سلام.این فصل را با ذکر تمام تیترهایش (تاکید میکنم با ذکر کردن تمام تیترهایش) به انگلیسی ساده و روان خلاصه کن   

Characteristics of Media Management	2
Media markets have characteristics that differ from those of other sectors. These characteristics must be taken into account to successfully manage media enterprises. Thus, this chapter willrst provide a market denition in the media sector and then go on to discuss the multidimensional competition in the media markets. On this basis, the special features of media products and the structure of the media markets
will be explored.1



	Market Definition in the Media Sector

Economic competition constitutes a dynamic process in markets. In order to portray the action parameters of media enterprises, it stands to reason thatrst the markets in which the media enterprises participate should be classied. An overview of the relevant markets is provided in Fig. 2.1. The specic characteristic of media enterprises consists of the fact that they sell their services not only in one market
but in two business markets simultaneously.
The services that media enterprises usually provide represent a service package of information and entertainment (content) on the one hand and advertising space on the other hand. These two services, however, are traded on different markets. For the content, the consumer markets are relevant. In media sciences, consumers are
referred to as“recipients.”Figure 2.1 shows that the business markets on the consumer side primarily differ according to the type of media and the manner in
which the recipients consume the media content (e.g., as readers or listeners). The advertising spaces, however, are traded on the advertising markets with the adver- tising industry.


1See also for the following chapter Wirtz (2011b, 2019b).

Ⓒ The Editor(s) (if applicable) and The Author(s), under exclusive licence to	23
Springer Nature Switzerland AG 2020
B. W. Wirtz,Media Management, Springer Texts in Business and Economics, https://doi.org/10.1007/978-3-030-47913-8_2

Media enterprises usually do not produce all the content contained in their service packages themselves. For this reason, the procurement markets for content are also important in both the information and entertainment segments. The relevance of the procurement markets varies because the portion of the self-produced content takes on different extents, depending on the respective sector as well as within the sector. Furthermore, the procurement markets for content also constitute, to some extent, business markets.
The enterprises can, for example, purchase the complete rights to an event and then resell them in the form of secondary utilization rights. In addition, enterprises can also reuse their own productions.
Within the framework of this textbook, the enterprises examined are primarily those that produce content that is utilized within their own media spectrum and for whom exploitation of the content markets is only a secondary goal. Aside from the content markets, media enterprises are active in further procurement markets such as
thenance or human resources markets.

Because these markets do not have any fundamentally media-specic characteristics, they will here only be addressed to the extent to which they are relevant to the media sector.
Figure 2.2 portrays the submarkets of the media sector. It becomes clear that there are strong interdependencies between these submarkets. The relationships between the markets, however, differ in their intensities. A very strong relationship exists between the content market and the recipient market because the attractiveness of the content plays a decisive role in determining the level of demand.
There is an equally strong relationship between the advertising and the recipient markets because the success among recipients substantially inuences the amount of advertising revenue. Primarily in those areas in which content procurement is associated with high investments, such as for broadcasting licenses for sports broadcasts in the TV segment, the potentially attainable advertising revenue is an important variable for the amount of investment and,nally, a variable for the
content’s attractiveness.


	Multidimensional Competition

The competition between media enterprises can be analyzed in different dimensions. The type of competition is therst dimension. The different submarkets in which the media enterprises compete with one another constitute the second dimension. The difference between intramediary and intermediary competition is the third dimension of competition. Finally, the fourth dimension concerns the object of competition
itself and thus raises the question of what the media enterprises are competing for.
 

These four dimensions of competition among media enterprises will be individually addressed below.
Regarding therst dimension of competition among media enterprises, two types of competition may be distinguished, i.e., economic and journalistic competition.
The difference between economic and journalistic competition lies in the application of diverse standards for evaluating the results of the competition. Competition is referred to as economic competition if its standard for success is expressed in monetary terms and can be measured in prots, market shares, or salesgures. Journalistic competition, however, underlies more strongly qualitative measures of
success such as timeliness of the information, diversity of opinion, or balanced reporting.
Concerning the second dimension, a subsegment analysis of the competitive market is carried out. In this context, for media enterprises, the competition on the recipient markets is the most important one. On the recipient markets, a signicant
portion of the revenues is realized and success in those markets has a major inuence
on the success in the advertising market.
Regarding differing shares of the advertising revenues with regard to the total revenues, the competition in the advertising market varies in intensity according to the different types of media. The same applies to the procurement markets because the share of in-house and outsourced productions varies from media sector to media sector.
The distinction between intermediary and intramediary competition constitutes the third dimension of media competition. On the one hand, all media products are subject to competition that is intrinsic to the products’category. This is called intramediary competition because here the various products of one media category compete with each other in all markets. Supra-regional daily newspapers or televi-
sion broadcasters are examples of this kind of competition.
On the other hand, different types of media compete with each other. For example, the print and TV products compete with each other (intermediary compe- tition). The intensity of the competition depends on the interchangeability of the media. The interchangeability between the individual types of media differs and
depends on the functions they are meant to fulll for the recipients.
Thus, for example, there is a higher level of interchangeability between
newspapers and the Internet than between newspapers and TV, because TV programs, in contrast to newspapers, employ moving pictures and are primarily used for entertainment.
The question of the object of competition as the fourth dimension of media competition is relevant only for the consumer market. Whereas the competition for advertising sales in the advertising markets and the content procurement markets is determined by attracting content, the competitive situation in the consumer markets is ambiguous. On the one hand, media enterprises compete for the purchase of media products, but on the other hand, they also compete for the time budgets and the attention of their recipients. Figure 2.3 summarizes the four dimensions of competi- tion among media enterprises.

