Media Regulation Frameworks: Balancing Media Freedom, Public Interests, and Controlling Media Oligopolies

 

Abstract

Media industries play an integral role in the life of the modern world. The vast of the population perceives media as not only a source of entertainment but, also information. Because of their critical role, media for the longest period has attracted the attention of policy-makers. Therefore, this essay aims to evaluate how media regulation frameworks are premised on protecting media freedom, and public interests among others through limiting media oligopolies. The essay argues that media regulation especially limiting media oligopolies has impacted positively on the democratization of media. It facilitates more media outlets that further facilitate to divergent viewpoints consumed by the general public.

  The essay will discuss media regulation. It is enforced by the laws and policies of a particular country.  Their existence is on the grounds of protection of freedom of speech and independence of media. The regulation is in the forms of self-regulation, statutory regulation and co-regulation.  Further, it discusses the democratization of media and its implications in Australia with the aid of comparative analysis using an information privacy policy in the USA.  The essay concludes that it is imperative to formulate media regulations that safeguard the freedom of the press by promoting divergent views.

Introduction

Social media as an avenue for disseminating and acquisition of information is increasingly becoming popular in the contemporary world as opposed to the mainstream media. According to the study by Statista Research Department (2024), there are an estimated 21.3 million active social media subscribers in Australia. Albeit the fact that the majority of the Australian population is embracing social media as a source of information, recently conducted research has indicated that more than half of the population does not trust news and information from this source (Wilding et al., 2018).

Independent and free press is salient in enabling information flows between the citizens and authorities. Democratic countries such as Australia have profoundly recognized that disseminating information is significant in upholding liberal and democratic societies. However, with press freedom, it raises the question of meeting fundamental standards such as fairness and accuracy. The matter has led to extensive debate locally and internationally on media regulation and the form it should take. Notably, the role of media is instrumental in realizing and exercising the right to protect freedom of expression, however, media regulation frameworks are premised on protecting media freedom, and public interests among others through limiting media oligopolies.

The paper is divided into three parts. Part, one focuses on defining media regulation citing cross-media ownership policy. It covers the evolution and its implications in Australia with the aid of different forms of media regulation. The second part is the critique of media regulation.  The paper evaluates how regulation has succeeded in democratizing media access. It further builds on the democratizing of media by discussing on conflict between regulation and freedom of speech. The argument is cemented by the use of a case study. 

 The third part is the comparative analysis that dives into details of the current media regulatory framework in Australia. The comparison between Australian and USA media regulations plays an instrumental in indicating the distinction and their effectiveness. The fourth and concluding part is the conclusion that encompasses the recap of the main points and gives implications on the paper’s findings on future media regulation laws and policies.

 

Media regulation

The framework is instrumental in the limitation of media oligopolies since it defines the path of democratization of media. Furthermore, it enables a diversification of the political and social opinions that give voice to the minority populations. Also, is a vital aspect in the development country’s key values such as language and culture.  In other words, the rationale of the media regulation in limiting media oligopolies enhances the ability to use media for the people-formation. Therefore, it forms the fundamental of cultural identity, rights to public participation formulated with individual’s association with media concerns on the impact on the minority population and media failure especially on the global space. 

Within a media oligopoly’s structure, the dominance of the market by a few large firms significantly controls the flow of information. In other words, they act as the only source of information hence impacting and shaping public opinion (Chung et al., 2022). About this argument, in 2017, the Australian government proposed a relaxation of strict cross-media ownership policies and laws. The new rules prohibit a common ownership or control of either TV, radio or newspaper in a particular area (Wilding et al., 2020).  Thus, it aims to encourage more operators to take advantage of the expansion of new markets.  The development is due to the acknowledgement of the digital porous and competitive global environment.  The proponents of changes in laws argue that it unfairly restricts local media enterprises from optimizing the scale and scope of their undertaking and also the ability to access fundamental requisites to be competitive globally.

 Notably, in Australia, the evolution of media has been shaped by globalization and technological advancements. The changes and reviews have included changes in various media control rules as such cross-media ownership rules. In a few words, the media regulation in Austria involved the Broadcasting Services Act 1992 (BSA ACT) which focuses on the censorship and preservation of cultural values (Grisold and Presold, 2020). In other words, the policy aimed to solidify the country's ability to regulate and monitor the broadcasting realm.

 The second aspect of evolution is the licensing of broadcasting. Under the BSA Act, the policy initiates activities to develop co-regulatory conditions. The broadcasters were operating under regulated conditions and environments.  With online content becoming popular, the authority recognized the need to regulate online and digital content.  The Enhancing Online Safety Policy of 2015 draws on the national cultural code to regulate prevented digital content (Wilding et al., 2021). Finally, prevention and content regulation make the contemporary evolution of media restriction in Australia.  The policy provides the framework to report online crimes and ban negative online content.

 Media regulation being a wider realm encompasses various forms such as content regulation and access regulation.  On one hand, content regulation includes broadcasting threshold and classification of content.  Consequently, the content regulation's primary objective is to influence the disseminated content to the audiences (Chapdelaine et al., 2021). In effect, it shapes the public view and cultural values. On the other hand, access regulation entails frequency allocation and digital neutrality. While frequency allocation impacts the equal distribution and accessibility of resources by all broadcasters, digital reality impacts creating a neutral ground for all websites and internet users (Spindler, 2020). In effect, it ensures there is equal online innovation and competition.

