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Comparative Aspects of Media Economics and
its Development in Europe and in the U.S. A.
Robert G. Picard
During the past three decades, I have often been asked to define the term “media
economics” and the parameters of the field of study. Although it is widely agreed that
the field involves economic theory to explain the workings of media industries and
firms, I believe it goes much further to investigate and explain how the economic,
financial and regulatory forces influence the operations of media markets and their
effects on society. The media economics field also involves inquiry that focuses on
how economic factors produce the kinds of media systems found in societies, deter-
mine the ways in which media operate, affect the choices of content, and reveal their
implication on culture, politics, and society. Those who embrace the field understand
that financial and economic concerns are central to understanding communications
systems and firms and in the formulation of public policies regarding communications
@icard, 2003: 301).
As an academic field, media economics has always been an orphan. Its theoretical
bases, general perspectives, and application have been influenced by the questions of
the day in the locations in which it developed, the disciplines from which it arose, and
by the academic departments in which it found a home. There is no widely agreed upon
place for research and education on media economics to be housed in a university. It
is found in journalism training, broadcasting institutes, media studies programs, eco-
nomics and political science departments, and social science and business schools.
The decision of its placements appears to be based more on where it first appeared
rather than sober deliberation. This is not a weakness, however, but reveals the
vibrancy and scope of the topic and the range of perspectives and methods involved
in its study.
Part of the difficulty in drawing parameters around the field of inquiry is that there
really is no such thing as media economics. Rather there is the application of economic
perspectives to 1) explaining media structures and economic forces on media and
how they are affected by the environment surrounding them and 2) employing that
Imowledge in attempts to achieve business and policy outcomes. By its very nature the
first activity requires studies of descriptive, empirical and theoretical bases. The second
requires a qualitative and normative approach that tends to be primarily descriptive
and grounded in normative theories. Neither approach is inherently superior to the
other but their results must be applied in different manners. Robert G. Picard
‘There are three dominant traditions observable in how media economics is studied
and employed: a theoretical tradition, an applied tradition, and a critical tradition.
The theoretical tradition is concerned with producer and consumer choices and other
economic factors affecting media. It tends to be based in classical and neo-classical
economics. The approach tends to be used to explain the underlying forces that affect
media firms and market activities and to theoretically establish optimal outcomes
involving regulatory and policy options. The applied tradition is concerned with
media market structures, trends and changes, as well as cost structures and revenue
in firms. This approach is used to help company decision-making and to provide
evidence for choices in policy bodies. The critical tradition is based on normative
outcome preferences and factors that inhibit or would promote those outcomes
(Picard, 2005).
‘The theoretical and applied traditions have used both microeconomic and macro-
economic approaches, whereas the critical tradition takes a broader view that consid-
ers the overall effects of the economic, political and social bases of the communications
systems and the constraints that are placed upon the systems. Each of the approaches
contributes evidence and explanation analyzing and understanding media and the
environment in which they operate.
1. The Atlantic Divide in the Development of the Field
‘Although scattered inquiry involving economic issues of media appeared on both
sides of the Adlantic earlier, consistent and specifically focused study did not appear
until the 1970s, Contacts between researchers on both sides were rapidly established
because the number of researchers in the field was initially small. From the beginning
of that interchange of ideas, differences in the approaches to media economics were
evident and were clearly influenced by the contexts in which the scholars carried out
their inquiry.
U.S. researchers came from a highly commercialized media environment in which
the state was not a participant, and in which economic and regulatory intervention was
more limited. Changes to media markets and their environments were well underway.
The stability that had previously been evident in media markets was eroding and a
decline was underway in the number of competing newspapers (all of which were
commercial, politically independent papers). Simultaneously, cable television that
offered more than redistributed overthe-air channels was developing and spreading
and changing competition in video markets.
European scholars as a whole worked within split media systems in which print
was commercial but broadcasting was primarily state-created and protected. Govern-
ment intervention in the economics of commercial industries overall was far more
significant in Europe than across the Atlantic and support for those policies created
opportunities to use the state mechanism to deal with media matters. At the time, eco-
nomic difficulties were altering the structure of the European newspaper industry,
particularly newspapers owned by or linked to political parties in the multiparty
16 Comparative Aspects of Media Economics and its Development in Europe and in the U.S.A.
democracies. In a number of countries efforts were being made to liberalize broadcast
policy, primarily involving radio, to introduce commercial broadcasting.
