Current and Emerging Issues in the Audiovisual Industry - Mercedes Medina - E-Book

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Mercedes Medina

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This book focuses on the challenges of competition in television broadcasting markets. How is the evolution from a two-sided market to platform economics reshaping competition in television broadcasting? How are new market dynamics changing competition for content creation and acquisition and the revenue streams? Will content remain king? Or will new competitive dynamics undermine the sustainable creation of high quality content, especially in small media markets?

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Table of Contents






I.1. Bibliography

1 New Paradigms of Audiovisual Industry

1.1. Toward political freedom

1.2. Media economics challenges

1.3. International trade of ideas

1.4. Bibliography

2 The Threat of OTT for the Pay-TV Market

2.1. The “new” barriers to entry and value chain

2.2. The pay-TV competitors in Spain

2.3. The competitive and cooperative strategy of Netflix

2.4. Bibliography

3 The Resistance of Legacy TV Channels

3.1. The engine of audiovisual market

3.2. Economic potential

3.3. Contribution to society

3.4. Bibliography

4 The Public Service Heritage

4.1. The crisis of the Spanish public television

4.2. The current challenges

4.3. Recommendations for the future

4.4. Bibliography

5 The Battle for Audiences

5.1. The battle for time in the media market

5.2. New measurement systems

5.3. Toward qualitative research

5.4. Bibliography

6 Entertaining Power: Quality of Contents

6.1. Defending media content quality

6.2. Perspectives of quality on TV

6.3. Searching for quality

6.4. Bibliography

7 From Attention to Engagement in the Battle for the Audiences

7.1. Attention economy: the relationship with the creative mastermind

7.2. Engagement as the completion of the relationship

7.3. Trends and practical implications

7.4. Bibliography

8 Monetizing in the Digital Era

8.1. Traditional funding systems of broadcasting

8.2. Broadcasters and online activities

8.3. The new online business

8.4. Bibliography

9 Implementing Innovation Strategy

9.1. Innovation culture

9.2. Media transformation

9.3. Final thoughts

9.4. Bibliography


End User License Agreement

List of Tables

3 The Resistance of Legacy TV Channels

Table 3.1.

Advertising revenues of private audiovisual groups (millions €)

Table 3.2.

Ranking of most watched shows Tele 5 and Antena 3 (maximum audience) 2015

Table 3.3.

Number of employees in the audiovisual sector

Table 3.4.

Economic and financial results (millions €)

8 Monetizing in the Digital Era

Table 8.1.

Strategies for online video monetization

9 Implementing Innovation Strategy

Table 9.1.

Mobile services and Internet revenue (000 €)

List of Illustrations

2 The Threat of OTT for the Pay-TV Market

Figure 2.1.

Number of subscribers by distribution system

Figure 2.2

Spanish supply of pay-TV (distribution system/companies/prices/content and services)

Figure 2.3.

Netflix International Expansion

3 The Resistance of Legacy TV Channels

Figure 3.1.

Evolution of TV advertising revenue (million €)


Figure 3.2.

Evolution of TV revenue and pay-TV (million €)

Figure 3.3.

Advertising investment (real estimated) (million €)

Figure 3.4.

Number of independent producers

Figure 3.5.

Annual evolution linear TV consumption (min. ind/day)(soure: Kantar Media)

Figure 3.6.

Evolution of TV consumption according to age segments (average daily minutes per person)

4 The Public Service Heritage

Figure 4.1.

RTVE results (1991–2005) in millions of euros

Figure 4.2.

RTVE annual debt (1991–2005) in millions of euros



Table of Contents

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Diverse and Global Perspectives on Value Creation Set

coordinated by Nabyla Daidj

Volume 1

Current and Emerging Issues in the Audiovisual Industry

Mercedes Medina

Mónica Herrero

Alicia Urgellés

First published 2017 in Great Britain and the United States by ISTE Ltd and John Wiley & Sons, Inc.

Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licenses issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned address:

ISTE Ltd27-37 St George’s RoadLondon SW19 4EUUK

John Wiley & Sons, Inc.111 River StreetHoboken, NJ 07030USA

© ISTE Ltd 2017

The rights of Mercedes Medina, Mónica Herrero and Alicia Urgellés to be identified as the authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988.

Library of Congress Control Number: 2016958362

British Library Cataloguing-in-Publication Data

A CIP record for this book is available from the British Library

ISBN 978-1-84821-977-9


The changes in the audiovisual industry are enormous, facilitated by broadband digital distribution and paid services for both linear content streams and disaggregated content. This is transforming the environment in which viewers choose to access audiovisual content, the markets for that content and the fortunes of enterprises operating in the industry.

The rapidly changing environment surrounding the audiovisual industry is characterized by significant apprehension. Broadcasters are concerned that linear television streams may be declining and asynchronous viewing will become the norm. Consumers are anxious because the technology needed is becoming more complex and are worried that they are being priced out of the market for that technology and the content it provides. Pay-television operators and digital download firms are worried because policies supporting free and public service broadcasting make investment riskier and limit their abilities to pursue innovation. Social observers are troubled by the idea that free television might disappear and only pay services remain, thus making it unavailable to significant parts of the public.

It is tempting to conceive the new opportunities and new players in the audiovisual industry as revolutionizing and destroying existing producers, channels and services, but the reality is more that of adaptation, evolution and transformation as legacy producers and broadcasters adjust to new market positions and new uses for their products. This is not the task that many established players would like to undertake, because it creates an increasingly competitive struggle for audiences and financial resources. Many wish the situation would just end and are resisting changes necessary to make their firms more competitive. Others are reducing the quality of content as resources diminish, harming themselves and the overall quality of content in society.

Some firms are struggling valiantly to make sense of the new environment and find sustainable and profitable pathways. They are trying to comprehend the new forces at work, seeking to find what they can do and making efforts to understand what changes their enterprises will be required to make. Identifying strategies that producers, broadcasters, cablecasters and other pay-television services can employ in this environment is crucial. This book helps make sense of the transformation underway and the issues that different participants in the audiovisual industry are encountering.

The authors of this book use the Spanish audiovisual industry as a case to examine and explain the nature of the challenges. They show how investing carefully, innovating processes, products and distribution, developing new relationships with audiences, creating new business opportunities and business models, and improving quality content are important elements of transformation.

Underlying all the chapters is a focus on audiences and consumers and how the additional audiovisual services and choices are altering what, when and how they watch audiovisual content as well as their willingness to pay for it. The significant shift in consumer behavior indicates that considerable portions of the public were unhappy with previous content and services, and had only few options but to consume what was offered.

In evaluating the changes, the authors describe markets and processes that many traditional broadcasters and those producing for those broadcasters do not understand well. They reveal the new economic influences and relationships and how market power is shifting in the audiovisual content from suppliers to consumers. They explore how the confusion over functions and roles of traditional television channels in the new environment is confounding their response and why it must change.

The authors show that the audiovisual industry has become much more complex and that companies must become much more aware and decisive about their place in it. They also show that existing companies need clear strategies and new objectives for coping with the increased competition and new services that attract consumer attention and payments. The authors provide some advice on how to think about the changes and develop new strategies that will be necessary.

This is a useful book that is focused on change, innovation and helping to develop thinking about how to improve the competitive positions of companies in the new environment and how to better link them to audiences and paying consumers who will be needed to improve their revenues and sustainability in the future. Solving these issues is critical if society is to have the type of audiovisual industry necessary to provide quality entertainment and informational services that serve social, cultural and political needs.

Robert G. PICARDReuters InstituteUniversity of OxfordDecember 2016


The television industry is facing important structural changes worldwide, which has been in constant expansion and change since the beginning. It is a relatively new industry, naturally open to innovation and highly influenced by technology and the consequent improvements in the quality of delivery or consumption.

A problem arises before the digital challenge and the threat of new online audiovisual services. It needs to be solved by the industry, its regulators and by academic research: what will TV be and what will be its position in the value chain? Following Evans [EVA 11, p. 1], “television is now bigger than TV”, but television has not died at all.

