Unit 12 Passage One Economic Foundation of Mass Media

John Vivian

The mass media are expensive to set up and operate. The equipment and facilities require major investment. Meeting the payroll requires a bankroll. Print media must buy paper by the ton. Broadcasters have gigantic electricity bills to pump their messages through the ether.

To meet their expenses, the mass media sell their product in two ways. Either they derive their income from selling a product directly to mass audiences, as do the movie, record and book industries, or they derive their income from advertisers who place advertisements for mass audiences that the media provide,as do newspapers magazines, radio and television. In short, the mass media operate in a capitalistic environment, and, with few exceptions, they are ill business to make money.

Advertising Revenue. Advertisers pay the mass media for access to potential customers. From print media. advertisers buy space.From broadcasters, they buy time.

Generally, the more potential customers a media company can deliver to advertisers, the more advertisers are charged for time or space.CBS had 40 million viewers for the 1996 Super Bowl, and it charged $1.3 million for a 30 second commercial. A spot on a daytime program, with a fraction of the Sup Bowl audience, typically goes for $85,000. Time magazine, claiming a 4.6 million circulation, charges $138, 200 for a full-page advertisement. If Time's circulation were to plummet, so would its advertising rates. Although there a exceptions,newspapers, magazines, television and radio support themselves with advertising revenues.

Book publishers once relied solely on readers for revenue, but that has changed. Today, book publishers charge for film rights whenever Hollywood turns a book into a movie or a television program.The result is that publishing houses now profit indirectly from the advertising revenue that television networks pull in from broadcasting movies.

Movies too have come to benefit from advertising.Until the 1950s, movies relied entirely on box-office receipts for profits,but moviemakers now calculate what profits they can realize not only from“moviehouse traffie”but also from recycling their movies through advertisingsupported television and home videos. The home video aftermarket, in fact now accounts for the lion’s share of movie studio income.Today, moviemakers even pick up advertising directly by charging commercial companies to include their produets in the scenes they shoot

Circulation Revenue. While some advertising-supported mass media, such as network television, do not charge their audiences,others do. Wall Stree Journal readers pay 75 cents a copy at the newsrack.Rolling Stonecos$3.95.Little if any of the newsrack charge or even subscription revenue ends u with the Wall Street journal or Rolling Stone.Distribution is costly, and distributors all along the way take their cut. For some publications, howee. subscription income makes the difference between profit and loss.

Dinect audience payments have emerged in recent years in broadeasing. Cable subscribers pay a monthly fee Audience support is the basis of subscription television like commercial-free HBO. Noncommercial broadeasing. including the Public Broadeasting Service and National Public Radio,relies heavily on viewer and listener contributions. Record makers, mavienakers and book publishers depend on direct sales to the consumer.

Besides advertising and circulation revenue, some media units derive income from other sources, including donations.

Audience Donations. Audience donations are important to some mediz operations. Public radio and television stations, which carry no advertising solicit their audiences for contributions. On-air fund drives, usually running one week twice a year, raise as much as 30 percent of many stations’ budgets. Why do listeners and viewers cough up $50 or more for publicstation programming when there is so much free media available? On their fund drives, the stations emphasize their heavy emphasis on public affairs and high-brow cultural content, which is hard to find in advertising supported media.The stations then state, quite frankly, the continuance of the programming is dependent on volunteer contributions. The pitches take many tacks, some of dubious logic, some guilt trips, and some carrying an implied threat.

Even so, they raise significant funding:

• "You pay for your newspaper, so why not your news from NPR?"

• "Do your share. Don't leach on your neighborscontributions."

• "If we don't receive your pledge, we may not be able to continue the quality of programming you've come to expect. "

Private Support. The Christian Science Monitor, which maintains an rxpensive staff of foreign correspondents, has lost money for 30 years. Neither dvertising nor subseription income is sufficient to meet expenses. In recent years, the Monitor has been in the red $ 12 million to $16 million a year. The 

lasses were made up as always by the Christian Science Church, which sees par of its mission as providing quality news coverage of world affairs. Similarly.th Unification Church of the Reverend Sun Myung Moon2 underwrites the money losing Washington Times.

Private support, largely from philanthropic organizations,helps keep the Public Broadcasting Service and National Public Radio on the air. The Federal Communications Commission does not allow PBS, NPR or their affiliate station to accept advertising.

Many limited-circulation publications are supported by organizations that seek to influence limited audiences. Corporations like Exxon produce classy magazines geared for opinion leaders-state legislators, municipal officials an college professors. Special-interest groups such as the trucking industry, religious denominations and professional groups produce ad-free publications and video productions to promote their views.

Government Subsidies. The idea of government support for the mass media might seem contrary to the democratic ideal of a press that is fiercely independent of government, if not adversarial. The fact, however, is that Congress has provided as much as $286 million a year in tax-generated dollars for a quasi government agency, the Corporation for Public Broadcasting, to funnel to the nation’s noncommercial television and radio system. Buffers are built into the structure to prevent governmental interference in programming.The buffers seem generally to have worked.Some statesincluding Minnesota,New Mexico and Wisconsin, provide state tax dollars for noncommercial broadcasting.

Government dollars also constitute a small portion of mass media advertising revenue. State legislatures appropriate money to buy television and broadcast time, as well as newspaper and magazine spaceto promote tourism and to attract new industry. The Defense Department buys space in publications for recruiting troops. The U.S.Postal Service promotes its services through advertising. Newspapers and magazines benefit from discount postal rates, a kind of government subsidy.

Some states require regulated industries, such as insurance companien, u buy space in the state's newspapers to publicize their financial reporte Although these reports, called legal advertisements or legals, are in tiny ana type, the same size as classified ads, the fees from them are important incoe for many publications.Some publications also have an indireet subsidy from school boards and other government units that are required by law to publish their minutes and sometimes budgets and other documents.These too are called legals.

Auxiliary Enterprises.Many media companies have nonmedia enterprises that generate income that can relieve the profit pressure on their medi operations. For years, the Chicago Tribune made handsome profits selling newsprint from its Canadian paper factories.Such auxiliary enterprises can tide the media properties through lean times. In 1997, the Public Broadcasting System@ decided to exploit its brand name bystepping up the marketing of PBs products and services.Many PBS and NPR affiliates issue catalogs withT-shirts. tapes, toys and trinkets that are spin-offs from programs.