	Product Specifications
“Therst and most serious mistake  that an analyst  of the television industry can make is to assume that TV stations are in business to produce programs. They are not. TV stations are in business to produce audiences. These audiences, or means of access to them, are sold to advertisers”(Owen et al. 1974, p. 4). This statement by
Owen, Beebe, and Manning can be applied to nearly the entire media sector and
highlights the fact that media are complex products that combine multiple product qualities.
These product specications, inter alia, result from the revenue structure and the production process of media. Given that the product specications concern numer- ous aspects of management, such as product policy, they are addressed more closely
in the following.



	Media Products as Combined Products

Media revenue can usually be broken down into sales and advertising revenues. Media are simultaneously marketed in recipient and advertising markets, in which

they offer specic services. In the recipient market, the service consists of a combination of information and entertainment content.
Whereas the advertising market is characterized by the opportunity to transmit an advertising message via the medium to the recipients. Thus, media enterprises seek to attain the highest possible number of target group contacts while simultaneously minimizing wastage (Martin 2005).
Since the service in the advertising market cannot be rendered independently of the service in the recipient market, as both service components are combined in one
nal product, media production always is a combined production. In the creation of a media product, the demands of both the recipients and the advertising clients must be
taken into account equally in order to guarantee long-term market success.
Hence, the demands of newspaper readers for objective and comprehensive coverage must be balanced against the interests of the advertising clients that show a clear commercial target group orientation. Figure 2.4 summarizes the issue of media products being combined products.


	Media Products as Public Goods

Media products exhibit some of the characteristics of public goods. Typical features of public goods are the non-exclusivity of consumption and non-rivalry in consump- tion. Non-exclusivity of consumption refers to the fact that no recipient can be prevented from using a public good. Therefore, the use of the good cannot be made subject to remuneration. The second feature, non-rivalry in consumption, refers to the fact that consumption by an individual recipient does not limit the consumption by remaining recipients.
The criterion of non-exclusivity of consumption, for example, applies to the TV sector because the use of unencrypted programs is difcult to prevent. For this reason, no remuneration is charged for the use of unencrypted TV programs. Instead, the program isnanced by fees or advertising revenues. The assumption of non-exclusivity of consumption in the print media is questionable, however, because
 

the media contents are linked to the carrier medium“paper.”Hence, every reader has to purchase a newspaper and can exclude other potential readers from consumption by keeping the newspaper to him- or herself.
Regarding non-rivalry in consumption, it is necessary to distinguish whether the consumption concerns only the content or also the respective carrier medium. When considering the content on its own, the characteristic of non-rivalry is applicable because the information or entertainment content does not wear out through consumption.
In the area of television, for example, this means that each viewer, independent of the total number of viewers, may consume the same program in the same quality. However, it becomes more complicated when the carrier medium has to be taken into consideration. Looking at video streaming via the Internet, for example, the number of simultaneous accesses affects the server in question, so that the quality of the product may suffer.


	Media Products as Services

Media products are a composition of physical products and services. Services primarily refer to intangible activities that are not associated with direct changes in ownership. The service provision, however, can be connected with a tangible asset. As constituent characteristics of services, the following features are considered: intangibility of the product, the allocation of effective services in terms of personnel, material, or immaterial resources, and the integration of external factors.
The reason for the immateriality of services is due to the fact that service implementation requires performance potentials, which are intangible and not per- ceptible prior to its realization. The immaterial nature of services results in the hindered storage and transportation. This means that a service can only be used at the time and place of its production.
The necessary allocation of service productivities means that specic capabilities, such as know-how, are required to produce the service. The integration of external
factors is mentioned since the subject or object for which the service is carried out lies beyond the enterprise’s inuence and the success of the service production is thus, at least in part, heteronomous.
At the moment of production, media conform to the constituent characteristics of a service. Thus, media are to a large extent immaterial goods. For example, in the performance of a piece of music, voices and sounds are necessary that are created exactly at the moment of performance. The participating musicians and instruments
represent the material and personnel resources that are necessary to compile the service“music.”
The listener for whom the service is performed constitutes an external factor.
Based on the fact that human performance dominates in the process of creating the service, a musical performance, like many other media products as well, may be characterized as a personal service.
 

