spring 2007cmns 130 advertising and the selling of consumption ubiquitous intrusive intensive...

Spring 2007 CMNS 130

Advertising And the Selling of Consumption

• Ubiquitous• Intrusive• Intensive

– Without precedent in any historical epoch

– Part of a continuum of persuasion in democratic propaganda


Learning Objectives

• Identify the Commodity Characteristics

• Trace the economic exchange in the media

• Introduce Advertising and the competitive ideological views of advertising


Advertising Today(2005)

• In Canada, $12.6 billion in revenues

• In the US: $277 billion in revenues– Question: how does this compare? – Breakdown:

• 24% TV• 21% Newspaper• 4% Internet

– Source: TVBureau, Canada


Reading Economic History

• Media begin in state of patronage• Commercialize over time: that is,

become part of system of private enterprise in the economic system of capitalism– Characteristics of capitalism:

• Rule based exchange of goods and services• Characterized by drive to reduce labor and

material costs and set prices to extract profits– Economy of scale

• Operates by “law” of supply and demand


The Peculiar Nature of the Media Commodity

• Ephemeral: high risk• Renewable: consumption does not

destroy availability of use to another

• Characterised by high creative labour costs which, as yet,cannot be wholly substituted by labour

• Thus, economists argue: carry the characteristics of a public good


The Importance of Marginal Cost

• What: marginal cost is the cost of production after the initial prototype is made: ie. The cost of materials and labour for each successive unit

• The paradox in media:– Costs or producing the first prototype are

high, but very low to zero for additional copies

– This is called zero marginal cost: suggests a difficulty in trapping exchange value


The Public Good Problem

• Implies media goods may tend to be ‘freely’ exchanged: eg. MP3 file sharing

• Businesses respond by creating laws to ‘trap’ exchange value: eg. Fundamental basis of entertainment law is Intellectual Property– Which establishes a monopoly for the

creator for 70 years on products of the mind


Fundamentals of IP exchange

• Creative property sold – Over space: option rights in certain markets– Over time: option over first run, second or

syndication etc.– Over “windows” or various media:

• Eg: mainstream TV, specialty, DVD release, reruns. Etc.

• Each stage realizes separate revenue stream: growing tendency to “ancillary” or secondary markets:

– Exploiting video games, Tshirts etc


Media Risk

• Sometimes called the hit to release ratio• In entertainment goods, very high

– US networks get on average 2000 scripts– Take 20 to pilots– 2-4 to air– Lose at least half before the get a House, for

example– Profits from the block buster hits pay the

costs of all the losses ( see CC 334)


Strategies for Reducing Risk

• Raise large amounts of capital• Integrate production process• Integrate vertically or horizontally (

see CC 336)• Recycle creative components• Imitate formats• “rationalize” demand: condition

taste, promote ‘ritual’


Media Economics

• Four main forms of financing the media:

– Public Tax support/patronage or subsidy– Advertising– Subscription Revenue– Unit Sales ( eg. PPV, DVDs)

• Fringe media: volunteer labour/ gray market


Different Models

• Newspapers 80% ad supported plus subscription revenues

• Mainstream TV ( eg. CBC, CTV, CBS, Fox) ad supported

• ‘specialty’ satellite cable both ad and subscription supported


The Nature of the Exchange in TV

• Advertisers buy Ad time from Networks to get access to Audiences

• This is ‘audited’ by companies like Nielsen or BBM in Canada

• How much they buy and when is determined by their target audiences


The Audience Commodity

• Dallas Smythe the inventor of the concept of the ‘audience commodity’

• Really, the commodity of exchange is the ‘audience’ of prospective buyers– There is a discount for poor or marginal consumers– The scarcer, the higher the premium– Among consumers, premiums are paid to reach

young ( 12-34) year old white consumers– But, in general, the more you attract, the more profit


The Nature of the Competition

• Each entrant ( whether new medium, new player in the same market, or competitor in same target market but different medium) impacts potential revenues– Issue is how “elastic” or “ constant” is the

total available consumer “spend”– It is cyclical ( goes with measures of

consumer confidence which tends to be high in times of low unemployment and inflation, and availability of easy credit)

– But overall, shows a steady growth


Competition Cont’d

• How media compete:– Sell ‘brand’: lifestyle types– Specialize– Build huge libraries

• Use tied selling: exclusive deals to distribute with partners in same marketing family


Trends in Media Competition

• Growth of oligopoly allows more efficient ‘bulk’ buys to advertisers

• At the same time, greater proliferation of media platforms ( video podcasts, print, specialty formats)presents audience fragmentation over space and time

• “Desperately Seek the Audience”• FRAGMENTATION

– DEVELOPMENT OF EVER GREATER ‘SEGMENTATION’ OF AUDIENCES INTO TASTE GROUPS

– EVER WIDER PLATFORMS TO REACH THEM


Definition of Advertising

• How consumers become aware of potential goods or services to buy ( CC: 339).

