Benjamin Compaine

Standards, Technology Adoption, and Ownership—But Not All in One Place

In this issue of the Journal of Media Economics we have three very different articles. One revisits the frequent issue of technology standards, a second explores diffusion of innovation, and a third examines regulatory and technology consequences. To a great extent, they each expand our understanding and appreciation of frequently raised issues in the field of media structure, regulation, and performance.

Scholars Help Answer John Wanamaker's Query: Which Half of My Advertising Is Wasted?

This issue’s research touches on one of the most important issues that matters to the media industry: audience size. This was not part of a plan or issue theme. It just happened that the three articles and book review that were next in the queue for publication happened to share this common thread. By most other criteria, they are quite different from one another. Of course, audience size is a critical factor for all manner of media. In the canonical profit maximization problem, a firm’s decisions are driven by marginal cost. In media, whether a theatrical film, a television show, or a publication—even an online publication—the overwhelming bulk of the costs are fixed and tied up in creating the content. The marginal costs associated with additional users or viewers ranges from low (for a print publication) to almost not measurable (for a broadcaster or Web site). From a cost perspective, there is little reason not to pursue larger audiences. Two additional considerations drive media firms to increase their audience size. If advertising is a source of revenue, the content can attract greater revenue for more viewers, listeners, or readers. Direct consumer revenue (admission, subscription, and per copy) is proportional to content sales. Therefore, media enterprises are always looking for help in increasing the size of their audiences. John Wanamaker, the 19th merchant who founded department stores under his name in Philadelphia and New York, has been famously credited with holding that, “Half my advertising is wasted. I just don’t know which half.” The Internet has provided that information for online advertisers, as they can now track ad exposure; attention; and, in many cases, sales. However, this process is imperfect for advertisers in older formats, who still wrestle with Wanamaker’s quandary.

Nonprofit Models, Media Ownership and Diversity, and Advertising Prices

There are three excellent articles in this issue of the Journal of Media Economics. The most unusual of the three is Miles Maguire’s (2009) article, “The Nonprofit Business Model: Empirical Evidence from the Magazine Industry.” It is different for two reasons. One is that we see relatively little research these days drawn from the magazine business. But, most atypical is that the research happens to coincide with a current curiosity about the viability of a nonprofit business model for the legacy media business. Rarely does academic research coincide with concurrent surfacing of a new issue in the popular media. Maguire’s (2009) piece arrived 2 months before an op-ed article in The New York Times (Swensen & Schmidt, 2009) started the buzz about the attraction of a nonprofit model (see also http://www.nytimes.com/2009/01/28/opinion/28swensen.html). The authors of the Times piece, both from the world of finance, proposed an endowment might be established for a media company, in their case, newspapers. As nonprofits, they “would benefit from Section 501(c)(3) of the I.R.S. code” (p. A31). This status would

Three Industries, Three Issues, But a Common Thread of Solid Analytics

This issue of the Journal of Media Economics offers up three very disparate research threads, covering three different industry segments and as many unconnected issues. What they have in common are solid analytics that contribute yet fresh pieces to its unique jigsaw puzzle. In “Consequences of Vertical Separation and Monopoly: Evidence From the Telecom Privatizations,” Bruno E. Viani is concerned with how regulations effect recently privatized telecoms carriers around the world. Guan Ru Chen helps marketers with an understanding of the relation among advertising, pricing, and profit in “The Threshold Effect of Advertising on the Intensity of Price Promotions: Using a Rational Expectations Model”; and Xiaofei Wang and David Waterman add insight into a long-standing policy issue in the United States by delving into “Market Size, Preference Externalities, and the Availability of Foreign Language Radio Programming in the United States.”

Editors' Preface: Think Global. Drink Local. National Studies with Transnational Appeal

This issue of the Journal of Media Economics features four articles from authors based in four countries in Asia, Europe, and North America. We make note of this to highlight the truly global nature of the field of media economics. One explanation for this phenomenon might be that there was a time, not so long ago, when electronic media in most of the world outside North America were government owned or controlled. Thus, much of the research was more about the public service aspect of those providers. With not only privatization, but the explosion of other conduits for electronic content—cable; satellite; and, most recently, the Internet—the landscape for many researchers has broadened beyond the traditional print media. Although most of the research that comes our way tends to be rooted in the media of a particular society—in this issue, we have Japan, Korea, the Netherlands, and the United States— as editors, we look for research where the relations, the trends, the findings, the methodologies, and the implications transcend the particular uniqueness of any one nation’s laws, policies, or structures. The four articles in this issue are perfect examples.

Editors' Preface: A Fresh Application of Network Analysis on Audience Behavior and a Double Helping of Media Integration Implications

Over the past 3 years, we have remarked in this space from time to time about what we seek in the research that we send to reviewers. Although the final decision will always have an element of subjectivity, two qualities in the best articles are (a) a real contribution to theory or evidence regarding media economics and (b) immediate and practical policy relevance. Few articles offer both, but they should have one of these qualities. The three articles in this issue of the Journal of Media Economics certainly do. Thomas B. Ksiazek’s article, “A Network Analytic Approach to Understanding Cross-Platform Audience Behavior,” in fact, has a strong element of both advancing methodology and policy. If the application of network analysis he applies to media content finds broader adoption, it might help address many speculative questions that have been bandied about on the implications of both the Internet and the larger number of news and entertainment sources we have today. The issues raised by Ahreum Hong, Daeho Lee, and Junseok Hwang; and Claudio A. Agostini and Eduardo H. Saavedra in their respective articles are more narrowly focused, but nonetheless have practical policy implications. Both are looking at the outcome of the constant mergers and acquisitions in media industries (and, inversely, divestitures). These often result in real or potential lessening of competition through horizontal or vertical integration within a media segment. Although both find that there are economic consequences in the cable and theatrical film distribution areas, respectively, they stop short of what they mean for corporate strategy or public policymakers. Indeed, it would be up to such actors to use the authors’ findings to address questions before them.

