Whether or not you admit it, most people are aware of what’s happening in the X factor. With massive viewing figures, the X Factor remains one the most highly viewed entertainment programmes, so it’s hardly surprising that demand for advertising slots is so high especially when people are waiting for news about the contestants. The X Factor pulls in £8000 per second from TV adverts and it is estimated that the charge for a 30 second advertising slot is a staggering £190,000, expected to rise to £250,000 for the live final. It looks like the recession has had little impact on those wanting to sponsor the X Factor.
Nevertheless, there has been some controversy this week. Every Monday morning we see stories about the contestants and this week was no exception. But, it wasn’t so much about the contestants this week, but rather it concerned the voting. Following the episodes over the weekend of 7th and 8th November 2009, both the ITV and Ofcom, the telecommunications regulator, received thousands of complaints as Simon Cowell gave his support to ‘Jedward’ over Lucie Jones, even though in earlier episodes, he had said he would ‘leave the country if they won’.
However, Ofcom has said that the X Factor won’t be investigated, as the regulator only investigates voting irregularities and the treatment of contestants and not the outcome of the programme. Meanwhile, speculation is rife that Simon Cowell either wants to keep Jedward on the show, because of their viewer ratings, or that by voting Lucie off, the public will rebel and vote Jedward off this week and Simon will avoid looking like the bad guy.
Who knew that the world of entertainment could be analysed using economics!!
Ofcom won’t investigate X Factor ITN (11/11/09)
750 complain to Ofcom over Lucie’s X Factor exit Wales Online (12/11/09)
£8k a second bonanza for X Factor ads as ITV chiefs cash in on Jedward mania Mail Online (11/11/09)
Watchdog rules out X Factor probe BBC News (10/11/09)
Thousands complain to ITV and Ofcom over X Factor ATV Network News, Doug Lambert (10/11/09)
X Factor: Simon Cowell is an evil genius and we love him Telegraph, Liz Hunt (11/11/09)
Simon Cowell’s evil genius rules The X Factor Guardian, Marina Hyde (13/11/09)
Resistance is futile in the face of this master of psychology Independent, Matthew Norman (12/11/09)
Jedward: X Factor twins John and Edward help ITV rake in advertising Telegraph (11/11/09)
The X Factor becomes the ‘British Superbowl’ as advertising fees soar Tines Online, Dan Sabbagh (11/11/09)
The Ofcom site can be found at:
Ofcom (Home Page)
Questions
- What is the purpose of regulation? What are the advantages and disadvantages of legal restrictions?
- What is the role of Ofcom? How does it regulate telecommunications and what other regulators are there?
- Why is the price for an advertising slot during the X Factor so expensive? What does this tell us about price elasticity and income elasticity of demand?
- Ofcom is not going to investigate X Factor. What are the main reasons behind this decision? Do you think this was the right decision?
- If a judge’s decision can increase advertising revenue, then from a commercial point of view does that make it the ‘right’ decision?
It’s probably one of the most recognisable names in the world – Disney. Well, as if the company wasn’t already established enough, it’s just got a bit bigger, with a $4bn deal with Marvel Entertainment, Inc. Characters such as Mickey Mouse, Cinderella and Donald Duck have now been joined by some more masculine characters including Spider-Man, Iron Man and the X-Men. Much of Disney’s recent success has come from films appealing to girls, but in-house Disney franchises appealing to boys are fewer and further between. “We would love to attract more boys, and Marvel skews more in the boys’ direction, although there is universal appeal to many of its characters” said Bob Iger, Disney chief executive. “Marvel’s is a treasure trove of characters and stories, and this gives us an opportunity to mine characters that are well known and characters that are not well known.”
This new deal is likely to have major repercussions for Warner Bros and all of the major Hollywood studios, as well as those with a vested interest in Marvel. It is also hoped that this deal will restore some of Disney’s profits, which have been reduced through the current economic downturn. The following articles consider this deal and the likely results.
Weaker sales dent Disney profits BBC News (30/7/09)
Disney to buy Marvel in $4bn deal BBC News (31/8/09)
Walt Disney buys Marvel Entertainment in £2.5billion deal Mirror News (1/9/09)
Disney take-over of Marvel Telegraph, Paul Gent (2/9/09)
Disney’s Marvel Deal Forces DC’s Hand Defamer, Andrew Belonskey (10/9/09)
Disney deal puts Marvel online slots at risk for Cryptologic Online Gambling News (9/9/09)
Disney’s picl-up of Marvel not so super: Citi FP, Trading Desk (4/9/09)
Disney to buy Marvel in $4bn deal (video) BBC News (1/9/09)
Of mouse and X-men Economist (3/9/09)
Disney buys Marvel, Now in Business with every studio in Hollywood Defamer, Brian Moylan (31/8/09)
For Disney’s announcement of the take-over, see:
Disney to acquire Marvel Entertainment Disney Corporate News Release
Questions
- Discuss the pros and cons for consumers of the take-over of Marvel Entertainment by Disney.
- Which factors will have had a significant impact on Disney’s profits in the current recession? Explain why.
- What do you think will be the likely impact of the take-over on Marvel’s shareholders?
- Discuss the main ways in which a business can grow and consider their advantages and disadvantages.
- How will Disney’s Marvel deal affect its competitors and those with whom it does business? Is Disney going to be able to control prices and other aspects of business deals?
