Industries: Ownership & Control

1) What is a conglomerate in the media industries?

A conglomerate is a company that dominates the media industry and owns many subsidiaries (smaller companies). 

2) What is a subsidiary?

A subsidiary is a smaller company under a conglomerate.

3) What are the benefits for media companies of vertical integration?

Vertical integration is when one conglomerate owns different companies in the same chain of production. The most significant benefit of vertical integration for a conglomerate is:

Increased revenue overall:

• Complete ownership of the entire chain allows conglomerates to retain costs and increase revenue as they can obtain profit from each stage of production. For example, if Disney owned each company in the chain of production required to make a movie, money earned by those companies would go back to Disney, increasing revenue.

4) What are the benefits for media companies of horizontal integration?

Horizontal integration is when one company buys other companies at the same level of distribution. It allows companies to:

• Widen their audience
• Find other ways to make money, by moving on to different platforms
• One conglomerate could own companies in TV, Radio, Magazines, Newspapers, etc. This would increase profit.
• Spread risk
• If a conglomerate owns different companies at the same level of distribution, when one of those companies fails or loses revenue, the conglomerate will have other streams of revenue to fall on. 

5) Give three examples of media companies or brands that have used synergy to maximise their profits.

Synergy is when a company creates a brand that can be used across different media products and platforms.

For example:

Disney owns the Lion King as a movie. This movie is then referenced through products/merchandise (e.g. toys), the Lion King musical, events, theme parks, etc.

Apple uses Apple TV and Apple Arcade on their devices, effectively creating a brand used across different media products. This maximises their profits as consumers pay a subscription to use these services on Apple devices.

Sony creates technology (audio, video, cameras, computing, smart devices), produces film and television through Sony Pictures Entertainment, caters to the video-game industry through PlayStation, etc. This maximises their profits.

6) What is convergence and what device has changed the relationship between audiences and producers?

Convergence or technological convergence refers to the fact that we can now access all different types of media on one device. Smartphones have been the most significant in changing the relationship between audiences and producers, as traditional industries (such as newspaper companies) are now moving onto video content / content on social media, and audiences are now creating their own user-generated content.

7) Why did Facebook buy Instagram for $1bn? Answer in as much detail as possible.

Instagram had a huge audience at 30 million users at the time Facebook bought it. This increased Facebook's audience by a vast amount.

Instagram was a significant rival to Facebook and through buying Instagram, Facebook essentially removed the competition and ensured that they would dominate the social network industry.

The deal increases revenue overall, potentially increasing Facebook's value by around $100 billion. 

 8) What is the name of the media billionaire who used to own Fox?

Rupert Murdoch.

9) List 10 companies that are part of the Disney media empire. The graphic below will help you.

• Lucasfilm
• Pixar
• ABC Entertainment
• Hulu
• Marvel Entertainment
• Disneyland Inc.
• ESPN Books
• Maker Studios
• Marvel Press
• The Muppets Studio
  

10) Why did Disney buy Fox - what are the benefits? These benefits are particularly discussed towards the end of the article. 

 

Disney bought fox because:

• It adds high-grossing films such as the original Star Wars movies, the Marvel superhero pictures, Avatar and Deadpool, and popular TV shows such as The Simpsons and Modern Family. This heavily increases revenue as more consumers will pay subscription services (Disney+) to view them.
  
• It expands their offerings in the live television area with the FX and National Geographic cable channels, and Fox's regional sports network in the US. This helps to increase revenue as it reaches into new markets.
• It extends their outreach into global/foreign markets after purchasing companies such as Star India and Tata Sky.
• It gives Disney majority control (as it is also owned partially by the conglomerates Comcast and Time Warner) over the streaming service Hulu. This increases profits as Hulu makes an extremely high amount of revenue.
• By investing heavily into online streaming platforms, Disney counters threats from companies like Netflix and Amazon (Amazon Prime).
• It expected to create at least $2 billion in cost-savings.
• The deal puts Disney in a great positon against California's "tech giants" (conglomerates).
• At the time the article was written, the CMA was investigating Fox's bid to buy the parts of Sky that it doesn't already own. As the Disney deal will not alter the investigation, if the deal is approved before Disney's purchase of Fox assets, the whole of Sky would be transferred to Disney's ownership. If not, Disney will still obtain 39% of Sky (the amount Fox "currently" owns). However, Disney will be able to decide Sky's future either way.
• It would increase Disney's power (as said by the Writer's Guild of America West).
• Looking at the graphic, Disney would obtain many subsidiaries under Fox that generate high amounts of revenue, such as:
• Amstrad
• LAPTV
• Star TV
• 20th Century Fox
• Fox Studios Australia
• Hulu
• National Geographic Partners
• Endemol Shine Group
• Fox International
• Fox Networks
• etc.

Grade 8/9 extension tasks

Read this Inverse feature on Disney buying Marvel. Why does the article suggest it may not have been good for the movie industry overall? 

 

It suggests that although Disney helped skyrocket Marvel's reputation and revenue, the MCU (Marvel Cinematic Universe) is creating new movies and TV shows so fast that movies are losing their "spark" and feel lifeless / made only for the purpose of profit. Marvel's dominance in the movie industry has effectively meant that comedy movies or movies with mid-budget action cannot compete and have been disregarded by most audiences. The VFX industry is also struggling to keep up with Marvel's unrealistic expectations, as they "pump out" movies at an extremely high rate.

In summary, although overall it more than quadrupled Disney's revenue, Marvel's popularity seems to have killed creativity in the movie industry, as movies have begun to primarily seek profit instead of creative innovation and audience enjoyment.

From my own experience, the MCU seems to have been experiencing a decline in quality in general. The CGI is ruined as it is too rushed, and looks worse even when compared to movies like Avatar, which was made in 2009. The writing feels somewhat uninspired and most new series and movies depend on one significant plot twist (that is made obvious most of the time) instead of great direction all throughout. Originality is lacking and when I watch a new Marvel movie, it feels like I've seen everything already. Based on what I've seen online, many other people seem to hold this opinion as well. Therefore, although Marvel has increased profit for Disney and has secured itself as a dominating force in the film industry, it has created a trend of "quantity over quality" that has ruined many other movies, not just ones that Marvel have created.

 

From another article: