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Obstacles to Benefits of Media Abundance: A Resource-Based Approach to Television Facilities and Personnel Prof. Robert G. Picard Media Management and Transformation Centre Jönköping International Business School, Jönköping University, Sweden Remarks to the International Seminar on the New Economy of Media, School of Film and TV Arts & Technology of Shanghai University, 12 June 2005 Changes in technology and public policies, and the growth of advertising support, have led to the proliferation in the types of media available and the number of media outlets existing worldwide. The expansion of media offerings have generally been delivered with policy makers and media firms holding out the promise of increased content, more choice, and a range of social benefits based on improved information flow and provision of material promoting domestic culture and social life. Perhaps no media has been more affected by these changes than the television industry (including terrestrial, cable, and satellite television). Today I do not wish to debate whether the purported objectives of media abundance are realistic or the extent to which they are rhetoric, and I recognize that differences in the political and economic contexts and the extent of pre-existing media systems significantly influence why and how expansion of media have taken place. What concerns me is that the growth of media outlets is taking place in many locations without a corresponding growth in the fundamental resources necessary to sustain it. The growth of television worldwide is extraordinary. In the United States, the average cable household receives about 60 channels, with large numbers of households receiving up to 500. In Europe the number of television channels increased 400 percent in the past 15 years. In China, provincial satellite television is being offered to nationwide audiences, bringing the total number of television channels available nationally to about 70. The growth of media has created an oversupply of content because audience consumption has not increased proportionally (Picard, 2002). The result of this increase in television channels is not a corresponding increase in view but more selective viewing. Individuals are also making more choices among media and units of media and are spreading their consumption further than ever before (Becker and Schoenbach, 1989). Although there are many places from which content can be delivered to audiences, significant challenges in providing quality content exist because of limitations in the 1 value chain on the production of content. Three major elements of the value chain relevant to this discussion: the supply chain, the producer’s value chain, and the distribution chain Figure 1: Basic elements of the value chain supply value chain producer’s value chain distribution value chain Media firms are primarily engaged in the production and distribution aspects. They, of course, access the supply chain when they acquire content and other materials from another producer. Although there are slight differences among media industries and firms, the basic value chain involves content: that is, selecting, organizing, packaging, and processing content; followed by activities preparing it for distribution; and then distribution and related marketing activities for the product or service (Figure 2). Figure 2: The Value Chain of Media Firms producer’s value chain acquired content created content selecting, organizing, packaging, and processing content distribution value chain production/ manufacturing/ transformation of content into distributable form distribution marketing, advertising, and promotion Source: Picard, 2002 The high growth of media content outlets has created higher demand for media products in the distribution part of the value chain. However, significant obstacles to producing the benefits from the enlarging number of media outlets exist in the production portion of the value chain. The primary challenge involves filling the enormous demand for motion 2 pictures, television programming, audio recordings, and print media content necessary for the new channels. The ability of media firms to meet this demand is limited because of the unique creative nature of media content, the skills and knowledge required of personnel, and the specialization of facilities required for production. As a result it is increasing difficult for producers to provide adequate domestic content that is interesting and produced at an appropriate level of quality, forcing reliance on imported content, lessening overall quality of content, and leading to heavy reliance on repeat uses of the same content. All these choices make the additional media units and content less valuable and less interesting to audiences. The challenges faced by media firms in this environment can be understood and more effective responses developed if one utilizes resources perspectives. Issues of resource availability are crucial to the success of all industries and dependence on resources reduces the independence of organizations and the opportunities available to them (Pfeffer and Salancik, 1978). Resource limitations and problems coordinating and managing resources have been shown to be factors in the stagnation and decline of some media firms (Picard, 1996). Good resource management ensures that resource dependency that can limit a firm’s activities or growth is avoided and the capabilities of core resources are constantly upgraded, and well utilized. This presentation explores obstacles to media firms producing the benefits of abundance because of resource limitations. It employs the resource-based perspective, a strategic approach to understanding internal factors within companies or industries that promote or impede growth or development (Foss, 1998). It recognizes that special unique resources are critical to success and that use and development internal factors related to capabilities, competencies help determine competitiveness of the firm or industry (Wernerfelt, 1984; Prahalad & Hamel, 1990; and Barney, 1991). From this perspective two resources are critical if benefits are to be obtained from the expansion of choices available through television, cable, and satellite services: First, resources of facilities and equipment with which to produce additional content; and Second, trained personnel to create content that makes the new channels attractive and effective. Production Resource Capacity Obstacles Production of goods and services requires availability of essential facilities in which the labor can take place and in which requisite equipment is available. Many parts of the world today face a central challenge in providing sufficient audio-visual content because of limitations of production capacity due to the lack of production facilities such as studios, sound stages, and editing suites necessary to support levels of production required by the increased demand for content. Production of a single film may require creating sets and occupying soundstages for several months and the demands of producing a single television show may require 3 blocking a soundstage for many days. If a show is produced daily, even an hour long program it may require occupying a study for a half day or having a studio dedicated only to that program (Zettl, 1999; Cury, 2001). As a result, the number of programs that a studio can accommodate for production is highly limited. This problem was starkly illustrated in the European Union where the combination of a limited numbers of film production facilities and the fact that most television production facilities were operated by public service broadcasters who enjoyed monopoly statuses (Noam, 1992). When commercial competition was introduced and expanded the number of channels available, the lack of facilities in which domestic television competitors could produce programming limited their abilities to produce domestic content. The lack of capacity