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Who Owns The Media and Why Does It

Matter?Week 7 Lecture 1

Jen Paton

• Understand the structure of the global media business.

• Understand the difference between commercial media and other alternatives (e.g. government owned media, independent news, etc)

• Understand the traditional structures of media business 

>Sky Sports is owned by BSkyB. >BSkyB is owned partly by its own employees, and partly by NewsCorp (Rupert Murdoch’s company.)>NewsCorp wants to buy out the rest of the company so it owns it all.>Other shareholders are demanding a higher valuation.>If they agree to a buyout, the deal will still have to meet regulatory approval from the UK

30 Billion USD in Revenue in 2009

Newscorp PropertiesList of Newscorp properties; http://www.faqs.org/sec-filings/100806/NEWS-CORP_10-K/dex21.htm

Only Number Three Global Media Conglomerate after…

• 1. Walt Disney Corporation• 2. Time Warner• 3. NewsCorp

Family Owned

Largest Broadcaster in the world, with 23,000 staff.

Government Owned

• Almost universally, the largest media firms are owned by governments or by private families.

• Government ownership is more pervasive in broadcasting than in printed media (this goes back to our discussion of regulation – the bandwidth for print is infinite, for broadcast is physically limited).Djankov, Nenova et. al. “Who Owns

The Media?” Journal of Law and Economics vol XLVI (October 2003).

Two Theories of Ownership

• (NB: More than two exist! But we will look at two today.)

• Public Interest theory: government ownership is good, cures market failures.

• Public Choice: government ownership is bad, “undermines political and economic freedom –” a free market model of media ownership is best.

Djankov, Nenova et. al. “Who Owns The Media?” Journal of Law and Economics vol XLVI (October 2003).

Public Interest Theory• Government ownership serves the PUBLIC INTEREST.• Government ownership is desirable because:

– If consumers and the public are ignorant, “state media ownership can pose the public to less biased, more complete, and more accurate information” than it could obtain with private ownership which serves the interest of advertisers.

– How can we trust private businesses or companies to give fair coverage to events?

• These were the justification for the formation of the BBC and were subsequently repeated in many other countries.

vs. Public Choice Theory• PUBLIC is better off with CHOICE of media options.• Government owned media can distort and manipulate• Leads to propaganda – how can we trust government to

be fair?• Private media offers alternative views, allowing the public

to choose among political figures, goods, products.• Competition assures that views obtain more sides to a

story.• James Murdoch’s MacTaggart Lecture, 2009 is a defense

of this (and a brutal diss of the BBC) (http://www.guardian.co.uk/media/video/2009/aug/28/edinburghtvfestival-jamesmurdoch )

Concentration of Media Ownership

Why is Media Ownership Concentrated?

• Amenity potential - there are other benefits than money to controlling media: fame, status, influence, power.

• More of the above than would come from owning a similarly sized business in another industry.

• Hence, media ownership tends to consolidate in a few hands: be they government or business.

Defense of Public ChoiceGovernment ownership of media is bad.Private ownership of media is best.YAY: Private ownership. BOO: Government ownership.

Public Choice Theory would say

• Governments should not have high levels of media ownership.

• Free marketplace competition leads to “greater freedom of the press, more economic and political freedom, and better social outcomes.”

By contrast, Public Interest Theory would predict that

• Governments should have higher levels of media ownership and

• The consequence would be “greater freedom of press, more economic and political freedom, and better social outcomes.

• Which is right?• Djankov, Nenona, et al. (2003):

Who Owns the Media? is a study that defends Public Choice theory.

• Harvard/World Bank Study, found that• Government ownership is greater in

poorer countries and more autocratic regimes; and Privately Owned media is corrrelated with better outcomes.

Methods• Determining Ownership is Not Easy• They aim to identify “the ultimate

controlling shareholder of each media outlet.”

• “For each legal entity, then, we identify its ownership structure…

• “We …identify vote holders at each level of ownership until we reach an entity for which it is not possible to break down the ownership structure any further.”

