And the Commercialization of the Internet

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The Political Economy of Communications


the Commercialization of the Internet



Rory O’Brien


Course: LIS3725Y

Professor: Andrew Clement

Date: August 5, 1998



Table of Contents



Political Economy of Communication


Commodification of content

The audience commodity and advertising

Personal information as commodity

Intrusion into public spaces


Corporate concentration



Social class

Gender and race

Social movements

The Political Economy of the Internet

Growth and Globalization

Increase in the number of people online

Mergers and acquisitions

Microsoft and monopoly

Governments and the Global Information Infrastructure (GII)

The Net Is Getting Commercialized

Advertising on the net

Consumption on the net

Some Issues

Pornography and censorship

Security and privacy

Lifestyle changes

Who will govern the Internet?

The info-rich and the info-poor







Today, I have read my mail, watched a video clip, listened to a CD, done some research, played a game, and wrote this paper. All this was done on one machine, my personal computer at home. My computer is hooked up to the Internet via a telephone line. The computer cost me $4,000 two years ago, and a telephone line and Internet connection costs about $600/year. This is a considerable sum, but because this technology has become an important part of my work, it is worth it. I am only one of millions in the same situation, who, with our money, are fueling the single largest media transformation in history, the convergence of social interactions into a digital format on the Internet.

It is vital that we understand this transformation of the way we communicate, as it has immense ramifications in almost every aspect of our lives, from the way we work, to how we play, learn and participate in civic life. We should not be complacent, trusting that the decision-makers shaping these new systems of communication will look after our interests. They are being driven by a systemic momentum that will, if unchecked, produce a society in which people will interact solely on the basis of economic consumption, with manipulative, commercial intrusions into daily life undreamed of a generation ago. Immediate action is required to ensure that the current trend for the commercialization of the Internet does not result in a global consumer society, but instead preserves at least some vestiges of a civil society.

This paper is written to clarify the processes involved in the commercialization of the Internet. It is divided into two main sections. In the first section, I attempt to present a critical analysis of the political economy of communication, using some conceptual tools designed by Vincent Mosco, a noted communications researcher. This will provide the ‘larger picture’ of the information and communication sector in the world today. The second section continues this analysis, but focuses in on the Internet itself, to show how it is becoming increasingly commercialized and shaped by the agendas of the corporate world. In addition, a number of issues are presented, which serve to highlight some of the more pressing concerns.


Political Economy of Communication

In his recent book, The Political Economy of Communication (1996), Vincent Mosco provides insight into the forces that are shaping the way we communicate. He does so through the analytical method of trying to understand the political economy of the evolving information and communications sector, which is to say he attempts to uncover the realities of the current situation: the players, their activities and environments, and their motives and effects. He prefers to study social processes, rather than structures and institutions, and while he realizes that no analysis can encompass the totality of events and relationships, one can focus attention on particular ‘entry points’ in the field to provide a theoretical framework for understanding those social processes.

Mosco’s three ‘entry points’ for analysis are commodification, spatialization and structuration. Each will be explained and elaborated on in the subsequent sections.



Mosco (1996: 143-144) defines commodification as "the process of transforming use values into exchange values, of transforming products whose value is determined by their ability to meet individual and social needs into products whose value is set by what they can bring in the marketplace". Commodification is the primary means by which social relations become economic relations. Schiller (1996a: 18) applies this idea to the exchange of information when he writes:

"The spectacularly improved means of producing, organizing, and disseminating information has transformed industrial, political, and cultural practices and processes. Manufacturing, elections, and creative efforts are increasingly dependent on informational inputs. This has conferred great value on some categories of information. The production and sale of information have become major sites of profit making. What had been in large measure a social good has been transformed into a commodity for sale."


Commodification of content

The commodification of media content involves the transformation of messages into marketable products. Items produced by a series of creative processes, such as the development of a film, newspaper article, or recording, are packaged up and distributed to consumers. In some cases, the consumers pay directly for the movie tickets and CDs, in others, they pay indirectly through higher costs for general merchandise and service required to reimburse those companies for the expenses of advertising, which in turn pays for the ‘free’ TV or radio program consumed.

Realization of profits depends on the extent to which labour, consumer, and capital markets can be controlled: labour via increasing workhours for the same pay, and increasing the productivity of the worker through work measurement and monitoring systems; consumers by aiming for market monopoly, use of advertising, and diversification of product line; and capital by allowing for replacement of labour with machines and expansion of the commodity form, i.e., new content venues.

