In its most basic form, news stations, media outlets, and social media giants all make money by capturing your attention.
If everyone conserved their attention and stopped watching certain TV channels, or stopped spending time on social media apps, then the companies would go broke.
How do news channels make money from our attention?
News channels sell advertising space in the form of commercials to businesses and corporations. The larger the TV audience is, the more a business will pay for an advertisement spot.
This makes sense, as the more people who are watching an advertisement, the greater impact it will have to bring in more sales.
So news stations make money by capturing viewer attention. Businesses will then pay the news stations to put their commercial advertisements in front of their viewers.
But there’s a bit more to it than just that.
Let’s dive in.
What Media and News Companies Make What Money ?
When it comes to news channels and media companies, there are 2 key players who make most of the money.
Overview Of Media Industry The 2 Key Players
- Content Producers – Content producers are simple. These are the companies shooting, editing, acting, producing, and overall creating the content that is shown on TV. Typically content producers (TV Networks) have to make deals with distributers to get their content shown to large audiences.
Notable content producers include individual networks or studios such as CNN, FOX NEWS, Pixar, ESPN, and Netflix.
- Distributors – Distributers make deals with content producers to make their content on their individual networks available to the customers of the distributers.
Spectrum, Dish Network, Direct TV, Hulu, Netflix, Amazon are all notable examples of media distributers.
A few years ago, the distributers had all the power because they controlled the customers and the audience available to the networks.
This is still largely the case, however, with the explosion of high speed internet, cell phones, and wifi, many networks are now able to interface directly with their audience becoming the distributers themselves.
For example, streaming service companies like Netflix, Disney, and Amazon are all content producers and distributers.
Traditionally, the distributers get the money and then divide it up between the content producers,
TV Station Overview: 2 Traditional Ways News / Media Make Money
There is 2 traditional way TV companies make money,
- Selling Advertising Space. TV shows draw attention. And when you have a lot of peoples attention, that’s the best time to try and sell them something. The more eyeballs on a TV program, the more advertisers will pay a TV company to show their commercial.
This is why Superbowl commercials cost so much. The viewing audience is massive.
- Selling Subscription Fees. You don’t have to, but living in the modern world, pretty much everyone pays for TV. Whether it’s Direct TV, or Dish Network, or Hulu Plus, or Spectrum Cable. These monthly fees are revenue for the distributers.
Here’s some more detail on Advertising revenue vs. Subscription revenue.
There’s 2 Basic Types of TV News Channels.
1. Broadcast News – Broadcast news is free news broadcast over the main channels like CBS, NBC, and ABC.
2. Cable News – Cable news is not free and comes with a subscription fee. For example CNN, FOX NEWS, and ESPN
The TV news channel business used to be simple. Broadcast news channels would send their signal to everyone with a TV who could get their signal. Advertisers would then pay the broadcast TV channel to run ads & commercials in front of their audience.
The money the TV stations made from selling advertising space paid their bills (and then some).
But some people didn’t have access to broadcast TV, so cable distribution companies like spectrum (and satellite like direct TV) would run a cable to your house for a monthly subscription fee.
Now cable TV distribution companies could make money from selling advertisement space and from monthly subscription fees.
Cable TV brough with it a whole new array of TV content producers like Nickelodeon, Discovery, CNN and FOX NEWS.
Each individual TV channel makes a deal with the cable distribution companies to split the revenue from the cable company’s subscription fee.
The higher the individual network’s TV ratings, (or the larger their audience) the larger portion of the subscription fee and advertising revenue that individual network will receive from their deal with the cable company.
So traditionally, TV distributers make money from a combination of selling advertising space and monthly user subscription fees.
While content creators (individual news stations) traditionally share the TV ad revenue and subscription fees in proportion to the individual networks audience size.
But new technology has created new options for news stations and content creators to earn income.
Internet, Radio, and Social Media Income
No matter what platform a media company is using, the general idea is the same. Capture your attention.
Once media outlets have your attention, then they can sell your attention to advertisers who pay for commercial advertisement space.
New stations aren’t just content-producing ‘TV news stations’ anymore. News stations are no longer limited by their ability to make distribution deals with larger distributers.
News stations today have a multiple media channel approach to creating income streams. News channels also connect with their audiences thought their websites, podcasts, radio stations, and social media campaigns.
Every one of these media sources is an opportunity to follow you, and grab your attention. From the TV in the morning, to the radio in your car, to your computer screen at work, to your phone screen all the time.
(by the way – here’s some tips on how to use social media more consciously)
The more attention that is captured, the more outside businesses will pay for advertising space on each one of these platforms.
We already talked about TV revenue, but here’s some of the nuances on how news channels and media outlets make money on different platforms.
Online, Internet Website Income Streams
Revenue Through Ad Sales – If you go to any news website you’re likely to get blasted in the face with banner ads, sidebar ads, pop-up ads, header ads, and ads in the middle of every article.