Djankov, Nenova et. al. “Who Owns The Media?” Journal of Law and Economics vol XLVI (October 2003).

Four Main Categories of Media Ownership

• 1. The State– Could be a foreign state.

• 2. Families (Privately owned, with one family controlling 20% or more of company.)

• 3. Corporation (Privately owned, no owner with 20% more of voting rights)

• 4. Other (e.g. a nonprofit, a church, a union)

Djankov, Nenova et. al. “Who Owns The Media?” Journal of Law and Economics vol XLVI (October 2003).

An Example – Private Ownership

• Family Owned.

FAMILY OWNEDDjankov, Nenova et. al. “Who Owns The Media?” Journal of Law and Economics vol XLVI (October 2003).

Many ownerships are mixed.

• Newscorp–Majority shareholders: the Murdoch

Family.– Second largest shareholder: Prince Walid

Bin Talal of Saudi Arabia.

Examples – “State Ownership”

• Ownership can mean different things in different contexts.

• Largest TV Station in Burma– Controlled directly by the Ministry of

Culture.• The BBC– Board of Governors is appointed by the PM– Its Charter specifies independence from

government control.Djankov, Nenova et. al. “Who Owns The Media?” Journal of Law and Economics vol XLVI (October 2003).

Private/Family Ownership Can Be Close to the State

• Saudi Arabia– Two of the 5 largest daily newspapers

are owned by royal family members.• Ukraine– The Deputy Prime Minister owns 30% of

the top television station.• Kazakhstan– The presidents son and daughter-in-law

control 7/12 media outlets surveyed.Djankov, Nenova et. al. “Who Owns The Media?” Journal of Law and Economics vol XLVI (October 2003).

• Singapore’s Singapore Press Holdings (SPH) is ultimately owned by the Lee family, but “the government must approve” of the majority shareholder and can “force shareholders to sell shares.”– Thus “family ownership” does not truly

reveal the degree to which the government exercises control over SPH.

Djankov, Nenova et. al. “Who Owns The Media?” Journal of Law and Economics vol XLVI (October 2003).

• Saudi Arabia: government approves the appointment of newspaper editors and reserves the right to dismiss them.

• Thus even though government doesn’t own all the major papers it still exercises control over them.

Djankov, Nenova et. al. “Who Owns The Media?” Journal of Law and Economics vol XLVI (October 2003).

Findings• Families and State own the media

throughout the world.• In the sample of 97 countries, only

4% of media are “widely held”, 2% are employee owned.

Djankov, Nenova et. al. “Who Owns The Media?” Journal of Law and Economics vol XLVI (October 2003).

Ownership: Top Newspapers Globally

57%29%

14%

Families

State

Other

92 countries sampled.

Djankov, Nenova et. al. “Who Owns The Media?” Journal of Law and Economics vol XLVI (October 2003).

Ownership: Top Television Stations

92 countries sampled.

34%

60%

6%

FamiliesStateOther

Djankov, Nenova et. al. “Who Owns The Media?” Journal of Law and Economics vol XLVI (October 2003).

Ownership: Top Radio Stations

72%

18%

Radio Ownership

StateOther

Djankov, Nenova et. al. “Who Owns The Media?” Journal of Law and Economics vol XLVI (October 2003).

Monopolies• Private monopoly – where total share

of privately held media firms is more than 75% - only one in the sample, Singapore.

• State monopoly – When total share of state controlled firms is more than 75%.– 21 countries have state monopoly of daily

newspaper.– 43 countries have state monopolies of

national broadcast news stations.

More Concentrated than Other Industries

• Amenity potential “creates competitive pressures toward ownership concentration” (17).

Regional Variation• State ownership more likely in:

Africa, the Middle East/North Africa.– Press and Television tend to be state

owned.• Europe, North America, and South

America.– Press tends to be privately held.– Television tends to be privately held in

the Americas, state held in Europe.

