Concentration in Media Systems

Concentration of ownership in the media sector presents important problems for the cultural industries. First, concentration creates dominant positions for some players, which can affect the necessary pluralism of ideas in a society. From another point of view, there are strong pressures to allow strong players in a given market because of the growing trend toward globalization in cultural markets. The digitization of the whole field of cultural production and technological convergence processes have also stimulated concentration.

The Problems Of Concentration

As Sánchez Tabernero and Carvajal have specified, “concentration can be analyzed from the market viewpoint or from the perspective of the companies. In the first case, concentration increases when the position of dominance or influence of the main companies becomes stronger, the public’s power of choice is reduced and when some ‘independent voices’ disappear. From the business point of view, concentration implies industrial growth of the communications groups” (2002a, 15). Economic centralization explains how a few players increase control of the means of production in a given society. From a critical perspective, the main danger with concentration is the trend toward oligopoly (i.e., when the market is dominated by a small number of companies) and monopoly (when the market is dominated by a single firm, instead of a large number of companies).

Less critical theories are more tolerant of concentration. For instance, Schumpeter (1943) argues that imperfect markets with a certain amount of concentration stimulate innovation and economic development, so long as this dominant position does not entail abuse over long periods of time. And classical economic theories support the self-regulatory capacity of the market and underestimate the ability of state action to prevent concentration.

The concentration of media systems implies a process whereby a certain set of companies tends to increase the relative or absolute number of units that they control (Miguel de Bustos 1993). This phenomenon involves companies adopting two strategies of growth: internal growth takes place when new products are created to gain markets thanks to investment and accumulation; external growth involves the purchase of other companies. Even though the capital demands tend to be larger for external growth, it has the advantage of immediate growth with foreseeable risk. In the cultural sector, internal and external growth result in three forms of concentration, which are also found in other industries.

First, horizontal integration or monomedia expansion occurs when a company produces various final products within the same type of business. Monomedia expansion takes place within the same business, with the objective of increasing market share, eliminating idle capacity of the company, and allowing the formation of economies of scale. This type of concentration developed early in the history of the press, with the consolidation of press groups. There is also strong monomedia concentration in the phonograph and cinema markets.

Second, vertical integration or expansion takes place when companies that operate in different stages of the value or supply chain are added. In this case, the companies expand with the objective of embracing different phases of production, from raw materials to the finished product, in order to obtain a reduction of costs and better supply. This type of concentration generally allows for the lowering of the costs of intermediation. Transactional costs are reduced and the power of suppliers and dominant buyers become more limited. Particularly in the audiovisual sector, companies depend on reliable access to content and/or distribution of this content. This type of concentration has been growing worldwide during the past two decades.

Third, diagonal or lateral growth of conglomerates represents diversification outside the original business, with the objective of reducing risks by developing synergies. According to Gillian Doyle (2002), evidence suggests that diagonal growth is the most effective way to facilitate the sharing of specialized content or a supply structure. Diversification allows companies to disseminate the costs of the risks involved in innovation in a variety of formats and methods of distribution. The appearance of the Internet has apparently promoted this possibility. Another example of such growth strategies is the conglomerate growth of the daily press, which has tried to explore more profitable sectors, such as TV. This is a long-term strategy with the objective of securing safer investments, to counteract the slightly lowering trend of decreasing profit rates.

Alberto Pérez Gómez (2002) identifies five forms of concentration: horizontal integration or monomedia; vertical integration; multimedia integration, when a company controls different types of media; conglomeration, when a company goes beyond the communications sector; and internationalization, when a company transcends national boundaries. Because of the growing convergence between the telecommunications, computer, and audiovisual sectors, some authors argue for the need to incorporate the category of convergence into the processes of concentration (Miguel de Bustos 2003). In this way, convergence would include offline activities that move toward the Internet. These forms can obviously complement or juxtapose each other.

As a result of concentration processes, companies acquire a firmer standing and act as barriers to the entrance of other companies. In an international and dynamic market, companies often face a dilemma on how to grow: either by acquisition – purchasing smaller firms – or by merging with international groups.