According to research carried out under the title “New habits of audiovisual consumption in Europe: impact of digitization in the industry and the media diet of citizens”, funded by the Spanish Ministry of Economy and Competitiveness, in 2012, 83% of respondents preferred to see programs on television over other devices; 65.5% had no interest in watching online content, 51% had difficulty finding them and 35% had poor connection. These data show that there is still scope for linear television, with scheduled content on fixed days [MED 15].

Observation of the market in recent years has shown that television is still the favorite medium for audiovisual content. However, in the new digital era, television will have to demonstrate some of the functions for which it is irreplaceable: specifically, as promoter of live events; as discoverer, developer and distributor of content and of course, producer. New media benefit from the experience of traditional television, which has been the expert for more than 60 years in gathering viewers, entertaining and exciting all audiences, both young and old [MUR 11].

Arrese [ARR 06] notes that information and entertainment products are attention goods, which require experiencing them to assess their value, and generate economies of scale as well. Therefore, its value should not be measured only by the costs of production and reproduction, but by the level of satisfaction and utility they give to the user. On the same matter, Doyle [DOY 10] notes that the success of content is measured by its ability to “hook” the audience. In order to “hook” the viewers in the new competitive environment, broadcasters should develop systems for measuring satisfaction and usefulness of the content and tools to gather better information about viewers and find an adequate supply of different profiles.

Traditional audiovisual media companies have managed to create competitive strategies in the national market and internationally. Through a process of vertical and horizontal growth, they have managed to be solid companies, as shown by their economic data. With precise programming strategies, they have achieved high audience shares. Thanks to the multiplatform strategy, they have spread their content to all devices available to users. The role that audiovisual companies will have to continue to play in the coverage of events and in the interpretation and understanding of them for the general public, as well as their role in social cohesion, is unquestionable.

The new breaks into the old but not as a complete killer. The old remains. Therefore, the order of the chapters in this book combines the new with the old as it happens in the market. In this book, we consider current and emergent issues, new entrants play the role of directors of trends and help us observe how markets and legacy media transform.

Although some examples of the Spanish market are provided, reflections and trends are valid for other countries. In today’s globalized world, the echo of phenomena multiplies and has similar effects on all economies founded on free markets. Some chapters are more theoretical and others provide information on market analysis. The ideas collected here are the result of years of market observation, conversations with media managers and trend analysis. The analysis in the discipline of media economics is not understood without the use of data that reflect the behavior of markets and companies.

In Chapter 1, we reflect on the new paradigm of media that technology has instigated. The media continue to seek havens of freedom to perform the function for which they were created. In some countries, these havens exist and function, but in others, the consequences of freedom have not always been freedom for all or freedom for better products. Market concentration and loss of content quality are some of the current threats. In any case, the current challenges for media companies lie in the development of competitive content together with the successful compliance of the function to inform and entertain. Innovation in discovering alternative revenue streams has become a key issue for media managers.

Chapter 2 describes the entry of new audiovisual online services on the market that have challenged the legacy media companies and led to some paradigm shifts in traditional business models. The profile of new companies, namely Netflix, and their way of reaching audiences are a great revolution for pay-TV operators.

Chapter 3 questions the notion that new media are to eliminate their predecessors and discusses the value of the contributions of private television companies to the market. Although new competitors arrive, the bargaining power and weight in the market of audiovisual companies remain important for the media industry in most European countries.

In Chapter 4, we gaze at the increasingly difficult and less sustainable role of public television in Europe. We analyze the Spanish model which highlights the economic and financial difficulties of maintaining a corporation like RTVE and the various solutions that governments have launched.

Again, Chapter 5 questions the role of new operators after an analysis of consumer trends in recent years. In this case, the focus turns to the audience of audiovisual content. Despite the new offerings and consumption possibilities, these remain higher for traditional television systems.

