Recap: Three strategies to deal with culture
Universalization (e.g., Doraemon) Localization Transculturation
5. Economics of Print Media
5.1 Economics of the daily newspaper 5.2 Economics of books and magazines
5.1 Economics of the Daily Newspaper
Newspaper markets Financial performance Government policies Globalization
The Newspaper Market
One of the most profitable of all media industries even though the circulation is in decline A means of reaching mass audiences, rather than segmented audiences, in the eye of advertisers
The Newspaper Market
Primarily a monopoly (96%) in the U.S. Where there is competition, differentiated newspapers exist (e.g., broadsheet vs. tabloid) Barriers to entry are high, because of
Costs Advertiser preferences
The HK Newspaper Market
Facts Monopolistic competition
Financial Performance
Dual product market Circulation spiral: circulation advertising Increased prices as a result of inelastic demand for newspapers; i.e., no close substitutes are available for consumers to choose other products at a lower price
Daily vs. weekly papers TV, cable, and radio
Advertising
Newspapers get 5 times more advertising revenue today than they did at the end of WWII 3 major categories:
National advertising Retail advertising (from local businesses) Classified advertising
More substitutability is evident in the advertising than in the information product market
Operating Budgets
Revenues
Expenses
Advertising
65-80%
Local/retail 55-60% Classified 20-35% National 10-15%
Circulation
20-35%
Editorial 7-10% Advertising 5-6% Circulation 9-10% Promotion 1-2% Mechanical 13-15% Newsprint 15-30% Administration 8-12% Building and land 1-3%
Cost Structure
High first-copy costs Relatively low reproduction costs because of economies of scale
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Government Policies
No comprehensive economic policy toward the newspaper industry has ever been established in the U.S. Tax exemptions and incentives Anti-trust laws
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Globalization
The newspaper industry is less affected by globalization and remains primarily a domestic industry Agree? Disagree? Newspapers vs. magazines vs. books Overseas Chinese newspapers
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5.2 Economics of Books and Magazines
Market structure Financial performance Government policies Globalization
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The Book/Magazine Market
Americans are spending less time and money on consumer books and magazines Books
Intense competition Minimal barriers to entry Mergers and acquisitions since the 1960s
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The Book/Magazine Market
Magazines
Monopolistic competition Total number of magazines purchased: 1.3 copies/adult Average cost for a single copy at newsstands: US$2.13 Growing consolidation
AOL Time Warner was the largest owners of magazines in the U.S.
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Financial Performance
Books
Most books are discounted by publishers to bookstores, distributors, etc. Profit and loss (P&L) analysis
Revenue streams
Magazines
Paid circulation Newsstand circulation Ads
Business model
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The Prospects of E-books?
Low consumer acceptance
Too expensive
Inconvenient and unappealing
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Web-based Magazines
E-magazines can break new stories, update existing articles, and provide useful links Allow advertisers to buy both print and electronic ads simultaneously Convergence is the key Prospects?
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Globalization
The major export destination of U.S. books
Canada UK Australia Hong Kong Mexico The Netherlands Taiwan The Philippines
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