As soon as a media product is stored on a data medium, for example, on a CD or as an MP3, it loses part of its service character and becomes a material good to which the constitutive characteristics of services no longer fully apply. Since storage on a carrier medium is necessary for most media companies in order to make the product
accessible to the customer, media are referred to as rened services, some of which are material goods and some of which are services.



	Media Products as Meritorious Goods

Media products are frequently referred to as meritorious goods. Those kinds of goods are characterized by a small-scale demand regarding a socially desired level of penetration that is determined by ofcial decision-makers. Therefore, it is concluded that the consumer preferences have to be adjusted through subsidization or consumer stress and pressure to consume.
This is reected, for example, in a lower sales tax on printed products or inxed book prices that are justied by the goal of promoting diversity of opinion and providing a diversity of information.
Regarding meritorious goods, there are concerns that perfect competition can lead to adverse selection. Relating to media, the recipients are not able to assess the quality of the media products because of asymmetric information. Thus, they are only willing to pay an average price for those products. Suppliers offering qualita- tively more valuable products and intending to charge a higher price for their service
are elbowed out of the market due to the consumers’low willingness to pay. Instead, those suppliers will survive who offer lower-quality products, designed to make prots at an average price.
Adverse selection especially occurs considering experience goods that are not
consumed regularly. This, however, is usually not the case for media products that are not individual items. Thus, customers of a newspaper can assess the quality of the information and draw comparisons after several purchases. The seller is likewise interested in building a reputation for quality in order to ensure product sale. Thereby, products other than only low-quality products are available on the market. Another way to solve the problem of asymmetric information is through the intervention of reliable third parties who regularly screen and guarantee the quality
of the products. In this context, government agencies come into play making the supplier’s authorization dependent on compliance with specic standards, e.g., the competent state media authorities that grant licenses for radio broadcasts. Apart from that, nongovernmental institutions, such as consumer protection organizations or
professional associations, can also take on watchdog functions. However, the ques- tion of whether media products are meritorious goods is quite controversial because the assessment is ultimately based on value judgments. Beside the view that media products are meritorious goods, there are other opinions that some media products manifest rather demeritorious characteristics. That means that certain media products are consumed to a greater extent than what is societally desirable. A frequently cited
 

example is the undesirable broadcasting of children’s programs that portray violence.


	Quality of Media Products

In communication science literature the cultural dimension of media products is regularly emphasized. The discussion primarily focuses on the quality of media products. For the management of media enterprises, this poses the question of whether and how the quality of media products can be assessed by the media
enterprises and the recipients as well as to what extent it can be inuenced by the management.
Because of its merely subjective measurability, it is precisely the quality of media products that is an important factor for media management. Indeed, in journalism, the timeliness, relevance, correctness, and transmission of information are over- whelmingly cited as objective criteria for the quality of media products. But even
these criteria arenally subjective and do not apply to the area of entertainment.
Thus, the quality of media products can only be planned and controlled by the
management to a limited extent. Quality can neither be guaranteed at the beginning of the production phase nor controlled at will during the production phase. However, a positive correlation between the available budget and the quality of a media production is generally assumed. But usually this is an average consideration for which huge outliers on both ends of the scale frequently occur (Owen and Wildman 1992).
Moreover, the management’s limited inuence on the quality of media productions is due to the fact that media production is a creative process that
frequently cannot be standardized. For example, regarding movie productions, the intuition and creativity of the director play a paramount role when it comes to the quality of the output. Neither factor, however, can be inuenced to a great extent.
Radio programs, on the other hand, are frequently led by headstrong star radio
presenters who play a decisive role in the consumers’perception of the product. Finally, the content of the advertising, which is part of the product and contributes to its overall impression, can also be inuenced only to a limited extent.
From the recipient’s perspective, the quality assessment of media products is
likewise problematic. When testing quality, basically three quality characteristics can be derived from the consumers’perception: search qualities, experience qualities, and credence qualities. Search qualities can be assessed by the consumer, at least in part, through inspection prior to purchase.
Experience qualities can only be assessed after consuming the product. With respect to credence qualities, even after consuming the service, the consumer has no opportunity to assess the quality. The relationship between these three quality features is portrayed in Fig. 2.5.
Some media products only manifest search qualities to a limited extent. Many information and entertainment products have already been depleted through the initial consumption. Hence, a quality assessment of these media products is not

possible prior to consumption. For instance, the quality of the information contained in a newspaper article can only be assessed after it has been read, but at the same time there is no necessity to reread the consumed information. The same is true for books, as the entertainment value can also only be assessed after the book has been read.
Hence, many media are experience goods. Consumers can, however, try to make conjectures about the quality prior to consumption by means of product features, such as the author. If the quality of the media product cannot be assessed by the recipient even after consumption, additionally, credence qualities are present in the media sector. This is the case to some extent in the area of information. Although
the recipient can gauge whether the need for information was fullled, he or she is often unable to pass judgment on the correctness and completeness of the informa- tion. Figure 2.6 summarizes the specications of media products.