Regardless of the processes involved, the commodification of media products are especially important field of research since they are immediately involved in shaping consciousness, both at the individual and collective levels. Television, in particular, has become one of the major influences in people’s lives, with more time spent watching TV than practically any other activity.

Most of the research into communications has focussed on how media messages are shaped to reflect the interests of capitalist enterprises. Though the standard rationale is that the media are just giving people what they want, it is more the case that the media are giving advertisers what their corporate customers want, namely to induce people to buy their products. So, in addition to the ideological role of the communications industry, and that of being a site of commodity production in its own right, it also supports the commodification processes in society as a whole, through the provision of advertising services.


The audience commodity and advertising

Though people generally think the purpose of mass media is to serve them with information or entertainment, those in control of the media know their primary function is to sell audiences to advertisers (Smythe 1981). Television, radio, magazines, and to a lesser extent newspapers, provide content that has been carefully selected to appeal to particular segments of the population, each with its own consumption habits. The ‘sale’ of these various audiences to advertising companies constitutes the main revenue stream for these media corporations.

Dallas Smythe elaborates on the reasons the system has been tremendously successful in promoting the consumer ethic:

"The secret... will be found in (1) the relation of advertising to the news, entertainment, and informational material in the mass media; (2) the relations of both that material and advertising to real consumer goods and services, political candidates, and public issues; (3) the relations of advertising and consumer goods and services to the people who consume them; (4) the effective control of people's lives which the monopoly capitalist corporations dominating the foregoing three sets of relationships try to establish and maintain. The capitalist system cultivates the illusion that the three streams of information and things are independent: the advertising merely "supports" or "makes possible" the news, information, and entertainment, which in turn are separate from the consumer goods and services we buy. This is untrue. The commercial mass media are advertising in their entirety."{Smythe 1981: 7-8}

A number of researchers have commented on the nature of advertising. Stuart Ewan (1976) provides the argument that advertising grew in importance as a means of promoting a consumption-oriented social ideology in order to resolve the problems of social control and the need for increased production in the 1920s and 30s. William Leiss (1976) criticizes this ethic of consumption on the basis that it does not produce satisfaction, but rather creates a permanent on-going dissatisfaction that can only be momentarily assuaged by buying more things. Jhally (1988) continues this line of exploration in his writings on commodity fetishism.

The evolution of the consumer society has another ramification, a major one. Current consumptive lifestyles in the wealthier nations are environmentally unsustainable. The resources required to produce the goods are either non-renewable, or are being used up faster than they can replenish themselves. Waste products are being dumped into the soil, air and water faster than they can be absorbed. The energy fueling this cycle of production and consumption is largely derived from the burning of fossil fuels. The megatons of carbon dioxide waste resulting from this process has led directly to global warming and climate change. The magnitude of the probable effects is appalling, including a rise in sea level, reduction in biodiversity, and more severe floods, droughts and storms. It seems ironic that, in light of this knowledge, that the world automobile fleet recently surpassed the five hundred million mark (Worldwatch 1998). No doubt the advertising industry, for which the automobile is the single largest advertised commodity, must bear some of the responsibility for that.


Personal information as commodity

Personal information is also becoming a commodity. Corporate means of obtaining feedback about preferences for media products, such as audience ratings for TV programs, is becoming more sophisticated, making use of advanced communication and information technologies. This use is not constrained to the mass media - it is now a major part of most economic transactions to collect information about those transactions and sell it to others. Credit card purchases are a good example; they provide the credit card company with information on your buying preferences. This becomes the basis for categorizing you into a database of demographic profiles, which are then sold to companies whose products and services are purchased most by consumers with your profile. Besides opportunities for direct marketing and sales, companies’ decisions regarding such things as pricing, location of stores, inventory, and product development are also enhanced with such information, hence its value as a commodity.

This type of electronic ‘surveillance’ of transactions and activities has been extended beyond economic feedback on purchases. Clement (1992) relates how it is increasingly being used to monitor employee performance via automatic data collection on tasks related to computer use. As the use of computers expands in our information society, the threat of ‘Big Brother’ cannot be ruled out, although it may not be government but big business that holds ultimate power.


