economics of news production

The above video documents the production of a ten-second news segment for a U.S. national news network. In this segment, a network correspondent declared that the (then) upcoming Indiana primary is a "must win" for Hillary Clinton.

The production involved a satellite truck, a two-person video crew, and the news correspondent. The production location apparently was chosen so that behind the correspondent would appear the Lincoln Memorial, the Washington Monument, and the U.S. Capitol. Why the segment was shot live to air isn't clear. Being live to air required the crew and the equipment to be in place at the time of the broadcast, waiting for the on-air cue, and required the satellite truck to relay the signal.

The camera crew had years of experience and large equipment. They also had an on-camera, focused microphone that could cut out extraneous background noise like a plane flying overhead. This video crew could make great video.

The correspondent was a 19-year television news industry veteran. Among other reporting positions, he had served as an embedded video reporter in Iraq. He undoubtedly is intelligent and knowledgeable.

Let's hope that changes in the news industry and new video economics result in much better use of such talents, skills, and resources.

Tags: , , , ,

decreasing value of a telephone call

red phone booth

glass phone booth in Arlington, VA

abandoned phone kiosk in Arlington, VApay

 

Thanks to Aaron Logan for the image of the red phone booth.

Tags: , ,

economics of social attention

Persons like to look at photographs of pretty girls and pretty boys. Taking objectification to a higher level, rigorous experimental testing (using photographs from Hot or Not, re-rated in a controlled laboratory procedure) has established that subjects discount the value of looking across time and trade money and work for viewing opportunities. These behavioral patterns are highly general and are also observed in biological markets among non-human species.

Subjects discounted opportunities to look at persons at a rate many orders of magnitude higher than the time discount of money. The time discount factor for viewing photographs was around 9% per second.[1] That's about seven orders of magnitude greater than a monetary time discount around 6% per year. Internet users are commonly considered to have a short attention span. Perhaps a better way to understand Internet users' behavior is that they have a very high discount rate for the goods that they commonly seek.

Male heterosexual subjects valued half-second looks at attractive female faces at roughly half CPM advertising rate for cable television. Based on subjects' choices revealed in a monetary choice task, heterosexual male subjects valued looking at photographs of attractive females at a rate of $4.50 per thousand half-second views (see table below). CPM advertising rates vary greatly depending on the audience targeting and demographics. For general video program across a wide range of national channels, $10 CPM is a reasonable benchmark. Can Internet banner ads attract attention? This evidence suggests that banner ads showing pretty female faces and targeted to a heterosexual male audience have considerable attention value.

Value to Viewer Per Thousand Views
Opposite Sex Person
In Photograph
Heterosexual Viewer
Male Female
Attractive $4.50 $0.50
Neutral $1.90 $0.20
Unattractive -$0.70 -$1.80
Source: Hayden et. al. (2007) pp. 3-4.

Other evidence also indicates that many men are highly responsive to an attractive female face. Economists with impressive respect for bureaucratic work have studied the design of loan forms. They've estimated the effect of including on the form a picture of a female bank employee rather than a picture of a male employee:

A woman’s photo instead of a man’s increased demand among men by as much as dropping the interest rate five points! These things are not small. And this is very much an economic problem. We are talking about big loans here; customers would end up with monthly loan payments of around 10 percent of their annual income. You’d think that if you really needed the money enough to pay this interest rate, you’re not going to be affected by a photo. [Harvard Magazine]

Behavioral economics surely is a fascinating new intellectual field.

One valuable general insight from research in behavioral economics is the importance of a wide range of complex circumstances for human behavior. Humans do not behave as if a general-purpose computational device determines their actions. The researchers who studied valuation of photographs of faces suggested that their results point in the opposite direction:

Collectively, our results indicate that social orienting decisions obey principles remarkably similar to those underlying economic choices about food or money. These results suggest the possibility that a shared neural system mediates both social and non-social decision making.[2]

Taken literally, that's absurd. Behavioral routines to secure food and sex go back to the beginning of sexually reproducing organisms. The value of money is much more neurologically elaborate. That token money mediates human trade is an amazing human social-cognitive feat. Discounting and trade are better understood as behavioral characteristics that commonly emerge from specific biological problem-solving.