News websites (or websites of any kind) sell ad space on their website to the highest bidder. Website revenue does not go to the distributer.
The more someone clicks on a website, the more likely they are to click on an ad.
This is exactly why more headlines have become “click-bait”. To further illustrate this point, here’s another article I wrote on “Why Most People Only Read Headlines”.
Subscriptions And Memberships Online – Sometimes media website’s or news website require that you pay a monthly fee (or membership fee) in order to access their content. Similar to paying for your newspaper.
Merchandise – A huge benefit to owning your own website audience is selling merchandise. Stickers, hats, shirts, ect. Any merchandise sold online is yet another source of income.
Radio Income Streams
Revenue Through Ad Sales – Radio is fairly straight forward. Just like broadcast TV, radio relies on advertisers to by commercials. The more people’s attention your radio channel has, the more advertisers will pay to run ads.
Revenue Through Subscriptions – XM radio or Sirius Radio don’t rely on ads. But users must pay a monthly subscription fee, just like cable TV networks.
Social Media Income Streams
Social media companies have become a whole new type of news channel. Social media companies rely on it’s users to be content creators, while the social media company takes the role of distributer.
Ad Revenue – Social media companies rely on their huge user base to sell advertisement space at large scales to both big-business-corporations and small businesses.
Either way social media companies relay on ad revenue.
User Data Sales –Social media companies also collect massive amounts of data on their users. Everything from age, gender, location, birthday, purchasing preferences, political preference, ect.
This data is extremely useful to advertisers who want to sell products to people in certain categories. Social media know how valuable this data is and sell it to data companies, who then sell it corporations.
The Concentration Of Wealth & Power In The Media
In 1983, 90% of all news and media companies were owned by 50 different companies. Today 90% of traditional American media is owned by only 6 companies all competing for your attention on TV.
At&T (owns TimeWarner, CNN, and Direct TV), News Corp (owns FOX), Sony, National Amusements (owns CBS & Viacom), Comcast (owns NBC), and Disney (Owns ABC & ESPN).
Those “Big 6” own both the “content creation” (individual networks) and “distribution” (cable & satellite companies).
However, the“Big 6” is starting to see competition from new angles. “Direct to consumer” streaming services like Netflix, YoutubeTV, Hulu, and Amazon Prime. (not that some of these companies aren’t giant conglomerates of their own.)
Traditional “big 6” media companies are seeing competition “in the attention economy” from social media companies like facebook & Instagram (meta), twitter, tic tok, and snapchat.
These are also, not small companies.
While these companies ‘duke it out’ with more & more powerful algorithms, to try and capture more of our attention, it’s our responsibility to be mindful how much time we’re giving away for free.
The real power lies within our power to choose when, where, and how much media you consume.
Who Regulates The Media? Who Funds The FCC ?
With only a few powerful corporations controlling the media content that the American people see, who oversees these companies to make sure they stay legal, truthful, and are working in the best interest of the American people?
Who is The Federal Communications Commission (FCC).
- The FCC is an independent U.S. government agency that answers to the United States Congress.
- The FCC oversees all interstate and international communications.
- It also maintains standards and consistency among media types and communication methods while protecting the interests of consumers and businesses.
- The agency is accountable to U.S. Congress and its actions are monitored closely by investors.
- The FCC is headed by a chair, who is one of five commissioners appointed by the President.
What is The Job of The FCC?
The FCC was established in 1934 as part of the Communications Act, which is a law regulating domestic and foreign wire and radio communications.
Basically the job of the FCC was to make sure all radio companies (the only media companies at the time) were competing fairly and ethically.
The mission of the FCC is to help advance the global communications industry through:
- Economic support to ensure there is enough competition in the communications / media sector
- The revision of media regulations (laws) to allow new technologies to thrive
- The promotion of competition, innovation, and capital investment
- The strengthening of the national communication infrastructure
Unfortunately, according to a Harvard study by Norm Alster from the Center of Ethics, the FCC has become a “captured agency” funded and run by the media companies it’s supposed to be overseeing.
The FCC is run by the US House & Senate to work in the best interest of the American people. However, the members of the US House and US Senate are elected by receiving large campaign donations from the media corporation as outlines extensively by Norm’s Harvard study.
This creates a large conflict of interest for the elected members. On one hand they’re supposed to
oversee FCC regulation of Media & Communications, but on the other hand, the media & communications companies are paying for their political campaigns.
There is no clear answer on how to best solve this conflict of interest other than “campaign finance” rules.
However, the responsibility of how you spend your time, regardless of how big the company is and how expensive their algorithm is which is pointed at your brain from the other side of your screen.
First and foremost, news companies, media companies and streaming companies all make money by 1st commanding your attention.
Once your attention is captured, they profit largely on selling advertising space to other businesses.
There are lots of nuances, variations, and offshoots, but his is the general model used for media companies of all sorts and sizes to make money.
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Thanks for reading !
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