funding mechanisms in mass media

In niches in the mass media, alternative funding mechanisms have been at work for decades. Examples include newspapers that sell advertising in print as well as advertising different brands online in order to align with evolving demographics and technology.

Writing Prompt Applying Your Media Literacy – New Media Funding

What is the future of advertising as a media revenue stream?

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Summary: Media Economics Mass media has traditionally been funded through sole proprietorship and venture capital investments, but recently there has been a trend away from independent ownership toward consolidation with most mass media entities (e.g., television stations, radio stations, newspapers) increasingly being owned and then consolidated by corporations. Despite the trend toward conglomeration, there are strong indications that new technologies are fostering new types of media startups that, in turn, are opening up new and creative funding schemes. At the same time, many of the new media and startups are using traditional funding structures to capture a larger user pool and a bigger revenue stream. In addition, companies can target consumers far more effectively by using online market research that assists in the development of consumer profiles. This can be done by using online research methods for data mining purposes, such as Google Analytics to target and track the online behavior of potential consumers (through cookies). This enables companies to better target the focus of their online advertising to their most likely customers (based on their online behavior). Conduct an online search for boots or furniture and note how the online ads you see on websites you visit will suddenly include ads for winter boots and dining sets.

The future of media economics will depend in large part on future technology innovations as well as consumer demands, both of which drive trends. Examples include self-funding through crowdfunding and innovative funding schemes for creative startups, both of which are Internet-reliant.

3.1 Financial Foundations Mass media fit well into the profit-driven capitalistic system until two major revenue streams began drying up. Advertising revenue has fallen dramatically in the last few decades, creating financial challenges for most daily newspapers, magazines, and the broadcast industry in general. A second significant U.S. media revenue source has been sales. This revenue too has declined for companies that have been losing their purchasing audience. Might there be lessons to learn from how other countries finance their media? Or from the experiences of niche players in the U.S. media landscape?

3.2 Ownership Structures

The structure of mass media in the United States has followed a common business pattern. It begins with a visionary entrepreneur, followed by consolidation through conglomerates and chains that strip the outlet of uniqueness in favor of a more homogeneous (and safer) approach to information dissemination. New FCC rulings are designed to stem this pattern, but it is unclear what new ownership structures will emerge from current uncertainties.

3.3 Media Economic Patterns Some mass media are in a mature stage of their development. After a history dating to the 1830s, the daily newspaper industry probably is on its last legs, eclipsed by technology and unable to reinvent itself in time to save itself entirely. These patterns of business are predictable, with industries moving through phases of innovation, entrepreneurship, and maturation. But the question is whether new media startups will follow this traditional pattern, particularly when the Internet breeds a new type of entrepreneurial spirit, or whether funding schemes will become as creative as the new startups themselves.

3.4 Rethinking Media Ownership Tremendous energy is going into rethinking how the mass media need to be restructured to survive economically. The first to be hit hard in the Internet age was the recorded music industry. After significant downsizing and painful adjustments, equilibrium has been found for the radio industry to become self-sustaining by adapting to new delivery models that better meet the demands of Internet-savvy consumers. More radical changes may be necessary for the withering newspaper industry and magazines, but many new ideas are in development that cut costs while increasing creativity in an attempt to meet consumer needs.

3.5 Funding Alternatives The press is, by design, separated from government influence for the sake of objectivity and independence. Democracies have found ways, however, to channel public funding into the media in a way that serves the common good while avoiding government control. If government is to have a greater role in supporting the mass media financially, the challenge is to assure that the media retain the ability to be a

watchdog on government for the people; thus, any governmental support needs to be within that supportive vein—the press as a public service.

3.6 New Media Funding Losses in advertising and subscription revenue have been substantial. New Internet- based funding models have been popping up on the media landscape in the last few years, such as online fundraising through crowdfunding, and online subscriptions to media services. These alternate funding models are providing renewed hope to media organizations in terms of both providing new funding sources and restructuring business models that cut cost while increasing innovation.

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