	Market Structure

An analysis of the market structure provides information on the intensity of compe- tition within the sector. Therefore, conclusions can be drawn regarding the prot- ability of the business in the sector and the strategic options available to the management of media enterprises in order to pursue their business goals. For media management, two aspects of the market structure are of special signicance:
the concentration, i.e., the supply and demand structure in the respective markets, as
well as market entry barriers that exist for established and new suppliers (Fu 2003).

	Concentration

To assess competition within a sector, concentration is frequently used as an indica- tor wherein a positive correlation between the number of suppliers and the intensity of competition is assumed (Scherer and Ross 1990). The absolute concentration results from the total number of active suppliers in a market. But given that the size
of this number does not permit conclusions about the supplier’s market power, the relative concentration is used as a standard for concentration. The relative concen-
tration is the product of the accumulated shares of turnover from the largest three, six, or ten market participants in comparison to the total turnover in the relevant market.
When assessing media market concentration, one must consider that media enterprises are operating in consumer, advertising, and procurement markets, which are characterized by different demand situations. Accordingly, there are different types of markets and behaviors in the submarkets. Hence, a polypolistically structured market with numerous consumers and a small concentration is assumed in the recipient markets.
In the advertising markets, there are indeed multiple consumers, but it is rather rare that one advertiser holds a major market share. Consequently, the market concentration is moderate. Only a few procurement markets, such as the market for broadcasting rights for sports events, are dominated by a few suppliers that can exercise considerable power in those markets (Hoskins et al. 2004; Noam 1983).
 

	Market Entry Barriers

Market entry barriers are dened as“anything that requires an expenditure by a new entrant into an industry but imposes no equivalent cost upon an incumbent”(Baumol et al. 1988, p. 198). They decrease the probability of a new supplier entering into a
market, thus protecting the established enterprises. There are three different kinds of market barriers: structural, strategic, and institutional.
Structural market entry barriers are caused by media product characteristics and the media production process. Economies of scale and network effects, switching costs, increasing returns, and the spiral effect belong to structural market entry barriers. Economies of scale result from the structure of media production costs.
The production of media is characterized by a high proportion ofxed costs.
When a media product, such as a movie, is created, considerable costs are
incurred for the technical and human infrastructures as well as for the rights of use. These so-calledrst copy costs are necessary for the creation of therst copy of the media product and are independent of the number of subsequent media users.
If therst copy costs are high and the respective variable costs of the production comparably low, considerable economies of scale can be realized. This means that the average costs rapidly decrease as the output increases. Sincerst copy costs are allocated to all the copies produced, the higher the number of copies produced, the
lower the average costs (cost degression effect).
This effect can be observed in all media sectors but especially in digital products such as video games. Thexed costs for the production of a video game are relatively high, but the variable costs for reproduction by means of pressing the game on DVD or Blu-ray discs are comparatively low. This means that an increase of the output rapidly decreases the average costs per copy (see Fig. 2.7).
First copy costs lead to a highnancial risk for the production of media products because they usually constitute sunk costs, i.e., irreversible costs (costs incurred in
 

the past that can no longer be retroactively inuenced) that cannot be recovered in case of failure. Highrst copy costs act as market entry barriers because many potential suppliers are not in a position to incur the risk of an unprotable invest- ment. Furthermore, the economies of scale favor an established supplier with a high
production capacity.
New suppliers are forced to enter the market with production capacities similar to those of established suppliers and to quickly achieve a high number of units in order to avoid competitive disadvantages from high average costs.
Aside from economies of scale, there are also economies of networks associated with media products (Economides 1996). These describe the external effects arising in real or virtual networks through the increasing number of users. In real networks, there is an actual, physical interconnectedness (e.g., via the Internet), whereas virtual networks consist of groups that use the same product (e.g., users of the LINUX operating systems). If the value of a network increases with the number of its users, there are direct network effects.
With direct network effects, an increasing number of users are tantamount to an increase in the network’s efciency. Metcalfe’s law seeks to express this relationship mathematically:“The value of a network goes up as the square of the number of users”(Shapiro and Varian 1999, p. 184).
Indirect network effects primarily concern goods that consist of a basic product
and different complementary products (e.g., operating systems and application software). Here, a large number of users of an operating system frequently lead to an expanded supply of complementary products that in turn indirectly enhances benets associated with the basic product. For example, in the market for video game consoles, one can observe indirect network effects because the video game console
provider with the highest market share usually offers the largest amount of games. Individuals’participation in a specic network requires investments in goods that facilitate afliation with the network. These investments can be both monetary (e.g., the purchase of a pay-TV decoder) and non-monetary (e.g., time that a user invests in
understanding and handling a software product). Switching to another network renders, these investments are worthless since these then become sunk costs.
Switching costs consist of investment and opportunity costs. Investment costs are those costs that are related to integration into the new network. Opportunity costs arise if participation in one network excludes the participation in another network. Switching costs lead to a lock-in effect, i.e., to a certain extent, the participants are committed to the network initially chosen (Shapiro and Varian 1999).
In order to facilitate communication between the network participants, compati- bility decisions must be made. Compatibility is achieved through uniform interface
conguration (standardization). With the chosen standardization strategy, the sup- plier of a network can signicantly inuence exchange costs and thus the strength of the lock-in effect. The higher the switching costs, the more expensive it is for the
user to join another network. Competing systems have to be in a position to compensate switching costs with substantial additional benets.
Positive network externalities, highrst copy costs, and high switching costs can
lead to increasing returns. Positive feedback is created through direct and indirect
 

