Friday, January 27, 2012

Three-Party Market

Reading Discussion: Three-Party Market
One of the most common ways media which appears to be free is paid for is through a system called the three-party market. In a three-party market, a third party pays to become part of a seemingly free exchange between the other two parties. A good example would be television: advertisers pay in order to insert their ads into the content which is being given for free from the producer to the user. This might make it sound like the advertiser is some sort of parasite, attaching itself to an otherwise free cultural exchange, but of course television products can only be given away freely to the consumer because advertisers pay. A good way to think about this is that TV networks are selling viewers to advertisers. In a weird way, when you watch TV, you become a product, because your attention is valuable (although I’m sure viewer attention is becoming less reliable, and less valuable, in an age of DVR when many commercials can be skipped through). Theoretically, after seeing advertisements, the consumer will go out and spend money on the products/services advertised, thus closing the circle and allowing advertisers to make their money back. The cost of advertising is ultimately included in the price of products, and so you’re paying for all your free TV channels whenever you buy something advertised on them. 

Like most people, I basically understood that this was how TV (and radio, certain print media, etc.) worked: through advertiser support. But this reading made clearer how brilliant the three-party market system is. The appearance of “free” is a powerful motivator to consume something, and I doubt TV would have become as important as it did in American culture if you had to pay by the minute (or something) to watch it. Overall, I think the audience benefits more from three-way marketing than do advertisers, because the stage of the transaction in which the audience goes out and buys advertised products may or may not take place, and involves a great deal of individual choice, even considering the persuasive nature of advertising. I think it’s a pretty good deal that you get to choose which advertisers, if any, to support with your money, and still get free TV regardless.


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