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Media pluralism and competition

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Abstract

In this paper, we study the role of competition in fostering media pluralism. We analyze this issue in a framework where political ideas are horizontal differentiated, and where news firm choose the amount of pluralism to provide to the media market. We show that when the costs of providing pluralism are relatively high, media pluralism is higher in monopoly than in duopoly. In this context, we question whether the EU approach to media pluralism based exclusively on competition law is sufficient to foster pluralism in the EU media market.

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Notes

  1. Media pluralism refers to the diversity of opinions that each media actor publishes, i.e. internal plurality (see Battaggion and Vaglio 2012). A related concept is media plurality, which is associated with the diversity of media actors in the media market, i.e. external plurality. In this paper, we focus more on media pluralism. Both media plurality and media pluralism are thought to be essential for democracy, since the media industry has an important weight in the political process, due to the considerable influence it can have on the public opinion. For evidence on this influence, see Stromberg (2001, 2004a, b), Besley and Burgess (2002), Eissensee and Stromberg (2007), and Dutta and Roy (2013).

  2. A related issue is the influence of competition on media quality. See for instances, Tsourvakas (2003), Armstrong (2006), Peitz and Valletti (2008), Crampes et al. (2009), Battaggion and Drufuca (2014).

  3. Two examples where the EU has used non-economic arguments in the application of competition law were the EBU/Eurovision System and the UIP (United International Pictures) cases. In 1989, EBU/Eurovision System applied for exemption from competition law on the acquisition of television rights to sports events. The EU concede the exemption on the bases that EBU members provide a public service and a broad range of sports programs for minorities, with educational, cultural, and humanitarian content. In 1981, UIP notified to the Commission, on behalf of Paramount Pictures Corporation of a series of joint-venture agreements and related agreements concerning the production and distribution of motion pictures. A case prohibition based solely on cultural concerns related to the European film industry would not have been possible under competition law. Even so, the Commission used conditions in order to reduce the impact of the UIP agreement in the European film industry.

  4. Supply side forces can arise due to three reasons: political preferences of journalist and media owners; pressure from advertisers; and pressure from political parties. When journalists and media owners have an ideological bias, they tend to give voice to their favored political opinions (Baron 2006). Pressure from advertisers can arise due to the two-sided nature of the media sector (Gabszewicz et al. 2001). From one side, advertisers prefer newspapers that sell more and that do not give them “bad” publicity. From the other side, media firms need the ad revenues, which are maximized when they cover a larger audience and they do not hurt advertisers with bad publicity. Political parties (and interest groups) can also use the media firms that they control for propaganda and electoral aims (Besley and Prat 2006).

  5. Another possibility would be to introduce vertical differentiation, i.e. quality differences, between media outlets. We follow most of the literature in media pluralism in that we look only to the horizontal product differentiation dimension.

  6. Howe (1960) is responsible for one of the first analysis of multi-product firms. For more recent approaches, see Chisholm and Norman (2012). They show that product lines are wider in larger markets, and when product substitutability is lower.

  7. Fat products then differ from customized products (see Dewan et al. 2003). With customized products, consumers have to pay extra for each additional customized characteristic that they wish to have access (for example, in the car market, consumers have sometimes to pay extra to have air-conditioning). While with fat products, all customized characteristics are free for the consumer (for example, a word processor with different typeface options), and as such a consumer can have access and consume all the different options included in the package.

  8. In other words, consumers are single-home. The introduction of multi-home consumers (i.e. consumers that consume from both media outlets) would have as main consequence that competition between outlets would be reduced (Doganoglu and Wright 2006). In this sense, the results in our paper would be strengthen, since the monopoly case could end up providing more media pluralism than the duopoly case even under more scenarios.

  9. Results in the monopoly case are not changed if the monopolist is located inside the line or at the other extreme of the line.

  10. The empirical evidence from journalistic studies support our view that news firms try to adapt news to readers’ heterogeneous political preferences, however in the limits of the political area that the news outlet defends (Gans 1999). Newspapers do this adaptation for several reasons. In first place, by adapting news to readers’ political preferences, newspapers can satisfy a larger share of the audience (Gans 1999). Second, readers’ political opinions can change and therefore newspapers need to adapt to them (Gitlin 1999). Third, newspapers have incomplete information about readers’ political preferences, which means that covering different political leanings than just a limited one is a smart business strategy (O’Neill and Harcup 2009). Fourth, newspapers try to set a political agenda in the public opinion, and in order to achieve this, they cover different articles about a topic to arouse discussion in the society, usually giving different (but close) political leanings to the different articles (Coleman et al. 2009).

  11. Given that location is exogenous, we make two simplifying assumptions. First, we assume linear transport costs. As shown by D’Aspremont et al. (1979), if location is endogenous, a location equilibrium only exists with quadratic transport costs. In particular, the equilibrium entails maximum differentiation, i.e. the two firms locate at the opposite extremes of the line. Second, we abstract from the advertising market. If location is endogenous and media firms besides competing on prices also compete on advertising, the location equilibrium of the model entails either maximum or minimum differentiation, depending on the size of the advertising market (see Gabszewicz et al. 2001; Garcia Pires 2014). As shown by Garcia Pires (2014) the introduction of advertising can contribute to more media pluralism because of the extra revenues that relax price competition. In this sense, the introduction of advertising in our model would reinforce our results. Note also that, as long as we introduce advertising in the model, results with linear and quadratic transport costs are similar (see Garcia Pires 2013, 2014).

  12. Note that, as also discussed in the introduction, one of the most important functions of the media is the provision of information. In our model however, and following most of the literature on media pluralism, we model information as a pure act of consumption, where only some unspecified utility-producing characteristic of the medium is relevant. Introducing the information value of the media would increase even further the value of media pluralism for consumer surplus.

  13. For example, to provide media pluralism away from the newspaper’s political core, the media firm might need to hire a complete new journalist staff and respective administrative structure that specializes in this extra political area. Conversely, when media pluralism is contiguous to the media firm’s political core, the media firm might be able to continue to use the same staff and structure.

  14. Note that to consider that the market is covered is a standard assumption from duopoly Hotelling models. The same occurs in the media pluralism literature, which uses the Hotelling model (see for instance, Gabszewicz et al. 2001, 2006). The reason why Hotelling models consider a market that is covered is to focus on competition. Accordingly, competition between firms is stronger when the market is covered. This is so since firms strategies (such as price, advertising or media pluralism) are nor restricted by the extent of the market. Conversely, when markets are not covered competition is restricted by the extent of the market covered.

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  1. Centre for Applied Research at NHH (SNF), Helleveien 30, 5045, Bergen, Norway

    Armando J. Garcia Pires

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Correspondence to Armando J. Garcia Pires.

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Garcia Pires, A.J. Media pluralism and competition. Eur J Law Econ 43, 255–283 (2017). https://doi.org/10.1007/s10657-016-9548-x

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