertising as viewers are more likely to avoid advertisements that are frequently shown or repeated. The second article is “Do New Media Substitute for Old Media?: A Panel Analysis of Daily Media Use,” by Shinjae Jang and Minsoo Park. This article seeks to measure the degrees of substitutability and complementarity among a variety of different media. The author uses daily media diaries completed by several thousand Korean households between the years of 2010 and 2012. The structure of the diaries allows the author to construct individual-specific panel data regarding the daily consumption of various media. The panel nature of the data allows the author to employ panel econometric techniques that allow individual time-invariant characteristics to be controlled for. The ability to control for these individual characteristics may be quite important in answering the author’s primary research question. For example, does subscribing to a print newspaper and reading news online imply that both are complements? Perhaps but it may also be the case that both actions correspond to someone that is a “news junkie.” Panel econometric techniques allow the author to control for such factors in a way that cross-sectional data would not allow. The author finds strong substitutability among print, television, and computer news consumption. On the other hand, telephone and computer consumption tends to be more complementary. The degree of substitutability or complementarity grows when the author controls for factors such as ownership of various devices or subscriptions. The third article is “Does Media Coverage of a Celebrity Suicide Trigger Copycat Suicides?: Evidence from Korean Cases,” by Yun Jeong Choi and Hyungna Oh. In this policy-relevant article, the authors attempt to discern whether greater media coverage of celebrity suicides leads to increases in national suicide rates. The authors merge reported national suicide data for Korea from 1997 to JOURNAL OF MEDIA ECONOMICS 2016, VOL. 29, NO. 2, 49–50 http://dx.doi.org/10.1080/08997764.2016.1188637

Effects From Privatizing A Television Market, the Influence of Mobile Advertising on Movie Box Office, and Causal Relationships Between Word of Mouth and Movie Ticket Sales

The first article in this issue finds privatization of the Croatian television market led to decreasing concentration with a foreign-owned channel replacing government television as the dominant broadcaster in the market. The second article uses data on mobile Location-Based Advertising in China to show these ads can substantially increase movie ticket sales for up to nine days after a consumer receives the ad. The third article uses causal analysis of the relationship between Word of Mouth and movie box office in Taiwan, with findings that show when marketers should encourage positive online comments and discourage negative online comments. The first article is “Media Control: A Case for Privatization in Transitional Economies” by Fran Galetić, Marina Dabić and Timothy Kiessling. This study examines what happened when the government controlled television market in Croatia was liberalized to allow privately owned broadcasting. The market in Croatia is similar to markets in other recent members of the European Union, therefore this study offers insights about privatization for similar EU countries and candidates to join the EU. Concentrated media ownership can threaten diversity of expression and create autocratic control of mass communication. Television strongly influences audiences, so it’s important that television programs reflect diverse opinions and ideas. Therefore, liberalization of government controlled television markets “is a very important step in each country that is moving to a democratically controlled government” (p. 113). The Croatian market was monopolized by three government controlled television channels until 2000. Privatization began in 2000, resulting in 11 national channels, both public and private, by 2014. Concentration in the Croatian television market was measured as the share of all viewers that each national channel had, with the total for all channels equaling 100 percent. This method did not include viewers watching local or specialized channels. New channels entered the market throughout the study. The Herfindahl-Hirschman index in the Croatian television market diminished throughout the study, indicating decreases in concentration. By 2014, the HHI was below 1800, meaning the market was moderately concentrated. The study also used regression to conduct a trend analysis that predicted the market share for each national television channel for three years after the data ended. The regressions tested four different functional forms for each television channel, and used the models with the highest R-squared. The projections found that the television channel with the largest market share is expected to enjoy continued growth at the expense of its three closest rivals. As a result, the HHI is also expected to stop decreasing and begin increasing instead. “Generally speaking, Croatian public TV channels will continue losing their audience, while the majority of other private TV channels will gain new audience” (p. 119). The authors conclude the Croatian television market has transitioned from monopoly to oligopoly because market concentration remains high even though the number of channels is not small. However, government-controlled channels are expected to continue losing market share as private channels gain larger audiences. Some channels, including the leading channel, are now owed by foreign interests. The authors argue that foreign “firms offer a global perspective and are not influenced by the government and offer programming that will deliver an eclectic view” (p. 122). JOURNAL OF MEDIA ECONOMICS 2016, VOL. 29, NO. 3, 108–110 http://dx.doi.org/10.1080/08997764.2016.1216217