In a book on the current issues and trends of the media market, academic research demands reflection on the quality of content. The content of the media is the driving force and rationale of this industry, if its content is not relevant, engaging and compelling for audiences, the whole structure of this market will collapse and will require a larger industrial structure than there has been in recent years. A view of the quality of content from the business perspective seems necessary as the foundation of media management in the coming years. In this sense, quality is an implicit commitment between the producer and the receiver. The content must meet the expectations of consumers and the consumers must be able to perceive quality. The quality of content is the foundation of trust for the audiences.

The new media have questioned the type of consumption of traditional media. So far it was enough to have viewers in front of the television set, regardless of whether or not they liked what they saw and whether the content was valuable or prejudicial for their cultural values. The new media paradigm calls for greater participation and involvement of the audience, where their pleasure and satisfaction are key factors in deciding on content development and where the individual knowledge of the tastes, interests and needs of viewers has put marketing over programming tasks. Chapter 7 will focus on these issues.

One of the most pressing issues for the good running of any business is revenue. Current technology allows innovation in the sources of income and a search for more personalized monetization systems. Chapter 8 provides a profound reflection on the economic nature of the goods and services of information and entertainment, and the consequences on its funding and business models – a current debate, unresolved for media companies.

The final chapter is devoted to innovation. It attempts to answer the nature of innovation in media firms. Is all innovation disruptive, or is there collaborative innovation? How should companies innovate? What are the keys to innovation? The observation of some companies will give practical and suitable answers.

I.1. Bibliography

[ARR 06] ARRESE A., “Issues in media product management”, in ALBARRAN A., CHAN-OLMSTED S., WIRTH M. (eds), Handbook of Media Management and Economics, LEA, New Jersey, 2006.

[DOY 10] DOYLE G., “From television to multi-platform. Less from more or more for less”, Convergence. The International Journal of Research into New Media Technologies, vol. 16, no. 4, pp. 1–9, 2010.

[EVA 11] EVANS E., Transmedia Television. Audiences, New Media and Daily Life, Routledge, UK, 2011.

[MED 15] MEDINA M., La audiencia en la era digital, Fragua, Madrid, 2015.

[MUR 11] MURPHY S.C., How Television Invented New Media, Rutgers University Press, New Brunswick, 2011.

Chapter written by Mercedes MEDINA.

1New Paradigms of Audiovisual Industry

The New World Information and Communication Order, a concept coined in the 1980s in the UNESCO International Commission for the Study of Communication Problems, has evolved since then. It capitulated in 1990 to give way to the concept of the Information Society, as a result of the growth and expansion of information and communication technologies.

Some of the recommendations made in the 1980s are still in force: strengthen the independence and avoid informational imbalances, democratize information and ensure cultural diversity, facilitate access to information, protect journalists, reduce the commercialization of content and expand financial resources, strengthen cultural identity and foster international cooperation.

However, since the 1990s, the world has certainly become more globalized. Against the political powers, citizens have gained greater prominence; therefore, the new international order brings new elements to the industrial ecosystem of media [NIE 08].

The importance of cultural industries as bearers of values and identity led the members of the United Nations to sign the Convention on the Protection and Promotion of the Diversity of Cultural Expressions in 2005. The new digital context highlighted the increasingly protagonist role of citizens as content generators, a context where the “creative commons” of the economy of participation and sharing relegated the protectionist approaches of the past concerning intellectual property of works. In the 20th Century, the owners of media left the States in control of the media; in the 21st Century, citizens access content more easily and are even content generators.

In this chapter, we will study how the new order of communication has evolved around the three major issues of concern: the defense of pluralism, the social role of media content and the free circulation of global content.

In short, in this chapter, we will establish the general lines on which the media industry is based; from its global and historical evolution to its triple political, economic and cultural dimension.

1.1. Toward political freedom

Media play a social function that has to do with informing citizens truthfully, showing exemplary models of behavior and providing a useful and effective service to society. These fundamental principles must be secured and safeguarded, because the media shape public opinion and influence the recipients.

When asked who should control the media, political systems offer two extreme positions: interventionism and liberalism. State interventionism believes that the media are state-owned and therefore the public power should control its content and management. The opposite extreme position is liberalism, in which the market itself regulates and directs the activity of the media, and therefore the public sector should not have any external control.