 Rationale on the media regulation

The democratization of media in Australia has faced a myriad of challenges. Nevertheless, the efforts in conjunction with government policies have been successful to a greater extent. One of the areas where the democratization of media has extensively succeeded is in the public interest. Efforts to resolve media oligopolies were pinned on the argument that public interest would be best in the situation whereby there is a diversification of views (Winseck  ,  2021). The act of watering down cross-media ownership policy was poised to ensure diverse views through diversified ownership of licenses. Also, it impacts on the general public welfare and the ability of the public to have insights on the latest developments. Consequently, the public interest does not include only public safety and well-being but also national security.  The correlation between these variables draws the arguments of journalist ethics. According to the UNHR, the best approach to address the ethical dimension of journalists on matters of public interest is through the adaptation of a human rights-based approach (Sonnenberge et al., 2022). Thus, the ethical duty should involve engaging in a balancing analysis.

Although media regulation has been a success, from time to time there is an emergency of conflict with the freedom of the press.  The government-led initiatives are capable of undermining the independence of media. When independent media is fully controlled by the government on the grounds of national security it underscores the concern of journalism integrity (Hong et al., 2024). This has been the case with a good number of authorities citing the context of national security. Also, the government media regulation bodies can use the regulation laws and policies to influence the information content to shape public opinion and surpass any criticism from journalists. The conflict between media regulation and independence of the press is increasingly becoming difficult to create an equilibrium. For example, within the paradigm of the New York Times, the issues of press independence were handled in a manner that indicates a high level of journalism ethics (Muller and Birnbauer). Therefore, to minimize the risk of executing unjustified and harmful manner, the media house sought advice from various security organs. By doing so, the editorial allowed the state agency to interfere with its editorial independence by voting them to offer advice on what is correct to publish.

 A case study of anti-terror laws and the Australian government indicates the conflict between media regulation and the independence of the press.  The situation unraveled various ethical and legal issues as the result of the cases in 2001, in which, the Australian, a newspaper publisher, revealed to the general public the counterterrorism operation that led to smoke out and apprehended of various militias linked with al-Shabaab, a terrorist group based in Somalia (Stewart et al., 2009). The police accused the newspaper of publishing information before the occurrence of the raiding undertakings. The editor of the paper, on the other hand, justified their action by claiming they gave the police a chance to vet information before its publication and had to wait for several days. Furthermore, the auditor purported that, the act of requiring the police to vet before publication was a ‘highly unusual practice’.   The Australian paper praised its action citing the willingness of the paper to practice responsible reporting and maintaining a high code of ethics. Therefore, the aspect of withholding information from publication while seeking clarification from the authorities challenged the principle of press independence.  The case study is a clear example of where media and authorities are willing to cooperate when facing an issue of national security.

The balance between government control and independence of the press has disadvantages outweighing the advantages. Excessive control of media by the government undermines democracy and governance. With a lack of democracy and governance, the public is at risk of not accessing diverse viewpoints. Furthermore, the government will not be held accountable in matters of national interest. Furthermore, the introduction of convenorship and intimidation of journalists plays a key role in undermining the integrity of journalists.

Comparison analysis

 In Australia, just like many other countries worldwide, the use of social media as a source and channel for conveying information is becoming more popular. Thus, the digital realm forms the fundamentals of the current media framework. The framework is confined under the online content regulation. Some of the digital services that are regulated include built not limited to websites and social media platforms (Frosio et al., 2023). These services are required to comply with content standards and other grouping requirements. Since it operates under the Broadcasting Services Act, the digital vendors are required to implement mechanisms that will ensure sanity on the internet such as restriction of the harmful content (Bahl et al., 2020). The online content regulation regulatory majors on privacy and security. The parameters are further divided into four key concepts breach of privacy, data protection, trespass and surveillance. The Privacy Act 1988, defines the principal aspect of the legislation that protects the handling of individual information on the personal level. It includes activities such as the gathering of data, usage of data, storage and also matters data disclosure of individual information in the government public sector and also within the private spectrum.

 In the comparison analysis, the essay uses A case study of USA information privacy laws. The information privacy law in the USA is guided by the Privacy Act 5 U.S.C. (2006) which provides the regulation of information handling by the federal organs (Moira Paterson). 

The law stipulates that the federal organ must ‘collect information to the greatest extent practicable directly from the subject individual when the information may result in adverse determinations about an individual’s rights, benefits, and privileges under Federal programs’ (Moira Paterson, pg 27). Also, there is a clause within the policy that prevents any chances of maintenance of records and in the process, it is described as guaranteed by the law unless it conflicts with authorized law enforcement undertakings.

 Both Australia and USA information privacy law, laws have similarities to a greater extent. They have stipulated the mechanisms of collecting and gathering personal information belonging to an individual. In effect, they promote freedom of speech and press. This is in line with media regulation on media oligopolies that aims to create divergent viewpoints from the general public               (Pisarkiewicz et al., 2021). With federal agencies through policies allowing more and encouraging more media, especially in the digital space, the freedom of the press and working as an independent body will guarantee a proper and acceptable manner of handling private information.

