Lecture 8 Media Business

Lecture 8
Media Business
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Lecture Outline
- Media ownership
- Types/patterns of ownership
- Media consolidation/Concentration of ownership
Media Ownership
- Media markets, in the pursuit of efficiency through economies of scale and network effects,
generally have a tendency to move away from the competitive form of organization towards
oligopoly (dominated by small number of companies) or monopoly (one company).
- Such a situation raises concern as the efficiency that results from large economies of scale also leads
towards a smaller number of competitors and can degenerate into inefficient abuse of monopoly
power.
- Monopoly in media markets is however quite different in its impact from monopoly in products and
services markets.
- Concentration in media markets, apart from the usual economic effects, can profoundly influence
opinion and ideas.
- Concentration in media markets – fewer independent owners of media outlets— has a negative effect
on diversity. The economic interests of media owners influence their advertising, programming
choices, and how they provide access to information.
Media Ownership Patterns

a) State media or state-owned media
- In In Kenya, KBC Channel1 TV, Y254 TV, Heritage TV and several Radio stations in
Radio Services. KBC Radio Taifa · KBC English Service · Pwani FM · Coro FM · IFtiin FM ·
Mayienga FM · Minto FM · Kitwek FM · Mwatu FM · Ingo FM · Mwago FM etc
- Public/state media is media ultimately controlled and/or funded by the state
- They may be the sole media outlet or may exist in competition with privately controlled media.
b) Privately Owned Media Houses

(1) Joint stock media companies
- A joint-stock company is a business entity which is owned by shareholders.
- Each shareholder owns the portion of the company in proportion to his or her ownership of the
company's shares (certificates of ownership).
- it allows unequal ownership with some shareholders owning a larger proportion of a company
than others
- Shareholders can transfer or sell their shares to others without any effects to the continued
existence of the company.
Media Shareholder Stake (%)
Nation media Aga Khan Fund for Economic Development 44.66
group Alpine Investments Limited 10.15
National Social Security Fund with 3.44
John Kibunga Kimani 1.54
Jubilee Insurance Company of Kenya Limited . 1.07
Standard Chartered Nominees A/c 0.91
CfC Stanbic Nominee Limited 0.81
Standard Top three (associated with Moi family): 69.03
Media Ground - S.N.G Holdings Ltd
- Trade World Kenya Ltd 10.90
- Miller Trustees Limited 10.53
The Moi family, Kulei and other close associates
own over 90% stake
Media Max Kenyatta’s family ?
James Mwangi (Equity) 12.0
Central Kenya Investors (group) ?
Dr. William Ruto 67.0? 60%?
Source: Data was obtain from online sources and therefore not verified
(i) Chain Ownership – it means the same media company owns numerous outlets in a single
medium, a chain of newspaper, a series of radio stations, a string of television stations or
several book publishing companies.
(ii) Conglomerate Ownership
 It means the ownership of several businesses one of which is a media business.
 In a conglomerate, there is interlocking of directorships.
 Their main business will be a high profit industry, but they run a media company for
prestige, social and political influence on decision makers (private or public sector,
the government).
 Such a conglomeration may not always support an unbiased or dispassionate
presentation of events, issues and personalities.
(iii) Sole proprietorship companies

- Sole proprietorships a type of business entity owned and run by one individual and in which there is
no legal distinction between the owner and the business.
- The owner receives all profits (minus taxes) and has unlimited responsibility for all losses and debts.
- Every asset of the business is owned by the proprietor and all debts of the business are the
proprietor's.
- A sole proprietor may use a trade name or business name other than his or her legal name.
Advantages
 Ease in organizing
 Needs little capital to start and run a business.
 It permits a high degree of flexibility - owner since is boss
 Ease credit access because of the owner's unlimited liability
 The owner receives all the profit.
Disadvantages
 Limited resources - banks fear extending credit because of the small assets and high mortality
rate.
 Unlimited liability for business debts, damaged
 If the firm fails, creditors may force the sale of the proprietor's personal property as well as their
business property to satisfy their claim.
 When the owner dies, continuation of the business is difficult; a new owner must typically accept
all liabilities of the business.
(iv) Partnerships
- Defined as a legal form of business operation between two or more individuals who share
management and profits.
- It is held together by partnership agreement/deed
- Partnerships come in two varieties:
 general partnerships - the partners manage the company and assume responsibility for the
partnership's debts and other obligations
 Limited partnerships - A limited partnership has both general and limited partners.
o general partners own and operate the business and assume liability for the partnership,
o Limited partners serve as investors only - have no control over the company and are not
subject to the same liabilities as the general partners.
 As proactive measure. Be sure you draft a partnership agreement that details how business decisions
are made, how disputes are resolved and how to handle a buyout.
 The agreement should address:
o the purpose of the business
o the authority
o responsibility of each partner
 It is more prudent to consult a lawyer experienced in small businesses agreements.
 The partnership agreement should:
o How will the ownership interest be shared?
o How will decisions be made?
o When one partner withdraws, how will the purchase price be determined?
o If a partner withdraws from the partnership, when will the money be paid?
Media Consolidation/Concentration of Ownership

- Concentration of media ownership (aka media consolidation) is a process in which progressively
fewer individuals or organizations control increasing shares of the mass media.
- Cross media ownership is the ownership of multiple media businesses by a person or entity. These
businesses may include print, television, radio and various online entities.
- When a person or entity owns any two of these media outlets, it is considered to be involved in cross
media ownership. Equity holding in a company is a commonly used measure of ownership/ control
in a company.
- Equity holding serves as a quantifiable measure which can be both monitored and controlled.
- Cross media ownership includes print, broadcast and the new media ownership by the same entity.
- When the same company owns several along with newspaper, magazines, musical labels, and
publishers and so on, the cross media ownership is there.
- Contemporary research demonstrates increasing levels of consolidation, with many media industries
already highly concentrated and dominated by a very small number of firms.
- The media itself has nothing but benefits from merging.
- But they will control the media and control the information that we receive killing diversity and
alternative and divergent views/opinions
Reasons for concentration of media ownership

 Scarcity – the few who have the resources dominate the scarce market
 Need to attract and maintain new and expert talent - .Expert talents are drawn to a giant media house
as opposed to a single entity
 Ego and Glamour – the bigger the media network, the more royal/pride for both workers and owners
 Need for profit – other the journalistic domain of the media, It is also a business entity that must
deliver profit to the owners
Advantages and Disadvantages of Media Consolidation

Advantages of Media Consolidation
 Media for the consumers - what works for the consumers, works in the media; quality media wins
 Minimal Government Control
 The Advantage of Converging Technologies – TV, phone, internet from one company for a single
competitively priced bill
 Diversification – reduces investment risk
Disadvantages of Media Consolidation

 Lack of Competing Viewpoints and Perspectives
 Money Vs. Public Interest – profit chase, dropping of innovative or risky ideas, favoring of tried and
tested
 Focus on Advertisers rather than the audience - minimal interest in affairs, more interest in lucrative
genres
 Biased Political Views – you get what the owners want you to do; support candidates that advance
their intestates
 Less Local News – because of the scope, the local news takes a backseat

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Lecture 8

Media Ownership Patterns

b) Privately Owned Media Houses

(iii) Sole proprietorship companies

Media Consolidation/Concentration of Ownership

Reasons for concentration of media ownership

Advantages and Disadvantages of Media Consolidation

Disadvantages of Media Consolidation

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