Thursday, May 11, 2017

The Complicated Relationship Between Politics And The Media

There has been a lot of discussion about the media and politics in the last few years.  We have learned about the so called fake media, like Breitbart News.  Donald Trump has gotten into the act by claiming that media sources that are critical of him are the really fake media.  The relationship between the media and politics is discussed in this article by economists.  It turns out that our traditional media sources are much more important to politicians than fake media.  The recent acquisition of Tribune Media by Sinclair Broadcasting illustrates the issue between media concentration and politics.

After its acquisition of Tribune Media, Sinclair's ownership of local TV channels puts it in contact with 70% of US households.  That has been very good for its shareholders and it has been very good for Donald Trump.  Sinclair's stock increased by 38% in six months.  That is a 24% greater increase in value than S&P 500 index over the same period.  Donald Trump assisted Sinclair in extending its household coverage to 70% because it appointed the Chairman of the FCC who removed a rule that restricted coverage to 39%.  21st Century Fox is currently at 37%; it also competed with Sinclair for the acquisition of Tribune Media.

Donald Trump's son-in-law Jared Kushner is reported to have struck an interesting deal with Sinclair (which they both deny.  Since Donald Trump is a celebrity, TV ratings usually improve when Trump is part of the news content.  Kushner promised greater access to Trump interviews in exchange for a promise not to comment on Trump's statements.  Sinclair's coverage of Trump has been measurably more positive about him and his policies than a neutral rating.  That was particularly helpful to Trump because of Sinclair's access to the Ohio and Florida TV markets.

Trump's celebrity status has been particularly good for cable news networks like CNN, CNBC and Fox News as well.  Trump creates controversy and that attracts viewers.  That is important for broadcasters because the prices that it charges for advertising slots is positively related to audience size. Donald Trump is boon for television networks.  Much of the coverage is critical of Trump but that still enables him to control the news cycle.  He doesn't even have to be interviewed.  A simple tweet will do the trick.

When we think about the relationship between the media and politics we tend to focus on government efforts to influence the media.  It is really more complicated than that.  Business considerations have a powerful effect on the media.  Bill O'Reilly was a star performer at Fox News.  He had been the subject of law suits by women who accused him of harassment for several years.  Fox paid millions to his accusers for several years because he had a huge audience.  Fox decided to fire O'Reilly when advertisers decided not place their ads on the O'Reilly show. They did not want their products or firms to associated with O'Reilly after his behavior with women was  exposed.  Advertisers pay for most of media services that we consume.  The business interests of advertisers and media firms have a powerful affect on what appears on TV and other media sources.  This issue becomes more acute as media ownership becomes more concentrated.


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