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COMS 200 Study Guide - Final Guide: Corporate Media, Network Effect, Ebay

Communication Studies
Course Code
COMS 200
Christopher Gutierrez
Study Guide

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Part 2: Ownership, Infrastructure, Participation (Summary and Key Terms)
The iteets uhol aiage to apitalis
The early internet was not only non-commercial, it was also anti commercial
This internal policing by internet users was based on the assumption that
commercialism and an honest democratic public sphere did not mix. Corporate media
were the problem and the internet was the solution
Fee akets: the oe spiit as that usiesses should always be permitted to
develop any area where profits could be found and that this was the most efficient
use of resources for an economy
For the business community and politicians, the internet was all about unleashing
entrepeneurs, slaying moopolies, pootig ioatio ad geeatig fitio fee
As Bill Gates faousl put it. Thee as geat oe to e ade
Capitalism and the internet seemed a marriage made in heaven
Three areas stood out early on or have emerged forcefully in subsequent years
1) First the dominant wires that would come to deliver Internet service providers
(ISP) broadband access for Americans were and are controlled by the handful of
firms that dominated telephone and cable television
- These firms were all local monopolies that existed because of government
monopoly licenses
- Although often despised by consumers, they were arguably the most
extraordinary lobbying force in the nation as their survival depended on
government authorization and support
- ISPS are the only entry point to the Internet and digital networks
- These telephone and cable giants came to support the long process of what
as alled the deegulatio of thei idusties that ae to a head i
- They suspected deregulation would allow them to grow ever larger and
have more monopolistic power
- The stated justification for deregulation was that these traditional phone
and cable monopolies would be permitted to use their wires to compete
ith eah othe i loal akets, eatig oa fide aket opetitio
- In exchange restrictions on mergers would be relaxed, so they could gird
themselves for the coming competitive warfare
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2) The second area where conventional microeconomics would raise eyebrows if not
ring alarm bells is how capitalist development of internet related industries has
quickly, inexorably, generated considerable markt concentration at almost every
level often beyond that found in non-digital akets
- There are multiple areas where private interests can get a chokehold on the
Internet and seize monopoly profits, and they are all being pursued
- Google for example holds 70 percent of the search engine market and its
share is increasing
- Microsoft, Intel, Amazon, eBay, Facebook, Cisco, and a handful of other
giants enjoy considerable monopolistic power as well
- The crucial Wi-Fi chipset market for example, is a duopoly where two firms
have 80 percent of the market between them
- Apple via iTunes control an estimated 87 percent market share in digital
downloads and 70 percent of the MP3 player market
- By conventional economic theory, concentration in markets in general is
bad for the efficient allocation of resources in an economy. Moopol is
the enemy of competition, and competition is what keeps the system
Most ipotat the iteet adds to the i hat eooists te etok effets
- Meaning that just about everyone gains by sharing use of a particular
service or resource
- Ifoatio etoks, i patiula, geeate dead-side economies of
sale, elated to the aptue of ustoes as opposed to suppl-side
economies of scale related to cost advantages as scale goes up
- The largest firm in an industry increases its attractiveness to consumers by
an order of magnitude as its gets a greater market share
- Google is a classic example of economies of scale and monopoly power; as
it grows larger, its search engine becomes ever more superior to erstwhile
- The more that a particular device becomes the interface for whole
networks of applications, the more customers are drawn in, and the
exponential demand side economies of scale take over
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3) If the iteet has poe a spaig goud fo oopol, it has additioal
problems when we look specifically at how capitalist media industries address the
digital world. This is the third area of conflict between economic theory and the
internet, and probably the most deep-seated pg.4
- Media products have always been a fundamental problem for capitalist
- The pole is that a pesos use of ifoatio, ulike tagile goods
and services does not prohibit others from using it
- Ex) anyone who purchased a book could then print additional copies and
sell them. There would be free market competition, and the price of the
book would come tumbling down to the marginal cost of publishing a copy.
But authors would only receive compensation for those copies of the book
they personally published or authorized. Thus was the origin of copyright
laws. Authors received temporary monopoly rights to control who could
publish their books
- When new media technologies developed and powerful media
corporations emerged in the 20th century, they were able to pressure
Congress to extend the length and scope of copyright protection
- Ex) Looking at over the air broadcasting, whether one person or one million
people listened to the program, it didn't change the cost of broadcasting it
and producing the program. The marginal cost of additional listeners was
zero. A broadcaster couldn't charge a listener to tune in to a program
because he/she had free access to it
- The internet raised the market problem a lot: Digital content could be
spread instantly at no charge all over the world
- “ait is degaded  audae ut it is a euieet fo apitalist
aket eooies
- There was a lot more copyright enforcement going on and it has proven to
be effective but it came at a cost for Internet users
- Development of digital rights management (DRM) technologies imposed
limitations of the functionalities of digital devices and software
Where would the money come from if entertainment media were to transition to
a digital old?
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