Analysis on Institutional Transformation of American Radio and Television Indust

Abstract. Nowadays， with development of economic globalization and new media technology， the media industry has developed rapidly.Diversified trend emerged in the media industry. Accordingly， the various institutions of the media industry have many contradictions. At present，American media industry in the world has super position and crucial influence. American radio and television industry can demonstrate this realistic conflict and contradictory conception. The article discusses the internal mechanism and trend of media institutional transformation through analyzing the institutions on American radio and television industry.

Keywords： Radio and television Institutional transformation American

With development of economic globalization and new media technology，the media industry has developed rapidly，the media industry emerged diversified trend. Media institutional transformation also changed accordingly.We need to focus on not only institutional transformation itself， but also its inner mechanism.

Government is firstly the main body of institutional transformation.As main supplier of institution government plays decisive role on the choice of path，the order and the opportunity of propulsion on institutional transformation. Another main body of institutional transformation is media industry which promotes institutional transformation spontaneously driven by interests.Interaction between government and media industry makes institution reach equilibrium. Establishment of institution each time is a process of reach equilibrium through repeated game.

At present，American media industry has super position and crucial influence in the world.American radio and television industry can demonstrate more realistic conflict and contradictory conception. We can see from the process of institutional transformation on American radio and television industry that this kind of institutional transformation presents the phenomenon of mutual penetration between mandatory change and induced change.Firstly，the path of institutional transformation is that government relaxes （or strengthens） the control.Secondly，the induced transformation of institution which is lead by competition and fusion of media industry.Then，the mandatory transformation is lead by government.Finally，institution establishes（or stops） and reaches short-run equilibrium.

1. The process of institutional transformation on American radio and television industry

In America， the most of radio and television agencies belongs to private ownership. Radio and television industry has characteristics of scale economy and scope economy， this make them grab market to expand scale and seek appropriate mode of operation and management. The operation of private radio and television agencies are only responsible to the law，so government has no right to intervene directly.The American government attempted to legislate at the birth of radio and television industry in order to benefit the public and develop media industry normally.

The restriction which the American government operates on the radio and television industry mainly can be divided into three stages：

The first stage： the birth of the restriction on radio and television industry.

In the early public broadcasting was not restricted by the law in America.At this stage，government released two acts which were ‘The Marine Radio Act of 1910’ and ‘The Radio Act of 1912’ . The two acts were both involved in emergency needs of maritime vessels for radio equipment.The total sales of radio equipments at that time were increased from 60 million in 1992 to 13.6 billion in 1923.It even reached 35.8 billion in 1924. The traditional explanation was the technology had led to the birth and the rapid development of radio and television industry.But then radio and television industry appeared numerous technical problems， which hindered the development of the new media.The technical problems became the barriers in the development of media industry at the same time. It is established at radio seminar in 1922 that the control of government on radio was necessary. Radio industry itself also aware of the demand for some forms of government regulation.But the court did not determined that the government had the right to control more aspects of media industry.At this moment， it both urgently need a new regulations from the angle of radio industry and government.That is to say， it produced the supplies of institution and demands of institution.Expected equilibrium of institutional supply and institutional demands led to establish institution of the radio and television industry in America.Releasing ‘The Radio Act of 1927”was a short-term equilibrium of institution at this stage.The act supervised radio industry， which a structured way of controls was correspond to the basic technical problems，while the licensing factors were coordinated transport problems.Radio industry is a special industry.Government supervised and gave license to the private radio stations is based on scarcity of spectrum.The quantity of stations which were set up in a region is limited.This limited the quantity of participants which enter the radio industry. The act of 1927 decreased the quantity of the radio stations，which decreased from 681 in 1927 to 606 in 1929. In addition， the quantity of the stations which was allowed to broadcast radio during the night reduced from 565 to 397. In 1928， 164 radio stations announced at the same time that the Federal Radio Commission could not meet the demand of public and should immediately restore the original state.It had been proved that the market access restrictions of government and the demand of public for radio were both favorable for radio industry.Usually there is no other interference to accept radio signals，this can make audience content and bring considerable profits to owners.Technological progress was important，but it was not indispensable.Its contribution is not as large as imagined.The development of radio and television industry was also benefit from institutions. Institutional factors and technical factors interacted each other.

