At the end of 2010, South Korean conservative government granted four major conservative newspapers the licenses to operate new cable TV channels, which are comprehensive programming channels almost like terrestrial networks. The government’s decision was made after years of severe nationwide debate, division and cross-industry bickering. Although it was very questionable whether the market could milk additional TV advertising spots from advertisers, the government claimed that the new channels would generate enough advertising revenue. However, even though the new channels have greatly lowered their price for advertising spots, they are “drowning in red ink.” The government really did not know that television advertising is price inelastic? Or, just because of the political thinking, they were blind to media economics?
Sunday, September 9, 2012
They really didn’t know the price inelasticity of the demand for TV advertising?
According to HMF, the concept of price elasticity of
demand – especially, “the demand for television advertising is price inelastic”
- can be relevant to public policy. I totally agree on that. I believe that media
policy makers have to keep in mind the basic economic theorem.
At the end of 2010, South Korean conservative government granted four major conservative newspapers the licenses to operate new cable TV channels, which are comprehensive programming channels almost like terrestrial networks. The government’s decision was made after years of severe nationwide debate, division and cross-industry bickering. Although it was very questionable whether the market could milk additional TV advertising spots from advertisers, the government claimed that the new channels would generate enough advertising revenue. However, even though the new channels have greatly lowered their price for advertising spots, they are “drowning in red ink.” The government really did not know that television advertising is price inelastic? Or, just because of the political thinking, they were blind to media economics?
At the end of 2010, South Korean conservative government granted four major conservative newspapers the licenses to operate new cable TV channels, which are comprehensive programming channels almost like terrestrial networks. The government’s decision was made after years of severe nationwide debate, division and cross-industry bickering. Although it was very questionable whether the market could milk additional TV advertising spots from advertisers, the government claimed that the new channels would generate enough advertising revenue. However, even though the new channels have greatly lowered their price for advertising spots, they are “drowning in red ink.” The government really did not know that television advertising is price inelastic? Or, just because of the political thinking, they were blind to media economics?
Subscribe to:
Post Comments (Atom)
Some follow-up questions:
ReplyDeleteWhat's the rationale behind the deregulation?
Did the newspapers welcome the policy?
From the public's perspective, why is this not a good thing?
How many existing channels compete for audience attention?
What are the plausible outcomes of this new policy?
The four Korean national dailies — the Chosun Ilbo, JoongAng Ilbo, Dong-A Ilbo and Maeil Business Daily — had been desperate not only to leverage their print dominance to television but also to overcome the recession of newspaper industry ever since 2009, when the incumbent government took steps to relax Korea’s traditional restrictions on newspaper-broadcasting cross-ownership, despite much concerns over the harm to diversity in public opinion and the thinly-stretched budgets of advertisers.
DeleteThe ostensible reason for the deregulation was that the new media outlets would push Korean broadcasting to another level and deliver better content that will allow them to expand internationally and become globally-relevant media companies.
The new channels have been trying to compete with national networks such as KBS, MBC, and SBS because they are comprehensive programming channels almost like terrestrial networks. They are, however, operating at a loss due to the very low viewer ratings and poor advertising spots.
This comment has been removed by the author.
ReplyDeleteTo know the economic concepts is one thing, but to put these concepts in use is another thing. When regulators try to introducing economic concepts to media market, there should be a premise which is to built a competitive environment. However, because of the scarceness and the influence of media (including the content providers and the platform operators), there are always a lot of compromises with reality.
DeleteTaiwan announced the “Cable Radio and Television Act” in 1993 to promote the sound development of the cable radio and television industry. Because of the low price and numerous channels, the penetration of cable television grown very fast and become the most popular media nationwide in a very short period. Therefore, government sets a low price ceiling and restricts the operators to adjust the price for protecting the right of access to media of all citizen. However, the limitation results in Taiwan’s cable television industry falls into a vicious circle. Although the operator provide hundred channels, but most of the programs have highly homogenous, and the cable television industry environment is lack of vitality. That could be another case of the blind to media economics.