Intrusion into public spaces

Commodification processes are intruding into public information and cultural areas traditionally outside of the commercial realm. Libraries and schools, suffering under government cutbacks, are cutting deals with corporations to allow marketing and sales to take place on their premises in return for much-needed revenue. Publicly-owned communication venues such as postal, telephone and broadcasting companies are being increasingly privatized. Public spaces are also being encroached upon by advertising, on streets, in museums, and sports arenas, to name a few. Even clothing is used for advertising - witness the popularity of ‘Club Monaco’ and ‘Roots’ brandnames emblazoned on sweatshirts and handbags. People are even sporting Nike tatoos.



Spatialization, according to Mosco, refers to "the process of overcoming the constraints of space and time in social life" (1996: 173). In reference to the political economy of communication, it refers to the constraints on the movement or flow of information, goods and services, and also to the effects of communication on the processes of differentiation of corporate operations and their subsequent reintegration.


Corporate concentration

"The political economy of communication has specifically addressed spatialization chiefly in terms of the institutional extension of corporate power in the communication industry. This is manifested in the sheer growth in the size of media firms, measured by assets, revenues, profit, employees, and share value. Political economy has specifically examined growth by taking up different forms of corporate concentration" {Mosco 1996: 175}

Corporate concentration proceeds along paths of horizontal and vertical integration. Horizontal integration occurs when a media enterprise buys a significant part of another company that is not a direct competitor. In some cases, the bought company is outside the industry altogether, however, in most instances, it is a related media corporation. Examples of such cross-media conglomeration include News Corporation’s takeover of the Twentieth Century Film Coporation, Time-Warner’s purchase of Turner Broadcasting, and Disney’s acquisition of Cap Cities/ABC.

Vertical integration takes place when a company extends control within a line of business, often to provide competitive advantage due to security of production. Forward integration refers to the purchase of companies to which one sells, as in the case of MCA’s purchase of Cineplex-Odeon, a large theatre chain through which MCA could distribute its films. Backward integration occurs when a supplier is bought, such as when The New York Times acquired paper mills in Quebec to reduce market uncertainties in the supply of paper for its presses.

The desire to increase profits and reduce risks has led, through a spate of mergers and acquisitions mostly over the past 10 years, to an oligopolization of the industry worldwide. Edward Herman and Robert McChesney, following the work of Jeremy Tunstall (1977) and Ben Bagdikian (1992), trace the rise of this oligopoly in The Global Media (1997). They conclude

"The global media is dominated by ten or so vertically integrated media conglomerates, most of which are based in the United States. Another thirty or forty significant supporting firms round out the meaningful positions in the system. These firms operate in oligopolistic markets with substantial barriers to entry. They compete vigorously on a non-price basis, but their competition is softened not only by common interests as oligopolists, but also by a vast array of joint ventures, strategic alliances, and cross-ownership among the leading firms." (p. 104)

A recent example illustrates this very well:

"The US regional telecoms operators Bell Atlantic and GTE said they have agreed to a merger of equals that would create a telecoms giant with $53 billion in combined annual revenues, a combined market capitalisation of $125 million and 250,000 employees. The merged company would be the largest US local exchange carrier with 63 million access lines, or over one third of the total, and the leading cellular operator with 10.6 million subscribers, or a 20% market share.

The merged company would also have strong positions in the data transmission business, where both Bell Atlantic and GTE are heavily investing in the ADSL technology, which allows for high-speed data transmission over regular phone lines. At global level, the two groups have assets in 30 countries around the world with no overlap.

The move is the latest in a series of mega-mergers that have led to the rapid concentration of the US telecoms sector, a process which was triggered by the adoption of the 1996 US Telecoms Act. Bell Atlantic and GTE explained that the merger is aimed at acquiring the financial, operational and technological resources to compete effectively with other emerging US communications giants, in particular AT&T-TCI, SBC-Ameritech and WorldCom-MCI." (European Commission 1998b)