network effects. The higher the number of consumers who join a network, the higher the network’s attractiveness. Decreasing average costs due to economies of scale facilitate price reductions, whereas high switching costs hinder the consumers’ migration to competitors.
In the media sector, network effects can be found, for example, in the areas of TV, Internet, and video and computer games. Hence, an increasing number of participants in a cable network leads to an expanded offering of stations and thus to positive feedback. In the Internet, an increasing number of users lead to an increase in services. This applies, for instance, to peer-to-peer networks. By means of strategic decisions, e.g., regarding standardization, the management of a media
enterprise can contribute considerably to a network’s success and establish high market entry barriers for new suppliers.
Another structural market entry barrier is the spiral effect, which describes the interdependent effects between advertising markets and recipient markets. This effect arises when revenues in the advertising markets increase in an overly propor- tional manner due to high market shares in the recipient market. Investments in increasing product attractiveness thus become affordable, further increasing the
market shares in the recipient market. The spiral effect may be observed primarily in media with a high share ofnancing through advertising, e.g., in newspapers and magazines.
Strategic market entry barriers serve to prevent the entry of new suppliers into the market. For example, product differentiation strategies act as strategic market entry barriers since they serve to exploit market potentials to reduce the sales potential for new suppliers.
Institutional market entry barriers are based on legislative or administrative measures. They affect primarily the areas of TV and radio because these are mostly subject to strict regulation. For example, state-regulated broadcast licensing can be designated as an institutional market entry barrier. Figure 2.8 summarizes the individual market entry barriers.

	Changes in Media Usage Pattern

The media usage pattern has changed considerably over time. The following section portrays the change in the media usage pattern by means of variousgures. The development of the media usage pattern is closely connected to technological developments or media prevalence.
Figure 2.9 illustrates the speed of technology diffusion of different types of media in the United States. While radio, color TV, and the microcomputer have all taken a similar amount of time (about 10 years) to reach 50% of US households, modern information and communication technology (developments of the last 10 years) evolved twice as fast. It took only 4 years for smartphones and 6 years for social media to reach more than 50% of US households (Ritchie and Roser 2019). Altogether, technology diffusion is becoming faster and faster and the number of technological devices is increasing rapidly. While in the past there were only TV and
radio, nowadays more and more devices and services for media use are developed (e.g., tablets, smartphones, ebooks). Since the advent of the Internet in the mid-1990s, new technologies emerged, spreading much faster than before. A main reason for this development is the increasing interdependence between users, technologies and services, the resulting network effects, as well as the numerous changes of technologies. These aspects create a very strong dynamic in the media market, which in turn leads to changes in user behavior and the development of new technologies.
 

In recent years, the time that people devote to media use has constantly increased due to new media and technologies and amounted to over 10 h and 25 min/day in 2017. The major portion of daily media use is attributed to the radio (2017: 178 min/ day) and to TV (2017: 248 min/day). The Internet has gained increasing importance since 2000. Between 2000 and 2005, the usage time had increased by about 238% to 44 min/day and further rose to about 149 min/day in 2017. Although the usage time of print media had increased by 9 min between 1995 and 2005, it has ever since
declined signicantly reaching a lower level in 2017 (31 min) than back in 1995 (see Fig. 2.10) (Wirtz et al. 2006b).2
In the future, a moderately increasing media usage may be expected. It can be assumed that Internet use, in particular, will further increase, while the use of radio, classical television, and the print media will stagnate or decrease. Therst signs of
the signicance that the Internet has garnered as a mass medium can be seen
primarily among the younger media consumers. For male youth, the computer is
the most important medium, even more important than television, and for young people in general, the Internet is an important part of daily life. Even among elderly people, the use of this medium is expected to considerably increase in the next few years. 
This circumstance is primarily attributable to the fact that various media products will be incrementally distributed via the Internet. In this context, music and TV in particular but also radio, magazines, and newspapers will be accessed more intensely via the Internet—not least due to current developments regarding mobile Internet via smartphones and other mobile devices.
This will have a considerable inuence on the usage of traditional sound carriers (physical carrier media such as CDs). The daily usage time has an average of 19 min/ day by 2017. To a large extent, traditional sound carriers are being replaced by
digital storage media such as mp3, whose compatibility with various types of terminal equipment is convenient for the recipients. Even TV and radio are affected by this development.
Because the Internet has a return path, TV programs distributed over the Internet can be supplemented by interactive functions. Based on the dynamic growth of the broadband market, however, one can expect a greater usage of Internet TV and a decline in the use of traditional TV by 2017.


