sutton049

Comcast and Time Warner are awaiting regulatory responses to their application to merge and become the dominant player in cable television provision in the U.S. If permitted, the combined firm will control about 2/3rd of the broadband cable market and about 40% of the entire broadband market in the U.S. (which is used for both cable and the Internet). Independently, the two firms both have reputations for poor installation and repair services, poor billing and collection practices, high prices, and price increases above inflation levels. No one seriously believes their claims that the merger will be pro competitive, lead to more consumer choice, better service and lower prices. The companies have not been helping their case by appearing to be operations out of control when it comes to their customers.   In recent months customers seeking services have been kept on the phone for hours and forced to undergo forms of psychological abuse while they tried to get the changes they wished....

The explosive growth of digital news and information providers is forcing news organizations to recognize their diminishing significance to users of digital devices, but many remain bewildered about how to respond. This challenge is difficult because many news personnel do not make distinctions among news provision, information provision, and journalism. Consequently, the strategies of many news organizations approach each as equally valuable. They are not. News provision involves providing reports about contemporary events and developments locally, nationally, and globally. Information provision involves providing non-news content that meets audience interests and needs. Journalism involves researching and producing news, features, and analytical stories based on professional practices and norms. In the past, news organizations tended to have strong control over journalism, news provision, and information provision in their markets. However, they began losing that control wit...

Media ownership transparency has become a goal of media reform advocates on both sides of the Atlantic, but is often simplistically presented as a solution to problems in media performance. As I have shown in my research over time, it is not the form of ownership that matters, but the owners themselves. There are good and bad corporate owners, good and bad private owners, good and bad family owners, and good and bad foundation owners. And many owners whose media perform badly on issues of social service and public interest don’t care if the public knows who they are. This is not to oppose making it easier for the public to know who the owners are—in some cases (especially in southeast Europe) owners sometimes hide behind shell companies, investment firms holding their shares, and even individuals fronting for them. Gaining transparency may help identify consolidation and concentration for antitrust and pluralism analyses, but lifting those veils alone is not going to solve the...

Single-copy magazine distribution is undergoing a remarkably unheralded transformation and it has enormous implications for both publishers and consumers.   Each year about 3 billion copies of magazines are distributed to 150,000 retail outlets within a large and complex distribution channel. This is extremely important to publishers because it produces about one quarter of circulation revenue and is used to promote subscription and introduce new titles.   In simple terms, the system operates by publishers selling copies to wholesalers and wholesalers reselling the copies to retailers. However, retailers return unsold copies to wholesalers for a full refund and wholesalers return them to publishers for a similar refund.   Because of the large number of titles, copies, and retailers involved, and the geographic scale of the country, publishers and retailers have sought to minimize their effort, create economies of scale, and reduce transaction costs.   Publishers cont...

There has now been enough experience and research to draw conclusions about how news is transitioning to the digital world and what it means for news companies. If one objectively views the developments, one sees that the current developments are is neither as bleak as some journalists portray them nor as rosy as some digerati frame them. Instead, we have reached a point where digital news is becoming workable in commercial terms, but is not yet mature enough to erase the industry's business challenges. News consumption in the digital environment is significant and audience reach is now 5 to 10 times larger across digital platforms than for print editions of most newspapers.   Many large news organizations are now generating 15-25 percent of their revenue from online, tablet, and smartphone platforms and benefits are starting to appear for some mid-sized players as well. If we look at what has occurred in the past decade, there are some important lessons to embrace about news ...

The proposed merger between Bell Canada Enterprises and Astral Media will shortly be considered by the Canadian Radio and Television Council (CTRC). The merged company will own 70 television and cable channels, more than 100 radio stations, and some of the country’s most popular websites. The combined company will serve nearly one-third of the national TV audience, more than 40 percent of the national cable TV audience, and about 30 percent of the nationwide radio audience. In addition the merger will increase Bell’s vertical integration and its power over distribution systems used by competitors. This later factor is particularly important because Canada lacks much of the regulatory control seen in Europe and the US over business practices of distribution systems that are also used by competing firms. The merger will benefit the two companies by giving them more market power and permitting efficiencies at the corporate and divisional levels. It is also likely to produce efficienc...

The markets of magazine and newspaper printing firms are undergoing significant changes, reflecting on-going transformations in the customers they serve. Some of the changes have been under way for 2 decades with traditional printing companies morphing into printing service companies offering more profitable value-added services and products.   These included high-end specialized printing capabilities and services, database printing, and wide-ranging distribution services. At the same time, the increasing number of magazine titles, accompanied by lower average press runs, pushed the companies toward higher efficiency and acquisition of presses and systems designed for lower press runs. In this environment, many printers could not effectively compete and consolidation began creating large regional players in the industry. Shorter-term trends have also played havoc with the printing industry by killing off some magazine and newspaper titles, lowering the average number of pages ...

