Universität Flensburg Internationales Institut für Management Professur für Allgemeine Betriebswirtschaftslehre, insbesondere Medienmanagement ADVERTISING PRICING IN GERMAN CONSUMER MAGAZINE INDUSTRY - An Industrial Economic Analysis of Market Concentration, Advertising Prices, and their Interrelations - Dissertation zur Erlangung des akademischen Grades Doktorin der Wirtschaftswissenschaften (Dr. rer. pol.) an der Universität Flensburg Astrid Kurad, M.B.A., B.B.A. Flensburg, 24. November 2008 Supervisor: Prof. Dr. Stephan Panther Universität Flensburg Internationales Institut für Management Censors: Prof. Dr. Robert Picard Jönköping International Business School Media Management and Transformation Centre Prof. Dr. Mike Friedrichsen Stuttgart Media University Department Business Informatics Institute for Media Business (IMB) ii Meinen Eltern iii ACKNOWLEDGEMENT In pursuing my dissertation, many people supported me on this way. Finally, I have the chance to express my thankfulness to them. First and foremost, I thank Prof. Dr. Mike Friedrichsen for guiding me through the entire dissertation process with tremendous expertise, sin- cerity and cordiality. During the last years, he was a continuous source of motivation and inspiration. In issues of media economics and media management, he was an experienced and patient partner in every de- bate. Furthermore, his help and suggestions were invaluable in the process of empirical analyses and interpretations. His influence as an esteemed tutor and a dear friend will have major impact on me wher- ever I will go and whatever I will do in the future. I am also very grateful to Prof. Dr. Stephan Panther for being available for discussions on theoretical, empirical and formal topics of my disser- tation. As an unmitigated economist, he helped me to discover new perspectives of the topic and gave me valuable comments and sugges- tions to improve my thesis. During my stay at the Media Management and Transformation Centre, I not only experienced a beautiful wintertime but also received valuable information in plenty of precious discussions on the theoretical part of my thesis and possible empirical approaches. I would like to express my gratefulness to Prof. Dr. Robert Picard, Prof. Dr. Gustafsson and the entire MMTC staff for their hospitality and for giving me the possibility to present and discuss crucial aspects of the dissertation with them. I am grateful and honoured for having been part of the MMTC and having met a whole lot of wonderful people. I particularly owe thanks to Robert Picard who took over the task of reviewing my dissertation. iv I thank Timo Abend for his loving understanding and his neverending patience and support no matter how far away I have been during this challenging task. Furthermore, I would like to thank my dear friends Anne-Katrin Nie- meier, Kati Jäckel and Katrin Späth and my brother Dieter Kurad for accompanying and encouraging me in all these years and always being there for me. Finally, I owe special thanks to my parents who supported me in every imaginable way. Astrid Kurad Flensburg, November 2008 v LIST OF CONTENTS ACKNOWLEDGEMENT ............................................................................. IV! LIST OF CONTENTS ................................................................................... VI! LIST OF FIGURES ....................................................................................... XI! LIST OF TABLES ........................................................................................ XV PART I.! INTRODUCTION ......................................................................... 1! 1! RESEARCH PROBLEM AND DEMARCATION OF THE TOPIC ..................... 1! 2! RESEARCH APPROACH OVERVIEW ..................................................... 13! 3! AIMS AND STRUCTURE OF THE THESIS ............................................... 17 PART II.! THEORETICAL FRAMEWORK ............................................ 20! 4! ECONOMICS OF CONSUMER MAGAZINES ............................................ 20! 4.1! Definition and Typology of Consumer Magazines ........................ 20! 4.2! Attributes and Particularities of Consumer Magazines ................ 23! 4.2.1! Legal Particularities ................................................................... 24! 4.2.2! Duality of Submarkets and Business Model ............................. 25! 4.2.3! Financial Particularities ............................................................. 30! 4.3! Good Classification of Consumer Magazines ............................... 30! 4.3.1! Free Good versus Scarce Good ................................................. 30! 4.3.2! Real/Material Good versus Service/Immaterial Good .............. 31! 