What media economics and management research tells editors

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What media economics and management research tells editors

6/22/2010 1:27:00 PM

By Robert G. Picard

For the past 60 years, through times of relative stability and dramatic change, scholars have been examining structures that affect the news media: internal structures, explored through organizational and management studies; and external structures, the focus of economic studies.

Media economists look at market-based activities and nonmarket factors affecting the news industry. In general, they focus on media consumers and companies, looking at their rationales and strategies for allocating resources, as well as the implications of those rationales and strategies. The field also encompasses explorations of industry structures, competition, the effects of government policy, and the relationship between the overall economy and company performance. Specific issues explored in media economics studies include:

Why media mergers and acquisitions typically fail to produce the expected synergies.
How advertisers behave during recessions and why newspapers are more affected than other media by economic downturns.
Why joint operating agreements fail to save newspapers in the long run: Although JOAs reduce some costs, the savings are not enough to overcome the diseconomies of scale or the long-standing preferences and consumption patterns of readers and advertisers.

Media management scholars generally take one of two approaches. The rational approach focuses on organizational structures, processes and practices. Studies in this area consider how to create effective strategies and how to better plan, organize and coordinate activities to stimulate efficiency and growth. The adaptive approach instead focuses on the irrational forces in organizations and considers how to cope with them. Adaptive management studies are concerned with promoting leadership and creativity; coping with tension and conflict in organizations; balancing competing demands; and responding to organizational cultures that limit possibilities. For example, media management studies have examined:

Why it is so hard to change newsroom organization and processes, as well as optimal strategies for dealing with change resistance created by inertia, path dependencies, entrenched culture and practices, and employee apprehension.
Why conflict and tension develop among board members, publishers and editors – people with different incentives, interests, and professional norms and values, as well as different views about strategy and operation.
Why innovation is needed in news organizations and how to nurture it within a once-stable newsroom culture.

Robert G. Picard is a leading academic expert on media economics and management. A consultant and business school professor, he is the author of 23 books, including "The Economics and Financing of Media Companies," "The Internet and the Mass Media," and "Media Firms: Structure, Operations, and Performance." He is editor of the Journal of Media Business Studies and was previously editor of The Journal of Media Economics. He is director of the Media Management and Transformation Centers, a global research and training organization.

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Research Themes

Research in media economics and management is as broad and diffuse as the challenges facing newspaper managers today, but some key strands are worth highlighting:

