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Determinants of Profit in the Broadcasting Industry | Evidence from Japanese Micro Data |

Author

Listed:
  • Norihiro KASUGA

    (Faculty of Economics, Nagasaki University)

  • Manabu Shishikura

    (Institute for Information & Communications Policy)

Abstract

The operating areas of each terrestrial broadcasting station in Japan are geographically divided by a licensing system and form oligopolies in each of their respective markets. These institutional constraints define the market structure, and as a result, affect the business performance of the broadcasting industry. The primary purpose for regulation is based on the gMedia Ownership Rule, h a rule designed for preserving gplurality, h gdiversity h and hlocalism h of stations. Similar rules exist in many countries, but benchmarks differ. To this end, if the regulative authority introduced a new regulation framework, it might be useful to improve the financial foundation of the licensed stations, thus preserving the original purpose of the rule. With the rapid progress of digital technology and the increasingly diversified selection of media types, the government needs to urgently review Japan fs old regulations with the aim of giving more freedom in the operation of terrestrial stations and so promote voluntary restructuring. Based on the above viewpoints, we implemented an econometric analysis with respect to factors that affect on the business performance (especially on profit) of each station. We focus on the terrestrial broadcasting industry because it plays a central role in the Japanese broadcasting system. As a result, we ascertained the following points. (1) Structural parameters: market share of each station has a positive correlation with profit, although market concentration appears to have no correlation. (2) Geographical parameters: the number of households per station and the income per household have positive correlations. (3) Business parameters: the aired ratio of self-produced TV programs has a positive correlation with revenue, although it has a negative correlation with profit. It is said that geographical environment is quite important for business performance in the broadcasting industry. This hypothesis is strongly supported by our results. Therefore deregulation and subsequent voluntary rearrangement may reinforce the operating basis of each station.

Suggested Citation

  • Norihiro KASUGA & Manabu Shishikura, 2005. "Determinants of Profit in the Broadcasting Industry | Evidence from Japanese Micro Data |," Industrial Organization 0505006, EconWPA.
  • Handle: RePEc:wpa:wuwpio:0505006
    Note: Type of Document - pdf; pages: 22
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    Keywords

    Terrestrial Broadcasting Station; Determinants of profit; Principle of Media Ownership Rule; Audience Share; Oligopoly;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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