The paper alludes that based on policies and approaches, Australia has the best approach to dealing with the democratization of media. the combination of the news laws making a relaxation on the cross-media ownership policy and information privacy law forms a strong fundamental to dealing with control of the flow of information. By allowing new entrants in the media industry there is the creation of divergent views that impact positively on shaping public opinion and to some extent cultural values. 

 Conclusion

Australia's federal agency is working towards empowering more media to venture into existing and new markets to address the concern of market oligopolies. The arguments towards media oligopolies are that they hinder divergent views hence obstructing the freedom of speech/press

 The essay findings also indicate that the media industry is shaping towards digital platforms. Unlike traditional media, digital media can reach a wider audience, hence the need for more resources to be competitive in the global arena.  Therefore, the media regulation to ensure internet service providers are not practising favours will ensure equality in digital services such as social media and websites.   Therefore, the essay concludes that the media regulation frameworks are formulated to promote public interest and its achievable by limiting the existence of media oligopolies.

 The findings indicate that federal agency needs to create well-thought policies that will protect and not hinder the well-being of digital users. Policies such as the information privacy policy though it targets to protect the public interest can result in conflict between the federal state and the press independence. In a nutshell, the dynamics of information consumption and dissemination should be the key guidance in the formulation of new policies. The democratization of media will not be fully realized without a strong working relationship between the federal agency and the media outlets.

 

 

 

 

 

 

 

 

 

 

 

References

Bahl, V. S., Rahman, F., Bailey, R., Krishnan, S., Deo, S., & Sontakke, N. (2020). Internet intermediaries and online harms: Regulatory.

 

Chapdelaine, P., & McLeod Rogers, J. (2021). Contested Sovereignties: States, Media Platforms, Peoples, and the Regulation of Media Content and Big Data in the Networked Society. Laws, 10(3), 66. https://doi.org/10.3390/laws10030066

Chung, M., & Wihbey, J. (2022). Social media regulation, third-person effect, and public views: A comparative study of the United States, the United Kingdom, South Korea, and Mexico. New Media & Society, 146144482211229. https://doi.org/10.1177/14614448221122996

Frosio, G., & Geiger, C. (2023). Taking fundamental rights seriously in the Digital Services Act's platform liability regime. European Law Journal, 29(1-2), 31-77.

 

Grisold, A., & Preston, P. (2020). Economic Inequality and News Media. Oxford University Press.

Hong, M. S. S. K. (2024) Government Influence on the Press in Democracies, Journalists’ Perception of the Influence, and the Media Environment

Moira Paterson, THE PUBLIC PRIVACY CONUNDRUM –  ANONYMITY AND THE LAW IN AN ERA OF MASS SURVEILLANCE, week 8 reading

Muller and Birnbauer, THE ETHICS OF REPORTING NATIONAL SECURITY MATTERS, week 9 reading

Pisarkiewicz, A., & Polo, M. (2021). Old and new media: the interactions of merger control and plurality regulation. In Research Handbook on EU Media Law and Policy (pp. 54-74). Edward Elgar Publishing.

 

 

Spindler, G. (2020). Role and Liability of Online Platforms Providing Digital Content and Digital Services – Some Preliminary Thoughts, Including Impact of the Digital Content Directive –. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3550354

Statista Research Department, T. text provides general information S. assumes no liability for the information given being complete or correct D. to varying update, & Statistics Can Display More up-to-Date Data Than Referenced in the. (2024, January 10). Topic: Social media in Australia. Statista. https://www.statista.com/topics/8628/social-media-in-australia/

Sonnenberg, S., Mason, L., Lim, Y., & Reddi, T. (2022). Towards a Human Rights-Based Approach to New and Emerging Technologies. Policy Paper Series on New and Emerging Digital Technologies and Human Rights.

 

Stewart, Cameron, & Wilson, L. (2009, June 21). The Holsworthy Barracks Plot: A Case Study of an Al-Shabab Support Network in Australia. Combating Terrorism Center at West Point. https://ctc.westpoint.edu/the-holsworthy-barracks-plot-a-case-study-of-an-al-shabab-support-network-in-australia/

Wilding, D. (2021). Regulating News and Disinformation on Digital Platforms. Journal of Telecommunications and the Digital Economy, 9(2), 11–46. https://doi.org/10.18080/jtde.v9n2.415

Wilding, D., Fray, P., Molitorisz, S., & McKewon, E. (2018). The impact of digital platforms on news and journalistic content. Digital Platforms Inquiry.

Wilding, D., Giotis, C., & Molitorisz, S. (2020). Submission to Australian Communications and Media Authority-Impartiality and Commercial Influence in Broadcast News, Discussion Paper. Impartiality and Commercial Influence in Broadcast News, Discussion Paper.

Winseck, D. (2021). Media and internet concentration in Canada, 1984–2020.