The News Corp’s launch of the tablet newspaper The Daily in February 2011 was heralded as the future of news and revealing opportunities for major new entrants in the news market. After a year and a half of operation, the digital newspaper has lost more than $30 million, managed to gain only 100,000 subscribers—not a trivial amount but low for a global player, and has just announced that it is cutting 1/3 of its editorial staff and ending original production of sports news and commentary. Journalistically The Daily is not a bad news product and its app is facile and effective. So why hasn’t it been more successful? The fundamental problem is that the digital-only paper has been overshadowed by the success of legacy print newspaper brands in the market for digitally delivered news. The Daily has never been so brilliantly written and edited that it could gain the significant attention and acclaim needed to overcome the brand advantages of legacy news providers. Major newspaper—s...

U.S. newspapers are increasing their use of co-opetition practices, that is, cooperating with competitors to reduce costs, create synergies, or reduce risk in new markets. Such activities are permissible if they are not designed to create cartels or control prices for advertising or circulation. The latest example occurred this week when the Boston Herald announced an agreement with the Boston Globe for its competitor to print and deliver the Herald . The move creates cost savings for the Herald by allow it to cut printing, trucks, and delivery personnel, while simultaneously creating production and distribution economies and an additional revenue stream for the Globe --a win-win for both companies. Such service agreements do not violate antitrust laws because the papers remain independent, set their own prices, and create their own content. If papers were to engage in such actions they would have to apply for an antitrust exemption under the Newspaper Preservation Act (see John C...

I was recently reviewing the effectiveness of media ownership policies and regulations and was struck by the limited success they have achieved during the past 50 years in Western nations. There seem to be two central problems with ownership regulation efforts: ownership really is not the issue that we are trying to address through policy and we have convoluted views of ownership. Media ownership is not really what concerns us, but is a proxy of other concerns. What we are really worried about is interference with democratic processes, manipulation of the flow of news and information, powerful interests controlling public conversation, exclusion of voices from public debate, and the use of market power to mistreat consumers. It is thus the behavior of some of those who own media rather than the ownership form or extent of ownership that really concerns us. This is compounded because media practitioners, scholars, and social critics have highly convoluted views about ownershi...

The U.S. Federal Communications Commission has adopted rules designed to halt cable system operators from retaliating against independent channels when there are business disputes or discriminating against them in favor of ones in which they ownership stakes. The rules are intended to ensure that the monopoly power of cable operators is not used to deny viewer choice or harm competition channel providers. One rule is designed to prohibit systems from dropping channels when there are business disputes with systems that have been taken to the commission for resolution. Another rule is designed to create a more level playing field for independent channels by making it possible for them to reach more viewers. Comcast Corp., for example, has been accused in recent years of forcing competitors’ sports channels into premium packages that fewer viewers select. Given that price rises for cable services have far outstripped inflation rates in recent years, that service providers cr...

What do you do when your industry is changing? What do you do when your innovations are fueling the changes? Those problems have plagued Eastman Kodak Co. for three decades and the company’s experience provides some lessons for those running legacy media businesses. Eastman Kodak’s success began when it introduced the first effective camera for non-professionals in the late 19 th century and in continual improvements to cameras and black and white and color films throughout the twentieth century. Its products became iconic global brands. The company’s maintained its position through enviable research and development activities, which in 1975 created the first digital camera. Since that time it has amassed more than 1,100 patents involving electronic sensing, digital imaging, electronic photo processing, and digital printing. These developments, however, continually created innovations damaging to its core film-based business. Digital photography created a strategic dilemma for the com...

The Federal Communications Commission has moved to keep Internet service providers from limiting or unreasonably discriminating against content provided by competing services The regulations are designed to keep telephone and cable companies that provide phone services from using their Internet services to limit use of Skype and other online telephone services. It is also intended to halt them from making content provided by audio and video service providers they do not own less desirable by limiting downloads from firms such as Netflix or Hulu or providing faster service only for their own content. The rules are designed to maintain a level competitive position on the Internet and to restrict the abilities of companies that dominate access to the Internet from using oligopolistic control of the service points to harm content competitors. The regulations require that services allow their customers equal access to all online content and services, but allow the services some fle...

