Recap: Three strategies to deal with culture

Universalization (e.g., Doraemon) Localization Transculturation

5. Economics of Print Media

5.1 Economics of the daily newspaper 5.2 Economics of books and magazines

5.1 Economics of the Daily Newspaper

Newspaper markets Financial performance Government policies Globalization

The Newspaper Market

One of the most profitable of all media industries even though the circulation is in decline A means of reaching mass audiences, rather than segmented audiences, in the eye of advertisers

The Newspaper Market

Primarily a monopoly (96%) in the U.S. Where there is competition, differentiated newspapers exist (e.g., broadsheet vs. tabloid) Barriers to entry are high, because of

Costs Advertiser preferences

The HK Newspaper Market

Facts Monopolistic competition

Financial Performance

Dual product market Circulation spiral: circulation advertising Increased prices as a result of inelastic demand for newspapers; i.e., no close substitutes are available for consumers to choose other products at a lower price

Daily vs. weekly papers TV, cable, and radio

Advertising

Newspapers get 5 times more advertising revenue today than they did at the end of WWII 3 major categories:

National advertising Retail advertising (from local businesses) Classified advertising

More substitutability is evident in the advertising than in the information product market

Operating Budgets

Revenues

Expenses

Advertising

65-80%

Local/retail 55-60% Classified 20-35% National 10-15%

Circulation

20-35%

Editorial 7-10% Advertising 5-6% Circulation 9-10% Promotion 1-2% Mechanical 13-15% Newsprint 15-30% Administration 8-12% Building and land 1-3%

Cost Structure

High first-copy costs Relatively low reproduction costs because of economies of scale

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Government Policies

No comprehensive economic policy toward the newspaper industry has ever been established in the U.S. Tax exemptions and incentives Anti-trust laws

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Globalization

The newspaper industry is less affected by globalization and remains primarily a domestic industry Agree? Disagree? Newspapers vs. magazines vs. books Overseas Chinese newspapers

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5.2 Economics of Books and Magazines

Market structure Financial performance Government policies Globalization

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The Book/Magazine Market

Americans are spending less time and money on consumer books and magazines Books

Intense competition Minimal barriers to entry Mergers and acquisitions since the 1960s

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The Book/Magazine Market

Magazines

Monopolistic competition Total number of magazines purchased: 1.3 copies/adult Average cost for a single copy at newsstands: US$2.13 Growing consolidation

AOL Time Warner was the largest owners of magazines in the U.S.

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Financial Performance

Books

Most books are discounted by publishers to bookstores, distributors, etc. Profit and loss (P&L) analysis
Revenue streams

Magazines

Paid circulation Newsstand circulation Ads

Business model

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The Prospects of E-books?

Low consumer acceptance

Too expensive
Inconvenient and unappealing

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Web-based Magazines

E-magazines can break new stories, update existing articles, and provide useful links Allow advertisers to buy both print and electronic ads simultaneously Convergence is the key Prospects?

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Globalization

The major export destination of U.S. books

Canada UK Australia Hong Kong Mexico The Netherlands Taiwan The Philippines

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