The divide in contexts and existing media policy was of an oceanic scale and the
contextual differences led researchers to ask questions and frame initial research in
different ways as organized study of media economics began. U.S. scholars sought to
determine why competition could not be sustained in the commercial newspaper
industry and how and whether cable services could be economically viable as com-
mercial entities. Their European counterparts asked questions about how democracy
could function when political newspapers failed and whether social benefits would be
produced by expanding choice in radio and television and how such a change would
affect incumbent public service channels,
In the European context, the critical approach—routed in political economy, polit-
ical sociology, and cultural studies—played a stronger role in the development of the
media economics field, but the theoretical and applied approaches were also evident.
Conversely, the applied approach took the strongest position in U.S. media economics
studies, but the theoretical and critical approaches were also represented.
Although the contextual divide between the European and U.S. media environments
were wide in the 1970s, that divide is no longer on an oceanic scale. Nevertheless,
differences are still evident depending upon the countries, universities, and scholars
compared.
Today, newspapers and magazines on both sides of the Atlantic are primarily com-
mercial operations. Commercial broadcasting plays a significant role in both locations,
although public service broadcasting remains the dominant player in most European
nations. Cable and satellite services are equally available and highly commercialized.
Internet services are similar on both continents, but Internet services of public service
broadcasters have a stronger role in a number of European nations.
The economic forces faced by media on both sides of the Atlantic are similar today,
particularly the competitive effects of the dramatic rise of commercial entrants in
broadeasting/cable/satellite. Across different types of media we see fragmenting
audiences, increasing dependence on advertising and consumer payments, and the
development of media product portfolios designed to overcome declining returns per
individual unit of media, to spread costs, and to reduce risks.
Media on the European side of the Atlantic remain primarily domestic enterprises
and do not economically benefit from exports to the same degree as their American
counterparts. Although political rhetoric and policy continue to support the creation
of a common market for European media firms, that market has not developed sig-
nificantly because of impediments of language, domestic content demands, national
cultural policies, and domestic ownership preferences in broadcast licensing. Even in
print media, where the least state control is exercised, trade in print media is highly
limited. Research has shown that only about four percent of consumer magazine
circulation in the EU crosses a national border, trade in newspapers is even more
limited with less than one percent of circulation crossing a border.
17 Robert G. Picard
2. Intellectual Origins and Loci of Studies
Although it is tempting to assert wide differences between media economics study in
the U.S. and Europe, the distinctions are not as strong as some may believe. The
literature of media economics on both continents has been one of the most interna-
tionalized among academic disciplines from its inception, and the primary differences
result from the focus and emphasis given to various avenues of inquiry.
‘The theoretical tradition was primarily influenced by classical and neo-classical
scholars from both sides of the Atlantic who addressed issues of media. Notable con-
tributions were made by persons such as Ronald Coase, P.O Steiner, and George
Stigler.
The applied tradition was built upon the base of the theoretical tradition and pro-
duced a long stream of descriptive studies using industrial organization and institu-
tional theory on both sides of the Atlantic. Much of the U.S. work in the 1970s, for
example, was inspired by Nordic studies and studies commissioned by the Commission
of the European Communities on the growth and causes of newspaper mortality and
concentration, and a good deal of research was influenced at an early stage by Euro-
pean media scholars such as Nadine Toussaint Desmoulins, Karl Erik Gustafsson,
‘Alfonso Nieto, Anthony Smith, and Axel Zerdick. Economists and media scholars
such as Alan Albarran, Sylvia Chan-Olmsted, Benjamin Compaine, Douglas Gomery,
Stephen Lacy, Barry Litman, Lester Turow, David Waterman, and myself have conducted
a good deal of research from the applied perspective to explain developments in
media. Many of us, however, have then used that information in policy and regulatory
debates and proceedings because we see it as enlightening debates and choices rather
than as an end in itself.
Regulatory changes in the United States affecting broadcasting and television
induced many economic and policy researchers to focus on media economics. Their
approach differed from the normative approach of many European scholars because
regulatory processes in the U.S. specifically require the use of applied economic
analyses. This promoted studies by government, industry, and academic economists,
attracting attention of researchers such as Jack Beebe, Willard Manning, Eli Noam,
Bruce Owen, Kent Webb, and Steven Wildman.