 

 

 

 

 

 

PUBLIC RELATIONS AND PROPAGANDA HAVE DISTINCT DIFFERENCES IN THEIR PRINCIPLES, ETHICS AND RESULTS

 

Introduction

The dynamics of contemporary society are undergoing drastic changes; hence the business environment is expected to develop coping mechanisms.  Precisely, the forces defining the business environment are compelling businesses to create the right image in the public arena which is imperative for their relevancy and survival.  Amongst the reasons behind this paradigm shift are the changes in channels of communication, the rate of broadcasting information and technological processes. These factors create an effective channel to reach a wider audience and disseminate the latest market information such as the availability of a variety of products, products’ features and prices of different goods as well as services.  To remain competitive and retain customers, businesses need to generate positive media coverage to create a positive image in the public eye. This approach is referred to as public relations. PR activities have been employed extensively to achieve their objectives effectively.  Consequently, public relations and propaganda are viewed as approaches that aim to shape viewpoints and influence a specific market niche opinion. Thus, it is noteworthy to mention that PR uses propaganda to support their customers’ interests while employing a myriad of techniques to persuade and influence a specific customer base. However, while public relations and propaganda are akin to communication objectives, they are distinct differences in their principles, ethics and results.

Concept of Public relation and Propaganda

The biggest message between propaganda and public relations is the degree of the truth in the message.  According to Theakrer (2020), public relations can be defined as the act of having persuasive information and executing adjustments to Forster's support for an activity or an institution. A successful PR presents an image that is aligned with the reality. Also, its persuasive nature helps in convincing the masses that it is the reality. Notably, a high percentage of PR is directed towards the general public but some reasonable percentage is directed towards the human capital within an organization (Moore et al., 2023).  PR entails several steps that include but are not limited; to conducting research, promotion, information planning, implementation of ideas and evaluation of the outcomes. It achieves its goals by connecting its activities such as publicity and media consultation that are central to disseminating information to the public. On the contrary, PR activity can be executed using unorthodox means of relying on information that includes propaganda.

 Propaganda is a persuasive mechanism that aims to shape public opinion, attitudes and beliefs using unacceptable means such as deception and lies.  Its main objective is to get support from the public and acceptance; concurrently creating hatred for the opposing party (Bredikhin et al., 2020).  In other words, primarily is to serves the interests of the messenger.  The messenger relies upon one-sided information, emphasizing the strength of one side while highlighting the limits of the other (Bastian, 2006).  It employs communication media, for example, television, radio and newspaper to reach a mammoth audience.  Since such an audience is incapable of giving feedback, it simply agrees or disagrees.

 Channel to amplify salient information’s and organization’s milestones

In a situation where PR is aligned properly with other marketing activities, it is effective in amplifying what the organization is trying to communicate using alternative channels. For example, a press release launching a new product can be timely used as a channel for marketing the product, even though the product is making its debut in the market. According to Grunig et al., (1984). The four models of communication in PR are its representation in reality. Gruni’s four models have influenced scholars in the PR field, and it is considered a perfect model in modern society (Vivian, 2017).  He draws an intellectual roadmap with well-entrenched phases that make a distinction between PR and propaganda. Precisely, it makes PR intellectually respectable, more practical and also teachable. The First three models target to help an organization to be goal-oriented.  According to Gruning, persuasion is a softer word in comparison to manipulation. He further purports that persuasion has always been an integral part of the fourth model (two-way asymmetrical); hence it is not rejected since it is symmetrical.

 The press agentry/public model of PR will attempt to amplify the key information of an organization’s product or services by getting media coverage.  Although the organization is not very concerned with the truth and accuracy, PR is not like propaganda that uses excess efforts to attempt to control public opinion and discard any dissenting arguments (Seletzky et al., 2010) . For instance, a case study of the Beijing 2008 Olympics.  The Olympics is an all-round competition being held every four years and attracts millions of spectators and thousands of participants. Since it is a global event, the visitors view things differently because of the differences in cultural backgrounds (Fei et al., 2021).  China being a communist state, controls media activities and the utilization of the internet.  Therefore, due to this factor, a major challenge faced the organizations in the country, as they tried to maintain positive public relations. Also, it plays a role in resolving the issue of engagement, a bit complicated compared to most of the countries worldwide. The event was important to the Chinese government and, therefore they used media to show that the government was committed to maintaining an open environment even before the beginning of the tournament.

Consequently, to amplify information regarding its milestones, PR employs a public information model. The model is confined to the organization disseminating true and accurate insights to inform the public (Fawkes, 2007). For example, a company releasing information on its public health campaigns aimed at dealing with waterborne diseases due to heavy flooding. While PR may be targeting to release accurate and truthful information, Propaganda in most cases employs ‘in-house journalists’ who primarily serve the media with lies and deception that people want to hear.

  The third model aims to achieve efficient communication.  The two-way asymmetric nexus is on understanding the thinking of the public (Kelly et al., 2010).  For instance, when an organization is launching a new product, the message will be packaged better with a proper approach. In a nutshell, within this model, the organization distributes feedback tools such as questionnaires. Notably, the ultimate objective of the two-way asymmetric model is to compel the audiences aligned to the desire of the organization and not bring changes to the organization.

 Within the context of the amplification of important information, such as the launching of a new product, PR employs a two-way symmetrical model. The model realm is on engagement and relationship between the organization and the public (Milojevic, 2015). Therefore, before launching a new product, the organization will try to engage the public to understand how they think. The feedback will then be utilized to make better decisions and directives in the interest of both parties.  