Historically, in most countries, media were directed and controlled by the State, and hence public media were a monopoly. This is the case, for example, of the press in Spain at the time of General Franco or televisions and radios in almost all European countries when they started [CAL 02].

In some countries, totalitarian systems developed systems of censorship, so that only what the government is interested in is published. Although it was a common practice in the past in countries where democracy had not been established, it still exists in some countries. For example, in 2007, the Venezuelan television channel RCTV, which had more than 30 years of experience on the air and was an audience leader, was closed because the government of Hugo Chaves thought it destabilized public order with its content; in China, more than 4,000 officials control the information posted on the Internet or accessed from the Chinese territory every day. When regimes are in a process of being liberalized but freedoms are not fully guaranteed, the censorship system leads to the practice of self-censorship by professionals and media managers. This way, sanctions or other more severe measures against what is published are avoided.

In the 1980s, freedom of trade and expression bloomed in the fields of the media market, in both television and print media. The shadows caused by monopolistic approaches, whose main protagonist was the State, and its dominion over information emerged. In the 21st Century, there are still remnants of statist approaches and lack of freedom in some Arab countries, North Korea, Cuba and China. In other countries, terrorist or destabilizing groups condition freedom of press, as is the case in Colombia, Guatemala or Mexico, where journalists are often killed by drug traffickers [FRE 15].

Liberalization of the media entails the reduction of direct State control, that is, privatizing some public media (as TV channels Rai 2 in Italy in 1975 and TF1 in France in 1987) and the incorporation of private initiatives in the control of the media. When the media were left in the hands of private capital, governments realized the need to regulate the market and establish standards to protect fundamental principles and human rights. For the legal system to organize and allow the full development of the institutions that operate in the free market economy, it is necessary that the law is consistent with the rules of the free market, that it respects free trade, that there is an effective control system and that punitive measures are effective in achieving compliance to the law.

One of the principles that every free state must recognize is that of pluralism. The principle of pluralism recognizes the legitimacy of all cultural options, behaviors, lifestyles, ideologies, policies and human values. The defense of pluralism is justified in considering the public’s right to be informed and access the media, and the freedom of expression of journalists. It is essential to guarantee this right and these freedoms in a democratic society.

One way to ensure pluralism is for public institutions to encourage the creation of media companies, so that the different voices of society are represented in the media and have access to them. Thus, pluralism in this sense is identified with a range of media and content wide enough to cover all the information and entertainment needs of citizens.

The liberalization process of radio and terrestrial television in Europe ended in the 1990s. Privatizing the capital and management of media introduced advertising as a revenue source, sometimes the only or main one. Although, historically, the origins of television in North America and Europe are different, we are currently in a stage of coincidence: both in the use of technologies and in the influence that States have in it. Homogeneity is seen in some areas of programming, although the legislation of the Member States of the European Union seeks to maintain a level of European programming. There is another common note between the United States and ‘Europe: the States’ role gradually ceases to have such prominence and, perhaps above the general interest and public service, commercial forces operating in the market gain strength and influence.

Investment in the launch and implementation of new TV channels, together with limited advertising revenue, required new private partners. In some cases, they came from outside the electronic media industry, for example, from sectors such as banking, computer and electrical. For many of these companies, television was one of the most profitable businesses of their activity. Press managers invested in television, partly to diversify risk and partly in an effort to achieve higher profitability. Most multinational groups participated in television activities: Maxwell, Fininvest, Bertelsmann, Springer Verlag, Hachette, Havas, Time, Warner, Bond and Murdoch. One consequence of the increased presence of televisions in the information market was the stagnation or decrease of the reading of daily newspapers and magazines.