Determinants of Media Ownership

• “Levels of state ownership of all forms of media are sharply and statistically significantly lower in less autocratic countries.” (365)

• “The negative association between government ownership and political and economic freedom is stronger for newspapers than for television” (378)

• Supports the “Public Choice” theory rather than the “Public Interest” view.

Djankov, Nenova et. al. “Who Owns The Media?” Journal of Law and Economics vol XLVI (October 2003).

Consequences of State Ownership?

• “Greater state ownership of media is associated with a greater number of journalists jailed and media outlets owned by the government” (26)

• Countries with greater state ownership tend to censor the internet more heavily.

• Political consequences: state owned outlets are more likely to have unbalanced political coverage (especially if both TV and Papers are state owned).

• Economic consequences: Greater state ownership of media associated with less publically listed companies.

Djankov, Nenova et. al. “Who Owns The Media?” Journal of Law and Economics vol XLVI (October 2003).

Amartya Sen on Democracy and Famine

• Sen is an economist, looked at famines around the world after WWII.

• His theory is that famines cannot happen in a real democracy, in part due to a non-government owned press.

• As a case study, India:“The Government (of India) cannot afford to fail to take prompt action when large scale starvation threatens. Newspapers play an important part in this, in making the facts known and forcing the challenge to be faced” (at 76).

Break ?

Critique of Public ChoicePrivate ownership of media creates its own problems.Private media does not serve the interests of citizens.

• The study we just looked at seems to present the view that private ownership of media outlets presents better outcomes than state ownership – socially, economically, even in terms of health.

• But what are some of the negative outcomes of private ownership?

Media in the Marketplace• In privately owned, advertising financed media,

the “capitalist value of competition” drives media and news coverage.

• As reporters compete for scoops,they have less time to verify sources or perhaps sometimes to investigate stories with depth.

• We’ve looked at this in terms of news values etc, but now we must ask where those news values arise from: the competition for audiences, the competition for ad revenue, and ultimately, the marketplace itself.

Partially adapted from a lecture by Prof. G Bently in The Transnational News Environment, “The Political Economy of News Reporting”, October 2010.

Political – Economic Analysis of Media

Definition of political economy (Mosco, 1996: 25) ‘the social relations, particularly the power relations, that mutually constitute the production, distribution and consumption’ of communication, in a historical and cultural context”

Partially adapted from a lecture by Prof. G Bently in The Transnational News Environment, “The Political Economy of News Reporting”, October 2010.

• Comes from Marxist thought.• Society is based on structured

inequalities, society tries to perpetuate those inequalities.

• Including through the media.• Concentration of media ownership

undermines media’s role as a watchdog of power.

• Thus, private ownership cannot provide fair and equitable mediaspace.

Partially adapted from a lecture by Prof. G. Bently in The Transnational News Environment, “The Political Economy of News Reporting”, October 2010.

Back To Marx, Briefly.• "The ideas of the ruling class are, in

every age, the ruling ideas:  i.e., the class which is the dominant material force in society is at the same time its dominant intellectual force.  The class which has the means of production at its disposal, has control at the same time over the means of mental production"  (1964, p. 78). 

Chomsky’s Propaganda Model Of News

• Don’t get confused: Chomsky is taking a broader definition of propaganda than we did in our lectures last week.

• To Chomsky and his followers, • All Media, government owned or privately

controlled, propagate a society’s ideologies.• Ideology propagated through: selection of

topics, emphasis on certain topics, framings – all the news values we spoke about in previous lectures.

Chomsky’s Propaganda Model

• He refutes the idea described in the first half of the lecture – that “the public choice” model is all flowers and sunshine.

• But he also wouldn’t agree that government ownership is a “solution”.

• Instead, he says private and government owned media perpetuate business and government interests at the expense of citizen’s real interests.

• Chomsky/Marr interview: http://video.google.com/videoplay?docid=-4827358238697503#