Media Competition and Coexistence: the theory of the Niche (Routledge Communication Series)

Media Competition and Coexistence The Theory of the Niche

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Media Competition and Coexistence The Theory of the Niche

John W. Dimmick

2003

LAWRENCE ERLBAUM ASSOCIATES, PUBLISHERS Mahwah, New Jersey London

Copyright © 2003 by Lawrence Erlbaum Associates, Inc. All rights reserved. No part of this book may be reproduced in any form, by photostat, microform, retrieval system, or any other means, without prior written permission of the publisher. Lawrence Erlbaum Associates, Inc., Publishers 10 Industrial Avenue Mahwah, NJ 07430 Cover design by Kathryn Houghtaling Lacey Library of Congress Cataloging-in-Publication Data Dimmick, John W. Media competition and coexistence : the theory of the niche / John W. Dimmick. Includes bibliographical references and index. ISBN-8058-3787-6 (cloth : alk. paper) 1. Mass media—Economic aspects. I. Title. P96.E25D56 2003 338.4'730223—dc21 2002069349 cip

Books published by Lawrence Erlbaum Associates are printed on acid-free paper, and their bindings are chosen for strength and durability. Printed in the United States of America 10 9 8 7 6 5 4 3 2 1

This book is dedicated to those who made my career possible, Clara and Arthur Dimmick, Gertrude and Curtis Newton, Rod and Irene Dimmick

Contents

Table and Figure Index

viii

Preface

ix

Acknowledgments

xi

1

Competition Within Industries: Sociocultural Evolution

1

2

The Theory of the Niche

23

3

Competition for Advertising

43

4

The Niche and the Strategic Group: The Niche-Breadth Strategy

64

5

The Gratification-Utility Niche

77

6

Further Aspects of Competition and Coexistence

105

7

The Community Level: Niche Difference, Coexistence, and Complexity

118

References

127

Author Index

139

Subject Index

143 vii

Table and Figure Index

Table 1.1 Type of Ownership of Radio Stations: 1922-1930 Table 1.2 Characteristics of r and K Selection Table 1.3 Growth Rate (ra) and Proportional Change in Average (Mean) Organization Size for Movie Theaters and Newspapers Table 1.4 Daily Newspapers 1912-1980 in Eight Circulation-Size Categories Table 1.5 Number of Small Dailies (Less Than 5,000 Circulation) in Competitive and Noncompetitive Cities of Differing Size: 1920-1950 Table 3.1 Measures of Niche-Breadth, Overlap, and Superiority for Radio and Television Table 3.2 Measures of Niche-Breadth, Overlap, and Superiority for Television and Cable Table 4.1 Means and Standard Deviations of Normalized D-Measures 1987-1999 Table 5.1 Factor Analysis of Gratifications Obtained Table 5.2 Niche-Breadth and Overlap Measures Table 5.3 Pair-Wise Comparisons of Media Superiority Table 5.4 Percent Correct Classification or "Fit" Between Choice Models Table 5.5 Entertainment Gratifications Table 5.6 Niche-Breadth: Gratification Opportunities Table 5.7 Telephone and E-mail Gratification Questions Table 5.8 Factor Analysis for Gratifications Sought From News Media (N = 415) Table 5.9 Time Spent With Five News Media "Yesterday" Table 5.10 Gratification Opportunity Questions for Daily News Media Table 6.1 Breadth and Overlap Measures for Three TV Stations Table 7.1 Pricing Practices of Media Industries Figure 1.1 Figure 2.1 Figure 3.1 Figure 6.1 Figure 6.2 Figure 7.1

VIM

Types of Selection Relationships Among Niche Dimensions Advertising Shares for Three Media Overlap for NBC and CBS Radio Networks Effect of Serial Competition on Newspapers Dominance Index, 1935-2000

Preface

This book is about twin phenomena which represent two sides of the same coin, competition and coexistence within and among media organizations and industries. As such, the book is a work situated in the relatively new field of media economics and management. The central question underlying the theory and data presented in the following chapters is: how is it that media firms as well as entire industries exist and persist over time despite what often seems to be intense competition for resources such as audiences and advertisers? The question is answered in this volume using a bioecological theory—the theory of the niche—to explain competitive processes. Despite the focus on niche theory, the book does not eschew traditional economics. Indeed, every chapter incorporates relevant economic constructs into the analytic framework. This framework ranges from the use of the notion of economies of scale in chapter 1 to explain selection and firm mortality in newspapers and movie theaters, to the use of the concept of transaction costs to explicate the rise of advertising agencies in chapter 3, to employing the concept of strategic group in analyzing the niche breadth strategy in chapter 4, to the measurement of gratificationsutilities in chapter 5. The central reason for the use of the theory of the niche is that received economic theory such as the theory of the firm conceptualizes competition as occurring within industries. Media competition however, has often been seen as a matter of competition between industries (McCombs, 1972). Niche theory provides a way to address the competition between industries. It does not replace received economic theory but, instead, provides a means to analyze a phenomenon on which traditional economic theory has been relatively silent. Hence, the theory of the niche should be viewed as a complement to existing economic and IX

X

PREFACE

management theory which can provide insight into competition within and between media industries. The book is organized largely around levels of analysis of competition. Chapter 1 treats competition as a within-industry phenomenon, whereas chapters 2,3, and 5 focus on between-industry competition. The strategic group level of competition, a level of analysis lying between the firm and the industry, is the subject of chapter 4. Finally, competition and coexistence at the community level forms a large part of chapters 6 and 7. This organization of the volume by levels of analysis foreshadows a conclusion drawn in the final chapter: that media competition and coexistence are complex multilayered processes whose explication requires analysis at many levels.

Acknowledgments

First and foremost, I am deeply indebted to several generations of ecologists who have collectively produced the theory of the niche and whose cumulative contributions I have tried to render in chapter 2. This chapter, although not a long one, represents nearly twenty years of reading bioecological work and attempting to apply it in my own field. Chapter 2 distills what I believe to be the essence of niche theory, or at least my application of it to media competition. I am profoundly grateful to the many ecologists, both cited and uncited in this book, who have created what I regard as a powerful and useful theory. Over the years several people who have been my co-authors on articles, conference papers and book chapters have contributed to the theory and data contained within the covers of this book. Two former graduate students, who are now established academicians—Eric Rothenbuhler and Alan Albarran—helped mold and shape the early niche work and I am truly grateful to them. In addition, I owe Eric another debt for reading and critiquing an earlier version of this manuscript. Although much of the work in this book appears in print for the first time, some of the theory and data have appeared in journal articles and convention papers. Chapter 1 is based on an article published in an issue of Communication Research posthumously honoring F. Gerald Kline, the founding editor of that journal and the author's dissertation advisor at the University of Michigan. Some of the data in chapter 3 are drawn from a Journal of Communication article and a convention paper co-authored with Eric Rothenbuhler. The seeds of chapter 4 were sown in a BE A paper co-authored with Alan Albarran. The discussion of the impact of industry structure on the gratification opportunities, and their subsequent role in the success of cable and the VCR, in chapter 4 is drawn from an article which appeared in the Journal of Media Economics. Chapter 5 also had its precursors in IC A and XI

XII

ACKNOWLEDGMENTS

AEJMC conference papers written in conjunction with Jean Dobos and Charles Lin and in papers written with Carmin Gade and Caroline Rankin. This book would probably not have been written were it not for the sabbatical leave procured for me by Carroll Glynn. I owe her many thanks for both the generous leave and her constant encouragement and support. As the book was being written, I was fortunate enough to be able to avail myself of my friend and colleague Daniel McDonald's considerable methodological expertise. I thank Dan for the many unremunerated consultations. Finally, I owe my wife Karen more gratitude than I can properly express in words for her support during the time the book was being written. Despite largely foregoing a social life, movies, concerts, and most of the other appurtenances of civilized life for more than one year, she was always willing to listen with enthusiasm to my latest little "discovery" or to applaud (literally) when yet another chapter was completed. I owe her, big time. That this book was produced in a timely fashion is due in part to the efforts of Grace Rees and Ting-Ting Lu. Grace deciphered my prose and used her considerable word-processing and editing skills to turn my barely legible drafts into a readable manuscript. Ting-Ting, my wizard of the APA style manual, assured that the citations and references were in proper form. I thank them both for their hard work. —John W. Dimmick

1 Competition Within Industries: Sociocultural Evolution

The theoretical framework used in this chapter to conceptualize competition within communications industries is sociocultural evolution which, like its biological predecessor and counterpart, does not easily yield long-term predictions. Although if one can delineate the selective forces operating in the contemporary world, shorter term prediction may be possible. Like the biologist, the researcher interested in the economics and management of the media cannot appeal to universal laws like those of chemistry or classical physics to supply explanation for phenomena. Like the biologist, who also studies complex living systems, the social scientist inhabits a world where prediction is difficult, at best, and explanation must be won without recourse to causal laws. The economic and social development of each medium of communication is unique. Although one can represent the diffusion of all media by the familiar S-curve, the pattern of influences producing the curve representing each medium will be quite different. Hence, in explaining the development of each medium and its competitive interactions we are dealing with a unique set of circumstances. Biologists are often faced with the same sort of problem, explanation of unique events. The biologist's solution to the problem is to construct what Ernst Mayr (1997, p. 64) calls an historical narrative, "... a scenario that would explain the observed facts of the case, such as in what area of the world humans originated." As Mayr pointed out, classical philosophers from logic and mathematics or the physical sciences considered historical narrative invalid. However, as Mayr also pointed out, this view has been exploded by recent work in the philosophy of science. Historical narratives, Mayr (1997, p. 64) wrote, 1

2

CHAPTER 1

may be the only scientifically and philosophically valid way of explaining the unique in nature. He continued, It is, of course, never possible to prove categorically that a historical narrative is 'true.' The more complex a system is within which a given science works, the more interactions there are within the system, and these interactions very often cannot be determined by observation but can only be inferred. The nature of such inference is likely to depend on the background and previous experience of the interpreter; and therefore, not surprisingly, controversies over the best explanation frequently occur. Yet every narrative is open to falsification and can be tested again and again.

In this chapter and in some sections of the following chapters, the author has constructed such historical narratives to explain the patterns of competition and coexistence within and among media industries. The word evolution is seen infrequently in the communication literature, and when it does occur, it is used in its most general sense to describe a cumulative change process such as the "evolution" of the television medium. An exception is DeFleur and Ball-Rokeach's (1972, p. 17-18) use of the term to refer to evolution as a theoretical paradigm. In their brief discussion, these authors refer to two very different models as evolutionary. The first model, identified with Herbert Spencer, is based on the idea that society develops like an individual embryo, increasing over time in complexity and differentiation. The second model posits that social selection processes are the basis for the changes in society and the communication industries. In this chapter, only the latter will be considered a true evolutionary model. Spencer's concept of evolution as the unfolding of the individual organism was founded on an embryological metaphor based on the work of the biologist Von Baer (see Blute, 1979). The path of embryological change is, of course, programmed and predetermined, and the change process unfolds independent of the environment. Models based on embryological metaphors are, however implicitly, deterministic. The inherent determinism probably accounts for the opposition in the early twentieth century of the American proponents of this viewpoint, such as W. C. Sumner and A. G. Keller, to any attempts by the state to ameliorate the conditions of life for the poor by means of social legislation (see Campbell, 1969). Given this line of reasoning—if the path of change is truly predetermined—inaction is the obvious solution to the social problems. Justification for the more unpleasant consequences of such a laissez-faire social policy was found, unfortunately, in Darwin's notion of natural selection. At this point, an issue of eponymy turns substantive. The name of the nondeterministic theory of change was attached to a school of thought founded on a deterministic model. Sumner, Keller, and their ilk became known as Social Darwinists. Zachariah (1971) recounted the major arguments in the ensuing debate between what he calls the Conservative Darwinists (the so-called Social Darwinists) and what he calls the Reform Darwinists, who strongly disputed the attempts by Sumner and others to justify their social beliefs by appeal to Darwin's theories of

COMPETITION WITHIN INDUSTRIES: SOCIOCULTURAL EVOLUTION

3

organic evolution. The Reform Darwinists had the forces of logic and common humanity on their side, and they may, as Zachariah implied, have ultimately won an important intellectual skirmish. Unfortunately, the struggle to establish a social evolutionary theory was lost. As Campbell (1969) points out, the rejection of social evolutionary theory stems from its association with the so-called Social Darwinists. A more fitting eponym for this discredited tradition in social theory would be Spencerism, Sumnerism, or Kellerism. The Spencerian tradition in social theory is founded on a biological metaphor but it is not evolutionary. As Blute (1979, p. 50) stated, models of change founded on embryologic metaphors are more properly called "developmentalism." The embryological model of change is antithetical to Darwin's original work and to the post-Darwinian synthetic theory of evolution by virtue of its inherent determinism and its assumption that change occurs independently of the environment. Unfortunately, the previous paragraphs are not merely intellectual history devoid of relevance to the present or the future of the communication industries. The Spencerian legacy in contemporary communication is represented by those who insist that any and all governmental intrusion is antithetical to the "natural" functioning of the marketplace. It should be emphasized that such policy positions are based on a Spencerian version of evolution that is not the view of evolutionary theory adopted in this chapter. Indeed, the view of evolution espoused in following pages is a nonnormative one and cannot, by itself, be adduced to support any particular policy position. Rather, the consequences of policy are one factor, among others, in explaining or predicting change in communication industries (see the discussion of radio and Table 1.1). The word evolution as used in this volume acquires its meaning from Campbell's (1969) use of the term to denote social change independent of genetic alteration. In other words, sociocultural evolution is concerned with macro-evolutionary change in observable attributes of social organization arising from the interaction with the environment. In Campbell's view, sociocultural change proceeds from two processes—variation and selection retention—and he has shown how these processes operate in such diverse areas as cultural change (1969,1975), learning and thought (1974a), and scientific discovery (1974b). Similarly, Blute (1979) argued that linguistic change follows a pattern of variation and selective retention. The concepts of variation and selective retention are so general that Ulrich and Barney (1984) regarded the evolutionary approach as a meta-theory. Sociocultural Evolution in Organizational Populations

Variation and selective retention are the two core elements of Campbell's evolutionary epistemology around which this chapter synthesizes evidence of evolution in the communications industries. A third concept essential to evolutionary theory and to the analysis presented here is the concept of population. A population is a set of organizations that resemble each other more than they resemble members of other populations. For the purposes of this chapter, a population is the equivalent to

TABLE 1.1 Type of Ownership of Radio Stations: 1922-1930 Commercial sTATIONS

% (n) Stations

Educational Institutions

Churches

Newspapers and Publishers

% (n)

%(n)

% (n)

Electric and Radio Stores and Service Companies % (N)

Total %

1922

4.2(10)

19.1 (45)

2.6 (6)

20.5 (48)

53.6(126)

100

1923

1.9(7)

25.1 (90)

6.1 (22)

16.7 (60)

50.2(180)

100

1924

5.1(15)

29.2 (86)

10.5(31)

12.9(38)

42.3 (125)

100

1925

6.9(21)

36.1 (110)

16.4(50)

10.8(33)

29.8 (91)

100

1926

11.4(31)

32.9 (89)

15.1 (41)

14.0(38)

26.6 (72)

100

1927

30.1 (101)

27.1 (91)

12.5(42)

11.3(38)

19.0(64)

100

1928

31.1 (120)

22.7 (82)

13.3 (48)

11.3(41)

19.6(71)

100

1929

44.1 (152)

19.1 (66)

11.0(38)

9.9 (34)

15.9(55)

100

1930

59.0 (223)

13.8(52)

7.9 (30)

9.5 (36)

9.8 (37)

100

Source: Adapted from Willey and Rice (1933, p. 196, Table 54). Excludes their miscellaneous category because it does not represent a single, definable population.

COMPETITION WITHIN INDUSTRIES: SOCIOCULTURAL EVOLUTION

5

a communication industry such as the set of TV stations or cable systems in the United States (Dimmick & Rothenbuhler, 1984a, 1984b). Competition is defined as ecological similarity, the use of the same or similar resources. Organizations who are members of the same population or industry are ecologically similar and may compete strongly. More extensive definitions of both the concept of population and the concept of competition will be given in chapter 2. The concept of population and the processes of variation and selective retention form the basic conceptual systems necessary to describe sociocultural evolution. Briefly, variation within a population or industry provides one precondition for evolution to occur. If sufficient variation is present, environmental conditions such as regulation or competitive effects of the industries for example, may operate differentially to favor or select organizations possessing certain attributes. The organizations favored by the environment survive and prosper, whereas organizations that do not possess attributes favored by the environment may attempt to survive by adapting to an altered environment or may succumb to the pressure of environmental selection. In other words, sociocultural evolution operates to increase the "fit" between a population of organizations and the environment. Darwinian and Lamarckian Evolution There are two major forms of evolution or ways in which the "fit" between organizational populations and environment may be accomplished. Hannan and Freeman (1977), reacting against the prevailing concepts of organizational change that emphasize adaptation to the environment, stressed the inertia and rigidity of organizations and the limitations on adaptiveness. These authors proposed that change occurs largely through selection or organizational originality (Hannan & Freeman, 1984). Following Boesiger (1974), the idea that populations adapt to specific ecological conditions may be styled Lamarckian evolution, and change in populations through selection is appropriately called Darwinian selection. There is little doubt that both forms have occurred in the communication industries. As data presented later in this chapter shows, change through selection processes has occurred in the population of movie theaters as well as in the newspaper industries. On the other hand, the radio industry's adaptation to an altered environment (see chap. 3) in the post-television era provides a prominent example of Lamarckian evolution. Clearly, both forms of population change occur; the theoretical task is to identify the conditions that produce these forms of evolution. Variation The first requirement for sociocultural evolution is the existence of variation. Industries are polythetic groups of organizations (Blute, 1979; McKelvey, 1980). The set of organizations or firms within an industry are more like each other than they are like firms or organizations in other industries. For example, TV stations resemble each other more than they resemble newspapers, although

6

CHAPTER 1

TV stations are by no means identical. The concept of a polythetic group implies that members of a population may vary with respect to any given attribute or set of attributes (see McKelvey, 1980, for the process of variations arising within populations) and that variation between industries is greater than variation within industries. Variation among members of an organizational population or industry is not, however, constant across time. It is useful to contrast two points in an industry's evolution that bear on the kind and amount of existing variation. These two points in an industry's development over time are termed the "nascent" industry and the "mature" industry. These terms are not intended to denote neatly discrete stages, but rather indicate broad phases of industry history. It is also useful to distinguish two different components of variation—innovation and diversity. Innovation refers to the emergence of new or unique attributes possessed by one or a few organizations in an industry at a particular point in time, and diversity refers to the difference in the values of attributes common across many organizations in a population. The process of innovation has been studied under the rubric of the social construction of technology (see Bijker, Hughes, & Pinch, 1987). As Hawley (1978, p. 792) pointed out, technological innovation generally precedes development of organizations. "In many instances it seems that the tool appears before an effective organization has been devised." The nascent industry emerges out of technological innovation; technological advances prompt entrepreneurs, engineers and innovators to attempt to create a viable organizational form. In the case of communication industries, a viable organizational form is some combination of technology, audience needs and content, financial support, and organizational structure that allows an organization to sustain itself. As this implies, technology is the precipitator in the formation of nascent industries but the creation of a new industry emerges out of attempts to create a viable organizational form that endows the technology with a social purpose. For example, Sarnoff's vision of a "radio music box" was one attempt to give sound transmission technology a social purpose. Although historians celebrate the creator of a viable organizational form, the nascent industry is usually the result of a number of individuals and organizations experimenting with various social uses of technology to find out "what works." Although advances in paper-making and printing technology made the mass newspaper technically feasible, the technology alone was not sufficient. There were failed attempts to found inexpensive mass newspapers (see Emery, 1962) before Benjamin Day's New York Sun successfully combined technology, content, financial support, and a means of distribution into a viable mass newspaper. The nascent industry is likely to be characterized by both a high degree of innovation and a high degree of diversity. The innovation typically involves divergent notions of how the technology can be successfully used. In the nascent radio industry, this divergence was reflected in the differences between the radio group and the telephone group. Currently in the cable industry there are national channels that attempt to segment the audience following a narrowcast philosophy, whereas others attempt to appeal to a wider audience by adhering to a "broadcast" philosophy. The

COMPETITION WITHIN INDUSTRIES: SOCIOCULTURAL EVOLUTION

7

nascent industry may also be more diverse. In such new industries, all organizational attributes—structure, personnel roles, and operating routines—must either be borrowed or created and, as a result, one would expect a highly diverse set of organizations. This is especially true where the industry is unique and has no models. For example, TV was modeled on the radio industry, but there were no precedents for radio and the motion picture. The nascent industry, precisely because of its trial-and-error character, is often chaotic and fast-changing, and in the beginning, may not seem to be an industry at all but a set of organizations with little in common save technology. As Roehrich (1984, p. 66) observes, "the fledgling industry is usually characterized by a volatile set of conflicting, growing industry trends—often as many simultaneous directions as there are pockets of entrepreneurs in the field. For the early participants, there are no rules of the game. The competitors define the rules and shape the eventual industry structure." For example, Brittain and Freeman's (1980) analysis of the births and deaths in the semi-conductor industry shows that the organizations within the industries displayed the same volatility as the technologies. The recent demise or down-sizing of many so-called dot.com companies on the World Wide Web may indicate that this industry is beginning to move from its nascent period into an era of maturity. If viable organizational forms emerge from the nascent phase, they become the basis of a mature industry (the process by which forms emerge will be treated in the following section). These viable forms are characterized by relative stability and a slower pace of innovations. The innovation component still exists as firms try out technological improvements or management techniques for greater operating efficiency or competitive advantage, or for adjustment to a changing environment. The free-for-all, trial-and-error innovation of the nascent period has, however, dampened as "what works" has become clear through the operation of selection processes. In the mature industry the predominant form of variation is diversity from firm to firm within the population. Although a complete classification of the dimensions along which organizations in mature industries manifest their diversity is beyond the scope of this work, it is possible to discuss briefly some dimensions of the diversity that are intended as suggestive rather than exhaustive. First, organizations within an industry can be expected to be diverse on demographic attributes such as age, size, geographic location. Second, firms will vary on economic attributes that include debt levels, return on investment, and the productivity of their personnel. A third dimension of diversity concerns what is called organizational culture or "corporate personality." Here, important attributes include receptivity to innovation, organizational climate, risk-taking, and management style. Another dimension likely to be important is organizational structure, which includes departmentalization, reporting relationships, reward systems, and degree of centralization of authority. The existence of variation of both kinds—innovation and diversity—is crucial if sociocultural evolution is to occur, because selection processes require variation.

8

CHAPTER 1

Selective Retention A second requirement for evolution is the operation of consistent selection processes. As Campbell (1969, p. 73) pointed out, given variation and selective retention, "evolution in the direction of a better fit to the selective system becomes inevitable." Some writers (e.g., McKelvey & Aldrich, 1983) used the term natural selection from biological usage to refer to selection processes. However, when applied to selection in the realm of human organizations, the word "natural" is potentially misleading and redolent of Spencerism. A more appropriate and accurate term is Zachariah's (1971, p. 73) use of psycho-social to denote selection processes by humans and human agencies. Darwin, who coined the term natural selection, used it to denote selection in nature as opposed to the artificial selection practiced by animal and plant breeders on domesticated populations (Evans, 1984). Given the origin and the meaning of the term natural selection, it seems inappropriate to apply it to the realm of organizational populations. In the communication industries, selection is the result of such human forces as consumer choice, advertising allocation decisions, and policy or regulatory action. Therefore, selection in sociocultural evolution is not natural in Darwin's sense, but psychosocial. Of the various psychosocial selection processes reviewed by Campbell (1969), two are pertinent to sociocultural evolution in communication industries. The first selection process is differential diffusion: organizational forms or attributes that are perceived to be successful are likely to be imitated. When organizational forms are imitated, the result is the birth of new organizations and the growth of populations or subpopulations. In the cable industry for example, the apparent success of HBO's concept of satellite delivery of movies to cable systems resulted in a number of similar channels that relied in whole or in part on feature films. Similarly, the first successful penny newspaper, the New York Sun, spurred the establishment of new penny papers in other cities (Emery, 1962). In addition, diffusion of the new form also resulted from imitation by existing papers. As the biographers of The Baltimore Sun (Johnson et al., 1937, p. 33) wrote: As soon as it became apparent that at least four penny newspapers were highly successful financially, their competitors began to study their methods with assiduity and respect; but not only to study, but to copy them, if possible.

As these examples suggest, differential diffusion may be most important in the nascent phase of an industry, although this selection process also occurs in mature industries as successful innovations appear. The second type of selection is differential mortality. Evolutionary change in a population occurs not only as a result of differential diffusion but also by differential failure or death of organizations. Figure 1.1, based on Mayr's (1982) discussion, illustrates the major types of selection by differential mortality. In the figure, the values of hypothetical organizational attributes represent the variation in the

FIG. 1.1. Types of selection.

9

10

CHAPTER 1

population on which selective processes operate. Figure 1.1 illustrates stabilizing selection that occurs in a stable environment. Here, at the tails of the distribution, mortality occurs among those organizations with extreme values on the attribute, values out of the range of fitness suitable for the environment. Figures 1.1b and l.lc represent mortality in changing environments. In diversifing selection, the two extremes of the distributions are favored and the organizations at the middle of the distribution are subject to mortality—resulting in a bimodal distribution. The book publishing industry provides an example of diversifying selection. In this industry, the large publishers as well as the small houses have survived, whereas mortality has disproportionately fallen on the middle-sized firms (Powell, 1982). Directional selection, represented by Figure l.lc, occurs when one tail of the curve of variation is subject to mortality, shifting the mean value of the attribute of the population up or down. The effect of the rise of TV on the magazine industry illustrates directional selection. Outcompeted for national advertising by television (see chap. 3), the large mass-circulation magazine such as Life, Look, and the Saturday Evening Post were afflicted with a high mortality rate. On the other hand, the smaller, more specialized magazines were relatively unscathed by television; the net result was a downward shift in the organization size, as indexed by average circulation in the magazine industry. The two major forms of selection—differential diffusion and differential mortality—may be illustrated by data from the nascent phase of the radio industry. (This example does not fit neatly into the major types of differential mortality illustrated in Table 1.1 because the data in the radio example are discrete whereas the examples in Table 1.1 are based on continuous distributions.) Table 1.1 shows the types of ownership of radio stations for the years 1922-1930. In this period, as the column headings demonstrate, there are a number of types of ownership. In short, there is variation. In early radio (Barnouw, 1966), stations were often founded on vague promise of indirect benefits or revenues. Vendors of radio sets hoped to stimulate sales, colleges and universities saw opportunities to extend their offerings beyond the campus, and religious organizations saw radio as an opportunity to recruit members and solicit contributions. The spectrum was quickly saturated, and costs escalated rapidly. Commercial stations had a selective advantage in two ways (Barnouw, 1966). First, the clear-cut goal of producing revenue directly gave them the means both to justify and to meet increasing costs. Second, in 1923, in an attempt to alleviate the confusion created by a crowded spectrum, the regulatory authority assigned many noncommercial stations less desirable locations on the dial. The combination of directly producing and regulatory action favoring reception of their signals gave the commercial stations a powerful competitive advantage. As a result, both differential diffusion and differential mortality are apparent in Table 1.1. The differences between the number of stations in a category in any two years is equal to the number of stations at a time plus the number of stations founded in the category, minus the number of failures or dissolutions. Hence, an increase within a category suggests that a successful form is being imitated

COMPETITION WITHIN INDUSTRIES: SOCIOCULTURAL EVOLUTION

11

(foundings exceed failures), whereas a decrease indicates net mortality (failures exceed foundings). Differential diffusion is reflected in the increase in the number of commercial stations in 1923 through 1930, whereas the decrease in the number of stations in other ownership categories after the period 1923-1925 is due to differential mortality. In summary, the selective advantages seem to have operated to enhance the viability of the commercial form and this success is reflected in the number of organizations founded in this category. The other ownership forms become more rare both through higher mortality and a lower rate of organizational founding. It should be noted here that selection is operating on ownership types, not on other aspects of organization. Apparently there was a ready market for stations despite the numerous failures and the relatively high cost of the necessary broadcast equipment (Archer, 1971). As concluding notes to the discussion of selection processes, several caveats are in order. First, selection is not an all-or-none process, it is probabilistic in nature. Within a population, organizations that possess attributes that fit the selection criteria are more likely to survive, and organizations that lack these attributes are less likely to survive. Second, populations evolve only if selection criteria operate consistently across time. As Campbell (1969, p. 75) stated, "If survival or nonsurvival is a purely random matter, no evolution will take place." Although chance or "luck" may play a role in the survival of individual organizations, evolution of an entire population requires a consistent, nonrandom selection process. The third caveat is that selection processes do not necessarily yield an optimal or maximal fit of a population to the selection criteria. Survival or success requires only a satisfactory fit rather than perfect or nearly perfect fit. Although some theorists in the population ecology of organizations (e.g., Hannan & Freeman, 1977) have speculated that the environment optimizes fitness, empirical data on the organizational population that bear on this question are virtually nonexistent. The current position in biology (Mayr, 1982, p. 589) is one that views fitness as satisfactory rather than optimal. Even biologists who have used optimizing models to study evolution (Oster & Wilson, 1978, p. 292-315) conclude that fitness represents a compromise. In any given case, there is never enough time or enough variability to optimize all attributes to the environment. As a result, existing organizations are likely to possess some attributes that have been positively selected, some attributes that are selectively neutral, and yet other attributes that may be a palpable liability. Hence, fitness is likely to be a nonoptimal compromise among the attributes constituting organizations. As a corollary, one should not assume that selection inevitably leads to "progress" in any sense other than fit of population to environment. r-K Selection

The most explicit theory of selection processes is called r and K selection. The objective of this selection and the following sections of this chapter is to ascertain if r-K selection has operated in the communication industries. The term was origi-

12

CHAPTER 1

nally coined by Mac Arthur & Wilson (1967) and the letters r and K refer to two of the parameters of the logistic equation for population growth. The logistic equation gives the instantaneous rate of change (d) in population size (N) at time (t):

where N is the population size and K is the carrying capacity or the ability of the environment to support the population. In bioecology, r can denote either r max, the maximal rate of increase under ideal conditions, or ra, the actual rate of growth. Because r max is dictated by the genetic structure of the population, ra is the parameter's only relevant meaning in studies of sociocultural evolution. The curve produced by the equation is a S-shaped one with time on the horizontal axis and population size on the vertical axis. Growth is slow at first and then accelerates but slows as the population nears K and finally turns negative as the population exceeds K. As a model of population dynamics, the logistic, like other deterministic growth models, has been the subject of debate and criticism. Although the model fits a few laboratory and natural populations (see Ricklefs & Miller, 1999, and Pianka, 1983, for discussions), the logistic is unrealistically simple. For example, both r and K are assumed constant—invariant across time—and this is rather unlikely to be the case. As Pianka (1988) pointed out, these and other assumptions can be replaced by more realistic ones but the mathematics quickly become intractable. Although the logistic itself is not a useful model, Pianka (1970,1972) developed an explicit theory of selection based on Mac Arthur and Wilson's distinction between r and K selection. Table 1.2 displays the major elements of r and K selection. As Pianka emphasizes, r and K selection are relative terms and populations can be arrayed on a continuum anchored by pure r selection at one extreme and pure K selection at the other. For example, in the realm of annual plants in temperate climates, these populations are subject to r selection in the early spring and to K selection later in the season. Pianka's conceptualization implies a continuum which runs from r-selection at one end of the scale to K-selection at the other. Populations that are r selected arise out of what Pianka (1970) called an ecological vacuum corresponding to the early nascent phase of an industry. As technological innovation makes new organizational forms possible and one or more organizations establish viability, there is a demand for the product or service. By imitation or differential diffusion, the successful organizational form's numbers may multiply. At this point the long-term nature of the demand is not established; it is uncertain whether the resources required to sustain the organizational form will be available in the long term. For example, such dominant industries as radio and motion pictures in the early stages of development were believed by some to be mere fads. In this uncertain environment, selection favors small organizations that are relatively inexpensive and that can be set up quickly to capitalize on demand.