 Engaging with audience

Fundamentally, PR activities can generate compelling and attractive content that can feature on various platforms of the organization such as websites and social media. Thus, such information can be amongst the approaches to changing with subscribers. It can be the source of generating interest and traffic even with the culmination of the PR undertaking. Also, the movers and shakers in the industry may visit these digital platforms to get the latest information such as product development, growth plans and also various news.  The advancement in communication technology makes digital platforms the ideal platforms to communicate two-way interactive.  According to the study that involved assessing organizations’ communication, it is only government corporations and nonprofits organization that prefers to use one-way communication in their various digital platforms (Kirkwood, 2017).  According to Waters et al., (2011) these kinds of organizations have a strong preference for a one-way communications model to pass information digitally and the press agentry model was more utilized than the three other models. The systems theory emphasizes that the organization are part of the business environment that facilitates the interconnection and interaction of systems.  For example, the media, federal state, buyers and many others may be the systems within a company’s environment. While the organization is focusing on establishing an efficient external system, it is also important to have an internal system. The internal systems should have interacting subsystems, where they’re a myriad of units affecting the operation of each other. They include but are not limited to the production units marketing and accounting units. Notably, the main objective of the theory is that the survival of the organization should be pinned on monitoring and adaptation to the ever-evolving and changing environments between the systems.  The interaction between the organization and its customer base is only to provide the organization with useful insights and retain the customer base (Idris, 2020).  Although dialogue communication seems to be an effective PR activity, it is facing challenges. They are mainly triggered by organizations not willing to use social media and websites as a mechanism for reaching out to their customers. Briones et al., (2011) on research on the cross social media revealed that the challenges of building relationships and meaningful conversations on digital platforms are directly proportional to the staff’s resources and the average time spent online.  The other delimits are on assuring the organizational management of the importance of digital platforms on two-way communication and fostering a relationship.  Soon et al., (2014), study in Singapore federal state indicates that challenges in two-way communication are the investment in terms of time and resources to pursue a successful communication and the identification of the best evaluation method of evaluating public engagement on various sticky issues.

Sense of entitlement and employee pride

 An organization using PR to organize corporate social responsibility activities can help boost employees’ pride and morale.  Such activities provide an ideal opportunity for employees to work and collaborate to ensure the success of the undertaking. According to Tech and Yeomans (2017), they infer CSR is a responsibility of any organization to its society. Therefore, the employees who execute the four dominant PR roles will have a sense of entitlement and pride. During the CSR-PR undertaking the expert prescriber is responsible for identification communication breakdowns and problems.  They are also expected to develop solutions. The communication breakdown between the organization and the public will be solved in an efficient and effective approach to avoid creating more problems that may need another public relation (Broom and Smith, 1979).  The communication faciliatory employees are expected to be the bridge between the public and the organization. Their job is to facilitate interaction and play an important role in enabling and developing two-way communication. The purpose of two-way communication is for the organization to gather more information on customers’ viewpoints and act accordingly according to both parties’ interests (Broom and Smith, 1979). Another type of employee involved in CSR-PR activity is the problem-solving process facilitator.  Their job is to identify and develop mechanisms to solve problems. However, unlike the expert prescribers who work individually, they are expected to work together with the organization’s management. The collaboration ensures that they offer tailored solutions to the identified problems.  Finally, the communication technician employees are responsible for writing and distributing communication content such as press releases.  Notably, in any PR activity, there must be a press release to relay information to the public on the latest developments. However, the communication technician is not in problem-solving or strategic planning processes. In other words, their job-specification is not a task-oriented role.

 

Conclusion

Similarly, while propaganda and public relations share some similarities in communication activities, there is a distinction in their operations. Based on the information presented in the essay, it is clear that PR uses persuasion and transparency. In other words, the findings have alluded that effective persuasion is capable of shaping perceptions. Furthermore, it influences the way people interpret and accept information, hence underlines its importance in the modern society.  However, it is worth noting that even though information is persuasive it does not mean it is ethical. This is the case with propaganda that uses lies and deception to persuade the public.

 

 

 

 

 

 

 

 

 

 

 

References

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Bastian, A., 2006. Public relations vs. propaganda. Transylvanian Review of Administrative Sciences, 2(18), pp.20-25.

Bredikhin, A. & Udaltsov, A., 2020. Propaganda as a means of implementing the ideological function of the state

Briones, R.L., Kuch, B., Liu, B.F. and Jin, Y., 2011. Keeping up with the digital age: How the American Red Cross uses social media to build relationships. Public relations review, 37(1), pp.37-43.

Broom, G.M. and Smith, G.D., 1979. Testing the practitioner's impact on clients. Public relations review, 5(3), pp.47-59.

Fawkes, J., 2007. Public relations models and persuasion ethics: a new approach. Journal of communication management, 11(4), pp.313-331.

Fei, W.A.N.G. and Tong, T.O.N.G., 2021. Paradigm Shift and Networking: Reconstruction of Public Relations Concept and Practice of Beijing 2022 Olympic Winter Games from the Perspective of Relationship Management. 上海体育学院学报, 45(7), pp.35-43.

Idris, I., 2020. Propaganda in Contemporary Public Relations. In Proceedings of the 1st International Conference on Anti-Corruption and Integrity (pp. 82-89).