Bundling, Books, and Trust

Media economics may sound like a very specific sub-discipline, but in fact it is a simple label for an almost unwieldy range of subjects and methodologies. It encompasses economic theories with some related industry as an example; or, it can start with a media issue that is best addressed through an approach from the world of economists. Research that comes to the Journal of Media Economics (JME) is sometimes sent to us by trained economists who take an interest in a media issue and, other times, from mass communications specialists addressing issues using the tools from the economists’ tool bag. This observation surfaced in light of the three articles selected for this issue of JME. In “Bundling Information Goods Under Endogenous Quality Choice,” Nodir Adilov is clearly taking the economists’ approach. The issue of bundling of goods or services is a generic one, but Adilov adopts the cable industry as an illustrative case for investigating the implications of endogenous quality choice when information goods are bundled and analyzes the welfare effects of regulation that forces firms to unbundle products in an a la carte fashion. In their article, “Success Drivers of Fiction Books: An Empirical Analysis of Hardcover and Paperback Editions in Germany,” Christina Schmidt-Stölting, Eva Blömeke, and Michel Clement start from a mass media problem: What determines the financial success of published books, particularly fiction? To derive some insights from their dataset, the authors reach into the econometrics tool kit and find that a seemingly unrelated regression (SUR) model would be appropriate. Then, just when we think we have a handle on the types of contributors to our literature, we find a submission like Füllbrunn, Richwien, and Sadrieh’s “Trust and Trustworthiness in Anonymous Virtual Worlds.” This is neither fish nor fowl, neither the world of economists as we expect it, nor the traditional media as we have known it. The experimental methodology here comes out of the social sciences, augmented by some innovative touches needed for exploring such uncharted territory.

Addressing Real Issues for the Uncertain and Challenging Environment of the Media Industry

We suppose that one of the attractions of tilling in the field of media economics as opposed to other academic disciplines is that much of what we do has pragmatic implications. We are not doing research for the intrinsic enjoyment of research. For most of us, we feel that in addressing a problem here or an issue there, we add bits to the knowledge that helps managers and policymakers come to better outcomes. Decisions must often be made under conditions of uncertainty. But the fewer unknowns—and unknown unknowns—the greater the probability of success, whether measured by profit or an intended social or political outcome. It is with this in mind that we publish three studies in this issue of the Journal of Media Economics (JME) that we feel make an immediate contribution to real-world needs of media industry players. None are an endpoint, as they all suggest the need for further investigation that seems to be an endless stream in academic research. But all advance the markers down the field a bit.

Exceptional Research or Why Harry Truman Sought a One-Handed Economist

First, consider the two media structure articles. In “Does Ownership Matter? Localism, Content, and the Federal Communications Commission,” Danilo Yanich employs content analysis of local television newscasts in 17 designated market areas (DMAs) to probe the “extent of local content on locally produced newscasts and to examine what effect, if any, media ownership had on that local content.” The relevance of the study, explains Yanich, goes to the policies of the United States’ primary broadcast regulator, the Federal Communications Commission (FCC), in promoting localism in its overarching regulatory objectives. Those who closely follow FCC rule-making may recall that in June 2003, it relaxed many of the restrictions on media ownership, in part because it felt that such changes would either promote localism or not harm it. The specifics included changes in newspaper-broadcast local cross-ownership rules, as well as the limits on the number of stations that a single owner could control in a market. When the federal courts halted implementation of the rules due to questions on the evidence that the FCC had provided to support its new rules, the FCC—and others who were opposed to the FCC’s proposed rules—set about commissioning research to better understand the effects the rules might have. Yanich’s article is significant for two reasons. On the one hand, there are the findings that the form of ownership does indeed matter in the production of total news and local news on local television newscasts themselves. But, it also highlighted how the level of aggregation and the types of variables included substantially affects the direction of the effects. First, he found that regressions with station-level factors only lead to the conclusion that “consolidated” stations produce less local content than those that are “independent.” But, when he incorporated

Modeling Media Outcomes: Theories Behind the Curtain*

This issue has three very different pieces of research. The common thread running through these three articles is a theoretical analysis of media markets. As such, they also advance our understanding of some important issues facing consumers of the media—society—as well as implications for those who manage media enterprises. Although both of the editors of this journal have been part of the peer review process as authors of articles and have served as reviewers for many articles submitted to this and other journals, neither of us had edited a peer review journal prior to the Journal of Media Economics (JME). Having served in this capacity for 1 year now, we have touched yet another component of the academic research process. Wearing this new hat, we have come to appreciate how insightful and cogent many reviews are. In our role as editors, we see how important good reviews are to the ongoing quality of the journal and how important comprehensive reviews are to facilitating our task of quality assurance. At the end of this issue, we gratefully acknowledge the individuals who have answered our request to review one or more articles for Volume 22 of JME. We also thought that this would be an especially appropriate juncture to draw from the referee report of the articles in this issue as part of our preface. We cannot specifically identify the writers of each, but their names are in the listing. In each case, our reviewers offered very valuable suggestions for revisions. In each case, the basic premise and methodology was considered sound, and the findings are a significant contribution to our literature.