With recession biting, many people are cutting back on spending. This has not been even across products, however. People have tended to shift from more luxurious products, such as foreign holidays and branded products, to holidays at home and supermarkets’ own-brand products (see Shoppers opt for supermarket brands Financial Times (4/8/09)). There has also been a decline in spending on consumer durables, such as cars, furniture and kitchen appliances.
One sector that has fared better than most, however, is the teenage market. “So far it seems teenagers have not cut back on their shopping. Teen-targeted retailers such as Primark, New Look, H&M, Asos and Hot Topic are all weathering the recession better than rivals aimed at an older demographic.” This is a quote from the first of the two linked articles below, which look at this market and its future prospects.
Teenage spenders struggle to learn BBC News (4/8/09)
Hollister: the shop that smells like teen spirit Times Online (5/8/09)
Questions
- How is spending on particular products during a recession related to their income elasticity of demand? How does the income elasticity of demand depend on the length of the time period under consideration?
- Why has the teenage market been less susceptible to the recession than many other markets?
- To what extent will being ‘bargain savvy’ be enough for teenagers to survive the recession without having to make substantial changes in spending patterns? Consider the concept of price elasticity of demand in your answer.
Setanta is a sports broadcaster that emerged from an Irish dance hall in West London in the 1990s. Since 2004 it has grown rapidly, acquiring major sporting rights and acting as something of a rival to Sky. However, Setanta has now gone into administration following the collapse of talks with a US investor, its failure to pay a number of sporting organisations and the loss of its English Premier League games. Having less than 60% of the annual subscribers needed, and competing against Sky, it is hardly surprising that this broadcaster has now exited the industry. But, what are the reasons behind this collapse? Marketing, advertising, pricing, the recession or dominance by its competitors? What will be the impact of this bankruptcy on its employees, the Pay TV market, sporting organisations and its customers?
Offer made for stake in Setanta BBC News (12/6/09)
Troubled sports channel stops broadcasting CBBC Newsround (24/6/09)
Setanta goes off air with loss of more than 200 jobs Guardian, James Robinson, Leigh Holmwood (23/6/09)
Blavatnik offers Setanta lifeline BBC News, Robert Peston (12/6/09)
Last-ditch effort to save Setanta BBC News (9/6/09)
Football’s minnows braced to take full force of Setanta collapse Guardian, Owen Gibson (24/6/09)
UFC: After Setanta divorce where now: Bravo, Viring, Channel 5 or Sky? Telegraph, Gareth Davies (23/6/09)
Setanta sports taken off air in Britain Times Online, Dan Sabbagh (23/6/09)
Questions
- How was Setanta able to expand so quickly? Is this part of the reason for its failure?
- Premium content, such as Premier League matches, is already dominated by BSkyB. What does the collapse of Setanta mean for the structure of the Pay TV market?
- What reasons could explain Setanta’s inability to attract sufficient subscribers? Is its collapse a consequence of the recession, or are there other factors? What are they?
- Who will lose out from Setanta’s bankruptcy? Think about all those connected with Setanta. What will happen to the Scottish Premier League, which has paid the SPL clubs out of its own pocket? Will it get this money back?
- Do you think there were any other options open in a bid to rescue Setanta? If Ofcom had stepped in to regulate the industry, would it have made a difference?
Walk down any street in the country, and you’re bound to see a Sky dish. With subscribers still increasing, a viewing target of 10 million by 2010 and revenue increasing to £1.4 billion, it seems that Sky TV is hardly suffering from the current ‘challenging conditions’ besetting so many firms.
Enter Ofcom, the independent regulator and competition authority for the UK’s communication industries that has been investigating the UK Pay TV industry since 2007. A consultation was published on the 26th June 2009 in which Ofcom indicated that BSkyB should be forced to make its premium sports and film channels available to rival broadcasters in a bid to ‘promote choice and innovation’. The articles below look at this conflict.
Sky may have to share TV channels BBC News (26/6/09)
Ofcom may set Sky’s wholesale prices Digital Spy, Andrew Laughlin (25/6/09)
Ofcom proposes measures to improve competition in pay TV Ofcom (26/6/09)
Pay TV Phase three document: Proposed remedies Ofcom Consultation (26/6/09)
BSkyB in war of words with Virgin Media and BT Guardian, Leigh Holmwood (24/6/09)
BSkyB keeps Premier League rights BBC Sport, Football (3/2/09)
Sky will fight Ofcom over Premium TV Tech Radar, Patrick Goss (26/6/09)
Pay TV market investigation: Consultation document Ofcom (18/12/07)
Sky asked to open up Premium sports and movies Times Online, Peter Stiff (26/6/09)
All believers in a competitive market must back Ofcom to take on Sky Telegraph, Neil Berkett (26/6/09)
Ofcom: Sky not playing fair with premium content Tech Radar, Patrick Goss (26/06/09)
Questions
- How well does BSkyB fit into a monopoly position for its premium content?
- What are the regulatory options open to Ofcom?
- How does Ofcom aim to introduce more competition and fairer prices into the Pay TV market?
- Why is it argued that competition is in the public’s best interest? Do you agree with this, or should BSkyB be allowed to carry on as it is?
- What has enabled Sky to become such a dominant force?
- How do you think the collapse of Setanta will affect this debate?
- Sky TV has seen its profits continuing to grow. Given that we’re in a recession, what does this tell us about Sky and the type of good or service that it supplies?