Scandal Reporting and Business Outcomes, Welfare Effects from Internet Access, and Welfare Effects from Public Broadcasting

The first article in this issue finds no support for the widespread belief that sensational news coverage can increase a news organization’s profits. The second article estimates the average user in five European countries receives consumer surplus from free access to internet leisure activities of 525 to 785 Euros per year. The third article estimates the annual welfare from public service broadcasting programs in the Netherlands to be at least 131 million Euros more than the annual subsidy. Each study has implications that cross international boundaries. “The Economics of Sensationalism: The Lack of Effect of Scandal-Reporting on Business Outcomes,” by Brinja Meiseberg, Jochen Lengers, and Thomas Ehrmann, re-examines assumptions that sensational news stories increase circulation and advertising sales, thereby increasing newspaper profits. Journalists may instead produce sensational stories for ideological reasons or because sensational stories can boost their professional image and career. Newspaper advertising rates are usually fixed in the short-run, so advertisers might receive more benefits from circulation increases than newspapers do. The study examines these possibilities by researching effects from reporting by the German tabloid BILD on a scandal that forced the German federal president to resign. BILD’s reporting was criticized as sensational. First, do publishers profit from sensational news stories? The researchers use an event-study to determine if the scandal coverage resulted in abnormal returns to the stock price of BILD’s owner, the Axel Springer Corp.. This method is also used to look for abnormal increases in circulation at BILD, and abnormal increases in BILD’s online audience. Results “do not find support for any linkages”(p. 9) between coverage of the scandal and abnormal returns to Axel Springer’s stock price. There were “no effects on sales of single editions or in the aggregate” circulation figures (p. 9). Results were mixed for online audiences. However, the initial scandal reporting appeared to increase online audiences at BILD’s upscale competitors, perhaps because competing news outlets had “more brand name capital in regard to public affairs and issues having an impact on society-at-large” (p. 12). Second, do journalists benefit from producing sensational news? The study did not have adequate quantitative data to determine how the scandal affected the employment and earnings of journalists who covered the stories. However, some journalists did receive a prestigious prize for investigative reporting. Journalists also wrote a book and sold film rights to a German production company. The researchers conclude sensational stories can enhance a journalist’s career prospects. Media outlets “may be able to hire investigative journalists at lower wages in exchange for a certain degree of freedom of choice concerning which stories they want to cover” (p. 12). Third, do advertisers benefit from sensational coverage because they reach audiences that are larger than the audience they paid to reach. Advertisers did not receive any benefits because circulation was not increased by coverage of the scandal. The researchers conclude the conventional belief that sensational news coverage can increase audiences and profits was not supported. The scandal coverage may have instead been driven by “journalists’ private motivations” (p. 13) because journalists hoped to profit from the sale of books or film rights and to boost their professional reputations. “The Value of the Internet as Entertainment in Five European Countries” by Smaranda Pantea and Bertin Martens estimates how much value European consumers receive from the internet. The European Union promotes universal broadband coverage to stimulate economic growth, to reduce prices, and to provide internet access to isolated individuals and groups. However, broadband policy

Vertical Integration and Concentration in Cable Television Markets, the Accuracy and Entertainment in Local Newspapers, and Effects of Movie Stars on the Volatility of Box Office Revenue