	Changes in the Advertising Markets

Along with changes in the recipient markets, the development of advertising revenue is of particular importance for media enterprises. There are clear correlations between the advertising market and the global economy. After the bursting of the dotcom bubble and thenancial crisis in 2008, advertising revenues sharply decreased. That means that there is a dependence of the media branch on other
branches, which the management of a media enterprise explicitly needs to take into account (Picard 2010).
After 2000, there was a slump in the entire advertising market due to overall market conditions. In recent years the advertising market recovered in the United States and reached a peak in 2018 at 243,303 million USD. Nevertheless, for example, the revenue of daily newspapers shrank steadily, which is primarily attributable to the shift of the regional advertising markets to online portals. The increasing prevalence and use of competing Internet services constitutes a special threat to the classical revenue structure of publishing houses in this segment.
Therefore, digitalization affects the development of the advertising markets in several respects. Traditional media also prot from the further development of the Internet and telecommunications sector because the competition among numerous new suppliers has led to high advertising investments. Furthermore, no cannibalization effect has yet occurred, due to the largely stable usage of traditional media. Nevertheless, based on the Internet and the growing signicance of e-commerce, new advertising opportunities have emerged.
Online promotional activities are implemented as supplements to traditional campaign elements. In recent years, online advertising revenues have continuously grown compared to other sectors. An overview of US advertising revenue develop- ment between 2004 and 2018 is shown in Fig. 2.11.
 
	Media Competition and Convergence

The situation in the media markets is characterized by structural upheavals. On the one hand, the competitive environment of traditional media enterprises has changed profoundly as new market participants from the computer or telecommunications sectors are entering the media markets. On the other hand, classications between
relevant markets are becoming more difcult because the boundaries between
media, computer, and telecommunication products are becoming moreuid (Picard 2009).
This, for example, is reected in a supplementation of established print and TV products by new services of the Internet and multimedia sectors. Harvard Business Publishing, for instance, offers a free podcast for download each week, presenting
current ideas and comments of leading business managers. This arises from the increasing convergence between the media sectors information technology and telecommunication.
Regarding the sector of information and communications technology, conver- gence is understood as the harmonization of certain technologies, the combination of individual value-added processes of telecommunication, media and information technologies, and,nally, a merging of the markets as a whole. The following three factors can be distinguished as determinants of convergence development:
digitalization, deregulation, and changes in user preference (see Fig. 2.12).



	Digitalization

Digitalization offers new opportunities for the presentation, storage, and distribution of media products and forms the technological basis for convergence (Rayport and Jaworski 2001). The standardization of previously separated storage media, e.g., through the storage of movies, music, and texts on hard drives, facilitates the exploitation of economies of scope in the upstream and downstream stages of the value-added chain. For example, reference books are published as bound editions or as multimedia programs on CD-ROM, and academic articles are issued in journals or
as PDFles via the Internet.
Furthermore, digitalization has effects on the technological infrastructure. In light
of the conversion from analog to digital data communication, different communica- tion networks are usable for data transfer and thereby substitutable for one another. For example, Internet access can be accomplished via telephone, cable, satellite, and mobile networks, as well as via wireless LAN. This is accompanied by an increase in data transmission capacity and the development of new interaction formats.

	Deregulation of the Information, Media, and Communication Markets

Since the middle of the 1990s, comprehensive deregulatory measures have been implemented in the United States (introduction of cross-sectoral competition and liberalization of vertical integration regulations). In the European Union, deregulatory efforts, such as the liberalization of the telecommunication sector, also led to the emergence of competitive structures in the information, media, and communication industries. Without this development, there would not have been an appropriate macroeconomic framework for the convergence process.