COMPETITION WITHIN INDUSTRIES: SOCIOCULTURAL EVOLUTION

13

TABLE 1.2 Characteristics of r and K Selection r Selection

K Selection

Environmental Resources:

Uncertain

More constant or predictable

Population Size:

Below carrying capacity

Near carrying capacity

Mortality:

Non-directive, density independent

Directive, density dependent

Competition:

Less intense

More intense

Selection Favors:

Smaller size

Larger size

Leads to

Fast growth rate

Competitive ability

Source:

Adapted from Pianka (1970), Table 1, p. 593.

This is the core meaning of r-selection. In the 1980s, the video arcade exemplified this sort of rapid growth of a population composed of small organizations. A more recent example is the explosion of small dot-corn companies doing business on the World Wide Web. The nascent industry, lacking evidence of long-term demand for its products or services, is unlikely to attract large firms with capital and expertise in similar industries quickly. For example, IBM moved slowly and ponderously into personal computers, and before it could establish a presence, the industry structure was formed by smaller and newer firms such as Apple (Roehrich, 1984). In short, r selection favors proliferation of small, lightly capitalized organizations that can be set up quickly to exploit newly discovered demand. As the population grows upward toward K—the maximum number the environment can support—mortality occurs but failure results from many factors and selection at this point is nondirectional. In the case of newspapers, Park (1923, p. 286) stated the notion of K or carrying capacity succinctly when he wrote, "There were more newspapers than either the public or the advertisers were willing to support." As growth approaches, K competition becomes keener as a result of population density. As competition increases in intensity due to the increasing number of organizations, selection will begin to favor the larger, more efficient and hence competitively superior organizations. K selection is selection for competitive superiority which entails large size and economic efficiencies. As Pianka (1970, p. 593) wrote, "as an ecologic vacuum is filled, selection will shift a population from the r toward the K endpoint" of the continuum.

14

CHAPTER 1

It should be noted here that Pianka' s linking of size, efficiency, and competitive ability is similar to the notion of economies of scale, in which the average cost of a production declines as the number of units produced increases. The theory of r-K selection implies a clear pattern that should be observable over time in the course of an industry's development. Hannan and Carroll (1992) developed math models that show that organizational founding rates increase and then decline as the population density of organizations rises, and that mortality among organizations drops with low population density and increases with high density. In the population ecology literature this is called a density dependent interaction (Ricklefs & Miller, 1999). First, one should observe the growth in number of relatively small organizations as the organizational form proliferates in space and over time. As growth reaches the upper limit (K), the competition precipitated by population density results in mortality among the smaller organizations as they are outcompeted by the larger. Concomitantly, mortality among the smaller organizations should be reflected in an increase in the average size of organizations in the industry. If r-K selection occurs in communication industries, one indication is mortality, a decrease in the number of organizations. As a starting point in the search for r-K selection, the number of organizations in the major industries of mass communication were plotted across time (magazines were not included because the nondirectional selection pattern noted earlier precludes r-K selection). These plots show that the initial precondition for r-K selection, organizational mortality, occurred in two populations—movie theaters and newspapers. The evidence for r-K selection in these industries are examined in the following sections of this chapter. In other industries besides newspapers and movie houses, population size is growing or stable, indicating that foundings have equaled or exceeded failures. In TV and radio, spectrum scarcity has limited the number of radio and TV stations, and in the cable industry the public utility conception of the industry has restricted the number of systems and until recently, guaranteed each system monopoly status within its designated service area. These limitations on population size have no doubt restricted the severity of intrapopulation competition, and this is one major reason for the pattern of growth or stability in numbers of organizations within these industries, which make them unlikely candidates for r-K selection. r-K Selection: Movie Theaters

According to Ramsaye (1926), the first nickelodeon was founded in Pittsburgh five years after the turn of the century in a vacant store room that had a capacity of less than 200 patrons. Within one year there were perhaps a hundred nickelodeons in that city and the form was diffusing to other major urban centers like New York and Chicago. There were roughly 9,000 nickelodeons by 1910, and a decade later the form had reached its peak. As Allen (1980) pointed out, the number of small "store

COMPETITION WITHIN INDUSTRIES: SOCIOCULTURAL EVOLUTION

15

shows" that could be financed with minimal capital escalated so quickly that their exact numbers are difficult to ascertain. If r-K selection is occurring among the population of movie theaters, one should observe a period of strong initial growth that peaks as the environment is saturated. As this plateau is reached, the growth should turn negative and the decrease in the number of theaters should be accompanied by an increase in organizational size. Table 1.3 shows the actual rate of growth (ra) and the proportional change in average size of movie theaters for the decades for which data could be located. Theater size is computed as the average weekly attendance per year divided by the number of theaters. Attendance per theater is used as the measure of size for two reasons: these data are available, and more important, in the population ecology perspective (Dimmick & Rothenbuhler, 1984a, 1984b) patronage is the resource theaters depend on for survival. As Table 1.3 shows, the strong initial growth is evidenced in the magnitudes of the ra's from 1910 through 1930; at the same time, there is little increase in the average theater size. Between 1930 and 1940, growth becomes negative and this is accompanied by a large increase in average theater size indicating the closing of a number of theaters and the absorption of their audiences by the remaining organizations. The mortality among theaters is not simply the result of economic depression. As a Department of Commerce study (summarized by Odium, 1947) reported, demand for movies declined, but the decrease was less than the drop in demand for shoes or food for home consumption. Following their decline in the 1930s, a number of theaters resurged in the 1940s accompanied by a relatively small downturn in size. In the 1950-1970 period, both ras and changes in size are negative, reflecting the impact of TV. In general, then, the data in Table 1.3 for the period 1910-1940 are consistent with the pattern one would expect from r-K selection. However, r-K selection implies specifically that mortality occurs among the smaller organizations in a population. Unfortunately, no quantitative data are available bearing on the number of theaters in various size classes for the first decades of the industry. Although quantitative data do not exist, several contemporary writers note the decline in numbers of smaller theaters. Ramsaye (1947, p. 7), a close observer of the early industry and author of one of the first histories of motion pictures, observed that as the industry matured, the number of theaters decreased as seating capacity increased. Johnston (1926, p. 26) comments on the demise of the small theaters in smaller cities, and Barry and Sargent (1927, p. 10) note the same pattern in the metropolis. "At this writing, in the big cities, a sweeping change is underway. Several thousand smaller theaters are being replaced by great neighborhood houses of the latest type." Similarly, Willey and Rice (1933, p. 178) stated that, "In recent years, many small houses have been discontinued because of competition from larger theaters." As these observations suggest, the trend towards replacement of smaller by larger theaters began in the 1920s but net mortality (births minus deaths) is most apparent in the 1930s. Although a number of factors contributed to the demise of the small theaters— for example, proliferation of the automobile, which widened movie-goers' choice

TABLE 1.3 Growth Rate (ra) and Proportional Change in Average (Mean) Organization Size for Movie Theaters and Newspapers Movie Theaters

Newspapers Proportional Size Change

r

Proportional Size Change

1850-1860

.524

.280

1860-1870

.483

.187

1870-1880

.692

-.190

1880-1890

.658

.419

1890-1900

.383

.302

1900-1910

.168

.373

Year

ra

1910-1920

.666

(Not Available)

-.082

.502

1920-1930

.151

.035

-.135

.442

1930-1940

-.335

.836

.010

.021

1940-1950

.223

-.131

-.092

.380

1950-1960

-.121

-.529

-.021

.117

1960-1970

-.145

-.380

-.009

.064

1970-1980

*

*

-.051

.055

Sources: Number of theaters—1910 estimate; Willey and Rice, 1933, p. 178; 1920; Seabury, 1926, p. 277; 1930; Willey and Rice, 1933, p. 178; 1930-1970, Historical Statistics. Weekly Attendance—1920; Willey and Rice, 1933, p. 179; 1930; Willey and Rice, 1933, p. 178; 1930-1970, Historical Statistics. Newspaper numbers and circulation are from Historical Statistics and Statistical Abstract of the U.S. Note: Newspaper numbers and circulation exhibit smooth growth and decline and, hence, the figure for each decade year (e.g., 1930) is representative of the trend in the previous decade. Movie attendance, however, varies greatly from year to year and the attendance in any decade year may not be representative of the trend. Therefore, means were calculated for the available years in each decade and these averages were used to calculate size changes for theaters. *As noted in Figure 2, the movie industry in 1975 began to report number of screens rather than the number of theaters.

16

COMPETITION WITHIN INDUSTRIES: SOCIOCULTURAL EVOLUTION

17

of theaters (Johnston, 1926), and the expense of equipping theaters for "talkies"—the major reason was probably the economic advantage of the larger theater. As early as 1919, a study of the motion picture industry by Connick (quoted in Seaburry, 1926, p. 277-278) concluded that economies of scale existed in movie exhibition. There is no doubt as to the financial advantage of the theater with a large seating capacity over a small one. An examination of the cost of operating theaters shows that with the same standard of exhibition, the only increase in operating cost in the case of the large houses occurs in the comparatively low-priced items, such as ushers and cleaners. The big items—management, film rental, and orchestra, stay the same.

In addition to the intrinsic economic efficiency of the larger theaters, many of which were owned by the large firms that dominated the industry (see Huettig, 1944; Whitney, 1982), the evidence indicates that by the late 1920s theater management, especially in the larger chain-owned houses, was highly developed and efficient (Katz, 1927). Over the history of the motion picture, movie theaters have changed radically from the small "store show" to the downtown movie palaces of the 30s and 40s to the post-W.W. II drive-in theater to the contemporary multi-screen theaters which first appeared in the 1960s. Although the movie experience has changed from watching major Hollywood films in the dark and cavernous recesses of a rococo cathedral in a central city to viewing a contemporary film on one of perhaps a dozen screens in a suburban multiplex, the K selection in the form of economics of scale is still evident. Stones (1993, p. 233) wrote, The centerpiece of a successful multiplex is its focus on economies of scale. Multiple auditoriums that share a common parking lot, box office, restrooms and concession area reduce overhead expenses and generate more profit per square foot.

r-K Selection: Daily Newspapers The decline in the number of daily newspapers is a well-established theme in the research literature (e.g., Nixon & Ward, 1961; Rosse, 1980). A number of studies have examined mortality in the industry but with the exception of those by economists (e.g., Rosse, 1967,1980) the research is largely descriptive and atheoretical. The purpose of this section is to examine the evidence for r-K selection in the daily newspaper industry. At first, r-K selection may seem an implausible explanation for the death of daily papers. Given the widespread attention in the trade press and the general media when a metropolitan paper closes its doors, one might gather the impression that it is large metropolitan dailies that are especially prone to mortality. This impression seems to contradict r-K selection, which implies mortality of the smaller organizations. An examination of the evidence, however, indicates this impression is probably incorrect. Table 3.3 shows the growth rates (ras) and changes in average organization size from 1950 to the beginning of the 1980s. In Table 3.3, organization size is computed

18

CHAPTER 1

by dividing average daily circulation by the number of papers, because circulation is a critical resource for daily papers. In general, the growth of dailies is slower than the explosive growth of movie theaters. Newspapers, of course, are an urban phenomenon—so much so that Park (1929) determined that one could define an urban area on the basis of the pattern of newspaper circulation. The slower growth of newspapers reflects the fact that a large increase in numbers had to await concentration of the population in cities. Newspaper growth, as the table shows, is quite strong from 1850 to 1890, but slows markedly in the two decades spanning the turn of the century as the environment becomes saturated. Their-values, except for slight positive growth in the 1930s, then turn negative for the remainder of the time series, with the largest negative changes in the period 1910-1930. The small positive growth in the size of the newspaper population was also noted by Ray (1952), who observed that the increase could be due to the political ferment of the 1930s or to cost decreases in middecade. Given Delacroix and Carroll's (1983) finding that newspaper births occur in periods of intense political activity, the former explanation seems the more probable. Although the number of papers is growing rapidly in 1850-1890, the size changes show a corresponding increase. As growth in population reaches asymptote and turns negative, however, the largest changes in average organization size occur in 1910-1930, the period in which the largest negative growth also occurs. This suggests widespread mortality among dailies and absorption of most of their circulation by the remaining papers. In the following decades, the size changes were positive but relatively small. The crucial question is whether the mortality occurs primarily among smaller organizations. Scattered evidence from previous research does suggest mortality among dailies in smaller communities. Ray (1952, note 1923) reported that the majority of dailies suspending publication in 1910-1919 were in small cities. Similarly, data published by Neurath (1944, Table 1) for 1930-1941 show that the decline of two-paper cities is most evident among the smaller communities. Nixon and Ward's (1961) data also show the sharpest decline among papers in smaller cities in the period 1945-1961. The data in Table 1.4 were compiled to locate more precisely the size classes in which mortality is apparently occurring. In Table 1.4, decreases in a category do not necessarily indicate mortality because it is possible for papers to appear in different size classes from decade to decade due, for example, to circulation growth or decline. As Table 1.4 shows, in all size classes except one there is an increase in the relative frequency of dailies. The exception to this pattern is in the size class of papers of less than 5,000 in circulation. Although almost two-thirds of all dailies were in this size class in 1912, by 1980, this category accounted for less than 15% of all papers. Such a large difference is unlikely to be entirely due to growth of papers out of the size class. The largest decline in the small dailies (less than 5,000 circulation) occurs in the decades 1920-1950. Table 1.5 was constructed to concentrate analysis on small dailies within these decades. The theory of r-K selection implies that large firms outcompete the smaller. Because competition occurs within cities, it is relevant to

TABLE 1.4 Daily Newspapers 1912-1980 in Eight Circulation-Size Categories **7972 (N = 1823)

7920 (N = 1993)

7930 (N = 1925)

1940 (N = 7967)

1950 (N = 1816)

I960 (N=1787)

7970 (N=1758)

1980 (N = 1763)

More Than 500,000

.05

.10

.26

.25

.55

.45

.63

.62

250,001-500,000

.38

.55

.83

.82

1.32

2.07

1.59

1.36

100,001-250,000

1.26

1.71

2.75

3.21

4.68

4.59

5.18

4.99

50,001-100,000

3.40

3.41

4.21

3.67

5.45

6.16

6.77

8.05

25,001-50,000

4.94

5.12

7.22

6.99

10.02

12.31

14.16

15.66

10,001-25,000

10.75

13.10

16.00

16.03

22.74

25.46

26.84

29.84

5,000-10,000

15.85

15.35

19.64

23.15

24.39

25.57

26.62

25.24

Less than 5,000

63.37

60.66

49.09

45.88

30.85

23.39

18.21

14.24

Total

100%

100%

100%

100%

100%

100%

100%

100%

Source: N.W. Ayer Directories 1912-1960 and Editor and Publisher International Yearbooks for 1970 and 1980. Note: Defined as English language dailies in the United States, including Alaska and Hawaii but excluding territories and possessions. The unit of analysis is the organization and, hence, papers with more than a single edition were tabulated as a single organization. For the same reasons, papers selling advertising space jointly were tabulated as separate organizations. **The total number of papers for 1912 is smaller than the 1920 total, due to the fact that a significant number of papers, especially in smaller towns, did not report circulation and could not be tabulated. This problem persists, with less severity, through later decades. The total number of papers reported will vary slightly from other published figures due to definitional differences.

20

CHAPTER 1

TABLE 1.5

Number of Small Dailies (less than 5,000 in circulation) in Competitive and Noncompetitive Cities of Differing Size: 1920-1950 1 Daily

2 or More Dailies

1920 N

1950 N

% decrease1920-1950

1920 N

1950 N

% decrease 1920-1950

25,00150,000

8

3

62.50

28

3

89.28

10,00125,000

107

66

38.32

158

24

84.81

10,000 and below

474

403

14.98

174

21

87.93

Total

589

472

19.86

360

48

86.67

Source: N.W. Ayer, American Newspaper Annual, 1920, and N.W. Ayer and Sons, Directory of Newspapers and Periodicals, 1950.

compare rates of decline in the small dailies in communities that vary in their degree of newspaper competition. Table 1.5 compares the number of cities with small dailies in 1920 and 1950 in competitive (two or more dailies) and noncompetitive communities where the daily is the only paper. The comparison is accomplished within categories of city population size. In Table 1.5, comparison is restricted to three population categories of cities of 50,000 and below because there were few small dailies in the larger population categories and no large single-newspaper towns served exclusively by small dailies. As the probabilistic nature of selection processes addressed earlier in the chapter implies, not all mortality of smaller dailies will be due to K selection. For example, Carroll (1987) found that a "liability of newness" predisposes newer newspapers to failure. A decrease in cities with small dailies in a size class could also occur as a result of poor management, growth or decline of the paper or city out of size class, or a number of other factors. There is no reason to believe however, that these other factors would occur with unequal frequency in competitive and noncompetitive cities. Given this certeri sparibus assumption, the operation of factors besides competition should result in a baseline decrease in noncompetitive cities against which decreases in the number of cities with small dailies, in both competitive and noncompetitive communities, can be assessed. However, the decrease in the competitive cities is substantially larger in all three size classes. Across the three categories of size, the number of cities with small dailies decreases by a bit less than 20% where there is no competition. In competitive cit-

COMPETITION WITHIN INDUSTRIES: SOCIOCULTURAL EVOLUTION

21

ies, this decrease exceeds 85%. Such a disparity is so large that it is unlikely to be entirely due to factors other than competition. The apparent mortality of smaller dailies in competitive cities suggests of course, that the operation of economies of scale that gave a selective advantage to the larger papers. In newspapers, economies of scale mean that as circulation increases the per-paper cost falls. Ray (1952) seems to have been the first to note the existence of scale economies in daily newspapers. In examining data on employee productivity, Ray found that employees on larger papers were more productive—as measured by value added per employee—than employees of smaller papers. He quickly added, however (Ray, 1952, p. 36), that this results "in part, because of the economies of large-scale production. Large newspapers, for example, afford fuller employment of special purpose equipment such as presses and stereotype facilities." Later studies designed explicitly to investigate this question such as Ferguson (1963) and Rosse (1967) found positive evidence of economies of scale in the US newspaper industry. In addition, Reddaway (1963) provides evidence of scale economies in the British daily press. Such scale economies evidently resulted in the long-term trend for advertisers to buy space in the larger paper (Bagdikian, 1971, p. 79; Emery, 1962, p. 518-519), which because of scale economies could offer a lower cost-per-thousand readers than the smaller papers. Picard (1993) has explained that a so-called "circulation spiral" occurs. If two competitive papers reach a situation where the larger paper has 60% of the circulation it also attracts more advertising—due to the tendency of advertisers to buy the larger paper—so that the smaller paper will be progressively less viable economically. The emphasis on the smallest class of daily papers in the earlier analysis is not meant to imply that they were uniquely vulnerable. Examination of papers and their circulations in large cities such as New York or Chicago for the years 1920-1950 also show a pattern of selection favoring the larger papers. In 1920, Chicago supported ten English language dailies but by 1950 there were only six papers; those still publishing had been among the largest dailies in 1920. The mortality of smaller dailies in New York was even more pronounced. In 1920, there were 22 dailies, but by 1960 there were only 7. As in Chicago, the survivors of 1960 were the larger papers, some of which represented mergers of formerly independent firms. However, precisely because the smaller papers in smaller communities were present historically in greater numbers, they also represent the class most strongly affected by r-K selection. Rosse (1980) wrote that the reason daily newspapers have failed is their failure to segment the market, to adapt by finding a less-than-mass-audience readership or a more specialized audience. Picard (1993), on the other hand, argued that a segmentation strategy involving changing to a tabloid format, serving audiences less attractive to advertisers and serving areas smaller than an entire metro area is not an acceptable alternative to papers' owners and that there is little evidence that such a strategy would succeed. This underscores Hannan and Freeman's (1984) position, noted earlier, that organizational adaptation may be difficult.

22

CHAPTER 1

However, although newspapers have not, with few exceptions, segmented their audiences, segmentation of a spatial sort seems to have occurred. In addition to the metropolitan daily, in most urban areas there also may exist suburban dailies or weeklies as well as dailies or weeklies in satellite cities. Rosse's umbrella competition model (see Picard, 1989, and Lacy & Simon, 1995) might be interpreted to mean that newspapers have effectively segmented space—the metropolitan landscape—so that each newspaper has an area of habitat or coverage that overlaps little with other papers' spaces and effectively insulates it from strong competition. This spatial segmentation is effective since urban space is the container for the resources—advertisers and subscribers—on which newspapers depend for survival. For example, Niebauer, Lacy, Bernstein, and Lau (1988) in a national study of newspaper competition, found that market structure in the central city—competing dailies, dailies under a Joint Operating Agreement or monopoly dailies—had little effect on either the existence of suburban papers or their circulation levels. These authors also found that the larger the population of a suburb (i.e., potential subscribers) the more likely the suburb was to have a daily newspaper. Using the county rather than the city as the unit of analysis in a study of national scope, Lacy and Davenport (1994) found that an index of concentration was higher than the level used by the Justice Department to indicate high concentration. Such concentration levels generally denote an absence of competition. These studies indicated that there is an absence of direct competition in U.S. metropolitan areas and, in that respect, these studies are consistent with an interpretation of the umbrella model of competition to the effect that American newspapers have effectively spatially segmented metropolitan areas. One salient consequence of this segmentation is the contemporary absence of strong intra-population competition in the wake of daily newspaper mortality due to r-K selection. The result of such umbrella competition is that newspapers representing several layers of umbrella competition such as national dailies, metropolitan dailies, suburban dailies and weeklies may coexist within a metropolitan area, although as Lacy and Simon (1995) pointed out, not all layers of the umbrella are represented in any particular metro area. The author will return to the implications of the umbrella model as spatial segmentation in chapter 4 and chapter 6 where spatial segmentation is given a clear interpretation in terms of the theory of the niche.

2 The Theory of the Niche

The relationship between ecology and economics has existed from the beginning. According to Mayr (1997, p. 207), the term ecology was coined in the 1860s by Haeckel, who defined the word as that corpus of knowledge concerning "the economy of nature." Economic thought has been so thoroughly intertwined with the development of ecology that Worster (1994) entitled his intellectual history of the field of ecology as Nature's Economy. Several decades ago, Ehrlich and Holm (1962) pointed out the potential for merging ecological thought with the social science disciplines, including economics. The reason underlying their suggestions is straightforward. Albeit in different spheres of activity, economists and ecologists study the use of resources and the competition for those resources. For example, a chapter titled "Economics of Consumer Choice" (Mac Arthur, 1972) appeared not in an economics text, but in a book on ecology. These two disciplines sometimes employ similar theoretical constructs—a similarity often obscured by difference in labels. Although space limitations preclude extensive discussion of the parallels between economics, business and ecological thought, it can be pointed out for example, that the terms breadth and overlap in the ecological theory of the niche have their counterparts in portfolio analysis and in the concept of substitutable commodities. The work presented in this chapter is part of the second wave of application of ecological thought to the human social order. The first wave occurred in the first half of the 20th century, when ecological concepts were applied in several fields including sociology, economics, and geography (Hawley, 1944). The second wave seems to date from Hannan and Freeman's (1977) seminal application of concepts from population ecology to the study of organizations. In this second wave of research and theorizing, various concepts have been borrowed from population and evolutionary ecology to describe and explain organizational phenomena. Although this line of research and theory has been fruitful in many

23

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CHAPTER 2

ways, the author's position is that the full benefit of ecological thought can only be derived from applying ecological theory—such as the theory of the niche—as a whole theoretical system, not as isolated constructs. In applying the theory of the niche to media organizations and industries, it is not being suggested that populations of organizations and populations of biological species have anything in common except that insofar as organizations or species constitute populations that subsist on the same resources, they came within the purview of the theory. Just as it was clear in chapter 1 that evolutionary concepts such as variation and selection are general enough to cross the boundary of the human and nonhuman, so it will be made clear in this chapter that the theory of the niche is an abstraction that can bridge the nonhuman and the human social worlds. The theory of the niche is abstract and general; its substance is a set of concepts and propositions concerning competition and coexistence. As such, it is not exclusively a biological theory, but a theory formulated to describe and explain competition and coexistence among populations. The data reported in subsequent chapters can be considered an illustration of the generality of the theory because concepts and measures are applied not in analogic fashion, but as a theory of competition and coexistence per se. At the most abstract and general, a unit's (population or individual) niche is its relationship to its environment. The original meaning of the word "niche" was architectural (from the Latin nidus or "nest") meaning an opening or recess in a wall which was intended to hold a statue or some other object. Although the term was used by naturalists such as Grinnell (see Pianka, 1988, for a brief history), it was also present in the work of social scientists such as human ecologist Robert Park. The concept has gained a certain currency in contemporary business usage as reflected in such phrases as "niche market," which seems to denote a specialist company or industry. This latter usage is not an accurate reflection of its ecological meaning because, as is described later, there are generalist niches as well as specialized niches. "Niche" has also been used in various ways in the organizational science literature. In this volume, the concept is based on its meaning in ecological theory. Ecologists have tested and refined the term over the past 40 years, and we can profit from the theoretical debates and empirical studies which have contributed to the contemporary meaning of niche. Although the term niche was first used by Grinnell in the 19th century, the niche concept began to acquire theoretical life with Hutchinson's (1958) definition as an n-dimensional hypervolume. Although as Pianka (1988) pointed out, this conceptualization was too abstract for practical use, Hutchinson's work is a theoretical milestone in the development of the theory. Ricklefs and Miller's (1999) definition reflected the Hutchinsonian conception. The niche ... occupies a part of the n-dimensional volume that represents the total resource space, or niche space, available to the community. We think of the total niche space of a community as a volume into which the niches of all species fit, as do balls of various sizes packed in a box.

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This spatial conception of the niche is reflected in such key theoretical terms as niche dimensions, niche-breadth, and niche overlap, which are defined later in the chapter. First, however, it is necessary to define such key terms as population, industry, and the concept of competition. The spatial concept of the niche has led some analysts to speak of "empty" niches. However, if one keeps in mind that the niche is fundamentally a relationship, then it is clear that there are no empty niches. Although it is possible that some resources may be underutilized or not utilized at all, the concept of the niche as a relationship between population or individual and the environment precludes calling it an empty niche. Competition Media economics generally follows a definition of competition drawn from industrial organization economics in which competition is viewed as being defined by the number of firms in an industry (e.g., Owen & Wildman, 1992). Both Picard (1989) and Albarran (1996) presented competition as stemming from the categories of industries defined by the theory of the firm—pure competition, oligopoly, monopolistic competition and monopoly. Carlton and Perloff (1994) pointed to other definitions of competition. In one characterization of competition, the attributes of price-taking, a large number of firms, and ease of entry and exit are used to judge the competitiveness of an industry. These authors also noted that in policy discussions a competitive industry is viewed as one where no intervention is required to improve performance. As Scherer's (1980, p. 10) definition made clear, the purpose of defining competition in this way is to explain such "dependent variables" as price and output levels. In modern economic theory an industry is said to be competitive (or more precisely, purely competitive), only when the number of firms selling a homogeneous product is so large, and each individual firm's share of the market is so small, that no individual firm finds itself able to influence the commodity's price by varying the quantity of output it sells.

Whereas defining competition in this way allows us to answer questions concerning firm's pricing behavior and output levels, it is less useful in answering the central questions of this volume concerning how media organizations survive and prosper or fail in the face of rivalry from other organizations and industries. The definition of competition in this book, as described in chapter 1, was ecological similarity or, use of the same or similar resources by organizations or industries. Although somewhat abstract, this is a definition that applies to both competition within and between populations. In addition, this definition can be given a clear operational meaning in this and subsequent chapters. Competition occurs when ecological similarity exists and resources are limited. Competition is thus indirect in the sense that resource consumption by an ecological unit (individ-

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ual firm or industry) lowers the availability of resources common to the competitors. This particular form of competition has been called exploitative competition. The ecological definition of competition is closer to the definition of what Scherer (1980, p. 10) called "rivalry" ("... a conscious striving against other business firms for patronage ...") than it is to the industrial organization economists' definition of competition. Population, Community, and the Notion of Industry Competition occurs among populations within communities. Communities consist of populations within a specific geographic boundary. In the realm of media organizations, we can conceptualize communities as existing at different levels of analysis—the international, the national, the regional, and the local levels. Within a community a group of populations that use common resources is termed a guild (Root, 1967). For example in chapter 3, the media industries which use advertising resources within the United States (the community boundary) constitute a guild. Within the community, the unit of analysis is the population or the individual unit such as a firm or organization. A population is a set of organizations within which the variance in the population of the defining attributes is less than the variance between populations (Hannan & Freeman, 1977). Defining populations is a crucial task. Hawley (1944) was the first to insist that an adequate taxonomy was crucial if competition is to be accurately assessed as only populations with similar resource use actually compete. Within the field of organizational science, McKelvey made considerable efforts in that direction. As he pointed out (McKelvey, 1975), a core element in scientific knowledge is the development of a system of classification. In biology, this task is performed by the field of taxonomy which determines which populations are species and which are not. McKelvey (1982) began to develop the theory and the methods requisite to performing taxonomical studies in the realm of organizations. To date however, no such universal classification exists. McKelvey and Aldrich (1983, p. 112) proposed that populations could be defined as competence elements or "comps." Comps are defined as the element of knowledge and skill that, in total, constitute the dominant competence of an organization. "... and each population has a population wide set of comps that are held as knowledge and skill by employees of the organizations in the population." Although this conception seems promising in its generality, the process of defining the competence elements of a population or industry would seem to require a great deal of detailed study of the attributes of individual populations, which in most cases, probably does not yet exist. In industrial organization economics where the "industry" can be understood as a population of similar organizations, there seems to be no clear and general definition of the concept. For example, the difficulty economists have had in defining the industry concept is reflected in the discussions by Porter (1980) and Pearce (1992).

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In the field of mass communication and media economics, the problem of defining the industry or population has simply not arisen. In industrial organization economics the domain of study is all industries while in organizational science the domain is all organizations. In economics and organizational science, the heterogeneity of the domain has no doubt led to problems in defining a general and a workable unit of analysis. In mass communication and media economics, by contrast, because the investigators were members of schools or departments of communication, journalism, or telecommunication, they have chosen populations and organizations such as newspapers, cable systems, radio stations, or book publishing firms as the units of analysis. The more restricted range of industries studied has meant that the problems of classification have been less severe than in industrial organization economics or organizational science. Implicitly at least researchers have used technology or technical apparatus to define the organizations and organizational populations which they have studied. It should be noted that "technical apparatus" as used here is a part of, but not synonymous with, the more abstract notion of "core technology" in organizational science (see McKelvey, 1978). In McKelvey's (1982, p. 171) view, defining technology as technical apparatus is a "clanking hardware oriented view of technology." Although the definition of technology used in media economics and communication is less abstract and theoretical than McKelvey's notion of competence elements, it has the virtues of at least being clear and simple. Any minimally knowledgeable observer can quickly distinguish a newspaper printing press from a cable head-end, a radio studio, or a transmitter. However, until organizational taxonomies are available, McKelvey and Aldrich (1983) advised organizational researchers, in the absence of a comprehensive organizational taxonomy, to at least be clear about the populations they study and to use a "common sense" definition of organizational populations. In defining their units of study on the basis of technology, this is what media researchers have clearly done, and that is the practice followed in this and the following chapters. It should be noted, however, that as technological convergence in the communication industries becomes increasingly a reality the simple definition of industries used in the past may become obsolete and the need for a taxonomy of media organizations and industries may become acutely apparent. NICHE DIMENSIONS Space: Market and Community

In the natural world space can be a critical resource. For example, certain bird species have such highly specific requirements for nesting sites that these spaces are an essential resource for the population's survival. The interpretation of Rosse's umbrella competition model in the previous chapter effectively raises the questions of whether space itself is a resource and of the relationship of the spatial distribution of media organizations to competition.