This issue of Journal of Media Economics has studies on three important media industries: cable television, newspapers, and motion pictures. The first study presents evidence that vertically integrated cable providers may increase the carriage of their own channels at the cost of reducing carriage of rival networks. The second study looks at the endogenous decision of local newspapers regarding the accuracy (or “quality”) of their newspaper and how the incentives to invest in reporting accuracy depend on the reading habits of consumers. The final study shows that while movie stars may not guarantee profits for the studio, their presence may lower the volatility of revenue. This is an important consideration for movie studios given the risk and uncertainty associated with expensive movie productions. The first study, “Vertical Integration, Regional Concentration, and Availability in Cable Programming Networks,” is by Sung Wook Ji. This study examines the impact of two trends that have been observed over the past two decades in cable provision. The first trend is the increased vertical integration between content providers (cable television networks) and content distributors (cable systems). An example of this trend is Comcast’s merger with NBC Universal, the owner of cable channels such as the USA Network and MSNBC. Such vertical integration aligns the ownership of the television channel with the cable provider distributing the channel. The second trend is the regional clustering of cable providers that has occurred, creating large geographically contiguous cable systems. Both trends potentially change the dynamics of competition in the cable industry. Given the focus on vertically integrated and regionally-concentrated cable operators, the author chooses to examine the 122 metropolitan areas (DMAs) in which either Comcast or Time Warner, the two largest traditional (i.e. non-satellite) cable providers in the United States, have a presence. The author uses Warren Publishing’s 2009 Television & Cable Factbook to compile information on the carriage of certain cable networks and the various tiers of programming offered by each cable provider.

Movie Performance and Recent Trends in Music and Video File-Sharing

This issue of JME has two articles on issues related to movie performance and an article on recent trends in legal and illegal music and video file-sharing. All three papers have important implications for media firms—from record labels to movie production studios to movie theaters. All three articles are empirical in nature. They use a variety of different data sources and each article uses a different econometric strategy. The first article is “Elvis Is Returning to the Building: Understanding a Decline in Unauthorized File Sharing,” by Joost Poort and Jarst Weda. This study looks at illegal file-sharing in the Netherlands. The article relies on the self-reported downloading behavior of over 1,500 Dutch consumers, obtained via online surveys conducted in 2008 and 2012. The survey covers the consumption of legal and illegal digital media. The four-year delay between surveys allows the authors to track changes in consumer behavior over time. The data shows that illegal file-sharing of music decreased from 35% to 22% over the 4-year period. This is in contrast to a 7 percentage point increase (11% to 18%) in file-sharing of video media. What could explain this seemingly contradictory finding? The authors argue that this is due to the availability of legal digital media downloading options. In contrast to digital music—which is available from a wide variety of legal sources such as iTunes or Spotify— there were relatively few satisfactory legal sources of digital video during the sample period, according to the survey respondents. These findings are potentially important to media companies worried about the adverse effects of illegal file-sharing services, such as Pirate Bay. The results indicate that increasing the availability of legal downloading services may help diminish consumer incentives to engage in illegal file-sharing. The second article is “Superstars as Emotion-Eliciting Objects. An Examination of the Effect of the Emotion Mix of Movie Stars,” by Ana Suárez-Vázquez. This study examines the impact that superstars have on consumer decisions by focusing on the way in which a superstar can affect consumer emotions. Although many movie studies use standard box office revenue data, this study relies on a novel survey of college-aged young adults. The 320 survey respondents were asked to rate 17 movie stars based on the extent to which the stars caused students to experience the eight basic emotions of the hierarchy of consumer

Drivers of Media Bias, Welfare Effects of Multi-Mode Television Service, and Effects of Television Service Agreements on Local News Coverage

This issue of JME has three studies that are relevant for media policies or media effects. The first study shows how newspaper coverage of unemployment is influenced by the paper’s ideology and by competition in the paper’s market. The second study estimates the welfare effects from adding new digital channels to broadcast television stations in Korea. The third study finds a relationship between service agreements that allow U.S. television stations to cooperate and the stations’ coverage of local news. Each study adds to our understanding of how and why the output from media firms influences their audiences’ knowledge and welfare. The first study, “What Drives Media Bias? New Evidence from Recent Newspaper Closures,” is by Cagdas Agirdas. This study examines how newspaper news coverage changed after rival newspapers closed. Coverage will change after a rival’s closure if a newspaper’s biases are “demand-driven, [because] then a surviving newspaper could expand its reader base by moderating its bias to reach out to former readers of the closed rival newspaper in the same market” (p. 123). The study examines changes in the amount of unemployment news reported before and after rival newspapers closed. The author argues that newspapers that support a Democratic or Republican president will report less unemployment news when a favored incumbent holds office compared with more unemployment news when a disfavored incumbent holds office. However, this bias will be reduced after a rival closes if the surviving newspapers want to attract new readers. The study measures unemployment news because changes in the unemployment rate predict political success for an incumbent president’s party. A previous study also found that unemployment news was correlated with politically partisan newspaper endorsements. The author analyzes panel data for 99 newspapers from 1990 to 2009. The data set includes 24 markets where newspapers closed. Unemployment news stories were identified using keyword searches of online newspaper archives.

