In the economic history of electronic–and now digital–media, one key business strategy for enterprising technology companies and distribution services has been to transition into the content and storytelling business. In the 1920s, RCA, which pioneered commercial radio technology, started purchasing phonograph companies and radio stations–both content creators. Fast-forward to 1987–the Japanese electronics giant Sony paid $2 billion for CBS Records (renaming it Sony Music in 1991), and in 1989 Sony also acquired a major movie studio, Columbia Pictures, for $3.4 billion. In 2000, AOL, then the preeminent dial-up Internet company, also opted to take a chance on content creation and, for $164 billion, bought Time Warner–the world’s biggest media company at the time. However, because AOL underestimated the growth of broadband and wireless technology and fell behind in those areas, the merger went sour and Time Warner’s own executives eventually took charge and spun off AOL as a separate company in 2009. To rehabilitate itself, AOL got back into the content game in 2011, buying the popular Internet newspaper Huffington Post for $315 million.¹

Another technology company looking to rehabilitate itself with new media content is Yahoo! While many of its earlier Internet peers had already moved into the content business–Google bought YouTube, Microsoft developed Xbox and streaming media, Amazon publishes books and streaming media, and Apple distributes music and develops app downloads–Yahoo! (with the exception of its purchase of Flickr in 2005) had not offered much more than its own mostly aggregated content like Yahoo! Sports and Yahoo! News (Facebook’s content is provided by its users.) In 2013 Yahoo! bought the fast-growing Tumblr blog service for $1.1 billion in an effort to stake a claim in the social media content business. Given the media world’s history of other bad mergers, Yahoo! promised “not to screw it up” and reassured Tumblr’s mostly young users that it would not ruin their experience as it seeks to bring advertising to the service’s more than 100 million blogs.² Tumblr, as one of the most popular mobile apps, will also give Yahoo! content that is popular on mobile screens.³

Cable TV–for many years just a distributor of old network reruns and Hollywood movies–has also gotten into the business of developing its own content over the last few years, creating award-winning programs like The Sopranos, Mad Men, Dexter, and The Closer. More recently, Netflix is another media distributor entering the content creation business. Netflix, like cable TV in the early days, made its mark distributing old TV shows and Hollywood films–by sending DVDs through the mail and, later, by shifting its distribution system to streaming old TV programs and movies. In 2013 it premiered House of Cards, an original one-hour “political drama” starring Kevin Spacey. Just like a traditional TV network would, Netflix ordered twenty-six episodes of its new TV series.⁴ The company also ordered new episodes of the cult comedy series Arrested Development.

In the end, compelling narratives are what attract people to media–whether in the form of books or blogs, magazines or movies, TV shows or talk radio. People make sense of their experiences and articulate their values through narratives. And so “the story” of media economics today is–as it has always been–the telling and selling of stories.

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 News Corp. 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.