• Thus: integral to persuasion• In business, one of the costs of

marketing


Two Ideological Perspectives

• Libertarian• Essential to inform

consumers• Builds demand for

products• Enables sellers to

maximize sales and reduce costs

• Essential for efficiency of the market

• Reform Liberal• Information is biassed• Creates wants not

needs• Leads to oversupply

of goods• Passed on in costs to

consumers thus inflationary

• J.K. Galbraith


There is no free lunch

• Ad supported media appear ‘free’ to consumers

• But, the costs of ads are passed on in the end price of the good

• Marketing and ad costs can reach 10-15% ( almost like a private ministry of information GST)


Market Research

• Advertising is built on market intelligence

• Identification of potential consumers by demographics, behavioral and attitudinal factors

• Endebted to social psychology– Study of what attracts, appeals,

provides a sense of identify, pleasure


Market Intelligence

• An extensive network of trade associations which monitor audiences

• Large, independent or allied ad firms: eg. J Walter Thompson or Ogilvie Mather (CC: 344)

• The trend to “passive people meters” and universal barcodes: tv/exposure to ads/retail purchases try to simulate

“complete data shadows” of consumers


The Canadian Ad Market

Since the 20s, dealt with overspill from US Market

On a per capita basis, Canada’s total TV ad market is 1/3 the size of the USWhy?

OverspillSectors of the economy are public: eg. Health,

education, or have different norms: eg. Do not advertise legal services


Economic Regulation of the Ad Market

All things being equal, Canadian businesses will use US border stations or US magazines to reach Canadian consumers

But, Canada’s Income Tax Act disallows ad spending on US media to reach Canadians as an allowable expense

Thus, Canada protects the border for ads, to allow Canadian businesses to reach Canadian consumers


Other forms of economic regulation of ads

In Broadcasting, the CRTC limits the number of ads per hour ( unlike the FCC in the US)

Consumer Law Prevents Unfair Competitioneg. Prohibits deceptive practices, untrue allegations about the competition, “bait and switch” forms of roping in customers


Ad Rates

• American Idol is currently the highest ad rate of continuing series in the US

• Charges about $620,000 US per 30 second spot

• During the Super Bowl, may charge 2 million or more

• Global could charge only $100 K


Political Advertising

Government is still Canada’s biggest advertiser

The summit of democratic contests: Elections, has Election Act regulation of ad time:

1) Free ad time must be provided, proportional to seats in Parliament

2) Paid advertising is “capped”: unlike the US which has no spending limits, Canada does not want to have elections “bought” by those with the biggest ad budgets


Advertisers Clout on the News

• Canadian Association of Journalists:– We will not give favoured treatment to

advertisers and special interests. We must resist their efforts to influence the news. ( ethic guidelines

– Prohibit acceptance of swag: gifts

• Structural separation of editorial and ad departments

• But journalists aware of the need to sell and maximize audiences


Advertisers “Censor?”

Classic cases:1)Advertisers boycott: withdrawal after

wardrobe malfunction, Disney withdrawing from offensive contents, Bill Maher

2)Efforts to directly influence content1)Kingston Whig Standard: lost $100 k after

realestate agents pulled ads when article about direct sales published ( Russell: 52)

2)Tied selling: advertorials3)The Bay and National Post


Social Issues in Advertising

• Is there a social responsibility accepted?– Yes; the Advertising Standards Council of

Canada sets out several principles– Yes, Advertising directed at Children is

strongly regulated around the world• Prohibited for very young children• Type of appeal restricted

• In each generation, there are issues of representation in advertising hotly contested: gender, age, race, sexual orientation


Cultural Issues in Advertising

As form:– A dominant “art form”?– Reducing the “length” of video ‘sound bites”…

fuelling the trend to shorter “information bites”• As Utopic Ideal

– Establishing a ‘cult’ of ‘beauty’?– Infinite narcissm? – Selfish self-gratification? Desire? Pleasure?

• As Dominant Ideology– An Ideology of feckless ‘consumption’ and

materialism?


The “rules” of Advertising

• Norms created by ad directors, creators

• By Manufacturers• By social institutions set up to

regulate ads directly or indirectly– Direct: CRTC and Broadcasting Act– Indirect: Advertising Standards

Council


The Advertising Standards Council

• A not for profit body• Made up of advertisers, and

representatives of the public• A classic case of a “civil society” agency

for professional self regulation• Arms length from government an

industry• Set up to preempt or avoid direct

government regulation


Powers of the ASC

• To develop and administer codes• Recruit voluntary members• Receive and investigate complaints

– Thus, reactive, not educative in mandate

• Administer rulings• In some cases: administer fines,

compel withdrawal of ads etc.


Advertising Council Standards

• A copy must be accurate, clear, • Receives complaints ( under 1000 a

year)• Finds about 10% in contravention of

Standards• Not well known and consumer

groups argue, not proactive enough• No substitute for consumer boycotts


The Critical Perspective

• Advertising creates false consciousness

• Contributes to the standardization of cultural products

• Fuels the dominant ideology of capitalism: spend spend spend ( patriotism after 9-11)


Have we become Citizens of a Shopping Mall?

• Very few consumer protection groups in popular culture

• Effort to “protest” one of the most onerous of behaviors

• Groups like “adbusters” ( BC)use guerilla tactics of advertising against the dominant industry ( eg. Brontosaurus ad)

• They advocate a “buy nothing day”


Recommended Sources

• Leiss, Kline, Jhally, Advertising as Social Communication

• Frank, Liberation Marketing• Nick Russell: Media and Morals

spring 2007cmns 130 advertising and the selling of consumption ubiquitous intrusive intensive...

Documents

media risksometimes

media commodityephemeral

dvdsfringe media

various media

economic exchange

exchange of goods

high creative labour

cost of production