Grunig, J.E. and Hunt, T., 1984. Managing (Bredikhin & Udaltsov, 2020)

 

 

Kelly, K.S., Laskin, A.V. and Rosenstein, G.A., 2010. Investor relations: Two-way symmetrical practice. Journal of Public Relations Research, 22(2), pp.182-208.

Kirkwood, C.A., 2017. Non-profit organisations and stakeholder relationships: assessing digital communication through public relations theory: a thesis presented in partial fulfilment of the requirements for the degree of Master of Communication in Public Relations at Massey University, Wellington, New Zealand (Doctoral dissertation, Massey University).

Milojević, A., 2015. The two way symmetrical public relations and digital communication technologies: Between theory and praxis. CM-časopis za upravljanje komuniciranjem, 10(35), pp.81-108.

Moore, S. and Hübscher, R., 2021. Strategic communication and AI: Public relations with intelligent user interfaces. Routledge.

Seletzky, M. and Lehman-Wilzig, S., 2010. Factors underlying organizations' successful press release publication in newspapers: Additional PR elements for the evolving “Press Agentry” and “Public Information” models. International Journal of Strategic Communication, 4(4), pp.244-266.

Soon, C. and Soh, Y.D., 2014. Engagement@ web 2.0 between the government and citizens in Singapore: dialogic communication on Facebook?. Asian Journal of Communication, 24(1), pp.42-59.

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Do M&A deals create value for acquirers in Media & entertainment industry, with a focus in gaming industry

 

Literature review

This chapter introduces theories that formulate the foundation of the thesis. It highlights core theoretical principles and assumptions that inform the empirical analysis. The first two chapters introduce literature on mergers and acquisition research and efficient market hypothesis.  The chapters form the foundation for the applied method and elaborate on assumptions and theories backing the method. The subsequent two subchapters present the characteristics of the gaming industry to analyse the result.  The last subchapter summarizes academic theories and analyses M&A growth opportunities and challenges.

 

 Background on Merge and Acquisition   

Fundamentally, the terms mergers and acquisition are utilized interchangeably; however, some differences are quite salient. A merger is a combination between two, in most cases smaller size, enterprises and organizations. In a narrow view, it is a friendly transaction where top-level management in each organization seeks the shareholder's organization's approval to partake in decision-making.  The deal is negotiated within an elongated duration since there is a deep consideration of different company structures and philosophies. On the other hand, acquisitions can be defined as a hostile process enforcing the absorption of another company that ceases to exist after the process.  Therefore, acquisition undertakings are referred to as mergers even though it is debatable (Majaski, 2020). According to Moeller & Brady (2014), M&A is central to the global strategic and financial business landscape.  There is a strong correlation between the transactions and the natural evolution of organizations. Furthermore, there are powerful mechanisms to foster cooperative growth when operating in a conducive environment. For many investors, the assumptions are that such deals create value for companies underscoring the value creation aspect although the outcome can be different.

 There exists a myriad of reasons for involvement in M&A activities as well as how they are grouped differs significantly between the authors.  Trichterbon et al., (2016) argue that prior M&A experience impact positively on its general performance. They hypothesize and indicate that the M&A function, a segregated dedicated company department, rapidly enhances merger and acquisition performance. The department functions as the centre of all the M&A-related information and critically makes them proactive instead of reactive in M&A deals. Furthermore, it facilitates nursing prerequisite learning mechanisms and equips the M&A process with the necessary experience and capacity.

According to Aloke Ghosh (2001) in his study, his argument points out the vast majority of value creation found in the previous merger an acquisition researcher was biased. He argues that since the companies engaging in M&A are from a period of above-average profit they are therefore incomparable to the mean of the market but to the threat of the matching organization. In his study, he did not explore how merging firms were in a position to balloon cash flow after the merger. He did however conclude that in situations when cash was utilized as payment after the merger, there was an increment of cash flows.

 

Efficient market hypothesis

The efficient market hypothesis theory (EMH) also known as Random Walk Theory was created by Eugene Fama in the 1960s.  The theory is pegged on propositions that the prevailing price of stocks reflects on every available information at the moment such as the value of the firm (Glimne et al., 2021). It deals with the fundamentals in finance on the reason for the changes in prices in security markets and the way changes are occurring. It purports that there is a high degree of complexity in dealing with the market consequently, risk is adjusted using the market available information since the information is available to all parties and they are expected to make decisions based on it immediately. Berk et al., (2017) stated that security with equal risk should reciprocate returns, however, the statement is considered incomplete since the non-existence of the definition of equal risk. And because people from different backgrounds have different opinions and beliefs, they have differing judgements on riskiness.

 The EMH argues that profiting from the act of predicting price movements tends to be complex and not likely.  Thus, the fundamentals of price changes are the introduction of new information. A market is classified as efficient if there are prompt price adjustments without inclining towards price information (Ţiţan, 2015). The outcome thus is on the prevailing prices of securities having a reflection of information in entirety at a specific juncture. Furthermore, with all consideration factors, there is no reason to believe the prices are either unprecedentedly high or low. In other words, the security price adjustment occurs before an investor trades or makes a profit using new information.