4.3.3! Consumer Good versus Producer Good .................................... 31! 4.3.4! Durable Good versus Nondurable Good ................................... 32! 4.3.5! Private Good versus Public Good ............................................. 34! 4.3.6! Search Good versus Experience or Credence Good .................. 35! vi 4.3.7! Substitution Good versus Complementary Goods .................... 37! 4.3.8! Heterogeneous Good versus Homogeneous Good .................... 38! 5! MARKET CONCENTRATION, ADVERTISING PRICING STRATEGIES, AND THEIR INTERRELATION IN MEDIA INDUSTRIES .................................... 40! 5.1! Industrial Economics as the Main Theoretical Framework and relevant Aspects from Strategic Management ............................... 41! 5.1.1! General Assumptions and Approaches ..................................... 41! 5.1.2! Application and Integration of General Industrial Economic Theory to Media Economics Research ...................................... 46! 5.1.3! Relevant Concepts from Strategic Management ....................... 49! 5.2! Market Concentration in Media Markets ...................................... 52! 5.2.1! General Definition and Demarcation of Market Concentration 52! 5.2.2! Measuring Market Concentration .............................................. 54! 5.2.3! Media Related Studies on Market Concentration...................... 60! 5.3! Economics of Pricing and Advertising Pricing ............................. 64! 5.3.1! Definition and Demarcation of the Terms Price and Pricing .... 64! 5.3.2! Theoretical Approaches and Concepts of Pricing ..................... 68! 5.3.3! Strategic Options and Instruments in Advertising Pricing ........ 76! 5.3.4! Media Related Studies in Advertising Pricing .......................... 85! 5.4! Media Related Studies on Interrelation between Market Concentration and Pricing Strategies ........................................... 86 PART III.! RESEARCH STRATEGY .......................................................... 89! 6! QUANTITATIVE AND HYPOTHETICO-DEDUCTIVE RESEARCH DESIGN . 89! 6.1! Derivation of Research Questions from Research Aims ............... 91! 6.2! Relevant Variables for the Analyses .............................................. 91! 6.2.1! General Variables ...................................................................... 92! 6.2.2! Market Concentration ................................................................ 93! vii 6.2.3! Advertising Prices ..................................................................... 95! 6.3! Causal Hypotheses, Operationalization, and Variables for Concentration-Price-Interrelation Analysis ................................. 95! 6.4! Selected Sample for Analysis ......................................................... 97! 6.5! Data Sources ............................................................................... 100! 7! METHODS OF EVALUATION AND INTERPRETATION........................... 102 PART IV.! ANALYSIS OF DATA AND RESULTS ................................. 108! 8! MARKET CONCENTRATION IN CONSUMER MAGAZINE SUBMARKETS (RESEARCH QUESTION 1) ................................................................. 108! 8.1! Market Concentration in Reader Market .................................... 108! 8.1.1! Number of Publishing Houses ................................................. 109! 8.1.2! Market Shares in the Reader Market for Consumer Magazine Submarkets and General Results for Concentration on the Reader Market ......................................................................... 113! 8.1.3! Comparative Analysis of Reader Market Concentration in the Consumer Magazine Submarkets ............................................ 118! 8.2! Market Concentration in Advertising Market ............................. 128! 8.2.1! Advertising Earnings and derived Market Shares ................... 128! 8.2.2! Comparative Analysis of Advertising Market Concentration in the Consumer Magazine Submarkets ...................................... 130! 8.3! Summary ...................................................................................... 139 9! ANALYSIS OF ADVERTISING PRICES AND ADVERTISING PRICING STRATEGIES IN CONSUMER MAGAZINE INDUSTRY (RESEARCH QUESTION 2) .................................................................................... 141! 9.1! Absolute Advertising Prices ........................................................ 141! 9.1.1! Descriptive Results of Absolute Advertising Prices in Total Consumer Magazine Market ................................................... 142! viii 9.1.2! Comparative Analysis of Absolute Advertising Pricing in Consumer Magazine Submarkets ............................................ 145! 9.2! Cost per Thousand as Relative Advertising Price Measure ........ 148! 9.2.1!