Indrek Ibrus - Why are Media Markets Concentrating?
A single European digital media market would let us use Internet services despite our location. This idea worries media researchers. Indrek Ibrus, head of the TU Centre of Excellence in Media Innovation and Digital Culture explains why that is so.
A single European digital media market would let us use Internet services despite our location. This idea worries media researchers. Indrek Ibrus, head of the TU Centre of Excellence in Media Innovation and Digital Culture explains why that is so.
The European Union is currently hard at work developing a single digital market. This means all internet services should be easily accessible across country borders. This includes media services such as internet TV or film services, which are mostly not available to Estonian users. In case of the single digital market, these services would open themselves to Estonians, but media researchers are slightly worried about this idea. Researchers of media politics and media economics are afraid of media concentration in such a large market.
Why are media markets concentrating?
Decades ago, 2-3 newspapers and 2-3 TV channels dominated every media market. This changed into a very pluralistic media market once the Internet came. Yet, the concentration of media markets continued on an international level and the market is currently dominated by 1-2 video services, 1-2 social networks etc.
A classic reason for media concentration is the nature of the product. During the digital age a media product is not a physical object, which you can really sell or use up.
You can make endless copes, and the costs do not pile up: there is practically no added cost from making a digital copy. This makes the initial investment – the cost of creating the first copy or production structure – the most important cost of any media corporation.
Thus, media economics is directed by two principles – economics of scale and economics of scope. The first shows that when the scale of production increases, the average cost of production will decrease. Therefore, large corporations are always more cost-effective.
The economics of scope show that large media corporations – ones that encompass a great deal of intellectual property or production equipment and act on various platforms simultaneously – can use this synergy to become more effective than smaller operations with a smaller production catalogue and limited access to equipment.
It is widely known that markets relying on economics of scale and/or scope, that focus on large initial investments, are prone to large-scale structural market failures.
This means the market is not entirely free and is at the same time developing toward an oligopoly.
At this time of net services all of the above can be affected by the so called net effect, which will turn demand toward economics of scale – every single will benefit when a service is used by others as well. For example, if everyone uses Skype, it will be more beneficial for everyone – they can access a larger mass of people easily.
The same logic applies partially in case of all media services in which an auditorium seeks a shared experience – this is especially visible in sharing platforms, such as YouTube, which is preferred by sharers and their auditoriums thanks to the size of the user community.
The same applies to advertisers – they are also interested in reaching a larger public with minimal effort, which gives an edge in advertising sales to larger media corporations.
All this is complemented by the so-called attention economy approach – media markets are no longer structured by their own limitations, but the limitations of the user’s time. This means large cross-platform media empires have bigger “muscles” when it comes to grabbing the attention of the public.
The internet age brings us to an interesting question: how tight are these oligopolies?
One the one hand such a structure recreates itself quite successfully, but on the other hand, the pace of innovation has increased during the Internet age, which gives us hope that free enterprise is always capable of shifting the market balance. The concentration of markets at the age of Internet media needs more research and such researches will benefit policy makers, in case the research shows that concentrated media markets do not service the society in the best possible way.
This applies especially to the so-called European digital single market, which is currently terrified by the negative effect of US content suppliers (Netflix, Amazon etc.) to national media corporations.