	Changes in User Preferences

The increasing supply of media services has led to a fragmentation of media consumption. Especially young consumers use a diversity of services to satisfy their needs for information and entertainment (Rayport and Jaworski 2001; Napoli
 
2007). At the same time, one can assert that there has been a change in user preferences for the application of personal information and communication tools.
Further, user preferences have shifted to personalization and individualization of the used media, which is closely connected with this change (e.g., personalized newspapers such as wsj.com (The Wall Street Journal Online) or mobile telephone services offering individual information and ring tones). This interconnectedness is accompanied by a trend toward systematic solutions insofar as enterprises create integrated information and communication services by means of functional integra- tion on the one hand and service bundling on the other hand.
These developments have considerably changed the competitive conditions for media enterprises. Technological convergence leads to a coalescence of markets that have previously been differentiated from one another. In the market for communica- tion services, cable network companies, telecommunication enterprises of mobile and landline sectors, and satellite providers now compete with each other.
In order to distinguish themselves from their competitors, they diversify with integration strategies in the area of content production and therefore pose a competi- tive threat to media enterprises. In addition, the Internet is a communication platform that differs from others, being a time- and location-independent medium offering the opportunity to develop completely new business models on the basis of process innovations (Choi et al. 1997).
In this new, large marketplace, enterprises operate by unbundling and rebundling value creation chains. Previously separate activities, such as production and distri- bution, are being replaced by new, Internet-based business models. Other enterprises expand their content basis through mergers and employ more distribution formats in order to win new user groups. TV enterprises, such as News Corporation, which market their programs worldwide via cable and satellite transmission, also belong to this category. In recent years, this development has contributed to a greater and still pending restructuring of the competitive landscape in the area of media enterprises. Within the multimedia sector, different convergence types can be observed depending on the level of aggregation (Greenstein and Khanna 1997). Aside from the sector or branch convergence described above, convergence tendencies can also be seen at the product level, the business unit level, and the enterprise level. Thereby, the digitalization of all media content, in connection with the opportunity to arbi- trarily distribute the data without loss of quality, as well as irrespective of time and place, via multiple channels, constitutes the origin of the convergence of products
and services.
For instance, previously there were own devices for music consumption and for mobile telecommunications. Meanwhile, however, the increasing technological service performance has led to the mobile telephone’s capability for the transmission and acquisition of music. This highlights that product convergence involves the
afliation of different functionalities into a new product. Differing forms of com- bined broadband Internet services may be cited as another example of product
convergence.
In this context, a fragmented supply of services that the consumer previously obtained from different suppliers was associated with high effort and a relatively
 
complex selection process. Thus, the central advantages of combined broadband Internet services lie in the attractiveness of the product bundle as well as in the price savings for the entire product in comparison with the individual products.
Telecommunication products (Internet access, voice communication) are enriched with content to provide added value to the consumer. In this context, double play is the combination of Internet access and traditional telephony or voice over IP, triple play expands the service to entertainment services (e.g.,
IPTV), and quadruple play adds mobile telephone use as a fourth component. The unique conguration of services that are combined by the customer (or by different suppliers) is referred to as“individual multiplay.”
With advanced product convergence, it can be advantageous for an enterprise to
integrate convergent business areas either within the company or by means of outside cooperation. In this manner, economies of scale can be realized, and new, innovative products emerge by recombining individual performance features of existing services from various business areas.
If the convergence of previously separate services affects not only single business units but rather the entire enterprise, this may lead from business cooperation to merger. These cases are referred to as supplier or enterprise convergence. However,
in this context, it should be noted that the merger of enterprises in the course of the convergence may be difcult, especially in light of integration processes.
With regard to the achievement of corporate goals, the post-merger integration
process is of particular importance. Assuming product and service complementarity, the resourcest, i.e., the similarity of other enterprise resources, such as corporate culture or organizational structure, may facilitate the integration process and thus increase the M&A success.
In fact, general convergence tendencies that relate to the entire branch can be observed. In this context, it is therefore referred to as branch or sector convergence. This form of convergence is considered thenal stage of the convergence process and, in the end, leads to a gradual dissolution of previous branch boundaries. Figure 2.13 summarizes the various levels of convergence.
Sector convergence is a worldwide phenomenon and thus of global signicance. Figure 2.14 provides international experts’evaluations of the convergence processes situation in the Triad (Europe, the United States, and Asia) (Wirtz et al. 2006b).
Outcomes indicate that the most advanced convergence process is the process of supplier convergence, i.e., the emergence of integrated suppliers of multiplay services, such as broadband access, content (Internet TV, video-on-demand), and voice communication.
The second most advanced convergence process refers to technology conver- gence. This is the provision of one single IP-based broadband service via telephone networks, cable networks, and satellite. A similar advanced convergence process is the process of end devices’convergence, which is dened as the use of various services and networks via one single end device. The least advanced convergence
process is the process of product convergence, which refers to the integration of various functions into one single online service (e.g., interactive shopping TV).
Given that supplier and technology convergence are the most advanced ones, the results emphasize that the convergence in the Triad takes place on an aggregated level. Therefore, in the near future, the convergence process will take place at the level of product and end devices and thus will offer an even greater extent of integrated products and services for Internet users. Media enterprises in particular suffered considerable losses during the past years due to convergence-related com-
petition between ofine and online advertising markets.
According to expert evaluations, traditional media enterprises are still not suf- ciently prepared for sector convergence (see Fig. 2.15). Thereby, organizational and
editorial structures have been least adapted to the dynamic competition of innovative Internet enterprises.
Likewise, with respect to implementation of marketing and sales, the changed framework conditions have only been taken into consideration to a minor extent. Media enterprises have also failed to adapt their business strategies to the needs of sector convergence. Except in the area of M&A activities, good outset positions are evident for competition within the convergent media branches.