One of the dangers of the free market is corporate concentration, that, ultimately, the media are owned by a few entrepreneurs and, therefore, the information and cultural pluralism is imperiled. To prevent abuse of power, Western legislation established a series of conditions on media ownership, for example, not allowing a single shareholder to control more than a certain proportion of capital – the quantities stipulated often prevent owning more than 25% or 49% of the capital; not allowing one shareholder to own more than one media outlet in the same geographic market, in different markets or any complementary stage of industrialization, for example, that a television channel owns a production company, and preventing one company from overcoming a determined market share – could be applied to both advertising revenue and audience shares. By the beginning of the 21st Century, most Western countries liberalized all these limits to media ownership.

The greater role that civil society has acquired thanks in part to digital technologies has manifested itself in the development of complementary regulatory instruments such as self-regulation. This system leads economic players, social partners, citizens, non-governmental organizations and professional associations to adopt common guidelines and codes of conduct. For this system to be effective, it is necessary that there are professional authorities, independent to political power, to ensure the proper functioning of the market and to resolve disputes out of court.

The existence of councils to help regulate, sanction and encourage free competition and public service is the most appropriate way to achieve pluralism and good practice [LLO 13]. These councils exist in most Western countries. For example: the FCC in United States, Ofcom in the United Kingdom, “Conseil Superieur de l’Audiovisuel” in France and the “Autorità per le Garanzie nelle Comunicazioni” in Italy. In Spain, the General Audiovisual Communication Law 7/2010 foresaw the existence of a State Audiovisual Council (CEMA), but before it came to exist, the Law 3/2013 of Creation of the National Commission for Markets and Competition decided that the audiovisual sector was to be monitored and controlled by the National Commission for Markets and Competition (CNMC).

Although in the field of media in Spain, codes of conduct on content have not worked, the same cannot be said about the advertising industry, where the Association for Self-regulation of Commercial Communication, “Autocontrol” ( is a guarantee of legal compliance and good work [MUÑ 13]. It is a model for many countries in Latin America.

1.2. Media economics challenges

The economic dimension of media activities has been gaining prominence since the 1980s. Thus, media economics has been consolidated as an academic discipline that studies how the media respond to the wishes and needs of information and entertainment of the audience, advertisers and society in general, taking into account the available resources. It has three fundamental elements: (1) the media, which, as a subject of economic activity, is referred to as a company; (2) the product, which is the result of the activity of the company or media and (3) the consumers of the product [HER 09]. These three elements meet in the market, which is known as a physical location or social area where the supply and demand of media products is promoted and met.

The development of the media market in recent years allows us to see how the economic and commercial dimension of communication does not necessarily endanger the cultural, creative and social dimensions of communication. However, we should also be aware of, and reflect on, some concepts that shape the new economic order of the media in the 20th Century.

First, the concept of media product needs to be understood in its double condition, material and immaterial, integrating the concepts of product and service [MED 16]. The media goods concept is associated with a material dimension, the hardware part, while service is associated with the purpose provided. Although the hardware is essential for the information product to be considered an autonomous reality, the value is determined by the content of what is transmitted, the message. The value of the message reflects the kind of needs that media products aim to satisfy. Most goods existing in the market provide consumers with the means to satisfy material needs and desires. News and entertainment products of symbolic and intangible nature can be classified as cultural products. Cultural products deal with the meanings of life, and the needs and desires that they seek to satisfy are directed to the intelligence and will of the individual. Therefore, its value remains and is not destroyed or finished by a first act of consumption.

As we have seen, the guiding role of the State in the launch of radio and television channels in Europe determined the first funding system of audiovisual services, especially television: public funding. The monopoly situation of the first TV channels derived from the concept of public service television and the scarcity of the radio spectrum, owned and managed by the State. Commercial TV channels born from the deregulatory process that took place in Europe in the 1980s and 1990s brought a new way of funding, and consequently, a marketing process. Advertising revenues seemed sufficient to sustain the activity of the few channels that started out in different countries. The first peculiarity derived from this financing system is the presence of a new agent, the advertiser, who pays for the media. The television activity was financed by income received directly from advertisers, but not as consideration for television products. Advertisers do not buy programs, but airtime to insert their ads. Not just any time either, but one that corresponds to programs that bring together the right audience to their interests.