The relationship of concentration and diversity

A very interesting and relatively independent research stream on cultural industry dynamics is that on the relationship between industry concentration and product diversity. This stream of research rests on the tradition of the cultural pessimism of Adorno and Horkheimer. In this tradition cultural industries are seen to produce cultural goods ―on a large scale and in accordance with a strategy based on economic considerations rather than any concern for cultural development‖

(UNESCO 1982, p. 21). As the large firms control the means of production and the distribution circuits, the creative artists are left at the mercy of consumer demand that is dictated by such large corporations (ibid.). The starting point for the concentration and diversity research has been that large corporations are less interested in artistic values than small ones, and for this reason their products offer a low degree of diversity.

Similar arguments have also been built based on a more neutral basis where corporations are not seen as having a sinister agenda but as functioning based on risk calculations. In highly concentrated industries firms may use their market power to avoid providing significantly

6 The third console generation includes Nintendo Entertainment System, Sega Master System and Atari 7800, among others, launched in the mid-1980s

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innovative, and thus risky, goods to consumers. DiMaggio (1977, pp. 440-441) draws an analogy between competition based on innovations in the cultural sector and price competition in other industries. As oligopolists in other industries are unwilling to rock the boat with price reductions, similarly oligopolists in cultural industries may be unwilling to upset the status quo by introducing highly innovative goods. This is aggravated by the unpredictability of consumer response to any such new offering which is inherent to the cultural and creative industries. (ibid.) These factors may make it tempting for large corporations in the cultural industries to offer moderately innovative and predictable goods without much diversity.

The theme of concentration and diversity has been especially popular in the USA because of their anti-trust laws. Cultural industries have had their own major anti-trust trial by which the Motion Pictures Patents Corporation was disintegrated (see Mezias and Boyle 2005). In addition, interest in the concentration of cultural producers and diversity in their offerings is based on the special position that the media industries have in society (see Wirth and Bloch 1995).

The first empirical study on the relationship of concentration and diversity was published by Peterson and Berger in 1975 and it concerned the music recording industry. The study is based on data from Billboard Hot 100 charts between 1948 and 1973. Peterson and Berger (1975) found that as the majors have oligopolised the market the diversity among products has decreased. This phenomenon was aggravated by the major firms‘ efforts to monopolise resources, such as distribution channels, songwriters and performers, by issuing long contracts with them. Popular performers were unable get their more experimental material to the market through alternative record labels as their contracts bound them to a single label. Also, even given the chance with such experimental material, the alternative independent labels would have faced serious difficulties in distribution. Peterson and Berger (1975) reached the conclusion that competition leads to diversity and concentration to homogeneity.

Peterson and Berger‘s (1975) paper went without much debate for 17 years before opposing views emerged. Lopes (1992) disagrees with Peterson and Berger (1975) and argues that market concentration has not led to homogeneity because the majors have adopted an open system approach to music production. The closed system of in-house development characteristic of the 1940s and 1950s has been replaced with an open system where music is produced by semiautonomous label divisions within each company, which establish links with independent labels and independent record producers. In the 1980s the ratio of labels to firms in the top 100 music charts has risen considerably indicating a greater number of decision-makers. Despite continuing market concentration in the 1980s, the numbers of new artists in the charts has risen. The number of established artists in the charts has remained constant since the early 1970s, which indicates that homogeneity has not increased. Despite the oligopolisation of the popular music market innovation and diversity have increased during the 1980s. ―High market concentration produces no single, inevitable effect on innovation and diversity in large culture industries: instead, the effect of high market concentration depends on the organization of the specific industry and the structure of its market.‖ (Lopes 1992, p. 70)

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Burnett‘s (1992) findings are similar to those of Lopes (1992). Burnett (1992) states that there is no longer a negative relationship between concentration, measured as the percentage of top-selling records produced by the majors, and diversity, measured as the number of different top-selling records, in the music industry. According to Burnett‘s (1992) findings, the concentration of the recording music industry was at an all-time high during the 1980s but at the same time diversity increased considerably. This finding is accounted for by the adoption of the open system model of music production by the major companies. According to Burnett (1992, p. 765), the growing international youth culture and a differentiated audience forced the multinationals to continuously present new styles and artists to maintain their dominance.

The studies mentioned so far have measured diversity as the number of different artists that have reached the number one chart position or other top chart position in a given time frame. Thus all artists have been seen as different from each other independent of styles or genres.

Alexander‘s (1996) study takes a different approach as it is based on an entropy index of actual music characteristics. In this methodology songs go into a matrix based on such characteristics and songs in different cells are treated as equally different from each other. Alexander (1996) finds that both very low and very high levels of concentration are correlated with product homogeneity. Thus the optimum environment for product diversity is a moderately concentrated market structure. In their reply Peterson and Berger (1996) argue that Alexander‘s metrics for music characteristics are flawed. They state that taking into account only a limited portion of possible music characteristics simplifies the situation too much. Furthermore, they criticise the classification of songs as either similar or different without accounting for different degrees of similarity. Two songs differing by one characteristic and two songs differing by all characteristics are calculated to contribute equally to diversity. Peterson and Berger (1996) end up taking the stance of Lopes (1992) and Burnett (1992) that creative control has been dispersed more widely inside the majors to competing divisions and numerous labels and this has contributed to a growth in product diversity.

In a later study Dowd (2004), too, found that the open system effect for diversity is stronger than the concentration effect for homogeneity. Lee‘s (2004) study, on the other hand, looks into the concentration of the radio industry and concludes that the consolidation of the radio industry did not have an effect on the number of distinct radio formats but the number of songs that were able to become hits decreased.

Very little research on the relationship of concentration and diversity has been conducted outside the music industry. This may be due to the exceptionally good availability of the music chart data on which the measures of both diversity and concentration have been based. The measurement of diversity, however, is not a straightforward matter. The measurements used so far have calculated diversity as the number of artists, records or songs that reach consumer popularity. There is no guarantee that these artists, records or songs are actually diverse in any culturally meaningful way.

The measurements used indicate multiplicity rather than diversity (see Hesmondhalgh 2002, p. 76).

Many voices do not guarantee different messages.

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The challenge of measuring diversity has been tackled by Benhamou and Peltier (2007) using three different diversity measures in their study on the French publishing industry between 1990 and 2003. First, variety was measured by the number of titles published. Second, balance was measured in the distribution of sales among different titles. Third, disparity was measured by how much the products differed from each other regarding their content. The conclusion was that diversity measured by variety has increased, but when the measures of balance and disparity are used diversity seems to have decreased.

Despite its shortcomings, the research on the relationship of industry concentration and product diversity offers a useful building block for considerations of industry evolution in the cultural and creative domain. Eras of low and high degree of diversity at the first glance correspond to the eras of ferment and of incremental innovation. However, early motion pictures as well as early video games were rudimentary and homogenous. Motion pictures were initially sold as commodities and the first video games were similar Pong clones. The diversity of the product content took years to develop. Some sort of industry maturation was required for more culturally diverse products to emerge. It may well be that a degree of technological evolution and the development of dominant technological solutions enabled growth in content diversity. The open system model of cultural production increases diversity while associated powerful gatekeepers have the power to decrease it.

However, horizontal differentiation and diversity in tastes create the requirement for cultural diversity in products just as the artists have the inherent drive to be original. Ultimately the question is whether the innovations produced in the cultural and creative domain can be classified into radical and incremental or competence-destroying and competence-enhancing ones. Technological innovations, such as the introductions of film projector, home computer and compact disk, are relatively easily classified. Innovations in content, i.e. new symbols, characters and styles, are far harder to fit into the conceptual frame of industry life-cycle model.