Media Effect

Posted in Finance, Accounting and Economics Terms, Total Reads: 707

Definition: Media Effect

It can be defined as a theory which says that the effects coverage of events and happenings or stories by media can affect investor and consumer sentiments. The logic behind this is that in case of a major event unfolding in someplace consumers will not leave their homes and will be watching minute by minute coverage of the situation. This often leads to decrease in consumer spending.

It is also sometimes named as CNN effect owing to the channel in US whose 24 hour coverage of US’s foreign policies affected the decision making during the Cold war. 

Multiple examples can be cited to show the effects of media effect. During the space shuttle Columbia’s loss in 2003 media’s constant coverage on television kept people in their offices or homes and out of shopping malls or car buying shops thus influencing their buying behaviour. Media effects also influence donations for natural disasters. Like for Asian Tsunami in 2004, media frenzy in covering affected areas contributed to donations to the tune of 500$ per person affected person compared to just 50 cents in aid to persons affected by Uganda’s 18 year war.


Hence, this concludes the definition of Media Effect along with its overview.


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