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Online Versus Offline in the United States: Are the Media Shrinking?

2012; Taylor & Francis; Volume: 28; Issue: 5 Linguagem: Inglês

10.1080/01972243.2012.708710

1087-6537

David Waterman, Sung Wook Ji,

Media Influence and Politics

Abstract We find that combined revenues for 10 major media in the United States have steadily declined as a proportion of overall economic activity or gross domestic product (GDP) from 1999 to at least 2009 (the latest year for which we have complete data). For individual media, we find a generally consistent pattern in which increasing revenues from Internet distribution are exceeded by declines in revenues from established distribution channels, with the exception of television and video games, whose revenues have so far kept pace with GDP. We also report a marked overall shift from advertiser to direct payment support for the media industries over this period. We consider four possible reasons for these revenue trends: shifts in consumer media usage, reduced appropriability due to more difficult copyright protection, inadequate advertising business models, and reduced costs due to more efficient Internet distribution. Our analysis suggests we may be entering an era of a declining size of media industries in terms of conventional measures, but not necessarily a falling supply of media products themselves. Keywords: economics of mediamedia industrieseffects of the Internetsize and growth of mediaInternet business modelssupply of media products Acknowledgments We are very grateful to Daniel Shiman and Jean-Paul Simon; to seminar participants at the Oxford Internet Institute, University of Oxford, and at Indiana University; and to participants at the EuroCPR 2011 conference held in Ghent, Belgium, March 27–29, 2011; the Economics of Media and Content Industry Workshop held by IPTS, European Commission, in Sevilla, Spain, May 30–31, 2011; and the 39th TPRC Conference held in Washington, DC, September 23–25, 2011. We thank Jennifer Talbott for excellent research assistance. The authors are responsible for all remaining errors. Notes 1. Other studies, notably Duff (Citation2000) and Apte and Nath (Citation2007), have relied on other metrics to measure the information economy. See Flew and Cunningham (2010) for discussion. 2. A June 2010 ComScore report showed estimated spending in April 2010 on display advertising by all "general news" sites to be $77.1 million and for all "newspaper" sites to be $59.4 million. (ComScore Citation2010). The Internet Advertising Bureau indicates display advertising to account for 37.89 percent of all non-search, non-e-mail Internet advertising in 2010 (PricewaterhouseCooper Citation2011b). If the ratio of the reported "general news" to "newspaper" display ad spending is the same as the ratio of all newspaper website revenues ($2.74 billion in 2009) to non-newspaper news site revenues, the latter would have earned total revenues of $3.94 billion in 2009, which is 36.8 percent of the total Internet lower bound estimate for 2009. 3. Though estimates vary, YouTube was reported to collect about $1 billion in ad revenues in 2010 (Parfeni Citation2011). Facebook was reported to earn up to $700 million in 2009 (Eldon Citation2010), and $1.86 billion in 2010 (Womack Citation2011). 4. A recent report indicates total spending by Facebook subscribers on online virtual goods to be $800 million in 2010 (Takahasi Citation2011). Data for 2009 were unavailable. Virtually all of the reported amount for 2010 can be attributed to direct spending in support of online games, and Facebook apparently accounts for the overwhelming majority of this spending. 5. For periodic years from 1997 to 2008, the U.S. Census reports revenue from "publishing and/or broadcasting on the Internet," for all taxable and tax-exempt employer establishments engaged in "publishing and/or broadcasting on the Internet exclusively" (U.S. Census Bureau, The Statistical Abstract). While it is unclear exactly which firms are in this total, direct sales to both business and consumers are included, as well as advertising revenues. From 1999 to 2008, this Census measure, not including advertising revenues, rose from $0.8 billion to $10.4 billion (compared to $0 and $3.5 billion, respectively, for our Internet lower bound direct payment measure). Adding this Census direct payment measure to the upper bound total media advertising measure to estimate total Internet media revenues results in a decline in total media revenues as a percentage of GDP from 2.73 percent in 1999 to 2.32 percent in 2008, a relative decline of 15.3 percent. That compares to a decline of 16.8 percent from 1999 to 2008 for the Internet upper bound measure shown in Figure 2. 6. Based on one available continuous series (PricewaterhouseCoopers 2004; 2011a), U.S. Internet access payments grew from $11.9 billion in 2000 to $37.0 billion in 2009, resulting in a relative decline of 13.5 percent in total media revenues as a fraction of GDP from 2000 to 2009 when they are added to the Internet lower bound definition, and to a 14.0 percent relative decline when added to the Internet upper bound definition. These compare to respective 19.4 percent and 19.6 percent relative declines from 2000 to 2009 without Internet access included. While media obviously motivate consumer payments for Internet access, and they help to subsidize Internet media distribution, it is difficult to allocate those payments among media, communications services, search, e-commerce, and other non-media uses of the Internet. Greenstein and McDevitt (Citation2011) construct a series for U.S. Internet access payments from 1998 to 2006, leading to similar results in our measures. 7. Note that television revenue data reported in Figure 8 and elsewhere are for television services only. 8. The 1998–2008 US. Census data include textbooks, children's books, general reference books, professional technical and scholarly books, and adult trade books. 9. Information in this paragraph is based in part on private correspondence with a representative of Wilkofsky Gruen Associates, Inc. 1. The steady rise in U.S. television viewing hours since 1970, for example, has been accompanied by dramatic increases in channel capacity, and accompanying growth in programming investments, that have resulted from diffusion of cable and other multichannel television services and their digitization. 11. As stated by Mayer-Schonberger (Citation2009), "If in analog times it was cool to own lots of books or music records or movies, in the digital age it is cool to build on them—to take the artifacts of our information culture and combine them into something original" (61). 12. Wauters (Citation2010). 13. Boczkowski (Citation2010) relates vivid narratives and analysis of news imitation by two Argentinian newspapers. 14. An ongoing study undertaken by the IPTS, European Commission (to which an initial version of the present study contributed), asks some similar questions about the effects of digitization on media industries in the member countries of the European Union. (A series of reports is available at http://ipts.jrc.ec.europa.eu/publications) 15. Two recent studies (Waldfogel 2011; Mortimer et al. 2012) take a valuable step in this direction by addressing the question of whether recent declines in recorded music industry revenues have been accompanied by reductions in the quality and variety of music in the United States.