Leading and Managing Change: Knowing how to lead change in newsrooms and throughout the newspaper organization has become crucial in the current turbulent environment. Research in this area shows the importance of top-down vision and leadership, but also of bottom-up participation in and support for the process of change. Studies also have looked at how best to understand and overcome individual and organizational resistance and barriers to change; introduce new processes and products; effectively flatten hierarchy; and integrate cross-media newsrooms.
Productivity Management: This research approach has shown that traditional productivity measures may work for newspaper organizations as a whole but are not very useful for newsrooms. Studies show a clear relationship between higher productivity in newspaper companies, based on financial performance measures, and better strategic positioning and sustainability. But they also show that newsroom productivity – the contribution to a paper’s value -- is not effectively assessed by simplistic measures such as the number of stories that journalists produce. Rather, productivity stems from journalistic activities in which time is invested, such as research and sourcing. In fact, studies indicate that journalists producing the highest number of stories tend to add the least value to the product.
Quality and Value: This research has focused on how to promote, measure and produce quality journalism with both social and economic value. Studies suggest the need to focus not only on professional journalistic values but also on what is valuable to readers. The temptation to pander to lowest-common-denominator content is not highly effective, alienates core readers and fails to produce better sales or financial performance.
Financial Commitment: These studies explore quality in journalism by using the commitment of financial resources to news activities as a surrogate measure. Typical yardsticks include newsroom budgets, staff size and the amount of editorial space in the paper. The assumption is that spending more money improves content quality, increases value for consumers, and enhances competitive and financial performance. Evidence reveals a relationship between resources committed and better performance, although how much the former causes the latter is still debated.
Relative Constancy Principle: This principle focuses on the financial resources available to be spent on the news media. Originally suggested by Scripps-Howard Chairman Charles Scripps in the 1950s, the relative constancy principle asserts that a relatively steady proportion of advertising and consumer spending are devoted to media. Research has shown that the principle is generally functional in the short term, but not in the long term or in times when novel media technologies are introduced. Advertising budgets do rise and fall with the economy, but not at a fixed amount, as the principle suggests; for example, advertising expenditures grew relative to the economy in the second half of the 20th century. The principle’s explanatory power is further weakened by the fact that across media, consumer spending plays a more important role than advertising.
Theory of Niche: Borrowed from bio-ecological studies, this research approach looks at how different media can best adapt to survive when they are dependent on the same resources: advertising plus consumer time and money. Studies have shown companies risk being displaced if they do not have competitive superiority in gaining those resources. Newspapers, for example, have high superiority in retail advertising, but not classified or national advertising. Research also shows that specialization alters the resources on which a media company depends; by seeking different consumers and advertisers than its potential competitors, the company reduces competition for those resources and so becomes more sustainable. Niche differentiation, which enables coexistence rather than strong competition for the same resources, is one reason that smaller, local newspapers are less affected than metropolitan papers by new media such as the Internet.
Product Portfolios: This research focuses on the advantages and managerial challenges of creating more than one product. Producing a range of products for different audiences – for example, general-circulation paid newspapers, free papers, total market coverage papers, youth papers and cross-media offerings -- allows firms to cover a market more effectively. Studies indicate diversified portfolios are not merely a business strategy but also a means for better serving and informing wider audiences. Activities across the portfolio must be coordinated for economic efficiency, but the products also need to be sufficiently different in content and audience that they complement rather than compete. Research has also revealed the most effective ways to divide resources among products, as well as the role of central branded newspapers and websites in the product mix.
Entrepreneurship: This approach focuses on the processes and practices of entrepreneurs, examining how they can be used to bring innovation to existing and new firms. Studies have shown the processes and importance of opportunity identification, suggested ways of managing uncertainty, explored how to take and manage risks, and revealed why failure is part of the path to success. Although much research has focused on new firms, a large body of literature has shown that promoting and supporting entrepreneurship in well-established firms can result in company growth and renewal.

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A Little Background

Generations of newspaper managers and scholars have written useful books and articles about media economics and management. Early classics that helped train new managers and re-equip existing ones included Herbert Williams and Frank Rucker’s "Newspaper Organization and Management," William Thorn and Mary Pfeil’s "Newspaper Circulation," and Bob Giles’ "Newsroom Management."

Such publications met most newsroom management needs from the 1950s to the 1970s. But changes in audiences, dramatic growth in advertising expenditures, and increasing competition from television, cable and magazines altered the news environment. The introduction of information technologies throughout newspaper operations also contributed to shifts in markets, cost structures and revenues. Development of large media companies and conglomerates, along with their listing on stock market indices, created additional issues.

Existing knowledge did not provide much explanation of what was happening or why. Nor did it give newspaper managers effective tools for deciding how to react. Consequently, these managers were singularly unprepared for and unsupported in their efforts to deal with significant emerging strategic and economic issues. Making things even more difficult was the fact that most editors and publishers had learned the ropes by rising through the ranks of the newsroom or advertising sales department, with little or no management or executive training.

New scholarship in media economics and management began to flourish in the 1970s and 1980s. Much of it was developed by professionals who returned to university for advanced studies; other work was done by a growing number of economists and management scholars studying media challenges. Cooperation between journalism schools and business schools increased the level of the analysis and brought new business approaches into the scholarship.

Academic research applicable to the profession is now published in three primary journals in the field—The Journal of Media Economics, the Journal of Media Business Studies and the International Journal on Media Management—as well as numerous management and communication journals. Leading scholars also have written widely in professional publications such as Presstime, Nieman Reports and Editor & Publisher and have talked with organizations including ASNE, the National Newspaper Association, the International Newspaper Marketing Association and the World Association of Newspapers. Many have led executive training programs, taught media MBA programs, and taken part in workshops and seminars at centers such as the American Press Institute and Poynter Institute.

Media economics and management scholars scrutinize the issues dealt with daily in newspapers. The resulting knowledge is germane and critical to contemporary industry developments and well worth the time to investigate.

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