Who Owns The Media

WHO OWNS THE MEDIA?
SIMEON DJANKOV, World Bank

TATIANA NENOVA, World Bank
CARALEE MCLIESH, World Bank
and Abstract ANDREI SHLEIFER
Harvard University
We examine the patterns of media ownership in 97 countries around the world. We find that
almost universally the largest media firms are owned by the government or by private families.
Government ownership is more pervasive in broadcasting than in the printed media. We then
examine two theories of government ownership of the media: the public interest (Pigouvian)
theory, according to which government ownership cures market failures, and the public choice
theory, according to which government ownership undermines political and economic freedom.
The data support the second theory.
Introduction
In modern economies and societies, the availability of information is central to better decision
making by voters, consumers, and investors. Much of that information is provided by the media,
including newspapers, television, and radio, which collect information and make it available to
the public. A crucial question, then, is how the media should be optimally organized. Should
newspapers or television channels be state or privately owned? Should the media industry be
organized as a monopoly or competitively?
In this paper, we consider two broad theories of organization of the media and evaluate them
using a new database of media ownership in 97 countries.
The first theory of the media—and of institutions more generally—is the public interest
(Pigouvian) theory, in which governments maximize the welfare of consumers. Government
ownership of the media, perhaps even as a monopoly, is then desirable for three reasons. First,
information is a public good—once it is supplied to some consumers, it is costly to keep it away
from others, even if they have not paid for it. Second, the provision, as well as dissemination, of
information is subject to strong increasing returns: there are significant fixed costs of organizing
information gathering and distribution facilities, but once these costs are incurred, the marginal
costs of making the information available are relatively low. Third, if consumers are ignorant,
and especially if private media outlets serve the governing classes, then state media ownership
can expose the public to less biased, more complete, and more accurate information than it could
obtain with private ownership.
All these arguments were adduced by the management of the newly formed British Broadcasting
Corporation (BBC) in support of maintaining a publicly subsidized monopoly on radio and
television in Britain, and subsequently repeated in many developing countries.
In contrast, the public choice theory holds that a government-owned media outlet would
distort and manipulate information to entrench the incumbent politicians, preclude voters and
consumers from making informed decisions, and ultimately undermine both democracy and
markets. Because private and independent media supply alternative views to the public, they
enable individuals to choose among political candidates, goods, and securities—with less fear of
abuse by unscrupulous politicians, producers, and promoters. Moreover, competition among
media firms assures that voters, consumers, and investors obtain, on average, unbiased and
accurate information. The role of such private and competitive media is held to be so important
for the checks-and-balances system of modern democracy that they have come to be called “the
fourth estate,” along with the executive, the legislature, and the courts. Interestingly, even the
Pigouvian economists, who advocate regulation or even nationalization by a benevolent
government when considering other industries, support the free and private media.
Our paper provides a first systematic look at the extent of state and private ownership of media
firms around the world, of the different kinds of private ownership, and of the prevalence of
monopoly across countries and segments of the media industry. Our basic finding is that the two
dominant forms of ownership of media firms around the world are ownership by the state and
ownership by concentrated private owners, namely, controlling families. Many hypothesize that
the “amenity potential,” also known as “the private benefits of control,” arising from owning
media outlets is extremely high. In other words, the nonfinancial benefits, such as fame and
influence, that are obtained by controlling a newspaper or a television station must be
considerably higher than those that come from controlling a firm of comparable size in, say, the
bottling industry. Economic theory then predicts that private control of media firms should be
highly concentrated: the control of widely held firms with a high amenity potential is up for
grabs and cannot be sustained in equilibrium. Our findings are broadly consistent with this
prediction. Having described the basic patterns of media ownership, we evaluate the data in light
of the public interest and the public choice theories.
We find that government ownership of the media is greater in countries that are poorer, have
greater overall state ownership in the economy, lower levels of school enrollments, and more
autocratic regimes. The last finding in particular casts doubt on the proposition that state
ownership of the media serves benevolent ends. We then consider the consequences of state
ownership of the media, as measured by freedom of the press, political and economic freedom,
and health outcomes.
We find pervasive evidence of “worse” outcomes associated with greater state ownership of the
media (especially the press). The evidence is inconsistent with the Pigouvian view of state
ownership of the media. Still, since we have only a cross-section of countries, we cannot
decisively interpret this evidence as causal. Other, unmeasured, factors may account for the
observed relationships.
Conclusion
In this paper, we examine ownership patterns of newspapers and television (and to a lesser extent
radio) in 97 countries around the world. We find that media firms nearly universally have
ownership structures with large controlling shareholders and that these shareholders are either
families or governments. This evidence is broadly consistent with the ideas that there is large
amenity potential (control benefits) associated with owning media—be it political influence or
fame. We then show that countries that are poorer, more autocratic, with lower levels of primary
school enrollment, and with higher levels of state intervention in the economy also have greater
state ownership of the media. In addition, countries with greater state ownership of the
media have less free press, fewer political rights for citizens, inferior governance, less
developed capital markets, and inferior health outcomes (the last result being particularly
important in light of the argument that state ownership of the media serves the needs of the
poor).
The negative association between government ownership and political and economic
freedom is stronger for newspapers than for television. Although none of this evidence can
be unambiguously interpreted as causal, it obtains with extensive controls and there is no
empirical evidence of any “benefits” of state ownership. At some broad level, these results are
unsurprising, as intellectuals since John Milton in the seventeenth century have advocated free
press and independent media. Still, the results do provide support for the public choice against
public interest theory of media ownership in an environment where, as Coase has argued, the
public interest case is especially strong. Yet the data are inconsistent with these Pigouvian
arguments and reveal no benefits of state ownership

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WHO OWNS THE MEDIA?

SIMEON DJANKOV, World Bank

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