The multiplication of mergers and acquisitions of companies in the information/ communication sector has given rise to a new structure of conglomerates, replacing the traditional corporate structure of these firms. Despite the growing levels of concentration, the existence of thousands of small companies with a short life and little economic relevance is still functional to the process, whereby they renew the market by exploring new formats.

Measuring concentration poses a problem. There are several recognized methods and indicators, such as the index of relative entropy, the GINI index, which can be represented by a Lorenz curve, the four-firm concentration ratio (CR4), and the Herfindahl–Hirschman (HH) index. Although concentration can be measured, it is much more complex to quantify its effects on pluralism and diversity.

Another important problem is analyzing the issue of control. Historically, media companies have been family owned. Yet recent decades have seen a gradual change toward dispersed capital companies. In order to understand concentration processes as such, it is necessary to analyze the different forms of control and participation in the large groups or conglomerates.

Different Approaches To Concentration

There are three dominant positions on concentration: first, a liberal perspective that does not question concentration processes except for the case of monopoly; second, the critical school, which identifies concentration of ownership as one of the main capitalist mechanisms for its legitimacy; and, third, an eclectic position that does not share the critical view, but is concerned about the risks of concentration and argues for state interventionism to limit it.

From a liberal perspective, Eli Noam (2006) claims: “Pluralism is important. But there is no conceptual, practical or legal way to officially define and measure the vigor of a marketplace in ideas. The best one can do is to count voices, and assume that in a competitive system, diversity of information increases with the number of its sources.” To improve the analysis of the impact of media concentration of ownership, Noam divides the HH index (which is a sign of market power) by the square root of the number of voices. In this way, the index allows for consideration of different markets.

Other recent works in the United States intend to show that the presence of the big media conglomerates does not affect informational balance, sources, or even electoral behavior (Groseclose & Milyo 2005; Della Vigna & Kaplan 2006). From this perspective, concentration of ownership would not be a threat for democratic societies.

In Europe, the liberal thesis is found in the works of Spanish authors such as Alfonso Nieto, Francisco Iglesias, and Alfonso Sánchez Tabernero. Nieto and Iglesias (2000) point out that “the power to inform under circumstances of monopoly are not legitimate . . . but a direct sign of political or economic power which hinders competition in the information market.” Alfonso Sánchez Tabernero and Miguel Carvajal (2002b) believe that the concentration of media markets has clear limits because an inordinate amount of growth could lead to paralysis. Even though these authors recognize that the concentration of power can be an obstacle to free competition and to the exchange of ideas, they emphasize that growth processes should not be stopped because that would interfere with success and innovation.

A study conducted by World Bank researchers points out that in modern societies and economies, the availability of information is central to the best decision-making by citizens and consumers because of efficiency. The media are intermediaries that collect information and place it at the disposal of consumers and citizens, and, according to the researchers, private organization of this content is superior to public organization (Djankov et al. 2001).

From another perspective, the critical school has denounced the processes of concentration of ownership. In a pioneering work, Ben Bagdikian (1983) shows how the owners of the media promote their own values and interests. Their interference in editorial policies can be either indirect, through the influence of editors and selfcensorship, or direct, through the rewriting of text. Furthermore, the concentration of ownership in the hands of the economically dominant sectors tends to inhibit the expression of voices critical of the system. Following the same lines, but more recently, Edward Herman and Robert McChesney (1997) draw attention to the risks of communications concentration at a global level, transcending historical national barriers: “According to the logic of the market and convergence, we should expect the global oligopoly of the media to evolve gradually to an even larger communications oligopoly.” In Europe at the beginning of the 1990s, the British researcher Graham Murdock observed with concern the conflicts inherent in concentration: “Press freedom was seen as a logical extension of the general defense of free speech. This was plausible so long as most proprietors owned only one title and the costs of entering the market were relatively low . . . By the beginning of this century the age of the chain ownership and the press barons had arrived, prompting liberal democratic commentators to acknowledge a contradiction between the idealized role of the press as a key resource for citizenship and its economic base in private ownership” (Murdock 1990).

In Spain, the work of Enrique Bustamante (1999), Ramón Zallo (1992), and Juan Carlos Miguel de Bustos (1993) stands out among Latin researchers studying these issues. The work of Miguel de Bustos provides a detailed analysis of the structures and strategies of media groups.