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The usual way of denoting the business of media organizations is to use the term market. Like the ecological definition of community, the market concept entails a spatial element. As Albarran (1996) pointed out, a media market is defined by two elements: media products and geography. According to Carlton and Perloff (1994), the spatial boundary of a market is ascertained by asking whether an increase in price in one location affects the price in another location. If the answer is affirmative, the two locations are in the same market. Whereas this definition may hold for homogeneous products such as oranges, it may not hold for such products as the commercial availabilities on television stations. For example, a television station in a certain city may raise the price of its availabilities in a particular day—part due to higher ratings and yet not affect the pricing of commercials by other stations in the same city. Markets may be defined at the global, national, or local level of analysis. Some media organizations (like those portrayed in chap. 4) compete at the international level. Others, like the broadcast networks and most cable networks operate at the national level and radio and television stations and most daily newspapers compete at the local level. It is perhaps at the local market level where the role of space in media competition can be most clearly illustrated. The local geographic market can be defined in various ways, but perhaps the most rigorous and clear way is to use the Consolidated Metropolitan Statistical Area as defined by the US Office of Management and Budget. The CSMA is used for some purposes by the broadcast rating services (see Wimmer & Dominick, 1997), and by the Audit Bureau of Circulation, which certifies newspaper circulation as the area within which media audiences are measured, although some metropolitan dailies may draw readers from beyond this area (see Guthrie, Ludwin, & Jacob, 1988). Absent from the economic definition of market but present in the ecological concept of community is the notion of community structure which includes its richness in terms of the number of populations represented and the resource use relationships among them. Considered as ecological communities, local geographic markets vary in their organizational populations from market to market and across time. For example, the relative resource richness affects the number of media organizations that can survive in a given market at any given time. In a study of the effects of the growth of radio on newspapers in local markets with and without newspaper competition, Lacy (1987) found that population, retail sales and number of radio stations showed a larger increase in competitive cities than in non-competitive cities. The implied conclusion is that the competitive cities, perhaps an index of the resource richness, were richer in consumers and advertisers and, as a result, could support a larger population of radio stations. Local markets also change over time in ways that affect resources and media populations. Stamm (1985) concluded his analysis of the growth and decline in newspaper circulation by stating that historically, changes in the cities themselves coincide with changes in newspaper circulation. One way of highlighting the spatial aspect of competition is to envision a hypothetical local market of substantial size. This metropolitan area is com-

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posed of a central city core, a ring of suburbs, and satellite cities. Packed into this sprawling landscape are the spatial "territories" of many media organizations representing various industries. Radio and television signals define reception areas and newspapers (both daily and weekly) have their circulation zones. Other media territories include cable franchise areas while the multiplex theaters and bookstores in the shopping malls each have their areas of greatest patronage, as do the video rental stores. To this complex mosaic of spatial patterns superimpose the adoption patterns of personal computers and DBS penetration. Clearly this urban landscape, although it provides a high degree of choice for media patrons and advertisers, also displays a high potential for competition between organizations within the same industry and organizations representing different industries. However, it should be clear from this discussion that space is not a resource for media organizations beyond the minimal requirements of land for buildings, printing presses, transmitters, and head-ends. Space is not a resource but simply the area defining the geographic limits of resources such as audiences, patrons, or advertisers. The boundary defined by a broadcast station's signal acts in this way, as an envelope or container of the resources, such as audiences and advertisers, requisite to survival. Although space is not a resource, it is the stage on which the drama of competition and coexistence is played out. Resource Dimensions The resource dimensions which allow populations to survive form one of the defining features of the niche. In nature, populations' niches may be defined by a fairly large number of dimensions (Pianka, 1988). However, in actual empirical studies of competition and coexistence, ecologists use one to three dimensions to gauge competitive interactions. For media organizations and industries the relevant dimensions are the resource axes which allow media organizations and industries to exist and perpetuate themselves in time and space. Following Slobodchikoff and Schulz (1980) the term macrodimension is used to denote the resource dimension whereas the term microdimension denotes subdivisions of the resource dimension. There are six major macrodimensions—gratifications obtained, gratification opportunities, consumer spending, time spent by consumers on the media, and advertising spending as well as media content. Gratifications and gratification opportunities are a resource for all media organizations and industries because they represent the needs served by media and are the basis on which media are selected by their patrons. In other words, the demand for media products and services depends crucially on the gratifications and gratification opportunities. The time spent with media as well as consumer spending on media are a consequence of gratifications and gratification opportunities derived from the media. Gratifications and gratification opportunities require further explanation and this is provided in the next sections of this chapter.

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Gratifications Judging from current patterns of language use, the word "gratification" seems somewhat archaic today although it seems to have been common in 19th century writing, as in the following excerpt from Taylor's (1850, p. 54) comments about an incident during the California Gold Rush. The officers were eager for news from home, having been two months without mail, and I was glad that my habit of carrying newspapers in my pockets enabled me to furnish them with a substantial gratification.

Gratification became part of the research literature on mass communication when Herzog (1940) used it to describe the satisfaction derived from listening to a radio game show called "Professor Quiz." The contemporary development of this research tradition however, can be traced to Elihu Katz and his colleagues (Katz, Blumler, & Gurevitch, 1974, and Katz, Gurevitch, & Haas, 1973). In a seminal volume on uses and gratifications research, Katz, Blumler, and Gurevitch (1974, p. 20) wrote that gratification studies "... are concerned with 1) the social and psychological origins of 2) needs, which generate 3) expectations of 4) the mass media or other sources, which lead to 5) differential patterns of media exposure (or engagement in other activities) resulting in 6) need gratification and 7) other consequences, perhaps unintended ones." A critical distinction between gratifications sought (the "expectations" in #3, listed previously) and gratifications obtained (see #6) was made by Palmgreen, Wenner, and Rayburn (1980). The "expectations" in Katz et al.'s outline are the gratifications sought while gratifications obtained are the satisfactions actually derived from media use. Despite conceptual difficulties and theoretical debates, the uses and gratifications approach has generated a large number of studies, far too large to enumerate here. As Lin (1996) pointed out in her brief review of this research tradition, concepts such as "need," "motivations," and "gratification" have not been clearly distinguished. However, uses and gratifications research, despite its many difficulties, remains the communication field's major conceptual and empirical tool for studying media choice. Gratifications occur within what are called "domains," that cut across media industries. Domains are aspects of media content or forms of media use which define the substitutes available to satisfy the relevant set of gratification utilities. To date, several domains such as news, video entertainment, business and economic news, and interactive media have been identified by the author and are the subject of research reported in a later chapter. Other possible domains are such media activities as sports and shopping. The gratification concept is similar in many ways to the economic concept of utility. Georgescu-Roegen (1994) provided a conceptual and mathematical history of the concept of utility in economics. The core meaning of both concepts is satisfaction and both concepts bear on the problem of human choice. Picard (1989) considered that

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gratification studies "indirectly" address the concept of utility. As used by gratification researchers, the concept appears to be closest to the indifference approach to measuring utility (see Picard, 1989). In the future, theoretically integrating the gratifications construct and the concept of utility would make a strong contribution to the study of media choice. Such a task however, is beyond the scope of this volume. Gratification Opportunities The conceptual basis of gratification opportunities is drawn from Carlstein's (1982) work on time geography, that is rooted in the work of the Swedish geographer Torsten Hagerstrand. Time geography is based on the simple yet central fact that people—individuals and groups—change locations over time. Hagerstrand (see Carlstein, 1982) has developed a time-geographic notion that traces changes of location as paths in time-space. The activities of a human population form a web of paths in time-space and individual paths come together in bundles that might represent households, factories, or universities. An example of a bundle that pertains to media use would be a freeway during the morning commute on which commuters confined to their cars use radios, CD players, or tapes to gratify their needs for information and entertainment. Carlstein (1982) observed that human time was a resource because all activities require it. All activities cannot be performed at once but, instead, must be enacted sequentially. The notion of time as a limited resource results in the concept of a. population time budget. The aggregate time supply or budget is obtained simply by multiplying population size by the length of the observation period. As the term budget is meant to emphasize, only a limited number of activities can be performed within a given period. Carlstein conceptualized the time budget at the level of the population. However, for explicating the idea of gratification opportunities, it is more useful to think of household or individual time budgets because of media use, as an aspect of leisure time, actually occurs at these levels of analysis. The opportunities for satisfying media-related needs depend a good deal on where or when individuals or populations are located in time and space. For example, television is normally watched in the home, and its highest use is during evening hours. Radio and recorded music players, on the other hand, are more portable and better suited to mobile uses like exercising or driving to work. The current trend toward wireless communication devices such as cellular phones multiplies the number of time-space opportunities for communication. The individual's schedule or time-space locations throughout the day strongly influences the number of media available and the amount of time available for media use or, in other words, the gratification opportunities. Although the notion of time as a resource that must be allocated or budgeted is straightforward, Carlstein noted that social scientists are often not aware that time is a resource. As he pointed out, time is a resource but is not—like money—a medium of exchange. However, each activity can be assigned a time cost. Despite the grain of truth in the old saw that "time is money," time is not exchangeable, storable, or transportable.

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The connection between gratifications and time use can be seen most clearly in the contrast between the newer and the older media of communication. The traditional media—newspapers, radio, and television—have rigid and limited time schedules to which people must conform to a greater or lesser degree in allocating or budgeting leisure time. "In contrast," as Dimmick and Wallschlaeger (1986) observed, "the new media offer greater choice, more control over time of consumption, or both" (p. 9). In short, the new media may supply a greater number of gratification opportunities. The gratification opportunities that a medium affords its users result from the interaction of individual and household time budgets and the characteristics of the medium. Given relatively fixed time budgets, a medium that offers more of a given type of content or interaction at a greater number of times offers audiences in a particular time-space location a higher probability of obtaining the gratifications they seek. Recent trends in how Americans use and perceive time suggest that gratification opportunities may be important elements in media choice. Schor (1991) claimed that Americans are working longer hours and have less leisure time. In response to Schor's assertion, Robinson and Godbey's (1997) analysis, based on time diaries, showed that this is not the case. However, Robinson and Godbey's work also showed that Americans believe their time is scarce and precious whereas comparison of time diaries across the years shows an actual increase in free time for some people; more Americans also report feeling pressed for time. In this context, media that offers more gratification opportunities should be attractive to consumers. Research reviewed in chapter 5 shows that gratification opportunities are indeed important in explaining media choice. Time Spent and Advertising Expenditures Although the time spent by consumers on media use has not been of central concern to media economists, it has long been recognized as a key resource. For example, Kline (1977, p. 9) remarked, In the realm of media economics the obvious resource that concerns the analyst is the amount of money a person is willing to spend for a particular product. In many instances, though, the cost of the media product is less of a reason for not purchasing it than the lack of time to devote to using it.

A similar point is made by Block (1979, p. 32) who wrote that, Consumption involves both the time necessary to consume the good as well as the goods themselves. Consumption should not be viewed as an instantaneous process, since the time at a consumer's disposal must also be considered.

This economic conception of time as a resource consumed along with media products is necessary to an understanding of media competition. To the casual

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observer perhaps, the U.S. TV viewer or radio listener who pays no license fee for the privilege of viewing and listening, as is the case in Britain and other countries, is not involved in an economic transaction. As Nieto (2000) pointed out, time is an immaterial asset and is not generally thought of as one of the currencies of economic exchange. The viewer may be of the same opinion as the economist. As Nieto (2000, p. 149) observed, The communication media, both traditional and new, can make him erroneously think that he is managing his time when he uses it to zap from one television channel to another, from one radio station to another, when accepting a gift of informative or entertainment contents that he is actually paying for at least with his time.

The measurements of audience size in the media—ratings in broadcasting, circulation in the print media or hits on websites—are surrogate measures for audience time, the time that the audience hopefully (from the point of view of the advertisers) spends paying attention to advertising messages; advertising is of course, sold on the basis of such measures. In this way, time spent by media patrons acquires economic value. There is a clear economic exchange occurring but it is not the simple and straightforward one where the consumer directly pays the producer a monetary price for a product or service. I return to this point in chapter 7. Macrodimensions and Microdimensions Subdivisions of the macrodimensions are, as was noted earlier, termed microdimensions. The gratifications sought and obtained are first divided into domains, as noted earlier. The gratification-utility macrodimensions within each domain are defined by factor analysis. For example, cognitive and affective macrodimensions have been defined for video entertainment and for news media while a sociability factor or macrodimension has been defined for interactive media (see chap. 5). The microdimensions are individual gratifications questions. Time spent as a macrodimension is not really subdivided into microdimensions. Rather, there are different possible measures of time spent, such as hours, minutes, frequency of use, days per week, or relative frequency such as "more," "less," or "about the same," and time spent measured in minutes or hours. The consumer spending dimension is subdivided into categories such as dollars spent on cable, computers or magazines. The advertising spending subdivisions or microdimensions are represented by such categories as spot, local and national or network for TV or national, local and classified for newspapers, while for the Internet there is as yet a single dimension. While the gratification-utilities macrodimension and the advertising macrodimension can be readily subdivided into microdimensions (see chaps. 3 & 4), consumer spending and time spent cannot be so subdivided. Subdividing these latter two dimensions further does not yield qualitatively different units or categories.

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Resource Availability: Relations Among Niche-Macrodimensions To summarize the exposition in the preceding section, the niche macrodimensions are: (a) gratifications sought, (b) gratifications obtained, (c) media content, (d) time spent, (e) consumer spending, and (f) advertising spending. Taken together, these resource dimensions provide a comprehensive portrayal of the space which forms the arenas for competition and coexistence. The niche measures of breadth, overlap, and competitive superiority, defined conceptually later in this chapter, are performed on these resource axes separately. However, it is important to point out that these resource dimensions are not independent entities, they are related by translation processes. Figure 2.1 visually portrays the relationships among the niche dimension. The arrows in Figure 2.1, although the figure resembles a path diagram, do not denote simple causation. Instead, the arrows are indicative of translation processes. At an abstract and conceptual level, the term means a change from one form to another. Some brief examples are used later to illustrate concretely what is meant by "translation." For example, the gratifications sought by media audiences are estimated through research techniques such as surveys or focus groups or by observing what media content has proven popular in the immediate past or by exercising professional judgment (or indeed, by relying on intuitions); and these perceptions of audience needs or wants are translated, however imperfectly, into media content such as popular songs or TV series. Media patrons and audiences seek content they believe will be gratifying and translate media content into gratifications—utilities obtained which may or may not meet their expectations. Media patrons, in the case of media that carries a monetary price, translate their expected satisfactions not only into some level of gratification, but into consumer spending as well. In the case of broadcasting, that carries no monetary price on its content, audience viewing is translated into measures of time spent such as ratings by audience research firms and the estimates of audience size are, in turn, translated by advertising agencies into advertising placement in the various media. From these brief examples, it is clear that translations may vary from individual or household purchase decisions to more complex organizational decisions such as the fall line-up for a TV network. Translations may also involve the enactment of complex organizational routines such as measuring TV or cable audiences or newspaper or magazine subscribership. At an even greater level of complexity, translation processes may be conducted by an entire set of organizations such as the collective decisions by advertising agencies which determine how many advertising dollars will be allocated to each medium. It should be clear at this point that whether simple or complex, the translation processes determine the level of resources on each niche dimension, and thus, address the problem of resource availability. Niche theory deals with competition and coexistence given a certain level of resources and only includes the question of resource availability by stating what should happen if resources are increased or

FIG. 2.1.

Relationships among niche dimensions.

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decreased, a subject covered later in this chapter. However, in the long-term it is important, as an adjunct to competition theory, to map the translation processes on Figure 2.1 to explain variation in resource levels on the various niche dimensions. Limits on Resources One final point needs to be made explicit about the resources used by the media and that is that they are limited. The expenditure of both time and money on the media by consumers depends on the satisfaction derived from media use (see Fig. 2.1) or the magnitude of the gratification utilities. This satisfaction is subject to psychological satiation or, in economic terms, the principle of declining marginal utility which applies as much to media as to other goods and services (see Picard, 1989). Theoretically, marginal utility is the change in total gratification-utilities divided by the change in media units consumed. As the media patron spends more time and money on media satisfaction will decline with the onset of satiation. Advertising spending is also limited. The rational firm only spends money on advertising to procure profits. As Carlton and Perloff (1994, p. 604) wrote, The profit-maximizing firm sets its advertising expenditures so that the last dollar spent on advertising increases its profits, excluding advertising costs by exactly one dollar. That is, the firm maximizes its profits by setting the marginal cost of advertising equal to the marginal benefit...

Even if one does not accept the profit-maximizing assumption of conventional economic theory (see, e.g., Cyert & March, 1963), such factors as pressures from stockholders on the firm for efficiency and the rivalrous behavior of the media organizations and industries and ad agencies vying for the advertisers dollars is likely to set limits on advertising expenditures. Media Content as a Niche Dimension Before leaving the topic of niche dimensions, it should be noted that media content is also an important niche dimension. In Figure 2.1, media content is placed in a central position among the niche dimensions. Content is obviously a crucial resource to the media patron and the organizations and industries that spend billions of dollars each year to produce and distribute TV shows, recorded music, newspapers, and magazines as well as websites, books, and cable networks. However, media content has not been conceptualized and studied as a niche resource axis. To date only one study, Hellman and Soramaki (1994), used niche measures and constructs to study media content. As a result, little is known about this resource dimension. In addition, there are special problems in conceptualizing and measuring content as a niche dimension. For these reasons, discussion of this resource axis is reserved for chapter 6.

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Niche-Breadth and Niche Overlap In spatial terms, niche-breadth is a measure of the area of a niche along a particular resource dimension or axis, such as gratifications, gratification opportunities, time and consumer spending or advertising. Specialist populations have relatively narrow niches, whereas generalist populations have rather broad niches. In nature, the koala, which feeds solely on eucalyptus leaves is a specialist, whereas the American brown bear that utilizes many sources of food is a relative generalist. In the realm of industries, the movie industry, which is dependent on consumer spending is more specialized than the broader-niched cable industry, which draws resources both from consumer spending and from advertising. Niche overlap refers to ecological similarity between two populations. Overlap measures the relationship between populations in terms of the similarity or difference in their resource utilization patterns. In the spatial model of the niche, overlap is the area of niche space shared by adjacent niches. If resources are limited, overlap indicates competition, and the greater the magnitude of the overlap measure the stronger the competition. Populations with highly similar ecologies are strong competitors whereas those more dissimilar in resource utilization display less ecological similarity, and as a result, display lower overlap and less intense competition. Similarity in niches leads to strong competition, whereas niche differentiation leads to coexistence. The consequences of strong competition or ecological similarity can be illustrated by a series of simple experiments conducted by biologists early in the 20th century. Ricklefs and Miller (1999, p. 405-406) provided a synopsis of all these experiments. Here, one of the set of experiments is used for illustration. In the laboratory Cause (1934) placed two populations (species) of paramecia in a growth medium—a single resource—in a closed environment and observed the result. Over time, one population drove the other into extinction before the growth medium or resource was exhausted. The result of the experiments by Cause and others was termed the principle of competitive exclusion by Hardin (1960) because they demonstrated that populations which have highly similar ecologies, whose niches overlap strongly cannot coexist. Although many of these "bottle experiments," as Mac Arthur (1972) called them, were conducted in highly simplified environments which allowed for no other outcome than competitive exclusion, they effectively demonstrated the extreme outcome of strong competition or niche overlap. Among media industries, the single case of exclusion seems to be that of the organizational form of vaudeville excluded by the appearance of movies and radio, although elements of vaudeville performances and some performers survived in the competing media. According to Pianka (1988), the competitive exclusion principle is useful because it points to the necessity of there being some ecological difference—a difference in niche—that allows populations to coexist in environments that are saturated by competitive populations. The question is how similar in niche can populations be and still coexist. This is termed limiting similarity (Ricklefs &

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Miller, 1999). To avoid the detrimental effects of intense competition, there must be some critical difference in the niche of populations—some difference that lowers overlap—that allows them to coexist. A rather dramatic example of such coexistence occurs on the plains of Africa, where vast herds of herbivores of several species live together without mutual harm, and apparently all eating grass. Colin Fletcher (1973, p. 227) provides a summary of the ecological studies (e.g., Gwynne & Bell, 1968) bearing on the question of how these populations coexist. How come there are so many different grazing mammals—wildebeest, zebras, topi, kongoni, and Tommy for a start—that all seem to make a living in the same place and in large numbers by eating the same food? Why has not one of them proved so efficient at its job that, as normally happens in the end when different species compete directly, it has come to outnumber the others—or even to drive them elsewhere or into extinction. The answer to both these questions is that, contrary to appearances, the animals do not eat the same food. Often they prefer different kinds of grass. Almost always they tend to eat grass at slightly different stages of growth. Zebras, for example, attack the long, course vegetation. Topi tend to eat dried-up stalks. Tommy restrict themselves to short, tough, not necessarily new grass.

In short, these populations have evolved differences in niche that limit the inter-population competition for resources and allow them to coexist. Although the niches of these populations do overlap, there are critical differences which prevent strong and detrimental competition. Some populations which compete too strongly to exist on a single resource axis are substantially different on another. This is termed niche complementarity (Ricklefs & Miller, 1999). For example, hawks and owls often inhabit the same geographic territory preying on the same populations of small animals. On this dimension they overlap strongly. However, although they are ecologically similar in their food sources, they are radically different in time of utilization; hawks hunt by day and owls by night. Measures of niche overlap or ecological similarity are defined in chapter 4 for the advertising dimension, and in chapter 5 for the gratifications and gratification opportunities dimensions. The niche measures for categorical data used for advertising in chapter 5 also are used to measure breadth and overlap for the content niche in chapter 6. Niche overlap, however, is a symmetric measure. Such measures can tell us the strength of the competition between two competitors but not which of the two is superior. Competitive Superiority In the Gause (1934) experiment and similar studies, the populations that survived were those which were competitively superior. An idea that is strikingly similar has been current in mass communication research for decades under the label "functional alternative."

THE THEORY OF THE NICHE

39

DeFleur and Ball-Rokeach (1975, and earlier editions) use the term functional alternative to explain the effect of movies, TV, and radio on newspapers. Merton (1957) coined the term in sociology but it appears to have first been applied to media by these authors. They characterize the extent to which media are functional alternatives or competitors to the extent that they serve similar audience gratifications or needs. For example, they noted that to some extent, each of the newer media has eroded the per-household circulation of daily newspapers. A similar view, a clear expression of the concept of functional alternative, was advanced by McCombs (1972, p. 33) following his economic analysis of media competition: If one conceives of a mass medium as serving some social or psychological need of each individual in its audience, then the appearance of another medium that serves that need better (according to some criterion of communication performance) will result in shifts among the audiences. Over time, for example, radio, movies and television successively took over portions of the news, information and entertainment functions of the newspaper.

The first sentence of McCombs' quote clearly points to what, in the next section of this chapter, is called a displacement effect, due to the competitive superiority of one medium. The second sentence of the quote, which hypothesizes displacement due to the combined effects of several mediums on a single population, is termed diffuse or serial competition, and this phenomenon is discussed in chapter 6. It should be noted however, as Robinson and Jeffries (1979) pointed out, that the idea of functional alternatives has been used as an ex post facto explanation at the micro-level for the macro-level outcome of media competition. Some of the inferences concerning the impact of one medium on another have not been made on the basis of gratification-utilities actually measured in audience surveys and this is obviously necessary for explanations based on functional alternatives to acquire empirical cogency. McCombs' conceptual argument indicates that audiences choose—or fail to choose—a new medium over older forms on the basis of the relative efficacy of new and older media in gratifying needs. The idea of competitive superiority is also part of the diffusion of innovation perspective (Rogers, 1983). Rogers listed five attributes of innovations which can be used to predict their rate of adoption, one of which is relative advantage. "Relative advantage is the degree that an innovation is perceived as being better than the idea it supersedes" (Rogers, 1983, p. 213). Relative advantage has been found to be one of the best predictions of the rate of adoption of an innovation. The components of relative advantage are such things as profitability, low cost, time and effort saving as well as immediacy of reward. These components are all in a broad sense economic; all of them pertain to the efficient use of resources. In summary, both the literature on media competition and the diffusion of innovation literature contain ideas quite similar to the ecologists' notion of competitive superiority. How the idea of competitive superiority pertains to the theory of the niche is made apparent in the following section of this chapter.

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Competitive Displacement When a new population—an invader—arises in a community, one possibility, as outlined earlier, is competitive exclusion. However, another possibility is competitive displacement. If the invading population uses the same resources as the current members of the community then competition occurs and this should be reflected in niche overlap measure. However, overlap is a symmetric measure. Overlap assesses the strength of competition between two populations but yields no information concerning which population is the superior competition. As a result of competition, one population may appropriate a portion of another's niche space or displace the population from a portion of its niche resulting in changes, often a decrease in niche-breadth, on the part of the outcompeted population (Colwell & Futuyma, 1971). Another possibility is that resources increase to accommodate the populations' requirements. If resources do not increase, however, displacement or exclusion may occur. Another possibility is that both populations alter their resource utilizations to reduce overlap. The population which is responsible for the displacement is the superior competitor. Clearly, a measure of competitive superiority would be quite useful in inferring the impact of one population on another. In longitudinal studies, some evidence of competitive superiority is provided by measures of niche-breadth and niche overlap. If we observe that two populations (A and B) overlap strongly at the beginning of a time period and then in a later time period observe a decrease in niche-breadth of population B while A's breadth remains constant or increases, this is at least indirect evidence that A is competitively superior. However, the most direct evidence even in longitudinal studies would be a measure of competitive superiority. In cross-sectional studies such a measure is necessary (because one cannot observe niche changes over time in conjunction with overlap) to make inferences about the possible impact of one population on another population's niche. Measures of competitive superiority will be defined for the advertising dimension in chapter 4 and for gratifications and gratification opportunities in chapter 5. Levels of Niche Analysis Analysis of the niche may be conducted at four distinct levels defined by the macroand microdimensions: between macrodimensions, within macrodimensions, between microdimensions, and within microdimensions. At the between-macrodimensions level the analysis is a simple one, simply noting use or nonuse of a resource axis, but this is nonetheless an important distinction. Some critical niche differentiation and overlaps occur at this level. For example, some media industries use a particular macrodimension and some do not. The movie industry is specialized on consumer spending, using no advertising, whereas newspapers and cable utilize both advertising and consumer spending. Niche analysis within macrodimensions can be exemplified by the advertising resource axis. For example, shares of total advertising consumed by the various

THE THEORY OF THE NICHE

41

media can be calculated and compared cross-sectionally or longitudinally. An analysis of this kind occurs in chapter 6, where an explanation of serial competition involving the impact of various media on the newspapers' share of all advertising from 1935 onward is presented. The between-microdimension mode of niche analysis is perhaps the most central and the most commonly occurring form in this volume. This level of analysis is the one at which the traditional niche measures of breadth, overlap, and superiority are calculated. Such measures dominate the analysis of the competition for advertising in chapter 3 and the presentation of the results of the analysis of the gratification niches in chapter 5. At the within-microdimension level two sorts of analyses may be performed. First, similar to analyses on the within macrodimensional level, shares of a microdimension such as national or local advertising accruing to various media can be calculated and compared cross-sectionally or longitudinally. Within gratification domains, it is also possible to assess differences between two mediums in respondent ratings on a microdimension or gratification question to index their relative superiority. Similarly, one can compute shares of the various media for a single advertising microdimension such as national advertising. One such analysis is presented in chapter 3. Questions concerning competition and niche differentiation can be assessed at the four different levels. It is important to emphasize that analyses at the different levels of the niche may yield answers to different questions and, as such, enrich and deepen understanding of niche relationships. For example, as is apparent in chapter 3, displacement may be evident at one level and not apparent at other levels of niche analysis. The Niche and Media Competition Based on the concepts defined earlier in this chapter, it is now possible to give a succinct account of the role of the theory of the niche in conceptualizing and measuring competition between media industries. Industries are populations of organizations, and competition is defined as the extent of ecological similarity between industries or firms. Competition may occur along several resource dimensions. These resources are limited. At an abstract level, the niche of an industry is its position in the space defined by the resource dimensions. Niche-breadth is the distance through a niche along a resource axis. Competition is measured operationally by the overlap between the industries' niches on a particular dimension. The theory of the niche implies that successful coexistence of competitors requires a difference in niche or limiting similarity. In this resource-limited environment already populated by media industries, new media enter and compete with their predecessors. If overlap between the new industry and the older forms is high, then there are three possibilities. First, resources may increase to enable coexistence of more media forms. Second, the

42

CHAPTER 2

competitively superior population may appropriate all or part of other populations' niches. Partial appropriation is termed displacement and is measured by a narrowing of the outcompeted population's niche. Third, the competitively superior form may appropriate all of a competitor's niche. This is termed competitive exclusion and appears to be rare among communication industries. In the case of some industries such as cable, the medium's success may involve a combination of increasing resources, displacement, and niche differentiation.

3 Competition for Advertising

This chapter concerns the patterns of competition and coexistence that have occurred since the early in the 20th century, on the advertising macrodimension and its attendant microdimensions. In the case of advertising, quantitative data exist from the early 20th century to the present. This affords the opportunity of constructing a chronological historical narrative to provide an overview of the successive rounds of competition as new media arise to compete for advertising dollars and ultimately coexist with older media. Newspapers and Advertising Agencies In the beginning there was only the newspaper, and the medium had no competition from other industries. As trade grew in the mercantile communities along the Atlantic seaboard in colonial America in the period before the revolution, merchants discovered that simply placing a notice in the newspaper announcing that goods were available for purchase resulted in increased sales (Emery, 1962). The importance of advertising in the colonial press, as Emery (1962) noted, was indicated by the fact that the word "advertiser" often appeared at the papers' mastheads. The earliest newspapers however, were rudimentary in content, being mere "newsletters" (such as the Boston Newsletter), which printed or reprinted correspondence. These were superseded, according to Park (1923), at the beginning of the 18th century by the journal of opinion, often economically supported by political parties. This political press was, in niche terms, differentiated by content and sources of economic support and as a result, competition among papers must have been rather weak. The rise of the information press was probably strongly related to its support by advertisers' dollars. Using a game theory model, Gabszewicz, Laussel, and Sonnac (2000) showed that editors are likely 43

44

CHAPTER 3

to eschew strong political views in their papers to attract advertisers. Thus, pursuit of advertising as a major source of economic support with its corollary of "objectivity" was likely to have the effect of reducing niche differences which had obtained among the politically supported papers and, by enhancing newspaper similarity in content and source of economic support, placed them in a position of stronger overlap in content and economic dependence and hence, in stronger competition. As advertising grew to be a major source of newspapers' revenue, most advertising was for local goods and services produced in the communities served by the papers. According to Beniger (1986), until the 1870s, only such goods as books and patent medicines were advertised nationally. These were the slender beginnings in the growth of the national advertising microdimension that would grow to be of major importance in the niches of several media. Placing ads in newspapers to achieve national or regional circulation would have been difficult and cumbersome for early advertisers and would have entailed relatively high transaction costs. (Transaction costs are expenses incurred in negotiating and enforcing agreements or contracts over and above the price of the product or service.) Because advertisers were forced to place ads in newspapers one at a time, the transaction costs would have been quite high. It would appear that one major reason for the founding of the advertising agency as an economic institution was to solve the problem of transaction costs associated with national and regional advertising in newspapers. Although Beniger (1986) dated the founding of the first advertising agency to 1841, Presbrey (1929) said that the first agency began in 1865 when George Rowell and his partner, Horace Dodd, opened shop in Boston. Their plan was to buy space in newspapers on a yearly contract and then retail it to advertisers. Presbrey (1929, p. 266) described their innovative financial arrangements as follows: Rowell and Dodd made up a list of one hundred papers. A few of the papers held more or less strictly to their "publisher's rate," but by diligent correspondence the others were induced to cut quite radically on a promise of continued patronage. There were some who were obdurate. To these the young advertising agents paid 75 per cent, of the card rate, less 3 per cent, discount for cash in thirty days. Most of the papers, however, got something like 25 per cent. Rowell and Dodd keeping the remainder. The cash discount in addition to the commission was a Rowell idea which the papers readily accepted and which later became common practice.

Why would advertisers and newspapers concede to the agencies such as Rowell and Dodd's organization this role of space broker? The answer seems to lie in the transaction costs associated with regional or national advertising. As long as advertising remained local the problem of transaction costs was minimal. However, when the necessity of advertising in a larger geographic market emerges and it becomes necessary to buy ads in many papers, the transaction costs become considerable. Although the agency commission is a transaction cost, the cost of the commission was surely less to the advertisers than the costs

COMPETITION FOR ADVERTISING

45

of forging agreements with a great many newspapers. Thus, the market with its high transaction costs was supplanted by contracting organizations, the ad agencies. According to Presbrey (1929), Rowell's first "list" consisted of New England papers and Presbery also noted that it is patent medicines (one of the first nationally distributed products) that was the mainstay. Later the "list" system was applied to other regions and states by Rowell and Dodd and their imitators. The modern full-service agency has, of course, moved well beyond this early role as space broker. However, the agencies still perform a necessary role in mitigating transaction costs. Consider, for example, the plight of the TV networks who, if ad agencies did not exist, would have to contract individually with several hundred TV stations. The Substitutability of Media in Advertising Eventually, the hegemony of the newspaper as the only purveyor of mass advertising would come to an end. In economic terms, the question is whether the newer media—magazines, radio, TV, and cable—would be viewed as viable alternatives or substitutes by advertisers and their agencies. Picard's (1989) assessment was that there is indeed substitutability in the market for advertising. Evidence of substitutability may also be drawn from a natural experiment which took place during World War II. During the war years of the 1940s, newsprint, like many other products, was in short supply due to rationing (J. McKerns, personal communication, July 12, 2001). Figure 3.1 shows the shares of all advertising for newspapers, radio and magazines before, during, and after WWII. The graph shows a pronounced dip in newspapers' share during the war years. Simultaneously, there is a corresponding upward rise in the shares for magazines and radio. Apparently, the effect of newsprint rationing on newspapers' share was negative during the time that the alternative advertising media show a corresponding increase in share during WWII, thus demonstrating substitutability. A more contemporary example is provided by a study by Reid and King (2000), where advertising managers were surveyed concerning their perceptions of media interchangeability for national advertising. These authors found, contrary to their hypothesis, that advertising managers viewed the media as substitutes. One major implication of media substitutability is that it endows ad agencies with some ability to control prices. For example, one ad executive (Priemer, 1967, pp. 26-27) made it clear that the existence of substitutes kept the price of TV availabilities within bounds. "We manipulate buying pressure, presumably by knowing alternative media paths at times when prices go beyond the realistic horizon, and in this way we affect price loads." Although quantitative data on advertising for the period do not exist, according to Emery (1962), magazines enjoyed a burst of circulation growth in the 1890s which made them a competitor for advertising revenue. As Emery (1962, p. 401) noted, "Newspapermen grumbled in the late 1890s that the magazines were getting too much of the new products of American business." At the same

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FIG. 3.1.

Advertising shares for three media.

time, the agencies acquired perhaps their most important role in media competition—selecting the medium in which the advertising is placed (Presbery, 1929). Hence, the advertising agency became a key economic institution in controlling a major resource macrodimension along which media industries compete and define their niches. The Rise of Radio

When radio emerged in the United States in the early 20th century, it entered a society that was exuberantly affluent, the "Roaring Twenties." The sale of radio sets and the founding of broadcasting stations presaged a new and vigorous industry. However, radio was new and everything had to be invented; there were no models or precedents to guide its development. As a nascent industry (see chap. 1), radio was the focal point of the visions of engineers, entrepreneurs, legislators, educators, and

COMPETITION FOR ADVERTISING

47 47

government officials. Out of their inventions—technical, organizational, and economic—a new industry would be created. The first radio networks were founded in the late 1920s, and the first attempts to gauge the size of radio's audience were launched roughly the same time (see Buzzard, 1990). Coincident with the foundings of the radio networks national advertisers were beginning to move into network radio. However, network radio was expensive. Martin (1932) estimated the yearly cost for a network evening program at between $257,400 to $295,200 in Depression-era currency. These costs include network time costs and talent costs but do not encompass the additional costs of program promotion. However, despite its high costs, economies of scale due to the very large network audiences made radio a very cost-effective medium for national advertisers. Wolfe (1949) quoted National Association of Broadcasters estimates that stated a half-hour evening network program had a cost-per-thousand households of $5.30. The comparable cost for newspapers was $8.28, whereas a full-page advertisement in national magazines cost about $8.75 per thousand households. Radio's major competitors, of course, were newspapers and magazines that relied on the printed word along with illustrations for their persuasive impact. Harvard University conducted a series of apparently unpublished studies in the middle 1930s comparing the efficacy of print and auditory presentation that were summarized by Midgley (1948). These studies found that recall of various forms of information, particularly advertising trade names, was better for the spoken word than the printed word. Midgley (1948, p. 27) wrote that the competitive superiority of radio as an advertising medium lay in the power of the human voice. Radio offers certain techniques not available in any other medium for "stepping up" the sales message; and the most outstanding one is the use of the human voice, with its impact, inflections, conviction and warmth. There are numerous ways of using the human voice to achieve effective selling. Some of the most successful of these have been: 1. Flesh and blood dramatizations which make an indelible impression on the listening audience. 2. Authoritative statements made in person by the quoted authority directly into the microphone. 3. Testimonials delivered directly by persons who have used the product. 4. The sales message delivered by the star, with all the impact of his personality.

Today, radio as well as TV advertising falls into three categories: national or network, local, and spot or national spot. For national advertisers, the radio networks of the 1920s, 1930s, and 1940s routinely delivered large national audiences that simultaneously heard advertising messages. In addition, radio advertising became important to local businesses in markets around the country. However, for regional advertisers or other businesses whose products were not suitable for national net-

48

CHAPTER 3

works, there was no alternative to traveling from local market to local market buying ads that would attain the required coverage. As Buzzard (1990, p. 7) wrote,"... someone had to get on a train and physically canvass the territory to place the ads." This problem—transaction costs due to the time and money required for travel—is similar to the problem posed by national advertising in newspapers prior to the use of advertising agencies. The solution to the problem was once again the founding of an organizational form, the "station rep" firm that sells the local station's commercial availabilities at the national level to advertisers who desire more geographic coverage than a local station can provide but for whom a network buy would be inefficient. As is pointed out in a later chapter, the use of the "spot" microdimension by radio and then TV provides niche separation from other media industries. What impact did radio have on its competitors, the print media? Data on all three forms of advertising—spot, local, and national—are not available for the period of early radio. However, data reported by Lazarsfeld (1940) are available from the late 1920s through the 1930s on the national advertising microdimension and are used to assess radio's effects on print advertising. Because only one microdimension— national advertising—is available, the niche metrics of breadth, overlap and superiority, presented later in this chapter, could not be calculated. Instead, using the raw dollars in Lazarsfeld (1940, Table 50, p. 273), each medium's share of national advertising was calculated for the years 1928 through 1939. The graph (not shown) of these shares over the period showed newspapers declining, radio's share increasing, and the shares of the other media as relatively flat. Hence, the preliminary indication is that radio has displaced newspapers. To test this hypothesis, a form of time series regression was performed. In this analysis, the question is not whether there is some dependence among the shares. Rather, the question in this analysis and the analyses of shares presented in this and subsequent chapters, is whether the pattern of relations among the shares can be interpreted as displacement of an older by a newer medium. Shares are the appropriate measures of displacement as they are direct reflections of the competitive abilities of media industries. One caveat however, that is important concerns the regression analyses performed in this chapter and in later chapters. The number of years for which data exist for assessing displacement do not constitute a sufficiently large number of cases to detect anything other than large effect sizes (see Green, 1991). Medium and small effect sizes cannot be detected with the number of cases that exist and the reader should be aware of this limitation. Regression analysis, of course, requires the researcher to satisfy a number of assumptions. If assumptions are violated, as is almost always the case, the results of the regression may be misleading. When assumptions are violated, the usual recommendation is to transform the variables. However, this practice results in difficulties in interpretation. It would be useful in such cases to be able to employ a nonparametric statistic which does not require such stringent assumptions. Hence, all the regression analyses were duplicated using Kendall's partial tau (see Gibbons, 1993, for the formula of the partial tau) correlation to account for the effect of

COMPETITION FOR ADVERTISING

49

the mediums' shares other than those involved in the displacement. While the taus and the partial taus are affected by serial correlation, the magnitudes are so strong that it is unlikely that they are entirely the product of the positive serial correlation present in the data. In all cases where maximum likelihood regression is reported in this book, parallel analyses using Kendall's partial tau corroborate the substantive conclusions drawn from the regression analyses. In addition, in the analysis of the impact of radio as well as subsequent analyses involving advertising shares, only media which purvey content were included in the analyses. Direct mail and outdoor advertising were omitted from the analyses because they do not purvey content in addition to advertising messages. This is consistent with the portrayal of the niche dimensions in Fig. 2.1, in which gratifications obtained from media content are related to time spent which in turn, is related to advertising allocations. However, the shares of the communication media such as TV or cable were computed using all advertising dollars as the denominator so that the values of the independent and dependent variables in the regression analyses do not sum to one. Furthermore, because preliminary analysis indicated multicolinearity among some of the shares, a single variable representing the shares of the other media besides the independent variable (the new medium) and the dependent variable (the older medium) were computed and entered as another independent variable in the analyses, thus serving as a potential alternative explanation or control variable. Finally, preliminary analyses of the share data revealed that positive serial correlation was present in all the analyses of advertising shares. Hence, time series regression utilizing the exact maximum likelihood method was used to remove the autocorrelation. In the case of the radio data, the maximum likelihood regression yielded a significant effect of radio on newspapers' share of advertising for the 1928-1939 period (B = -.716, t = 4.55, p = -.0019) while the effect of the combined share of the other media was not significant. The available evidence then, appears to indicate displacement of newspapers by radio. The statistically significant negative association between the shares of national advertising of the two mediums would appear to be a rather clear indication of displacement on the national advertising microdimension. According to Buzzard (1990), network radio had three advantages over other media. First, through the practice of sole sponsorship (one advertiser sponsored an entire program), the advertiser could create sponsor identification in which listeners favorably identified the program with the sponsoring product or company. Second, radio's ability to deliver large audiences on a national level was congruent with the marketing objectives of large manufacturers who produced national brands of such undifferentiated products such as soap and toothpaste. Third, the family or household was viewed by these advertisers as the unit that purchased these undifferentiated products and the nuclear family or household that gathered nightly around the radio set matched the unit presumed to purchase and consume these products. As Midgley (1948, p. 29) phrased the prevailing belief,

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When entire families listen to radio programs together, millions of conversations are started by the program, which go on and on until the product advertised is purchased. Radio gets the advertiser to the entire purchasing-board of the family at one time.

Given these advantages along with those isolated by the Harvard studies and the role the national advertisers played in creating and programming network radio, it is hardly surprising that radio was able to displace newspapers from a portion of its niche on the national advertising microdimension. Radio's Displacement by Television Although TV made its debut at the 1939 World's Fair, its development was delayed by the cataclysm of World War II. Unlike radio, for which there were no models or precedents, there was a model for TV and that model was radio. The industry structure, economics and regulatory apparatus were simply extrapolated from the older electronic medium to the new industry. In the 1950s when TV began to diffuse, it was instantly and massively popular in the large urban areas where the first stations appeared. The effects of the new medium on the older forms of entertainment and information were immediately apparent. Baraouw (1970, p. 5) wrote, "Cities where television was in operation were experiencing a local chain explosion. As sets entered homes, theater attendance, night-club revenue, and taxi receipts dropped. So did radio listening." As more stations were built and as television was adopted nationally by consumers, the effects noted in the large cities would become national trends (see Bogart, 1972). In this section, I assess the effect of television on radio on the advertising resource dimension. The source for the raw data is McCann-Erickson's figures on the advertising revenues for the media. The first step in the analysis was to compute measures of niche-breadth, niche overlap and competitive superiority for radio and television. The breadth and overlap formulas are drawn from Levins (1968). Recall from chapter 2 that niche-breadth refers to the range of resources used by a population or industry. Operationally, it is measured as the proportional utilization of resources across resource types. The measure (B) is defined as follows:

In research presented later in this chapter, p.i represents the proportion of a given population's (TV or radio or cable) revenue derived from a particular microdimension (national, local, or spot). The measure B ranges from a low of one when only one resource microdimension is utilized to an upper limit equal to the number of resource microdimensions used by the population. B approaches its maximum when resource utilization is distributed rectangularly or evenly across resource cat-

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egories. Industries with low breadth measures are specialists and those with high breadth measures are generalists. Whereas breadth relates populations to their environment, overlap measures the relation between two populations in terms of the similarity of their resource utilization patterns. Niche overlap measures the degree of ecological similarity or difference. Populations with highly similar ecologies or resource utilization patterns overlap strongly, although those that are dissimilar in resource utilization display less ecological similarity and as a result, lower overlap. If the resources are not superabundant, overlap may be construed as an indication of the likelihood of competition between two populations. The overlap between two populations i and j is given by the geometric distance shown as follows:

The term di,j denotes the distance between populations i and j, pi is the proportion of population i's resource use in a microdimension, and h represents the resource microdimensions used by the populations. To compute the overlap of television and radio, pi represents the proportion of all of TV's advertising revenue for a given year obtained from each h (national, spot, and local) whereas P. represents the same data for radio. Calculated in this way, overlap is a measure in which high overlap is denoted by values near zero and larger values indicate lower overlap. It should be noted at this point that some readers of the earlier niche studies such as Dimmick and Rothenbuhler (1984a, 1984b) expressed discomfort with the overlap measure because of what they view as its "inverse" nature where high overlap is denoted by low values. Conversion of the measure to one in which high values denote high overlap would be mathematically simple and straightforward. However, I believe the measure in its original form is appropriate given the spatial conceptualization of the niche and niche overlap. When overlap values are high this denotes that the niches of two ecological units are not occupying the same resource space, that there is some distance between the niches. Alternatively, an overlap near zero indicates that the two niches are at nearly identical positions in the resource space, and use the same combination of resources in nearly the same proportions. Such "crowding" of the two units in the resource space usually is indicative of strong competition and the theory of the niche states that such a condition cannot persist for very long. Therefore, the niche overlap measure has been retained in its original form because its meaning is consistent with both the construct it is measuring and with the over-arching theory. Once the theoretical meaning of the niche overlap construct is clearly understood, it is readily apparent that the niche overlap formula is not, in fact, an "inverse" measure but one which is consistent with both the construct it is designed to measure as well as the broader theory.

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To determine which population is the superior competitor, Schoener (1974) proposed a measure he called "alpha" for use in ecological field studies. Unlike the overlap measure, a symmetric measure of competition, alpha is an asymmetric measure of competition. This asymmetry differentiates this measure from the earlier overlap measure and allows the researcher to draw conclusions about which population in a pairwise comparison is the superior competitor. An analysis of alpha over time yields insight into changes in this superiority and therefore the possibility of competitive displacement or exclusion. Although Schoener's notation is preserved for the metric "alpha," it should be pointed out that the measure is not equivalent to the alpha-parameters of the Lotka-Volterra equations that denote the effect of one population on the size of a competing population. In strict terms, the alpha parameters of these equations can be measured only by some means such as removal experiments (Hairston, 1980) and not by availability or resource use of data alone. Rather, Schoener's metric is interpreted as a measure of the competitive superiority of one population over another. The formula for alphaj (read as the competitive superiority over population i of population j) is shown next. The complementary formula alpha t follows straightforwardly from the equation.

Where: T./Tj = The ratio of the number of resource items consumed by an individual of population j to that consumed by an individual of population i computed for each population by dividing the total resources utilized by the population size. d; k and d(k = The frequency of utilization of resource k by populations i and j, where k equals a resource microdimension such as network or local. /k = The frequency of resource k in the environment, or the total amount of advertising gained in a particular resource microdimension by all mediums using this resource.

Schoener's alpha differed in two respects from the measures of breadth and overlap equations. First, the metric takes into account, in the left hand term, the relative sizes of the populations and the total amount of resources each population consumes. Second, the numerator and the denominator of the right-hand term utilize the amount of a resource consumed by the population in relation to the total amount of the resource that is available. Schoener gave the following rationale for the right-hand term of the equation. The more similar the resource utilization of two populations, the more intense the competition. To the extent that resources are

53

COMPETITION FOR ADVERTISING

abundant, they do not contribute much to the intensity of the competition. The numerator of this right-hand term is much like earlier asymmetric overlaps or "alphas" such as that formulated by Levins (1968), whereas the denominator might be interpreted as the populations' (squared) market share in each of the resource microdimensions in which it competes. Table 3.1 shows the values of the three-niche metrics from 1949 through 1980. In addition, to establish a baseline for comparison, radio's niche-breadth values are shown beginning in 1935. Radio's niche-breadth increases throughout the 1930s and 1940s. In 1935 it was 2.35 and by 1948 it had increased to 2.82, close to its maximum value. Underlying the changes in breadth is a decrease in the medium's dependence on national or network advertising (55% of its total in 1935) and an increase in the proportions of its Table 3.1 Measures of Niche Breadth, Overlap, and Superiority for TV and Cable Breadth

Overlap

TV

Cable

1980

2.82

1.34

1985

2.93

1990

Superiority TV over Cable

Cable over TV

.25

108,176

5.3E-06

1.42

.27

2201.77

.00025

3.19

1.58

.24

172.7

.005

1995

3.32

1.74

.196

192.3

.005

1998

3.37

1.72

118.84

.006

.207

54

CHAPTER 3

advertising revenues from spot and local. In 1948, prior to the advent of television as a national medium, radio's niche was a broad one and this factor played an important role in its adaptation to the impact of television. In 1949, the first year for which data are available for television, Table 3.2 shows an extremely high overlap (.036) between radio and television. The table also shows that TV's niche-breadth value is rather large in 1949, although not as large as the value for radio. At this point, TV was not yet a truly national medium either in its coverage of the country by signals from existing stations or in the diffusion of receiving sets. However, it is striking that even at this early period, about half its advertising revenues are from national or network advertising, far exceeding its revenues from local advertising. The superiority measures show radio superior to TV in 1949, but one year later in 1950, TV has become superior to radio and this superiority continues to increase through 1980. What would account for this early superiority of TV while still in its infancy? The answer seems to be that the same class of national advertisers who had played an important role in early network radio perceived that TV was the superior advertising medium. These decisions were apparently reached during the period of the "freeze" between 1948 and 1952 when the Federal Communications Commission had suspended the process of granting licenses for new TV stations. By the end of the freeze, a little over one-third of U.S. households would have TV sets (Sterling & Kittross, 1978) and TV would not become universal in diffusion until about 1960. Despite the paucity of TV equipped households and stations to serve them, it appears that manufacturers of nationally distributed mass consumer products, the mainstay of network radio, became major advertisers in early television. In 1956, about 60% of TV network revenues were concentrated in four categories—food, toiletries, soaps, and automobiles (Bogart, 1972, Table 73, p. 195). This emphasis on mass produced consumer products is also reflected in the list of the top ten companies advertising on network television in 1956. Among the top ten are the three auto companies (Ford, GM, and Chrysler) as well as Lever Brothers, Procter and Gamble, Colgate-Palmolive, General Foods Corporation, and American Home Products. The giants of mass consumption bet early and heavily on the success of television. Clearly, the producers of the products of mass consumption were behaving as if TV were the superior medium to radio very early in television history. This raises the question, why was TV considered superior? One reason TV was considered superior was the existence of research evidence showing very early on that TV was a more effective advertising medium than radio. This research, conducted by Thomas Coffin of Hofstra College, was reported not only in an academic journal (Coffin, 1948) but was prominently featured in the trade press such as Broadcasting, Telecasting (Telestatus, 1948). Coffin's study found that TV was having a strong impact on other leisure activities, notably radio listening. In a paragraph that was probably salient to advertisers, the trade magazine article reported that 91 % of respondents in a May survey preferred video commercials to radio commercials, whereas in a survey five months later none of the respondents preferred radio spots to their video counterparts. Such dramatic evidence was probably not lost on advertisers.

COMPETITION FOR ADVERTISING

55

The answer to the question of TV's competitive advantage also probably lies in TV's visual nature and the possibilities it held for advertising. TV could actually show the product as it appeared on the store shelf or in the showroom and radio could not. TV could even demonstrate the product while the best radio could do was to sing its praises. Television could show the box of Tide® and even, in shades of gray and white, display its effectiveness over "ordinary" detergent. The now-classic form of the 1955 Chevrolet could be introduced to the family as they sat in the living room around the TV set, and Dad and Mom could vicariously experience driving the car as it sped down the highway in the commercials. The best radio could do would be to dramatize the verbal excitement generated by the new model automobiles. The theory of the niche (see chap. 2) states that if high overlap or ecological similarity is apparent, and if one medium is superior to the other, then displacement will occur if resources are not superabundant. The displacement should be apparent in the niche-breadth of the outcompeted medium. As Table 3.2 shows, radio's niche-breadth begins to decline almost immediately after the onset of its high overlap value with television. In 1949, radio's niche-breadth is 2.8 but the values decline to 1.66 by 1980. Behind the changes in breadth are profound changes at the microdimensional level. In 1949, more than one-third of radio's advertising revenues were from network, but by 1980 this had declined to less than 5%. Concomitantly, local advertising increases in the 1949 through 1980 period from approximately 43% to nearly 75%. The story of the radio industry's adaptation is well known (see Sterling & Kittross, 1978). Network radio dwindled to a news service and the local stations adopted formats based on recorded music. Today, radio is a specialist on the advertising resource dimension drawing most of its sustenance from advertisers in the local markets. It is television that has replaced radio as the generalist or broad-niched medium. However, it was radio's broad niche developed in its early history that allowed its contemporary survival. When it was outcompeted for network advertising, it could compensate by utilizing other microdimensions more intensively. Contrast radio's adaptation with a specialist industry—the movies— which were also affected adversely by television. Because movies were a specialist on the consumer spending dimension, because their only source of revenues were box office receipts, the movie industry had "nowhere to move" in the resource space when outcompeted by television and, as a result, their revenues dropped precipitously. As the theory of the niche implies, the generalist population or industry is better equipped by its broad niche to weather an adversely changing environment than the specialist. The Impact of TV on Magazines It is widely believed in the field of mass communication and the subfield of media economics that the mass circulation general interest magazines such as Life, Look, and the Saturday Evening Post owed their demise in the 1970s to competition from TV for advertising dollars. This belief is reflected in introductory mass communi-

TABLE 3.2 Measures of Niche Breadth, Overlap, and Superiority for Radio and Television BREADTH

OVERLAP

SUPERIORITY

i Year

56

Television

Radio

1935

2.359

1936

2.198

1937

2.478

1938

2.528

1939

2.513

1940

2.548

1941

2.652

1942

2.674

1943

2.662

1944

2.699

1945

2.735

1946

2.790

1947

2.808

1948

2.820

j

i

j

Radio TV

TV Radio

.404

2.426

1949

2.534

2.803

.036

1.896

.518

1950

2.604

2.789

.049

7.646

.127

1951

2.497

2.731

.115

13.417

.071

1952

2.415

2.605

.176

22.832

.042

1953

2.563

2.551

.178

19.038

.050

1954

2.579

2.457

.210

26.303

.035

1955

2.563

2.256

.283

29.586

.031

1956

2.587

2.160

.329

26.025

.035

57

COMPETITION FOR ADVERTISING

Year

Television

Radio

i 1 Radio TV

L jTV Radio

1957

2.557

2.203

.332

30.413

.030

1958

2.539

2.168

.357

36.617

.024

1959

2.604

2.072

.374

36.896

.024

1960

2.614

2.049

.380

40.154

.022

1961

2.598

2.045

.387

52.880

.016

1962

2.533

2.026

.419

57.083

.015

1963

2.548

2.046

.407

66.755

.012

1964

2.574

2.022

.403

72.472

.011

1965

2.582

1.993

.414

74.964

.011

1966

2.587

1.993

.411

72.867

.011

1967

2.556

2.001

.420

69.973

.011

1968

2.657

1.958

.394

78.055

.010

1969

2.669

1.904

.411

62.333

.013

1970

2.679

1.860

.422

49.947

.016

1980

2.821

1.660

.406

89.781

.008

cation texts such as those by Becker and Roberts (1992), De Fleur and Dennis (1994), and Folkerts and Lacy (2001). More advanced works such as Bogart (1995) also seem to accept the competition hypothesis. However, this hypothesis appears not to have been actually tested. In contrast to the field's belief in the competition hypothesis, work in administrative science has offered an alternative hypothesis. Hall (1976), on the basis of an extensive case analysis of the Saturday Evening Post, argued that the mass circulation magazines succumbed not to competition, but on the contrary, were the victims of their own internal financial and management dynamics. A more complex analysis by van Zuilen (1977) pointed to a number of factors involved in the mortality of the mass circulation magazines. Van Zuilen attributed mass

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circulation magazine mortality to external factors such as postal rate increases and to internal factors like financial management problems and editorial weaknesses. His analysis appears to view competition from TV for advertising as one of many problems faced by magazines such as Life. Van Zuilen's (1977, Table 3.11) showed a decline in magazines' share of total advertising from 1946-1956 and a concomitant increase in TV's share. However, Van Zuilen did not explicitly test the competition hypothesis. To test the competition hypothesis the advertising shares of magazines and newspapers were analyzed for the period 1949 through 1976, the era in which the competition would have occurred. Although the McCann Erickson data do not record advertising revenues for the mass circulation publications separately from the other magazines, magazines such as Look and its counterparts were such important vehicles for national advertising that it is likely that a displacement effect would be measurable even in the aggregate magazine data. The procedure for testing the association between the TV and magazine shares uses time series regression analysis employing, like the earlier share analyses, an alternative or control variable representing the shares of the other communication media was computed. However, in this case the variable was strongly correllated (.82) with the other independent variable—TV's share of advertising. Hence, the analysis was performed in two stages, or steps. In the first step, the variable representing the other communication media was entered as the sole independent variable in a regression analysis with magazines' share as the dependent variable. The residuals from this first exact maximum likelihood analysis were used in a second analysis with TV's share as the independent variable again, using the exact maximum likelihood method. The analysis showed that TV and magazine shares are negatively related (B = -.027, p < .004) indicating some displacement of magazines by television. A regression analysis analyzing TV and magazine shares from 1976 to the present shows no statistically significant association, positive or negative. Hence, there is evidence in the share data for the field's long-standing belief that competition between magazines and TV led to a displacement effect. It should be noted that these findings do not refute Hall's (1976) hypothesis that the demise of Life, Look, and the Saturday Evening Post was due to their own internal financial dynamics or van Zuilen's (1977) analysis that the magazines died of a number of external and internal problems. However, the findings presented in the preceding paragraphs are consistent with a displacement effect of TV on magazines, indicating that competition was also an important factor in the deaths of the mass circulation magazines. The lack of a negative relation between newspaper and magazine shares after 1976 is also consistent with an observation made by several researchers, including van Zuilen (1977), that these magazines that have flourished after the demise of the generalist publications were specialist magazines which are visible today on any newsstand. The specialist magazines which survived and thrived in the post-TV era are differentiated from the electronic medium in content and audiences, and as a result, no longer compete strongly with TV.