References and Notes:

[1] Benjamin Y. Hayden, Purak C. Parikh, Robert O. Deaner, Michael L. Platt (2007), "Economic principles motivating social attention in humans," Proceedings of The Royal Society B, Figure 2, p. 4. Financial institutions typically exponentially (in time) discount the value of money by the relevant interest rate. Human intertemporal choices in behavioral experiments are typically more consistent with hyperbolic discounting. The subjects approximately hyperbolically discounted future opportunities to view photographs of attractive persons. The differences between these two forms of discounting, while important, has little relevance here.

[2] Id. p. 1.

Tags: , , ,

the big picture for voice call termination

On 27 March 2007, Ofcom released a statement setting mobile voice call termination charge controls for the next four years. These new charge controls replace charge controls set to expire 31 March 2007. The previous charge controls had been set for 1 September 2005 to 31 March 2006, but then had been extended for additional year. The previous charge controls had been subject to a lengthy, contentious appeal and a revision that eliminated separate control across rather different types of competitors (fixed-mobile termination vs. mobile-mobile termination). In conjunction with issuing the new charge controls, Ofcom began considering revising those controls in view of the impact of indirect routing for mobile number portability on the effective termination charge.

Inter-carrier compensation issues are quite difficult for regulators. Ofcom's recent call termination statement comes about two years after Ofcom initiated formal consideration of new charge controls through publication of a document entitled Wholesale mobile voice call termination -- a preliminary consultation (7 June 2005). Following that preliminary consultation were two other consultations, Wholesale mobile voice call termination -- market review (30 March 2006), and Mobile call termination -- proposals for consultation (13 September 2006).

Economic formalisms seem to constrain Ofcom's ability to do sensible policy analysis. European Commission recommendations urge national regulatory authorities to define, "in accordance with the principles of competition law," a relevant "market" for regulatory action to be "voice call termination on individual mobile networks" (see Framework Directive 2002/21/EC, Article 15). Ofcom carefully considered Significant Market Power (SMP), Countervailing Buyer Power (CBP), a "two-sided market" (that's not meant to be a duplicative description; it's an organization of transactions currently attracting attention in leading economic and business analysis), and a variety of other concerns of the type typically raised in competition cases. In line with EC recommendations, Ofcom then concluded:

There are separate markets for the provision of wholesale mobile voice call termination in the UK to other Communications Providers by each of Vodafone, O2, Orange, T-Mobile and H3G. (paragraph 1.10)

Ofcom deserves respect and appreciation for collecting considerable data and examining in detail the structure of mobile voice services and businesses. However, defining as "markets" individual companies' mobile voice call termination services is conceptually absurd. Such "markets" are by definition "monopolized" by the company with respect to which they are defined.

Competition law should not be allowed to obtain a dominant position in communications policy analysis. A well-established, highly competitive symbolic market for legal and regulatory claims exists within the framework of competition law. That market spurs economic growth for lawyers, economists, regulatory affairs departments, technical consultants, etc. For more inclusive economic development, communication regulators should consider interconnection rules in relation to broad economic development goals.

Having communication service providers earn a large share of their revenue from basic voice communication is likely to impede growth in broadly capable networks and innovative communication services. Ofcom's charge controls set mobile voice call termination rates about 5 pence per minute through 2011. Consider those charges with respect to some real-world communications development goals. Vermont, for example, is pursuing the goal of having for everyone, everywhere state-wide symmetric mobile data service of at least 3 Mb by 2010, and at least 20 Mb by 2013. Such development could easily support zero-price mobile call termination charges. On the other hand, if zero-price mobile termination charges would cause a major loss in revenue to mobile service providers, such charges are much less likely to occur. Through both regulatory lobbying and large expenditures on marketing and promoting, communications service providers can sustain prices with little relation to economic and technical aspects of reality.

