29 Pages Posted: 8 Jun 2004
Date Written: May 2004
In 2003 the Federal Communication Commission (FCC) proposed modest relaxation of its media ownership concentration rules; the proposal aroused heated political opposition and has been partially overturned by Congress and stayed pending appellate review. The purpose of this paper is quite narrow: to explore, from a public policy perspective, measurement issues associated with media ownership concentration in general, and online content control in particular. Measurement is meaningless in a vacuum. Alternative approaches to measurement derive their relative merits chiefly from their ability to assess the phenomenon under study, not from independent or abstract characteristics of the measurement device. In the policy area, the choice of a method of measurement follows from the adoption of a goal, or an understanding of the nature of a problem, rather than the other way around.
Media ownership concentration raises two broad policy concerns (1) the problem of market power, which can reduce output and raise prices, reducing both consumer and social economic welfare and (2) the problem of private restrictions of access by suppliers of content that may be unpopular or politically incorrect to audiences, and the closely related issue of government regulation of content and access. The first issue (economic competition) is indistinguishable from that addressed by antitrust policy, and the sophisticated analytical tools of modern antitrust analysis present the best available approach to measurement. The second problem (competition in the market place of ideas, which I call Miltonian competition) can also usefully be approach from an antitrust perspective, leading to a different conclusion about sound concentration measurement techniques. In this second context it makes no sense to measure concentration using revenue or audience weights, because any channel that is available to a given consumer is equally valuable as a potential source of politically significant material. Popular channels, by definition, have popular content, but if this popularity arises from consumer choice rather than structural barriers to entry it has no significance in measuring the ease with which politically disruptive ideas can be excluded from the audience.
Online content (such as entertainment, news and advertising that is generally not in video format) may belong in the same relevant economic markets as mass media, or not, depending on the actual substitution behavior of customers. If consumers or advertisers would substitute online channels for traditional mass media channels in response to price or quality changes, then both media belong in the same market. Ownership attribution and share measurement would follow the usual antitrust rules.
Measuring concentration of control of online content for purposes of assessing restrictions on access by audiences to politically or otherwise unpopular material, and by sources of such material to audiences, requires attention, first, to the facts concerning control. If identifiable commercial entities can restrict access based on content, they should be attributed with control over the portion of transmission capacity they control. On the other hand, if both end users and content suppliers are free to find each other on the Internet, then barriers to Miltonian competition (and consumption of expression) are nil. There remains an empirical question whether use of online communication provides an alternative that users find a good substitute for traditional media for the purpose of seeking out unpopular ideas and minority-taste content. A related empirical issue involves the role played by opinion leaders in facilitating access by mass audiences to unpopular ideas expressed via unpopular channels.
Measuring media ownership concentration is a meaningless exercise in the abstract. A necessary predicate is an explicit model or models of how concentration affects policy variables such as consumer welfare or competition in the marketplace of ideas. Only then can a measure of concentration be constructed and tested for empirical consistency with the underlying model(s), with which the concentration data may or may not be consistent. As to consumer welfare in the traditional economic sense, which is positively associated with vigorous competition, traditional antitrust models and measurement techniques are, broadly, as good as it gets; there is no need for a special antitrust approach to media industries. The more controversial and often conflicting policy goals of protecting press freedom from government abridgement and of promoting diversity (or Miltonian competition) present more difficult challenges. If, however, ensuring that citizens have as much access as possible to potentially conflicting views is the objective, then concentration is best measured by counting the noses of independent sources, without regard for their current economic success. Moreover, in general, concentration in the market place of ideas, properly measured, will be lower than economic concentration.
Suggested Citation: Suggested Citation
Owen, Bruce M., Confusing Success with Access: Correctly Measuring Concentration of Ownership and Control in Mass Media and Online Services (May 2004). Stanford Law and Economics Olin Working Paper No. 283. Available at SSRN: https://ssrn.com/abstract=545302 or http://dx.doi.org/10.2139/ssrn.545302