Vertical integration and media ownership

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Hollywood
Why is Hollywood such a
successful film industry?
Hollywood
Vertical integration of the
Hollywood film industry
Vertical integration was a key feature of the Hollywood studio system up
to 1948.
The ‘Big Five’ studios were:
"The Big Five," major studios realized they
could maximize their profits by controlling
each stage of a film's life:
• production (making the film),
• distribution (getting the film out to
people),
• exhibition (owning first-run cinemas in
major cities).
• "The Little Three" studios also made
pictures, but each lacked one of the crucial
elements of vertical integration.
• Together these eight companies
essentially controlled the entire market.
They also controlled the terms under which you could see
their films. Prestige or “A-Movies” used studio stars and
lavish production values, and then could only be seen
initially in studio-owned, first-run cinemas.
When the studios released these films to cinemas they
didn't own, they forced those owners to buy A-pictures in
combination with a number of, often mediocre, Bpictures (no stars, bargain-basement genre pictures) and
shorts, a practice called "block booking."
Moreover, the studios often made the exhibitors buy the
films blind, not allowing them to see what they were
getting before they got it.
The end of Hollywood's Golden
Age
In 1948 the studios were ordered to give up their cinemas,
opening the market to smaller producers.
This, coupled with the advent of television in the 1950s,
seriously compromised the studio system's power and
profits. Hence, 1930 and 1948 are generally considered
bookends to Hollywood's Golden Age, the period when
these eight companies secured 95 percent of all film
rentals and close to 70 percent of all box-office receipts.
So, Vertical integration has gone, making
the Hollywood studios more competitive?
Case study:
All owned by Rupert Murdoch
Type
Subsidiary of News Corporation
Industry
Film
Founded
May 31, 1935, by merger of Fox Films (founded in 1915)
and 20th Century Pictures, Inc. (founded in 1929)
Founder(s)
William Fox
Joseph M. Schenck
Darryl F. Zanuck
Raymond Griffith
William Goetz
Headquarters
Fox Plaza, Century City, Los Angeles, California, United States
Products
Motion pictures, television films
Owner(s)
Independent (1915–1985)
News Corporation (1985–present)
Parent
Fox Entertainment Group
Divisions
20th Century Fox Animation
Fox Animation Studios
Fox 2000 Pictures
Subsidiaries
Fox Searchlight Pictures
Fox Atomic
Fox Interactive
20th Century Fox Home Entertainment
Fox Television Studios
Blue Sky Studios
20th Television/20th Century Fox Television
Fox Star Studios
Website
www.foxmovies.com
[1]
Type
Subsidiary of News Corporation
Industry
Film, television
Founded
1990s
Headquarters
Fox Plaza, Century City, Los Angeles,
California, United States
Key people
Jim Gianopulos, Chairman, CEO
Products
Motion pictures, Television programs
Revenue
$13.28 billion USD (2004)
Operating income
$2.9 billion USD (2004)
Net income
$1.85 billion USD (2004)
Owner(s)
News Corporation
Employees
12,500 (2004)
Parent
News Corporation
Type
Public
Traded as
NASDAQ: NWS
NASDAQ: NWSA
ASX: NWS
ASX: NWSLV
NASDAQ-100 Component
S&P 500 Component
S&P/ASX 50 Component
Industry
Mass media
Founded
Adelaide, Australia (1979)
[3]
(12 November 2004)
Founder(s)
Rupert Murdoch
Headquarters
1211 Avenue of the Americas,
New York, NY 10036, USA
Area served
Worldwide
Key people
Rupert Murdoch
(Chairman and CEO)
Chase Carey
(President & COO)
Products
Cable network programming, filmed
entertainment, television, direct broadcast
satellite television,publishing, and other
Revenue
US$ 33.706 billion (2012)
Operating income
US$ 2.212 billion (2012)
Net income
US$ 1.179 billion (2012)
Total assets
US$ 56.663 billion (2012)
Total equity
US$ 24.684 billion (2012)
Employees
48,000 (2012)
Subsidiaries
List of subsidiaries
Website
NewsCorp.com
[1][2]
[4]
[4]
[4]
[4]
[4]
[4]
Delaware, United States
Some of those names for this year:
• BV = Buena Vista – a subsidiary of Disney
• P/DW = Paramount Dreamworks
• Gold = Samuel Goldwyn Studios (exMGM)
The interesting one:
• LGF = Lionsgate – (Canada) the most
commercially successful independent
company in North America
Type
Public
Traded as
NYSE: TWX
S&P 500 Component
Industry
Mass media
Predecessor(s)
Time Inc.
Warner Communications
Founded
1990
Headquarters
Time Warner Center,
10 Columbus Circle,
New York City, New York,United
States
Area served
Worldwide
Key people
Jeffrey L. Bewkes
(Chairman & CEO)
Products
Television, movies, entertainment,
cable,broadcasting, radio, web
portals
Revenue
US$ 28.7 billion (2012)
Operating income
US$ 6.1 billion (2012)
Net income
US$ 3.5 billion (2012)
Total assets
US$ 68.304 billion (2012)
Total equity
US$ 29.954 billion (2011)
Employees
34,000 (2012)
Subsidiaries
List of subsidiaries
Website
www.TimeWarner.com
[1]
[1]
[1]
[1]
[1]
[1]
US Weekend box office
February 15-17, 2013
UK Box Office for 2012
• Momentum Pictures – a successful British
film Distributer
……Owned by Paramount Pictures.
British Involvement?
• Most of these films have British actors,
many in the lead role.
• Is it important to British audiences to see
British stars on screen?
Media Ownership
• Have the big studios managed to find a modern
equivalent of vertical integration?
• Why do you think that the big studios own
smaller production companies?
• Why not just focus on making big, mainstream
releases?
• Can the British film industry compete?
Case Studies
• Find out what information you can about at
least one American film production
company. Do they have links to wider
media ownership?
• Do the same for a UK film production
company
hint: Aardman, Film4, New Line Cinema, etc
Look at co-productions
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