Since the emergence of cable and satellite television services there has been struggles among platforms to increase their attractiveness to audiences and to draw market share from terrestrial television in developed nations. These struggles have had affected content producers, broadcasters, platform operators and regulators attempting to fashion socially optimal broadcasting systems. In the first competitive struggles between terrestrial broadcasters and cable operators, broadcasters controlled the highest quality contemporary programming and cable operators primarily competed by offering a wider variety of channels and providing premium movie channels. In many locations broadcasters actively sought regulatory policies to keep their channels from appearing on cable in order to reduce its attractiveness as a competitor. As cable matured and satellite services emerged, the nature of the struggle shifted as greater subscription and advertising revenues allowed cable networks to o...

Following hearings on the state of newspapers this past year, the U.S. Federal Trade Commission staff has now prepared a discussion paper of potential policy recommendations to support the reinvention of journalism. It is a classic example of policy-making folly that starts from the premise that the government can solve any problem—even one created by consumer choices and an inefficient, poorly managed industry. Most of the proposals are based in the idea of using government mechanisms to protect newspapers against competitors and to create markets for newspapers offline and online. The FTC’s staff ignores the fact that most newspapers are profitable (the average operating profit in 2009 was 12%), but that their corporate parents are unprofitable because of high overhead costs and ill-advised debt loads taken on when advertising revenues were peaked at all time highs. It also fails to make adequate distinction between longer term trends affecting newspapers and the effects of the c...

I was sorting through some of my father’s belonging recently and came across the 1941 souvenir edition of the Honolulu Star-Bulletin (Jan 8, 1941), “The March of Hawaii.” Its lead story was the reorganization and strengthening of the Pacific Fleet and the appointment of Admiral H.E. Kimmel to head it. My father acquired the paper while stationed in Hawaii with the Army Air Corps. Eleven months later the U.S. was at war, with Kimmel taking heat for having the bulk of his capital ships anchored in Pearl Harbor during the Japanese attack. I was reminded of the find this week while reading the news that Gannett has agreed to sell the Honolulu Advertiser to the Star-Bulletin . The two have a 130-year history of competition, somewhat muffled until they escaped their relatively difficult marriage in a joint operating agreement between 1960s and the millennium. Now the smaller paper is buying the bigger paper, if it can comply with or skirt antitrust provisions. We are now in the last throes...

The struggle to control prices of digital content sold online continues, with producers and distributors battling over prices for downloads of books and music. In the latest skirmish, Amazon removed Macmillan books from its website after the company protested that online retail was using monopoly power to force publishers to accept prices no higher than $9.99. Macmillan and other publishers have now signed distribution deals with Apple that allows them to price downloads at $12.99 and $14.99. Producers, of course, want higher prices because they produce higher revenue and better profits. The struggle to control prices is not unique to the online environment. In the offline world, producers of books, magazines, CDs, and DVDs have long struggled to gain limited shelf space because there is a large oversupply of products and retailers’ have selection preferences for popular, rapidly selling products. Large national and retailers have also used their bargaining power to push wholesale and...

Many journalists pursuing new online initiatives are learning that good intentions are not enough for providing news. The latest group to do so is former Rocky Mountain News reporters who started rockymountainindependent.com this past summer using a membership payment and advertising model. The effort collapsed Oct. 4 with them telling readers, “We put everything into producing content and supporting our independent partners, but we can no longer afford to produce enough content to justify the membership.” There problem is hardly unique. The conundrum facing many journalists is whether to pursue the noble work of journalism as unpaid charitable work or to become engaged as journalistic entrepreneurs with a serious attitude toward its business issues—something many despised in their former employers. If journalists want pay for their work, if they want to provide for their families, and if they want to pay mortgages, they need to spend more time figuring out how to provide value that wi...

This is not trick question and it is being increasingly asked as public broadcasters grow larger, offer multiple channels, move into cross-media operations, and increasingly commercialize their operations. The Federal Communications Commission will have to consider that question shortly when it considers the effort of WGBH Education Foundation—operator of WGBH-TV, the highly successful Boston-based public service broadcaster—to purchase the commercial radio station WCRB-FM. WGBH is the top ranked member of the Public Broadcasting Service in the New England and produces about one third of PBS’ programming. It operates a second Boston television station, WGBX-TV, and WGBY in Springfield, Massachusetts. In addition it operates FM radio stations WGBH (Boston), WCAI (Woods Hole), WZAI (Brewster), and WNAN (Nantucket) and is a member of National Public Radio and Public Radio International. It operates two commercial subsidiaries involved in music rights and motion picture production. This mo...