The significance of an efficient market is due to high-intensity competition among investors ready to generate profits from the availability of new information. Precisely, the ability to figure out under and overpriced stocks is imperative (Clarke et al., 2001). Consequently, many people spend a considerable amount of time and capital in the effort to detect wrong-priced stocks.  Thus, naturally, as many of the analysts compete against each other the effort to exploit each other of over or -valued securities and the likelihood of the ability to find and capitalize on such mispriced securities diminishes.  Understandably, in equilibrium, only a relatively small percentage of the analysts will be able to profit from the exploitation of mispriced securities, mostly in an expected way (Ţiţan, 2015). For many investors, the information analysis payoff has the highest chance of not outweighing the transaction costs.

 The most salient implication of the EMH can be stated in the form of a slogan: To begin with is ‘Trust market prices’ at a given time, prices of securities in a market that is working correctly reflect all the available information to investors. Consequently, there is no opportunity for double-playing investors and therefore the outcome is that all investments in a market that are working efficiently are ‘fully priced’ which is normal because the investors are getting exactly what they have spent money on (Clarke et al., 2001).  However, the fair pricing of all securities will not that the performance of all will be equal, similarly, the chance of rising or falling in price is expected to be fairly for all securities. Thus, according to the capital markets theory, the expected outcome from security is a fundamental function of its risk.  It is worth noting that the price of the security reflects the current price value of the expected cash flows shortly and it involves various factors that include but are limited to volatility, liquidity as well as the risk of going bankrupt. Nevertheless, while the prices are rated in terms of rational, the expected changes in prices are supposed to be random and out of range of predicting since it is classified as new information using its very nature and it should be unpredictable. In a nutshell, stock prices are opinions to follow a random walk. Based on these findings, the report would like to test whether the hypothesis the report would like to test so that it can determine the importance of EMH in developing theoretical on the merger and acquisition

Hypothesis (i)

 EMH is claiming that no new information is used in making M&A decisions and is reflected in the market prices. But it can be observed the time is fluctuating all the time, thus EMH is incorrect.

Gaming industry and M&A

The gaming industry is in the midst of a period of rapid growth and diversification. The worldwide games market as of 2021   has generated $ 175.8 billion, however, despite the slight decline in revenue generation the market was poised to generate more than $ 200 billion within 4 years. The growth of the market is majoring attributed to the prevalent adoption of mobile devices, the increasingly widespread female gamers and also the democratization of the accessibility of gaming via cloud-based services. In the contemporary world, while digital content and subscription-based models are gaining popularity there is still a significant percentage of the market for physical games and hardware upgrades. Consequently, as the gaming industry continues to develop, evolve and attract a diverse range of players, the investors need to have profound insights to facilitate their understanding and catering of specific preferences and needs of underserved audiences.

Thus, considering the developing nature of the gaming industry, there are few academic research work that instigate value creation, especially in the media and entertainment industry covering the gaming sub-sector. However, there are various studies available. Markus Schiefs's (2013) research work titled “Business Models in the Software Industry “defines the business model traits and their impact on the company and M&A performance. By classification, the outcome reflects the current situation in other sectors.  He argued that the value added to the acquired company is positive and, in most cases, there is considerable emphasis that organizations are ready to pay high premiums to seize technological opportunities.  The information for company acquisition however is not conclusive. Consequently, Schief in his findings came up with three characteristics of positive M&A performance for the acquirer. The market seems to have a positive reaction to what he terms software companies that are majoring in application software, the software firms that are utilizing M&A not as an initial source of innovation for the updating of their portfolio and M&A events from an organization based in the consumer software sector.

The thesis study by Tatiana Abromava “Stock price reactions on M&A, Dividends and Game Releases. Evidence from Gaming Industry (2013)” researched 55 M&A pronouncements in the gaming industry sector for five years starting from 2008. The study found that the events positively impacted the CAR of the acquirer and the organization being acquitted stock prices and that the process of buying a near stake in a company affected positively the acquirer's stock during and after the event duration.  the increasing change in dynamics of the gaming industry is driven by innovation and lucrative virtual products and convinced the investors to seek M&A-driven growth opportunities within the sector. Thus, the strategic decisions to exploit the opportunities and be profitable may be through a combination of companies, the acquisition of profitable iPs to seek loyalty; gaining a customer base, or whether the acquisition will be central in enhancing the human capital a talent pool within the organization. Based on these findings we will conduct regression analysis to ascertain the hypothesis below.

Hypothesis

Hypothesis (ii); the Acquirers in the gaming industry are exposed to more favourable conditions compared to the rest in the music and entertainment industry

 

 

 

Characteristics of gaming industry

According to Marchand et al., (2013), the gaming and software turnover are cyclically attached to the hardware that they used for their operations.  It means that a new console is needed when games are sold and thus many people will have the get a new console until it reaches the peak before starting to experience a decline while waiting for the arrival of the new generation of consoles. Furthermore, their study argues that the demand for gaming has been taking significant market share and it may impact the wellbeing of video gaming sales. Matt Gardner (2020) states that the gaming industry is expected to experience a new level of growth for the next half a decade but it is not attributed to the gross sales revenue of the next generation consoles such as PlayStation 5. Instead, the growth of the revenue in gaming sales is expected to be the result of mobile and cloud-based gaming.