‘The critical tradition was influenced by political economy and political sociology
concerns that linked economics to social and political outcomes from Marxist and
non-Marxist perspectives, sometimes producing strange bedfellows. The U.S. academic
environment has produced and supported a well-established and long-standing tradition
based on the critical tradition, with works by Robert Babe, Ben Baggikian, Vincent
Mosco, Janet Wasko, John McManus, Robert McChesney, Herbert Schiller, and Michael
Schudsen whose work using sociological, political economy and media studies per-
spectives on the influence of media economics is well-regarded globally. Their work
was not in isolation and heavily influenced by Europeans such as Gerd G. Kopper,
Nicholas Garnham, Peter Humphreys, Armand Mattelart, and Graham Murdock.
18 Comparative Aspects of Media Economics and its Development in Europe and in the U.S.A.
Iwould like to suggest that a good part of the perception of differences in European
and American scholarship seems to result from the academic homes of that research.
We need to recognize that there are long-standing differences in the traditional position
and roles of communication and media studies programs in Europe vis-a-vis those of
the journalism and mass communication programs in the United States. Although
journalism studies related to the content skills and operations of media have been in
place for nearly a century in U.S. universities, those activities were not integrated in
most European universities until the last quarter of the twentieth century.
‘The twentieth century tradition of practical education in U.S. universities encour-
aged the development of media management courses, particularly after the Second
World War. This training primarily concentrated on tactical issues of management
such as how to supervise employees in a newsroom, how to operate a radio station
advertising sales operation, and how to program television programs. That education
originally was not strongly grounded in management or economic theory, but it created
ascholarly context in which the subsequent development of media economics scholar-
ship emerged. Consequently, the context focused the attention of media economics
researchers on applying theory to solve specific company and industry issues.
During the same time frame, European education in media was guided by a less
industry-oriented and practical approach. It applied sociological, psychological,
political science, political economy, and cultural studies perspectives that created a
theoretically strong media studies perspective. Education generally emphasized ana-
lytical rather than practical skills and promoted deep investigation into the processes
of media and their effects on society. The approach was subsequently adopted in the
U.S. by a wide range of scholars and became the basis for non-industry oriented media
studies programs that were instituted in departments of sociology and communication
studies.
As media industries became more commercialized across the West, business schools
in both the U.S. and Europe began supporting research from the perspectives of busi-
ness economics to help provide managerial economics knowledge for media man-
agement training. Although those schools embraced the applied tradition, its practice
was much more theoretically based than the applied media economics research found
in journalism and mass communications programs.
‘Today, 1 do not believe that we can assert a simple European-American divide in
terms of the type of media economics scholarship. Both Europeans and Americans
undertake excellent scholarship from the theoretical, applied and critical perspective.
There are, however, differences in the scholarly cultures of universities and depart-
ments in various nations that support or value certain approaches and perspectives
over others. Clearly, however, the preponderance of the research in the U.S. is oriented
toward applied research, whereas critical approaches are more prevalent in many parts
of Europe although less so than in the past. This is partly due to increasing demands
by the European Commission and national regulatory bodies for empirical data and
research.
19 Robert G. Picard
In many German universities there remains a strong preference for media econom-
ics research using political economy and political sociological approaches. In other
German universities, however, more applied approaches are being used to support
programs in media management. In French universities, strong attachments to socio-
logical approaches remain but a good deal of research from scholars in economics
and business institutions is more akin to the applied tradition. The mentioned range of
approaches is also evident in U. K. universities where basic applied media economics
research exists alongside that influenced by political economy and cultural studies
perspectives.
Much of the change that I perceive in European institutions results from policies
that have upgraded polytechnics to universities and from the effects of the Bologna
process. Together, these are altering the structure of higher education to create a
tiered education system much more like that of the United States, in which lower
levels of education concentrate on preparing students for employment, but higher
levels of education concentrate on developing more analytical and critical abilities. It
is also creating different categories of universities in which the types of education
offered and research undertaken are valued differently.
