News Media Performance in Hypercompetitive Markets: An Extended Model of Effects

One of the enduring questions in media management research and regulation has been about the relationship between media competition and media performance. Over the past quarter century, the rapid consolidation of ownership in media industries in the United States and other developed nations has focused the attention of scholars and policymakers on how the changing structure of media markets may be affecting the public interest. Two key assumptions have dominated these discussions. The first is that media competition is a positive force, improving service of the public interest. This assumption parallels general theories in economics, which hold that competition leads to more consumer choice, lower prices, and higher-quality products as organizations strive with one another to attract customers. The second assumption is that media play a central role in society by providing diverse ideas (Compaine, 1985), informing the public about current events and social issues, and serving as a watchdog on the government (World Bank Institute, 2002). Therefore, any trend that would serve to undermine the media’s performance of these roles would be detrimental to society. This ongoing concern about media consolidation has produced a large body of research on the effects of competition on media performance. However, the research is based primarily on observations of the U.S. media market, and the majority of the work has focused on newspapers, which face little direct competition in the United States. The few published studies from outside of the United States have been done in other developed nations where media-market conditions are similar. The underlying question driving almost all of the research has been what effects the reduction in competition among media organizations has on media performance. Although clearly a critical concern, the focus on media consolidation is only half of the equation. Since the late 1970s, technological, economic, and regulatory changes have created explosive growth in the number of news and information providers, both in local markets and globally. This growth has greatly increased the intensity of direct and indirect competition among media companies for audiences and advertisers. Technologies such as the World Wide Web, cell phones, and personal digital assistants (PDAs) are introducing new layers of competition into media markets around the world. Even more notably, in many developing nations, the number of media outlets has mushroomed in the wake of political and economic liberalization, reaching levels never seen in developed countries relative to population size (Gross, 2002). Contrary to classic economic theory, many hypercompetitive1 markets are showing few signs of rationalizing because owning media companies has significant externality value, particularly in periods of political and economic instability (Hollifield, Vlad, & Becker, 2004; Open Society Institute, 2005). This article will explore existing theory and research on the effects of media competition on media performance. It will examine the implications of economic and strategic management theory for news media performance in markets characterized by hypercompetition and propose a model that outlines the effects of hypercompetition on news media performance.