COMPETITION FOR ADVERTISING

59 59

The Advent of Cable On the first day of August, 1981, Warner Communications premiered its stereo rock-music channel, Music Television (MTV). Significantly, the inaugural video was titled "Video Killed the Radio Star" by a group called the Buggies. The lyrics of this first MTV video, although couched in the past tense, represented the Buggies' (and presumably MTV's) vision of the future impact of video music. Following is an excerpt: Video killed the radio star Video killed the radio star We can't rewind we've gone too far Put the blame on VTR. (Buggles/The Age of Plastic/Island Records)

It seems appropriate that the opening chords of the new satellite-delivered cable channel sounded themes of competition and obsolescence because MTV represented the new medium of cable television, which some observers confidently expected would replace some of the older forms of communication. In fact, video did not kill the radio star. MTV, along with its sister network VH-1 became, like radio, a form of promotion for the recording industry, and cable has not yet replaced broadcast TV. Cable television began unobtrusively enough during the freeze on TV station licenses as a way to bring TV signals to towns without stations. It survived after the freeze was lifted as a means of disseminating TV signals in towns located in mountainous or hilly terrain. In the late 1970s and early 1980s however, cable channels began to be distributed by satellite and the first truly national services were born—HBO, MTV, ESPN, C-SPAN, and Nickelodeon as well as the Weather Channel and the Disney Channel (Barnouw, 1990). With the inception of the satellite-delivered channels, cable gained a national audience and national advertising. In addition, cable systems sell availabilities in the national channels in their local communities. A study by Dimmick, Patterson, and Albarran (1992) found that cable did not compete strongly with the broadcast media although its most likely competitor was broadcast television. This latter assertion seems justified on the basis that cable and the VCR have displaced TV on the time-spent dimension. During the 1980s and 1990s, the TV shares of audience have dropped but cable's have risen (Carroll & Howard, 1998). The niche metrics for cable and broadcast television for the years between 1980 and 1998 are shown in five-year intervals. TV's niche-breadth is quite high in 1980, and by 1985, it is near its maximum of three indicating that it is utilizing nearly equal proportions of its revenues from national or network, local and spot. By 1990, TV had acquired a new

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CHAPTER 3

advertising microdimension—syndication—that places its new upper limit at four. Cable's breadth in 1980 reflects its dependence on national advertising while the increase in breadth in succeeding years reflects its success in garnering more local advertising. The overlap measures, while showing a slight increase after 1985, do not indicate strong competition. It is the superiority measures however, that show the most dramatic changes. Cable's superiority over TV in 1980 is so small it must be expressed in scientific notation. Whereas TV is still superior to cable in 1998, the discrepancy in the pairs of superiority measures for each year has markedly narrowed. Although the data indicate no displacement at the between-microdimension level, analysis at the macrodimensional level was also performed to ascertain whether displacement had occurred at this level of analysis. Examination of a graph of TV and cable's advertising shares from 1982 to the present appears to show a small displacement. TV's share drops almost exactly four percentage points and cable's share increases by almost exactly the same impression. Once again, exact maximum likelihood regression was employed to ascertain whether this graphical impression could be corroborated. The results seem to confirm the visual impression. The impact of cable on TV's share is negative (B = -.555) and statistically significant (t = -2.76, p = .016), although there was no statistically significant effect of the variable representing the shares of the other media. Whereas the displacement effect of cable on TV is clearly evident, it is also less severe than for example, the effect of radio on newspapers. The question that might well be raised is why cable's impact is so small compared to that of TV's impact on radio. There are two reasons why cable's displacement of TV was rather small. First, as the theory of the niche states (see chap. 2), if resources are increased the additional resources cushion existing media from competition by an invader. Two studies (Demers, 1994, and Glascock, 1993) found that contrary to McCombs' (1972) constancy hypothesis, advertising expenditures actually increased over time. Demers' study covered the time period 1850 through 1990, when Glascock's study spanned the years 1978 through 1990. The pertinent question here is whether advertising revenues for all the media were higher in the cable period than in previous decades. To answer this question, the percentage which advertising represents of the Gross Domestic Product were examined in two time periods, 1949 to 1978 and 1979 to 1998. The first period was dominated by television while 1979 represents the year cable began to make inroads into broadcast TV audiences. The mean for the TV period is 2.05 (sd = .214), and the mean for the cable era was 2.19 (sd = .144). Whereas the difference between these means is small, even a small percentage of the GDP is economically significant. A t-test shows that the two means are significantly different (t = 2.57, df = 48, p = .013) indicating a greater share of the GDP was expended on advertising in the cable era. Although an increase in advertising resources may have cushioned competition between cable and older media such as television, it is not the only reason for the

COMPETITION FOR ADVERTISING

61 1

small negative impact on television by cable. The second reason is that the majority of firms or channels in the cable industry are following a strategy that differentiates them from their potential competitors and this strategy has consequences for advertising revenues. This difference in strategy is most clearly seen in an analysis of the niche microdimensions and macrodimensions. The Advertising Guild: Coexistence Among Specialist and Generalists A guild was defined in Chapter 2 as a group of populations or industries that exist on the same resource such as advertising. Because of their use of a common resource, the potential for strong competition within a guild is high. Since the 1930s, three industries—radio, television and cable—have invaded the guild resulting in the three cases of displacement discussed earlier. However, the theory of the niche does not explain only the dramatic events like competition and displacement, it also explains the quiet life of coexistence. The theory of the niche explains coexistence by the concept of ecological differentiation or niche difference. Although on the surface the members of the advertising guild may seem ecologically similar, the theory directs us to look for the limiting similarities which enable coexistence. In the case of TV and cable, niche differences can be isolated at three levels of analysis: between macrodimensions, between microdimensions, and within microdimensions. As noted earlier, at the macrodimensional level there is strong competition between TV and cable on the time-spent dimension and, as also noted earlier, cable has displaced some of the time spent with broadcast television. It is often the case that strong competition on one resource axis is accompanied by an absence of competition on other resource dimensions. This seems to be the case with cable and TV. On another macrodimension—consumer spending—cable derives revenue from subscriptions while TV does not. Of course, both mediums use advertising resources, and it is on this macrodimension that one would expect coexisting mediums to have evolved differences in niche. At the between-microdimension level, cable is a relative specialist while TV is a relative generalist. Cable has a narrow niche and TV has a rather broad niche. One major reason for these niche differences lies in the number of microdimensions utilized. Cable and TV share the use of two microdimensions— network or national and local—although they are differentiated by TV's use of two microdimensions—spot and syndication—unshared by cable. The relevance of these differences limits overlap between the two mediums and it is almost guarantees that their niche-breadths will be somewhat different. These factors help explain why the conditions for displacement were not apparent at the between- microdimension level in the measures of overlap and superiority. Furthermore, there is niche differentiation at the within-microdimension level. Both TV and cable use large proportions of national or network advertising and this could potentially mean strong competition for this resource. As pointed out earlier,

62

CHAPTER 3

cable has increased its use of local advertising. In 1998, however, it was still rather specialized with 70.2% of its advertising revenues drawn from the national category. Despite the surface appearances of strong competition for national advertising, a closer examination suggests that there are differences in competitive strategy between cable and broadcast television that result in niche differences in their use of this microdimension. The broadcast networks aim at attracting the widest possible mass audience. Whereas some of the national cable channels seem to follow a "broadcast" strategy and attempt to attract a broad audience, most seem to follow a specialist strategy by appealing to narrower audiences such as golfers, history buffs, food and wine aficionados, or sports fans. These differences in programming strategies result in differences in audience sizes, the attendant ratings, and differences in demographic profiles of the audiences. These differences in audiences are in turn reflected in the roles that cable and broadcast TV enact for national advertisers. Advertisers in network TV are buying "tonnage," or sheer audience size, and commercials are sold on the basis of the absolute ratings. In cable, on the contrary, advertisers are usually buying the demographics, such as gender or income groups or the psychographic groups, that watch particular channels (Eastman & Ferguson, 1997). The importance of specialized audiences for selling cable to advertisers was documented in a study by Waterman and Yan (1999) which attempted to account for differences in cable and TV CPMS: "... the advantage of attracting special interest audiences tends to outweigh the advantages of audience size per se with respect to advertising prices—at least for the more popular cable networks in our sample." Hence, it is the niche separation within a single microdimension (national advertising) and niche separation between the macro and microdimensions discussed earlier which allows cable and broadcast television to coexist despite strong competition for audience time and attention. In addition, cable and television exhibit price differentiation; cable advertising is generally less costly than TV availabilities. These considerations raise an important question at the heart of competition for advertising by the media—what explains advertising expenditures on the media? To answer this question, it is necessary to study the gatekeepers of advertising, the advertisers and their agencies (see Fig. 2.1). Although the niche metrics and niche levels capture the industry level dynamics of competition, to answer the question of what explains advertising allocation to the media one must descend in levels of analysis (see Dimmick & Coit, 1982, for a taxonomy of levels of analysis) to the level of the organizations which actually make these decisions. Although there is no tradition in mass communication research or media economics of studying the decision-making of advertisers and their agencies, such studies are necessary. For example, the trade press and others, such as Warner and Buchman (1991), suggested that as broadcast TV audiences have eroded, money formerly spent by advertisers on TV has gone to cable and cable is used as a supplementary medium to compensate for audience declines in network television. One could also ask whether Web advertising dollars represent "new money" allo-

COMPETITION FOR ADVERTISING

63

cated by advertisers and agencies above and beyond the normal budgets, or if the Web represents a substitute for other media. These questions can only be assessed by actual studies of the decision-making of advertisers who set the advertising budgets and media buyers in advertising agencies who allocate the dollars to each medium. It is these decisions that ultimately shape a medium's niche and determine the outcome of media competition for advertising. This chapter chronicles the competition for advertising from the colonial press through the cable era. Currently, another new medium—the World Wide Web—has begun to compete with the existing media for advertising dollars. However, it will be several years before sufficient data has accumulated to allow assessment of the Web's impact. It is too early to evaluate the question of whether the Web will have a profound impact, as has TV, on the advertising niches of other mediums or if, like cable, the Web will evolve into a medium differentiated from its competitors, and thus, have a smaller competitive effect on its potential rivals for the advertisers' dollars.

4 The Niche and the Strategic Group: The Niche-Breadth Strategy

Few entities are more maligned in communication literature than the large media corporation, often under the rubric of a "conglomerate." As Demers (1999) pointed out, this criticism has two major sources. The first is predictably Marxist in origin; the second stems from present and former media professionals that view a relatively small number of owners of large media firms as resulting in a concentration of power, and in the homogenization of media content and an unwillingness to espouse controversy. However, cogent and effective criticism requires a theoretical and empirical understanding of the communication firm and its environment. The concept of strategic group aids such understanding. The Niche and Strategic Groups Since the 1970s, the concept of strategic groups has evolved out of the industrial organization economics and strategic management research literatures. A strategic group is a set of firms within an industry that is pursuing the same or similar strategies (an extended treatment of the concept of strategy will be given later in the chapter). According to Porter (1980), the strategic group concept is a level of analysis that lies between the level of the firm and the level of the industry. To take a simple, hypothetical example, an industry manufacturing razor blades might consist of two groups of firms. One group might specialize in high quality and more costly blades and the other strategic group might be composed of firms operating at the lower end of price and quality dimensions.

64

THE NICHE AND THE STRATEGIC GROUP

65

The origin of the strategic group concept is attributed to the work of Hunt (1972) and Porter's (1980) elaboration of the concept. A growing research trend through the 1980s and 1990s resulted in numerous studies. Barney and Hoskisson's (1990, Table 1) survey lists 27 studies conducted up to 1987 and Reger and Huff's (1993, Table 1) reviewed 24 studies published between 1987 and 1992. One of the most common methodological approaches to delineating strategic groups has been to cluster-analyze financial or accounting data to define the strategic groups and attempt to relate group membership to measures of performance, such as profitability. Other methods include Porter's (1980) a priori method that involves specifying the strategic dimensions and then locating firms along these axes to define the groups. This method is used to identify the firms pursuing the niche-breadth strategy later in this chapter. The use of cluster analysis has been criticized on ontological grounds (see Barney & Hoskisson, 1990). Because cluster analysis always produces a set of clusters, the question then becomes whether the clusters are real entities or artifacts of method. This is not an insoluble problem as techniques for cluster validation have been developed. However, another problem with many of the early studies is that the search for performance differences across groups or clusters proved elusive and disappointing. A newer approach to the identification of strategic groups—called the cognitive approach—relies on the reports of industry participants or informants (see Reger & Huff, 1993; Fiegenbaum & Thomas, 1995; Peteraf & Shanley, 1997). According to Peteraf and Shanley (1997, p. 166), "Studies of managerial cognition show that executives tend to view their industries in terms of groups of firms." These authors developed a theory of strategic group identity intended to elucidate how strategic groups evolve within an industry and how groups affect the actions of firms within the industry. Although no studies of strategic groups were undertaken in the communication industries, Chan-Olmsted (1997) proposed such analyses. In her article, Chan-Olmsted (1997) supplied a single insightful sentence to connect the notion of strategic groups to the theory of the niche. She wrote, "By selecting different niches, these strategic groups avoid any unnecessary competitive behavior and prosper together by sharing the environment." What Chan-Olmsted suggests is a new level of analysis for research on the niche. First, as outlined in chapter 1, no individual firm is probably ever identical to any other firm in an industry although they share many important similarities. In chapter 2, it was pointed out that McKelvey and Aldrich (1983) once characterized the two major approaches to the study of organizations as "all organizations are alike" and "all organizations are different." The strategic group construct focuses on both firms' similarities and differences, reconciling these two polar approaches. Therefore, the strategic group concept, in allowing for likeness or similarity within groups and differences between groups, holds the potential for capturing some essential features of an industry important to the study of competition and coexistence.

66

CHAPTER 4

The microlevel niche resides at the level of the firm. Whereas the most macroscopic niche level is conceptualized at the level of the industry. Between these microscopic and macroscopic levels the concept of strategic group provides an important bridging construct as a way to conceptualize variation within an industry at a level higher than that of the individual firm. The potential of the strategic group concept can be illustrated using an example familiar from earlier chapters of this volume, the newspaper industry. First, it should be made clear that the "common sense" (McKelvey & Aldrich, 1983) classification of newspapers as a single distinct industry is probably an accurate one. All newspapers are recognizable as being members of a same population. They all rely on the same resource categories; advertising or subscription sales or a combination of both resources. Furthermore, newspapers use the same, or quite similar, technologies and often hire workers from the same pool of personnel. Although newspapers, as members of the same industry, are similar, the strategic group concept prompts us to ask if there are groups within the industry. Each umbrella layer, or geographic segment, portrayed previously in chapters 1 and 2 may represent strategic groups. Recall that Rosse's umbrella layers as updated by Lacy and Simon (1993) included national newspapers, metropolitan dailies, suburban papers, and satellite city dailies and weeklies. Representatives of these layers may exist within some definable metropolitan area such as a Consolidated Metropolitan Statistical Area. Each CMSA is a patch of habitat containing exemplars of firms adapted to local ecological conditions within the metro area. However, as the umbrella hypothesis implies, these adaptations are not simply unique to each CMSA but recur in different CMSAs across the country. For example, a suburban daily serves advertisers and readers within that suburb with coverage of the local area. Its strategy and niche are different from the metro daily that has a larger circulation area and more broadly based news coverage that attract readers and advertisers that differ to some extent from the metro daily. Clearly, the strategies are different with the result that there are clear differences in resource use and niche. Within a specified region of the country or national level, the suburban dailies might be said to form one strategic group whereas the metro dailies constitute another group. The same could obviously be said of the weeklies and the national papers. The niche differences reflected in the strategic groups within the newspaper industry may serve to keep competition within limits and thus serve to foster coexistence. Beyond this however, there may be another effect of strategic groups; they may serve to engender prosperity as Chan-Olmsted suggested for the industry as a whole. Although there may be no discernible differences in performance measures like profitability between groups at a single time point, one could advance the hypothesis that across time, differentiations of firms' niches into strategic groups, because such differentiation reduces direct competition, performance measures would show increases across the industry's history as a consequence of the emer-

THE NICHE AND THE STRATEGIC CROUP

67

gence of strategic groups. A research design to test whether the newspaper industry is indeed divided into strategic groups is proposed in chapter 6 as part of this discussion of media content as a niche dimension. The Niche-Breadth Strategy In the critical literature, the word "conglomerate" is often used to describe a large communication firm. A recent book highly critical of large media firms (Barnouw, 1997) prominently featured this word in the title. In economic terms, a conglomerate is a holding company generally comprised of firms that operate in unrelated markets. Barnouw (1997) and his co-authors subdivided their topic into single media industries or genres such as TV news, newspapers, book publishing, children's programming, and Hollywood firms producing film and TV. However, the firms which the critics are probably most concerned about do not think of themselves as operating in separate and disjoint markets but rather, as attempting to exploit their simultaneous operation in several media industries. To understand the contemporary multidivisional media firm that operates in several industries it is necessary to understand its purposes and goals in relation to its behavior. It is necessary, in a word, to understand its strategy. Competition in the communication industries has become too complex to understand in its entirety in terms of single industries. Scholars of management and journalists who cover the communication industries have observed that there are a relatively small group of large corporations which loom large in communication landscape. It is no secret that some of the largest firms have positioned themselves as dominant competitors for the 21st century through merger and acquisition as well as their own start-up enterprises. Quinn (1996), for example, referred to these companies as "information-entertainment" firms and Maney (1995) characterized them in a more popular fashion as "megamedia." The hallmark of these firms is that each operates in a number of communication industries. In the merger frenzy of the 1980s, the buzzword was "synergy." As Bogart (1995, p. 51) defined it, "The underlying principle is that the transfer of symbolic messages across media boundaries permits a "synergy" that makes the whole larger and more profitable than the sum of its separate parts," although some media CEOs interviewed by Bogart (1995) expressed their doubts about actually realizing synergy. In many ways the niche-breadth strategy outlined next attempts to give some precision to the rather abstract and often amorphous concept of synergy. However, in pointing out that some large communication companies seem to be following such a strategy, I do not claim they are all pursuing it successfully. The purpose of this section of the chapter is to propose a new form of K-selection operating in the communication industries. Recall (see Table 1.2) that K-selection is characterized by among other factors intense competition, a population of organizations near the carrying capacity of the environment and selection that favors large size, competitive ability, and higher resource use per unit. This section of the

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chapter focuses on a strategy—the niche-breadth strategy—common to some of the largest media corporations. The environmental factors favoring organizations employing this strategy are: the fractionalizations of media consumers across a growing array of media channels as well as the attendant uncertainty over the viability of the current media distribution systems; and the environment of deregulation in the U.S. economy as well as abroad which has had the effect of encouraging merger and acquisition (see Ozanich & Wirth, 1998, for an overview of merger and acquisition activity in the communications industries). According to Porter (1980, p. xvi), a firm's "... competitive strategy is a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there." The corporations employing the niche-breadth strategy are, first of all, diversified companies. Hence, the strategy they follow is not confined to the level of a single industry but developed at the level of the parent company or supraorganization. For diversified corporations, strategy is formulated at two levels (Porter, 1996). The first level, strategy, is how to compete in each of the markets or industries in which the firm operates. The second level is corporate strategy, which determines the industries in which the firm enter or operate and how the corporate office should manage the divisions representing the firm's choice of industries. The niche-breadth strategy takes its name from the theory of the niche, the subject of chapter 2. Normally a niche is defined at the level of a population or industry. It is possible, however, to conceptualize the niche at the level of an individual organization (e.g., Baum and Singh, 1994). In chapter 2, the term niche-breadth is used at the level of the industry to refer to the relative number of resources used by an industry. Recall that a relative specialist uses one or a small number of resources while a relative generalist utilizes a large number. (Disney, e.g., is a generalist firm that operates in several different industries and draws revenues from a variety of different markets, whereas a firm like Reuters is an information specialist.) The term niche breadth strategy is applied to a single firm; insofar as a strategic group is pursuing a similar strategy it becomes meaningful to speak of a niche at the level of the group. The essence of the niche-width strategy is the attempt to create a wide corporate niche to exploit a variety of resources as fully as possible. The strategy is composed of four elements: scale or size as defined by revenues; diversification; multinational operation; and exploitation of economies of scope. In the following section, each of the elements of the niche-width strategy is considered and will be illustrated by the operations of a group of firms currently employing elements of the strategy. It should be noted at this point that more traditional strategic methods such as vertical integration (e.g., by Time-Warner) also form part of the strategies of these firms. However, as these are well known and easily recognizable, and because the focus here is on the niche-breadth strategy, these elements of strategy are omitted from the discussion. The corporations were selected on the scale criterion by using the ranking of communications companies by revenues published by Veronis, Suhler and Associ-

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ates' annual Communication Industry Report (1995) and considered only those ranked in the top ten. On the second criterion—diversification—firms were selected which had diversionalized structures in which the divisions represented different media businesses. Only publicly traded U.S. corporations were considered. The third and fourth criteria were assessed by examining the corporate annual reports for the years 1987 through 1999. The result of this process yielded four firms: Time-Warner (rank # 1), Disney (rank #2), Viacom (rank #4), and News Corporation (rank #7). Scale

K-selection, as noted previously, requires a focus on organizations of large size. Scale is a means to competitive advantage because it usually entails the firm's access to greater capital either through its own resources or its ability to procure funds in the capital markets. For example, access to capital enables the organization to successfully compete for expensive media talent at the microlevel or at the macrolevel to engage in acquisitions or joint ventures. Because of the capital requirements of these large firms, scale also becomes a barrier to entry. It should be noted here that large size does not mandate that a firm follow the niche-width strategy. There are large firms such as Reuters, which pursue a specialist strategy (see White, 1999) and even their diversification into new media such as the Internet is predicated on continuing to be a specialist. Diversification Time-Warner encompasses over 160 different subsidiaries, clustered into four divisions: cable systems, cable networks, entertainment, and publishing. Cable systems consist of Time-Warner Cable, the country's second largest multiple system operator. Cable networks include premium services HBO and Cinemax, and the Turner Entertainment Group (e.g., CNN, CNNFN, CNN Headline News, TBS, TNT, The Cartoon Network, and TCM). Entertainment includes the Warner Brothers and Castle Rock Studios, and WEA Record Group. Publishing includes a number of magazines (e.g., Time, Life, Fortune, Sports Illustrated, and so on) and book publishing companies (e.g., Time-Life, Brown, Sunset, Warner). The recent megamerger of Time-Warner and America Online added significantly to the new company's repertoire of businesses. The Walt Disney Company also clusters its business interests into three divisions: Broadcasting, creative content, and theme parks. Its broadcasting division includes the ABC television network and its owned and operated stations, the ESPN family of cable channels, the Disney Channel, and all ABC radio holdings. Creative content includes Disney's film and television production companies (e.g., Buena Vista, Disney, Miramax, Hollywood, and Touchstone Pictures). Disney's theme parks include Disneyland, Walt Disney World, and EuroDisney.

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Viacom operates four business divisions—networks and broadcasting, entertainment, video and theme parks, and publishing. Networks and broadcasting includes its group of cable channels (MTV, VH1, Nickelodeon, Nick at Night, Showtime, The Movie Channel, Comedy Channel, and Sundance). Entertainment consists of Paramount Studios, Viacom's interest in the United Paramount Network (UPN), Spelling Entertainment, Paramount Domestic Television, and the Paramount stations group (TV). Video and theme parks include Blockbuster Entertainment, Kidzville, and Kings Island theme parks. Publishing includes a number of book publishers. Recently, Viacom also acquired the television network CBS. News Corporation also operates four divisions labeled as broadcasting, entertainment production, publishing, and other. The broadcasting unit is composed of the Fox television network and its owned and operated television stations. Entertainment production includes the Fox studios for both film and television and its cable services (FX, Fox Sports, Fox News). Publishing includes a number of newspapers, magazines, and book publishers. The other category represents the company's non-media interests. The most elementary definition of diversification is a firm that operates in different businesses or industries. Being in different businesses insulates the parent firm from the vicissitudes of the performance of any single business and from the ups and downs of the business cycle. For example, Picard and Rimmer (1999) found that newspaper firms that were more diversified were better able to weather a recession. In addition, through cross-subsidies that enable a well-performing division to bankroll a division that is temporarily not performing well, financial assistance can be provided from within the corporation. However, it is possible for a firm to engage in several businesses and still be dependent on a single industry. For example during the 1980s, CBS was diversified but dependent for most of its revenues on network television (Dimmick & Wallschlaeger, 1986). Dimmick and Wallschlaeger proposed a measure of diversification to assess the degree to which a diversified corporation is dependent on a single business, or conversely, has revenues or profits or spread rather evenly across its corporate divisions. (As the catalog of media business in which the four firms engage implies, a division consists of closely related businesses.) The measure (D) is defined as where pi is the proportion of the firm's operating income (income arising from the normal operation of the firm) contributed by the ith division and d is the number of divisions or media operations as follows.

The above version is the normalized version of the formula whose upper bound is one and is attained when operating income is evenly spread across divisions. The D measure has also been used in analyzing diversification strategies of companies operating premium cable channels (Albarran & Proco, 1990).

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Firms with large D measures are more robust in the sense of being able to sustain their viability in the face of a poorly performing or even declining business. Corporations seem to be aware of this value of diversification. For example, NewsCorp's annual report (1992, p. 5) noted that "By industry, operating profit is broadly spread, but newspapers contribute the largest portion of our earnings." Similarly, Disney's annual report (1994, p. 3) stated that"... we are not dependent on any single segment of our business." D measures were calculated for the members of the four-firm supra-group for the years 1987 through 1999 and the means and standard deviations are shown in Table 4.1. As the table shows, all four corporations are diversified to some extent but that the firms vary substantially. Examination of the yearly D measures (not shown) over the 13 year period shows that Disney has shown a relatively steady increase in its D-measure, with a decline since 1997. Viacom also ends the period with a marked increase in D, but the values of the measure do not exhibit the relatively smooth increase evident in the trend in the Disney measures. In general, the Time-Warner D measures show a substantial decline toward the end of the period in the years 1992 through 1999. The recent merger with AOL should result in an increase in the D measures for the new company in the coming years. NewsCorp shows an increase over the period but the magnitude of D at the end of the 13-year span is not as great as at Disney or Viacom. Table 4.1, which shows the means of the four firms for the 13 year period, demonstrates that Disney has the highest mean diversification index for the period followed by NewsCorp and Time-Warner at much lower levels. Viacom has the lowest average D-measure for the period. Disney also has one of the lowest standard deviations of the four firms, indicating relatively low fluctuation from year to year whereas Viacom, which also exhibits the lowest average D measures, displays the greatest fluctuation from year to year. Clearly, Disney is the most diversified firm and is also one of the most stable in its diversification. Diversified firms differ in their organizational patterns (Williamson, 1975). On one end of the continuum is a class of firms called holding companies in which the corporate office exercises some financial control over a group of unrelated businesses. This sort of firm, as noted earlier, is often called a conTABLE4.1

Means and Standard Deviations of Normalized D-Measures 1987-1999 Mean

Standard Deviation

Disney

.80

.14

Viacom

.63

.24

Time-Warner

.67

.18

Newscorp

.68

.13

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glomerate. At the other end of the continuum are corporations that, in addition to financial controls, exercise a strong degree of control and coordination over a group of related businesses. Williamson (1975) calls this the multidivisional or m-form type of corporate structure. One example of the m-form organization is a firm engaged in related diversification. Galbraith (1996) has summarized studies conducted by the Harvard Business School of Fortune 500 Companies. These studies have examined the relationship between performance (usually return on equity) and diversification. In these studies, the corporations that performed well were pursuing a strategy of related diversification. As Porter (1996) explains, simply being a diversified firm such as a holding company does not deliver stockholder value since individual investors can diversify their own portfolios. A mere holding company also does not attain the competitive capabilities such as cost reduction which accrue to related diversification. The four firms in the analysis are all pursuing a strategy of related diversification. It is apparent from the business in which the four firms engage that they are pursuing a common strategy of related diversification in that each captures in its enterprises media which are to some extent entertainment and information substitutes. This can be seen more clearly in a more minute examination of one major consequence of the related diversification strategy, economies of scope. Economies of Scope Related diversification makes it possible to achieve economies of scope and it is a consciously chosen aspect of corporate strategy. As Disney (Annual Report, 1993, p. 5) put it,"... we believe an acquisition must be in a related or complementary field." Economies of scope reside in what are called joint products (see Pearce, 1992). An example of a joint product in agriculture would be wool and mutton. A firm that produces one product in a set of joint products must necessarily be able to produce the other products. In the media industries, a firm that holds the copyright on a film should be able to produce a videocassette of the same film. Economies of scope occur when it is cheaper to produce joint products together (Carlton & Perloff, 1994). Picard (1989, p. 63) defines scope economies as occurring when "... the production of one product lowers the production costs of another product because they share inputs and spread the cost between them." The first aspect of economies of scope is the lowering of costs. The firm engaged in related diversification has the ability to "... amortize costs across as many distribution outlets as possible." (Time-Warner Annual Report, 1988, p. 2). The ability to spread developmental costs across several media resolves some of the uncertainty about recouping R and D expenses. As Time-Warner (Annual Report, 1996, p. 6) observed, "only when a company feels confident about recouping its costs by spreading them across several forms of distribution will it invest in developing costly programming on a regular long-term basis."

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The second aspect of economies of scope is deriving revenues from several sources, all based on the same input or idea. As Carlton and Perloff (1994, p. 71) wrote, "Many factors contribute to economies of scope, and one of the most important is common inputs." For example, the Disney movie Aladdin was first a box office success in its theatrical run and the video sold some 24 million units. The movie script and characters were also the basis for a restaurant and stage show at Walt Disney World. In addition, Aladdin was used to create a Sega videogame, a music album and two TV specials (Maney, 1995). In a similar vein, NewsCorp (Annual Report, 1993, p. 4) stated "... we are harvesting the data from all our communication sources to re-distribute in a variety of electronic retrieval systems." At a more abstract level, the notion of economies of scope providing multiple revenue streams was summed up by Time-Warner (Annual Report, 1992, p. 3) whose report noted the importance of copyright in protecting sole proprietary rights to content. Part of what makes the business of ideas so powerful is copyright ownership. Once an idea takes definitive shape as a book, article, CD, album, film, videocassette, or TV show—creative software whose copyrights Time-Warner owns—it can be sold, licensed and used over and over again, in different formats and languages, through different technologies, to different audiences. The more a company controls not only the creation of these software copyrights but the various forms of their distribution, the greater its potential profits.

A final advantage of economies of scope is that the knowledge from producing one media product is likely to be relevant to producing a related media product (Carlton & Perloff, 1994). NewsCorp (Annual Report, 1992, p. 7) asserted, "Our underlying philosophy is that all media are one. The principles and skills involved in discovering and fostering creative talent—no matter the format, be it newspaper, television, magazines, films or books—are transferable." Interdivisional Cooperation However, simply engaging in what appears to be related diversification is not sufficient to guarantee that the benefits of economies of scope are realized. It is also necessary to couple related diversification with tactics designed to coordinate the behavior of the various divisions of the firm to realize scope economies. Four such tactics have been developed by Disney (Eisner, 1999) to foster coordination and synergy among its divisions. The first tactic pertains to executive compensation. Rather than simply pay executives high salaries they are instead rewarded in part with stock options. The worth of the stock, of course, depends on corporate performance. For example, compensation for division executives is dependent not just on division performance but on overall corporate performance as a whole. The second tactic or practice involves encouraging collegiality and communication across divisions. Foremost among these is a weekly lunch meeting of top executives and

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division heads with the objective of promoting interdivisional cooperation among division managers who might otherwise act competitively and opportunistically. In addition, there are various programs designed to inform all employees—hourly, middle managers, and executives—about the activities of each of the corporate divisions. Third, there is a mechanism for settling interdivisional conflicts (over cost allocation, for example) which might otherwise disrupt cooperation between divisions. Finally, the Disney Company created the post of what might be called a "synergy czar" so that ideas originated in one division could be cross-promoted or expanded on by other divisions. The idea is that the role of synergy czar is to mobilize the relevant divisions to make contributions to a project so that"... the cumulative effort on a given project exeeds the sum of its parts (Eisner, 1999, p. 238). These four factors—the model of executive compensation, interdivisional cooperation and communication, resolution of conflict between divisions and employment of a synergy czar—probably help explain the rather equal distribution of revenues for Disney across its divisions. In turn, this pattern of revenue distribution is reflected in the very high D measures for this company, as shown previously in Table 4.1. It is unlikely that a firm could attain D measures of this magnitude without securing the close cooperation of its constituent divisions. Such interdivisional cooperation mitigates against interdivisional rivalry and opportunistic behavior that may enhance the success of some divisions but would almost certainly result in impaired performance of the firm as a whole. For example, Okrent (2000) attributed the failure of Time-Warner's Internet venture to the competitiveness and lack of cooperation among the company's divisions that were expected, by corporate level executives, to supply content for the venture. All four of the companies which form part of this analysis are transnational media corporations in that they have significant foreign direct investment (FDI) in other nations of the globe (Gershon, 1997). These investments allow the companies to gain access to a wider base of patrons and advertisers. The companies themselves acknowledge that having an identity that stretches beyond domestic borders is critical to company strategy and development. Consider the following quotes from selected company annual reports: NewsCorp (1995, p. 7) asserts that "... we have become a media company unmatched in global reach." Time-Warner (1992, p. 4) is billed as "... the world's leading media and entertainment company." Disney (1995, p. 7) viewed its operations as "... operating the Disney brand all over the world." Viacom (1998) stated that it follows a dictum to "think globally and to act locally." Clearly, the four companies reviewed in this case analysis continue to compete on a global level with one another and with other transitional media corporations like Bertelsmann A.G., Sony, and Hachette. The Niche-Breadth Strategy The evidence presented in this part of the chapter shows that all four companies exhibit some of the elements of the niche-breadth strategy: scale, diversification, economies of scope, and multinational operation. First, the four firms are large in scale as shown by their membership in the top ten group of revenue pro-

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ducers. Scale guarantees access to resources and acts as a barrier to entry. Second, all of the firms are diversified as shown by the D measures, and furthermore, all are engaged to some extent in related diversification. Third, there is evidence from their public policy statements that three of the firms consider economies of scope to be important. The competitive advantage gained through scope is readily apparent. In an age of multiplying distribution s, content that is attractive to consumers is the critical commodity. Hence, ownership or control of marketable content is the first requisite for corporate survival. As audiences continue to fractionalize across distribution channels producing unique content becomes less feasible. Producing (or reproducing) the same or similar content in two or more media disperses costs across a large number of consumers, provides a broader revenue base, and leads to an efficient operation. Fourth, all the corporations analyzed here are multinational in operation. Although the four corporations all display some of elements of the strategy, they probably vary in their implementation. For example, one industry analyst (quoted in Schmidt, 2001, p. 78) said that synergy has never been on of News Corp's strengths: "... when you talk about multimedia companies, you would like to say that the whole is greater than the sum of the parts. In the case of News Corp., I think the whole is equal to the sum of the parts." If one had to pick the best current exemplar of the strategy, it would have to be Disney. As noted earlier, the environmental trends of audience fractionalizations and de-regulation of American industry seem to favor corporate strategies such as the niche-breadth strategy and the characteristics of K-selected organizations which are manifest in Disney, Time-Warner, Viacom, and News Corporation. The consequence of K-selection is efficient use of resources. Implementing the niche-breadth strategy successfully confers survivability as well as efficiency. The notion of niche-breadth strategy and its role in K-selection in the communication industry provided concrete and detailed support for Williamson's (1983) contention that multidivisional firms may be, under some conditions, superior competitors with high survival potential. Williamson's remarks on this aspect of diversified firms pertained to firms that are divisionalized and have strategic planning capability and internal control mechanisms. In the long run, Williamson (1983, pp. 157-158) wrote: ... the superior viability properties should manifest themselves in terms of differential survival. On the other hand, conglomerate structures that lack financial and structural rationality and want for sound management will... decline relatively. If the selection mechanism is working well, they will be required to adapt appropriately, shrink relatively, or face extinction.

Although it seems to be clear that the companies analyzed in this section of the chapter are following elements of the niche-breadth strategy, it is not possible (with publicly available data) to assess in detail the relative success of these firms in actually implementing the strategy although the D-measures do provide some limited evidence.