Without going into a wholesale historical review of the political and economic
forces that brought European context closer to that of the Americans, I would like to
suggest that the traditional emphasis of European scholars in employing knowledge
to critically assess media economics and to promote policy outcomes different from
that in the U.S. has not been highly effective in the past two decades. The critical
approach seems to have done little more than create an intellectually compelling body
of criticism about media performance and what should or ought to be done. Outside
ofa few pyrthic victories, it seems to have had less of an impact on policy outeomes.
Although the Council of Europe and the European Parliament, and many national
parliaments often embrace the rhetoric of the critical tradition, the policies imple-
mented by the European Commission and national parliaments have primarily taken
on industrial policy preferences to promote the interests of media businesses, espe-
cially those of large European firms, and their approaches rely heavily upon the
market and economically based competition policy to form the primary basis for media
policy. With the exception of the critical rhetoric and the maintenance of stronger
public service broadcasting, the overall outcome in the media environment is not
considerably different in many European nations from that in the United States.
3. Textbooks and Courses in Media Economics
Ifone considers the textbooks and courses of study of media economics on both sides
of the Atlantic, differences in scholarship are not dramatically different once one dis-
counts material designed to domesticate them. The first textbook to specifically deal
with media economics appeared in France in 1978 and took an industrial economics
approach to analyzing the media industries and markets (Toussaint 1978) as did a
Spanish-language text in 1985 (Lopez 1985).
20 Comparative Aspects of Media Economics and its Development in Europe and in the U.S.A.
The first English language textbook applied basic economic principles to media
companies and markets and discussed the existing research on the topic (Picard
1989). Two more significant textbook contributions from the U.S. appeared in the
1990s and took a distinct industrial economics approach in analyzing media industries
separately (Alexander, Owers and Carveth 1993 and Albarran 1996). In 1993 a volume
specifically exploring economic forces and choices involved broadcast and other
video media (Owen and Wildman 1993) and was based on theoretical and applied
economics. The first British textbook on the subject appeared in 2002 and blended
both traditional economics and political economy perspectives (Doyle 2002).
The first German-language textbook appears to have been published in the early
1990s (Bruck 1993), exploring print media from the economic and political economy
standpoints; a later volume similarly focused on broadcast media (Beck 2002). In 1996,
an extensive contribution explored media economies from a variety of economic,
political and sociological perspectives (Heinrich 1994). A specific effort to develop
and view media economy as a media theory appeared just after the turn of the century
(Kiefer 2001).
The transformation of the former state and party media in central and eastern
European states brought significant interest on media economics and textbooks
emerged that explored the structure of the industries and their workings of media
markets in attempts to explain the challenges and developments that were appearing
(Kowalski; Galik 2001; Vartanova). A proliferation of textbooks in the 1990s and early
2000s expanded the text literature dramatically so that most major nations in North
America and Burope had domestic publications for use in coursework. For the most
part, these books provided content similar to that found in the French, German, and
American textbooks.
Viewed as a whole, textbooks are more remarkable for their similarities rather
than for their differences. They provide basic understanding of economic principles
relevant to media operations, they discuss and analyze industries through the per-
spectives of industrial and institutional economics, they explore the roles of audiences
and advertisers as consumers, and they deal with issues of competition and concen-
tration and of regulation and policy. Differences exist in emphases given to certain
topics, the illustrative examples introduced, and the implications raised, but general
approaches and overall content are relatively similar. Textbooks, however, are not
the only material used in education and research and it is in other media economics
literature—journal articles, treatises, and focused investigations—that the European
preferences for critical political, sociological and cultural approaches and American
preferences for applied approaches are more evident.
How media economics is taught is also important in order to understanding the
field. Courses take a variety of forms that reflect a greater diversity than apparent in
the primary textbooks and are more akin to the differences reflected in the general
media economics literature. Common titles include:
21 Robert G. Picard
- media economics
= economic aspects of media
— media economics and policy
— media economics and government regulation
— political economy of media
— economics of television
= economics of film
— cultural industry economics
— media economics and management
— media businesses
— the new economy and the media
— media economics and new technology
— economics of media and entertainment
The courses thus emphasize widely varying aspects or interests depending upon the
institutions at which they are offered, the expertise of the faculty, and the dominant
research paradigms embraced.
We must recognize, however, that a variety of issues related to media economics
are also taught in media and communications courses involving law, ethics, philosophy,
media criticism, and media effects as well as in a variety of other academic depart-
ments, In these courses, economics tend to be incidental and are approached as one
of a number of factors creating outcomes that are the focus of the course involved.
