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THE BUSINESS OF MASS MEDIA

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Some of today’s biggest mass media corporations have long histories in which they adapted to various technological changes, including the mass media’s recent digital turn. The Warner Brothers part of the current Time Warner conglomerate got its start in 1903, when three brothers established their first movie theater in Cascade, Pennsylvania. Disney started in the back area of a small Los Angeles real estate office in 1923, producing animated shorts as the Disney Brothers Studio. NBC started out in 1926 as a radio network formed by RCA (founded in 1919) and is currently a part of NBC Universal, which is a subsidiary of cable and broadband giant Comcast (founded with just over a thousand cable subscribers in Mississippi in 1963). CBS, another major media corporation, began as a small radio network—the United Independent Broadcasters—in 1927 and quickly became a formidable challenger to NBC in radio and later television.

There can be big advantages to having the resources, name recognition, and established political connections that come with being a long-time powerful member of mass media, like Time Warner, Disney, Comcast, and CBS. But in the age of the Internet, the leap from start-up to digital media powerhouse can happen in a few years or less. Two prime examples of this are Google and YouTube.

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Google traces its origins to 1995, when Stanford student Sergey Brin was assigned to show prospective student Larry Page around campus. A year later, the pair were collaborating on a prototype search engine; and in 1997, they registered the domain name “Google.com”—a play on the mathematical word googol (the number written out as a one followed by one hundred zeros). In 1998, the pair officially registered the company as an entity and hired their first employee. The company proceeded to grow at a startling pace, adding an increasing amount of services and features every few months, including AdWorks in 2000, Images in 2001, Google Shopping in 2002, Gmail in 2004, Google Maps and a mobile search app in 2005, the Android mobile operating system and Chrome browser in 2008, the first Nexus mobile device and Google TV in 2010, Chromebooks in 2011, Chromecast in 2013, and prototypes of self-driving cars in 2014. Google is now one of the leading digital conglomerates in the world.

If anything, YouTube is even more of a digital age success story in terms of speedy accomplishments. The three founders—Chad Hurley, Steve Chen, and Jawed Karim—say they got the idea for a video-sharing site during a dinner party, and on Valentine’s Day in 2005 they registered the trademark, name, and logo for YouTube. The first video (of Karim at the zoo) was posted on April 23, and by September, the site got its first million-hit video (a Nike ad). By December, the company was getting major investment attention and was more widely available after upgrading bandwidth and servers. Google bought YouTube in October 2006, just a year and a half after the first video was posted, for $1.65 billion.

The economic impact of a video-sharing and social media site like YouTube goes well beyond the video and banner ads Google can sell on the site. The site has been used for various purposes—training, information, politics, film festivals, or as a way to launch music careers. Usher used YouTube to introduce Justin Bieber in 2009, and Psy hit it big with the “Gangnam Style” video in 2012, the first YouTube video to garner over one billion hits (see “Psy and the Meaning of ‘Gangnam Style’” on page 142). YouTube is also challenging the traditional entertainment media. Some of the leading celebrities in the eyes of U.S. teens aren’t mainstream stars but YouTube sensations like Smosh, KSI, Ryan Higa, and Jenna Marbles, all of whom have tens of millions of subscribers.1 Google’s acquisition of YouTube continues to be a good investment, with the amount of time people spend watching YouTube each month up 50 percent over the previous year.2

The logistics behind the rise of digital conglomerates like Google and its subsidiary may be different from those behind traditional mass media companies like Time Warner or Disney, especially in the speed with which they get results. But the enormous flow of money and substantial power over the media landscape make the economics of these relative newcomers just as important when studying the media.

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THE MEDIA TAKEOVERS, MULTIPLE MERGERS, AND CORPORATE CONSOLIDATION over the last two decades have made our modern world very distinct from that of earlier generations—at least in economic terms. What’s at the heart of this “brave new media world” is a media landscape that has been forever altered by the emergence of the Internet and a changing of the guard, from traditional media giants like Comcast and Time Warner to new digital giants like Amazon, Apple, Facebook, Google, and Microsoft. As the Yahoo! and Netflix ventures demonstrate, the Internet is marked by shifting and unpredictable terrain. In usurping the classified ads of newspapers and altering distribution for music, movies, and TV programs, the Internet has forced almost all media businesses to rethink not only the content they provide but the entire economic structure within which our capitalist media system operates.

In this chapter, we examine the economic impact of business strategies on various media. We will:

As you read through this chapter, think about the different media you use on a daily basis. What media products or content did you consume over the past week? Do you know who owns them? How important is it to know this? Do you consume popular culture or read news from other countries? Why or why not? For more questions to help you understand the role of media economics in our lives, see “Questioning the Media” in the Chapter Review.