 Leverage

 The impact of leverage as for the time of M&A announcement, various studies have found it has impacted negatively on the company’s leverage on the chances of success in the process of completing acquisition even when operating under favorable conditions. Harrison et al., (2014) that companies with higher leverage tend to possess fewer resources that are prerequisites in value creation including post-announcement undertakings, which are generally a high-cost activity with the ability of adverse effects that may be not correct under specific debt agreements. Their study also found that a trading strategy that shorts acquirers with unprecedented levels of leverage and purchasing rivals of those companies results in considerable positive buy-and-hold high-level returns of at least 35% over 2 years after the acquisition announcement. Also, Jankowitsch et al., (201) indicate that even though the increased risk of debt utilized in financing the acquisition in a situation where the acquirer is highly leveraged at the time of the M&A announcement, the bonds of such a company tends to surpass the performance of bonds of acquirers with lower leverage, nonetheless both of their returns are not positive.  Cardoso's (2020) study employs dummy variables to aid in expressing the levered nature of the acquirers and their targets. The outcome of the study stressed that “results that pointed a ‘negative and statistically significant at the1%and 10% level”.  Nevertheless, the study further indicates that long-term variations, become weak drastically indicating that there is more than one factor such as the ‘management quality and macroeconomic context’.  That addresses various post-merger performances.

 Stakeholder performance implications

The theoretical framework based on the stakeholder theory level is that management and organizations are not only mandated to create the best resources for their investors but need to have a panoramic view of the interests of the customer base, and suppliers inter alia to maintain success in the long run. The theory is the result of the necessity for managers to deal with the ever-evolving business environment and the quest to have a broad framework that looks beyond the interests of the stockholders (Clarke et al., 2001). In other words, it was designed to have a deep comprehension of the needs of all parties involved who in one way or another could affect the success of the company’s objectives and goals. The implementation is through actively managing the relationship and the surroundings regarding and revolving around the business.

 The extensive studies regarding the implications of M&A result in mixed outcomes on the advantages of M&A on outcomes for the acquirers. According to Rau et al., (1998), the Acquirers and the company may be disadvantaged by overpayment, while the target company shareholder may benefit from a short period, although some researchers are claiming that the question remains unanswered. Agrawal et al (1192) in their deep research teaching Jensen et al., (1983)   findings, tried to determine the EMH, which argues that M&A should be profitable for shareholders, the findings remained unsolved, the findings that the acquirers and the firm are estimated to be losing at least 10% of their market value in the 5 years after M&A announcement instead of gaining. Another research work, utilizing a control group of non-acquired organizations concluded that after an M&A announcement the performance for both non-acquired and the ragged firms is akin. the acquiring firm shareholders among the rest tend to benefit less or experience similar returns that the returns are neutral since they incur the entire cost of acquisition, the issue of interaction and the serving debt.

Growth Opportunities

 Since there are low entry barriers, there are many game publishing companies making their entry into the market but many are struggling to reach the point of break-through. According to data from Statista (2016) close to 19000 games were released in the market at the beginning of 2016. Thus, for most of these companies to have a future they must either be acquired or forced to exit the market due to a high level of competition.  Further, since game technology is rapidly developing and competition is becoming stiffer, the cost of game production has also been increasing.  For big companies, it may become more profitable through the acquisition of small potential companies rather than engaging their developers to develop a game from scratch. Consequently, the amount of media time and consumption via the video industry has gained steady momentum in recent times since large companies have created a tendency to acquire games to increase their intellectual properties and practice business diversification.  For instance, Disney organization acquired social game development firm  Playdom I in a deal worth $ 762 million whereas Warner Bros  Home Entertainment purchased “Rocksteady and Studios” and “Midway Games”.

 Challenges and risks in the gaming industry

Despite a myriad of successful cases in gaming industry M&A, the deals also faced numerous challenges and risks. They include but are not limited to integration issues, cultural issues and the overestimation of the synergies.  For example, Blizard’sacquistion of King Digital Entertainment faced the challenge of integration, and in return, it impacted negatively on the anticipated synergies and financial performance.  Consequently, the gaming industry's foundation is based on technology.  Technology is increasingly evolving at a faster pace and therefore it is upon the firms to keep up with the pace. The fast-paced nature of the gaming industry means that the technological obsolesce and frequent shifting of customer preferences can result in the eroding of the value of the acquired firms and results in losses to the acquirer shareholders.   Thus, the acquirers must mitigate the risks to realize sustainable value creation.

 Post merger transition may result to conflict-of-interest regarding the organization culture. The merger and acquisition mean that new employees from the acquirer company come with a different culture that may conflict with the already existing culture.  If the situation is not well addressed it may lead to dwindling of performance post the M&A. therefore, the acquirer company must be interested in the organizational culture and how to deal with it. The interest is pegged on how the organizational culture may evolve o change since there is adjustment in the human capital and in most cases replacing the existing employees.

Summary

 The literature on the gaming industry M&A used the EMH theoretical approach to build argument on M&A.   therefore, using the empirical findings the report nexus is capturing of new findings. The report extensively covered gaming industry and the implications of its characteristics. The employment of leverage, challenges and opportunities provide the report with strong foundation to testing its hypotheses.

 References

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