full version News Corp As An Oligopoly Essay

News Corp As An Oligopoly

Category: Business

Autor: victor 14 May 2010

Words: 616 | Pages: 3

While a monopoly enjoys sole control of a particular industry, an “oligopoly involves only a few sellers of a standardized or differentiated product; so each firm is affected by the decisions of its rivals and must take those decisions into account in determining its own price and output.” (McConnell-Brue, p. 414) An example of an oligopoly can be found in the mass media (radio, television, publishing houses, etc). An oligopolistic corporation with significant holdings in both the United States and the world is News Corporation.

News Corporation is the world’s third largest media conglomeration. (Saucedo, ¶ 1) While the corporation has significant holdings in its media ownership through out the world, 75% of its revenue is derived from the U.S. market. (Hannaford, ¶ 1) News Corporation is able to attain oligopolistic control not only of a specific media industry (such as television), but of mass media as a whole. It does this through cross ownership of various combinations of media enterprises such as television networks, satellite cable, newspapers, etc. The Federal Communications Commission (FCC) has recently been deliberating on a proposal that could ban a company from “owning a newspaper and broadcast media in the same market.” (Reuters ¶ 3) The cross-ownership of media and ownership and conglomeration of varied media businesses in one market allow News Corporation to maintain and control its position as a media oligopoly.

An oligopoly is comprised of a few organizations that control a market. One of the main ways that a company gains oligopolistic power in today’s market is through the active pursuit of acquisitions and mergers of its competitors. According to McConnell-Brue (p. 468), one of the chief reasons for mergers is the aspiration to gain monopoly control. This seems true of media oligopolies such as News Corporation. “In 1983, 50 corporations controlled the vast majority of all news media in the U.S. but by 1992 less then two dozen companies controlled 90% of the mass media and by 2004 that number declined to 5 corporations controlling the majority of the U.S. media industry.” (Bagdikian, 2004) While there have been laws in place to prevent monopoly control, relaxation of those laws and policies in the 1980s and 1990s has served to strengthen oligopolistic interest and push conglomerated control of media closer to that of monopoly. The FCC Chairman Martin “has favored relaxing the ban on a media company owning broadcast and newspaper properties in one market.” (Reuters ¶ 10) Such policies would assuredly favor oligopolistic enterprises.

News Corporation as an oligopoly with its differentiated media products is dependent in part on non-pricing strategies such as advertising. Rather than being simply reliant upon advertising, News Corp is taking a pro-active to increase its market control by branching out in to advertising. “Fox Interactive Media (FIM), the online arm of News Corp has plans to become a full service online advertising agency that provides advertising to non-News Corp sites.” (Riley ¶ 1) This strategic move will heighten the company’s strategic competition online and enforce its role as a media oligopoly. After effectively meeting the non-pricing strategies, the corporation can then concentrate on a good pricing strategy by seeking an appropriate level between floor price and ceiling price through which the company can maximize its profits.

References:

Bagdikian, Ben.The New Media Monopoly, 2004. Referenced from corporations.org, (http://www.corporations.org/media/) Retrieved 15 December 2007.

Hannaford, Steve. Oligopoly brief: News Corporation, 2004. Oligopolywatch.com (http://www.oligopolywatch.com/2004/03/13.html) Referenced 15 December 2007.

McConnell-Brue. Economics, 16th Edition; Ch. 25 Monopolistic Competition and Oligopoly.

Reuters. FCC chair seeks U.S. media ownership decision-AP, 2007. Reuters.com (http://www.reuters.com/article/mergersNews/idUSN1840519720071018)

Riley, Duncan. News Corp Gets Serious On Online Advertising: Fox Interactive Ad Network To Power Other Sites, 2007. TechCrunch.com (http://www.techcrunch.com/2007/11/26/news-corp-gets-serious-on-online-advertising-fox-interactive-ad-network-to-power-other-sites/)

Saucedo, Matthew. News Coporation. Hoovers.com (http://www.hoovers.com/news-corp./--ID__41816--/free-co-factsheet.xhtml) Retrieved 15 December 2007.