Consequences of the Economic Crises on the Media

Introduction

During the past few years, there has been a discussion on the world economy among researchers and policy makers. The world economy sunk into recession and most of the countries suffered due to crises. As the world economy was going under such staggering proportions, some scholars say that the root cause of the economic and financial crises is the mortgage market of the USA which has been involved in selling sub-prime mortgage to a large number of customers with inadequate or little income. The mortgages were bundled into paper investments and were sold to major financial institutions around the globe. Therefore, the global economic crises have affected all aspects of the life (Andy, 2008). The world financial crises have caused havoc on the entertainment and media, particularly the sectors that are dependent on consumer spending and advertising. Most of media companies were suffering through significant shifts in their business before the crisis. The economic crises have exacerbated these issues dramatically (Vollmer, Kunstner, & Chahine, 2008).

Current report is focused to explore the impact of financial crises on the media of Romania, Hungry and Poland.

Description of Media

As capital has fled and international credit crunch has been able to freeze the arteries of the world economy that is based on cheap credit. Media companies have been denied for normal flow of credit. Therefore, a massive global crisis has restructured and transformed media. The rising global and financial crises have afflicted developed, as well as, developing media companies. The outcome is in the form of demand destruction, massive unemployment, and price deflation among various assets classes. However, a number of economists have speculated that the world economic crises will lead to a global recession of several economies. Thus, media companies have planned for reconstruction of media companies that will be affected in a negative way (Ekmekcioglu, 2012). According to a research by Martin (2009) media across the world has lost up to 60% of income due to financial crises. It has been revealed in the report that media were forced to adopt some cost saving measures that include reduction of volume, reduction of investigative reporting, laying off staff, and huge cuts in international and provincial coverage. It has been mentioned in the report that media markets have experienced a massive transfer of foreign investors and bankruptcies of independent outlets. The outcome is in the form of overall drop in the quality of news delivery to people. A significant impact is that the media content has become more entertainment centred, shallower, and has become prone to business and political influences.

After the great slump in financial markets of the world, the global media and entertainment industry is taking central stage again. There are significant opportunities for industry players; and there is forecast of reaching approximately $1289 billion in 2017with 5% growth rate during 2012-2017. According to a leading management consulting and a market research company, the global media and entertainment, improved economy would increase demand for entertainment products; therefore, result will be in form of rising online distribution of video games and content that will boost the user spending. Some factors, such as advertiser spending, consumer income levels, government regulations and technological innovations are expected to affect industry dynamics. The increased dominance of internet based entertainment has been anticipate to lead to high growth of internet advertising and account for more than 10% growth of the industry during coming years (Lucintel, 2012).

Impact of the Global Financial Crisis on Media of Romania

Romania is the second largest country in Eastern Europe and has population of 22 million. The country has been one of the fastest growing economies in Europe until 2008 when it was severely hit by the financial crisis. Media and entertainment industry has been the most dynamic sector of the country, after it ditched communism in 1989. For most of media organizations of Romania, the financial crisis that started in 2008 has proved to be a cold shower. There was a sharp decline in advertising revenues when media environment was seemed to be expanding on different levels. After joining the European Union, Romania has become a part of the largest economic of the globe, while strengthening its position particularly in terms of global division of labour. The last three years of adherence of Romania to the EU has been marked as a significant growth of the economy that is induced by increased foreign investment, growth in labour productivity, and increase in export oriented production. At the same time, economic reforms of Romania have been supported by favourable international economic conjunction with growth of international trade, growth of world economy, and high prices of international financing with relatively lower costs (Vigaru, 2009).

The media landscape to Romania, as well as, of other countries has been impacted by general economic trends over the past years. Recent economic landscape has been affected by the recession and economic crisis, the media market has undergone evolution and adaptation. The media and entertainment sector of Romania was significantly affected by the global financial crisis. However, it has overlapped with a long term crisis of the sector that is undergoing transformation due to growth of new digital technologies. These products are turning media products into a commodity; and are forcing entertainment and media accompanies to experience some new forms of receiving revenues from their services. Media and entertainment sector of Romania is the third most dynamic in Eastern and Central Europe, after Turkey and Russia. Romania is ahead of Hungary, Poland, and Czech Republic as it has growth rate of more than 5%. Digital opportunities are becoming better understood around the globe and media companies are trying to develop and implement new digital strategies that can meet the demand of the market and cope with the variation of consumer behaviour. Different segments of the media and entertainment industry are at different stages of development; however, they are embracing digital to meet the varying demands of consumers profitably and effectively. Media and entertainment companies of Romania are reaching to the 'end of the digital beginning' as they have made commitment to future of digital media and are struggling to make some necessary changes to their products and services, organization and distribution patterns (Chirileasa, 2012).

PricewaterhouseCoopers (PwC) projects of media and entertainment in Hungry are expected