Sources of Revenue
There are two main sources of revenue for the mass media: consumer purchases and advertising. Consumers pay directly for some media messages, such as going to the movies, subscribing to cable, satellite or on-demand online streaming services, and buying magazines, e-books, or DVDs. Advertising dollars also support many of the same media that consumers purchase (magazines, newspapers, cable TV) because purchases alone are not enough to keep these industries afloat. Advertising is also the sole support for several other media, including broadcast TV and radio and much of the Internet. Advertising rates are determined mainly by how many people are in the audience (and for how long). For print media, this means circulation size (the number of people who buy or subscribe to newspapers and magazines); for live TV and radio, this primarily means ratings (the number of households that are in the viewing/listening audience for a given time slot, including those who record and watch later the same day). For Web sites and streamed TV content on computers or mobile devices, usage data can get more complicated, but everything gets measured—from unique hits (that is, individual visitors to a site) and the amount of time people spend browsing to people’s patterns of click-through behavior with links. Your “second screen” time matters as well—advertisers want to know, for example, how often while you are watching TV that you also “check in” with an app like Viggle on your mobile device.
FOLLOWING THE economic principle of exponentiality, blockbusters such as Despicable Me 2 bring in most of the film industry’s profits and pick up the slack of box office bombs, such as R.I.P.D. (left) © Universal Pictures/Courtesy Everett Collection; (right) Scott Garfield/© Universal/Courtesy Everett Collection
Big box office and high ratings are keys to mass media success because mass communication messages are expensive to make and deliver. For example, the production and promotion costs of a half-hour TV sitcom can range from several hundred thousand dollars per episode to several million. Such high investment costs mean that profit can be elusive. In fact, most new TV shows are canceled, few movies become blockbusters, most novels do not become bestsellers, and few albums have strong sales (Vogel, 2011). How, then, do they ever make money? The few blockbuster movies, bestselling books, and hit television shows or albums must make up for all the rest. In economics, this is called exponentiality: relatively few items bring most of the income, while the rest add only a little (Vogel, 2011). Across the media industries, about 80 to 90 percent of mass media revenue comes from only 10 to 20 percent of the products made.