Advertising and political bias in the media: the market for criticism of the market economy

American Journal of Economics and Sociology, The, July, 2002 by Daniel Sutter

Proponents of the corporate bias thesis provide virtually no direct evidence of successful collusion by business. They cite periodic statements by business leaders suggesting that corporations should act more in their collective interest and stop funding anti-business messages. For instance, a number of businesses in the early 1900s formed the National Civic Foundation (NCF) to counter the Muckrakers' attacks on business (Miraldi 1990:64-65). In combination with their own publicity and education campaign, the NCF attempted to rouse advertisers to action. One letter to a newspaper states, "If I were an advertiser myself, I would see that none of my money went to papers and magazines that were promoting anarchy in the country" (quoted in Miraldia 1990:65). Yet this merely means that business leaders realize they face a prisoner's dilemma, and that talk alone is insufficient to overcome free-riding.

IV

Boycotts by Criticized Companies

I CONSIDER NEXT the ad that harms a specific company. For the affected company the cost to their reputation and stock price likely outweighs the benefit of reaching even a large audience. General Motors will not buy ads on a show that criticizes one of its cars; tobacco companies will not advertise in publications advocating anti-smoking laws. Profit-maximizing news organizations will be sensitive to the potential loss of these companies' advertising dollars, despite journalists' claims for separation of the advertising and news departments. The argument appears perfectly straightforward:

While receiving more than $30 million each year from tobacco advertisements, TV Guide does not publish any articles critical of the television networks' gentle treatment of the cigarette industry. Purchasing ads in TV Guide to the tune of $590,000 a week, tobacco companies also buy the magazine's silence. (Lee and Solomon 1990:6).

The argument, however, fails to consider the marginal impact if one company pulls its ads. Almost all businesses advertise: TV Guide would not have to publish blank pages if tobacco companies pulled all their ads. Over 500 companies have products with sufficient appeal to benefit from national advertising (Baker and Dessart 1998:94). Although the largest corporate advertising budgets seem very impressive, no one advertiser has anything close to monopoly power in the advertising market. The largest corporate advertiser, Proctor and Gamble, spent $1.224 billion on advertising in 1990, and the 10 largest corporate advertisers that year spent a total of $6.885 billion (AD$Summary). Yet these sums are a fraction of total advertising. Total advertising in the 10 media AD$Summary tracks that year was $41.138 billion. Concentration ratios, the percentage of market sales controlled by the largest firms, are a common measure of market power. Most typically used to measure market power among sellers, concentration ratio s can also be applied on the demand side. Proctor and Gamble has 2.97 percent of the market; the four-firm and eight-firm concentration ratios (standard sizes used for comparison) were 10.0 and 14.7 percent respectively. By this measure, the demand side of the advertising market is not concentrated.