Regarding the influence of the state on the evolution of the media industry, Mosco outlines four processes that relate to both spatialization and commodification: commercialization, liberalization, privatization, and internationalization. Support for commercialization has the state moving away from policies and regulations that serve the public interest, such as the principle of universality, toward those that favour commercial interests, such as the deregulation of the telephone companies. Government liberalization of restrictions in the number of media service providers, such as allowing private competitors entry into a market previously controlled by a state-owned monopoly, is seen as beneficial by supporters of competition, but as a relinquishing of control by the state to business oligopolies. Privatization of state-owned media enterprises has been commensurate with market liberalization, and is indicative of government’s push toward commercialization, notwithstanding potential effects on political and cultural sovereignity. Internationalization, often in the form of inter-governmental agreements to promote trade (e.g., the North American Free Trade Agreement, trans-national integrations (e.g., the European Union), or agencies for managing inter-state commerce (GATT, World Bank, etc.), has been effective in giving the richer nations, and their resident trans-national corporations, more control over global communication policies. Governments, via these four processes, show themselves to be facilitators, rather than opponents, of the trend toward social dominance by commercial media oligopolies.



The push toward globalism by large-scale business interests has been matched, and fueled by, the globalism of trans-national media corporations. This has led to a number of social effects, but has been particularly marked in terms of what Schiller (1976) calls "cultural imperialism", i.e., the domination of the poorer nations by the richer ones in areas of culture and social policies. It is worth exploring this aspect in more detail, since not only does three-quarters of humanity live in the poorer ‘South’, but because the hegemonic processes are also illustrative of the controlling influences of the large media within the North itself.

Most of the efforts made by UNESCO in the 1970s and 1980s to establish a New World Information and Communication Order, were designed to improve the parity in information fows between North and South. The following quotes by highly regarded researchers show why these efforts were needed:

"The traditional Western concept of freedom, which states that the state's only obligation is to guarantee laissez-faire, has meant that society has allowed freedom of speech to be realized with the means at the disposal of each individual. In this way freedom of speech has in practice become the freedom of the well-to-do... At the international level are to be found the ideals of free communication and their actual distorted execution for the rich on the one hand and the poor on the other. Globally the flow of information between states - not least the material pumped out by television - is to a very great extent a one-way, unbalanced traffic..." {Nordenstreng 1974: 44}

"What is generally termed the global economy would rather seem the economies of a few OECD member states and newly industsrializing countries. What is often refered to as "global communication" is virturally the transnational proliferation of mass-marketed advertizing and entertainment produced by a few mega-companies. As with so many other ‘global’ events: if there is a global information revolution, ther majority of the world’s population has not received an invitiation. There are still very stark inequities between North and South in the access to communication hardware and software. Disparity is a clear feature of the today’s global communication."{Hamelink 1995: 2}

The proliferation and commercialization of such mass media as television, magazines, radio and newspapers were once hailed as positive signs of "development" by most Third World governments. Their political and economic leaders were no strangers to First World culture and economic systems, having either spent many years studying in the universities of the industrialized nations or grown up in the wealthy Westernized enclaves of the colonial elite. To them development was synonymous with economic growth stemming from an adoption of the Western model, i.e., capital-intensive industrialization and urbanization. The mass media, and television in particular, were seen as the most important means to induce the necessary socio-economic changes in their 'traditional' societies.

Early researchers in the field of communications in development (Lerner, 1961; Pye, 1963; Schramm, 1964) focussed on the power of the media to alter people's ways of thinking, to mentally prepare them to accept and welcome the social and technical innovations needed to 'modernize'. They thought by aiding the diffusion of Western ideas and technology, the mass media would help to improve the living conditions of the poor people in 'backward' nations.

Such conclusions were overly optimistic and basically flawed, according to later commentators (Rogers, 1976; Hedebro, 1982). Their main basis of criticism was that the earlier proponents accepted the premises of the 'dominant paradigm' of developmental thinking; i.e., that the cause of underdevelopment lay in the Third World nations themselves. As they saw it, the ‘under-developed’ nations lacked not only modern facilities such as capital, skilled labour, transportation and industrialized production infrastructures, and mass media, but also a progressive mindset - the citizens, especially the peasantry, were tradition bound, fatalistic, prejudiced and unresponsive to innovation. Like the political and economic thinkers who created the notion of 'development' as a world ideal, these early researchers ignored the historical reality of the centuries-old, unjust and exploitative relationships between the wealthy and poor countries, relations established by the old colonial powers primarily to benefit their economies at the expense of the diversification and expansion of the economies of the colonized nations.

