Media market concentration and pluralism

• DOI: http://doi.org/10.1111/jems.12265
• Date: 01 April 2019
• Published date: 01 April 2019

247

J Econ Manage Strat. 2019;28:247–259. wileyonlinelibrary.com/journal/jems © 2018 Wiley Periodicals, Inc.

Received: 10 October 2016 Revised: 27 April 2018Accepted: 10 May 2018

DOI: 10.1111/jems.12265

ORIGINAL ARTICLE

Media market concentration and pluralism

Torben Stühmeier1,2

1Center forApplied Research in Economics

Münster (CAWM),Universität Münster,

Münster, Germany

2Düsseldorf Institute for Competition Eco-

nomics (DICE), Heinrich-Heine-Universität,

Düsseldorf, Germany

Correspondence

TorbenStühmeier, Center for Applied

Researchin Economics Münster (CAWM),

UniversitätMünster, Münster, Germany.

Email:torben.stuehmeier@uni-muenster.de

Abstract

We study the relationship between market concentration and market variety, and

thereby focus on two dimensions of variety, namely on internal variety and on exter-

nal variety. In our setup, firms can expand their internal variety continuously around

their focus point on a Salop-circle. External variety then refers to the market supply

of variety offered by all firms on the circle. We believe that this setting is particu-

larly applicable to media. It turns out that in more concentrated markets, there is an

incentive to provide more internal variety in order to compete for consumers. Then,

the relationship between market concentration and external variety turns out to be

ambiguous. There also exists no clear free market bias with respect to socially opti-

mal internal and external variety.

KEYWORDS

advertising, concentration, media market, pluralism

JEL CLASSIFICATION:

L13, L82

1INTRODUCTION

Pluralism is a basic general rule of media policy. In media markets, authorities are even more concerned with market concen-

tration than in other markets because, besides protecting economic competition, they additionally wish to safeguard pluralism.

Polo (2007) defines pluralism as the “objective of ensuring a balanced, fair, and unbiased access of all the political opinions

and views to the media.” Diversity of opinion is seen as a major public objective for the media sector, relating to political aims

like deliberation, participation, and democracy, as well as to social aims like social cohesion and cultural diversity (see, e.g., the

early works of Downs, 1957; Hayek, 1945, or more recent works of Armstrong, 2005; Prat & Strömberg, 2011; von Hagen &

Seabright, 2007). The European Court of Justice therefore considers that, in the light of Article 10.2 of the Convention, there is

a compelling public interest in maintaining a pluralistic media landscape.

The media landscape is undergoing constant structural change toward the digitalization of media content. According to the

Pew Research Center, newspaper and cable news consumption is decreasing persistently, and newspaper circulation is falling

from year to year. Conversely, digital media consumption is steadily increasing. The change in media consumption habits has

direct consequences for the markets, with traditional media outlets such as newspaperscontinuing to be hard-hit. Newspaper ad

revenue has been declining 4% each year, to $19.9 billion in 2015, less than half of what it was a decade ago.1This structural

change is causing a long-term trend of media market consolidation in many traditional media marketsworldwide2and is spurr ing

a debate on the consequences for pluralism in the markets, raising concerns for media policy that strive toward safeguarding

pluralism in the markets. Media pluralism is usually seen as threatened by concentration trends in the media markets.

I thank Dmitry Lubensky and the audiences at the 14th Media Economics Workshop in Zurich, the Scientific Seminar on Competition, Regulation and Freedom

of Expression in Digital Markets in Florence, and the 15th International Industrial Organization Conference in Boston.