There is also work that represents an intermediate group with respect to the two previous schools. Gillian Doyle (2002) offers two ways of approaching the subject. On the one hand, she presents economic and industrial arguments that tend to favor a more legal approach to the problem, with an inclination to allow some level of concentration. On the other hand, she also discusses perspectives that focus on society and citizens, political power, political pluralism, and cultural diversity.

Pérez Gómez (2002) analyzes the advantages and disadvantages of concentration in media systems. In the first case, he underlines the exploitation of synergies and economies of scale, as well as the possibility to improve distribution and lower costs. Bureaucracy and limits to competition stand out as the risks. Yet, the major problems are not so much in the economic area but with the issue of information pluralism. Pérez Gómez is not conclusive as to whether concentration affects pluralism of information, and argues that it is very difficult to determine the cases in which it does influence it.

Finally, Carles Llorens Maluquer (2001) envisages the need to defend pluralism and diversity in the media, which shape public views, although not exclusively. He warns that the homogeneity of audiovisual services has more to do with competition than with the concentrated structure of the industry. According to him, “the liberalization of the audiovisual sector has promoted pluralism, but the levels of diversity remain the same or have decreased.”

Empirical Studies

Several works have approached the difficult task of studying empirically the processes of concentration of media ownership. In most of them the analysis is focused on the national structure in certain countries. A much smaller number of studies have analyzed concentration on a regional scale, with a comparative approach.

Europe is the region with the greatest work on the subject. At the beginning of the 1990s, the Commission for the European Community sponsored a study by Booz-Allen and Hamilton on pluralism and concentration in the media (1992). This report shows a strong concern with the risks that pluralism would encounter when faced with concentration processes, especially in the distribution and consumption of media. The study analyzed the situation of twelve member countries of the European Community at the time. Even though the main focus was centered round consumption, it highlighted the predominance of the public media, as well as the growing role of the large media groups in the main European markets. It also sent a warning about the incipient transnationalization of broadcasting, currently limited by national frontiers. The researchers’ proposal was to harmonize different legislation in order to guarantee pluralism.

A more recent study commissioned by the Netherlands Media Authority analyzed the levels of concentration of ownership in the national and regional press, radio, and television markets (Ward 2004). The study takes into account the percentage of audience share and turnover of the first three operators of each country and the presence of media groups that hold assets in diverse media markets (cross-ownership). The report states that there are several regulatory instruments that guarantee pluralism in media markets. Nevertheless, it warns that the concentration processes are reaching the levels established by law. Even though the public media still retain a considerable market share in radio and television, the report points out that since the 1990s, the concentration of media ownership has increased on a yearly basis.

Another study conducted in eighteen eastern European countries shows the growing level of concentration of the media in the region. Even though the passage from state-owned media to mixed systems after the fall of the communist regimes led to the appearance of a significant number of new media, both print as well as electronic, a strong concentration process based on a market rationale took place rapidly. A new group of media came onto the stage after a privatization process where the interests between the media and political parties became a matter of fact. The report emphasizes the following common denominators: small and fragmented markets, a strong bond between media owners and political parties, state influence through the granting of subsidies, a monopoly in press distribution, and the growing presence of foreign capital. The report recommends the establishment of limits to the concentration of media ownership (Petkovic 2004).

In Latin America, Mastrini and Becerra (2006) have done research that takes into account the structure of the cultural industries’ markets and their levels of concentration. In the first place, the economic relevance of the information/communications sectors was analyzed; second, measurement of concentration levels was assessed in six different markets (press, radio, open television, paid television, basic telephony, and mobile telephony) of ten countries in the region. Finally, the study analyzed the main media groups in each country. The results show a very high degree of concentration in all cases. In fact, the research shows that the first four operators dominate 80 percent of every market.

These are not the only studies of media concentration. However, these are useful examples of how concentration studies have been conducted. The research does not typically include a methodology to relate concentration of ownership with media content. All of these cases highlight the high level of concentration reached in the different markets, the presence of media and communication groups that have dominant positions in several media markets, and the need to have regulations that protect content diversity and media pluralism.

References:

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