Requiring communication providers who offer voice communication to accept voice communication from others at no charge to those others would help to deflate revenue from basic voice communication. One technical description of this sort of interconnection regime is "bill and keep". Discussion of bill-and-keep has tended to focus on inter-carrrier compensation (pie splitting or money-routing) rather than on more important issues of industry structure. Regulation of mobile voice call termination rates has much broader implications for communication service users than pass-through of termination rate reductions or the particular circumstances of mobile voice calls. Regulation that supports per minute pricing of voice communication through the year 2011 does little to foster important communications possibilities that are already clearly visible.

Tags: , , , ,

alternate economic analysis of underwear folding

Excited by the potential profit from a male-oriented omnimedia homemaking enterprise, I emailed to one of my female cousins:

To help [her husband] and other husbands keep house while their wives are on vacation, I've started a new "homemaking" series on my blog. Check out:
http://purplemotes.net/categories/homemaking/

You might consider investing money in this enterprise. It's going to be bigger than Martha Stewart!!!!

She responded:

Dude, you are going to remain a bachelor for a long time with a Web page like this.

Cuz

I hadn't taken that into consideration in my economic analysis of underwear folding. But because of our networked economy, I can benefit from others' ideas!

socks in drawer

Tags: , , ,

sensory economics: cheaper is better

Experimental studies indicate that persons rate images that they process more fluently as more aesthetically pleasing:

We propose that aesthetic pleasure is a function of the perceiver's processing dynamics: The more fluently perceivers can process an object, the more positive their aesthetic response. We review variables known to influence aesthetic judgments, such as figural goodness, figure-ground contrast, stimulus repetition, symmetry, and prototypicality, and trace their effects to changes in processing fluency. Other variables that influence processing fluency, like visual or semantic priming, similarly increase judgments of aesthetic pleasure.

Speed of identification and categorization of stimuli indicate processing fluency. They are also plausible indicators of the bodily cost of processing stimuli. Thus an economic interpretation of these results is that, among images with a common (zero) external price, persons prefer images that they process at low bodily cost.

Processing fluency implicitly refers to some processing objective. A typical biological approach divides making sense into stages of sensation, perception, and cognition. Then perceptual fluency refers to processing through the stage of perception. Conceptual fluency would then be understood as adding additional meaning-related processing beyond the stage of perception. However, these stages are not biologically well-defined. Much evidence points to a more flexible and functionally organized process of making sense.

The experimental evidence on processing fluency might be better interpreted with respect to the subjects’ plausible goals in processing the stimuli that the experiments present. The experiments present to subjects individual images not related to a narrative or a personal encounter. For example, some experiments present subjects with random patterns of dots. The subjects are then asked questions about the image, such as “How attractive is it?” and “To what category does it belong?” The latter question clearly points to an information processing objective. The former question is an affective evaluation of the results of such an information processing objective. These experiments thus suggest that, given an information processing objective, persons prefer images that they process at low bodily cost.

These experiments point to much additional useful research. Recent work on multi-sensory perception and mirror neurons indicates that the body creates common effects from different sensory services. That suggests, as does other evidence, that sensory form affects stimulus processing fluency. Moreover, making sense of information, narratives, and persons probably has significantly different implications for stimulus processing. Experiments that incorporate multiple sensory dimensions and that more explicitly structure communicative objectives could make an important contribution to science and to the practical design of communication services.

None of these comments should be interpreted to devalue aesthetic pleasure in the here and now. Experimentally unifying figural goodness, figure-ground contrast, stimulus repetition, symmetry, prototypicality, and visual and semantic priming in a common economics of processing fluency and preference is a great scientific achievement!

Cited reference:
Reber, Rolf, Norbert Schwarz, and Piotr Winkielman (2004), "Processing Fluency and Aesthetic Pleasure: Is Beauty in the Perceiver's Processing Experience?" Personality and Social Psychology Review, v.8 no. 4 pp. 364-82.

Tags: , , ,