reached a crisis in many nations after the European Union “Television without Frontiers” directive (European Commission, 1989) required that 50 percent of programming broadcast be of European origin and that at least 10 percent be created by producer independent of the broadcasters. A number of nations set this independent production quota higher, most notable the United Kingdom which enacted a 25 percent quota. The impossibility of meeting such requirements without changes in industry’s production resources was soon recognized by the European Commission. To help increase facilities and production to meet the goals, the Commission established a series of action plans over the based decade and a half to help improve production capacity, financing, and distribution of audio-visual products (European Commission, Media Programs). The central contributions of production studios are one of the reasons that the U.S. has been so successful in the audio-visual industry. Studio facilities are recognized as sources of competitive advantage for major film and television production companies and are seen as critical assets. These unique property-based resources (Miller and Shamsie, 1996) provide production advantages for the companies that own or control studios and media content production facilities because make it possible for them to effectively utilize the facilities themselves and then make any excess capacity available to other producers. They also become centers and clusters around which the broad variety of support services and firms necessary for production locate, increasing both production capabilities and the economic contributions of the audio-visual industry. Increases in demand due to rapidly increasing need for original broadcast programs— especially domestic programs, for production of audio-visual advertising, for creation of audio-visual materials for promotional purposes by companies, non-governmental organizations, and government agencies also place pressure on limited production facilities and underscore the needs additional facilities and services. Capacity of Personnel The second crucial component of the contemporary media and entertainment environment is creative and artistic personnel that can create the information and entertainment content needed by the expanding offerings of media. This creative 4 capacity, however, is not easily found or created, but is a central success factor in media industries. In reality, every nation suffers from a limited pool of talented writers, musicians, actors, and directors. If highly talented and creative individuals are only one in a million, even large nation—such as the Untied States with nearly 300 million population—will have difficulty finding sufficient talent and will have to look outside its boarders to locate the best available talent. In small nations—such as Sweden with 9 million population—it is impossible to locate media personnel of sufficient quality to serve all domestic media needs. In cases where there is a rapid increase in need for creative and trained personnel, educational institutions and professional training schemes are rarely able to provide the pool of necessary labor in the short to mid-term. Because training opportunities are limited, even creative and talented individuals with the desire to enter the field find it difficult to get training opportunities that will prepare them in the techniques and practices of set design and construction, production technology, cinematography, lighting, script writing, directing, acting, editing, producing and financing productions, and managing audio-visual firms. If economic or linguistic considerations made it difficult for a nation to provide domestic personnel of sufficient quality or restrict the availability in broader regional or global labor markets, media production must take place with whatever labor is available, but the skills levels and creativity of those who must be employed will be lower and affect the types and quality of audio-visual productions. These factors make preparation and development of personnel for media industry needs central to the future of the industry. The rapid changes in markets in recent years has not allowed media firms, educational institutions, education policymakers to adequately plan and implement training to prepare sufficient numbers of skilled and knowledgeable personnel in many nations. This is especially problematic because the availability of appropriate human resources is critical in labor intensive industries (Bhalla, 1974), of which media are a part. A critical need in media is the production of information and entertainment in domestic language(s) and of content reflecting a local culture, identity, and lifestyle—or at least content that does not conflict badly with it. Such content is thus more attractive and successful with audiences. If personnel to directly create sufficient content are not available, then efforts need to be made to localize and customize existing content to fit domestic needs of imports or in creating exports of one’s own. Research has shown that European multimedia producers have not effectively engaged in localization and customization and are behind U.S. producers, according to recent research (European Commission, 2000). Effective localization and linguistic customization on a global scale requires considerable attention to potential networking and strategic partnerships because 5 few firms are able to handle internally the numerous and complex issues created by the hundreds of different markets that exist globally. These activities, however, require personnel with special creative and managerial skills and nations, industries, and companies must develop personnel development and content export and importation strategies appropriate for their unique situations, as illustrated by the variety of strategies employed by firms that are globalizing of television activities (Pathania-Jain, 2001; Shrikhande, 2001), Discussion If expansion of choice through increased channels and broadcast hours is to achieve its stated goals of providing more choice and social benefits, efforts need to be directed to developing necessary resources to support the levels of production needed to provide the additional materials. Significant efforts need to be made to locate develop personnel necessary to achieve those goals. Talent and creative, technical, and managerial skills are knowledge-based resources that give a media firm capabilities that are not easily imitable (Miller and Shamsie, 1996). When trained and creative personnel are limited, firms that are able to attract those personnel gain significant advantages in audio-visual markets and make it difficult for firms without the best personnel to compete effectively. If the aims of policymakers are to provide effective competition and choices among an increased number of audio-visual outlets, significant attention and investments must be channeled to developing the labor pool with which to make it happen. The need to increase the supply of production facilities and services is also critical and it is clear that advantage is gained when other firms in similar industries located near each other, allowing enhanced development of capabilities across firms, and these practices often create advantages for specific nations and regions (Porter, 1998). Efforts to gather and develop property- and knowledge-based resources in media as part of economic development efforts have resulted from this approach (Backlund and Sandberg, 2002). It must be noted that the challenges of developing facility and personnel resources vary significantly. Facilities are relatively easy to develop but people are harder and take more time. Finding living, breather individuals interested in the media is not the problem, but finding persons with creative, artistic temperaments and developing the skills for quality audio-visual production taken significant effort. 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