The second stage： reinforce regulations of radio and television industry

The rapid development of wireless television， cable television and satellite television not only made American commercial radio and television more centralization and scale， but also made the environment of management on electronic media more complicated.This also required a more centralized regulation to radio and television industry，which was more advantageous to the development of the radio and television industry. Government and radio and television industry both need to have a new institution.Institutional alternation from equilibrium to disequilibrium was a process that government and media industry games repeatedly. ‘The Communications Act of 1934’ became a new short-term equilibrium of institution on radio and television industry.The act of 1934 replaced the radio act of 1927 and established the monopoly position of the commercial radio and television. This act made control within an entity and took all forms of communication under the control of Federal Communications Commission. According to the law of America， radio and television in America was primarily local and serviced for the local audience.However， the regulation which was developed dispersively was soon changed by the concentration of broadcasting industry. National broadcast platform was more attractive to advertisers. The space of market development was more larger. Because the local broadcasters cooperating with national broadcasters through scale operation had a better interests， therefore independent local broadcasters need to enter the radio network for its own interests.This increased concentration. Marked by act of 1934， the regulation of radio and television industry was further strengthened.

The third stage： deregulation of institution on radio and television industry.

At this stage， the game between government regulation and market regulation repeatedly shifted. Relaxing regulation was to reduce the control and management of government.Radio and television industry mainly relied on market adjustment..

In twentieth Century 60's to 70's，Federal Communications Commission implemented a series of regulations on broadcast and cable industry.These regulations influenced the operation of radio and cable which were in all kinds of situation.So strategy of the deregulation was put forward.The vigorous development of radio and television industry could not change the situation that radio and television agencies had no profit for many years. It appeared the situation once again that regulation should be reformed urgently.In the 1980s，because they realized that they were lack of necessary experience about regulations，the Federal Communications Commission had been expanding the bottom line of regulation.In 1992， the Federal Communications Commission weaken the Two-headed Oligopolistic Law which had prevented an owner from owning one more AM or FM radio station in a region for a long time. Clearly， the deregulation measures had brought a lot of help to those stations which were committed to reduce operating costs and simplify the operation of radio. Reduction on cost was not only the progress of technology， but also the institutional transformation.

The communication act of 1934 was a law which was regarding scarcity as a basic concept. By 1996， more than 12000 radio stations across America provided services through Live Broadcast Satellite. The act based the concept of scarcity was out of date. The institution of the old equilibrium was deviating from equilibrium with the induced changes. Demands for the new institution of government ， enterprises and public were urgent again. ‘The Federal of the Telecommunications Act of 1996 ‘ which was issued in 90s is so far the latest act concerning telecommunications， radio and television， cable television and other industries. This act was the result of deregulation. It marked a new short-term equilibrium of institution on the radio and television industry. The new act relaxed the restrictions of the radio and television industry.Before 1996， the law allowed coverage of a television station not exceed 25% in America. In 1996， the new legislation increased the coverage to 35% and canceled the limitation to the number of owing television station. In 1999， the Federal Communications Commission adjusted the the ownership system，which allowed a company in a region has 2 radio stations and 6 wireless radio stations in the form of public ownership. American radio and television industry emerged a situation which concentration and integration was unprecedented huge in the 90’s.

2. Analysis on the mechanism of institutional transformation on media industry

Institutional transformation depends on the process of institutional change. North believes that” Institutional change is a way which institution is established， changed and broken with the time. The parameters of institution changes include technology， population， property and resources controlled by government，etc.Institutional change constitutes the source of long-term economic growth.”Institutional transformation of the media industry is a process that subject of the institution choose a more efficient institution. According to the act of 1927，the act of 1934 and the act of 1996 as a sign of institutional transition， each institutional transformation is improvement， alternative and change of the original institution， which shows that institutional transformation from originally unbalanced state to a new balanced state.