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Across-lndustry Concentration This chapter discusses the potential economic efficiencies pertaining to the niche-breadth strategy. Whereas these efficiencies are important to the survival of the large multidivisional firms such as Disney, there may well be negative public welfare consequences of the niche-breadth strategy. Specifically, the efficiencies achieved by large multidivisional firms pursuing the strategy may lead to a high level of what Albarran and Dimmick (1996) called across-industry concentration. These authors proposed that there are actually two forms of concentration in the communication industries. The most familiar form—within-industry concentration—refers to concentration within a particular industry such as cable or newspapers and is often measured using indexes like the concentration ratio or Hirschman-Heifindahl index. Albarran and Dimmick (1996) however, proposed that a new form of concentration—across-industry concentration—was becoming increasingly important in the communication industries. They found that in 1995 the four-firm concentration ratio computed using total communication industries revenues was .25 whereas the eight-firm was .40. In other words, the top four companies accounted for about one quarter of the revenues of all communication industries while the largest eight firms controlled more than one-third. These authors pointed out that these levels do not qualify as high concentration but they also noted that the various levels of concentration (high, medium, and low) were defined based on experience with within-industry concentration. Clearly, there may be cause for concern when the top eight firms control 40% of all communication revenues. The recent merger of America Online and Time-Warner points to the potential public welfare consequences of the niche-breadth strategy in increasing within-industry concentration. This merger appears to have been created for many of the reasons outlined previously in this chapter. The merger gives AOL access to Time-Warner's broadband capacity and at the same time gives AOL access to Time-Warner's many consumer brands in their publishing segment and the content provided by the many other Time-Warner divisions. Alternately, Time-Warner has access to the Internet. The merger positions the new firm to be able to exploit many elements of the niche-breadth strategy. The net result of the merger is a broader-niched firm and what is surely an increase in across-industry concentration. Significantly, the Federal Trade Commission's greatest concern in approving the merger was to insure competition among Internet providers, to prevent within-industry concentration. The most important effect of the merger however, may be its impact on across-industry concentration. Previously, across-industry concentration has been an invisible form of concentration in that it has not been considered by the regulatory bodies who have the responsibility of insuring the survival of competition in media industries. The AOL-Time-Warner merger, the result of firms pursuing a niche-breadth strategy, is an indication that across-industry concentration should be considered in deliberation to allow further mergers or acquisition in the communication industries.

5 The Gratification-Utility Niche

Every minute of every day millions of people express their media preferences by renting or buying a movie on videocassette or DVD or by attending a movie at a theater. Media preferences are also expressed by sending an e-mail message to a friend, shopping online for a CD, watching a vintage situation comedy on a cable channel, reading a magazine or newspaper, or buying a book to read on vacation. These decisions by consumers or media patrons represent demand for media products and services. Underlying the media choices and hence, also underlying demand are the gratification-utilities that explain why people allocate money and time to the media (see Fig. 2.1, p. XXX, this volume). The media can be conceptualized as competing to satisfy the expectations or gratifications sought that audiences or patrons bring to their media use. Because the gratification-utilities are fundamental to media choice they are also fundamental to questions of competition and coexistence. This chapter is concerned with these fundamental questions as they are illuminated by studies of the gratification-utilities. The Environment and the Niche In his overview of the development of the niche concept, Pianka (1988) pointed out that ecologists expended a great deal of effort over several decades in differentiating population from environment. The niche concept was first introduced in the early 20th century and some definitions emphasize the environmental aspect of the niche at the expense of population characteristics, whereas others give prominence to population attributes and neglect the environmental aspect. Definitions of niche with an environmental bias have focused on the population's habitat. Alternately, definitions with a population bias have emphasized behavioral or structural adaptations. 77

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However, contemporary ecologists recognize that the niche concept implies a relation between population and environment. For example, Ricklefs (1979) defined the niche as "all the components of the environment with which the population interacts" (p. 875). The niche concept therefore denotes a relation between attributes of the environment and attributes of the population. Hence, if the conceptual confusion that surrounded earlier bioecological definitions is to be avoided, any translation of the concept into uses and gratifications research must retain the relational quality of the niche and preserve the distinction between population and environment. As defined in chapter 2, the populations are media organizations and industries. A major part of the environment of a media organization or industry is composed of media audiences and media patrons who attempt to satisfy some of their needs through use of the available media. The gratification-utility niche of a medium is defined in terms of the dimensions that compose the gratifications obtained (GO) from the communication medium. These dimensions, from the point of view of the organization or industry, are environmental dimensions. Hence, the populations— organizations or industries—are distinct from the environmental dimensions along which their niches are defined.

The Gratification-Utility Niche: Breadth, Overlap, and Superiority Measures The gratification-utility niche of a medium is defined by the breadth of gratifications obtained, the degree of overlapping GOs with other media, and its relative superiority in gratifications obtained compared to other media. The formal definitions of niche-breadth, niche overlap, and competitive superiority described next were developed by Dimmick (1985) as interval level counterparts of the traditional bioecological measures used in previous studies of media competition for advertising resources (Dimmick & Rothenbuhler, 1983, 1984a, 1984b). Because the traditional measures are appropriate only for categorical or nominal data, new formulae were necessary to take into account the interval level data typical of gratifications measures. The definitions further assume that the underlying need dimensions of gratifications obtained were identified using factor analysis. Each of the measures—niche-breadth, overlap, and superiority—is computed separately for each dimension yielded by the factor analysis. The index formulated for niche-breadth measures the degree to which a medium is capable of gratifying a relatively broad or relatively narrow spectrum of need statements on a gratification-utility dimension. Niche-breadth indicates specialist or generalist resource utilization. A specialist is a medium from which audience members obtain a narrow range of gratifications, whereas a generalist is a medium that fulfills a broader range of gratifications on each dimension.

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Where: u, 1 = the upper and lower bounds of a scale (e.g., 4 and 1) GO = a gratification obtained rating on a scale N = the number of respondents using a medium n - thefirstrespondent K = the number of scales on a dimension k - the first gratification scale The upper bound of B equals unity and is attained when all respondents rate a medium at the upper bound on all need or gratification statements on a dimension. The lower bound is zero and indicates that respondents are rating a medium at the lower bound of all gratifications scales. The upper bound of the measure indicates maximal generalism, and lower values represent decreasing generalism. For this reason, the measure is best conceived as a "departure-from-generalism index." The perceived similarity or overlap in gratifications obtained from two media (i and j) is computed by the formula as follows:

Where: i, j = medium i and medium j GO - a gratification obtained rating on a scale for i and j N = the number of respondents who use both i and j n - thefirstrespondent

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Low overlap values indicate high similarity in gratifications obtained from the two media whereas high values denote dissimilarity. The lower limit of the overlap measure is zero and indicates that the gratification niches of media i and j overlap completely (i.e., the niches of the two media are identical). The lower limit is attained when all respondents assign the same rating to the two mediums across all scales on a gratification utility dimension. The upper limit is u minus 1 and is reached when respondents rate one medium at the upper bound on all scales and the other medium at the lower bound of all scales. Because low overlap values may occur because respondents' ratings are either at the low or the high end of the scales, it is necessary to inspect the GO means and to consider the substantive meaning of the positions on the scale when interpreting the overlap measures. Niche overlap can be considered an index of the substitutability or complementarity of two competitive media. High overlap values indicate that two media are less substitu table. Although the overlap index measures the similarity in gratification levels provided by two communication media, the measure of competitive superiority is designed to answer whether one or the other of a pair of media provides greater gratification utility. A medium that obtains a significantly higher superiority score than another medium is superior in providing gratifications to the audience members or patrons. Media that do not significantly differ on the superiority index do not differ in their ability to provide gratifications.

Where: i,j = medium i and j m i>j = the value of a respondent's rating for those scale items on which i is rated greater than j (the sum of the actual values) mj>i = the value of a respondent's rating for those scale items on which j is rated greater than I (the sum of the actual values) K = the number of scales on a dimension k = the first gratification scale N - the number of respondents who use both i and j n - thefirstrespondent *Measures of competitive superiority for communication media, products and services. Copyright ©1985 by John W. Dimmick.

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81

The indices of superiority are defined as arithmetic means. As a result, the differences in superiority between two means on a gratification utility dimension may be tested for significance using a t test for correlated groups. If the test yields a significant result, this is interpreted as superiority of one medium over another on that dimension. Conversely, the absence of a significant difference indicates that neither medium is superior on that gratification utility dimension. Taken together, overlap and superiority define two conditions that must be satisfied for a new medium to displace an older form. First, the new medium must gratify much the same needs as the older medium—overlap must be relatively high. Second, the newer form must be superior to the older form. Recall that the notion of complete replacement of one population by another is termed exclusion, whereas a partial replacement of one form by another is competitive displacement. The Daily News Media: Newspapers, Broadcasting and Cable The study reported in this section of the chapter pertains to the niches of four daily news media: newspapers, radio, television, and cable. This research was conducted before the advent of the Internet but after cable had become a mature news medium. Two studies of Internet news are reported later in this chapter. The research presented here was undertaken to map the niches of coexisting media. In a guild of coexisting media one should not find intense or severe competition. Instead, one should observe niche differentiation among the media that keeps competition at a tolerable level and allows the competitors to coexist. Although niche theory does not make precise predictions about levels of breadth, overlap, and superiority, it is possible to state what pattern of findings would falsify the theory. In a guild of long-established competitors such as these news mediums, if the niche measures were to show a pattern of superiority of one medium over the other media on all the existing gratification-utility dimensions, this would falsify the theory because such a pattern in the data would belie the fact of coexistence by implying the subordinate media have no reason to exist. Rather, the niche measures should provide an explanation concerning why the members of the guild do in fact coexist. The study was conducted in Columbus (Franklin County) Ohio, and although this market is not completely representative of the U.S., it is sufficiently representative to be utilized as a test market for a number of products and services. The 18 gratification-utility items used in the study were developed from previous news gratification studies (see Dobos & Dimmick, 1988) and on the basis of openended interviews with a sample of news media users. The questionnaire containing the gratification-utility items were administered to a probability sample (N = 254) of respondents who used more than one news medium on a daily basis. These requirements were necessary as the overlap and superiority measures cannot be computed if a respondent uses only one news medium. Respondents were asked by trained interviewers in telephone interviews whether each of the media they actually used were "very," "somewhat," "only a little," or "not at all" helpful in obtaining the 18 gratification utilities. These scale positions were scored from 4 through 1. A cognitive- affec-

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tive factor structure was hypothesized (see Dobos & Dimmick, 1988) to underlie the gratification-utility items for all four news mediums. Due to the number of previous studies on news gratifications, confirmatory factor analysis was performed with LISREL to test the structural relations among the hypothesized cognitive and affective factors and gratification-utility items. The confirmatory model was specified to obtain parameter estimates for the interfactor correlations and item loadings on their respective factors. Loadings were fixed to zero on the opposite factors. Thus, a surveillance item was free to load on the cognitive factor, but not on the affective factor. Loadings less than .30 were not considered significant. Because the chi-square test of goodness of fit is sensitive to sample size and often results in rejection of an otherwise adequate model, rho provided a descriptive index of model fitting (Rentier & Bonett, 1980). Rho gives a measure of the improvement in model chi-square over the null model chi-square. Ideally, rho should approach .90. Table 5.1 shows the results of the confirmatory factor analysis of gratifications sought (GS) from "news in general," and gratifications obtained from newspaper (NPGO), cable television (CAGO), broadcast television (TVGO), and radio (RAGO). Rho values indicate that the cognitive-affective model is an adequate to nearly ideal depiction of the structure underlying gratifications sought and obtained. The best fit occurs for gratifications obtained from newspapers (rho = .87), and rho is lowest for cable (.76). As hypothesized, the gratification-utility items loaded on their respective cognitive and affective factors and t-values were above 2.0. The only exception was the "local" item, that failed to load above .30 as a cognitive gratification obtained from cable television, and its t-value was below 2.0. Substantively, this indicates a niche difference between cable and the other news media. It is only recently that a substantial local and regional news service is available to some cable subscribers on a special service tier but no such local service was accessible at the time of the study. The cognitive and affective dimensions were used to compute values for the niche-breadth and overlap on the two dimensions. The niche-breadth values shown in Table 5.2 provide a picture of the relative generalism/specialism of the daily news media in gratifying a broader or narrower spectrum of audience needs. On the affective dimension, whereas the television niche is slightly broader, the breadth values display little variability, indicating only small difference in the range of affective needs served. On the cognitive dimension, the breadth values are generally higher than on the affective dimension. Radio's niche-breadth is substantially lower than the other mediums, and cable's niche-breadth is slightly higher than that of either television or newspapers. In summary, TV is slightly more generalized than the other media on the affective dimension, although cable displays greater niche-breadth on the cognitive dimension. The largest differences in breadth are apparent on the cognitive dimension where radio shows much less ability to gratify a wide range of need categories, probably due to the brevity of most radio news. Except for radio, the other media show more generalism on the cognitive dimension than on the affective dimension.

TABLE 5.1 Factor Analysis of Gratifications Obtained Cognitive

Newspaper

Cable

TV

Radio

to feel in touch with local issues and events in the community

.38

.17

.33

.60

to feel in touch with what's happening in the U.S.

.71

.75

.66

.72

to feel in touch with international events

.75

.79

.58

.82

to get detailed analysis of complicated issues and events

.81

.77

.81

.73

to get detailed information about important issues and events

.83

.66

.75

.78

to get in-depth information about government and government officials

.83

.78

.76

.83

to give me facts to back up my opinions

.75

.74

.71

.78

to give me information I need to make up m mind about important issues and events

.74

.74

.74

.83

to find out what other people think about important issues and events

.56

.63

.47

.72

to give me relief from boredom

.61

.74

.55

.68

to give me something to think about besides my own problems

.58

.69

.60

.70

to be a pleasant way to fill time

.61

.59

.46

.69

to often be dramatic

.63

.59

.43

.69

to often be entertaining

.67

.75

.65

.54

to often be exciting

.71

.70

.63

.81

to make me feel good about the world and the people in it

.63

.71

.61

.59

to expect the reporters or writers to be like people I know

.46

.47

.52

.58

to give me things to talk about with my family and friends

.51

58

.52

.58

Coefficient alpha

.79

.83

.86

.85

Inter-factor correlation

.67

.54

.53

.65

Rho

.87

.76

.82

.78

Affective

83

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TABLE 5.2 Niche Breadth and Overlap Measures Niche-Breadth Cognitive

Affective

N

NB

NP

199

.75

.58

CA

90

.78

.58

TV

206

.75

.62

RA

78

.58

.57

Niche Overlap for Media Pairs NP— RA

49

1.20

1.06

TV—RA

66

.91

.91

CA— RA

26

1.73

.99

CA—NP

58

1.66

.94

CA— TV

69

1.61

.84

NP—TV

158

.73

.81

Although the breadth measures index the degree of generalism or specialism, the overlap indices portray the similarity in cognitive and affective gratifications provided by the news media. As Table 5.2 shows, there is greater variation in the overlap values on the cognitive dimension than on the affective. The generally lower values on the affective dimension indicate greater similarity among the media pairs in serving these needs. The largest overlaps on the affective dimension occur between television and newspapers, followed by TV/cable, TV/radio, cable/newspaper, and cable/radio. Newspapers and radio show the smallest overlap or similarity in affective needs served. On the cognitive dimension, the strongest overlap is between newspapers and television, followed by radio/TV. Cable, the newest of these older media, exhibits the lowest overlaps or similarity with radio, newspaper, and TV. The greatest similarity across both dimensions occurs between newspaper/TV and to some extent between TV/radio. For the other media pairs, less similarity on the cognitive dimension is coupled with more similarity on the affective dimension. In general, the overlap measures—like the breadth measures—show greater disper-

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sion on the cognitive than on the affective dimension. Across both dimensions, the strongest overlaps or similarity occurs between newspapers and broadcast television. Table 5.3 shows the superiority values for the cognitive and affective dimensions which were computed for respondents who used both mediums in each pair-wise comparison. As the table shows, there is greater superiority on the cognitive dimension and statistically significant differences occur for four of the six media pairs. Newspapers, television, and cable were all superior to radio on the cognitive dimension, whereas cable is superior to newspapers. At this level of niche differentiation, it is clear that there is less superiority evident on the affective dimension where only two of the six superiority comparisons are statistically significant and show that both newspapers and TV news are superior to radio news. This pattern, taken together with the similar pattern in the breadth measures, suggests that it may make little difference to news patrons which of the media are used to satisfy the affective gratifications. In other words, for the affective gratifications, the news media may be fairly close substitutes. Within microdimension niche differences on the cognitive dimension are also apparent in the data. Examination of niche differences at this level showed that respondents rated radio more helpful for local news than cable or broadcast television, but radio was superior to newspapers by only a slight margin. Cable was rated superior to newspapers for all items on the cognitive dimension except news about local and national events. On the affective dimension, radio was superior to newspapers only for the "reporters" item, and radio was superior to TV news only for the "relief from boredom" item, probably due to radio's role as a companion when driving or other noninvolving activities. Newspapers and TV news were superior to radio for all other items on the affective dimension. Whereas the examination of the between microdimension niche differences and the within microdimension niche differences show substantial niche differentiation, these data probably underestimate the actual degree of niche separation between the news media. In this study the gratification opportunities provided by the news media were not measured, and as a result, some niche separation that probably exists is not apparent in the data. The missing niche separation is probably most apparent for the broadcast media. For example, newspaper and TV news are the most frequently used pair of mediums. Their overlap is high and newspapers are perceived as superior. These mediums would probably overlap much less on a gratification opportunities dimension and TV would probably be superior on items such as "getting the news when I want it." What probably accounts for this pairing is that although newspapers may be the most cognitively satisfying, TV may supply greater gratification opportunities because newscasts in many markets are scheduled several times a day. Similarly, the position of radio as the least superior news medium is probably due to the absence of measures of gratification opportunities. Radio is available in times and places where it is difficult or impossible to use other media, such as driving to work, doing chores around the house, exercising, or performing some types of jobs. Measures of

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TABLE 5.3 Pair-Wise Comparisons of Media Superiority Cognitive

Affective

N

S

t

S

t

NP>RA

49

9.78 1.87

2.51

*

4.45 1.06

2 QQ

**

TV>RA

66

6.23 .59

5.25

***

4.17 2.09

2.61

*

CA>RA

26

8.40 1.72

3.65

**

6.07 2.54

1.89

CA>NP

58

7.48 3.27

2.69

**

3.95 2.22

1.57

TV>CA

69

2.82 2.72

.12

3.20 3.16

1.05

NP>TV

158

2.69 1.81

1.62

2.19 1.84

1.03

Note. *p < .05, **p < .01, ***p < .001.

gratification opportunities would probably reveal that affording such gratification opportunities accounts in large part for radio's survival as a news medium. In subsequent studies, measures of gratification opportunities were included to avoid potential underestimation of niche separation. The final objective of this study was to provide evidence concerning the validity of the decision model underlying the superiority measures. A decision model is a procedure that specifies how information—in this case, the values of the respondent's ratings of news media on gratification scales—is used to make the choice of a medium. Although a number of choice models have been identified, two broad classes of decision models—compensatory and noncompensatory—were shown by Lin (1985) to operate in media-choice decisions. A compensatory model allows high levels of one attribute—a gratification dimension— to compensate for low levels on another attribute or dimension. In such models, each attribute of an alternative—a news medium, in this case—in a choice-set is given a value and attribute values are combined additively to arrive at an overall value for each alternative. The alternative with the highest value in the choice set is the alternative that is actually chosen. The expectancy value model employed by Palmgreen and Rayburn (1982) and others is one example of the family of

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compensatory models. On the other hand, the noncompensatory models do not assume that choice is governed by an additive linear process. Instead, choice among alternatives may be made, for example, on the basis of the attribute most important to the decision-maker. Thus, the validation of the superiority measures examined both compensatory and non-compensatory choice models to determine if different choice models were associated with differences in the validity of the superiority measures. As Nunnally and Bernstein (1994) pointed out, the researcher does not validate a measure but rather validates the use of a measure for a particular purpose. In this case, one major purpose of the superiority measures is to play a role in assessing the probability of displacement or exclusion of one medium by another. Thus, respondents were asked: "Tomorrow, if for some reason you could only use one source for news, which medium would you select?" The correspondence between the respondent's answer to this question and their individual sums for mi>j components of the superiority measures constituted the criterion validity assessment. The assessment of the criterion validity of the superiority measures was conducted in the following way. The "fit" of the compensatory model was computed at the individual level by taking each respondent's sum of mi>j. for both cognitive and affective dimensions and ascertaining whether this sum was higher for the chosen medium than for the other news media used by the respondent. The respondent was considered correctly classified—in other words, the model "fits" the data—if the sum of the cognitive and affective dimensions was higher for the chosen medium than for the others. For the noncompensatory model fit was assessed by determining if either the cognitive or affective sums of mi>j. for each respondent were higher for the chosen medium than for the other mediums used. Table 5.4 shows the results of this classification. It is apparent from the data in this table that the noncompensatory model provides a better fit for the medium chosen than does the compensatory model. The noncompensatory model is the best fit in more than 77% of the cases for TV and it fits slightly over 70% of the cases for the respondents who chose radio. Whereas the noncompensatory model provides the best fit, the number of cases where it does not fit suggests that research on additional decision models might prove fruitful. The Video Entertainment Media In the 1980s and 1990s, the diffusion of cable TV and the VCR offered new choices in video entertainment to consumers. This section of the chapter chronicles the effects of these newer media on the older medium of television and explains the "video revolution," in terms of gratification utilities, and their relation to the displacement of time spent with TV. In addition, this section offers an explication of consumers' willingness to spend additional money on a VCR and cable using the findings of gratification utility studies and the structure of the TV industry as explanatory constructs.

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TABLE 5.4 Percent Correct Classification or "Fit" Between Choice Models Medium Choice

N

Compensatory (%)

Noncom-pensatory (%)

TV

98

74.5

77.6

Cable

36

66.7

72.2

Radio

17

35.3

70.6

Newspaper

97

59.2

71.5

The research findings used to accomplish these tasks include a study by Albarran and Dimmick (1993) and two studies by Dimmick (1993), that are designated as study 1 and study 2, respectively. All three studies were conducted in Columbus (Franklin County) OH, based on probability samples of 464 respondents (Albarran & Dimmick) and 393 and 394 respondents, respectively, in studies 1 and 2 (Dimmick). The 22 to 24 gratification and gratification opportunity questions were administered to respondents during phone interviews and each question was asked about all the entertainment media the respondent reported using. The gratification and gratification opportunity items were derived from a pilot study using open-ended questions. Table 5.5 shows the most recent version of the questionnaire items and the factors on which they loaded—cognitive, affective, and gratification opportunities. Except for minor differences in loadings and items, all three factors appeared in the gratifications obtained for the media studied—TV, cable, and the VCR. In all the factor solutions the affective factor emerged first and explained the most variance of the two gratification factors. In the Albarran and Dimmick (1993) study, the alpha reliabilities ranged from .77 to .87 whereas in the two studies reported by Dimmick (1993), the alpha's ranged .84 to .90. To facilitate the synthesis of the study findings, results are reported by niche measure rather than study-by-study. Rather than review all the breadth measures from all three studies, only the breadth measures for the gratification opportunities dimension will be reviewed since they are the most important in telling the story of the video entertainment media. Table 5.6 shows the values of the gratification opportunities breadth measures for TV, cable, and the VCR. As the table shows, the rank order of the breadth measures is the same across all three studies. The VCR exhibits the greatest breadth followed, in order, by cable and broadcast television. The fact that the VCR and cable supply greater gratification opportunities than TV is important in understanding what Wood and O'Hare (1991) called the "video revolution," the rise of cable and the VCR.

TABLE 5.5 Entertainment Gratifications Affective Factor To help you forget everyday cares To help put your mind at ease To help you relax from daily pressures To help occupy your time To help you relieve stress To help you unwind Cognitive Factor To give you the opportunity to figure out plots and stories To help you understand new or different people To test your ability to answer questions or solve puzzles To let you get to know characters or personalities as if they were your friends To let you understand why people act the way they do To learn more about things that interest you personally To make you feel as if you are participating in the competitive struggle of people playing sports or games To give you the opportunity to relive past events and feelings To help you learn how to improve your life Gratification Opportunities To offer entertainment you want at times that are convenient for you To give you a variety of entertainment choices To supply entertainment you want that is available every day To give you entertainment that fits in with your free time To help you plan your daily activities To give you entertainment that fits into your busy schedule To give you different entertainment choices To give you an opportunity to spend time with family members

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TABLE 5.6 Niche Breadth Gratification Opportunities Albarran & Dimmick

Study Dimmick Studv 1 1

2 Dimmick StudyStudy 2

TV

.56

.55

.49

Cable

.65

.64

.65

VCR

.78

.69

.71

Niche overlap is the degree to which two mediums serve the same gratifications. Recall from chapter 2 that overlap is conceived as a measure of competition or ecological similarity or, in economic terms, as substitutability. In the Albarran and Dimmick (1993) study, the strongest overlaps are between TV and cable. This measure indicates that on all three microdimensions—cognitive, affective, and gratification opportunities—TV and cable exhibit the strongest ecological similarity. Similarly, in both studies reported by Dimmick (1993), the highest overlaps on all three microdimensions are those for TV and cable. Clearly, in the sense of serving the same needs, TV and cable evince the strongest competition or substitutability. The superiority measures for the three studies show some between microdimension niche differentiations. In the Albarran and Dimmick (1993) study, the VCR is superior on the affective and gratification opportunities microdimension and TV is superior on the cognitive factor. Cable is superior to the VCR on the cognitive factor whereas the VCR displays a superior ability in providing gratification opportunities. Similarly, in study 1 cable is superior to the VCR on the cognitive factor although VCR is superior to cable on the gratification opportunities factor. Identical results for cable and VCR were found in study 2. Such niche differentiation helps explain the coexistence in many households of both cable and the VCR. Although the studies show consistent superiority for cable and the VCR, the same consistency is not apparent for TV and the VCR. in the Albarran and Dimmick (1993) study, the VCR is superior on the affective and gratification opportunities factors and TV is superior on the cognitive microdimension. In study 1, TV is superior on both the gratification factors but the VCR is rated as providing greater gratification opportunities. On the other hand, study 2 shows the VCR as superior on all three factors. The results of the three studies are inconsistent, but they agree in their findings of VCR superiority on the gratification opportunities factor because they do not show one medium as superior on all dimensions, these results provide some evidence of differentiation. The superiority measures for cable and broadcast TV however, are quite consistent across the three studies. In the Albarran and Dimmick studies, cable is superior to TV on the affective factor and on the gratification opportunities dimension. In studies 1 and 2 cable is superior to TV on all three microdimensions.

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As noted in chapter 2 and earlier in this chapter, the conditions for displacement or exclusion of one medium by another are high overlap and the competitive superiority of one medium. The results of these three studies indicate that the conditions were present for the displacement of broadcast television by cable. As is widely known, the prime-time TV network audience shares have been dropping steadily since the late 1970s, due it is believed, to competition from cable and the VCR. Although the studies reviewed here were conducted in a single market, the evidence they provide concerning the conditions for displacement make it plausible that the erosion of time spent with broadcast TV at the national level is due to a pattern of gratification utilities like the one that emerged from studies of the Columbus market. The "Video Revolution," the PRC, Gratification Utilities, and the Structure of the TV Industry The role of the gratification utilities in the "video revolution" can perhaps be best explicated in the context of research on the Principle of Relative Constancy (PRC) which aimed to explain spending on the media. As Figure 2.1 makes clear, gratification utilities have clear monetary implications in that they lead directly to consumer spending and indirectly to advertising expenditures. As originally formulated by McCombs (1972) and McCombs and Eyal (1980), the PRC stated that: "The level of spending on mass media by consumers and advertisers is determined by the general state of the economy. Any change in the level of the economy causes a parallel change in spending on mass media" (McCombs, 1972, p. 10). McCombs (1972) found support for the time-lagged influence of the gross national product on both consumer and advertiser spending on the media, although the evidence for the relation between the economy and advertiser spending was weaker than the evidence for constancy in consumer spending. Over a decade after McCombs' (1972) original monograph was published, Wood (1986) questioned the descriptive accuracy of the consumer spending aspect of the PRC, noting in particular that McCombs' correlation coefficients were afflicted by serial correlation. A few years later, Wood and O' Hare (1991) produced evidence that consumers spent more on cable and the VCR than would have been predicted by the PRC. Wood and O'Hare also found however, that despite the lack of predictive accuracy of the PRC during what they call the "video revolution," the PRC did hold as a long-term historical generalization. This finding was replicated by Son and McCombs (1993). Hence, the failure of the PRC in predicting consumer spending during the diffusion of cable and the VCR stands as an anomaly in the research literature on media economics. In McCombs' (1972) original proposal of the PRC, he asserted that one implication of constancy was that spending by consumers and advertisers on the media was a zero-sum game—new media would succeed only by diverting money from the older media. However, the research did not support the proposition that cable and the VCR succeeded at the expense of the older media. This lack of predictive or

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explanatory power offers an occasion for building a more complex theory of spending on the media. One of the keys to understanding spending on the "video revolution" by consumers is to broaden the inquiry beyond the PRC itself and to examine the competitive environment into which cable and the VCR were born. Specifically, it is necessary to take into account that aspect of the industrial organization model known as market structure or the theory of the firm (Albarran, 1996). The dominant force in the television market when the VCR and the national cable channels emerged was the three-broadcast network oligopoly consisting of CBS, NBC, and ABC. A study by Dominick and Pearce (1976) clearly demonstrated that the network oligopoly led to outcomes associated with this market structure in some of the other media industries. Specifically, Dominick and Pearce found that over the first two decades of television history, program diversity declined whereas the homogeneity of network schedules rose substantially. A later study by Wakshlag and Adams (1985), using somewhat different measures, documented the same trend toward lower program diversity. A study by McDonald and Schechter (1988) suggested that the decision process that produced this homogeneity of products was one based on rivalrous imitation of success. McDonald and Schechter found strong relations between ratings of programs of a given type (e.g., sitcoms) and the number of programs of that type aired in later time periods. As a result of the oligopolistic market structure, the networks provided fewer choices in programming which can be interpreted as indicating a decreasing number of gratification opportunities to consumers. The importance of lead-in effects or audience duplication during the period of dominance by the network oligopoly gave rise to the image of the television viewer as a largely inert mass of consumers. As a result, the popular image of the TV viewer was that of a beer-drinking, undershirted male who watched whatever images chased each other across the screen. There is evidence however, that it was not perhaps so much the viewers who were simple as the viewing environment provided by the network oligopoly. A study by Tiedge and Ksobiech (1986) of lead-in or inheritance effects indicated that even within the narrow range of options offered by the networks, a substantial portion of the audience changed channels when alternatives were available. Tiedge and Ksobiech computed correlations between the share of the lead-in program and the following program on the same network. Lead-in effects were at their strongest when a program had no competition beginning at the same time and at their weakest when a network program had two competing programs beginning at the same time. As Tiedge and Ksobiech summarized their findings, "The fewer options an audience has to choose from, the greater the relation between its share and the share of the lead-in program" (p. 61). Furthermore, whereas lead-in or inheritance effects have not disappeared (Cooper, 1996), there is evidence that as cable and the VCR were diffusing, lead-in effects were declining (Walker, 1988). These studies strongly suggest that there may have been greater

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demand for choice and variety (i.e., gratification opportunities) than the network oligopoly provided. The likely consequence of the restricted number of choices offered by the network oligopoly was a phenomenon that Peterson and Berger (1975) termed unsated demand. Their analysis of the recording industry shows that the sale of popular music declined during periods of high concentration that were also characterized by low content diversity in the music being marketed. Conversely, both content diversity and sales rose again as industry concentration declined. Peterson and Berger's notion of unsated demand implies that consumers may respond to the products offered by a concentrated or oligopolistic market structure by simply buying less. An analogous situation probably developed in the television market due to the restricted choice offered consumers by the network oligopoly. The difference in the two situations is that consumers did not stop watching television. The TV receiver is after all a one-time expense and in addition, watching television is a deeply ingrained cultural pattern in most households. As a result, network executives may have had few clues that audiences weren't satisfied. This is not to say that unsated demand is measurable only at the aggregate level of viewing or sales. Indeed, if national surveys employing gratification or utility measures (such as those in Table 5.5) had been conducted, the data would probably have shown that gratifications sought from television were higher than the gratification and gratification opportunities actually obtained; an indication of unsated demand. To review the theoretical argument developed thus far: the network oligopoly prior to the advent of cable and the VCR produced products in the form of programs that were highly similar, and as a result of a concentrated market structure and highly similar products, there probably existed a state of unsated demand among consumers that was susceptible to measurement by gratification scales. In other words, the structure of the industry probably had a direct effect on the niche dimensions of gratifications and gratification opportunities, the utilities underlying consumer choice. The next step in the theoretical argument is to show how the market structure and its probable effect on gratification utilities resulted in consumer spending on cable and the VCR as well as continued spending on broadcast TV. The theoretical argument developed in the previous pages provides an explanation of why many consumers adopted cable and the VCR. The condition of unsated demand—the probable low levels of gratifications and gratification opportunities derived from network television—created a situation in which consumers were willing to spend additional money on cable subscriptions and VCRs to satisfy their desires for video entertainment. Although longitudinal studies that span the time period both before and after the inception of these new media are lacking, the studies reviewed earlier which were conducted during the period of their diffusion provide some support for the contention that cable and the VCR provided higher utility or greater gratification than broadcast television.

