Page 82 - Critical Political Economy of the Media

Media cultures, media economics, media problems 61

a whole, are regarded as equal. However, when social value and individual value
diverge markets will usually not produce efficient outcomes. For ‘non-rivalrous’
goods their social value is the sum of everyone’s willingness to pay, for instance:

The social value of a TV programme is not represented by my individual
valuation, but by the aggregate valuation of all those people who might
watch the programme. There is no reason why consumption should be
restricted to the person (or the group of persons) with the highest willingness
to pay, because their ‘consumption’ does not reduce the amount of the good
that is available for others. A market mechanism which excludes consumers
who are not willing to pay a certain price would not, therefore, lead to an
efficient outcome.
(Koboldt et al. 1999: 56)

This has underpinned the rationale for a shared tax on users (licence fee) in public
service systems (Graham et al. 1999). It also highlights efforts in commercial media
to find ways to create scarcity in order to realise value. In a celebrated essay on
media political economy Garnham (1979) describes the main mechanisms used by
businesses to manage the public good character of cultural and informational
good. These include making content scarce by enforcement of intellectual property
rights; controlling access through box-office or other restrictions on distribution;
creating built-in obsolescence through the manipulation of time (such as daily
news); and creating value by selling audiences to advertisers.
The third kind of market failure is monopoly. In competitive markets, new
firms will be encouraged to enter to capture a share of profits. According to the
theory of imperfect competition, however, cost advantages associated with size
will dictate that an industry should be an oligopoly unless either some form of
market intervention or government regulation prevents firms from growing to
their most efficient size. Under conditions of oligopoly, where a few firms dominate
a market, these firms will tend to raise prices, enjoy supra-normal profits and may
be reluctant to invest in innovation. Media markets tend towards concentration
(chapter five).
In addition to the market failure problems of concentration, public goods, and
externalities, Garnham (2000: 54, 59–62) highlights problems arising from the
network character of media. Media are organised around technologies of
reproduction and systems of distribution. Such networks present a problem for
the model of market competition amongst suppliers of discrete, substitutable
products or services on which neoclassical economics is based. Networks work
best when resources are shared and pooled for the benefit of both providers and
users (positive externalities). Yet this can mean that a monopoly service is both more
efficient and more welfare maximising than a fragmented market of competing
suppliers. A classical example is a nationwide postal service based on fixed price
stamps and deliveries to all households. Concentration, public goods and network
characteristics are all forms of ‘market failure’ in that they challenge the effective