TEL 510 Media Economics

Spring 2001

Study guide for the final exam [May 1, 8:00AM]

Question Format:

The final exam will consist of eight to ten short answer and essay questions. It covers the materials taught during the whole semester.

Study topics:

General Introduction

  • Review the concept of price elasticity of demand
  • Its definition? How to interpretation it? Its relationship with total revenue?
  • What are income elasticity and cross-price elasticity?
  • Review the concept of "economies of scale"
  • Definition? Sources of economies of scale?
  • How do economies of scale create entry barriers? Other sources of entry barriers, in addition to economies of scale?
  • Relevance of "economies of scale" in mass media?
  • Review the economies of scale and market segmentation model (ESMSM)
  • What does the model mean?
  • Can you apply the model to explain media economic phenomenon?
  • What is "first-copy cost"? Its importance in understanding media economics?
  • Common economic characteristics of mass media
  • What is public good? Why are media products are public goods? What difference does this (i.e., media products being public goods) make to the media industry?
  • How is the public good nature of media products related to the dual product nature of media products?
  • Why is advertising important in the media industries?
  • Review the four types of market structures (esp. monopolistic competition)
  • Market structure of individual media industries?
  • What make the media markets mostly monopolistically competitive?

Newspaper

  • Downward spiral in newspaper circulation and advertising (Relate this to the review of demand elasticity)
  • Why do single newspapers tend to monopolize local markets?
  • Sources of scale economies in newspaper? Their combined effects?
  • The umbrella model of newspaper competition
  • What is its underlying economic concept? (substitution)
  • Besides inter-city competition, do local newspapers face other types of competition for audience attention and ad dollars?

Broadcasting

  • What is a broadcast network? What economic functions does a network perform? Why networking?
  • What are the implications of the presence of scale economies in television program distribution?
  • Why does advertiser supported television tend to offer lowest common denominator programming?
  • Why does national TV distribution tend to dominate local programming?
  • What are the economic advantages of networking over syndication in general?
  • How has the development of cable television contributed to the emergence of more broadcast networks?
  • Factors in program choices? And what factors increase program diversity?

Film/Video

  • How do video/film producers compete against each other?
  • Windowing
  • What is windowing? Reasons for windowing?
  • General principles in windowing?
  • Effects on program supply?
  • What are the economic explanations for the dominance of American films and other entertainment products worldwide?
  • What are the effects of copying on program distribution? How do producers respond to copying?
  • As distribution channels, what effects "new" technologies such as VCR and the Internet have on program production and distribution?
  • What potentials does the Internet have for content distribution? Problems?

Cable Television

  • Cable industry structure
  • What is the upstream market? Downstream market?
  • What is vertical integration? Horizontal concentration?
  • What potential problems do vertical integration and horizontal concentration cause?
  • Local cable market structure? What are the obstacles to cable over-building? What other multichannel video programming distributors does cable compete with?
  • Why is the economics of cable networking essentially the same as that of broadcasting?
  • Why doe single cable networks like CNN and MTV usually dominate their respective programming categories?