2.1 Institutional transformation of media industry is the process which is a mutual penetration between induced institutional transformation and mandatory institutional transformation

The selection of media industry institution in the initial stage does not have a clear and consistent target. Government as the main provider of institution relaxes or strengthens control at first. Then the game process between government and the media is repeated until the official regulations promulgated. Government becomes the main drivers of mandatory institutional change. In the process of the repeated game， radio and television industry in America is also from development to stagnation and then development. Every time process of institutional equilibrium is a process of further development on radio and television. When the net interests of present institution is less than another alternative institution， the subject of the institution leads to the demand to the new institution and pushes institutional transition. Through the induced institutional change， it promotes establishment of a more efficient institution. The power of two institutional change finds a balance between government and market mechanism by penetrating mutually.

2.2 Institutional transformation of media industry is a process of repeated game

Institutional transformation is not accomplished at once but repeats many times. In the process of transformation on the media industry institution， each subject has its own choice which is optimal strategy.The balance of each main subject can't completely consistent.Sometimes there is a confliction. The process of repeated game is a process of interest coordination. Each game group adjusts their strategy. This way is also the most basic behavior of media institution choice. Institution of media industry is difficult to form in one game.It must reflect and coordinate the interests and demands of each participants through many times. Only through repeated game the main body can find the best strategy. We can see the process at the birth of the telecommunications act of 1927. The initial game does not result in the birth of institution but through repeated process of coordination. Therefore repeated game is an eternal theme in the process of choosing media industry institution.

2.3 The result of institutional choice is rational expectations

Rational expectations are that people master all available information completely in advance in order to avoid the loss and gain maximum benefit. This kind of rational expectations which people make is that people consult the knowledge provided by history in the past.People make the most effective use of this knowledge and make a forecast with careful thinking. From the process of institutional transformation on radio and television industry ， we can see the choice of media institution is a kind of rational choice. The subject will weigh the pros and cons. For the media industry， it chooses what kind of institution may bring their own interests. For government it chooses what kind of institution is stability and easy to manage. For example， in the 80’s of the last century， the media industry formed the scale economy and scope economy with the relaxation of regulations， which reduced operating costs and simplified the operation. Radio and television industry appears a huge growth. From the early 90s， radio and television industry is growing at 15% to 20% a year. The process of the new institutional balance has less transaction costs and more efficient arrangements than the old institution.Institutional balance is the rational choice of government and the media enterprise until the official birth of the telecommunications act of 1996.

3. The trend of institution in radio and television industry

‘The 1996 Federal Communications act’ represents the basic idea ， the deregulation， of the America radio and television， telecommunications and other electronic information industries.That is to say that government reduces the control on telecommunications， radio and television and other electronic information industries and open competition and management to make the market become the major power of adjusting the subsistence and development of those industries. Deregulation has led to merger and integration in the radio and television industry. The trend of globalization is irreversible. Mergers and consolidation has become the two themes of the cross-century development on radio and television industry in American.

Deregulation provide more freedom to the radio and television industry from the aspects of business practices， ownership and freedom of speech. This trend will be continuing.But despite the phase of deregulation， the radio and television industry is not completely out of control. In the foreseeable future it will not appear this kind of circumstance. Existing controls still have an influence on all aspects of the radio operation including daily operations， program content， advertising and licensing. In the process of deregulation， some areas are still not affected by the nature. There are some other control measures completely abolished and there are some control measures will be weaken gradually， such as program control， regulation of commercial bribery， obscene and bad content of speech control，advertising control and regulation of daily operations.

With the development of digital technology， radio and television industry will come into a new application of digital transmission. The public will benefit from the excellent digital services and other forms of services. The transition to digital services will lead to the supervision of the Federal Council into a virtual supervision， therefore it will be more effective. Deregulation of media industry in America is in order to establish a market model of information highway. In the process of promoting the development on digital industry， the role of market mechanism can not be replaced. In the future， the radio and television industry will still find equilibrium in the process of industry development. The America will find the balance of institutional transformation in the action of the combination between market and government.

4. Acknowledgement

The Social Science Fund of Hebei Province in 2013（HB13JJ018）.

The Social Science Fund of ShiJiazhuang，HeBei in 2013（WJ1304）.

Dr. Research Starting Fund Of SHIJIAZHUANG University in 2013.

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