In addition to the consolidation trend, a number of other factors characterize the economics of mass media businesses. These are general trends or tendencies that cut across most business sectors and demonstrate how contemporary global economies operate.

Flexible Markets and the Decline of Labor Unions

Today’s information culture is characterized by what business executives call flexibility—a tendency to emphasize “the new, the fleeting … and the contingent in modern life, rather than the more solid values implanted” during Henry Ford’s day, when relatively stable mass production drove mass consumption.¹¹ The new elastic economy features the expansion of the service sector (most notably in health care, banking, real estate, fast food, Internet ventures, and computer software) and the need to serve individual consumer preferences. This type of economy has relied on cheap labor—sometimes exploiting poor workers in sweatshops—and on quick, high-volume sales to offset the costs of making so many niche products for specialized markets.

Given that 80 to 90 percent of new consumer and media products typically fail, a flexible economy has demanded rapid product development and efficient market research. Companies need to score a few hits to offset investments in failed products. For instance, during the peak summer movie season, studios premiere dozens of new feature films, such as Iron Man 3, Man of Steel, and World War Z in 2013. A few are hits but many more miss, and studios hope to recoup their losses via merchandising tie-ins and DVD rentals and sales. Similarly, TV networks introduce scores of new programs each year but quickly replace those that fail to attract a large audience or the “right” kind of affluent viewers. This flexible media system, of course, heavily favors large companies with greater access to capital over small businesses that cannot easily absorb the losses incurred from failed products.

The era of flexible markets also coincided with the decline in the number of workers who belong to labor unions. Having made strong gains on behalf of workers after World War II, labor unions, at their peak in 1955, represented 35 percent of U.S. workers. Then, manufacturers and other large industries began to look for ways to cut the rising cost of labor. With the shift to an information economy, many jobs, such as making computers, CD players, TV sets, VCRs, and DVDs, were exported to avoid the high price of U.S. unionized labor. (Today, in fact, many of the technical and customer support services for these kinds of product lines are outsourced to nations like India.) As large companies bought up small companies across national boundaries, commerce developed rapidly at the global level. According to the U.S. Department of Labor, union membership fell to 20.1 percent in 1983 and 11.8 percent in 2011, the lowest rate in more than seventy years.

Downsizing and the Wage Gap

With the apparent advantage to large companies in this flexible age, who is disadvantaged? From the beginning of the recession in December 2007 through 2009, the United States lost more than 8.4 million jobs (affecting 6.1 percent of all employers), creating the highest unemployment contraction since the Great Depression.¹² This phenomenon of layoffs—in both good times and bad—is characteristic of corporate “downsizing,” which is supposed to make companies more flexible (in terms of their commitment to their workforce) and more profitable.

This trend, spurred by government deregulation and a decline in worker protections, means that many employees today scramble for jobs, often working two or three part-time positions. Increasingly, the available positions have substandard pay. In 2011, the National Employment Law Project reported “more than one in four private sector jobs (26 percent) were low-wage positions paying less than $10 per hour.”¹³ This translates to a salary of about $20,000 a year or less. And, the “flexible” economy keeps moving in that direction. The U.S. Bureau of Labor Statistics estimated in 2012 that 70 percent of the leading growth occupations for the next decade are low-wage ones.¹⁴ In the news media, the emergence of online news sites, blogs, and other ventures (e.g., the Huffington Post or Politico) has led to the “downsizing” of traditional newsrooms—95 of the top 100 newspapers cut staff between 2006 and 2010. Layoffs and buyouts in newsrooms mean there are fewer reporters and editors to develop new ideas and innovative techniques to compete with the online news vendors, although in some cases the new online media have created opportunities for displaced news workers.

The main beneficiaries of downsizing, especially in the 1990s, had been corporate CEOs—many of whom had overseen the layoffs. The 2008 Nobel economist and New York Times columnist Paul Krugman reported on the growing gap between CEOs and average workers, stating that back in 1950 corporate CEOs earned about twenty-five times the average worker’s pay. Between 1970 and 2000, however, “the average annual salary in America, expressed in 1998 dollars (that is, adjusted for inflation), rose from $32,522 in 1970 to $35,864 in 1999. … Over the same period, however … the average real annual compensation of the top 100 CEOs went from $1.3 million—39 times the pay of an average worker—to $37.5 million, more than 1,000 times the pay of ordinary workers.”¹⁵ The major economic recessions of the 2000s have lessened the wage gap between CEOs and the average worker, but the gap was still significant enough to be an issue that spurred the Occupy Wall Street protests in 2011. Even as most big businesses had recovered from the recession and experienced record profits by 2011, their low-wage workers’ wages still suffered. For example, at the top fifty low-wage employers, including Target, McDonald’s, Panera, Macy’s, and Abercrombie & Fitch, the highest paid executives earned an average of $9.4 million a year. At that rate, they earned about $4,520 an hour, an amount it would take more than six hundred minimum wage employees to earn in the same time period.¹⁶ (See Table 13.1, “How Many Workers Can You Hire for the Price of One CEO?”)