Spanish TV Regulations and Audiences for Soccer Matches, Factors Influencing Utility from Watching TV, and How Media Coverage Influences Financial Returns for Australian Companies

This issue has two articles with significant contributions to our understanding of television viewing, and a third article with a new perspective on how media coverage affects corporate reputations. The first article is an empirical examination of Spanish television regulations requiring free broadcasts of sports events that are of general interest to the country’s population. The study uses panel data analysis of television ratings from free broadcasts of soccer matches to test the effects of the policy. The second article develops a Bayesian model of utility from television viewing that includes social externalities and whether viewers watched previous episodes of a TV program. This study develops a simulation from the model that results in recommended strategies for television programmers. The third article examines the effects of media coverage on the corporate reputations of publicly traded Australian firms. The study uses the tone of media coverage to group companies by reputation, and then examines each group’s risk adjusted returns before, during, and after the global financial crisis of 2007. The first article is “Are Broadcast Sporting Events of ‘General Interest’? A Regional Panel Data Analysis of TV Ratings for Spain’s La Liga,” by Levi Pérez, Víctor Puente, and Plácido Rodríguez. This study examines a Spanish policy that regulates the broadcast of sporting events on free and paid television channels. Spanish regulations require that sporting events of “general interest” appear on free television. Spanish regulations also give the free channel priority over paid channels when selecting which matches will be broadcast free. This has spurred a debate about how to find the best balance between the intellectual property rights owned by pay television channels and serving the information needs of Spanish audiences. There are no surveys that identify soccer matches of “general interest,” defined as matches that appeal to audiences across 10 different regions of Spain. The authors therefore used panel data analysis of 4 years of ratings to identify matches of general interest. The dependent variable was the number of viewers watching weekly free soccer matches in all 10 Spanish

Journal of Media EconomicsAward of Honor 2012

Prof. Alfonso Sánchez-Tabernero of the Universidad de Navarra has been recognized with the Journal of Media Economics Award of Honor for his scholarly contributions to the field of media economics. Prof. Sánchez-Tabernero’s research is mainly focused on strategies of growth and diversification of media companies, and on the concept of media quality. His work has resulted in more than 50 journal articles about media management and economics. He is author and co-author of five books on subjects that include media concentration and the public interest, media content and quality, and innovation in the media. Prof. Sánchez-Tabernero’s research has been funded by the European Parliament and by agencies of several different European governments. He is currently the president of the Universidad de Navarra. The biennial award recognizes contributions to media economics scholarship and the development of the discipline. The award was presented to Prof. Sánchez-Tabernero at the 12 World Media Economics & Management Conference in New York in May 2016. The award is usually presented at this conference. The award was determined by an informal committee of the two current editors and the founding editor of the Journal of Media Economics: Profs Robert Picard, Hugh J. Martin, and Adam D. Rennhoff. Previous recipients of the award include: Prof. Alan Albarran, USA Prof. Benjamin M. Compaine, USA Prof. Karl Erik Gustafsson, Sweden Prof. Barry Litman, USA Prof. Stuart M. McFadyen, Canada Prof. Alfonso Nieto, Spain Prof. Sylvia Chan-Olmsted, USA Prof. Bruce M. Owen, USA Prof. Robert G. Picard, USA Prof. Nadine Toussaint-Desmoulins, France Prof. David Waterman, USA Prof. Steven Wildman, USA