4. Summary
What can we say about our chosen field of inquiry? Clearly, there are divergent
approaches to investigating and explaining economic factors, but we must recognize
that each makes different types of contributions to the field. The differences in
approaches, however, result not because scholars are European or American, but
because of the scholarly traditions of the researchers involved, the institutions with
which they are affiliated, and where and how media economics is integrated into the
curriculum. There are as many differences among European media economic scholars
as there are among European and American scholars—and the opposite also stands
true for American scholars.
Regardless of those differences, we share a common interest in the workings and
manifestations of economic forces and on the outcomes they produce. We work in a
vibrant and compelling field whose explanations of media phenomena add under-
standing to why and how the media environment in which we exist is produced and
how it affects a variety of social, political and cultural concerns of engaged individ-
uals.
‘The media economics field is growing dramatically. When focused work in the field
started three decades ago, fewer than a dozen persons worldwide were regularly
engaged in research. It was ages before the Internet, before mobile telephones, before
CDs and DVDs, and before cable and satellite television, and even before color tele- parative Aspects of Media Econo
nd its Development in Europe and in the U.S.A.
vision in some nations. The development of those technologies and the changes they
have brought to media markets have spurred research and interest in media econom-
ies. Today there are hundreds of researchers worldwide—many are former students
of some of us—who are investigating questions in the field. We represent many
languages and cultures, but we share a similar interest in where the economic changes
in media are taking us and society. It is an intriguing field of inquiry that has much
understanding to offer to contemporary debates about media and whose influence is
growing stronger with every passing year.
References
Albarran, Alan B. (1996) Media Economics: Understanding Markets, Industries, and Concept,
Ames, IA: lowa State University Press.
Alexander, Alison, Owers, James and Carveth, Rodney (Eds.) (1993) Media Eeonomics: Theory
and Practice, Mahwah, NJ: Lawrence Erlbaum,
Beck, Hanno (2002) Medienokonomie: Print, Fernsehen und Multimedia, Heidelberg: Springer.
Bruck, Peter (1993) Okonomie und Zukunft der Printmedien, Munich: Fischer.
Kiefer, Marie Louise (2001) Mediendkonomik. Einfiikrung in eine dkonomische Theorie der
Medien, Munich: R. Oldenburg Verlag, 2001.
Galik, Mihaly (2001) Médiagazdasdgian, Budapest: Aula Kiad6.
Toussaint-Demoulins, Nadine (1978) Economie de Médias, Paris: Presses Uiversitaires de France.
Heinrich, Jitrgen (1994) Mediendkonomie, Band 1, Opladen: Westdeutscher Verlag.
Lépez, J.T. (1985) Economia de la communicacién de masas, Madrid: Grupo Zero.
Paul, Jean-Pierre (1991) Economie de la Communication TV-Radio, Paris: Presses Uiversitaires
de France.
Picard, Robert G. (1989) Media Economies: Concepts and Issues, Newbury Park, CA: Sage Pub-
lications,
Picard, Robert G. (2003) “Medi
Economic Ruth Towse (Ed.), A Handbook of Cultural
Economics, Cheltenham, U.K: Edward Elgar Publishing, pp. 301-305.
Picard, Robert G. (2005) “Historical Trends and Patterns in Media Economics”, in: Alan B.
Albarran, Sylvia Chan-Olmsted and Mike Wirth (Eds.), Handbook of Media Economics and
Management, Mahwah, N..J.: Lawrence Erlbaum Associates, pp. 23-36.
Owen, Bruce and Wildman, Steven (1992) Video Economics, Cambridge, MA: Harvard University
Press
23 Media Economics
in Europe
Edited by
Jiirgen Heinrich and Gerd G. Kopper
Authors
Gillian Doyle, Mihaly Galik, Andrea Grisold,
Karl Erik Gustafsson, Jirgen Heinrich,
Ingo Kohlschein, Gerd G. Kopper,
Frank Lobigs, Robert G. Picard,
Armin Rott, Alfonso Sdnchez-Tabernero,
Wolfgang Seufert, Gabriele Siegert,
Nadine Toussaint Desmoulins and
Ruth Towse
Informationskultur in Europa
Band 4