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Most industries that make up the media economy have one of three common structures: monopoly, oligopoly, and limited competition.

Monopoly

A monopoly arises when a single firm dominates production and distribution in a particular industry—nationally or locally. For example, at the national level, AT&T ran a rare government-approved and -regulated monopoly—the telephone business—for more than a hundred years until the government broke it up in the mid-1980s. And Microsoft dominates the worldwide market for business computer operating systems.

On the local level, monopolies have proved more plentiful, arising in any city that has only one newspaper or one cable company. The federal government has encouraged owner diversity since the 1970s by prohibiting a newspaper from operating a broadcast or cable company in the same city. But since 2003, the Federal Communication Commission (FCC) has made several efforts to relax cross-ownership rules, arguing that the Internet and cable and satellite television provide sufficient informational diversity for citizens. Media activists have countered that the large traditional media are still the dominant news media in any market, and that when they merge, it results in fewer independent media voices.

Oligopoly

In an oligopoly, just a few firms dominate an industry. For example, in the late 1980s, the production and distribution of the world’s music was controlled by only six corporations. By 2004, after a series of acquisitions, the “big six” had been reduced to the “big four” —Time Warner (U.S.), Sony (Japan), Universal (France), and EMI (Great Britain). In late 2011, Universal purchased EMI at auction; the deal, when finalized, will leave only three corporations controlling the vast majority of the world’s music. The Internet is also changing the music game, enabling companies like Apple to gain new dominance with innovative business models such as the iTunes store. Time will reveal whether “the big three” maintain their status as an oligopoly.

Firms that make up an oligopoly face little economic competition from small independent firms. However, many oligopolies have purchased independent companies to nurture the fresh ideas and products the small companies have generated. Without the financial backing of an oligopoly, those ideas and products might not have made it to market.

Limited Competition

Limited competition characterizes a media market that has many producers and sellers but only a few products within a particular category.¹ For instance, hundreds of independently owned radio stations operate in the United States. However, most of these commercial stations feature just a few formats—such as country, classic rock, news/talk, or contemporary hits. Fans of other formats—including blues, alternative country, and classical music—may not be able to find a radio station that matches their interests. Of course, as with music, the Internet is changing radio, too, enabling companies like Pandora and Spotify to offer streaming audio for a huge array of formats.