"Here we have the Western model of progress and individual success in a nutshell. Accumulation of consumer goods and a readiness to acquire more goods when such new opportunities are opened up by the product development departments of private enterprises; this is development... Examples from history and common sense refute this simplified view of social change. Individual change is not unimportant but what seems to be most needed in developing countries are changes in societal structures: land ownership, ownership of the means of production, distribution of power in political processes, and the like. These changes are not going to be brought about by using the mass media to promote such Western middle-class pre-dispositions as need for achievement, deferred gratification, and individual mobility." {Hedebro 1982: 38}

Preponderence Of US Media Products

The majority of global media conglomerates are US-based, particularly in the entertainment industries of film, television and music. What are the reasons US cultural fare is preferred by people in other countries? Media products are very similar to any other item of merchandise traded between nations. If those from the US are of higher quality and cheaper to buy than locally produced products, they will be preferred by the local retail merchants and consumers. The advanced technological expertise of American producers of film, TV programmes, magazines, and advertising or news copy, coupled with their long history of leadership in innovation has allowed US productions to become the ultimate 'definitions' of quality. Even the successful local products are often copies of American format.

Economies of scale also give the US a decided advantage over their competitors. The giant American media corporations are oligopolies, carving up the North American market among themselves and ensuring handsome profits by making the startup costs of any would-be competition economically unfeasible. They can afford to spend millions of dollars on a movie, TV show, or news story, knowing the great size of their market in the US alone would cover the costs of production. It is generally the 'software' (the information) that constitutes the bulk of their expenditures. The 'hardware' (e.g., celluloid, videotape, etc.) is relatively inexpensive to produce and distribute. Once the production costs have been satisfied by the market in the US , export sales are almost pure 'gravy'. Profit margins are so high for US companies in Latin America, they can afford to consistantly undercut the prices of the local producers.

And why have the local governments not imposed more severe restrictions on the distribution of American cultural products? The answer has been provided by many critical theorists (notably Stavrianos 1981 and Galtung 1980). The reason that US cultural domination has been tolerated to the extent it has is that the regional power elite identify more closely with their US counterparts than they do with their fellow citizens. Not only do they share the ideologies of the local American businesspersons, they also share their consumptive lifestyles. The money to pay for such status-conscious materialism often comes from acting as the local agents of the US multinational corporations. The managers of the Latin American 'cultural industries' are generally part of the compradore elite, made wealthy by sharing the profits of imported media fare. It has not been in their interests to bite the hand that feeds them.

Jorge A. Schnitman (1984) has given us an insight into such political and economic machinations in his review of the historical development of the film industry in Argentina. In 1946, Argentina was under the control of the strongly nationalistic government of Peron. Because of the power of the media to promote a sense of national identity, the local film industry was aided by protectionist measures. Laws were passed to ensure that 25% of all films shown in theatres in Buenos Aires, and 40% of films shown elsewhere, must have been produced in Argentina. When the Motion Picture Export Association of America refused to accept reciprocity trade in films, Peron suspended film import permits. The Argentine theatre owners and film distributors became alarmed at a 30% drop in attendance, with a corresponding drop in profits. They claimed, with some justification, that local films were of too poor quality, being hastily produced and heavily censored. They became part of a lobbying effort to allow foreign films back into the country. In 1952, after pressure was applied by the financial leaders of Argentina to remove import restrictions as a condition for receiving loans from the US Export-Import Bank, Peron relented. Within a few years, Peron was overthrown in a coup and US films had regained their position of dominance. The Argentine film industry has never recovered.

George Gerbner, who has been involved in a long-term study of the contents of film and television production, gives us one indication of why the production of programs for a global market may not be beneficial to any audience, either in the US or abroad.

"Consolidation has meant that, to make a profit, programs must be exported. Programs that are violent have a dramatic ingredient that translates well into any language. That, plus the fact that they are relatively inexpensive for foreign TV programmers to buy for the size of the audience that is sold to the advertisers, make ‘action’ (i.e., violent) media products the main type of cultural export." {Gerbner 1996: 32}

"Violence on television is an integral part of a system of global marketing. It dominates an increasing share of the world’s screens despite its relative lack of popularity in any country. Its consequences go far beyond inciting aggression. The system inhibits the portrayal of diverse dramatic approaches to conflict, depresses independent television production, deprives viewers of more popular choices, victimizes some and emboldens others, heightens general intimidation, and invites repressive postures by politicians that exploit the widespread insecurities the system itself generates." {Gerbner 1996: 28}


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