Media Mergers and the Ideological Content of Programming

Abraham L. Wickelgren, David J. Balan and Patrick DeGraba

No 275, Econometric Society 2004 North American Summer Meetings from Econometric Society

Abstract: This paper shows how rules restricting common ownership of multiple media outlets affect both the magnitude and diversity of the ideological content of programming. While in most industries the assumption that firms maximize profits is quite reasonable, we assume that media owners derive utility from the ideological content of programming (say, because they want to influence public policy) as well as from profit. As a result, owners are willing to sacrifice some profits to engage in their preferred form of ideological persuasion. In our model, there are two media outlets and three media owners, each of whom can have one of two ideologies. We define a parameter lÎ[-1,1] that captures the affinity between the two ideologies. If l=1 the ideologies are identical; if l=0, they are unrelated; and if l=-1, they are diametrically opposed. We find that even if common ownership is prohibited, ideological diversity is not guaranteed: if the two ideologies are sufficiently opposed (l sufficiently negative), then the owners of the two media outlets will have the same ideology. If the two ideologies are not so far apart (l positive or not too negative), however, then prohibiting common ownership will lead to ideological diversity (the owners of the two outlets will have different ideologies). When there is ideological diversity, the total magnitude of ideological content is greater since we assume diminishing returns to ideological persuasion. By the same token, the greater the ideological diversity, the greater is the total magnitude of ideological content. If common ownership is permitted, we find that common ownership often eliminates the ideological diversity that would have existed if the two ideologies were not too opposed (l positive or not too negative). On the other hand, if the two ideologies are strongly opposed, then allowing for common ownership can lead to diversity that would not have otherwise existed. The reason is that an owner of both outlets puts more ideological content into her programming at each outlet than would two different owners who are ideologically similar. (Some of the viewers lost when programming becomes more ideological switch to the other outlet; an owner of both outlets internalizes this externality.) This raises the cost of not owning at least one outlet for the potential owner whose ideology is very opposed to the ideology of the first owner. This increases her willingness to pay for the second outlet if she believes the alternative is common ownership. There is also another equilibrium where the owner with the opposed ideology believes that the alternative to her owning the second outlet is separate ownership by owners with identical ideologies. In this equilibrium, permitting common ownership does not lead to more ideological diversity. The issues of the ideological diversity of the media and the amount of ideological programming have a myriad of important implications. In particular, both of these issues have significant effects on how the media influences government policy.

Keywords: Media; Mergers; Media Cross Ownership (search for similar items in EconPapers)
JEL-codes: L41 L50 (search for similar items in EconPapers)
Date: 2004-08-11
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Persistent link: https://EconPapers.repec.org/RePEc:ecm:nasm04:275

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