Anthony J. Pennings, PhD

WRITINGS ON DIGITAL STRATEGIES, ICT ECONOMICS, AND GLOBAL COMMUNICATIONS

Media Content as a “Public Good”

Posted on | February 23, 2011 | No Comments


Media products are sometimes referred to as “public goods” because these products are not significantly “used up” in the process of consumption, and each additional user incurs little additional (marginal) cost. Unlike traditional products like a hamburger that is bit into, chewed, swallowed, and digested, media content is generally not destroyed while being consumed. Although the timeliness of media content is often an issue, the consumption of media does not deplete it.

With traditional public goods like a road or a park, the costs associated with the additional driver on a highway or your child enjoying the playground are minimal. With media content as well, additional consumers are served without incurring much expense. An additional radio listener, for example, would not impose even a negligible cost on the radio station. Likewise, one more click on a website would not cost the owner very much.

Economists like to talk about two characteristics of goods and services, called rivalry and excludability. Rivalry is sometimes called subtractability. When someone purchases a good that is highly rivalrous, it is consumed entirely by that person. These are also called private goods in that they are removed from collective or shared use. These are the ideal goods for economists because they are “well-behaved” in that they fit nicely into their economic models and are easily priced. A mobile phone almost always has a single owner until it breaks or becomes outdated. Other goods are less rivalrous such as going to a water park. Labor is utilized, water evaporates but for the most part, the park remains essentially the same after the family packs up and goes home. Radio stations emit their programming with a signal that is not used up by a commuter listening to music (and ads) on their way home.

The other issue is excludability. A water park usually has enough fencing and security to keep those who do not pay away from its pools and rides. A beach would more difficult and many communities make sure that rich owners of beachfront properties do not restrict surfers, swimmers and other beach users from accessing the beach. These “common goods” can be subject to congestion as more people use them.

The “nonexcludability” criteria of a public good takes into account the costs associated with keeping nonpayers out of the system. It is very difficult to keep a car off a road or a kid out of park, just as it is not feasible to keep a viewer from watching a TV show on broadcast TV.

Marginal Costs

A related issue concerns the costs of producing additional media content. In general, the marginal costs of producing an additional media item like a DVD is not very significant as are the costs of printing one more book, or adding an additional radio listener or television viewer. Almost all the costs associated with content creation are production and post-production expenditures involved in making the programs and then making sure it reaches an audience.

The costs associated with producing major films, for example, are mainly upfront and can climb into hundreds of millions of dollars. Salaries for major stars and other talent, camera and lighting costs, special effects and CG can drive the budgets of a major film way up. To recoup these costs, it is important to drive viewers into the theaters. Therefore, it often makes sense to spend a lot of money on advertising and other promotional activities.

Advertising media content can pay off significantly in reaching new audience members without incurring substantial production costs. While expensive, it often pays off because the costs of reaching each additional viewer is negligible. The calculation of advertising costs associated with films represent another important “microeconomic” calculation and can go awry if not planned carefully.

An interesting example of mass content model was in the case of software applications. Microsoft in particular became very rich by creating the standard operating system for the PC and then mass marketing it. While IBM had to compete in the competitive, low margin business of producing personal computers, Microsoft got nearly a free ride by providing original media content – the MS-DOS operating system – for each IBM PC and then the IBM-compatible clones like Dell and Compaq “portable” personal computer.

So this means that the “mass” in the mass media model is still important. Because the production costs are so high and costs of serving the additional audience member so low, it makes sense to reach as many customers as possible. I was tempted to write “consumer” there, but we have established that media content is not really consumed.

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Anthony

Anthony J. Pennings, PhD has been on the NYU faculty since 2001 teaching digital media, information systems management, and global communications.

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  • About Me

    Professor and Associate Chair at State University of New York (SUNY) Korea. Recently taught at Hannam University in Daejeon, South Korea. Moved to Austin, Texas in August 2012 to join the Digital Media Management program at St. Edwards University. Spent the previous decade on the faculty at New York University teaching and researching information systems, media economics, and strategic communications.

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