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Whereas indirect evidence suggests that there may have been consumer dissatisfaction with the fare offered by broadcast television, there are no studies known to the author which document declining gratification utilities. However, the studies reviewed previously suggest the superiority of the VCR and cable over broadcast TV. The evidence reviewed earlier concerning the low diversity or choice offered by the television networks suggest specifically that TV schedules failed to provide sufficient gratification opportunities for consumers. In addition to limited choice in programs, network program schedules are rigid and do not provide flexibility in time of use for the consumer. In contrast, VCR and cable offer a greater number of choices in content and flexibility in time of use. This is clearly demonstrated by the breadth measures in Table 5.6 that show cable and the VCR as having greater breadth on the gratification opportunities factor than broadcast TV. In addition, all three studies reviewed at the beginning of this section of the chapter clearly show that both cable and the VCR were perceived as providing more gratification opportunities than TV. Hence, the argument that consumers spent more money on the newer video media because of the greater choice and flexibility in time-use that they offered is a plausible one. The newer video entertainment media were able to successfully compete with broadcast TV because they offered precisely what TV lacked; in other words, their niche differentiation from television was largely responsible for their success. THE INTERNET The Internet is an omnibus medium. It does not consist of a single domain such as news or entertainment. It includes these traditional gratification domains, but also includes many others such as recorded music and on-line shopping as well. As a result, the Internet is likely to overlap and compete with the gratification domains of the established media. For example, Dimmick and McDonald (2000) found, in an analysis of 36 consecutive monthly cross-sectional surveys of Ohioans, that both the diffusion of the computer and the Internet have contributed to a displacement of time spent viewing television. Figure 2.1 suggests, perhaps the best way of explaining such displacements is to conduct gratificaion studies. Uses and gratifications research on the Internet has been suggested by, among others, Morris and Ogan (1996). Similarly, at the conclusion of a recent book on the Internet, Goff and Albarran (2000, p. 268) observed that "We need to know a great deal more about what motivations and expectations determine both when and how people choose to participate in the on-line realm." The next section of the chapter reports studies of gratification utilities in two domains, interactive or e-mail and news and information. The Interactive Domain: E-Mail The use of e-mail, not only for business correspondence but for personal use, has recently grown astronomically. Although several descriptive surveys have documented its extensive use and growth, little has been done to explain e-mail's popu-

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larity for personal use. This section of the chapter reviews findings from a study by Dimmick, Kline, and Stafford (2000) and presents additional data analysis to explain e-mail's displacement of long-distance telephone service. The study was conducted via a telephone survey with a probability sample (N = 309) of residents of Columbus (Franklin County), OH. Respondents were screened to assure that they used e-mail (excluding chat rooms, bulletin boards, and list-serves) for personal e-mail, messages to friends, family and acquaintances. The participants in the survey were asked whether they used local telephone service "more," "about the same," or "less" since adopting e-mail. An identical question was also asked about long-distance usage. Respondents were then asked 19 gratification utilities questions about their use of e-mail and the telephone. These gratifications items were derived from a pilot study that used open-ended questions (Stafford, Kline, & Dimmick, 1999). The gratification utility items were factor analyzed resulting in two dimensions, one of which was designated "sociability" and the other was composed of gratification opportunity items. The sociability factor is nearly identical to a factor of the same name which emerged from an analysis of phone gratifications (Dimmick, Sikand and Patterson, 1994). The sociability factor seems to be composed largely of items pertaining to relation maintenance (Dimmick & Stafford, 1997). The gratification questions are shown in Table 5.7 along with key word descriptions which will identify the items when they are referenced later in this section. Only one question failed to load on one of the two factors. Using the two gratification dimensions, niche-breadth, overlap, and superiority measures were calculated for e-mail and the telephone. The most important result from the breadth measures was that the telephone had the broadest niche on the sociability dimension whereas e-mail had the broadest niche on the gratification opportunities factor. The overlap measures indicated moderately strong overlap or substitutability. The superiority measures clearly indicate niche differentiation at the between microdimension level. The telephone is superior on the sociability factor while e-mail is superior on the gratification-opportunities dimension. The superiority of the telephone on the sociability dimension is no doubt due to the ability of the human voice to better serve these highly affective interpersonal gratifications than e-mail's printed text. In order to assess niche differentiation on the within microdimension level, paired Mests were calculated for each gratification and gratification opportunity question. The results of these tests (see Table 5.8) show e-mail had higher ratings on "Time," "Far," "Fit," and "Zone," all of which deal with the problems of keeping in touch with those far away or those people the respondents didn't have time to see in person when time zones or differing schedules pose obstacles to communication. The telephone is rated higher than e-mail on "Close," "Care," "Companionship," and "Advice." These are all sociability items and are highly affective gratifications pertaining to interpersonal relationships. Nearly half of the respondents in this study (48%) reported using long-distance service less since they adopted e-mail. Of course, this finding

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TABLE 5.7 Telephone and E-Mail Gratification Questions Sociability Gratifications to share ideas and opinions (Share) to send or receive personal messages (Person) to give or receive advice on personal matters or issues (Advice) keep in touch with people (Touch) keep in contact with people who are away (Far) fun or pleasure of communicating (Fun) feel or express caring (Care) give or receive information with people you know (Info) feeling of companionship with people you know (Comp) send or receive personal messages with those closest to you (Close) keep in contact with people you don't have time to see (Time) Gratification Opportunities to get the most for your money (Econ) fits within work schedules (Fit) simple or easy (Simple) ease in getting hold of someone (Hold) communication that is quick or fast (Fast) communication that is convenient (Conven) communication with people in different time zones (Zone)

qualifies as a displacement on the time spent macrodimension. The authors of the study used the gratification opportunities dimension—the factor on which e-mail was superior to the telephone—to explain the displacement. Superiority scores on this factor were calculated for each respondent and the number of "matches" were calculated. A match occurred when a respondent's superiority score was higher for the telephone and the respondent had also indicated that his

97

THE GRATIFICATION-UTILITY NICHE

TABLE 5.8 Factor Analysis for Gratifications Sought From News Media (N = 415) Cognitive Factor The news media help me keep in touch with international events

.32346

The news media fit into my busy schedule

.32018

The news media keep me in touch with local issues

.62089

The news media provide an explanation and analysis of complex issues

.30971, 25148

The news media provide the latest updates on stories

.67107

The news media keep me in touch with events in the U.S.

.67661

The news media provide stories on a variety of topics

.54212

The news media give me in-depth information about government officials

.58907

The news media give me information as quickly as possible

.42614

The news media give me accurate, objective information

.59178

The news media carry detailed information about current issues and events .69720 alpha = .78 Affective Factor The news media give me relief from boredom

.49525

The news media make me feel good about the world and people in it

.59821

The news media give me things to talk about with family and friends

.46738

The news media provide a pleasant way to fill my time

.57838

The news media are exciting

.57309

The news media help me plan my daily activities

.44614

The news media give me something to think about other than my own problems

.35646

Writers and reporters in the news media are like people I know.48488

.48488

alpha = .72

Interfactor correlation -.397

97

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other long-distance usage was "about the same." Conversely, a match occurred when a respondent's superiority score was higher for e-mail and the respondent said that he or she used the phone less since adopting e-mail. Matches were recorded for 58.4% of respondents who used long-distance less and in 61.8% of the respondents whose long-distance usage was unchanged. Further analysis of the data in Dimmick, Kline, and Stafford (2000) was undertaken at the within-microdimension level. The first step was to conduct Mests using the 19 microdimensions as independent variables and groups defined by using the telephone "less" and "about the same" as independent variables. At this unvariate level, ten of the variables showed significant differences. The second step in the analysis was to enter the ten variables displaying significant differents at the univariate level into binary logistic regression analyses. Both forward and backward step-wise methods were used to isolate the best predictors of being in the "less" or "about the same" group. The -2 Log Likelihood statistic and the Goodness of Fit statistic suggested that the fit of the final model was adequate. The model was able to correctly classify correctly 61.5% of the cases. The results of the niche microdimension analysis show clear differences between those respondents for whom e-mail has displaced some long-distance telephone use and those respondents who reported not altering their phone use since adopting e-mail. The variables associated with the displacement were two e-mail microdimensions, EECON ("to get the most for your money") and EINFO ("to keep in contact with people who live far away"). EECON is a gratification opportunities item while EINFO and TFAR scaled on the sociability factor. The item TFAR (to keep in contact with people far away) associated with stable phone use indicates that, although these respondents have access to e-mail, the phone is still perceived as the best means for communicating with friends, family, or acquaintances who live at a distance. A study conducted at Bellcore and reported in Baldwin, McVoy, and Steinfield (1996) identified four communication problems that emerged from a national survey. One of these problems was simply staying in touch. For those who did not change their long-distance usage, the phone is apparently a satisfactory medium for staying in touch with relatives and friends at a distance. Of the two microdimensions related to the displacement EECON, as indicated by the magnitude of the partial correlation, has the strongest association. The importance of this variable suggested that there might well be an income difference between those who use the phone less and those who had not altered their phone use. Specifically, those who are using the phone less since adopting e-mail may have lower incomes than those whose phone use was stable. Hence, a t-test was performed with income as the independent variable and the groups using the phone "less" and "about the same" as the dependent measure. The mean income for the displacement group was slightly higher than that for the stable group but the difference was not statistically significant (t = .879, df = 277, p = .381). Hence, the differences in the two groups' perceptions of the value of e-mail is not associated with differences in income.

THE GRATIFICATION-UTILITY NICHE

99

If the perception of e-mail as the best value is not rooted in the objective relative incomes of the displacement group and the stable group, where would such a belief come from? It cannot be the result of explicit cost calculations since, unlike long-distance phone service, e-mail is not a metered service. Due to the competition among phone providers, that has been manifest to even the most casual observer of broadcast TV or cable commercials, it is relatively easy for the consumer to ascertain the cost-per-minute of long-distance use. On the other hand, e-mail users simply pay an Internet Service Provider (ISP) a monthly fee that entitles them to other services in addition to e-mail. As a result, a strict economic comparison of the two services by consumers on the basis of price-per-unit is not feasible. The belief current in the displacement group that e-mail is a better value may simply stem from no more than a general impression that their ISP bill is lower than their monthly long-distance phone charges. The second microdimension related to the displacement was E-info ("to give or receive information with people you know"). First of all, it is important to note that this gratification is a question that characterizes the object of communications as the exchange as "information." None of the highly affectively charged gratifications questions related to such things as "advice," "companionship," or to "express caring" are related to the displacement, only the question pertaining to the affectively neutral "information." The absence of gratification items that are highly affective is probably because these sorts of items (what scale on the sociability factor) are best served by the telephone as shown in the analyses by Dimmick, Kline, and Stafford (2000). Thus, the association between the displacement of the long-distance phone by e-mail may indicate that e-mail is perceived by this group as being useful for communicative exchanges relatively low in affect and relatively high in factual content or "information." Although Walther (1992,1993) showed that relationships can be carried on through e-mail, this does not mean that people will find the phone and e-mail equally efficacious in meeting the goals of all interactions. The findings in this analysis suggest that choice of the phone or e-mail may in part be explained by the relative leanness or richness of the two mediums (see Rice 1992, 1993). E-mail is generally considered a lean medium whereas the phone is a richer medium in its communicative possibilities and one step closer to face-to-face interaction than e-mail. For those in the displacement group, e-mail may be preferred when the communicative goals involve relatively low affect or emotion and relatively high factual information and content. In such a situation, especially for those who view e-mail as less expensive monetarily, the phone may be viewed as an unnecessarily rich medium and an unnecessarily expensive one. Hence, e-mail may be chosen over the telephone for lowaffective/high-information activities, such as organizing a family reunion among far-flung relatives, not only because it is believed to be less expensive but also because it is a leaner medium appropriate to the communicative task. However, this ex post facto interpretation requires testing in future research since other interpretations are possible.

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Internet News A preliminary study was first undertaken to assess the gratification utility pattern associated with using Internet news. Stempel, Hargrove, and Bernt (2000) have suggested that explaining Internet news usage patterns in relation to the use of established media may require uses and gratifications research. Because this first study was conducted for multiple purposes, that limited the interview time available for asking gratification questions, only gratifications sought (GS) were measured. Gratifications obtained questions (GO) require asking each gratifications item about every medium used by a respondent while measuring gratifications sought only requires asking each question about some domain, in this case the news media. However, since the niche measures introduced earlier in this chapter require measurement of GOs, breadth, overlap, and superiority cannot be computed. Nevertheless, the results of this study may be used to hypothesize some features of the emerging niche of Internet news. Respondents in the study were 467 residents of the Columbus (Franklin County), OH metropolitan area, 121 of whom used the Internet for news. Respondents were located using standard RDD procedures and were interviewed by telephone. Respondents were first asked whether they used any of five news media—TV or cable, newspapers, magazines, radio, or the Internet—on a regular basis. The interview was terminated if the respondents used none of these news media regularly. After determining which news media were used regularly, the interviewers then asked questions concerning how much time was spent with each of the regularly used media. Then each respondent was asked 24 gratifications sought items. Finally, the interview concluded with demographic questions. A principal axis factor analysis established that two dimensions—cognitive and affective—could be used to explain respondents' answers to the gratifications questions. Table 5.8 shows the factor structure and the items both of which are highly similar to the factor structures reported in an earlier section of the chapter. Only those items which loaded on the cognitive aaffective factors are reported in the table. For the purposes of this study, four gratification opportunity items were asked during the interviews. Contrary to the results obtained in the entertainment and e-mail studies, these items did not form a separate factor but instead loaded on the cognitive factor. The gratification opportunity items are "busy schedule," "latest updates," "variety," and "information quickly." Analysis of the demographic and media use data revealed several statistically significant differences. First, men are more likely to be Internet news users than are women. Furthermore, those who are more educated, those with higher incomes and those who are younger are more likely to use the Internet for news. In addition, those who use the Internet for news also use a greater number of established news media and spend more time with the news media as a whole than the non-Internet users.

THE GRATIFICATION-UTILITY NICHE

1 01

Comparison of the two gratification sought factors for Internet users and nonusers show that the means (users = 1.43, nonusers = 1.53, where higher values denote lower gratification) are significantly different on the cognitive factor (t = 2.29, p = .023), but not on the affective factor (t = 1.26, p = .209). When the items on the cognitive factor were compared for users and nonusers, significant differences were found for four of the GS items—"international" (t = -3.64, p < .001), "latest updates" (t = -1.88, p = .062), "variety" (t = -2.09, p = .038), and "information quickly" (t = -1.79, p = .074). As Rosnow and Rosenthal (1989) pointed out, there is nothing especially sacred about .05 and in a preliminary study such as this the mistake one wants to avoid is ruling out relations that have potential theoretical significance. In the absence of measures of gratifications obtained and the calculations of breadth, overlap, and superiority, perhaps the best way of interpreting the pattern of results is to focus first on time spent by respondents with the various media. Table 5.9 shows time spent on the four daily news media by regular users as measured in four categories or intervals. The pattern of time spent shown in the table indicates that only TV and cable garner a near majority of respondents reporting use in the highest category (1 hour or more). By contrast, only 15.8% of newspaper readers spent that much time with the medium. Internet users in the 1 -hour or more category number only 21.3%. Perhaps the most striking finding in the table is that 45.4% of those who use the Internet spent 15 minutes or less online the day before they were interviewed. However, it is rather surprising that time spent on the Internet, available around the clock, is at such a low level for a large number of its users. On the other hand, it is clear from the findings just presented that Internet users are news aficionados, intensive consumers of news and information. Hence, one might expect them to spend a substantial amount of time on the Internet. The clues which can perhaps resolve this apparent contradiction are to be found in the differences between Internet users and nonusers on the GS items. Of all the TABLE 5.9 Time Spent With Five News Media "Yesterday" Internet

Newspaper

TV/Cable

Radio

(N = 321)

(N = 412)

(N = 215)

(N = 108)

Less than 15 minutes

22.1

12.6

39.5

45.4

15-29 minutes

30.2

12.4

21.4

16.7

30-59 minutes

31.8

29.8

20.0

16.7

More than one hour

15.8

45.1

19.1

21.3

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GS items in Table 5.8 that bear on substantive topics—"national," "local," "international," "events and issues," and "government officials"—only the item on international news is statistically significant. The other three statistically significant items are gratification opportunities. Two of these items—"updates" and "information quickly"—suggest logging onto news sites for brief periods of time and also suggest that it is the speed of accessing information that is important. Hence, the fact that users value international news more than nonusers and also seem to value getting news quickly does not imply expenditure of a great deal of time spent if these gratifications sought are predictive of what they actually obtain from news sites on the Internet. On the other hand, the other significant gratifications opportunity item ("variety") may be the expectation which influences the 21.3% of Internet users to spend an hour or more online. Rather than draw firm conclusions from this preliminary study, it seems more appropriate to offer hypotheses that can be tested in another study which measures gratifications obtained and can therefore employ the niche measures of breadth, overlap, and superiority. This study suggests that the Internet will likely be perceived by its users as superior to the established news media on the gratifications opportunities dimension. A follow-up study was performed to test this hypothesis with 211 respondents who used Internet news and at least one other daily news medium. The respondents were chosen using Random Digit Dialing techniques and the "most recent birthday" method from Columbus (Franklin County), OH telephone-owning households. Respondents were asked the eight gratification opportunity questions shown in Table 5.10 as well as displacement questions identical to those used in the e-mail study as well as demographic questions. The gratification opportunity questions were asked about each daily news medium that the respondent used regularly. Principal-axis factor analyses established that the gratification opportunity items formed a unidimensional scale for each of the daily news media—TV news, newspaper, radio, cable, and the Internet. The alpha reliability for the TV news factor was .83 and .81 for the Internet gratification opportunities. The displacement questions indicated that all the media had suffered some erosion by the Internet but that the displacement of TV news was by far the largest. Hence, this brief summary of the study concentrates on the effect of Internet news on TV news. Of the sample, 33.8% reported using TV news less after adopting Internet news, whereas 54.9% reported no change and 10.9% reported using the medium more. The overlap measures show moderate overlap between TV and the Internet on gratification opportunities. The superiority measures show the Internet superior to all the other daily news media; all are statistically significant with the exception of cable news. Thus, the hypothesis which motivated the study—that the Internet would be perceived as superior on the gratification opportunities received almost complete support. At the level of the microdimension Mests showed that the Internet was rated significantly higher than TV news on all eight gratifications opportunity items.

THE GRATIFICATION-UTILITY NICHE

1 03

TABLE 5.10 Gratification Opportunity Questions for Daily News Media For news that fits into my busy schedule To get the latest updates on news stories To obtain news at the times I want it For stories on a variety of topics To get information as quickly as possible To use my time wisely For a variety of choices in news coverage For convenient access to news

To assess the impact of the individual microdimension on the displacement, r-tests were conducted between the displacement group and the stable group using the eight gratification-opportunity items. The Internet means were significantly higher for the displacement group on three gratification-opportunity items—"schedule," "updates," and "variety"—were also found to be significant in the study reported previously in this chapter. Taken together, the two studies of Internet news suggest that the role of Internet news is as a complement rather than a complete substitute for older daily news mediums. The first Internet news study clearly shows that the medium is used largely for a few minutes at a time and the second study indicates that the Internet is superior to TV, the most frequently used daily news medium by the sample, on all the microdimensions. In addition, two of the three significant gratification opportunity microdimension "updates" and "schedule" clearly refer to time use. Hence, it appears that the role of Internet news, at least in the Columbus market, is to provide quick access at convenient times to the latest news developments. Conclusion: The Role of Gratification Opportunities One important conclusion which emerges from the studies reported in this chapter is the central role which gratification opportunities play in the use of the media, especially the newer ones. In the study of the traditional news media, presented at the beginning of this chapter, gratification opportunities were not measured and this is quite likely the reason that radio as a news medium appears to have little redeeming value. In the same study, the fact that TV and newspapers are the most frequently used pair of media might be explained by gratification opportunities. Whereas the newspaper offers greater depth of coverage and may be superior on this microdimension, tele-

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vision news may be also used by newspaper readers because it is faster, a gratification opportunity. The first study of Internet news suggested the hypothesis that this new medium may be superior, due in large part to the gratification opportunities provided by online news, although the follow-up study clearly shows that Internet news is perceived as superior to the older daily news mediums on the gratification opportunities dimension. Although the role of gratification opportunities in the news media is clearly an important one, their role in the studies of video entertainment is rather clear and unequivocal. In these studies the newer media—VCR and cable—are clearly superior to broadcast television. Likewise, in the e-mail study, gratification opportunities played a prominent role. E-mail was superior to the phone on this microdimension. Furthermore, one gratification opportunity microdimension—pertaining to the economic value of e-mail—was the variable most strongly related to the displacement of the long-distance phone by e-mail. In summary, the studies presented in this chapter suggest that the newer media are succeeding not necessarily because of their superior efficacy in satisfying media patrons' needs for information, entertainment or interaction, but rather because they are superior in supplying greater gratification opportunities. The newer media are able to supply more choices and greater flexibility and convenience in the use of patrons' time than the older media, that offer fewer choices and more rigid time schedules to which users must conform. In short, the newer media offer a greater range of choices and more convenience in times of use and these attributes may account, in large part, for their success.

6 Further Aspects of Competition and Coexistence

This chapter presents theory and data organized around the major themes of this volume, competition and coexistence, and is organized into three major sections. The first section presents a discussion of media content. Discussion of this niche dimension, as noted in chapter 2, has been deferred because there is only one study that analyzes media content data using the niche measures. Hence, this section addresses problems of inference and method in niche content studies by drawing on the research literature on media competition which has used content data. A second section of the chapter uses the content niche to propose a test of an hypothesis developed in earlier chapters. The third section of the chapter is devoted to the phenomenon of serial competition, the analysis of the combined competitive impact of several ecological units on a focal unit. In this case, analysis involves charting the competitive impact of magazines, radio, TV, and cable on newspapers and on the advertising macrodimension. CONTENT AS A NICHE DIMENSION As explained in chapter 2, media content is a niche dimension, but because it has been investigated in only one study (Hellman & Soramaki, 1994), consideration of the dimension has been reserved for this chapter. Media content is clearly a resource media organizations and industries depend on for their survival and prosperity, but the study of content poses problems of method and inference unique to this dimension. In the following sections, these problems are briefly reviewed and several examples are used to illustrate the problems and their potential solutions. Finally, a study is proposed to test an hypothesis developed in previous chapters, using data derived from content as an example 105

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of the sort of studies that could be conducted on the resource dimension of media content. Niche Breadth and Content Diversity Before embarking on an analysis of the problems of using content to measure competition, that involve the overlap measure, it is useful first to offer some comments on the breadth measure. The breadth and overlap measures appropriate for content studies are those defined in chapter 3 for discrete or nominal categories and are used to analyze the advertising data. Recall that the meaning of niche-breadth resides in the variety of resources used by an ecological unit as well as the distribution or use across the microdimensions. A broad-niched unit has its usage distributed evenly across microdimensions whereas a specialist unit uses fewer categories more intensively. When the concept of niche-breadth is applied to categories of media content, it is apparent that it is identical to the construct of content diversity. Diversity is generally defined as the number of choices available to the media patron whether the choices involve TV entertainment programs or the variety of news stories available. Clearly, the broader the content niche the greater the diversity of content. A broad niche would reflect a flat distribution of content units across categories and hence, wider choice, whereas a narrow niche would consist of content units concentrated in a few content categories. Furthermore, the similarity between niche-breadth and diversity is not merely conceptual. Some of the indices used to measure diversity are computationally very similar to the breadth measure. For example, Litman (1992) used the Hirschman-Heifindahl Index to measure diversity whereas Grant (1994) used what in ecology is known as the Simpson Index (Simpson, 1949) to calculate diversity. All three measures—niche-breadth, the HHI, and the Simpson Index—have as their central operation squaring the proportions of units in the categories and then summing them. Hence, there is a mathematical and a conceptual similarity between diversity and breadth. The importance of this similarity is that diversity, when understood as niche-breadth, acquires meaning within a theoretical context rather than remaining a relatively isolated construct. For example, Litman (1998) asserted that in response to competition from cable and the VCR, the TV networks have concentrated on content categories where they believe they have an advantage, such as soap operas and prime-time series, and have abandoned other content forms, such as theatrical movies and some major sporting events. If breadth measures of the networks' content across time actually show this narrowing of the content niche, the change can be interpreted in niche theory terms as a typical outcome of competition, a narrowing of one medium's niche in the face of competition. Therefore, there are clear advantages in interpreting content diversity as niche-breadth because such an interpretation brings theory to bear on what has essentially been a descriptive construct.

FURTHER ASPECTS OF COMPETITION AND COEXISTENCE

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Van Cuilenburg (2000) proposed that diversity can be studied at four different levels: content units, such as a TV program or newspaper story, content bundles, such as a TV channel or newspaper, at the level of an industry, such as cable or magazines, and at the level of the society's media system as a whole. Because the niche can be defined at the level of the organization or firm or at the level of a medium or industry, it is at these two levels (levels 2 and 3) that one could meaningfully conceptualize and measure diversity as niche breadth. The following section focuses on the concept of competition and its measurement by the overlap measure. The Overlap Measure as an Index of Competition The first problem one encounters in designing studies of the content dimension is defining the proper categories. Even a seemingly simple message like a TV commercial or a newspaper ad is, in fact, a very complex set of symbols and selecting content attributes for encoding into categories is a crucial and problematic measurement decision. In studies of media competition and coexistence it is of course crucial to select content attributes that are related to competition. It should be noted that this problem does not arise in the cases of the other resource dimensions. For example, consumer spending is simply recorded in dollars for each medium. Similarly, the categories of advertising spending are those used by the industries being studied such as "local," "spot," or "classified" advertising. The validity of gratification-utility measures is assured if the questions or microdimensions are drawn from carefully conducted pilot studies. On the content dimension however, assuring that the content categories are those which actually reflect competition is less straightforward. There are a number of influences that act on media content and competition is only one of many. The best guide to those content attributes that reflect competition is of course, previous theory and research. However, in the absence of such guides, the analyst must choose carefully those attributes likely to reflect content on the basis of knowledge of the industry or the organizations being studied and on the concrete competitive situation under analysis. A problem closely related to that of choosing categories that reflect competition is the problem of the number of categories. Competition among organizations may lead, in some cases, to purveying similar content, or, conversely, to content differentiation. Hence, the number of categories must be large enough to capture content differentiation if, in fact, it exists. A small number of categories may result in coding items of content reflecting actual dissimilarity into the same category, thus obscuring the existing differentiation. A second potential problem lies in the meaning of the indices used to measure competition. The indices most likely to be useful in measuring competition are the breadth and overlap measures. The overlap measure indexes the ecological similarity of two or more organizations or industries. The problem is that the content of two organizations may be similar or may overlap strongly, but this similarity may not

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indicate competition, as later analysis shows. Content may be similar for many reasons only one of which is that the organizations are in strong competition. Therefore, even if overlap is high, the analyst should seek information outside the content data to assure that competition is actually occurring. Probably the best source of such independent evidence is the other niche dimensions. If two organizations overlap strongly on the content dimension, one should be able to observe the consequences of the competition on other niche dimensions. For example, if the content overlap between two television stations in the same market is high, is there a corresponding similarity between their audience size and demographics of the product they are selling to advertisers? Four examples of content research can be used to illustrate the potential difficulties involved in drawing inferences about competition based on media content. The first example is a study done by Dominick, Wurtzel, and Lometti (1975) of the news programming of three New York City television stations. At the time the study was conducted, the "Eyewitness News" format was an innovation that had been adopted by one of these stations (WABC), and the goal of the study was to assess news content between the stations to ascertain whether the innovative news format had resulted in content differences. The content of the three stations' evening newscasts was analyzed for two composite weeks using a measure of minutes devoted to the following six categories: (a) hard news, (b) features, (c) human interest, (d) violence, (e) humor, and (f) on-camera interactions of news personnel. Dominick et al. reported that although WABC did not spend less time on hard news, the station did use more violent news, more human interest stories, and more humorous news items. Using the data in Dominick, Wurtzel, and Lometti (1975, Table 1), breadth and overlap were calculated for the three stations and these measures are shown in Table 6.1. The breadth measures show that WABC was slightly broader in its niche than the other two stations that exhibit nearly equal breadth measures. The overlap measures indicate a remarkable similarity in the three stations' coverage. Recall that this overlap measure (see chap. 3) is an index where low values indicate strong resemblance and higher values denote less similarity. All the overlap values in the table are near zero. Hence, the overlap measures could be interpreted as indicating strong competition. Before making this inference however, two strong reservations should be considered. First, the number of categories is rather small making it somewhat likely that differences are being obscured by being encoded into the same categories. This is especially true of the "hard news" category. Calculating the percentage of time devoted to this category from the data in Table 1 of Dominick et al.'s (1975) study shows that the majority of all minutes in the newscasts for the three stations were coded into this single category. The percentages are 55.9% for WABC, 61.1% for WNBC, and 63.5% for WCBS. It seems quite likely that the "hard news" category contains stories which may have actually shown niche differences in the three stations.

FURTHER ASPECTS OF COMPETITION AND COEXISTENCE

1 09

TABLE 6.1 Breadth and Overlap Measures for Three TV Stations Breadth WABC

.452

WNBC

.372

WCBS

.370 Overlap

Note.

WABC/WNBC.

024

WABC/WCBS

.010

WNBC/WCBS

.011

Computed from raw data in Dominick, Wurtzel, and Lometti (1975, Table 1).