	Environmental Changes and Dynamics in the Media Sector

The media sector is continuously changing. Beside deregulations that are conducive to the development of competition, the media sector to date has been primarily shaped by two factors. On the one hand, an increasing internationalization in business activities can be seen. On the other hand, there have been concerted efforts to form integrated media enterprises through mergers and takeovers. Within the context of internationalization, media enterprises that previously had focused their
its revenue abroad, may be cited as an example (see Fig. 2.16).
The revenue structure of the major media conglomerates reveals that in a few businesses the media sector constitutes only a portion of the total turnover. For example, the share of the media revenue at Sony amounts to about 31%. Most enterprises operate in several business areas such as TV production, movie, radio,
and the print media (see Table 2.1). The determination of revenues in the area of the Internet is difcult since many enterprises no longer consider the Internet and multimedia sector as an independent business area. Instead, they enter the revenues against other accounting entries.
In addition to sufcientnancing, market participants should have access to content, distribution channels, and technologies in order to exploit the potentials of
the technological and market convergence. Since these different areas are frequently covered by more than one single enterprise, during recent years, considerable merger and alliance activities in order to gain control of these strategically important resources have been observed in international media markets. Table 2.2 provides an overview of the most important takeovers in the information and communication market in the past years.
These endeavors aim to develop integrated media conglomerates in order to exploit the convergence potentials. Thereby, three phases of merger activities with differing motives can be observed:

•	In the United States, so-called“mega-mergers”have become increasingly appar- ent in the media sector since the mid-1990s. In this context, the acquisition of

ABC/Capital Cities by the Walt Disney Company in 1995 serves as an example. The acquisition of Turner Broadcasting by the media enterprise Time Warner Inc. can be cited as a further example. As a result Time Warner Inc. has become the media enterprise generating the highest revenue in the United States. Efforts to integrate individual areas of value creation and to build up the utilization chain can be seen as motives for these mergers. The association of manufacturing companies and TV broadcasters is an example of the integration of value-added steps. The setup of a utilization chain, e.g., takes place in the integration of cinema, pay TV, and free TV.
 
50	2 Characteristics of Media Management

•	Since the end of the 1990s, telecommunication suppliers have increasingly been participating in the acquisitions or mergers in the media sector. The attempt to diversify in the content market can be considered the driving force for such mergers or acquisitions. Examples of this kind of diversication are the mergers
of the French telecommunication enterprise Vivendi with the Canal+ Group and of the Canadian conglomerate Seagram with the afliated enterprise Universal Music and Universal Studios.
•	The third phase was shaped by M&A activities of enterprises in the Internet sector and reached a peak with the takeover of Time Warner by AOL in 2001. In this process, the content resources of Time Warner were made available to AOL and
were tapped by means of a new distribution channel. However, the merger of AOL and Time Warner has not been successful. Following AOL’s write-offs and value adjustments, the conglomerate suffered a loss of 99 billion USD for the
nancial year 2002. In order to counteract the downward spiral, AOL had to be eliminated from the company title in 2003. Finally, Time Warner separated from its troublesome subsidiary AOL on December 9, 2009. In 2015, Verizon acquired
AOL for 4.4 billion USD, and the digital advertising division was sold to Microsoft. The acquisition of Time Warner by AT&T will reinforce the vertical integration strategy of the mega-mergers of the 1990s. This will generate integrated offerings that combine attractive content and physical distribution capacities.

Due to company takeovers and merger activities, the structure of the media sector has undergone to rapid changes. Thus, the American entertainment conglomerate Walt Disney ousted the long-standing market leader Time Warner from its top position. According to stock market capitalization, Time Warner is still one of the largest media enterprises worldwide; however, its stock price has dropped consider- ably due to the abortive AOL merger.
Viacom, a vertically integrated media conglomerate, has primarily grown through strategic takeovers, however in early 2006 it was split into two separately listed associations on the stock exchange: Viacom Inc.and CBS Corp. These are examples of the potentials and risks of M&A transactions in the media sector. With Yahoo!, an Internet company has established itself among the largest media enterprises so far (see Fig. 2.17).

Knowledge Review Questions
1.	What are the product specications of media products?
2.	What does medial convergence mean and what repercussions does it have for the
media landscape?
3.	How are the media markets delineated from each other, and what interdependence structures do they have?