Efficiency of Japanese Local Broadcasters

Abstract

Terrestrial broadcasters have a vertically integrated structure consisting of two different activities: program production and transmission. In addition, each local broadcaster provides services under different environmental conditions, such as the geography of the service area. Taking the functional structure of broadcasters and heterogeneity across broadcasters into consideration, this article measures the organizational and sectional efficiencies using a network data envelopment analysis (DEA) model that incorporates these environmental factors. The results clearly reveal differences in the performance of broadcasters compared with the results obtained from ordinary DEA.

Notes

¹For the details of policy, see the Intellectual Property Strategic Program formulated by the Intellectual Property Policy Headquarters in the Cabinet Office (http://www.kantei.go.jp/jp./singi/titeki2/keikuku2009_e.pdf).

²Accomplishing localism is one of the conditions broadcasters must meet to obtain a license from the Ministry of Internal Affairs and Communications.

³For details on affiliate contracts, see the National Association of Commercial Broadcasters in Japan (2007).

⁴We devised an equation for estimating seven broadcasters' (the subjects of this study) revenues for 5 years to examine the relation between broadcasting revenues and regional economic levels as follows: ln (broadcasting revenues) = α + β ln (prefectural accounts). The results showed that adjusted R² was 0.94; and the values of alpha and beta were −3.144 and 1.215, respectively. Both values were significant at the 1% significance level; and a strong, positive relation between revenues and economic levels was confirmed. In addition, many previous studies of advertising demand use a variable that indicates the level of economic activities, such as gross domestic product. For studies on advertising expenditure, see Saruyama (2000).

⁵Television advertising expenditures have decreased since 2005, whereas Internet advertising expenditure in 2008 was 1.85-fold greater than what it was in 2005, according to the investigation by Dentsu, Inc.

⁶The revenue of a network that has only five affiliates was the smallest among networks.

⁷Sponsored programs are television programs produced after advertisers pay broadcasters for the program production cost and advertising fee. Sponsorship is frequently adopted in the Japanese broadcasting market.

⁸The greatest amount of data on broadcasters comes from this 5-year period. However, the samples of Sapporo Television Broadcasting are from 2002 to 2005, and those of RKB Mainichi Broadcasting are from 2003 to 2006, due to the availability of data. As a result, the total number of samples in this study is 33.

⁹If the skill and salary of an employee have a positive relation, labor cost may represent the skill level of employees. However, labor cost data in each division are not available in Japan.

¹⁰The remainder is the ratio of programming hours of purchased programs.

¹¹Regarding Kitanihon Broadcasting and Tulip-TV, which provide services in the same areas, the number of analog transmission stations is also the same.

¹²Sapporo Television Broadcasting, Kitanihon Broadcasting, and Tulip-TV did not start digital broadcasting during the calculation period.

¹³Furthermore, the first- and fourth-ranked stockholders of Kitanihon Broadcasting are public utilities—specifically, an electric power company and a railway company, respectively. It is often pointed out that these types of firms need to improve their efficiency.