However, it is possible that high content overlap could exist among TV stations in one of the country's largest markets. In such a large market, there may well exist sufficiently strong demand for advertising that the three stations could coexist comfortably despite high content similarity. Still, the inference that strong competition is occurring would be strengthened considerably by independent evidence. For example, the demographics of the three stations' newscasts could provide data indicating whether the audiences are similar or differentiated. Strong similarity in the demographic profiles would lend credence to the inference that strong competition is occurring. Interviews with the three stations' sales personnel could reveal whether they are targeting the same or similar advertisers. If they are, this would also strengthen the inference of strong competition. In all studies of news content, there are additional reasons aside from the six categories, for believing that the overlap measures may not be totally accurate measures of competition. This fact is made clear in a study by McCombs (1987) of the content of two metropolitan daily newspapers in Cleveland, the "Press" and the "Plain Dealer." It is clear, given the exposition in chapter 1, that these two papers serving the same geographic area and competing for the same readers and advertisers should be in a strong competitive relationship. Hence, it would not be surprising to find high similarity or overlap in their content. McCombs analyzed the two papers' content using constructed weeks for 1980 when both coexisted, and the "Plain Dealer's" content in 1983, after the "Press" had ceased publication. Calculation of overlap from data reported in McCombs' Table 2 yields a very high 1980 overlap of .012. Furthermore, this strong simi-

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larity is not likely to be an artifact of a small number of categories because McCombs used 14 categories ranging from political news to "accidents" to "agriculture" to "education." In short, everything seemed to indicate strong competition between the papers and the inference of strong competition seemed to be validated by the death of one of the papers, probably due to the factors outllined in chapter 1. Yet there are good reasons for supposing that the overlap may overstate the similarity of the two papers' content. McCombs (1987) pointed out two separate factors which could result in content similarity. One is the competition which undoubtably existed, and the other is the similarity in news judgment of the two organizations'journalists resulting from "... the similarity of their professional values, beliefs, and practices" (McCombs, 1987, p. 741). Both factors obviously contribute to the similarity of news content. Therefore, in the realm of news content, overlap between organizations reflects some combination of both influences and is not merely an index of competition. In other words, these two influences are conflated in high overlap measures of news content and it is impossible to separate them. Hence, hypotheses that predict high overlap of news content due to competition cannot adequately be tested. In this case, evidence from other niche dimensions should certainly be employed and overlap measures eschewed entirely. A third example of using content data to draw inferences about competition is provided by Hellman and Soramaki's (1994) study of the U.S. video market in the 1980s and 1990s. These authors conceptualized the major film studios and the independents as two strategic groups (see chap. 4) within the film industry. These researchers expected the majors to be broader niched generalists and the independents to be relatively narrow niched specialists and they expected the overlap between the two groups to have increased over time. The hypothesized pattern did not appear in the video rental market but the expected pattern was manifested in the sell-through market. In measuring the content of videocassettes, Hellman and Soramaki (1994) classified titles into six main categories and some twenty subcategories. Although they do not explicitly state that the overlap calculations were made using the six-category system, this was apparently the case as only one overlap measure is reported for each year. Hellman and Soramaki's Table 3 showed that overlap remained high between the two groups for 1982,1986, and 1990 for the rental market but declined across the same years in the sell-through market. However, in examining what they term certain strategic subcategories, they found differences between the two groups in the rental market where the overlaps calculated using the six-category system were consistently high, indicating strong content similarity. As a result, they concluded, "that even in rentals there seems to be a kind of division of labor between the two industry groups which the calculation of content niches could not distinctly differentiate" (p. 42). Whereas Hellman and Soramaki (1994) seemed to reach roughly the right conclusions, their analysis would have been more straightforward and less circuitous if

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not for two problems. The first problem lies in the number of categories used to calculate overlap and the second is a problem in levels of niche analysis. The use of only six categories to compute overlap probably results in the consistently high overlap found in the rental market. Recall that their hypothesis is one of differentiation, that the majors and independents are two distinct strategic groups pursuing different strategies by purveying differing content. The use of such a small number of categories may not allow such differentiation to actually appear. These authors seem to indicate, as their previous quote suggested, that the niche measures could not yield such differentiation. The problem, however, does not lie in the overlap formula but in the categories. The sensitivity of the overlap measures depends on the sensitivity of the category system underlying the overlap calculation and six categories do not provide a great deal of discrimination. The second problem lies in the distinction between levels of niche analysis explained in chapter 2. Hellman and Soramaki (1994) found differentiation in the rental market by examining percentages of some of the subcategories after rejecting their overlap analysis of the six main categories. A clearer notion of macro- and microdimensions might have solved the problem. These authors in effect treated all content as a macrodimension and calculated overlap using the six categories as microdimensions. An alternative way of conceptualizing the analysis would have solved both the problem of the small number of categories and the confusion of the levels of niche analysis. Each of the six categories could have been treated as a macrodimension composed of the subcategories as microdimensions. Overlap could then have been calculated on each macrodimensions. The results of these calculations would have provided a greater probability of capturing the existing differentiation, and at the same time, provide clear demarcation of competition in the six dimensions. A fourth and final example of the use of the overlap measure on content data is drawn from the years 1926-1956 when radio was the major mass entertainment medium and the radio networks were the undisputed rulers of the industry. Figure 6.1 shows the overlap measures for the 30-year period between NBC (the red network) and CBS. The overlaps were calculated using data compiled under the supervision of Harrison Summers (Summers, 1958), and represented some 17 program categories (collapsed from 30) aired in the 7 p.m. to 11 p.m. time period. The key question, as in the earlier examples, is the extent to which the overlap measures in Figure 6.1 are accurate reflections of competition. Time-trend data are perhaps the most seductive data displays of all, inviting the analyst into Rohrshach-like interpretations of their meaning. Figure 6.1 indicates that CBS and NBC were competing strongly (airing identical schedules) at the beginning of their history, becoming very differentiated during the middle years of their dynasty, and relapsing into moderately strong competition toward the end of their reign as the monarchs of entertainment. In fact, only the middle years of the graph reflect accurately the competitive situation. The appearance of stronger overlap at the beginning and ending of the period is in fact, quite misleading.

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FIG. 6.1.

CHAPTER 6

Overlap for NBC and CBS radio networks.

The apparent strong competition in the late 1920s and early 1930s is an artifact of the evolution of the medium. Radio was still a new form in this period, a nascent industry (see chap. 1) that was still in the process of developing appropriate forms of programming for a sound medium. In the early years, much of the programming was musical in nature and therefore was concentrated in a small number of categories on all the networks. As new program types evolved, the networks became more differentiated as shown by the larger value of the overlap measure. In fact, as Figure 6.1 shows, overlap decreases until the advent of World War II. There was apparently little rivalrous imitation among the networks, unlike the contemporary TV networks, because programming was largely controlled by the advertising agencies and sponsors and the networks simply sold available time slots (Dimmick & McDonald, 2001). However, overlap increases sharply following W.W. II, but this also is misleading and does not denote a period of rivalrous imitation leading to a strong similarity in programming. The increase in overlap from the late 1940s to the middle 1950s actually is due to the impact of television. Elsewhere in this volume (chap. 3) it was demonstrated that TV had an immediate and strong impact on radio. Underlying the pattern of increasing overlap in Figure 6.1 is the defection of advertisers to TV, often taking programs with them, with the result being

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a rapid decline in the diversity of radio programming on the networks to a mere news service. The previous section attempts, through the analysis of examples, to isolate the perils of using content analysis of the media to gauge competition. To briefly reprise the results of this analysis a simple list follows: 1. It is essential to choose categories which reflect competition and to use a sufficiently large number of categories because, as the examples show, a small number of categories may result in an inflated overlap measure that underestimates existing niche differentiation. 2. Overlap measures of news content are always misleading as they are conflated with other variables. In analyzing competition among news organizations the use of other resource dimensions in addition to content is clearly indicated. 3. Even where content overlap measures appear to be appropriate, it is necessary to validate them using data or information from other resource dimensions. 4. As the radio example indicates, there is no substitute for contextual information on the organizations and industries being studied. Once again, inferences about competition from content data alone are risky. 5. Finally, in designing studies of content competition it is necessary, as the videocassette study illustrates, to clearly distinguish the relevant macrodimensions and microdimensions. Having surveyed the problems of method and inference likely to afflict studies of content competition, the next section offers a design to test the strategic group hypothesis developed in chapter 4 through the content analysis of spapers. Measuring the Content Niche: An Illustrative Study This section of the chapter proposes a study to test the hypothesis that the various levels of "umbrella competition" in the newspaper industry represent strategic groups. The hypothesis states that the levels actually represent a geographical partitioning of the urban areas in the U.S. and that this geographical partitioning by metropolitan dailies, suburban dailies, satellite city dailies and weeklies serves to reduce competition between members of these strategic groups by cordoning off a sector within which each paper has a pool of resources—advertisers and potential subscribers—for which it has little competition. This spatial partitioning has the effect of preserving the industry from the strong and often mortal competition between metro dailies which prevailed in the early decades of the 20th century (see chap. 1). As noted in chapter 4, testing hypotheses regarding the existence of strategic groups has been problematic. The earliest research in this area often used cluster

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analysis until it was discovered that there existed strong reasons for questioning the ontological validity or the "reality" of groups derived from cluster analysis. A more recent methodology—the cognitive approach—uses interviews with industry executives to isolate strategic groups. However, to date this approach has been largely qualitative and does not accord well with the traditional means for testing hypotheses. The content niche dimension alternately, provides a rationale for testing the strategic group hypothesis in the newspaper industry. The various levels of umbrella competition—the hypothesized strategic groups—are expected to vary systematically in their content. The content specialization has been characterized by Lacy, Coulson, and Cho (2000, p. 1) in this way: First, metropolitan dailies that provide substantial regional, national and international coverage that is attractive to a wide-geographic area. Although the papers often circulate across the state, they also provide local coverage for the central city and suburbs in which they circulate most heavily. Second, satellite-city dailies that carry a fair amount of regional, national and international news but tend to be more locally oriented than the metros. These newspapers are located away from major metropolitan areas and do not aim to serve as wide a circulation area as metropolitan daily newspapers. Third, suburban dailies that primarily cover the suburban cities in which they are located. They are found in suburbs that have large populations and an active retail business. The content tends to be very heavily oriented toward the city and county in which the paper is located, although these papers may carry some national and international coverage from wire services. Fourth, weekly newspapers that are exclusively local and include paid-circulation and free-distribution papers. In Rosse's model these were either suburban non-dailies or specialized weekly publications in the metropolitan area.

It is clear from Lacy et al.'s depiction that there is a content continuum in the levels with the weeklies being most specialized in content, whereas the metropolitan dailies are the generalists of the industry. Hence it is possible to state the strategic group hypothesis in terms of the relative niche-breadth of the groups. The niche-breadth should increase as one moves from the lower levels (weeklies) through the higher levels (metro dailies). The overlap measure should not be used in accordance with the conflation problem described previously in this chapter. This hypothesis could be tested by taking a sample of urban areas nationally or within a region. Content could then be sampled by using the familiar constructed week technique. The content categories used in the analysis might be adapted from those used by McCombs (1987): local, perhaps divided into city and county, state, national, and international. Although this is a small number of categories, it is certainly large enough to capture the degree of differentiation which the theoretical rationale for the study leads us to expect.

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Restated in terms of a regional or national sample, the hypothesis is that the mean niche-breadth increases as one ascends the levels from weeklies to metropolitan dailies and that there is statistically significant differences between breadth means for the papers at different levels. Support for these hypotheses would provide evidence that the umbrella layers or levels in the newspaper industry do represent strategic groups. As described earlier, content data alone should not be used to infer competition or differentiation. It was suggested that data from other niche dimensions be used to corroborate the content data. In the case of the strategic group (hypothesis) data from the advertising dimension could be used in a confirmatory role. Just as content is partitioned by the levels of umbrella competition, the theoretical rationale for the study suggests a parallel partitioning of advertising. Specifically, one should find that sources for advertising are less "local" as one ascends the umbrella layers or that the geographic location of advertisers changes across the layers. Parallel to the content hypothesis one would expect an increasing generalism in advertising as one ascends the umbrella layers. Serial Competition In previous chapters, competition was assessed using measures of niche overlap and superiority which are, of course, always computed pairwise. That is, competition is measured between each pair of populations in a guild or within a gratification domain. However, ecologists have conceptualized competition as the total combined effect on a focal population by its competitors, called diffuse competition. Mac Arthur (1972) developed a mathematical theory that shows that even without environmental variation a population positioned on a resource dimension between two other populations may be outcompeted if it is too similar ecologically to the adjacent competitors. Pianka (1974, p. 239) conducted a field study of lizard populations and concluded that, "Low overlap with lots of competitors may be similar to high overlap with fewer ... competitors." Both Pianka (1988) and Ricklefs and Miller (1999) viewed the potential for diffuse competition as increasing with the number of resource dimensions used by the populations. In the U.S., vaudeville may have been the victim of diffuse competition from two other entertainment mediums, movies and radio. What is termed serial competition is closely related to diffuse competition and yet is wholly distinct. As the brief overview of diffuse competition suggests, serial competition occurs at the level of the community and refers to the simultaneous contention for resources among the populations in a given time period. Serial competition also occurs at the level of the community but represents the combined or cumulative effects of successive invasions on an older focal population or populations. Although he did not use the term serial competition, McCombs (1972, p. 33) defined the process in his discussion of the competitive interactions of the newspaper with the later-emerging media as follows:

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CHAPTER 6

If one conceives of a mass medium as serving some social or psychological need of each individual in its audience, then the appearance of another medium which serves that need better (according to some criterion of communication performance) will result in shifts among the audiences. Over time, for example, radio, movies and television took over portions of the news, information and entertainment functions of the newspaper. McCombs' hypothesis is couched in terms of needs or gratifications, and unfortunately, time series data on gratifications derived from the newspaper and its competitors are unavailable. However, advertising expenditures on the various media are available from McCann-Erikson, Inc. since 1935 to the present and these data may be used to test McCombs' diffuse competition hypothesis. As Figure 2.1 suggests however, gratifications are related to advertising expenditures through the time spent by consumers with the media. The advertising time-series data compiled by McCann-Erickson, Inc. begins in 1935 and continues to the present. During this time period there are sufficient data to test the serial competition hypothesis for radio, TV, and cable. Figure 6.2 shows the shares of newspaper advertising from 1935 through 2000 as well as a combined, cumulative share for radio, TV, and cable. As Figure 6.2 shows, newspaper shares exhibit a steady decline and the cumulative three-medium shares display a sharp increase over time. As in the analyses of share data reported in chapter 3, time-series regression analysis using the exact maximum likelihood method was used to assess the relationship between newspaper shares and the cumulative share for radio, TV, and

FIG. 6.2.

Effect of serial competition on newspapers.

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cable. As expected there is a significant negative relationship (B = -.809, p < .00001) between the two variables. There is also a significant relation between newspapers' share of advertising (B = -.309, p < .003) and a share representing the other media (see chap. 3 for a rationale for this procedure) indicating some displacement by other media in addition to the effect of the three "new" media. However, as indicated by the magnitude of the Bs, the effect of radio, TV, and cable is much stronger than the effect of the other media. The results of the analysis show clear support for the serial competition hypothesis for radio, TV, and cable. However, these results hold only for the 1935 through 2000 time period and there are reasons for believing that both magazines and radio contributed to serial competition prior to 1935. As noted in chapter 3, newspaper publishers complained around the turn of the century that competition from magazines was lowering their advertising revenues. Although this evidence is nonquantitative and anecdotal, it does suggest the possibility of an effect of magazines on newspapers' advertising revenues. Furthermore, the analysis of media shares of national advertising from the 1920s through the 1930s shown in chapter 3 clearly shows a negative relation between radio and newspapers' advertising. As a result there are reasons for believing that all four mediums—magazines, radio, TV, and cable—may have contributed to the impact of serial competition on newspaper advertising. It should be noted that the newspaper industry is not oblivious to the competitive impact of TV and cable. Recently, some of the largest newspapers in the country were instrumental in forming the Newspaper National Network, an organization formed for the express purpose of competing for national advertising (on the basis of CPM) with TV. The organization sells advertising in its cooperating papers and targets the same categories of products such as automobiles that were once the province of the visual medium. This chapter analyzed the problem of researching the resource dimension of media content. The chapter also presented the concept of serial competition and some analyses to show its historical operation on the newspaper industry. Chapter 7 takes as its theme niche differentiation at the national community level, and shows how such differentiation contributes to the coexistence of media industries. In addition, Chapter 7 looks at how the historical process of differentiation of media niches has resulted in a great deal of complexity with which contemporary researchers must contend.

7 The Community-Level: Niche Difference, Coexistence, and Complexity

The themes of this chapter are niche difference, coexistence, and the complexity of the niches of media industries, especially at the level of the national community. As pointed out in chapter 2, communities—a set of populations occurring within a specific geographic boundary—may be defined at several levels of analysis; the international, national, regional, and local levels. Although most of the analysis in the previous chapters has concentrated on the national level, the analysis of industries has been of single industries or pairs of industries. This chapter continues the community level of analysis begun in the sections on serial competition in chapter 6 by concentrating on the community of media industries as a whole. The first two sections of this chapter present analyses of the national community to demonstrate niche differentiation among members of the entire set of media industries. Such differentiation at this level of analysis is important because it demonstrates why so many media industries are able to coexist despite competition for resources. The first section deals with the decline in dominance over time on the advertising macrodimension. The second section illustrates niche differentiation among members of the national media community on the consumer spending dimension. The final sections of the chapter consider the topic of coexistence and complexity within the media community and point out opportunities for future niche research. 118

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The Decline of Dominance A great deal of the space in the earlier chapters was occupied by a portrayal of the complexity and intricacy of competitive relations within media industries and between pairs of industries. One purpose of this chapter is to ascend levels of analysis, to get above many of the intricacies of niche relation as portrayed in the breadth and overlap measures, and to portray over time the effects of repeated and successive invasions of the national media community, and to do so in a fairly simple, straightforward way. What is necessary at this point is a means of summarizing the effect of these repeated invasions. This objective is accomplished using data on advertising—the only macrodimension where time-series data are available—and the construct of dominance. Whereas the concept of dominance has a long history in bioecology and human ecology and has been defined in varied and somewhat different ways, the meaning of the term in this analysis is a modification of a definition given by McNaughton and Wolf (1970). The definition used here defines dominance as the niche space potentially occupied by other populations or industries. Perhaps the clearest way of explaining dominance over time is to focus on the history of the newspaper. At the beginning of the industrial age in the United States, the dominant population or industry was the newspaper. As the economy evolved, other industries—first, magazines, then radio, TV, cable, and recently, the Internet—invaded and successfully defined their niches on the advertising resource dimension. As a result, the advertising guild was probably less and less dominated by newspapers or any other single industry such as radio or cable. For example, newspapers share of all advertising in 1935 was 44.2%, whereas in 2000 it was 20.9%. Decreasing dominance across time accrues to the increasing subdivision of the advertising macrodimension by the invading industries. As a result, one should be able to observe a relatively steady decrease in dominance across time as new industries are able to define niches on the advertising resource dimension. Specifically, the hypothesis is that dominance as measured by the Simpson (1949) index, which is calculated using each medium's share of total advertising for each year (1935-2000), will decline over time. A rationale for using the Simpson index as a measure of dominance has been given by Pielou (1975). As pointed out in chapter 6, the Simpson index is nearly identical to the Hirschman-Herfindahl index of concentration. It is the sum of the squared advertising shares for the media in a single year. The conceptual similarity of "dominance" and "concentration" is obvious enough not to require explanation. Larger values of the Simpson index denote high dominance, that one or a small number of industries has large shares of total advertising and lower values indicate lesser dominance or a more even sharing of the resource. The Simpson index is a convenient way of summarizing the changes wrought in the community as new media have entered the arena to compete for advertising.

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FIG. 7.1. Dominance index, 1935-2000.

Figure 7.1 shows the values of the Simpson index, as a measure of dominance, from 1935 through 2000. In 1935, the value of the dominance index is above .20. Despite the usual peaks and valleys routinely seen in time-series data, there is a steep decline in the index across time until it reaches a value below . 10 in 2000, thus confirming the expectations of a decline in the measure. The decline in dominance indicates that as the community grows in complexity such as the number of populations, resources are more finely subdivided on this single resource macrodimension. The decline in dominance is a succinct way of expressing both the effects of the newer media on the formerly dominant newspaper and expressing the success of the newer industries. Declining dominance as the number of industries or populations increases could be the result of three factors. First, more populations could be accommodated by organizational mortality among the older media. Second, advertising resources could increase somewhat thus "making room" for the newer media on the advertising dimension. Third, niche differentiation could occur as the newer media coevolve with the older forms effectively reducing competition. Indeed, all these factors to some degree seem to have operated.

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First, there has been substantial mortality in the once dominant newspaper industry (see chap. 1). Probably both within-industry and between-industry competition contributed to the net mortality. Within-industry competition is apparent in the analysis in chapter 1, and latter chapters have documented successive displacements of newspapers on the advertising macrodimension by radio, TV, and cable. However, despite widespread net mortality, extinction or exclusion has not occurred, probably due in part to the newspaper industry's differentiation into strategic groups, as hypothesized in previous chapters. Concerning the second factor—the possibility that resources might increase to accommodate new industries—the evidence indicates that this did, in fact, occur in some cases such as the period of cable's diffusion (see chap. 3). However, over the entire time period between 1939 and 2000, there is no evidence of a positive trend in advertising resources allocated to the media. A time-series regression analysis of the percentage of the Gross Domestic Product devoted to advertising using the exact maximum likelihood method shows only a small positive trend (B = .0056), that is not statistically significant (t = 1.06, p = .295). Taken together, the lack of a positive trend in the 1939 through 2000 period and the increase during the cable period is consistent with previous research. Wood and O'Hare (1991) found no long-term increase but did find increases in shorter time periods. Demers (1994) whose analysis encompassed the longest period studied (1870-1990) also did not find a significant long-term trend but did find increases in some more limited time spans. The absence of a consistent positive trend in the allocation of advertising to the media over the long term helps account for the number of displacements on the advertising resource dimension documented in previous chapters. As the theory of the niche states, if resources do not increase to accommodate invading populations, alterations in the niches of competitors are the inevitable result. Finally, there is clear evidence of niche differentiation among the members of the national media community which would reduce competition and enhance the probability of coexistence. Recall (see chap. 3) that the advertising macrodimension is subdivided into national or network, local, classified, spot and syndication. Differentiation on these microdimensions is manifested in several ways. First, none of the major advertising media—newspapers, radio, TV, cable, and magazines—use all the microdimensions although TV, as the most extreme generalist, uses four of the five. Two mediums use microdimensions that are not shared at all with other media. Syndication is exclusive to TV, whereas classified is used only by newspapers out of all the major advertising media. Spot advertising is common only to the two broadcast mediums, radio and TV. Furthermore, as pointed out in chapter 3, there is yet more differentiation at the wimin-microdimension level of analysis. In short, there is evidence of considerable niche differentiation. In summary, the subdivision of the advertising resource dimension over time, as indexed by the decline in dominance, has been the result of the operations of three factors: newspaper firm mortality, the lack of a consistent increase over time in advertising resources, and niche differentiation among members of the community.

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Consumer Price Differentiation Among Media Industries Another way of showing differentiation at the community level is by comparing the pricing practices of media industries. It was pointed out in chapter 3 that price differences in advertising can occur between industries, which in effect, provides some niche differentiation within a microdimension. In mainstream economics, the price of a good, service or input is usually taken to mean that the price is a monetary one. However, as Pearce (1992) pointed out, the price of a good or service is essentially anything for which it is exchanged. This broader definition of price is essential to understand the pricing practices of the members of the media community and how these pricing practices result in niche differentiation of industries. Table 7.1 shows the pricing practices of the major media industries. These industries are divided, in the table, into three categories: industries where products are monetarily priced, those which are nonmonetarily priced, and those which are partially monetarily priced. The industries where pricing is only in monetary terms is the single largest group comprising such mediums as cable, books, and movies. Dollars spent on these media form a large part of consumer spending on the media. However, there is an important group of industries, including the broadcast media, for which consumers do not pay a monetary price for content. As discussed in chapter 2, patrons pay the cost of viewing or listening with their time. Finally, there is a group of industries comprised of basic cable, newspapers, and magazines which are partially monetarily priced. Although the consumer pays the subscription cost, it is well known that this price does not cover the cost of production, let alone even normal profit. In effect, the cost of the basic cable, magazine or newspaper is subsidized by advertising.

TABLE 7.1 Pricing Practices of Media Industries

Monetarily Priced

Nonmonetarily Priced

Partially Monetarily Priced

Movies

TV

Newspapers

Premium and Pay-per-view Cable

Radio

Magazines

Books

(some) Websites

Basic Cable

VCR Cassettes and DVDs

The Community-Level

Telephone Internet Access

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To see the result of these pricing practices, one only has to do a thought experiment and imagine what would happen if all media goods and services were monetarily priced, that the consumer paid the full price for all media products. On one hand, media patrons would be spending a much larger portion of their disposable income for media products and services, or alternatively, purchasing fewer media products and services. On the other hand, media industries would be in much stronger competition on the consumer spending resource dimension. The fact that media industries have evolved these differences in pricing practices (shown in Table 7.1) means that there are clear differences in niche on the consumer spending dimension. The effect of these differences in pricing strategies is to reduce the monetary demands on consumers and differentiate the niches of industries in the three categories so that the intensity of actual competition for consumer dollars is considerably below the potential competition. It should be noted that it is not necessarily the case that media industries have consciously chosen to differentiate themselves in their pricing practices. Indeed, a close examination of the industries' history would probably reveal that historical accidents of economics or technology were responsible for the differences. Whatever the origin of the pricing practices however, the result is niche differentiation. One implication of this brief excursion into pricing practices concerns the measurement of demand for the media. Demand is usually conceived as a quantity of a product available at a specific price. As Table 7.1 makes clear however, using monetary price to calculate demand works only for some media, not for those which are unpriced or partially monetarily priced. Hence, monetary price can be used to calculate demand only for those industries in the first column of Table 7.1. To calculate demand and compare demand for industries in different columns of Table 7.1, another measure must be used. Given the discussion in chapter 2, the obvious choice for a measure of media demand would be time spent by consumers with each medium because the "consumption" of all media products requires time and in the contemporary world time is a scarce and valuable asset. Coexistence and Complexity In his treatise on the intellectual history of the field of ecology, Worster (1994) asserted that Charles Darwin was quite aware that both extinction due to competition and what he called divergence—what modern ecologists call niche differentiation—were important forces driving evolution. While Darwin, according to Worster, was quite aware of differentiation or divergence the great biologist emphasized the role of extinction. However, as Worster wrote (p. 161), Darwin knew that"... diversity was nature's way of getting round the fiercely competitive struggle for limited resources." The evidence cited in previous chapters of this volume certainly point to the fact that among media organizations and industries, competitive exclusion or extinction is rare while niche differentiation is common at several levels of analysis. In addition to the examples of differentiation shown in earlier chapters, chapter 6 and this

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chapter have added examples at the community level. Although one can point out only one possible example of extinction of entire industries or populations (vaudeville), the foregoing pages of this book have presented numerous examples of "divergence" or niche differentiation. In fact, not only is extinction of entire media forms rare, but so is organizational mortality within populations. In only two industries (see chap. 1) has net mortality (births minus deaths) occurred: newspapers and move theaters. The examples of niche differentiation, alternately, occur in addition to those at the community level portrayed in chapter 6 and in this chapter, within industries and between industries. Within populations of media organizations there may be considerable differentiation. For example, if the hypothesis concerning strategic groups in the newspaper industry (developed in previous chapters) is supported, this would constitute a maj or example of differentiation. Other examples may be found in the radio and cable industries. Both populations fall under the economic classification of monopolistic industries. Firms in this category are generally fairly numerous and produce differentiated products (see Albarran, 1996). Within a single market, especially large geographic markets, radio formats are generally composed of different genres, styles and periods such as 1980s music, light rock, jazz, or classical music. Similarly, most of the national cable channels are highly differentiated on the content dimension, offering news, sports, weather, children's programming, or history. Cast in terms of niche theory, these monopolistic industries represent examples of niche differentiation which reduces the severity of competition between the firms within these industries. There are also numerous examples of between-industry niche differentiation. Whereas the newspaper was the first mass medium, the community of media industries has been successively invaded by magazines, radio, television, cable, and most recently by the Internet and the World Wide Web. Each invasion has altered the niche relations among the earlier mediums. Briefly, there are three possibilities when an invasion occurs. First, niche overlap and competition may increase with the result that organizational mortality may occur in some industries, or at the extreme an entire industry or industries may perish. As pointed out earlier, this eventuality is rare. Second, resources may increase so that competition does not increase substantially despite the presence of a new competitor. As pointed out in chapter 3, this appears to be part of the competitive story that occurred during cable's diffusion. Third, the new competitor may take over or displace some of the resources formerly used by other populations. This third outcome was demonstrated repeatedly in chapters 3 and 5 as well as by the decline in dominance demonstrated in this chapter. Alteration in niche seems to be the most common of the three possibilities. In earlier chapters, the displacement of newspapers by radio on the national advertising microdimension was documented and further displacements of newspapers on the advertising macrodimension by TV and cable. Chapter 3 reviewed the displacement of radio by TV on the advertising macrodimension and the displacement of TV by cable and the displacement and extinction of a

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group of magazines by TV. The displacement of long-distance telephone use by e-mail and displacement of some TV news viewing by the Internet was recorded in chapter 5. These displacements are changes in niche, sometimes observable as changes in niche-breadth. In many cases, the result of displacement is a narrowing of the niche of the outcompeted medium and the major consequence of displacement is greater specialization. Such specialization makes room for new industries and at the same time increases the complexity of space sharing on the resource dimensions. Future Research Although the Internet and the World Wide Web are still in their formative period, they have already had an impact on the older media. As noted in the previous paragraph, e-mail and Internet news have had their effects already on the older media. As these new forms mature and grow, there no doubt will be other effects on the niches of the traditional media. Internet news sources may displace some uses of the printed media and other forms, such as Web radio, may displace or alter the niche of its broadcast counterpart. However, if the past is any guide to the future, changes will largely be displacement effects rather than exclusion and extinction and the net result will be even greater complexity of niche relationships. Contrary to some of the early grandiose predictions, the Internet and the World Wide Web probably will not completely replace the older media. The net effect of successive invasions and changes in the niches of media industries is greater complexity in resource use patterns. This greater complexity makes it possible for more populations to share or partition the resource dimensions. In a word, the complexity of these niche relations makes coexistence among industries possible despite a greater number of competitors. To date, the history of niche relations among media industries suggests that we should expect what Darwin termed divergence, or niche differentiation, to be the consequence of the invasion by the Internet. However, the contemporary complexity of niche relationships also poses challenges for the theorist and researcher. The complexity is due in part to the sheer number of resource dimensions: advertising, consumer spending, gratification utilities, gratification opportunities, time spent with the media, and media content. The complexity lies not only in these six macrodimensions but also in that most of them are subdivided into microdimensions. This volume has presented research on only a small part of this complexity, advertising and gratification utilities. Consumer spending and the media content dimension largely remain to be explored. An additional facet of the complexity of niches which remains unexplored in this volume or elsewhere is the relationships among the niche dimensions (see Fig. 2.1). For example, the relationship of time spent to advertising spending or the gratification utilities' relationship to consumer spending. This question of what predicts the amount of resources available to the media is an important one for future research.

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Although the research presented in this volume has largely concentrated on only two resource dimensions, the theory presented in chapter 2 provides a comprehensive means of asking questions and formulating hypotheses about relationships concerning all six resource dimensions. Whereas elaboration and modification of any theory is necessary over time, I believe that the research reported here demonstrates that the theory of the niche is an important tool in studying questions of media competition and coexistence. I also believe that the theory is of sufficient conceptual richness to guide research which analyzes the complexities of media competition and coexistence for the forseeable future. In fact, if one takes into account all six niche macrodimensions, their microdimensions, and the possible relations between them, it is clear that a great deal of research yet remains to be accomplished. It should also be clear that mapping simultaneously the full multidimensional resource utilization of all contemporary industries (or even a single industry) is a daunting task. However, the work in this volume indicates that the researcher can learn a good deal by studying somewhat less than the full complexity of niche relations. I believe that this volume is a good beginning to the study of the complexity of media niches, but it is still only a beginning.

References

Chapter 1 Allen, R. C. (1980). Vaudeville and film: 1895-1915: A study in media interaction.

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Author Index

A Adams, W., 92 Albarran, A. B., 25, 28, 59, 70, 76, 88, 90, 92, 94, 124 Aldrich, H., 8, 26, 27, 65, 66

Brittain, J. W., 7 Buchman, J., 62 Buzzard, K., 47, 48, 49 £

l 14

^rRGCL.!n B

Bagdikian, B., 21 Baldwin, T. R, 98 Ball-Rokeach, S., 2, 39 Barney, J. B., 3, 65 Barnouw, E., 10, 50, 59, 67 Barry, J. F, 15 Baum, J. A., 68 Becker, S., 57 Bell, R. H. V., 38 Beniger, J. R., 44 Bentler, P. M., 82 Berger, D. G., 93 Bernt,J.R, 100 Ber S tein,I.,87 Berstein,J.M,22 Bijker,W.E.,6 Block M 32 Bluml'er J G 30 Blute M 2 3 5 Boesi'ger 'E ' 5 n~o,o.-t i'